AUXILIO,
INC. AND SUBSIDIARIES
|
||||
CONDENSED
CONSOLIDATED BALANCE SHEET
|
||||
JUNE
30, 2007
|
||||
(UNAUDITED)
|
||||
ASSETS
|
||||
Current
assets:
|
||||
Cash
and cash equivalents
|
$
|
790,964
|
||
Accounts
receivable, net
|
2,776,995
|
|||
Prepaid
and other current assets
|
22,904
|
|||
Supplies
|
650,077
|
|||
Total current assets
|
4,240,940
|
|||
Property
and equipment, net
|
257,807
|
|||
Deposits
|
28,790
|
|||
Loan
acquisition costs, net
|
328,710
|
|||
Intangible
assets, net
|
310,056
|
|||
Goodwill
|
1,517,017
|
|||
Total
assets
|
$
|
6,683,320
|
||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||
Current
liabilities:
|
||||
Accounts
payable and accrued expenses
|
$
|
1,835,118
|
||
Accrued
compensation and benefits
|
520,523
|
|||
Deferred
revenue
|
507,090
|
|||
Current
portion of long-term debt
|
600,000
|
|||
Current
portion of capital lease obligations
|
37,366
|
|||
Revolving
loan payable, net of discount of $30,149
|
719,851
|
|||
Total current liabilities
|
4,219,948
|
|||
Note
payable, less current portion, net of discount of
$153,753
|
1,646,247
|
|||
Commitments
and contingencies
|
-
|
|||
Stockholders'
equity:
|
||||
Common
stock, par value at $0.001, 33,333,333 shares
|
||||
authorized,
16,135,309 shares issued and outstanding
|
16,137
|
|||
Additional
paid-in capital
|
16,687,336
|
|||
Accumulated
deficit
|
(15,886,348)
|
|
||
Total
stockholders' equity
|
817,125
|
|||
Total liabilities and stockholders’ equity
|
$
|
6,683,320
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
||||||||||||||||||||||
(UNAUDITED)
|
||||||||||||||||||||||
|
Three
Months
|
Six
Months
|
||||||||||||||||||||
|
Ended
June 30,
|
Ended
June 30,
|
||||||||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||||||||
Revenues
|
$
|
5,022,112
|
$
|
2,481,139
|
$
|
10,885,023
|
$ 4,516,332
|
|||||||||||||||
Cost
of revenues
|
3,971,000
|
2,362,995
|
8,271,070
|
4,334,369
|
||||||||||||||||||
Gross
profit
|
1,051,112
|
118,144
|
2,613,953
|
181,963
|
||||||||||||||||||
Operating
expenses:
|
||||||||||||||||||||||
Sales
and marketing
|
313,909
|
490,981
|
588,384
|
1,001,884
|
||||||||||||||||||
General
& administrative expenses
|
570,963
|
536,707
|
1,245,727
|
1,193,872
|
||||||||||||||||||
Intangible
asset amortization
|
59,541
|
63,802
|
119,082
|
127,603
|
||||||||||||||||||
Total operating expenses
|
944,143
|
1,091,490
|
1,953,193
|
2,323,359
|
||||||||||||||||||
Income (loss) from operations
|
106,969
|
(973,346)
|
|
660,760
|
(2,141,396)
|
|||||||||||||||||
Other
income (expense):
|
||||||||||||||||||||||
Interest
expense
|
(201,714)
|
|
(209,155)
|
|
(406,596)
|
|
(219,005)
|
|||||||||||||||
Interest
income
|
4,580
|
17,417
|
6,969
|
18,744
|
||||||||||||||||||
Gain
on sale of marketable securities
|
-
|
-
|
-
|
10,448
|
||||||||||||||||||
Total other income
(expense)
|
(197,134)
|
|
(191,738)
|
|
(399,627)
|
|
(189,813)
|
|||||||||||||||
Income
(loss) before provision for income taxes
|
(90,165)
|
|
(1,165,084)
|
|
261,133
|
(2,331,209)
|
||||||||||||||||
Income
tax expense
|
(5,600)
|
|
-
|
(11,200)
|
|
(2,400)
|
||||||||||||||||
Net
income (loss)
|
$
|
(95,765)
|
|
$
|
(1,165,084)
|
|
$
|
249,933
|
|
$ (2,333,609
|
||||||||||||
Net
income (loss) per share:
|
||||||||||||||||||||||
Basic
|
$
|
(.01)
|
|
$
|
(.07)
|
|
$
|
.02
|
$
(.15)
|
|||||||||||||
Diluted
|
$
|
(.03)
|
$
|
(.10)
|
|
$
|
(.00)
|
|
$ (.17)
|
|||||||||||||
Number
of weighted average shares:
|
||||||||||||||||||||||
Basic
|
16,131,875
|
16,095,615
|
16,127,367
|
16,029,040
