AUXO Initiation 72412

Initiation of Coverage – July 24, 2012 OTCBB Symbol: AUXO

1 Vista Partners LLC www.vistapglobal.com

Analyst: Ross Silver Email: [email protected] Phone: 877.215.4813

AUXILIO, Inc. (“AUXO”), headquartered in Mission Viejo, California, is

the health care industry’s leader in Managed Print Services (“MPS”),

working exclusively with hospitals and hospital systems in the United

States. It is a business outsourcing, service-centric company which

provides intelligent print management programs and guaranteed

savings. Once contracted, the Company assumes all expenses related

to the production of documents in hospitals and affiliated clinics

including services, supplies, equipment, legacy service agreements,

parts, finance charges and labor which results in a predictable fixed

rate for its customers. The Company’s full-time, on-site teams of print

experts help hospitals and health systems substantially reduce

document production expenses through continuous process

improvements methodologies, education and training for hospital

staff, and efficiency tools and techniques that reduce paper volume

and improve end-user satisfaction. The Company customizes its MPS

program to meet the needs of each customer, manages vendor

relations, equipment and supply chains, and centralizes cost centers

to better manage the finances and assets of print infrastructures. The

Company is vendor independent.

Website: www.auxilioinc.com

Sector: Healthcare Services Price Target: $3.35 Market Cap: $17.6M Avg. Volume (10 day): 4,375 Cash & STI (mrq): $1.8M Float: 15.0M 52 Week Range: $0.52– $1.47 Shares Outstanding: 19.5M Revenue (ttm): $21.9M Enterprise Value: $18.2M

Capturing significant and growing opportunities in

$22B Healthcare MPS market

Signed $35M MPS contract with Bon Secours Health

System

Signed five year $10M contract with Sharp

HealthCare

Leveraging unique vendor-neutral MPS &

proprietary benchmark data

Established business model with services in over 84

hospitals and over 2,000 health care offices

100% customer retention since formation, including

many early renewals

Improving financial base with recurring revenue

base & solid balance sheet

Business Description ……….…….….. 2

Outlook, Conclusion& Valuation ……….…….….. 2

Managed Print Services ……….…….….. 6

2011 Financial Results ……….…….….. 9

Risks ……….…….….. 9

Management Bios ……….…….….. 10

Financial Statements ……….…….….. 13

Legal Notes & Disclosures ……….…….….. 16

Highlights Table of Contents

Stock Data

Corporate Overview Price in USD (as of date of report): $0.90

mailto:[email protected]

http://www.auxilioinc.com/



AUXILIO, Inc. (“AUXO”), headquartered in Mission Viejo, California, is

the health care industry’s leader in Managed Print Services (“MPS”),

working exclusively with hospitals and hospital systems in the United

States. It is a business outsourcing, service-centric company which

provides intelligent print management programs, and guaranteed

savings. Once contracted, the Company assumes all expenses related to

the production of documents in hospitals and affiliated clinics including

services, supplies, equipment, legacy service agreements, parts, finance

charges and labor which results in a predictable fixed rate for its

customers. The Company’s full-time, on-site teams of print experts help

hospitals and health systems substantially reduce document production

expenses through continuous process improvements methodologies,

education and training for hospital staff, and efficiency tools and

techniques that reduce paper volume and improve end-user

satisfaction. The Company customizes its MPS program to meet the

needs of each customer, manages vendor relations, equipment and

supply chains, and centralizes cost centers and better manages the

finances and assets of print infrastructures. The Company is vendor

independent.

Outlook

Health care organizations are historically dependent on paper for

clinical and medical purposes, legal and regulatory requirements,

psychological reasons and business transactions. AUXO’s proprietary

data research indicates hospitals generate millions of pages of print

volume annually with a typical 500-bed hospital producing about 35M

pages per year at an approximate cost of $1.5M. AUXO expects these

health care organizations will continue to struggle with escalating costs

in their print environments due to increased paper volume, the lack of

transparency for the spend and decentralized cost centers which have

resulted in a swelling array of printers and multi-function devices, over-

burdened IT staffs, ineffective equipment vendor management and

inefficient workflow processes.

