CynergisTek DEF 14A Definitive proxy

SCHEDULE 14A

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AUXILIO, INC.

(Name of the Registrant as Specified In Its Charter)

N/A

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AUXILIO, INC.

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD MAY 16, 2013

_____________________________________________

TO OUR STOCKHOLDERS:

NOTICE IS HEREBY GIVEN that the 2013 Annual Meeting of Stockholders of Auxilio, Inc., a Nevada corporation (the “Company”), will be held on Wednesday, May 16, 2013, at 3:00 p.m. Pacific Standard Time at the Company’s principal executive offices, located at 26300 La Alameda, Suite 100, Mission Viejo, California, 92691 for the following purposes, as more fully described in the proxy statement (the “Proxy Statement”) accompanying this notice (the “Notice”):

To elect the following persons to serve on our Board of Directors until the next annual meeting of stockholders and/or until their successors are duly elected and qualified: Edward B. Case, Joseph J. Flynn, Michael Joyce, William Leonard, John D. Pace, Max Poll and Michael Vanderhoof;

To consider and vote upon an advisory, non-binding resolution to approve our executive compensation as described in this Proxy Statement;

To consider and vote upon an advisory, non-binding proposal with respect to the frequency that stockholders will vote on our executive compensation;

To ratify the appointment of Haskell & White LLP to serve as our independent registered public accountants for the fiscal year ending December 31, 2013; and

To transact such other business as may properly come before the Annual Meeting, or any postponement(s) or adjournment(s) thereof.

All stockholders of record at the close of business on March 22, 2013 (the “Record Date”) are entitled to notice of and to vote at the Annual Meeting and any adjournment(s) or postponement(s) thereof.

The Company’s Board of Directors (the “Board”) recommends that you vote in favor of the foregoing items of business, which are more fully described in the Proxy Statement accompanying this Notice.

We cordially invite all stockholders to attend the Annual Meeting in person. Whether or not you plan to attend, it is important that your shares are represented and voted at the Annual Meeting. As an alternative to voting in person at the Annual Meeting, you can vote your shares electronically over the Internet or by telephone, or if you receive a proxy card or a form of voting instructions in the mail, by mailing the completed proxy card or form of voting instructions. For detailed information regarding voting instructions, please refer to the section entitled “Voting Securities” beginning on page 2 of the Proxy Statement.

For admission to the Annual Meeting, you may be asked to present valid picture identification, such as a driver’s license or passport, and proof of ownership of the Company’s common stock (the “Common Stock”) as of the Record Date, such as a brokerage statement, proxy card or voting instruction form reflecting stock ownership.

INTERNET AVAILABILITY OF PROXY MATERIALS

A COMPLETE SET OF PROXY MATERIALS RELATING TO OUR ANNUAL MEETING IS AVAILABLE ON THE INTERNET. THESE MATERIALS, CONSISTING OF THE NOTICE OF ANNUAL MEETING, PROXY STATEMENT, PROXY CARD AND ANNUAL REPORT TO STOCKHOLDERS, MAY BE VIEWED AT WWW.COLONIALSTOCK.COM/AUXILIO2013 OR WWW.SEC.GOV. INFORMATION INCLUDED ON THE COLONIAL STOCK WEBSITE OR THE COMPANY’S WEBSITE, OTHER THAN THE MATERIALS RELATED TO THE ANNUAL MEETING, IS NOT PART OF THE PROXY SOLICITING MATERIALS.

	By Order of the Board of Directors,
Mission Viejo, California April 5, 2013	/s/ Paul T. Anthony Paul T. Anthony Chief Financial Officer and Secretary

PROXY STATEMENT

FOR THE 2013 ANNUAL MEETING OF STOCKHOLDERS

MAY 16, 2013

SOLICITATION, EXERCISE AND REVOCATION OF PROXIES

The accompanying proxy is solicited by and on behalf of the Board to be voted at the Annual Meeting to be held at the Company’s principal executive offices, located at 26300 La Alameda, Suite 100, Mission Viejo, California on May 16, 2013, at 3:00 pm Pacific Standard Time, and any and all adjournment(s) or postponement(s) thereof. In addition to the original solicitation by mail or through the Internet, certain of the Company’s officers, directors and employees (who will receive no compensation in addition to their regular salaries) may solicit proxies by telephone or in person. The Company has not specially engaged employees or solicitors for proxy solicitation purposes. All expenses of this solicitation, including the costs of preparing and mailing this Proxy Statement and the reimbursement of brokerage firms and other nominees for their reasonable expenses in forwarding proxy materials to beneficial owners of Common Stock, will be borne by the Company. You may vote in person at the Annual Meeting, if you wish, even though you have previously mailed in your proxy or voted via telephone or the Internet. This Proxy Statement and the accompanying proxy are being made available to the Company’s stockholders via the Internet on or about April 5, 2013. The proxy solicitation materials were first sent on or about April 5, 2013 to all stockholders entitled to vote at the Annual Meeting.

Unless otherwise indicated, “Auxilio,” the “Company,” “we,” “us” and “our” shall refer to Auxilio, Inc.

The persons named as proxies, Joseph J. Flynn and Paul T. Anthony, were designated by the Board. All properly executed proxies will be voted (except to the extent that authority has been withheld) and where a choice has been specified by the stockholder as provided in the proxy it will be voted in accordance with the specifications so made. Proxies submitted without specification will be voted FOR the election of each of the seven nominees to our Board listed in the Proxy Statement, FOR the non-binding resolution to approve executive compensation, THREE YEARS with respect to the frequency that stockholders will vote on our executive compensation, and FOR the ratification of Haskell & White LLP to serve as our independent registered public accountants for the year ending December 31, 2013.

Any stockholder may revoke a proxy at any time before it is voted at the meeting by a proxy bearing a later date. A proxy may also be revoked by any stockholder by delivering a written notice of revocation to the Secretary of the Company at 26300 La Alameda, Suite 100, Mission Viejo, California 92691, Attn: Corporate Secretary, or by voting in person at the Annual Meeting.

INFORMATION ABOUT THE ANNUAL MEETING AND VOTING

Purpose

At the Annual Meeting, stockholders will be asked to elect seven directors, to provide non-binding advisory votes on executive compensation and the frequency of the stockholder vote on executive compensation, to ratify the appointment of Haskell & White LLP to serve as our independent registered public accountants for the year ending December 31, 2013, and to transact such other business as may properly come before the Annual Meeting. The specific proposals to be considered and acted upon at the Annual Meeting are summarized in the preceding Notice and are described in more detail in this Proxy Statement.

Voting Securities

If, as of the Record Date, you are a registered holder (meaning that your shares of Common Stock are registered in our records as being held in your name), then you may vote on matters presented at the Annual Meeting in the following ways:

·	by proxy: you may complete the proxy card and mail it to the Company;

·	by Internet or telephone in accordance with the instructions in the proxy card; or

·	in person: you may attend the Annual Meeting and cast your vote there.

If, as of the Record Date, you are a beneficial owner whose shares of Common Stock are held in “street-name” by a bank, broker or other record holder, please refer to your voting instructions card and other materials forwarded by the record holder for information on how to instruct the record holder to vote on your behalf.

If you are a registered holder and vote by proxy, the individuals named on the enclosed proxy card will vote your shares of Common Stock in the way that you indicate. When completing the proxy card, you may specify whether your shares of Common Stock should be voted for or against or to abstain from voting on all, some or none of the matters presented at the Annual Meeting.

If you do not indicate how your shares of Common Stock should be voted on a matter, the shares of Company Common Stock represented by your properly submitted proxy will be voted as the Board recommends. If you choose to vote by mailing a proxy card, your proxy card must be filed with the Corporate Secretary prior to or at the commencement of the Annual Meeting.

