Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2016 | May. 12, 2016 | |
Document and Entity Information | ||
Entity Registrant Name | AUXILIO INC | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2016 | |
Amendment Flag | false | |
Entity Central Index Key | 1,011,432 | |
Current Fiscal Year End Date | --12-31 | |
Entity Common Stock, Shares Outstanding | 24,557,224 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Current Reporting Status | Yes | |
Entity Voluntary Filers | No | |
Entity Well-known Seasoned Issuer | No | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | Q1 | |
Trading Symbol | auxo |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) | Mar. 31, 2016 | Dec. 31, 2015 |
Current assets: | ||
Cash and cash equivalents | $ 5,348,844 | $ 6,436,732 |
Accounts receivable, net | 7,191,704 | 7,397,957 |
Supplies | 1,412,349 | 1,458,609 |
Prepaid and other current assets | 469,429 | 625,806 |
Total current assets | 14,422,326 | 15,919,104 |
Property and equipment, net | 554,123 | 495,324 |
Deposits | 41,522 | 58,118 |
Intangible assets, net | 2,595,833 | 2,731,250 |
Goodwill | 3,665,656 | 3,665,656 |
Total assets | 21,279,460 | 22,869,452 |
Current liabilities: | ||
Accounts payable and accrued expenses | 7,979,455 | 8,306,860 |
Accrued compensation and benefits | 1,957,556 | 2,856,165 |
Deferred revenue | 787,806 | 913,677 |
Current portion of long-term liabilities | 611,646 | 598,750 |
Total current liabilities | 11,336,463 | 12,675,452 |
Long-term liabilities: | ||
Term loan, less current portion | 1,125,000 | 1,250,000 |
Capital lease obligations, less current portion | 107,132 | 125,496 |
Total long-term liabilities | $ 1,232,132 | $ 1,375,496 |
Commitments and contingencies | ||
Stockholders' equity: | ||
Common stock, par value at $0.001, 33,333,333 shares authorized, 24,452,085 shares issued and outstanding at March 31, 2016 and December 31, 2015 | $ 24,453 | $ 24,453 |
Additional paid-in capital | 27,727,578 | 27,682,061 |
Accumulated deficit | (19,041,166) | (18,888,010) |
Total stockholders' equity | 8,710,865 | 8,818,504 |
Total liabilities and stockholders' equity | $ 21,279,460 | $ 22,869,452 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Mar. 31, 2016 | Dec. 31, 2015 |
Statement of Financial Position | ||
Common Stock, par or stated value | $ 0.001 | $ 0.001 |
Common Stock, shares authorized | 33,333,333 | 33,333,333 |
Common Stock, shares issued | 24,452,085 | 24,452,085 |
Common Stock, shares outstanding | 24,452,085 | 24,452,085 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Income Statement | ||
Revenues | $ 14,515,640 | $ 13,847,915 |
Cost of revenues | 12,206,328 | 11,715,594 |
Gross profit | 2,309,312 | 2,132,321 |
Operating expenses: | ||
Sales and marketing | 671,347 | 742,071 |
General and administrative expenses | 1,763,021 | 1,386,343 |
Total operating expenses | 2,434,368 | 2,128,414 |
(Loss) income from operations | (125,056) | 3,907 |
Other expense: | ||
Interest expense | (25,700) | (34,049) |
Total other expense | (25,700) | (34,049) |
Loss before provision for income taxes | (150,756) | (30,142) |
Income tax expense | 2,400 | 2,400 |
Net loss | $ (153,156) | $ (32,542) |
Net loss per share: | ||
Basic | $ (0.01) | $ 0 |
Diluted | $ (0.01) | $ 0 |
Number of weighted average shares: | ||
Basic | 24,452,085 | 23,681,559 |
Diluted | 24,452,085 | 23,681,559 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY - 3 months ended Mar. 31, 2016 - USD ($) | Common Stock | Additional Paid in Capital | Accumulated Deficit | Total |
Equity Balance, beginning of period, Value at Dec. 31, 2015 | $ 24,453 | $ 27,682,061 | $ (18,888,010) | $ 8,818,504 |
Equity Balance, beginning of period, Shares at Dec. 31, 2015 | 24,452,085 | |||
Stock compensation expense for options and warrants granted to employees and directors | 45,517 | 45,517 | ||
Net loss | (153,156) | (153,156) | ||
Equity Balance, end of period, Value at Mar. 31, 2016 | $ 24,453 | $ 27,727,578 | $ (19,041,166) | $ 8,710,865 |
Equity Balance, end of period, Shares at Mar. 31, 2016 | 24,452,085 |
CONDENSED CONSOLIDATED STATEME6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Cash flows from operating activities: | ||
Net loss | $ (153,156) | $ (32,542) |
Adjustments to reconcile net loss to net cash (used for) provided by operating activities: | ||
Depreciation | 48,982 | 35,772 |
Amortization of intangible assets | 135,417 | 52,500 |
Stock compensation expense for warrants and options issued to employees and directors | 45,517 | 53,922 |
Stock compensation expense for restricted stock issued to key employee | 25,378 | |
Interest expense related to accretion of debt discount costs | 26,488 | |
Changes in operating assets and liabilities: | ||
Accounts receivable | 206,253 | (496,040) |
Supplies | 46,260 | (29,298) |
Prepaid and other current assets | 156,377 | (195,401) |
Deposits | 16,596 | |
Accounts payable and accrued expenses | (327,405) | 1,260,260 |
Accrued compensation and benefits | (898,609) | (147,200) |
Deferred revenue | (125,871) | (114,259) |
Net cash (used for) provided by operating activities | (849,639) | 439,580 |
Cash flows from investing activities: | ||
Purchases of property and equipment | (85,611) | |
Net cash used for investing activities | (85,611) | |
Cash flows from financing activities: | ||
Payments on capital leases | (27,638) | (24,416) |
Payments on term loan | (125,000) | |
Payments on notes payable to related parties | (52,944) | |
Net cash used for financing activities | (152,638) | (77,360) |
Net (decrease) increase in cash and cash equivalents | (1,087,888) | 362,220 |
Cash and cash equivalents, beginning of period | 6,436,732 | 4,743,395 |
Cash and cash equivalents, end of period | 5,348,844 | 5,105,615 |
Supplemental disclosure of cash flow information: | ||
Interest paid | 25,700 | 7,561 |
Income taxes paid | 71,703 | 100,050 |
Non-cash investing and financing activities: | ||
Property and equipment acquired through capital leases | $ 22,170 | 93,745 |