This condition positions AUXO’s MPS strategy as an attractive cost-

saving opportunity to health care organizations, evidenced by 14 new,

expanded or extended MPS contracts signed between January 2010 and

December 2011, including two in December with multi-hospital systems

which included a $40M agreement that is the largest in its history. In

Business Description

Outlook, Conclusion &

Valuation



addition, the Company has signed two new contracts in the past two

months, a contract valued at approximately $10M over five years with

Sharp HealthCare in San Diego, CA and a contract valued at

approximately $35 million over five years with Bon Secours Health

System (“BHSI”).

BSHSI is a $3.3 billion not-for-profit Catholic health system, sponsored

by Bon Secours Ministries, that is widely recognized for providing

outstanding patient care and consistently setting the standard in clinical

excellence. It is headquartered in Marriottsville, MD, and owns,

manages, or joint ventures a total of 19 acute-care hospitals, one

psychiatric hospital, five nursing care facilities, four assisted living

facilities, and 14 home care and hospice services. BSHSI has more than

22,000 employees and 10,000 physicians in New York, Maryland,

Virginia, South Carolina, Kentucky and Florida. This is a massive contract

win for AUXO and we may begin to see additional contracts of this size

in the future considering AUXO has demonstrated the ability to take on

large healthcare centers.

These multi-hospital system contracts are massive wins for AUXO and

AUXO may begin to see additional contracts of this size in the future.

AUXO has demonstrated the ability to take on large health care centers,

and scale its operations unit to meet the demands of the health care

market which is experiencing a heightened interest in consolidation and

M&A activity.

As a direct result of the American Recovery and Reinvestment Act

(ARRA) in 2009, which mandates hospitals implement Electronic Health

Records (EHR) by 2015, an added strain to compliance has occurred

placing new demands on IT departments and an escalation of paper

volume due to on-demand printing, mobile devices and the public

concern for rampant data security breaches of electronic medical files.

Additionally, interoperability of e-record technology is scattered across

care organizations with multiple EHR vendor products and hospital-

owned and developed technology causing networking and system

confusion and a lack of functionality among and between hospitals,

clinical offices and patients. This technology chaos and the disparate

skill level of technology use by caregivers results in paper records

remaining the most commonly used method for the exchange of

medical information. Additionally, the fact that hospital divisions, like

intensive care units, still document patient care with hard copy charts

results in the continuation of paper use and printing. Furthermore, the

increased emphasis on emergency contingency planning has many

hospitals maintaining paper files and/or backing up their EHRs with hard



copies in order to facilitate continued care in the event of power loss or

network compromise, although this trend may change in the future as

hospitals become more adept at using electronic records and as the

technology related to EHRs improves over time.

As mentioned earlier in this section, in December 2011, AUXO signed its

largest MPS contract to date with Catholic Health East, a multi-

institutional Catholic health care network with 54,000 full-time

employees. The five year, $40M contract placed AUXO’s MPS services in

19 hospitals, three long-term care facilities, and numerous clinical and

administrative entities in 11 states from Maine to Florida. AUXO

estimates that the contract will save Catholic Health East approximately

$12M over five years. We should note that in July 2010, AUXILIO

announced a five-year contract with Johns Hopkins Health System

(JHHS). JHHS recently expanded its MPS contract to include Suburban

Hospital in Montgomery County, Maryland. The 238-bed campus and

affiliated care facilities will be integrated into the original JHHS contract.

The Johns Hopkins Hospital, flagship of JHHS, has been ranked

America’s #1 hospital by U.S. News & World Report in its annual “Best

Hospitals” issue for the past 20 years. As a result of these large and

market leading reference customers, AUXO may be able to attract

business with customers of a similar or greater size. In addition, the

sales cycle for attracting customers similar to the ones mentioned may

be reduced.

Conclusion

Hospitals remain paper intensive environments even with the advent of

electronic health records. Few hospitals have clarity as to the total

volume and cost of their document production or how to efficiently and

cost-effectively strike a balance between end-users satisfaction,

workflow processes, and hardware and technology to manage their

print infrastructures to reduce costs. As a result, AUXO’s MPS services

are more desireable than ever. As the only vendor neutral, health care

exclusive MPS company in the U.S., AUXILIO is poised to provide

hospitals with specialized knowledge of urgent care print environments

that aids with cost reduction, assists with e-records execution and

provides on-site planning as a strategy partner to substantially reduce

volume.