Registered holders who vote by sending in a signed proxy will not be prevented from attending the Annual Meeting and voting in person. You have the right to revoke a proxy at any time before it is exercised by (a) executing and returning a later dated proxy, (b) giving written notice of revocation to the Company’s Corporate Secretary at 26300 La Alameda, Suite 100, Mission Viejo, California 92691 or (c) attending the Annual Meeting and voting in person. In order to attend the Annual Meeting and vote in person, a beneficial holder whose shares are held in “street name” by a bank, broker or other record holder must follow the instructions provided by the record holder for voting in person at the Annual Meeting. The beneficial holder also must obtain from the record holder and present at the Annual Meeting a written proxy allowing the beneficial holder to vote the shares of Common Stock in person.

IT IS IMPORTANT THAT PROXIES BE SUBMITTED PROMPTLY. THEREFORE, STOCKHOLDERS ARE REQUESTED TO SIGN, DATE AND RETURN THE PROXY CARD, OR SUBMIT THEIR VOTE VIA TELEPHONE OR THE INTERNET, AS SOON AS POSSIBLE, WHETHER OR NOT THEY EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON.

If you receive more than one proxy card because your shares are registered in different names or at different addresses, please provide voting instructions for all proxy cards you receive so that all of your shares of Common Stock will be represented at the Annual Meeting. The Company is delivering multiple Proxy Statements and Annual Reports to multiple stockholders who have requested physical delivery of the Proxy Statement and related materials and who are sharing an address unless it receives contrary instructions from one or more of the stockholders. If you are a stockholder residing at a shared address and would like to request an additional copy of the Proxy Statement or Annual Report now or with respect to future mailings (or to request to receive only one copy of the Proxy Statement or Annual Report if you are currently receiving multiple copies), please send your request to the Company, Attn: Corporate Secretary at the address noted above or call us at 949-614-0700.

Record Date, Quorum and Voting Requirements

Record Date

To be able to vote, you must have been a stockholder as of March 22, 2013 (the “Record Date”). As of the Record Date, 20,154,202 shares of Common Stock, par value $0.001 (“Common Stock”) were issued and outstanding. Each share of Common Stock is entitled to one (1) vote.

Quorum

For business to be conducted at the Annual Meeting, a quorum must be present. The presence at the Annual Meeting, either in person or by proxy, of holders of shares of the Company’s Common Stock entitled to vote and representing at least a majority of the Company’s outstanding voting power will constitute a quorum for the transaction of business. Accordingly, holders of at least 10,077,102 shares of the Company’s Common Stock must be present in person or by proxy at the Annual Meeting. Abstentions and “broker non-votes” will be counted for the purpose of determining whether a quorum is present for the transaction of business. If a quorum is not present, the Annual Meeting will be adjourned until a quorum is obtained.

Required Vote

For purposes of the quorum and the discussion below regarding the vote necessary to take stockholder action, stockholders of record who are present at the Annual Meeting in person or by proxy and who vote for or against, abstain or withhold their vote from a matter, including broker non-votes, are considered stockholders who are present and entitled to vote and count toward the quorum. As used herein, “broker non-vote” means the votes that are not cast on the matter in question by a broker with respect to shares of Common Stock because (i) the broker has not received voting instructions from the beneficial owner on such matter and (ii) such broker lacks discretionary voting authority to vote the shares of Common Stock on such matter. Brokers holding shares of record for beneficial owners generally are entitled to exercise their discretion to vote on Proposal 4 included in this Proxy Statement unless they receive other instructions from the beneficial owners. The effect of proxies marked “withheld” as to any director nominee or “abstain” as to a particular proposal and broker non-votes is discussed under each respective proposal below.

Proposal One, Election of Directors. Our directors will be elected by a plurality of votes cast at the Annual Meeting. This means that the seven nominees for director who receive the most votes will be elected. Only votes “for” or “against” affect the outcome. Abstentions are not counted for purposes of the election of directors. Abstentions are not counted for the purposes of election of directors. Should any nominee(s) become unavailable to serve before the Annual Meeting, the proxies will be voted by the proxy holders for such other person(s) as may be designated by our Board or for such lesser number of nominees as may be prescribed by the Board. Votes cast for the election of any nominee who has become unavailable will be disregarded.

Proposal Two, Advisory Vote on Executive Compensation: An advisory, non-binding resolution to approve executive compensation as described in this Proxy Statement. The affirmative vote of a majority of the votes cast at the Annual Meeting, without regard to either broker non-votes, or shares as to which the “ABSTAIN” box has been selected on the proxy card, is required for the approval of this non-binding resolution. While this vote is required by law, it will neither be binding on the Company or the Board, nor will it create or imply any change in the fiduciary duties of, or impose any additional fiduciary duty on, the Company or the Board.

Proposal Three, Advisory Vote on the Frequency of the Advisory Vote on Executive Compensation: An advisory, non-binding vote with respect to the frequency that stockholders will vote on our executive compensation. Generally, approval of any matter presented to stockholders requires the affirmative vote of a majority of the votes cast. However, because this vote is advisory and non-binding, if none of the frequency options receive a majority of the votes cast, the option receiving the greatest number of votes will be considered the frequency recommended by the Company’s stockholders. While this vote is required by law, it will neither be binding on the Company or the Board, nor will it create or imply any change in the fiduciary duties of, or impose any additional fiduciary duty on, the Company or the Board. Although this vote is not binding, the Board will take into account the outcome of this vote in making a determination on the frequency that advisory votes on executive compensation will be included in our proxy statements.

Proposal Four, Ratification of Haskell & White LLP as our Independent Registered Public Accountants. Ratification of Haskell & White requires the affirmative vote of the holders of a majority of the shares of Common Stock present in person or represented by proxy and entitled to vote at the Annual Meeting.

Other Matters. For each other matter brought before the stockholders at the Annual Meeting for a vote, the affirmative vote of a majority of the shares of Common Stock present in person or represented by proxy and entitled to vote on the matter at the Annual Meeting is required for approval. If you are present at the Annual Meeting but do not vote on any of these proposals, or if you have given a proxy and abstain on any of these proposals, this will have the same effect as if you voted against the proposal. If there are broker non-votes on the issue, the shares of Common Stock not voted will have no effect on the outcome of the proposal.

Revocability of Proxies

Any person giving a proxy pursuant to this solicitation has the power to revoke it at any time before it is voted. It may be revoked by filing with the Secretary of the Company at the Company’s principal executive office, located at 26300 La Alameda, Suite 100, Mission Viejo, California, 92691, Attn: Corporate Secretary, a written notice of revocation or a duly executed proxy bearing a later date, or it may be revoked by attending the Annual Meeting and voting in person. Attendance at the Annual Meeting will not, by itself, revoke a proxy.

Stockholder Proposals for 2014 Annual Meeting of Stockholders

Any stockholder desiring to submit a proposal for action at the 2014 annual meeting of stockholders and presentation in the Company’s proxy statement with respect to such meeting should arrange for such proposal to be delivered to the Company’s offices, 26300 La Alameda, Suite 100, Mission Viejo, California, 92691, no later than December 7, 2013 in order to be considered for inclusion in the Company’s proxy statement relating to the 2014 annual meeting of stockholders. Matters pertaining to such proposals, including the number and length thereof, eligibility of persons entitled to have such proposals included and other aspects are regulated by the Securities Exchange Act of 1934, as amended (the “Exchange Act”), Rules and Regulations of the Securities and Exchange Commission and other laws and regulations to which interested persons should refer.