Conversion of note payable to related party into restricted common stock | $ 257,835 |
1. Basis of Presentation
1. Basis of Presentation | 3 Months Ended |
Mar. 31, 2016 | |
Notes | |
1. Basis of Presentation | 1. BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements of Auxilio, Inc. and its subsidiaries (the "Company", "we", "us" or "Auxilio") have been prepared in accordance with generally accepted accounting principles of the United States of America ("GAAP") for interim financial statements pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, these financial statements do not include all of the information and notes required by GAAP for complete financial statements. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015, as filed with the Securities and Exchange Commission ("SEC") on March 30, 2016. The unaudited condensed consolidated financial statements included herein reflect all adjustments (which include only normal, recurring adjustments) that are, in the opinion of management, necessary to state fairly our financial position and results of operations as of and for the periods presented. The results for such periods are not necessarily indicative of the results to be expected for the full year. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. As a result, actual results could differ from those estimates. The accompanying financial statements include the accounts of Auxilio and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated. We have performed an evaluation of subsequent events through the date of filing these financial statements with the SEC. |
2. Recently Issued Accounting P
2. Recently Issued Accounting Pronouncements | 3 Months Ended |
Mar. 31, 2016 | |
Notes | |
2. Recently Issued Accounting Pronouncements | 2 RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In April 2015 and August 2015, the FASB issued guidance which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability consistent with the presentation of debt discounts, however debt issuance costs related to revolving credit agreements may be presented in the balance sheet as an asset. This guidance was effective for us in the first quarter of 2016. In November 2015, the FASB issued guidance related to the presentation of deferred income taxes. The guidance requires that deferred tax assets and liabilities are classified as non-current in a consolidated balance sheet. This guidance is effective for us in the first quarter of 2017 and is not expected to materially impact our financial position or net earnings. In May 2014, the FASB issued guidance which provides a single, comprehensive accounting model for revenue arising from contracts with customers. This guidance supersedes most of the existing revenue recognition guidance, including industry-specific guidance. Under this model, revenue is recognized at an amount that a company expects to be entitled to upon transferring control of goods or services to a customer, as opposed to when risks and rewards transfer to a customer. The new guidance also requires additional disclosures about the nature, timing and uncertainty of revenue and cash flow arising from customer contracts, including significant judgments and changes in judgments. Considering the one-year delay in the required adoption date for the guidance as issued in July 2015, the new guidance is effective for us beginning in 2018 and may be applied retrospectively to all prior periods presented or through a cumulative adjustment to the opening retained earnings balance in the year of adoption. We are in the process of evaluating the impact of the new guidance on our consolidated financial statements. In February 2016, the FASB issued a new accounting standard on leasing. The new standard will require companies to record most leased assets and liabilities on the balance sheet, and also proposes a dual model for recognizing expense. This guidance will be effective in the first quarter of 2019 with early adoption permitted. We are evaluating the impact that adopting this guidance will have on our consolidated financial statements. |
3. Options and Warrants
3. Options and Warrants | 3 Months Ended |
Mar. 31, 2016 | |
Notes | |
3. Options and Warrants | 3. OPTIONS AND WARRANTS Below is a summary of Auxilio stock option and warrant activity during the three month period ended March 31, 2016: Options Shares Weighted Average Exercise Price Weighted Average Remaining Term in Years Aggregate Intrinsic Value Outstanding at December 31, 2015 4,554,555 $1.00 Granted 250,500 0.97 Exercised - - Cancelled (513,000) 1.26 Outstanding at March 31, 2016 4,292,055 $0.97 4.50 $273,045 Exercisable at March 31, 2016 3,672,246 $0.95 4.50 $273,045 Warrants Shares Weighted Average Exercise Price Weighted Average Remaining Term in Years Aggregate Intrinsic Value Outstanding at December 31, 2015 1,975,231 $1.13 Granted - - Exercised - - Cancelled (300,000) 0.94 Outstanding at March 31, 2016 1,675,231 $1.16 4.59 $314,084 Exercisable at March 31, 2016 1,441,899 $1.18 3.10 $209,084 For the three months ended March 31, 2016 and 2015, stock-based compensation expense recognized in the statement of operations was as follows: 2016 2015 Cost of revenues $9,403 $33,294 Sales and marketing 8,333 9,264 General and administrative expenses 27,781 36,742 Total stock based compensation expense $45,517 $79,300 In April 2016 the Company issued an option for 300,000 shares of common stock to an executive officer. |
4. Net Loss Per Share
4. Net Loss Per Share | 3 Months Ended |
Mar. 31, 2016 | |
Notes | |
