AUXILIO,
INC. AND SUBSIDIARIES
|
|||||||
CONDENSED
CONSOLIDATED BALANCE SHEET
|
|||||||
JUNE
30, 2006
|
|||||||
(UNAUDITED)
|
|||||||
ASSETS
|
|||||||
Current
assets:
|
|||||||
Cash
and cash equivalents
|
$
|
1,697,908
|
|||||
Accounts
receivable, net
|
713,909
|
||||||
Prepaid
and other current assets
|
105,159
|
||||||
Supplies
|
373,111
|
||||||
Total
current assets
|
2,890,087
|
||||||
Property
and equipment, net
|
305,132
|
||||||
Deposits
|
28,790
|
||||||
Loan
acquisition costs, net
|
456,684
|
||||||
Intangible
assets, net
|
556,741
|
||||||
Goodwill
|
1,517,017
|
||||||
Total
assets
|
$
|
5,754,451
|
|||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|||||||
Current
liabilities:
|
|||||||
Accounts
payable and accrued expenses
|
$
|
848,580
|
|||||
Accrued
compensation and benefits
|
290,942
|
||||||
Deferred
revenue
|
354,629
|
||||||
Current
portion of long-term debt
|
616,626
|
||||||
Current
portion of capital lease obligations
|
56,364
|
||||||
Total
current liabilities
|
2,167,142
|
||||||
Note
payable, less current portion, net of discount of
$240,646
|
2,159,354
|
||||||
Commitments
and contingencies
|
-
|
||||||
Stockholders'
equity:
|
|||||||
Common
stock, par value at $0.001, 33,333,333 shares
|
|||||||
authorized,
16,122,809 shares issued and outstanding
|
16,124
|
||||||
Additional
paid-in capital
|
15,978,960
|
||||||
Accumulated
deficit
|
(14,567,128)
|
||||||
Total
stockholders' equity
|
1,427,956
|
||||||
Total
liabilities and stockholders’ equity
|
$
|
5,754,451
|
AUXILIO,
INC. AND SUBSIDIARIES
|
|||||||||||||
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|||||||||||||
(UNAUDITED)
|
|||||||||||||
Three
Months
|
Six
Months
|
||||||||||||
Ended
June 30,
|
Ended
June 30,
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
Revenues
|
$
|
2,481,139
|
$
|
1,237,850
|
$
|
4,516,332
|
$
|
2,021,927
|
|||||
Cost
of revenues
|
2,362,995
|
889,466
|
4,334,369
|
1,663,640
|
|||||||||
Gross
profit
|
118,144
|
348,384
|
181,963
|
358,287
|
|||||||||
Operating
expenses:
|
|||||||||||||
Sales and marketing
|
490,981
|
468,920
|
1,001,884
|
908,175
|
|||||||||
General and administrative expenses
|
536,707
|
525,752
|
1,193,872
|
1,010,093
|
|||||||||
Intangible asset amortization
|
63,802
|
93,368
|
127,603
|
186,736
|
|||||||||
Total
operating expenses
|
1,091,490
|
1,088,040
|
2,323,359
|
2,105,004
|
|||||||||
Loss from operations
|
(973,346
|
)
|
(739,656
|
)
|
(2,141,396
|
)
|
(1,746,717
|
)
|
|||||
Other
income (expense):
|
|||||||||||||
Interest expense
|
(209,155
|
)
|
(51,598
|
)
|
(219,005
|
)
|
(72,555
|
)
|
|||||
Interest income
|
17,417
|
11,300
|
18,744
|
13,511
|
|||||||||
Gain on sale of marketable securities
|
-
|
(41,734
|
)
|
10,448
|
362,061
|
||||||||
Total
other income (expense)
|
(191,738
|
)
|
(82,032
|
)
|
(189,813
|
)
|
303,017
|
||||||
Loss
before provision for income taxes
|
(1,165,084
|
)
|
(821,688
|
)
|
(2,331,209
|
)
|
(1,443,700
|
)
|
|||||
Income
tax expense
|
-
|
-
|
(2,400
|
)
|
(3,200
|
)
|
|||||||
Net
loss
|
$
|
(1,165,084
|
)
|
$
|
(821,688
|
)
|
$
|
(2,333,609
|
)
|
$
|
(1,446,900
|
)
|
|
Net
loss per share:
|
|||||||||||||
Basic
|
$
|
(0.07
|
)
|
$
|
(0.05
|
)
|
$
|
(0.15
|
)
|
$
|
(0.10
|
)
|
|
Diluted
|
$
|
(0.07
|
)
|
$
|
(0.05
|
)
|
$
|
(0.15
|
)
|
$
|
(0.10
|
)
|
|
Number
of weighted average shares:
|
|||||||||||||
Basic
|
16,095,615
|
15,854,874
|
16,029,040
|
15,212,829
|
|||||||||
Diluted
|
16,095,615
|
15,854,874
|
16,029,040
|
15,212,829
|
CONDENSED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
|
|||||||
(UNAUDITED)
|
|||||||
Three
Months
|
Six
Months
|
||||||
Ended
June 30,
|
Ended
June 30,
|
||||||
2006
|
2005
|
2006
|
2005
|
||||
Net
loss
|
$
(1,165,084)
|
$
(821,688)
|
$
(2,333,609)
|
$
(1,446,900)
|
|||
Reclassification
of realized amounts included in net loss
|
-
|
(97,500)
|
-
|
(222,210)
|
|||
Comprehensive
loss
|
$
(1,165,084)
|
$
(919,188)
|
$
(2,333,609)
|
$
(1,669,110)
|
AUXILIO,
INC. AND SUBSIDIARIES
|
||||||||||
CONDENSED
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
|
||||||||||
SIX
MONTHS ENDED JUNE 30, 2006
|
||||||||||
(UNAUDITED)
|
||||||||||
Additional
|
Total
|
|||||||||
Common
Stock
|
Paid-in
|
Accumulated
|
Stockholders'
|
|||||||
Shares
|
Amount
|
Capital
|
Deficit
|
Equity
|
||||||
Balance
at December 31, 2005
|
15,961,410
|
$
15,963
|
$
15,190,416
|
$
(12,233,519)
|
$
2,972,860
|
|||||
Common
stock issued for services
|
3,538
|
3
|
4,950
|
-
|
4,953
|
|||||
Relative
fair value of warrants issued related to revolving loan
payable
|
-
|
-
|
85,079
|
-
|
85,079
|
|||||
Stock
issued for services rendered in connection with procurement of
note
payable
|
45,861
|
46
|
69,954
|
-
|
70,000
|
|||||
Relative
fair value of warrants issued related to convertible loan
payable
|
-
|
-
|
340,188
|
-
|
340,188
|
|||||
Cashless
exercise of warrants to stock
|
112,000
|
112
|
(112)
|
-
|
-
|
|||||
Stock
compensation expense for options and warrants granted to employees
and
consultants
|
-
|
-
|
288,485
|
-
|
288,485
|
|||||
Net
loss
|
-
|
-
|
-
|
(2,333,609)
|
(2,333,609)
|
|||||
Balance
at June 30, 2006
|
16,122,809
|
$16,124
|
$15,978,960
|
$(14,567,128)
|
$1,427,956
|
AUXILIO,
INC. AND SUBSIDIARIES
|
|||||||
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|||||||
(UNAUDITED)
|
|||||||
Six
Months Ended June 30,
|
|||||||
2006
|
2005
|
||||||
Cash
flows used for operating activities:
|
|||||||
Net
loss
|
$
(2,333,609)
|
$
(1,446,900)
|
|||||
Adjustments
to reconcile net loss to net cash
|
|||||||
used
for operating activities:
|
|||||||
Depreciation
|
56,657
|
40,570
|
|||||
Amortization
of intangible assets
|
127,603
|
186,736
|
|||||
Stock
compensation expense for warrants and options issued to employees
and
consultants
|
288,485
|
-
|
|||||
Stock
issued for services
|
4,953
|
-
|
|||||
Gain
on sale of marketable securities
|
(10,448)
|
(362,061)
|
|||||
Interest
expense related to amortization of warrants issued for
loans
|
105,113
|
58,029
|
|||||
Interest
expense related to amortization of loan acquisition costs
|
38,019
|
-
|
|||||
Changes
in operating assets and liabilities:
|
|||||||
Accounts
receivable and other receivables
|
(225,085)
|
(1,002,165)
|
|||||
Supplies
|
70,466
|
(36,011)
|
|||||
Prepaid