Additionally, under Rule 14a-4, as promulgated under the Exchange Act, if a stockholder fails to notify the Company of a proposal at least 45 days prior to the month and day of mailing of the prior year’s proxy statement, then the Company will be allowed to use its discretionary voting authority when the proposal is raised at the annual meeting, without any discussion of the matter in the proxy statement. With respect to the Company’s 2014 annual meeting of stockholders, a stockholder proposal not previously submitted for the Company’s proxy statement may be submitted until February 20, 2014; thereafter, the Company will use its voting authority as described above.

PROPOSAL 1

ELECTION OF DIRECTORS

Directors are elected at each annual stockholder’s meeting to hold office until the next annual meeting or until their successors are elected and have qualified. Unless otherwise instructed, the proxy holders named in the enclosed proxy will vote the proxies received by them for the seven (7) nominees named below. Six of the seven nominees are currently directors of the Company.

It is intended that shares represented by the proxies will be voted FOR the election to the Board of the persons named below unless authority to vote for nominees has been withheld in the proxy. Broker non-votes and proxies marked “withheld” as to one or more of the nominees will result in the respective nominees receiving fewer votes. However, the number of votes otherwise received by the nominee will not be reduced by such action. Although each of the persons named below has consented to serve as a director if elected and the Board has no reason to believe that any of the nominees named below will be unable to serve as a director, if any nominee withdraws or otherwise becomes unavailable to serve, the persons named as proxies will vote for any substitute nominee designated by the Board.

THE BOARD RECOMMENDS THAT YOU VOTE “FOR” THE ELECTION OF EACH OF THE NOMINEES NAMED BELOW.

Name	Age	Position with the Company
Edward B. Case	61	Director, Chairman of the Audit Committee
Joseph J. Flynn	47	Director, Chief Executive Officer, President
Michael Joyce	70	Director, Chairman of the Compensation Committee
William Leonard	65	Seeking first time election to the Board
John D. Pace	59	Director, Chairman of the Board and Member of the Compensation Committee
Max Poll	66	Director, Member of the Audit Committee
Michael Vanderhoof	53	Director, Member of the Compensation Committee

Edward B. Case, 61. Mr. Case has over 30 years’ experience leading healthcare, academic and community organizations. Since January 2006, he has served as the Executive Vice President and Chief Financial Officer for The Rehabilitation Institute of Chicago (“RIC”) where he provides leadership and oversight for all aspects of the Institute. From December 2003 to December 2005, Mr. Case was the President and Owner of Healthcare Resource Associates, a leading provider of business process outsourcing services focused on cash flow improvements for hospitals and physicians. Mr. Case has also served as Chief Executive Officer and President of Presbyterian Healthcare, as well as Chief Executive Officer and Chief Financial Officer of BJC Health Systems, and Chief Financial Officer at St. John’s Mercy Medical Center. Mr. Case has served as a member of our Board since January 2006.

Mr. Case’s extensive healthcare industry financial leadership background provides the Board substantial financial and accounting expertise. Having served as the Chief Executive Officer and Chief Financial Officer of healthcare enterprises, Mr. Case brings to our Board strong accounting and financial oversight required for our financial reporting and enterprise and operational risk management.

Joseph J. Flynn, 47. Mr. Flynn has been a member of the Company’s Board since 2003 and has served as the Company’s President and Chief Executive Officer since September 2009. This is his second term of service as the Chief Executive Officer and President of the Company, having previously served in this capacity from 2004 to 2006. As our Chief Executive Officer, Mr. Flynn is responsible for executive management and leadership, strategic direction and stockholder relations. Mr. Flynn has over 20 years of experience in leading large international service operations in business media, software, and technology firms. During his hiatus from the Company, Mr. Flynn was the Vice President of the Sport Group for the Nielsen Company.

Mr. Flynn’s experience in service based organizations together with his historical perspective of the Company has given him extensive knowledge of the business model and brings leadership and unique perspective to our Board.

Michael Joyce, 70. Mr. Joyce has more than 30 years of experience in automotive and automotive related industries. Prior to his retirement in 1998, Mr. Joyce was President, Chief Executive Officer, and a principal owner of Pacific Baja Light Metals, Inc., a manufacturer of aluminum wheels and other machined aluminum castings of the automotive industry. Pacific Baja has manufacturing facilities in the United States and Mexico. From 1971 to 1983, Mr. Joyce held various management positions with Rockwell International, the last as Vice President and General Manager of its Western Wheel Division, a manufacturer of aluminum wheels. Currently at Superior Industries Inc. in Van Nuys, California, Mr. Joyce serves on the Compensation/Benefits Committee of the Board of Directors. Mr. Joyce holds a degree in Physics from Kent State University and an MBA from Ohio State University. Mr. Joyce has served as a member of our Board since June 2007.

Mr. Joyce brings corporate governance expertise to the Board garnered through his leadership positions and board service with other entities. His experience and qualifications provide sound governance leadership to our Board.

William Leonard, 65. Mr. Leonard has over 30 years of experience in business leadership roles. He joined Aramark Corporation in 1982 and held several positions of increasing responsibility including President and Chief Executive Officer before he retired in 2004. From 1971 to 1982 he was employed by Hertz Penske Truck leasing. Currently he serves as Chairman/Partner for both Prestige Office Coffee Service and All Around Lighting. From 2005 to 2012 he served as Chairman/Partner Palace Laundry. From 2002 to 2007 he was a Board Member for Pep Boys, Manny, Moe and Jack where he also served as Chairman and Interim CEO. Mr. Leonard holds a Bachelor’s Degree in Business Administration from New York University.

Mr. Leonard’s career experience in leading Fortune 500 companies, including those that provided outsource services to healthcare will bring to our Board insight and knowledge in the industry and the Company’s operations.

John D. Pace, 59. Mr. Pace is the Non-executive Chairman of the Board and Chief Strategy Officer. He spent 25 years with ServiceMaster Management Services which provided outsourced services to healthcare. Mr. Pace served there in a variety of senior leadership roles, the last as Executive Vice President for the West. Mr. Pace retired from ServiceMaster in March 2002. He is a Foundation Board Emeritus member of Mission Hospital. Mr. Pace has served as a member of our Board since 2004 and is a member of the compensation committee.

Mr. Pace’s career experience in leading a division of a successful Fortune 500 company that provided outsource services to healthcare, brings to our Board insight and knowledge in the industry and the Company’s operations. His background is an asset in strategic planning to the Company.

Max Poll, 66. Mr. Poll most recently served as President and Chief Executive Officer of Scottsdale Healthcare, where he retired in October 2005. He has been in health care administration for over 30 years and has held the positions of President & Chief Executive Officer of Barnes Hospital in St. Louis, Missouri, the primary teaching affiliate of Washington University School of Medicine; Administrator & Chief Executive Officer of Boone Hospital Center, Columbia, Missouri; and Assistant Director of St. Luke’s Hospital, Kansas City, Missouri. Mr. Poll received his Bachelors of Business Administration from Western Michigan University, and his Masters of Hospital Administration from the University of Minnesota. His activities have included board, committee membership, and officer positions on metropolitan, state and national health organizations, including the American Hospital Association, Association of American Medical Colleges, and Voluntary Hospitals of America, Inc. Mr. Poll is a Fellow in the American College of Healthcare Executives, and currently is a board member of the International Genomics Consortium and serves as its Executive Advisor. He is a founder, director and Chairman of Goldwater Bank in Scottsdale, Arizona. Mr. Poll has served as a member of our Board since 2005.

Mr. Poll’s career as a leader of various healthcare organizations provides our Board invaluable substantial operational expertise.