4. Net Loss Per Share | 4. NET LOSS PER SHARE Basic net loss per share is calculated using the weighted average number of shares of our common stock issued and outstanding during a certain period, and is calculated by dividing net loss by the weighted average number of shares of our common stock issued and outstanding during such period. Diluted net loss per share is calculated using the weighted average number of common and potentially dilutive common shares outstanding during the period, using the as-if converted method for secured convertible notes, and the treasury stock method for options and warrants. Diluted net loss per share does not include potentially dilutive securities because such inclusion in the computation would be anti-dilutive. The following table sets forth the computation of basic and diluted net loss per share: Three Months Ended March 31, 2016 2015 Numerator: Net loss $(153,156) $(32,542) Denominator: Denominator for basic calculation weighted average shares 24,452,085 23,681,559 Net loss per share: Basic net loss per share $(0.01) $(0.00) Diluted net loss per share $(0.01) $(0.00) |
5. Intangible Assets
5. Intangible Assets | 3 Months Ended |
Mar. 31, 2016 | |
Notes | |
5. Intangible Assets | 5. INTANGIBLE ASSETS Intangible assets consist of the following: Intangible assets are amortized over expected useful lives ranging from 1.5 to 10 years and consist of the following: March 31, 2016 December 31, 2015 Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization Delphiis, Inc. Acquired technology $900,000 $(157,500) $900,000 $(135,000) Customer relationships 400,000 (140,000) 400,000 (120,000) Trademarks 50,000 (50,000) 50,000 (50,000) Non-compete agreements 20,000 (11,667) 20,000 (10,000) Total intangible assets, Delphiis, Inc. $1,370,000 $(359,167) $1,370,000 $(315,000) Redspin Acquired technology $1,050,000 $(105,000) $1,050,000 $(78,750) Customer relationships 600,000 (200,000) 600,000 (150,000) Trademarks 200,000 (40,000) 200,000 (30,000) Non-compete agreements 100,000 (20,000) 100,000 (15,000) Total intangible assets, Redspin $1,950,000 $(365,000) $1,950,000 $(273,750) Total intangible assets $3,320,000 $(724,167) $3,320,000 $(588,750) |
6. Accounts Receivable
6. Accounts Receivable | 3 Months Ended |
Mar. 31, 2016 | |
Notes | |
6. Accounts Receivable | 6. ACCOUNTS RECEIVABLE A summary of accounts receivable is as follows: March 31, 2016 December 31, 2015 Trade receivables $7,032,513 $7,458,022 Unapplied advances and unbilled revenue, net 159,191 (60,065) Allowance for doubtful accounts - - Total accounts receivable $7,191,704 $7,397,957 |
7. Line of Credit
7. Line of Credit | 3 Months Ended |
Mar. 31, 2016 | |
Notes | |
7. Line of Credit | 7. LINE OF CREDIT AND TERM LOAN On May 4, 2012, we entered into a Loan and Security Agreement (the "Loan and Security Agreement") with Avidbank Corporate Finance, a Division of Avidbank ("Avidbank"). On April 26, 2013, we amended the Loan and Security Agreement with Avidbank. On April 25, 2014, we again amended the Loan and Security Agreement with Avidbank (the "Second Avidbank Amendment"). Under the Second Avidbank Amendment, the term of the revolving line-of-credit of up to $2.0 million was extended through April 25, 2015, at an interest rate of prime plus 1.0% per annum. This line of credit was further extended through June 25, 2015 under the third amendment to the Loan and Security Agreement. On June 19, 2015, we again amended the Loan and Security Agreement with Avidbank (the "Fourth Avidbank Amendment"). Under the Fourth Avidbank Amendment, the term of the revolving line-of-credit of up to $2.0 million was extended through June 19, 2017, at an interest rate of prime plus 0.75% per annum. As of March 31, 2016, the interest rate was 4.25%. There will be no minimum interest payable with respect to any calendar quarter. The amount available to us at any given time is the lesser of (a) $2.0 million, or (b) the amount available under our borrowing base (80% of our eligible accounts, minus (1) accrued client lease payables, and minus (2) accrued equipment pool liability). As of March 31, 2016 and December 31, 2015, no amounts were outstanding under the line of credit. The Fourth Avidbank Amendment also provided for a term loan facility which allows for advances up to $4,000,000 through June 19, 2016. Our initial draw was for $2,000,000 in 2015. Term loan repayments shall be in 48 equal installments of principal, plus accrued interest at an interest rate of prime plus 1.25% per annum. As of March 31, 2016, outstanding borrowings under the term loan are $1,625,000, of which $500,000 is due within one year. The interest rate is 4.75% as of March 31, 2016. While there are outstanding credit extensions, we are to maintain a liquidity ratio of cash plus accounts receivable divided by all obligations owing to the bank of at least 1.75 to 1.00, measured monthly, and a debt coverage ratio, whereby adjusted EBITDA for the most recent twelve months shall be no less than 1.50 to 1.00 of the sum of the annual principal payments to come due in respect of the term loan advances plus the annualized interest expense of the quarter ending on the measurement date. We were in compliance with all of the Avidbank agreement covenants as of March 31, 2016 and December 31, 2015. The foregoing description is qualified in its entirety by reference to the Fourth Amendment to the Loan and Security Agreement between Avidbank Corporate Finance and Auxilio, Inc., which is found as Exhibit 10.1 of our form 10-Q filed on August 14, 2015. In connection with our entry into the Loan and Security Agreement, we granted Avidbank (a) a general, first-priority security interest in all of our assets, equipment and inventory, and (b) a security interest in all of our intellectual property under an Intellectual Property Security Agreement. As additional consideration for the Loan and Security Agreement, we issued Avidbank a 5-year warrant to purchase up to 72,098 shares of our common stock at an exercise price of $1.39 per share. The foregoing descriptions are qualified in their entirety by reference to the respective agreements. These agreements are found in our Form 8-K filed on May 9, 2012 as Exhibits 10.1, 10.2, 10.3 and 10.4. Interest charges associated with the Avidbank line of credit, including loan origination costs, totaled $0 and $2,124 respectively, for the three months ended March 31, 2016 and 2015, respectively. Interest charges associated with the Avidbank term loan, including loan origination costs, totaled $20,499 for the three months ended March 31, 2016. |