According to IDC, printed page volume in the United States is expected

to reach 1.2 Trillion pages by 2015. With hospitals adopting new point

of service diagnostic devices and multifunctional devices like iPads and

e-charts with built-in print functions, print volume in hospitals is

http://www.idc.com/getdoc.jsp?containerId=prUS23015911



actually on the rise. Paper documents provide comfort and familiarity

to caregivers and patients, while also remaining valuable from a legal

and regulatory standpoint. The federal regulation of electronic record-

keeping has contributed to increased print volume with easier access

giving way to more copies being produced. As one physician noted in an

interview with NPR radio and reported in Modern Healthcare Magazine,

“the paperless hospital is as likely as the paperless bathroom.”

AUXO offers a comprehensive solution to managing and controlling

print costs, paper volume reduction and end-user satisfaction for its

customers which makes their service offering highly attractive.

AUXILIO was recently recognized by its peers as a “true pioneer” in the

MPS industry for its work in hospitals, and cited as a “best-of-breed”

independent document management service provider by an unbiased

global research company, Quocirca, for its “risk-free model, with no

upfront costs and advanced skill and knowledge of EMR readiness

strategies for health care.” Also, the company was recognized with a

2012 MPSA Leadership Award for the second year in a row for its

“strategic creativity and operational excellence” in the delivery of MPS

service to its customers.

AUXO conducts a no-cost assessment of a hospital’s document

production environment; more often than not, finding decentralized

cost centers and chaotic infrastructures of equipment, technology and

print-related supplies that result in high costs and workflow

inefficiencies. AUXO then places its own full-time trained MPS experts

on site, who customize and rationalize print environments to optimize

workflow and end-user productivity by creating a fully organized and

networked system. MPS experts also train hospital staff in print process

improvement techniques and volume reduction efficiency print

practices to maximize productivity. AUXO also renegotiates vendor

contracts in order to further reduce inefficiency and waste. The

Company believes that its MPS strategy can offer up to a 30% reduction

in print costs.

With approximately 5,795 hospitals in the United States, AUXO values

the market potential for its service at up to $22B. The average 1,000

bed hospital produces roughly five million documents per month, a

number that will only grow as print volumes increase. Garnering just

5% of the market could result in approximately $1.1B of revenue for

AUXO.

AUXO’s MPS strategies represent a better option than relying on

manufacturers and vendors for a number of reasons. The Company’s



health care-specific focus provides an advantage because no other

vendor or manufacturer has the same or longitudinal proprietary

information, knowledge base and ability to address problems specific to

the health care industry. Working on-site with hospital customers gives

AUXO an advantage over third-party vendors or manufacturers by

reducing the wait time between a problem arising and a solution being

found. Manufacturers and vendors serve a wide net of clients, resulting

in increased response time for service, goods, and troubleshooting.

Lastly, being vendor independent allows AUXO to better manage the

finances and supply chain of the full range of a hospital’s print-related

supplies and equipment that ensures higher quality at a lower cost.

Potential Acquisition Candidate

As AUXO continues to gain traction within the MPS segment, the more

potentially attractive AUXO becomes as an acquisition target. We

believe additional large contract wins, similar to the size of Catholic

Health East, could make AUXO very much “in play” as an acquisition

candidate for a larger suitor which could be beneficial for shareholders.

Valuation

Our 12-month target price of $3.35 is based on our risk adjusted net

present value calculation, which we conservatively estimate to be

$100M. We understand there is significant execution risk for AUXO.

With that said, we believe the current valuation doesn’t reflect the

potential upside. We highly doubt AUXO will continue to trade at a

discount for much longer. We could revise our price target higher

depending upon Auxilio’s ability to obtain new contracts in the future.