Michael Vanderhoof, 53. Mr. Vanderhoof is Chairman of Cambria Asset Management LLC and a principal in Cambria Investment Fund LP. Cambria Asset Management is the holding corporation for Cambria Capital LLC, a FINRA registered broker dealer with offices in Los Angeles, San Francisco and Salt Lake City. Cambria Investment Fund LP provides bridge loans and equity financing to early stage developing companies. Mr. Vanderhoof has over twenty five years of experience in the capital markets. From 1998 to present, he has advised various private and public companies on capital formation, mergers and acquisitions and financing. Mr. Vanderhoof is currently a director of Summer Energy Holdings, Inc. (OTCBB: SUME). From 1993 to 1997, Mr. Vanderhoof was a trader on a trading desk that made markets in over 200 OTC companies. His career began in 1985 as an Account Executive for a FINRA broker-dealer firm in Salt Lake City, Utah. Mr. Vanderhoof has served as a member of our Board since 2001.

Mr. Vanderhoof’s background in entrepreneurial investment brings to our Board strategic planning and risk management skills that are important to the implementation of our growth strategies and oversight of the Company and operational risk management.

Board Meeting and Attendance

During fiscal year 2012, our Board held twelve meetings in person or by telephone. Members of our Board were provided with information between Board meetings regarding the Company’s operations and were consulted on an informal basis with respect to pending business. Each director attended at least 90% of the total number of Board meetings and the meetings held by all committees of our Board on which such director served during the year.

Director Independence

The Board has affirmatively determined that the following nominees for election to the Board meet the definition of “independent” set forth in the NASDAQ corporate governance listing standards: Edward B. Case, Michael Joyce, Max Poll, and William Leonard.

Board Leadership Structure

We have chosen to split the roles of Chairman of the Board and Chief Executive Officer. Mr. Flynn serves as Chief Executive Officer while Mr. Pace is currently the non-executive Chairman of the Board. Although Mr. Pace is not independent, the Board has ensured that a majority of its members are independent. The Board believes that this structure is appropriate for the Company and provides the appropriate level of independent oversight necessary to ensure that the Board meets its fiduciary obligations to our stockholders, that the interests of management and our stockholders are properly aligned, and that we establish and follow sound business practices and strategies that are in the best interests of our stockholders.

Board’s Role in Risk Management

The Board provides oversight with respect to our management of risk, both as a whole and through its standing committees. The Board typically reviews and discusses with management at each of its regular quarterly meetings, information presented by management relating to our operational results and outlook, including information regarding risks related to our business and operations, as well as risks associated with the markets we serve. At least annually, the Board reviews and discusses an overall risk assessment conducted by management and the strategies and actions developed and implemented by management to monitor, control and mitigate such risks.

The Audit Committee of our Board also provides risk oversight, focusing in particular on financial and credit risk. The Audit Committee oversees the management of such risks, generally as part of its responsibilities related to the review of our financial results and our internal control over financial reporting, and specifically in connection with its consideration of particular actions being contemplated by us, such as financing activities. The Compensation Committee has responsibility for overseeing the management of risk related to our compensation policies and practices. The Compensation Committee considers risks associated with our business in developing compensation policies and the components of our executive compensation program, and periodically reviews and discusses assessments conducted by management with respect to risk that may arise from our compensation policies and practices for all employees.

Committees of the Board

Compensation Committee

The Compensation Committee is presently composed of Michael Joyce, who serves as chairperson of the committee, John D. Pace and Michael Vanderhoof. Neither Mr. Vanderhoof nor Mr. Pace meet the definition of “independent” set forth in the NASDAQ corporate governance listing standards. Pursuant to the authority delegated to it by the Board, the Compensation Committee reviews the performance of our executive officers and establishes overall employee compensation policies. The Compensation Committee also reviews and recommends compensation levels for our directors and our corporate officers, including salary, bonus, and stock option grants. The compensation levels recommended by the Compensation Committee are ratified by the Board. The Compensation Committee may not delegate its responsibilities, and our executive officers are not involved in determining or recommending the amount or form of executive and director compensation. The Compensation Committee met five times during the fiscal year ended December 31, 2012. The Compensation Committee does not currently have a written charter. The Compensation Committee did not engage a compensation consultant to assist in determining the amount or form of executive and director compensation paid during the year ended December 31, 2012.

Audit Committee

The Audit Committee is presently composed of Edward B. Case, who serves as chairperson and Max Poll, both of whom meet the definition of “independent” set forth in the NASDAQ corporate governance listing standards. The Board has also determined that Edward B. Case is an “audit committee financial expert,” as defined by the SEC rules. The functions of the Audit Committee include, among other things, reviewing our annual and quarterly financial statements, reviewing and discussing the results of each audit and quarterly review with our independent registered public accountants, and discussing the adequacy of our accounting and control systems. The Audit Committee met four times during the fiscal year ended December 31, 2012. The Audit Committee operates under a written charter adopted by the Board a copy of which is available on our Company website @ www.auxilioinc.com under Corporate Governance.

Nomination of Directors

We currently do not have a standing nominating committee and the Board performs the functions of a nominating committee. We do not believe that we need a separate nominating committee because members of our Board have the time and resources to perform the function of recommending nominees to the Board.

Nominees for the Board are selected and approved by a majority of the Board. In identifying potential nominees, the Board takes into account such factors as it deems appropriate, including the current composition of the Board, the range of talents, experiences and skills that would best complement those that are already represented on the Board, the balance of management, director independence, and the need for specialized expertise. The members of the Board identify director nominees through a combination of referrals, including referrals provided by management, existing members of the Board and our stockholders, and direct solicitations, where warranted. Referrals of director nominees should be sent to the Board, c/o Chief Financial Officer, Auxilio, Inc., 26300 La Alameda, Suite 100, Mission Viejo, California 92691. All referrals will be compiled by the Chief Financial Officer and forwarded to the Board for their review and consideration. At a minimum, a recommendation should include the individual’s name, current and past business experience, professional affiliations, age, stock ownership in the Company, particular banking or business qualifications, and such other information as the stockholder deems relevant to assist the Board in considering the individual’s potential service as a director.

Communications with the Board

Stockholders may communicate with the Board or any individual director by sending written communications addressed to the Board, or to the individual member of the Board, c/o Chief Financial Officer, Auxilio, Inc., 26300 La Alameda, Suite 100, Mission Viejo, California 92691. All communications are compiled by the Chief Financial Officer and forwarded to the Board or the individual director(s) accordingly.

Code of Ethics

We have adopted a “code of ethics” as defined in Item 406(b) of the SEC’s Regulation S-K that applies to all our employees, including our principal executive officer, principal financial officer and principal accounting officer. A copy of our Code of Ethics is attached as Exhibit 14.1 to our Form 10-KSB for the year ended December 31, 2003, filed with the SEC on April 14, 2004 and is available upon written request to the Company’s Secretary at 26300 La Alameda, Suite 100, Mission Viejo, California 92691, Attn: Corporate Secretary.

Director Attendance at Annual Meetings

Directors are encouraged to attend annual meetings of stockholders. Two members attended the Company’s 2012 annual meeting of stockholders.

EXECUTIVE OFFICERS

Our current executive officers are as follows:

Name	Age	Position
Joseph J. Flynn	47	Chief Executive Officer and President
Paul T. Anthony	42	Chief Financial Officer, Secretary and Treasurer
Simon Vermooten	52	Executive Vice President – Solutions
Scott G. Mumby	46	Executive Vice President – Operations

All officers serve at the discretion of the Board.

For additional information with respect to Mr. Flynn, who also serves as a member of our Board, please refer to his profile set forth above under the section titled “ELECTION OF DIRECTORS.”