and other current assets
|
(13,794)
|
37,713
|
|||||
Deposits
|
12,565
|
6,751
|
|||||
Accounts
payable and accrued expenses
|
337,976
|
(269,092)
|
|||||
Accrued
compensation and benefits
|
(31,995)
|
(169,799)
|
|||||
Lease
buyout provision
|
-
|
133,811
|
|||||
Deferred
revenue
|
55,767
|
161,721
|
|||||
Net
cash used for operating activities
|
(1,517,327)
|
(2,660,697)
|
|||||
Cash
flows provided by (used for) investing
activities:
|
|||||||
Purchases
of property and equipment
|
(124,536)
|
(15,858)
|
|||||
Net
proceeds from sale of marketable securities
|
26,698
|
979,311
|
|||||
Net
cash (used for) provided by investing activities
|
(97,838)
|
963,453
|
|||||
Cash
flows provided by financing activities:
|
|||||||
Proceeds
from line of credit
|
250,000
|
500,000
|
|||||
Repayments
on line of credit
|
(250,000)
|
(500,000)
|
|||||
Proceeds
from convertible note payable
|
3,000,000
|
-
|
|||||
Acquisition
fees paid for convertible note payable
|
(345,195)
|
-
|
|||||
Payments
on capital leases
|
(6,673)
|
(2,277)
|
|||||
Payments
on notes payable and long-term debt
|
-
|
(159,618)
|
|||||
Net
proceeds from issuance of common stock
|
-
|
2,944,969
|
|||||
Proceeds
from exercise of warrants
|
-
|
2,250
|
|||||
Net
cash provided by financing activities
|
2,648,132
|
2,785,324
|
|||||
Net
increase in cash and cash equivalents
|
1,032,967
|
1,088,080
|
|||||
Cash
and cash equivalents, beginning of period
|
664,941
|
951,090
|
|||||
Cash
and cash equivalents, end of period
|
$
1,697,908
|
$
2,039,170
|
AUXILIO,
INC. AND SUBSIDIARIES
|
|||||||
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
|
|||||||
(UNAUDITED)
|
|||||||
Six
Months Ended June 30,
|
|||||||
2006
|
2005
|
||||||
Supplemental
disclosure of cash flow information:
|
|||||||
Interest
paid
|
$
66,023
|
$
14,736
|
|||||
Income
tax paid
|
$
2,400
|
$
3,200
|
|||||
Non-cash
investing and financing activities:
|
|||||||
Warrants
issued for expenses of private placement
|
-
|
$
158,315
|
|||||
Relative
fair value of warrants issued related to issuance of note
payable
|
$
425,267
|
$
58,029
|
|||||
Property
and equipment acquired by capital lease
|
$
26,391
|
$
19,097
|
|||||
Stocks
issued for acquisition fees for convertible note payable
|
$
70,000
|
-
|
Options
|
||||
Shares
|
Weighted
Average Exercise Price
|
Weighted
Average Remaining Term in Years
|
Aggregate
Intrinsic Value
|
|
Outstanding
at December 31, 2005
|
2,008,497
|
$
1.48
|
|
|
Granted
|
571,500
|
$
1.38
|
|
|
Exercised
|
-
|
-
|
|
|
Cancelled
|
(160,500)
|
$
1.63
|
|
|
Outstanding
at June 30, 2006
|
2,419,497
|
$
1.45
|
8.43
|
$
158,390
|
Exercisable
at June 30, 2006
|
862,221
|
$
1.33
|
7.63
|
$
103,190
|
Warrants
|
||||
Shares
|
Weighted
Average Exercise Price
|
Weighted
Average Remaining Term in Years
|
Aggregate
Intrinsic Value
|
|
Outstanding
at December 31, 2005
|
1,398,535
|
$
1.25
|
||
Granted
|
698,541
|
$
1.94
|
||
Exercised
|
(112,000)
|
.30
|
||
Cancelled
|
(28,000)
|
.30
|
||
Outstanding
at June 30, 2006
|
1,957,076
|
$
1.56
|
4.28
|
$
375,498
|
Exercisable
at June 30, 2006
|
1,899,961
|
$
1.55
|
4.31
|
$
375,498
|
Three
Months Ended June 30, 2006