8. Employment Agreements
8. Employment Agreements | 3 Months Ended |
Mar. 31, 2016 | |
Notes | |
8. Employment Agreements | 8. EMPLOYMENT AGREEMENTS Effective January 1, 2014, we entered into an employment agreement with Joseph J. Flynn, our President and Chief Executive Officer ("CEO") since 2009 (the "Flynn Agreement"). The Flynn Agreement provides that Mr. Flynn will continue his employment as our President and CEO. The Flynn Agreement has a term of two years, provides for an annual base salary of $275,000. Mr. Flynn also receives the customary employee benefits available to our employees. Mr. Flynn is also entitled to receive a bonus of up to $150,000 per year, the achievement of which is based on Company performance metrics. Further, the Flynn Agreement revised the vesting schedule of warrants granted to Mr. Flynn in January 2013. The revision spreads the vesting date of the remaining 300,000 unvested shares from 150,000 on January 1, 2015 and 150,000 on January 1, 2016 to 100,000 on January 1, 2015, 100,000 on January 1, 2016 and 100,000 on January 1, 2017. The warrants will vest contingent with the achievement of certain financial performance metrics of the Company for calendar years 2015 and 2016. The calendar year 2014 performance metrics were not met and as such, they did not vest. The calendar year 2015 performance metrics were met. We may terminate Mr. Flynn's employment under the Flynn Agreement without cause at any time on thirty days advance written notice, at which time Mr. Flynn would receive severance pay for twelve months and be fully vested in all options and warrants granted to date. The foregoing summary of the Flynn Agreement is qualified in its entirety by reference to the full context of the employment agreement which is found as Exhibit 10.2 to our 10-Q filing on May 14, 2014. Effective January 1, 2016, we entered into an employment agreement with Mr. Flynn (the "2016 Flynn Agreement"). The 2016 Flynn Agreement provides that Mr. Flynn will continue his employment as our President and CEO. The 2016 Flynn Agreement has a term of two years, provides for an annual base salary of $300,000, and will automatically renew for subsequent twelve (12) month terms unless either party provides advance written notice to the other that such party does not wish to renew the agreement for a subsequent twelve (12) months. Mr. Flynn also receives the customary employee benefits available to our employees. Mr. Flynn is also entitled to receive a bonus of up to $180,000 per year, the achievement of which is based on Company performance metrics. We may terminate Mr. Flynn's employment under the Flynn Agreement without cause at any time on thirty (30) days advance written notice, at which time Mr. Flynn would receive severance pay for twelve months and be fully vested in all options and warrants granted to date. The foregoing summary of the 2016 Flynn Agreement is qualified in its entirety by reference to the full context of the employment agreement, which is found as Exhibit 10.31 to this Form 10-K filed on March 30, 2016. Effective January 1, 2014, we entered into an employment agreement with Paul T. Anthony, our Chief Financial Officer ("CFO") since 2004 (the "Anthony Agreement"). The Anthony Agreement provides that Mr. Anthony will continue to serve as our EVP and CFO. The Anthony Agreement has a term of two years, and provides for an annual base salary of $225,000. Mr. Anthony also receives the customary employee benefits available to our employees. Mr. Anthony is also entitled to receive a bonus of up to $108,000 per year, the achievement of which is based on Company performance metrics. Further, the Anthony Agreement revised the vesting schedule of warrants granted to Mr. Anthony in January 2013. The revision spreads the vesting date of the remaining 200,000 unvested shares from 100,000 on January 1, 2015 and 100,000 on January 1, 2016 to 66,667 on January 1, 2015, 66,667 on January 1, 2016 and 66,666 on January 1, 2017. The warrants will vest contingent with the achievement of certain financial performance metrics of the Company for calendar years 2015 and 2016. The calendar year 2014 performance metrics were not met and as such, they did not vest. The calendar year 2015 performance metrics were met. We may terminate Mr. Anthony's employment under the Anthony Agreement without cause at any time on thirty days advance written notice, at which time Mr. Anthony would receive severance pay for twelve months and be fully vested in all options and warrants granted to date. The foregoing summary of the Anthony Agreement is qualified in its entirety by reference to the full context of the employment agreement which is found as Exhibit 10.3 to our 10-Q filing on May 14, 2014. Effective January 1, 2016, we entered into a new employment agreement with Mr. Anthony (the "2016 Anthony Agreement"). The 2016 Anthony Agreement provides that Mr. Anthony will continue to serve as our Executive Vice President ("EVP") and CFO. The 2016 Anthony Agreement has a term of two years, and provides for an annual base salary of $245,000. The 2016 Anthony Agreement will automatically renew for subsequent twelve (12) month terms unless either party provides advance written notice to the other that such party does not wish to renew the agreement for a subsequent twelve (12) months. Mr. Anthony also receives the customary employee benefits available to our employees. Mr. Anthony is also entitled to receive a bonus of up to $132,000 per year, the achievement of which is based on Company performance metrics. We may terminate Mr. Anthony's employment under the 2016 Anthony Agreement without cause at any time on thirty (30) days advance written notice, at which time Mr. Anthony would receive severance pay for twelve months and be fully vested in all options and warrants granted to date. The foregoing summary of the 2016 Anthony Agreement is qualified in its entirety by reference to the full context of the employment agreement, which is found as Exhibit 10.32 to Form 10-K filed on March 30, 2016. |