Paul T. Anthony. Paul T. Anthony was hired as our Chief Financial Officer on January 3, 2005. Mr. Anthony also serves as our Secretary and Treasurer. Prior to joining the Company, Mr. Anthony served as Vice President, Finance and Corporate Controller with Callipso, a provider of voice-over IP based network services. During his tenure at Callipso, Mr. Anthony was responsible for all of the financial operations including accounting, finance, investor relations, treasury, and risk management. Before joining Callipso, Mr. Anthony was the Controller for IBM-Access360, a provider of enterprise software. Mr. Anthony joined Access360 from Nexgenix, Inc. where he served as Corporate Controller. Prior to this, Mr. Anthony held numerous positions in Accounting and Finance at FileNET Corporation, a provider of enterprise content management software applications. Mr. Anthony started his career at KPMG Peat Marwick LLP in Orange County in the Information, Communications & Entertainment practice. He is a certified public accountant and holds a Bachelor of Science in Accounting from Northern Illinois University.

Simon Vermooten. Simon Vermooten joined the Company in 2007. He currently serves as our Executive Vice President – Solutions. Mr. Vermooten has over 25 years of experience in key positions with a number of global copy/print manufacturers and service companies, including Lexmark International and IKON, where his 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. Simon 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.

Scott G. Mumby. Scott G. Mumby joined the Company in 2010. He currently serves as our Executive Vice President – Operations. As a previous member of PriceWaterhouseCoopers Strategic Change Practice, Scott 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, Scott has provided hands-on management of initiatives that span a full range of corporate functions, including marketing, IT, human resources, finance and enterprise learning. Scott earned his MS in organizational psychology from California School of Professional Psychology and his undergraduate degree from California State University, San Diego.

Family Relationships

There are no family relationships among any of our directors and executive officers.

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table discloses the compensation received in each of the last two fiscal years by (i) our Chief Executive Officer of the Company and (ii) the two most highly compensated executive officers or individuals in addition to the Chief Executive Officer.

Name and Principal Position	Year	Salary ($)		Bonuses and Commissions ($)(1)		Stock Awards ($)		Option Awards ($)(2)		All Other Compensation ($)		Total ($)
Joseph J. Flynn (3)	2012	$	269,087	$	110,000	-		$	39,809		-	$	418,896
Chief Executive Officer and President	2011	$	261,250	$	100,000		-	$	146,569		-	$	507,819

Simon Vermooten (4)	2012	$	190,000	$	187,156		-	$	35,488		-	$	411,644
Executive Vice President – Sales	2011	$	175,000	$	62,500		-	$	10,751		-	$	248,251

Scott G. Mumby (5)	2012	$	206,250	$	82,463		-	$	27,108		-	$	315,820
Executive Vice President - Operations	2011	$	199,167	$	35,425		-	$	10,751		-	$	245,343

(1)	Bonuses and Commissions include amounts earned by the individual and accrued by the Company in the year listed but paid to the individual in the subsequent year.

(2)

A discussion of the methods used in calculation of these values may be found in Note 7 to the consolidated financial statements which is in Part 2, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2012. These values reflect the dollar amount recognized for financial statement reporting purposes with respect to the fiscal year ended December 31, 2012, computed in accordance with ASC Topic 718, excluding the forfeiture assumption.

(3)	On August 31, 2009, Mr. Flynn rejoined the Company as our Chief Executive Officer and President.

(4)	Mr. Vermooten joined the Company in 2007 and currently serves as our Executive Vice President – Solutions.

(5)	Mr. Mumby joined the Company in 2010 and currently serves as our Executive Vice President – Operations.

Narrative to Summary Compensation Table

On August 5, 2009, the Board appointed Mr. Joseph J. Flynn as President and Chief Executive Officer (“CEO”) effective August 31, 2009. Mr. Flynn has served as a member of the Board since 2003. He previously held the position of our President and CEO from 2003 to 2006, having resigned to take a position as the Vice President of the Sport Group for the Nielsen Company. In connection with his appointment as President and CEO, we entered into an Executive Employment Agreement with Mr. Flynn, effective as of August 31, 2009 through December 31, 2011 (the “Flynn Employment Agreement”). The Compensation Committee set Mr. Flynn’s base salary at $261,250 for the fiscal year ended December 31, 2011. In addition to the base salary, in 2011 Mr. Flynn earned a $100,000 performance bonus and was granted an option to purchase 100,000 shares of Common Stock.

Effective January 1, 2012, we entered into a new employment agreement with Mr. Flynn (the “New Flynn Agreement”). The New Flynn Agreement provides that Mr. Flynn will continue his employment as our President and CEO. The New Flynn Agreement has a term of two years, provides for an annual base salary of $269,087, 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 $110,000 per year, the achievement of which is based on Company performance metrics. We may terminate Mr. Flynn’s employment under the New Flynn Agreement without cause at any time on thirty (30) days advance written notice. We may also terminate Mr. Flynn’s employment without cause following a change of control. In the event of such a termination of Mr. Flynn without cause, Mr. Flynn would be entitled to receive severance pay for six (6) months and be fully vested in all options and warrants granted to date, provided that Mr. Flynn complies with other aspects of the New Flynn Agreement. The foregoing summary of the New Flynn Agreement is qualified in its entirety by reference to the full text of the employment agreement, which was filed as Exhibit 10.2 to our 8-K filing on December 23, 2011. On January 16, 2013, Mr. Flynn was granted warrants to purchase 375,000 shares of Common Stock with a strike price set at $1.01, as set forth below in the Compensation Committee Report.

Effective January 1, 2012, the Company entered into an employment agreement with Mr. Simon Vermooten (the “Vermooten Agreement”). The Vermooten Agreement provides that Mr. Vermooten will continue his employment as our as Executive Vice President of Solutions. The Vermooten Agreement has a term of three years, provides for an annual base salary of $190,000, 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. Vermooten also receives the customary employee benefits available to our employees. Mr. Vermooten is also eligible to receive sales commissions under an incentive compensation plan which has a commission target of $100,000 for 2012 for signing $50 million in 5 year contract revenue in 2012, with all contracts signed in 2012 in excess of quota, commission paid at 125%. We may terminate Mr. Vermooten’s employment under the Vermooten Agreement without cause at any time on thirty (30) days advance written notice. We may also terminate Mr. Vermooten’s employment without cause following a change of control. In the event of such a termination of Mr. Vermooten without cause, Mr. Vermooten would be entitled to receive severance pay for three (3) months and be fully vested in all options and warrants granted to date, provided that Mr. Vermooten complies with other aspects of the Vermooten Agreement. On January 16, 2013, Mr. Vermooten was granted warrants to purchase 375,000 shares of Common Stock with a strike price set at $1.01. The warrants vest upon the Company achieving certain performance targets as set forth in the following table:

No. of Shares	Vesting Date	Performance Target
75,000	January 16, 2013	None
100,000	January 1, 2014	EBITDA target for FY 2013 of $2 million.
100,000	January 1, 2015	EBITDA target for FY 2014 of $6.3 million.
100,000	January 1, 2016	EBITDA target for FY 2015 of $9.2 million.

The vesting of the shares exercisable pursuant to the warrant will accelerate in the event there is a change in control of the Company. These warrants are not included in the summary compensation table because they were granted after our fiscal year ended December 31, 2012.