|
||||||||||||||||||
Diluted
|
17,631,173
|
17,773,484
|
18,541,538
|
17,706,909
|
||||||||||||||||||
AUXILIO,
INC. AND SUBSIDIARIES
|
|||||||||||||||||||
CONDENSED
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
|
|||||||||||||||||||
SIX
MONTHS ENDED JUNE 30, 2007
|
|||||||||||||||||||
(UNAUDITED)
|
|||||||||||||||||||
Additional
|
Total
|
||||||||||||||||||
|
Common
Stock
|
Paid-in
|
Accumulated
|
Stockholders'
|
|||||||||||||||
|
Shares
|
Amount
|
Capital
|
Deficit
|
Equity
|
||||||||||||||
Balance
at December 31, 2006
|
16,122,809
|
$
|
16,124
|
$
|
16,430,094
|
$
|
(16,136,281)
|
|
$
|
309,937
|
|||||||||
Stock
compensation expense for options and warrants granted to employees
and
consultants
|
-
|
-
|
251,380
|
-
|
251,380
|
||||||||||||||
Stock
options exercised
|
12,500
|
13
|
5,862
|
-
|
5,875
|
||||||||||||||
Net
income
|
-
|
-
|
-
|
249,933
|
249,933
|
||||||||||||||
Balance
at June 30, 2007
|
16,135,309
|
$
|
16,137
|
$
|
16,687,336
|
$
|
(15,886,348)
|
|
$
|
817,125
|
AUXILIO,
INC. AND SUBSIDIARIES
|
|||||||
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|||||||
(UNAUDITED)
|
|||||||
|
Six
Months Ended June 30,
|
||||||
2007
|
2006
|
||||||
Cash
flows provided by (used for) operating
activities:
|
|||||||
Net
income (loss)
|
$
|
249,933
|
$
|
(2,333,609)
|
|
||
Adjustments
to reconcile net income (loss) to net cash
|
|||||||
provided
by (used for) operating activities:
|
|||||||
Depreciation
|
68,403
|
56,657
|
|||||
Amortization
of intangible assets
|
119,082
|
127,603
|
|||||
Stock
compensation expense for warrants and options issued to employees
and
consultants
|
251,380
|
288,485
|
|||||
Stock
issued for services
|
-
|
4,953
|
|||||
Gain
on sale of marketable securities
|
-
|
(10,448)
|
|
||||
Interest
expense related to amortization of warrants issued for
loans
|
83,562
|
105,113
|
|||||
Interest
expense related to amortization of loan acquisition costs
|
143,730
|
38,019
|
|||||
Changes
in operating assets and liabilities:
|
|||||||
Accounts
receivable and other receivables
|
(1,052,737)
|
|
(225,085)
|
|
|||
Supplies
|
40,401
|
70,466
|
|||||
Prepaid
and other current assets
|
7,769
|
(13,794)
|
|
||||
Deposits
|
-
|
12,565
|
|||||
Accounts
payable and accrued expenses
|
515,015
|
337,976
|
|||||
Accrued
compensation and benefits
|
153,728
|
(31,995)
|
|
||||
Deferred
revenue
|
217,776
|
55,767
|
|||||
Net
cash provided by (used for) operating activities
|
798,042
|
(1,517,327)
|
|
||||
Purchases
of property and equipment
|
(22,441)
|
|
(124,536)
|
|
|||
Net
proceeds from sale of marketable securities
|
-
|
26,698
|
|||||
Net
cash (used for) investing activities
|
(22,441)
|
|
(97,838)
|
|
|||
Cash
flows provided by financing activities:
|
|||||||
Proceeds
from line of credit
|
-
|
250,000
|
|||||
Repayments
on line of credit
|
-
|
(250,000)
|
|
||||
Proceeds
from convertible note payable
|
-
|
3,000,000
|
|||||
Acquisition
fees paid for convertible note payable
|
-
|
(345,195)
|
|
||||
Payments
on capital leases
|
(9,949)
|
|
(6,673)
|
|
|||
Payments
on notes payable and long-term debt
|
(300,000)
|
|
-
|
||||
Proceeds
from exercise of options
|
5,875
|
-
|
|||||
Net
cash (used for) provided by financing activities
|
(304,074)
|
|
2,648,132
|
||||
Net
increase in cash and cash equivalents
|
471,527
|
1,032,967
|
|||||
Cash
and cash equivalents, beginning of period
|
319,437
|
664,941
|
|||||
Cash
and cash equivalents, end of period
|
$
|
790,964
|
$
|
1,697,908
|
AUXILIO,
INC. AND SUBSIDIARIES
|
|||||||