9. Concentrations
9. Concentrations | 3 Months Ended |
Mar. 31, 2016 | |
Notes | |
9. Concentrations | 9. CONCENTRATIONS Cash Concentrations At times, cash balances held in financial institutions are in excess of federally insured limits. Management performs periodic evaluations of the relative credit standing of financial institutions and limits the amount of risk by selecting financial institutions with a strong credit standing. Major Customers Our two largest customers accounted for approximately 46% of our revenues for the three months ended March 31, 2016 compared to approximately 34% of our revenues for the three months ended March 31, 2015. These customers had net accounts receivable totaling approximately $2,400,000 and $2,600,000 as of March 31, 2016 and December 31, 2015, respectively. |
10. Segment Reporting
10. Segment Reporting | 3 Months Ended |
Mar. 31, 2016 | |
Notes | |
10. Segment Reporting | 10. SEGMENT REPORTING Based on our integration and management strategies, we operate in a single business segment. For the periods presented, all revenues were derived from domestic operations. |
11. Asset Purchase Agreement -
11. Asset Purchase Agreement - Redspin | 3 Months Ended |
Mar. 31, 2016 | |
Notes | |
11. Asset Purchase Agreement - Redspin | 11 ASSET PURCHASE AGREEMENT – REDSPIN On March 31, 2015, Auxilio entered into an Asset Purchase Agreement (the "Purchase Agreement") with Redspin, Inc., a California corporation ("Redspin") and certain owners of Redspin, to acquire substantially all of the assets and certain liabilities of Redspin (the "Acquired Assets"). A copy of the Purchase Agreement was filed as an exhibit to the Current Report on Form 8-K filed with the SEC on April 6, 2015. On April 7, 2015, the Company completed its acquisition of the Acquired Assets in an asset purchase transaction (the "Transaction") pursuant to the terms and conditions of the Purchase Agreement. As a result of the consummation of the Purchase Agreement, on April 7, 2015, in consideration for the Acquired Assets, the Company paid Redspin $2,076,966 in cash, less a holdback of $200,000 to cover any indemnification claims made pursuant to the Transaction, and issued 452,284 shares of the Company's restricted common stock, par value $0.001, which was the number of shares having an aggregate value of $500,000, with the price per share equal to the average of the closing price of Auxilio common stock on the OTC Markets for the 20 most recent trading days prior to the date of the Purchase Agreement, rounded up to the nearest whole number of shares. The Company also agreed to pay a cash Earn-out Payment, as defined in the Purchase Agreement, upon the achievement of certain earnings targets in the first year following the date of the Purchase Agreement. Management estimated the fair value of the contingent consideration to be $0 as Management believes that the earnings targets will not be met. If no indemnification claims have been made prior to June 30, 2016, the Company's secretary will release the holdback funds to Redspin. The Purchase Agreement also provides for the Company to pay employee bonus shares of common stock upon the achievement of the same certain earnings targets and provided they remain with the Company for one year subsequent to the acquisition date. Management previously had considered the $124,000 of fair value of these employee bonus shares to be a component of the acquisition cost. After completing the analysis of the earn-out provisions, Management has determined that the employee bonus shares would be post-combination compensation. Management believes that the minimum earnings targets will not be achieved. Accordingly no related stock compensation expense has been recorded for the year ended December 31, 2015. The allocation of the purchase price of the assets acquired and liabilities assumed based on their fair values was as follows: Acquired technology $1,050,000 Customer relationships 600,000 Trademarks 200,000 Non-compete agreements 100,000 Goodwill 1,192,000 Accounts receivable 180,409 Other assets received 19,009 Accounts payable and accrued expenses (23,196) Accrued compensation (118,009) Deferred revenue (31,247) Total $3,168,966 Purchased identifiable intangible assets are amortized on a straight-line basis over the respective useful lives. Estimated useful lives of the identifiable intangible assets acquired ranges from three to ten years. We also recognized goodwill of $1,192,000. Goodwill is recognized as we expect to be able to realize synergies between the two companies, primarily our ability to provide market and reach for the Redspin products and services to Auxilio's customers. The Company incurred approximately $70,000 in legal, accounting and other professional fees related to this acquisition, all of which were expensed during the year ended December 31, 2015. Employment Agreement In connection with the Purchase Agreement, Auxilio and Daniel Berger ("Berger"), CEO of Redspin, entered into an employment agreement (the "Berger Employment Agreement"), pursuant to which Berger was employed to serve as Executive Vice President of Auxilio. The initial term of the Berger Employment Agreement is for two years (unless sooner terminated), and automatically renews for subsequent twelve-month periods unless either party determines to not renew. Berger's base annual salary will be $250,000, and Berger will be eligible to receive incentive compensation, consistent with that generally offered to executives of the Company. In addition, Auxilio and John Abraham ("Abraham"), Founder of Redspin, entered into an independent contractor agreement (the "Abraham Agreement"), pursuant to which Abraham was retained to perform the work assigned by the Company. The term of the Abraham Agreement is for two years (unless sooner terminated). In