Effective May 17, 2012, the Company entered into an employment agreement with Mr. Scott Mumby (the “Mumby Agreement”). The Mumby Agreement provides that Mr. Mumby will continue his employment as our as Executive Vice President of Operations. The Mumby Agreement has a term of two years, provides for an annual base salary of $210,000, 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. Mumby also receives the customary employee benefits available to our employees. Mr. Mumby is also entitled to receive a bonus of up to $65,000 per year, the achievement of which is based on performance metrics determined by the CEO. Under the Mumby Agreement, Mr. Mumby also received an option grant of 50,000 shares of Company stock with the strike price and grant date as of May 8, 2012. We may terminate Mr. Mumby’s employment under the Mumby Agreement without cause at any time on thirty (30) days advance written notice. We may also terminate Mr. Mumby’s employment without cause following a change of control. In the event of such a termination of Mr. Mumby without cause, Mr. Mumby would be entitled to receive severance pay for three (3) months and be fully vested in all options and warrants granted to date, provided that Mr. Mumby complies with other aspects of the Mumby Agreement. On January 16, 2013, Mr. Mumby was granted warrants to purchase 375,000 shares of Common Stock with a strike price set at $1.01. The warrants vest upon the Company achieving certain performance targets as set forth in the following table:

No. of Shares	Vesting Date	Performance Target
75,000	January 16, 2013	None
100,000	January 1, 2014	EBITDA target for FY 2013 of $2 million.
100,000	January 1, 2015	EBITDA target for FY 2014 of $6.3 million.
100,000	January 1, 2016	EBITDA target for FY 2015 of $9.2 million.

OUTSTANDING EQUITY AWARDS AT 2012 FISCAL YEAR-END (1)

		Option and Warrant Awards
Name	Type of Instrument	Number of Securities Underlying Unexercised Options and Warrants Exercisable (#)		Number of Securities Underlying Unexercised Options and Warrants Unexercisable (#)(2)		Number of Securities Underlying Unexercised Options and Warrants		Equity Incentive Plan Awards		Exercise Price ($)		Expiration Date
Joseph J. Flynn	Stock Option		83,333		-		-		-	$	0.75	5/15/2013
	Stock Option		83,333		-		-		-	$	0.90	5/28/2014
	Stock Option		100,000		-		-		-	$	1.40	2/2/2016
	Stock Option		7,500		-		-		-	$	0.71	7/1/2017
	Stock Option		5,000		-		-		-	$	1.25	11/8/2017
	Stock Option		5,000		-		-		-	$	1.70	4/2/2018
	Stock Option		2,500		-		-		-	$	1.83	5/8/2018
	Stock Option		2,500		-		-		-	$	1.80	8/7/2018
	Stock Option		2,500		-		-		-	$	2.15	9/2/2018
	Stock Option		2,500		-		-		-	$	0.78	11/6/2018
	Stock Option		2,500		-		-		-	$	0.55	2/5/2019
	Stock Option		2,500		-		-		-	$	0.55	3/19/2019
	Stock Option		2,500		-		-		-	$	1.01	5/7/2019
	Stock Option		252,500		-		-		-	$	0.60	8/5/2019
	Stock Option		2,500		-		-		-	$	0.80	11/5/2019
	Stock Option		33,333		16,667		-		-	$	1.01	12/31/2020
	Stock Option		33,333		66,667		-		-	$	0.76	1/3/2022
	Warrant (3)		200,000		100,000		-		-	$	0.94	3/31/2016

Simon Vermooten	Stock Option		125,000		-		-		-	$	0.71	7/1/2017
	Stock Option		25,000		-		-		-	$	1.25	11/8/2017
	Stock Option		66,667		33,333		-		-	$	1.05	8/4/2020
	Stock Option		6,667		13,333		-		-	$	0.99	9/6/2021
	Stock Option		16,667		33,333		-		-	$	1.35	2/2/2022

Scott G. Mumby	Stock Option		58,333		-		-		-	$	0.75	5/15/2013
	Stock Option		200,000		-		-		-	$	1.10	5/17/2020
	Stock Option		6,667		13,333		-		-	$	0.99	9/6/2021
	Stock Option		16,667		33,333		-		-	$	1.20	5/8/2022
	Warrant (4)		10,000		-		-		-	$	1.50	7/29/2016

(1)	Options and warrants shown in this table were granted between 2003 and 2012. There have been no stock awards granted to any Named Executive Officer. As such, these columns are omitted from this Table of Outstanding Equity Awards.

(2)	All options vest in cumulative annual installments of one-third of the shares commencing one year from the date of grant.

(3)	This warrants vests in cumulative annual installments of one-third of the shares commencing one year from the date of grant.

(4)

This warrant was granted as part of a convertible notes payable offering in July 2011. Further details regarding this transaction may be found in Note 4 to the consolidated financial statements which is in Part 2, Item 7 of our 2012 Annual Report on Form 10-K for the fiscal year ended December 31, 2012.

Equity Compensation Plan Information

The following table provides certain information as of December 31, 2012 with respect to the Company’s equity compensation plans under which equity securities of the Company are authorized for issuance.

Plan	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights		Weighted Average Exercise Price of Outstanding Options, Warrants and Rights		Number of Securities Remaining Available for Future Issuances Under Plans (excluding securities reflected in column (a))
	(a)		(b)		(c)
Equity compensation plans approved by security holders (1):		5,725,031	$	1.02		152,253
Equity compensation plans not approved by security holders (2):		2,454,606	$	1.34		-
Restricted stock units (3)		265,279		-		-
Total		8,444,816				152,253

(1)	These plans consist of the 2000 Stock Option Plan, 2001 Stock Option Plan, the 2003 Stock Option Plan, the 2004 Stock Option Plan, the 2007 Stock Option Plan, as amended, and the 2011 Stock Incentive Plan.

(2)

From time to time and at the discretion of the Board, we may issue warrants and stock options to our key individuals or officers as performance based compensation. We have also issued warrants to Sodexo Operations, LLC (“Sodexo”) in connection with a joint marketing agreement and to Cambria Capital, LLC in consideration for financing arrangements.

(3)

The Board has authorized the issuance of restricted stock units to Sodexo in connection with a joint marketing agreement, and other restricted stock units in compensation for a sales commission to Maryville Technologies. These restricted stock units were not issued under the 2011 Stock Incentive Plan.

DIRECTOR COMPENSATION FOR 2012

Name	Fees Earned or Paid in Cash ($)		Stock Awards ($)		Option Awards ($)(2)		Non-Equity Incentive Plan Compensation ($)		Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)		All Other Compensation ($)		Total ($)
Edward B. Case		—		—		21,718		—		—		—		21,718
Michael Joyce		—		—		28,664		—		—		—		28,664
John D. Pace (1)		78,000		—		28,699		—		—		—		106,699
Max Poll		—		—		20,679		—		—		—		20,679
Mark St. Clare		—		—		21,920		—		—		—		21,920
Michael Vanderhoof		—		—		25,925		—		—		—		25,925

(1)	John D. Pace earned fees for additional services rendered under a consulting agreement. See further disclosure under Certain Relationships and Related Transactions.

(2)

A discussion of the methods used in the calculation of these values may be found in Note 7 to the consolidated financial statements which is in Part 2, Item 7 of our 2012 Annual Report on Form 10-K. These values reflect the dollar amount recognized for financial statement reporting purposes with respect to the 2012 fiscal year computed in accordance with ASC Topic 718, excluding the forfeiture assumption.

Narrative to Director Compensation Table

The Company compensates its non-employee directors for their service on the Board with an initial grant of a stock option to purchase 25,000 shares of Common Stock. Each outside director also receives a stock option to purchase 2,500 shares of Common Stock for each Board meeting and committee meeting attended. In the 2012 fiscal year, for each outside director acting as chairperson of the Audit Committee and the Compensation Committee, the Compensation Committee increased the underlying number of Common Stock for the stock option to 3,500 shares of Common Stock, per Audit Committee and Compensation Committee meeting attended.