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
|
|||||||
(UNAUDITED)
|
|||||||
Six
Months Ended June 30,
|
|||||||
2007
|
2006
|
||||||
Supplemental
disclosure of cash flow information:
|
|||||||
Interest
paid
|
$
|
179,304
|
$
|
66,023
|
|||
Income
tax paid
|
$
|
2,400
|
$
|
2,400
|
|||
Non-cash
investing and financing activities:
|
|||||||
Relative
fair value of warrants issued related to issuance of note
payable
|
$
|
-
|
$
|
425,267
|
|||
Property
and equipment acquired by capital lease
|
$
|
-
|
$
|
26,391
|
|||
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, 2006
|
2,182,648
|
$
1.39
|
|||||||
Granted
|
896,500
|
.50
|
|||||||
Exercised
|
(12,500)
|
.47
|
|||||||
Cancelled
|
(177,000)
|
1.60
|
|||||||
Outstanding
at June 30, 2007
|
2,889,648
|
$ 1.10
|
7.97
|
$
273,237
|
|||||
Exercisable
at June 30, 2007
|
1,458,509
|
$ 1.30
|
6.94
|
$ 15,027
|
Warrants
|
Shares
|
Weighted
Average Exercise Price
|
Weighted
Average Remaining Term in Years
|
Aggregate
Intrinsic
Value
|
|||||
Outstanding
at December 31, 2006
|
2,467,076
|
$
1.34
|
|||||||
Granted
|
100,000
|
.47
|
|||||||
Exercised
|
-
|
.30
|
|||||||
Cancelled
|
(500)
|
3.00
|
|||||||
Outstanding
at June 30, 2007
|
2,566,576
|
$
1.30
|
4.05
|
$
449,513
|
|||||
Exercisable
at June 30, 2007
|
2,566,576
|
$
1.30
|
4.05
|
$ 449,513
|
Three
Months
|
Six
Months
|
||||||||||||
|
Ended June 30,
|
Ended
June 30,
|
|||||||||||
2007
|
2006
|
2007
|
2006
|
||||||||||
Cost
of revenues
|
$
|
26,154
|
$
|
31,672
|
$
|
53,792
|
$
|
71,934
|
|||||
Sales
and marketing
|
28,677
|
3,522
|
58,872
|
61,516
|
|||||||||
General
and administrative expense
|
53,866
|
73,333
|
112,753
|
155,035
|
|||||||||
Total stock based compensation expense
|
$
|
108,697
|
$
|
108,527
|
$
|
225,417
|
$
|
288,485
|
|
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
Numerator:
|
||||||||||||||||
Net
income (loss)
|
$
|
(95,765)
|
|
$
|
(1,165,084)
|
|
$
|
249,933
|
$
|
(2,333,609)
|
|
|||||
Effects
of dilutive securities:
|
||||||||||||||||
Convertible
note payable
|
(381,971)
|
(629,581)
|
(315,234)
|
|
(629,581)
|
|||||||||||
Income
(loss) after effects of conversion of note payable
|
$
|
(477,736)
|
|
$
|
(1,794,665)
|
|
$
|
(65,301)
|
|
$
|
(2,963,190)
|
|
||||
Denominator:
|
||||||||||||||||
Denominator
for basic calculation weighted average shares
|
16,131,875
|
16,095,615
|
16,127,367
|
16,029,040
|
||||||||||||
Dilutive
common stock equivalents:
|
||||||||||||||||
Secured
convertible notes
|
1,499,298
|
1,677,869
|
1,499,298
|
1,677,869
|
||||||||||||
Options
and warrants
|
-
|
-
|
914,873
|
-
|
||||||||||||
Denominator
for diluted calculation weighted average shares
|
17,631,173
|
17,773,484
|
18,541,538
|
17,706,909
|
||||||||||||
Net
income (loss) per share:
|
||||||||||||||||
Basic
net income (loss) per share
|
$
|
(.01)
|
|
$
|
(.07)
|
|
$
|
.02
|
$
|
(.15)
|
|
|||||
Diluted
net income (loss) per share
|
$
|
(.03)
|
|
$
|
(.10)
|
|
$
|
(.00)
|
|
$
|
(.17)
|
|
Trade
receivable
|
$
|
2,805,505
|
||
Allowance
for doubtful accounts
|
(28,510)
|
|
||
Total
accounts receivable
|
$
|
2,776,995
|
8. |
NOTE
PAYABLE
|
· |
revenue
recognition
|
· |
accounts
receivable valuation and related
reserves
|
· |
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
|
9,970,765
|
-
|
||||
Edward
B. Case
|
9,970,765
|
-
|
||||
John
D. Pace
|
9,970,765
|
-
|
||||
Max
Poll
|
9,970,765
|
-
|
||||
Michael
Vanderhoof
|
9,970,765
|
3,000
|
||||
Etienne
L. Weidemann
|
9,970,765
|
-
|
||||
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.
|