Managed Print Services

AUXILIO began offering Managed Print Services (“MPS”) to hospitals and

health care organizations in 2004. Since then, AUXO has grown to have

contracts with 64 hospitals and over 1,500 affiliated clinical and medical

facilities and administrative entities. AUXO’s service allows hospitals to

streamline their document production infrastructure through AUXO’s

health care exclusive, vendor-neutral business model. Adopting the

AUXO service can reduce actual per document printing costs

immediately and provide signficant seven figure savings over the

length of a contract, which is typically 3 to 5 years.

Managed Print Services



Addressable Market

Source: Company

The Auxilio Process:

Below is an illustration of the current purchasing process by hospitals:

Auxilio condenses the currently fragmented purchasing process as

illustrated below:



Competition

The majority of the competition in the healthcare industry market for

print management services comes from the large photocopy/multi-

functional digital device manufacturers such as Xerox, Canon, Konica

Minolta, Ricoh and Sharp. The competitive landscape also contains a

number of regional and local equipment dealers and distributors that

exist in the communities which the hospitals serve. In addition, AUXO

competes with in-house departments performing the functions that

AUXO is seeking to have them outsource.

Based on AUXO’s analysis of the competitive landscape, AUXO believes

a very strong opportunity for fully outsourced managed print services to

the healthcare industry exists. AUXO has a strong competitive position

in the marketplace due to a number of important reasons:

AUXO is entirely focused on the healthcare industry. No other

vendor/service provider has its entire business dedicated to

solving issues within the healthcare industry with the expertise

and knowledge base unmatched in the market.

AUXO has a unique approach to providing fully outsourced print

management programs. AUXO’s program is completely

outsourced and hospitals need only pay a single invoice. AUXO

operates the print management process as a department in the

hospital with full-time on-site staff. In contrast, vendors and

dealers, in the vast majority of instances, have multiple small

and large customers in a geographic area with whom they are

providing services, which result in major delays in providing

service and supplies to the hospitals.

By focusing solely on the hospital campus, AUXO enjoys much

lower turn-around times for service, greater up sell

opportunities and a much deeper service relationship with the

customer.

AUXO is not restricted to any single equipment vendor, which

allows them to bring customized hardware and software

solutions to their customers. AUXO’s approach is to provide

technology solutions to its customers without any prejudice as

to equipment.

AUXO maintains a daily connection with the hospital, which

allows them to provide a detailed strategy and plan on

equipment acquisitions saving the organization a great deal of

time, effort and money in this process.

http://www.xerox.com/

http://www.canon.com/

http://www.konicaminolta.com/

http://www.konicaminolta.com/

http://www.ricoh-usa.com/

http://www.sharpusa.com/



For the year ended December 31, 2011, net revenue increased by

$6,438,067 to $21,845,619, a near 42% increase, as compared to the

same period in 2010. Service revenue in 2011 totaled approximately

$19,800,000 compared to approximately $14,700,000 in 2010. The

increase was primarily a result of the addition of seven new recurring

revenue contracts between October 2010 and July 2011, partially

offset by recent renewals of several customer service contracts last

year, which contain programs to assist the customer in cost reduction.

AUXO anticipates overall revenue growth in 2012 as a result of the

expansion of their customer base. Equipment revenue totaled

approximately $2,050,000 in 2011 compared to approximately $750,000

in 2010, with approximately half of the 2011 revenue occurring from

one customer. However, it is important to note that AUXO expects to

significantly decrease the percentage of revenue from equipment

relative to total revenue as they continue to focus on recurring service

revenue.

In 2011 cash used for operating activities was $2,023,052 as compared

to cash provided by operating activities of $414,466 for the same period

in 2010. The difference in cash from operating activities was primarily

due to the costs incurred to implement new recurring revenue

contracts, more aggressive sales and marketing efforts to obtain new

clients and legal and consulting fees in connection with the

development of operational training tools, statutory filings, the drafting

and adoption of a new stock incentive plan and investor relations.

AUXO expects to continue to establish recurring revenue contracts to

new customers throughout 2012. AUXO expects higher cost of revenues

at the start of their engagement with most new customers, and they

may seek additional financing, which may include debt and/or equity

financing or funding through third party agreements. In July of 2011,

AUXO closed on a private offering of secured convertible notes and

warrants with gross proceeds of $1,850,000. In addition, AUXO entered

into an asset based line of credit agreement with Avidbank. This facility

provides for borrowings up to $2,000,000 not to exceed 80% of eligible

receivables. AUXO may seek additional financing; however there can be

no assurance that additional financing will be available on acceptable

terms, if at all. Any equity financing may result in dilution to existing

stockholders and any debt financing may include restrictive covenants.