consideration for such services, the Company agreed to pay Abraham $11,000 per month. Pro Forma Information The following supplemental unaudited pro forma information presents the combined operating results of the Company and the acquired business during the three months ended March 31, 2016 and 2015, as if the acquisition had occurred at the beginning of each of the periods presented. The pro forma information is based on the historical financial statements of the Company and that of the acquired business. Amounts are not necessarily indicative of the results that may have been attained had the combinations been in effect at the beginning of the periods presented or that may be achieved in the future. Three Months Ended March 31, 2016 2015 Pro forma net revenue $14,515,640 $14,546,591 Pro forma net loss $(153,156) $(233,421) Pro forma basic net loss per share $(0.01) $(0.01) Pro forma diluted net loss per share $(0.01) $(0.01) |
3. Options and Warrants_ Schedu
3. Options and Warrants: Schedule of Stock Options, Activity (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Tables/Schedules | |
Schedule of Stock Options, Activity | Below is a summary of Auxilio stock option and warrant activity during the three month period ended March 31, 2016: Options Shares Weighted Average Exercise Price Weighted Average Remaining Term in Years Aggregate Intrinsic Value Outstanding at December 31, 2015 4,554,555 $1.00 Granted 250,500 0.97 Exercised - - Cancelled (513,000) 1.26 Outstanding at March 31, 2016 4,292,055 $0.97 4.50 $273,045 Exercisable at March 31, 2016 3,672,246 $0.95 4.50 $273,045 |
3. Options and Warrants_ Warran
3. Options and Warrants: Warrant Activity (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Tables/Schedules | |
Warrant Activity | Warrants Shares Weighted Average Exercise Price Weighted Average Remaining Term in Years Aggregate Intrinsic Value Outstanding at December 31, 2015 1,975,231 $1.13 Granted - - Exercised - - Cancelled (300,000) 0.94 Outstanding at March 31, 2016 1,675,231 $1.16 4.59 $314,084 Exercisable at March 31, 2016 1,441,899 $1.18 3.10 $209,084 |
3. Options and Warrants_ Sche20
3. Options and Warrants: Schedule of Stock-Based Compensation Exprense Allocation (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Tables/Schedules | |
Schedule of Stock-Based Compensation Exprense Allocation | For the three months ended March 31, 2016 and 2015, stock-based compensation expense recognized in the statement of operations was as follows: 2016 2015 Cost of revenues $9,403 $33,294 Sales and marketing 8,333 9,264 General and administrative expenses 27,781 36,742 Total stock based compensation expense $45,517 $79,300 |
4. Net Loss Per Share_ Schedule
4. Net Loss Per Share: Schedule of Computation of Earnings Per Share, Basic and Diluted (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Tables/Schedules | |
Schedule of Computation of Earnings Per Share, Basic and Diluted | The following table sets forth the computation of basic and diluted net loss per share: Three Months Ended March 31, 2016 2015 Numerator: Net loss $(153,156) $(32,542) Denominator: Denominator for basic calculation weighted average shares 24,452,085 23,681,559 Net loss per share: Basic net loss per share $(0.01) $(0.00) Diluted net loss per share $(0.01) $(0.00) |
5. Intangible Assets_ Schedule
5. Intangible Assets: Schedule of Intangible Assets (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Tables/Schedules | |
Schedule of Intangible Assets | Intangible assets are amortized over expected useful lives ranging from 1.5 to 10 years and consist of the following: March 31, 2016 December 31, 2015 Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization Delphiis, Inc. Acquired technology $900,000 $(157,500) $900,000 $(135,000) Customer relationships 400,000 (140,000) 400,000 (120,000) Trademarks 50,000 (50,000) 50,000 (50,000) Non-compete agreements 20,000 (11,667) 20,000 (10,000) Total intangible assets, Delphiis, Inc. $1,370,000 $(359,167) $1,370,000 $(315,000) Redspin Acquired technology $1,050,000 $(105,000) $1,050,000 $(78,750) Customer relationships 600,000 (200,000) 600,000 (150,000) Trademarks 200,000 (40,000) 200,000 (30,000) Non-compete agreements 100,000 (20,000) 100,000 (15,000) Total intangible assets, Redspin $1,950,000 $(365,000) $1,950,000 $(273,750) Total intangible assets $3,320,000 $(724,167) $3,320,000 $(588,750) |
6. Accounts Receivable_ Schedul
6. Accounts Receivable: Schedule of Accounts Receivable (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Tables/Schedules | |
Schedule of Accounts Receivable | A summary of accounts receivable is as follows: March 31, 2016 December 31, 2015 Trade receivables $7,032,513 $7,458,022 Unapplied advances and unbilled revenue, net 159,191 (60,065) Allowance for doubtful accounts - - Total accounts receivable $7,191,704 $7,397,957 |
11. Asset Purchase Agreement 24
11. Asset Purchase Agreement - Redspin: Schedule of Allocation of the Purchase Price of the Assets Acquired and Liabilities Assumed (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Redspin, Inc. | |
Schedule of Allocation of the Purchase Price of the Assets Acquired and Liabilities Assumed | The allocation of the purchase price of the assets acquired and liabilities assumed based on their fair values was as follows: Acquired technology $1,050,000 Customer relationships 600,000 Trademarks 200,000 Non-compete agreements 100,000 Goodwill 1,192,000 Accounts receivable 180,409 Other assets received 19,009 Accounts payable and accrued expenses (23,196) Accrued compensation (118,009) Deferred revenue (31,247) Total $3,168,966 |
11. Asset Purchase Agreement 25
11. Asset Purchase Agreement - Redspin: Business Acquisition, Pro Forma Information (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Redspin, Inc. | |
Business Acquisition, Pro Forma Information | Three Months Ended March 31, 2016 2015 Pro forma net revenue $14,515,640 $14,546,591 Pro forma net loss $(153,156) $(233,421) Pro forma basic net loss per share $(0.01) $(0.01) Pro forma diluted net loss per share $(0.01) $(0.01) |