COMPENSATION COMMITTEE REPORT

The Compensation Committee of the Board reviews and establishes compensation strategies and programs to ensure that the Company attracts, retains, properly compensates, and motivates qualified executives and other key associates. The Committee consists of Mr. Joyce, its chairperson, Mr. Pace and Mr. Vanderhoof. No member of the Compensation Committee is an employee or officer.

The philosophy of the Compensation Committee is (i) to provide competitive levels of compensation that integrate pay with the individual executive’s performance and the Company’s annual and long-term performance goals; (ii) to motivate key executives to achieve strategic business goals and reward them for their achievement; (iii) to provide compensation opportunities and benefits that are comparable to those offered by other companies in the healthcare services industry, thereby allowing the Company to compete for and retain talented executives who are critical to the Company’ long-term success; and (iv) to align the interests of key executives with the long-term interests of stockholders and the enhancement of stockholder value through the granting of stock options. The compensation of our executive officer is currently comprised of annual base salary, a bonus plan pursuant to certain performance criteria being achieved, and long-term performance incentives in the form of stock option grants under the stock option plans.

Chief Executive Officer Compensation The Compensation Committee set Mr. Flynn’s base salary at $269,087 for the 2012 fiscal year. Mr. Flynn was granted stock options to purchase 100,000 shares of Common Stock on January 1, 2012 with a strike price equal to the closing price on such date. Mr. Flynn may also earn up to $110,000 in annual bonus, the achievement of which is based on Company performance metrics.

The Compensation Committee set Mr. Flynn’s base salary at $269,087 for the 2013 fiscal year. Mr. Flynn was also granted warrants to purchase 450,000 shares of Common Stock on January 16, 2013 with a strike price set at $1.01. The Warrant vests upon the Company achieving certain performance targets as set forth in the following table:

No. of Shares	Vesting Date	Performance Target
150,000	January 1, 2014	EBITDA target for FY 2013 of $2 million.
150,000	January 1, 2015	EBITDA target for FY 2014 of $6.3 million.
150,000	January 1, 2016	EBITDA target for FY 2015 of $9.2 million.

The vesting of the shares exercisable pursuant to the Warrant will accelerate in the event there is a change in control of the Company.

By the Compensation Committee,

Michael Joyce, Chairman

John D. Pace

Michael Vanderhoof

April 5, 2013

BENEFICIAL OWNERSHIP OF SECURITIES

The following table and the notes thereto set forth certain information regarding the beneficial ownership of our Common Stock as of March 31, 2013, by (i) each current director and director nominee; (ii) each executive officer named in the summary compensation table included herein who was serving as an executive officer at the end of the 2012 fiscal year; (iii) all our current directors, director nominees and executive officers as a group; and (iv) each person who is known by us to be a beneficial owner of five percent or more of our Common Stock.

	Shares Beneficially Owned
Name and Address of Beneficial Owner (1)	Number (2)		Percent
Paul T. Anthony		792,150		3.8
Edward B. Case (3)		195,000		1.0
Joseph J. Flynn (4)		939,334		4.5
Michael Joyce (5)		283,333		1.4
William Leonard (6)		1,240,000		6.1
Scott G. Mumby (7)		416,667		2.0
John Pace (8)		295,371		1.4
Max Poll (9)		218,333		1.1
Mark St. Clare (10)		260,333		1.3
Michael Vanderhoof (11)		1,642,747		8.0

Simon Vermooten (12)			315,000				1.5

All directors and executive officers, as a group

6,598,268

27.3

*	Less than 1% of the outstanding shares of Common Stock.

(1)	The address for all officers and directors is c/o Auxilio, Inc., 26300 La Alameda, Suite 100, Mission Viejo, CA 92691.

(2)

Unless otherwise indicated, the named persons possess sole voting and investment power with respect to the shares listed (except to the extent such authority is shared with spouses under applicable law). The percentages are based upon 20,154,202 shares outstanding as of March 31, 2013, except for certain parties who hold stock options and warrants that are presently exercisable or exercisable within 60 days, and who hold convertible promissory notes which may be converted into Common Stock within 60 days, whose percentages are based upon the sum of shares outstanding as of March 31, 2013 plus the number of shares subject to stock options, warrants and convertible notes that are presently exercisable or exercisable within 60 days held by them, or which may be converted into Common Stock, as indicated in the following notes.

(3)	Includes 6,500 shares issuable upon exercise of stock options exercisable within 60 days.

(4)	Includes 300,000 shares issuable upon exercise of stock warrant agreements.

(5)	Includes 4,500 shares issuable upon exercise of stock options exercisable within 60 days. Also includes 75,000 shares issuable upon conversion of a convertible note.

(6)	Includes 40,000 shares issuable upon exercise of stock warrant agreements. Also includes 200,000 shares issuable upon conversion of a convertible note.

(7)	Includes 83,333 shares issuable upon exercise of stock options exercisable within 60 days. Also includes 50,000 shares issuable upon conversion of a convertible note.

(8)	Includes 4,167 shares issuable upon exercise of stock options exercisable within 60 days. Also includes 75,000 shares issuable upon conversion of a convertible note.

(9)	Includes 5,833 shares issuable upon exercise of stock options exercisable within 60 days.

(10)	Includes 5,833 shares issuable upon exercise of stock options exercisable within 60 days. Also includes 100,000 shares issuable upon conversion of a convertible note.

(11)

Michael Vanderhoof is a principal in Cambria Investment Fund, L.P. Cambria Investment Fund, L.P. currently owns 80,000 shares of Common Stock and holds warrants to purchase 285,000 shares of Common Stock. Mr. Vanderhoof expressly disclaims beneficial ownership of these stocks and warrants, except to the extent he has a pecuniary interest therein resulting from his position as a principal of Cambria Investment Fund, L.P. Mr. Vanderhoof is also a principal in Avintaquin Capital, LLC, which currently owns 316,667 shares of Common Stock. Mr. Vanderhoof expressly disclaims beneficial ownership of these stocks and warrants, except to the extent he has a pecuniary interest therein resulting from his position as a principal of Avintaquin Capital, LLC. Includes 4,167 shares issuable upon exercise of stock options exercisable within 60 days. Also includes 150,000 shares issuable upon conversion of a convertible note.

(12)	Includes 75,000 shares issuable upon exercise of stock warrant agreements.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires the Company’s directors and executive officers and persons who own more than ten percent of a registered class of the Company’s equity securities to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and other equity securities of the Company. Officers, directors and ten-percent stockholders are required by the SEC’s regulations to furnish the Company with copies of all Section 16(a) forms they file. To the Company’s knowledge, based solely on the review of copies of such reports furnished to the Company and written representations that no other reports were required, during the 2012 fiscal year, all of the Company’s officers, directors and ten-percent stockholders complied with all applicable Section 16(a) filing requirements.

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

In August 2009, we entered into a consulting agreement with Mr. Pace (the “Pace Consulting Agreement”). The Pace Consulting Agreement provided that the Company would pay Mr. Pace $6,000 per month as compensation for his services; such compensation amount was increased to $6,500 per month effective January 2011. Total cash compensation to Mr. Pace for the years ended December 31, 2012 and 2011 was $78,000 and $78,000, respectively. In November 2012, we entered into a new consulting agreement with Mr. Pace that provides the Company will pay Mr. Pace $4,000 per month as compensation for his services for the period from January 1, 2013 through December 31, 2013.

The Company believes that the foregoing transactions were in the best interests of the Company and its stockholders. As a matter of policy, these transactions were and all future transactions between the Company and its officers, directors, principal stockholders or their affiliates will be approved by a majority of the disinterested members of the Board, on terms no less favorable than could be obtained from unaffiliated third parties and in connection with bona fide business purposes of the Company.