|
Six
Months Ended June 30, 2006
|
||
Cost
of revenues
|
$
31,672
|
$
71,935
|
|
Sales
and marketing
|
3,522
|
61,516
|
|
General
and administrative expenses
|
73,333
|
155,034
|
|
Total
stock based compensation expense
|
$
108,527
|
$
288,485
|
Three
Months Ended
|
Six
Months Ended
|
||
June
30, 2005
|
June
30, 2005
|
||
Net
loss:
|
|||
As
reported
|
$
(821,688)
|
$
(1,446,900)
|
|
Add:
APB 25 Expense
|
-
|
-
|
|
Deduct:
Total stock based employee compensation
expense
determined under SFAS 123 fair value based method
|
239,414
|
474,332
|
|
Net
loss, as adjusted
|
$
(1,061,102)
|
$ (1,921,232)
|
|
Basic
loss per share:
|
|||
As
reported
|
$
(0.05)
|
$
(0.10)
|
|
Pro
forma
|
$
(0.07)
|
$
(0.13)
|
|
Diluted
loss per share:
|
|||
As
reported
|
$
(0.05)
|
$
(0.10)
|
|
Pro
forma
|
$
(0.07)
|
$
(0.13)
|
Trade
receivable
|
$715,919
|
|||
Allowance
for doubtful accounts
|
(2,010)
|
|
||
Total
accounts receivable
|
|
$713,909
|
· |
revenue
recognition
|
· |
accounts
receivable valuation and related
reserves
|
· |
accounting
for income taxes
|
· |
impairment
of intangible assets
|
· |
deferred
revenue
|
· |
the
emergence of competitors in our target market, and the quality
and
development of their products and services;
and
|
· |
the
market’s acceptance of our products and
services.
|
· |
successfully
complete the development of our products and
services;
|
· |
modify
our products and services as necessary to meet the demands of our
market;
|
· |
attract
and retain highly skilled employees;
and
|
· |
respond
to competitive influences.
|
· |
greater
name recognition and larger marketing budgets and
resources;
|
· |
established
marketing relationships and access to larger customer
bases;
|
· |
substantially
greater financial, technical and other resources;
and
|
· |
larger
technical and support staffs.
|
· |
develop
or enhance our service offerings;
|
· |
take
advantage of future opportunities; or
|
· |
respond
to customers and competition.
|
· |
net
tangible assets of at least $2,000,000, if the issuer has been
in
continuous operation for at least three years, or net tangible
assets of
at least $5,000,000, if the issuer has been in continuous operation
for
less than three years; or
|
· |
average
annual revenue of at least $6,000,000 for the last three years.
|
Name
|
Votes
For
|
Votes
Withheld
|
||
Joseph
J. Flynn
|
9,756,715
|
6,208,233
|
||
Edward
B. Case
|
9,756,715
|
6,208,233
|
||
Robert
L. Krakoff
|
9,756,715
|
6,208,233
|
||
John
D. Pace
|
9,756,715
|
6,208,233
|
||
Max
Poll
|
9,756,715
|
6,208,233
|
||
Michael
Vanderhoof
|
9,756,715
|
6,208,233
|
||
Etienne
L. Weidemann
|
9,756,715
|
6,208,233
|
No.
|
Item
|
31.1
|
Certification
of the Chief Executive Officer pursuant to Rule 13a-14(a) and Rule
15d-14(a)
of
the Securities Exchange Act of 1934, as amended.
|
31.2
|
Certification
of the Chief Financial Officer pursuant to Rule 13a-14(a) and Rule
15d-14(a)
of
the Securities Exchange Act of 1934, as amended.
|
32.1
|
Certification
of the CEO and CFO pursuant to
Rule 13a-14(b) and Rule 15d-14(b) of the Securities Exchange Act
of 1934
and
18
U.S.C. Section 1350.
|