Management believes that cash generated from debt and/or equity

financing arrangements along with funds from operations will be

sufficient to sustain business operations over the next twelve months.

2011 Financial Results

Risks

http://avidbank.com/default.aspx?v=db784608-2ea4-4989-880f-00aeb370e17e&t=new



We encourage investors to view all risks listed in the Company’s annual

report on file with the Securities Exchange Commission which is

available on the SEC website, www.sec.gov.

Joseph J. Flynn — President & Chief Executive Officer

Joseph J. Flynn is the co-founder and President & CEO of AUXO. Under

Flynn’s leadership and strategic direction, the Company has experienced

continued and successful growth since its inception in 2004. He is an

accomplished business leader in the IT, media, and market research

industries. Mr. Flynn has over 20 years of international and domestic

business management experience with some of the world’s largest

global companies such as the Nielsen Corporation and Advanstar

Communications. Flynn is fluent in Spanish, French, and Portuguese and

earned a post-graduate secondary education degree in foreign language

education from the University of Rhode Island. He is a graduate of the

Catholic University of America in Washington D.C. with a BA in

international affairs.

Paul Anthony, CPA – Chief Financial Officer & Corporate Secretary

Paul Anthony is a Certified Public Accountant and an expert in financial

management, investor relations, tax, treasury, and risk management

with nearly 15 years of professional services experience with worldwide

enterprises, publicly traded companies, and start-ups. He has worked

for a number of the largest companies in the world, including KPMG

Peat Marwick LLP and IBM-Access360. Since 2005, Mr. Anthony has

worked as the lead financial management advisor and analyst for AUXO,

the pioneer of managed print services for the health care industry. He

earned a Bachelor of Science in accounting from Northern Illinois

University.

Simon Vermooten, Six Sigma Business Process Professional – Executive

Vice President

With 25 years experience in key positions with a number of global

copy/print manufacturers and service companies, including Lexmark

International and IKON, Mr. Vermooten’s professional responsibilities

included developing business and print strategy solutions for clients

such as Boeing, Bank of America, Kaiser Permanente, the US Navy and

the US Department of Veterans Affairs. Mr. Vermooten graduated from

the University of Surrey in England, earning a BSc in Business and Hotel

Management and a BA in Marketing. He also holds an MBA in Global

Management and is a certified Six Sigma Process Professional.

Management Bios

http://www.sec.gov/



Scott Mumby – Executive Vice President of Operations

Scott Mumby is a proven strategic leader, with 15 years of experience

implementing and managing growth and transformation initiatives for

organizations ranging in size from mid-market to Fortune 500. His

strength lies in leading change, from initial vision to implementation and

successful realization of expected benefits. As a member of

PricewaterhouseCoopers Strategic Change Practice, Mr. Mumby was an

Organization Transformation leader focused on managing complex

technology driven change in a variety of industries from banking to

manufacturing to high technology. Since then, in a succession of

consulting and enterprise leadership roles, Mr. Mumby has provided

hands-on management of initiatives that span a full range of corporate

functions, including marketing, IT, human resources, finance and

enterprise learning. Mr. Mumby earned his MS in organizational

psychology from California School of Professional Psychology and his

undergraduate degree from California State University, San Diego.

Lisa MacDonald – Senior Vice President, East Coast Operations

Lisa MacDonald is a highly experienced operations and health care

services executive who leads the East Coast portfolio of hospitals and

hospital systems for AUXO. With 18 years of experience with

ServiceMaster Management Services, she held leadership positions in

its Operations of Integrated Services departments supporting the

integration of network delivery systems in the areas of environmental

services, food services, engineering, clinical equipment and materials

management. Her expertise is in the strategic design, operations and

management of health care systems and processes that maximize

efficiency standards and streamline human resources and supply chain

resources. As a member of the Company’s executive team, Ms.