3. Options and Warrants_ Sche26
3. Options and Warrants: Schedule of Stock Options, Activity (Details) | 3 Months Ended |
Mar. 31, 2016USD ($)$ / sharesshares | |
Details | |
Outstanding, Beginning Balance | shares | 4,554,555 |
Outstanding, Weighted Average Exercise Price, Beginning Balance | $ / shares | $ 1 |
Granted | shares | 250,500 |
Granted, Weighted Average Exercise Price | $ / shares | $ 0.97 |
Exercised | shares | 0 |
Exercised, Weighted Average Exercise Price | $ / shares | $ 0 |
Cancelled | shares | (513,000) |
Cancelled, Weighted Average Exercise Price | $ / shares | $ 1.26 |
Outstanding, Ending Balance | shares | 4,292,055 |
Outstanding, Weighted Average Exercise Price, Ending Balance | $ / shares | $ 0.97 |
Outstanding, Weighted Average Remaining Term in Years | 4 years 6 months |
Outstanding, Aggregate Intrinsic Value | $ | $ 273,045 |
Exercisable | shares | 3,672,246 |
Exercisable, Weighted Average Exercise Price | $ / shares | $ 0.95 |
Exercisable, Weighted Average Remaining Term in Years | 4 years 6 months |
Exercisable, Aggregate Intrinsic Value | $ | $ 273,045 |
3. Options and Warrants_ Warr27
3. Options and Warrants: Warrant Activity (Details) | 3 Months Ended |
Mar. 31, 2016USD ($)$ / sharesshares | |
Details | |
Warrants, Outstanding, Beginning Balance | shares | 1,975,231 |
Outstanding, Weighted Average Exercise Price, Starting Balance | $ 1.13 |
Granted | shares | 0 |
Granted, Weighted Average Exercise Price | $ 0 |
Exercised | shares | 0 |
Exercised, Weighted Average Exercise Price | $ 0 |
Cancelled | shares | (300,000) |
Cancelled, Weighted Average Exercise Price | $ 0.94 |
Warrants, Outstanding, Ending Balance | shares | 1,675,231 |
Outstanding, Weighted Average Exercise Price, Ending Balance | $ 1.16 |
Outstanding, Weighted Average Remaining Contractual Life | 4 years 7 months 2 days |
Outstanding, Intrinsic Value | $ | $ 314,084 |
Exercisable | 1,441,899 |
Exercisable, Weighted Average Exercise Price | $ 1.18 |
Exercisable, Weighted Average Remaining Contractual Life | 3 years 1 month 6 days |
Exercisable, Intrinsic Value | $ | $ 209,084 |
3. Options and Warrants_ Sche28
3. Options and Warrants: Schedule of Stock-Based Compensation Exprense Allocation (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Stock-based compensation expense | $ 45,517 | $ 79,300 |
Cost of revenues | ||
Stock-based compensation expense | 9,403 | 33,294 |
Sales and marketing | ||
Stock-based compensation expense | 8,333 | 9,264 |
General and administrative expense | ||
Stock-based compensation expense | $ 27,781 | $ 36,742 |
3. Options and Warrants (Detail
3. Options and Warrants (Details) | 1 Months Ended |
Apr. 30, 2016shares | |
Subsequent Event | Options | Officer | |
Deferred Compensation Arrangement with Individual, Shares Issued | 300,000 |
4. Net Loss Per Share_ Schedu30
4. Net Loss Per Share: Schedule of Computation of Earnings Per Share, Basic and Diluted (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Numerator: | ||
Net loss | $ (153,156) | $ (32,542) |
Denominator: | ||
Denominator for basic calculation weighted average shares | 24,452,085 | 23,681,559 |
Net loss per share: | ||
Basic net loss per share | $ (0.01) | $ 0 |
Diluted net loss per share | $ (0.01) | $ 0 |
5. Intangible Assets_ Schedul31
5. Intangible Assets: Schedule of Intangible Assets (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2016 | Dec. 31, 2015 | |
Gross Carrying Amount | $ 3,320,000 | $ 3,320,000 |
Accumulated Amortization | (724,167) | (588,750) |
Delphiis, Inc. | ||
Gross Carrying Amount | 1,370,000 | 1,370,000 |
Accumulated Amortization | (359,167) | (315,000) |
Delphiis, Inc. | Acquired Technology | ||
Gross Carrying Amount | 900,000 | 900,000 |
Accumulated Amortization | (157,500) | (135,000) |
Delphiis, Inc. | Customer Relationships | ||
Gross Carrying Amount | 400,000 | 400,000 |
Accumulated Amortization | (140,000) | (120,000) |
Delphiis, Inc. | Trademarks | ||
Gross Carrying Amount | 50,000 | 50,000 |
Accumulated Amortization | (50,000) | (50,000) |
Delphiis, Inc. | Noncompete Agreements | ||
Gross Carrying Amount | 20,000 | 20,000 |
Accumulated Amortization | (11,667) | (10,000) |
Redspin, Inc. | ||
Gross Carrying Amount | 1,950,000 | 1,950,000 |
Accumulated Amortization | (365,000) | (273,750) |
Redspin, Inc. | Acquired Technology | ||
Gross Carrying Amount | 1,050,000 | 1,050,000 |
Accumulated Amortization | (105,000) | (78,750) |
Redspin, Inc. | Customer Relationships | ||
Gross Carrying Amount | 600,000 | 600,000 |
Accumulated Amortization | (200,000) | (150,000) |
Redspin, Inc. | Trademarks | ||
Gross Carrying Amount | 200,000 | 200,000 |
Accumulated Amortization | (40,000) | (30,000) |
Redspin, Inc. | Noncompete Agreements | ||
Gross Carrying Amount | 100,000 | 100,000 |
Accumulated Amortization | $ (20,000) | $ (15,000) |
Minimum | ||
Intangible Asset, Useful Life | 1 year 6 months | |
Maximum | ||
Intangible Asset, Useful Life | 10 years |
6. Accounts Receivable_ Sched32
6. Accounts Receivable: Schedule of Accounts Receivable (Details) - USD ($) | Mar. 31, 2016 | Dec. 31, 2015 |
Details | ||
Trade receivables | $ 7,032,513 | $ 7,458,022 |
Unapplied advances and unbilled revenue, net | 159,191 | (60,065) |
Allowance for doubtful accounts | 0 | 0 |
Total accounts receivable | $ 7,191,704 | $ 7,397,957 |
7. Line of Credit (Details)
7. Line of Credit (Details) - USD ($) | 3 Months Ended | 12 Months Ended | ||||
Mar. 31, 2016 | Mar. 31, 2015 | Dec. 31, 2012 | Jun. 19, 2015 | May. 09, 2012 | May. 04, 2012 | |
Line of Credit Facility, Initiation Date | May 4, 2012 | |||||
Avidbank | Line of Credit | ||||||
Interest Charges | $ 0 | $ 2,124 | ||||
Avidbank | Term Loan | ||||||
Line of Credit Facility, Maximum Borrowing Capacity | $ 4,000,000 | |||||
Long-term Line of Credit | $ 1,625,000 | $ 2,000,000 | ||||
Debt Instrument, Interest Rate Terms | prime plus 1.25% per annum | |||||
Line of credit | $ 500,000 | |||||