MacDonald is responsible for providing business leadership and

direction to the Company’s highly recognized Centers of Excellence

professional print strategy consultants and support staff. As a

professional change management expert, her skills include process re-

design, training and professional development, customer relations and

business management. She earned a business administration degree

from Taylor University and holds certifications from the ServiceMaster

Graduate Program.

Jeff Butler – Vice President of Business Development

Jeff Butler has dedicated his prestigious career to the health care

industry having over 25 years of executive experience in strategic

business and market development, team building and customer



relations, and has been instrumental in the design of original

professional services initiatives for hospitals. Prior to his 2004

appointment with AUXO, he held several national leadership positions

with ServiceMaster (now Aramark) in its hospital outsourcing services

areas, including acute and long-term care; and he led the Hill-Rom

Company’s sales force for its western region in the areas of patient

room systems and therapeutic surfaces. As a key executive liaison to the

Company’s hospital-partners, he is a health care print strategist and

expert process manager of its professional services to hospitals and

hospital systems. Mr. Butler earned a Bachelor of Arts from the

University of California, at Irvine, where he was a scholarship athlete.

Amer Otri - VP of Operations, Western Region. Amer Otri has an

extensive background in technology, management and operations, and

leads the company’s expanding footprint in the Northwest. He has been

at the forefront of helping to execute AUXO’s growth strategy to the

health care industry. Prior to his new position, Mr. Otri had been

Director of Operations for the Southwest Region. He has over 16 years

of international experience in operations management and IT solutions

with some of the largest IT and logistics companies in the world,

including DHL, New Horizons Computer Learning Centers and Agilience-

ME, a global leader in product development and adaptation of IT

solutions to drive process improvement. He is a graduate of Kakatiya

University in India with a degree in commerce.



Income Statement:

Year Ended December 31,

2011 2010

Net revenues $ 21,845,619 $ 15,407,552

Cost of revenues 19,131,257 12,532,193

Gross profit 2,714,362 2,875,359

Operating expenses:

Sales and marketing 1,830,538 1,566,137

General and administrative expenses 3,360,513 2,861,844

Total operating expenses 5,191,051 4,427,981

Loss from operations (2,476,689) (1,552,622)

Other income (expense):

Interest expense (171,945) (6,918)

Interest income 2,487 1,301

Change in fair value of derivative liabilities 62,000 -

Total other income (expense) (107,458) (5,617)

Loss before provision for income taxes (2,584,147) (1,558,239)

Income tax expense 7,495 11,479

Net loss $ (2,591,642) $ (1,569,718)

Net loss per share:

Basic $ (0.13) $ (0.08)

Diluted $ (0.13) $ (0.08)

Number of weighted average shares outstanding:

Basic 19,376,214 19,226,357

Diluted 19,376,214 19,226,357

Financial Statements



Balance Sheet:

As of December 31,

2011 2010

ASSETS

Current assets:

Cash and cash equivalents $ 1,832,115 $ 2,249,907

Accounts receivable, net 2,032,738 1,160,251

Prepaid and other current assets 74,977 331,483

Supplies 651,874 687,845

Total current assets 4,591,704 4,429,486

Property and equipment, net 191,810 234,975

Deposits 28,013 28,013

Loan acquisition costs 226,576 -

Goodwill 1,517,017 1,517,017

Total assets $ 6,555,120 $ 6,209,491

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable and accrued expenses $ 2,757,670 $ 2,538,828

Accrued compensation and benefits 1,031,748 772,532

Deferred revenue 381,767 255,802

Current portion of capital lease obligations 49,881 41,776

Total current liabilities 4,221,066 3,608,938

Long-term liabilities:

Convertible notes payable, net of discount of $364,250 at December

31, 2011 1,485,750 -

Derivative warrant liability 126,000 -

Derivative additional investment rights liability 235,000 -

Capital lease obligations less current portion 80,735 79,524

Total long-term liabilities 1,927,485 79,524

Commitments and contingencies - -

Stockholders’ equity:

Common stock, par value at $0.001, 33,333,333 shares authorized,

19,449,783 shares issued and outstanding at December 31, 2011 and

19,336,651 shares issued and outstanding at December 31, 2010 19,451 19,338

Additional paid-in capital 20,894,653 20,417,584

Accumulated deficit (20,507,535) (17,915,893)

Total stockholders’ equity 406,569 2,521,029

Total liabilities and stockholders’ equity $ 6,555,120 $ 6,209,491



Statement of Cash Flows:

Year Ended December 31,

2011 2010

Cash flows provided by operating activities:

Net loss $ (2,591,642) $ (1,569,718)

Adjustments to reconcile net loss to net cash provided by (used for) operating

activities:

Depreciation and amortization 125,601 250,252

Stock compensation expense for options and warrants granted to employees and

consultants 303,979 363,248

Fair value of restricted stock granted for marketing services 81,703 -

Fair value of warrants issued for marketing services - 90,161

Change in fair value of derivative liabilities (62,000) -

Interest expense related to accretion of debt discount costs 58,750 -

Interest expense related to amortization of loan acquisition costs 36,544 -

Changes in operating assets and liabilities:

Accounts receivable (872,487) 237,347

Prepaid and other current assets 256,506 (238,237)

Supplies 35,971 (150,675)

Deposits - 15,779

Accounts payable and accrued expenses 218,842 1,291,948

Accrued compensation and benefits 259,216 217,830

Deferred revenue 125,965 (93,469)

Net cash provided by (used for) operating activities (2,023,052) 414,466

Cash flows (used for) investing activities:

Purchases of property and equipment (24,669) (88,240)

Net cash (used for) investing activities (24,669) (88,240)

Cash flows provided by financing activities:

Net proceeds from issuance of Common Stock - 161,450

Proceeds from convertible notes payable 1,850,000 -

Acquisition fees paid for convertible notes payable (171,620) -

Payments on capital leases (48,451) (19,355)

Net cash provided by financing activities 1,629,929 142,095

Net increase (decrease) in cash and cash equivalents (417,792) 468,321

Cash and cash equivalents, beginning of year 2,249,907 1,781,586

Cash and cash equivalents, end of year $ 1,832,115 $ 2,249,907



This report has been prepared by Vista Partners LLC (“Vista”) with the assistance of Auxilio, Inc. (“the Company”)

based upon information provided by the Company. Vista has not independently verified such information, and in

addition, Vista has been compensated by the Company for advisory services. Statements in this report that are

not historical facts are “forward-looking statements” that involve risks and uncertainties. Forward-looking

statements can be identified by the use of words such as “opportunities,” “trends,” “potential,” “estimates,”

“may,” “will,” “could,” “should,” “anticipates,” “expects” or comparable terminology or by discussions of

strategy. Such statements involve known and unknown risks, uncertainties and other factors that may cause

actual results, performance or achievements to be materially different from the results, performance or

achievements expressed or implied by such forward-looking statements. Additional risks, uncertainties and other

factors are identified under the captions “Risk Factors” and “Special Note Regarding Forward-Looking

Statements” in the Company’s reports filed from time to time with the Securities and Exchange Commission,

including its Annual Report for the current fiscal year. Vista and the Company disclaim any intention or obligation

to update publicly or revise any forward-looking statements, whether as a result of new or additional

information, future events or otherwise, except as required by applicable law. The Company is solely responsible

for the accuracy of that information. Information as to other companies has been prepared from publicly

available information and has not been independently verified by the Company or Vista. For more complete

information about the Company, the reader is directed to the Company's website, http://www.auxilioinc.com.

Vista’s reports are based on data obtained from sources we believe to be reliable, but are not guaranteed as to

accuracy and do not purport to be complete. Because of individual objectives, this report should not be

construed as advice designed to meet the particular investment needs of any investor. Any opinions expressed

by Vista’s analysts are subject to change. This report is published solely for informational purposes and is not to

be construed as an offer to sell or the solicitation of an offer to buy any security in any state. Past performance

does not guarantee future performance. Free additional information about the Company and its public filings, as

well as free copies of this report can be obtained in either a paper or electronic format by calling

877.215.4813.For additional disclosures and disclaimers please visit

http://www.vistapglobal.com/pdf/Disclaimer.pdf.

Legal Notes & Disclosures

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AUXO Initiation 72412

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