Debt Instrument, Interest Rate, Stated Percentage | 4.75% | |||||
Warrants, Outstanding | 72,098 | |||||
Exercise Price of Warrants | $ 1.39 | |||||
Interest Charges | $ 20,499 | |||||
LoanAndSecurityAgreementMember | Avidbank | ||||||
Line of Credit Facility, Maximum Borrowing Capacity | $ 2,000,000 | |||||
Line of Credit Facility, Borrowing Capacity, Description | The amount available to us at any given time is the lesser of (a) $2.0 million, or (b) the amount available under our borrowing base (80% of our eligible accounts, minus (1) accrued client lease payables, and minus (2) accrued equipment pool liability). As of March 31, 2016 and December 31, 2015, no amounts were outstanding under the line of credit. | |||||
LoanAndSecurityAgreementMember | Avidbank | Line of Credit | ||||||
Debt Instrument, Description of Variable Rate Basis | prime plus 1.0% per annum | |||||
Debt Instrument, Interest Rate, Effective Percentage | 4.25% | |||||
LoanAndSecurityAgreementMember | Avidbank | Term Loan | ||||||
Debt Instrument, Description of Variable Rate Basis | prime plus 0.75% per annum | |||||
Debt Instrument, Maturity Date | Jun. 19, 2017 | |||||
Line of Credit Facility, Covenant Terms | While there are outstanding credit extensions, we are to maintain a liquidity ratio of cash plus accounts receivable divided by all obligations owing to the bank of at least 1.75 to 1.00, measured monthly, and a debt coverage ratio, whereby adjusted EBITDA for the most recent twelve months shall be no less than 1.50 to 1.00 of the sum of the annual principal payments to come due in respect of the term loan advances plus the annualized interest expense of the quarter ending on the measurement date. We were in compliance with all of the Avidbank agreement covenants as of March 31, 2016 and December 31, 2015. |
8. Employment Agreements (Detai
8. Employment Agreements (Details) - USD ($) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2016 | Dec. 31, 2014 | |
Chief Executive Officer | ||
Base Salary, Annual Amount | $ 300,000 | $ 275,000 |
Salary Bonus, Annual Amount | 180,000 | $ 150,000 |
Employment Agreement, Revised Warrant Vesting Schedule Description | The revision spreads the vesting date of the remaining 300,000 unvested shares from 150,000 on January 1, 2015 and 150,000 on January 1, 2016 to 100,000 on January 1, 2015, 100,000 on January 1, 2016 and 100,000 on January 1, 2017 | |
Chief Financial Officer | ||
Base Salary, Annual Amount | 245,000 | $ 225,000 |
Salary Bonus, Annual Amount | $ 132,000 | $ 108,000 |
Employment Agreement, Revised Warrant Vesting Schedule Description | The revision spreads the vesting date of the remaining 200,000 unvested shares from 100,000 on January 1, 2015 and 100,000 on January 1, 2016 to 66,667 on January 1, 2015, 66,667 on January 1, 2016 and 66,666 on January 1, 2017 |
9. Concentrations (Details)
9. Concentrations (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2016 | Mar. 31, 2015 | Dec. 31, 2015 | |
Accounts receivable, net | $ 7,191,704 | $ 7,397,957 | |
Customer Concentration Risk | |||
Accounts receivable, net | $ 2,400,000 | $ 2,600,000 | |
Sales | Customer Concentration Risk | |||
Concentration Risk, Percentage | 46.00% | 34.00% |
11. Asset Purchase Agreement 36
11. Asset Purchase Agreement - Redspin (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2016 | Dec. 31, 2015 | |
Daniel Berger | ||
Base Salary, Annual Amount | $ 250,000 | |
John Abraham | ||
Base Salary, Monthly Amount | 11,000 | |
Redspin, Inc. | ||
Cash Payments to Acquire Business | 2,076,966 | |
Allocated Holdback | $ 200,000 | |
Business Combination, Contingent Consideration Arrangements, Basis for Amount | The Purchase Agreement also provides for the Company to pay employee bonus shares of common stock upon the achievement of the same certain earnings targets and provided they remain with the Company for one year subsequent to the acquisition date. Management previously had considered the $124,000 of fair value of these employee bonus shares to be a component of the acquisition cost. After completing the analysis of the earn-out provisions, Management has determined that the employee bonus shares would be post-combination compensation. Management believes that the minimum earnings targets will not be achieved. Accordingly no related stock compensation expense has been recorded for the year ended December 31, 2015. | |
Legal, accounting and other professional fees related to acquisition | $ 70,000 | |
Redspin, Inc. | Minimum | ||
Estimated useful life of the identifiable intangible assets acquired | 3 years | |
Redspin, Inc. | Maximum | ||
Estimated useful life of the identifiable intangible assets acquired | 10 years | |
Redspin, Inc. | Common Stock | ||
Stock issued for acquisition, Shares | 452,284 | |
Stock issued for acquisition, Value | $ 500,000 |
11. Asset Purchase Agreement 37
11. Asset Purchase Agreement - Redspin: Schedule of Allocation of the Purchase Price of the Assets Acquired and Liabilities Assumed (Details) - Redspin, Inc. | 3 Months Ended |
Mar. 31, 2016USD ($) | |
Goodwill | $ 1,192,000 |
Accounts Receivable | 180,409 |
Other assets received | 19,009 |
Accounts payable and accrued expenses | (23,196) |
Accrued compensation | (118,009) |
Deferred revenue | (31,247) |
Total | 3,168,966 |
Acquired Technology | |
Finite-lived Intangible Assets Acquired | 1,050,000 |
Customer Relationships | |
Finite-lived Intangible Assets Acquired | 600,000 |
Trademarks | |
Finite-lived Intangible Assets Acquired | 200,000 |
Noncompete Agreements | |
Finite-lived Intangible Assets Acquired | $ 100,000 |
11. Asset Purchase Agreement 38
11. Asset Purchase Agreement - Redspin: Business Acquisition, Pro Forma Information (Details) - Redspin, Inc. - USD ($) | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Pro forma revenue | $ 14,515,640 | $ 14,546,591 |
Pro forma net loss | $ (153,156) | $ (233,421) |
Pro forma basic net loss per share | $ (0.01) | $ (0.01) |
Pro forma diluted net loss per share | $ (0.01) | $ (0.01) |