PROPOSAL 2

ADVISORY APPROVAL OF THE COMPANY’S EXECUTIVE COMPENSATION

The following proposal is an advisory, non-binding vote on the compensation of the Company’s Named Executive Officers, or a “Say-on-Pay” proposal, as required by Section 14A of the Securities Exchange Act, which was added by Section 951 of the Dodd-Frank Wall Street Reform and Consumer Protection Act and by rules of the SEC. The Company presents the resolution set forth below for approval by the stockholders.

We believe that our compensation policies and procedures are competitive, are focused on pay for performance principles and are strongly aligned with the long-term interests of our stockholders. In addition, our compensation programs are designed to reward our Named Executive Officers for the achievement of short-term and long-term strategic and operational goals and the achievement of increased total stockholder return, while at the same time avoiding the encouragement of unnecessary or excessive risk-taking.

We encourage you to closely review the compensation of our “Named Executive Officers” as described in this Proxy Statement under “Executive Compensation.” Stockholders are encouraged to read this section of the Proxy Statement, which discusses the compensation of our Named Executive Officers.

We seek to attract and retain experienced, highly qualified executives critical to the Company’s long-term success and enhancement of stockholder value. The Board of Directors believes the Company’s compensation policies and procedures achieve this objective, and therefore recommend stockholders vote “FOR” the proposal. Specifically, stockholders are being asked to approve the following:

“RESOLVED, that the compensation paid to the Company’s Named Executive Officers, as disclosed in this Proxy Statement pursuant to Item 402 of Regulation S-K, is hereby APPROVED.”

Because your vote is advisory, it will not be binding upon our Board of Directors and may not be construed as overruling any decision by the Board or create or imply any additional fiduciary duty by the Board of Directors. However, the Board of Directors and Compensation Committee value constructive dialogue on executive compensation and other important governance topics with our stockholders and encourage all stockholders to vote their shares in this manner. The Board of Directors will review the voting results and take them into consideration when making future decisions regarding our executive compensation programs.

THE BOARD RECOMMENDS A VOTE “FOR” THE NON-BINDING RESOLUTION APPROVING THE COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS, AS DISCLOSED PURSUANT TO THE COMPENSATION DISCLOSURE RULES OF THE SECURITIES AND EXCHANGE COMMISSION.

PROPOSAL 3

ADVISORY VOTE ON FREQUENCY OF FUTURE STOCKHOLDER

VOTING ON EXECUTIVE COMPENSATION

Proposal 3 is an advisory, non-binding vote on the frequency of stockholder votes on executive compensation, or a “say-on-frequency” proposal, as required by Section 14A of the Securities Exchange Act, which was added by Section 951 of the Dodd-Frank Wall Street Reform and Consumer Protection Act and by rules of the SEC. We are asking our stockholders to vote upon a Say-on-Frequency vote at our 2013 annual meeting.

In Proposal 2, we asked our stockholders to vote on the compensation of the Company’s Named Executive Officers. Proposal 2 is commonly called a “say-on-pay” proposal. In Proposal 3, stockholders may cast an advisory non-binding vote on how often the Company should include a say-on-pay proposal in its proxy materials for future annual stockholder meetings or other meetings of stockholders at which directors will be elected and for which the rules of the SEC require executive compensation disclosure pursuant to Item 402 of Regulation S-K. The vote on this proposal is not binding on the Company but will be considered by the Company as it administers its executive compensation program. Stockholders may vote for a frequency of say-on-pay votes of one, two, or three years, or may abstain from voting. The Board recommends that a non-binding advisory vote to approve the compensation of its executive officers as described in its annual proxy statements occur every three years. The Board believes that holding this vote every three years will be the most effective timeframe because it will provide the Board and the Compensation Committee with sufficient time to evaluate the results of a say-on-pay vote, engage with its stockholders following each such vote, if appropriate, to understand any concerns the Company’s shareholders may have, and to implement any changes they deem appropriate in response to the vote results.

Stockholders should note that their views on compensation are not binding on the Company. This vote also will not be binding on the Company’s Board of Directors and may not be construed as overruling a decision by the Board or create or imply any additional fiduciary duty on the Board. The Board may, however, take into account the outcome of the vote when considering when to present stockholders with a resolution to approve executive compensation.

Stockholders may vote for a frequency of Say-on-Pay votes of one, two, or three years, or may abstain from voting.

While our executive compensation program is designed to promote a long-term connection between compensation and performance, our Board recognizes that executive compensation decisions and disclosures are made annually. However, after careful consideration, our Board of Directors believes the presentation of a resolution to approve the compensation of our executives should be presented to stockholders for an advisory vote every three years.

THE BOARD RECOMMENDS A VOTE FOR THE “THREE YEARS” OPTION WITH RESPECT TO THE ADVISORY PROPOSAL ON THE FREQUENCY OF THE STOCKHOLDERS’ VOTE ON EXECUTIVE COMPENSATION.

PROPOSAL 4

RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS

The Board, acting upon the recommendation of the Audit Committee, has appointed Haskell & White LLP, independent registered public accountants, to audit the financial statements of the Company for the fiscal year ending December 31, 2013. Haskell & White LLP has audited the accounts and records of the Company since 2005 to the present. In determining whether the proposal has been approved, abstentions will be counted as votes against the proposal and broker non-votes will not be counted as votes for or against the proposal or as votes present and voting on the proposal.

THE BOARD RECOMMENDS A VOTE “FOR” THE PROPOSAL TO RATIFY THE APPOINTMENT OF HASKELL & WHITE LLP AS THE INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS OF THE COMPANY FOR THE YEAR ENDING DECEMBER 31, 2013.

FEES PAID TO OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS

Audit Fees

The aggregate fees for professional services rendered by Haskell & White LLP for the annual audit of the Company’s financial statements and the reviews of the financial statements included in the Company’s quarterly reports on Form 10-Q billed during the years ended December 31, 2011 and 2012 were $120,000 and $125,851, respectively.

Audit-related Fees

The aggregate fees for audit-related services rendered by Haskell & White LLP for consents and other assurance services billed during the years ended December 31, 2011 and 2012 were $12,275 and $450, respectively. These audit related services were primarily comprised of the review of financial information contained in post-effective amendments and prospective supplements to our outstanding registration statements and our Proxy Statement.

Tax Fees

The aggregate fees for tax services rendered by Haskell & White LLP billed during the years ended December 31, 2011 and 2012 were $0 and $0, respectively. Income tax return preparation services were provided by another firm in both years.

All Other Fees

There were no other fees for other services rendered by Haskell & White LLP during the years ended December 31, 2011 and 2012.

Audit Committee Pre-Approval Policies and Procedures

Our Audit Committee’s policy is to pre-approve all audit and permissible non-audit services provided by our independent registered public accounting firm in accordance with applicable SEC rules. The Audit Committee generally pre-approves particular services or categories of services on a case-by-case basis. The independent registered public accounting firm and management periodically report to the Audit Committee regarding the extent of services provided by the independent registered public accounting firm in accordance with these pre-approvals, and the fees for the services performed to date. All of the professional services rendered by Haskell & White LLP for fiscal years 2011 and 2012 were pre-approved by the Audit Committee of our Board in accordance with applicable SEC rules.

We do not expect representatives of Haskell & White LLP to be present at the Annual Meeting.

AUDIT COMMITTEE REPORT

The Audit Committee’s role is to act on behalf of the Board in the oversight of all aspects of our financial reporting, internal control and audit functions. Management has the primary responsibility for the financial statements and the reporting process, including the systems of internal controls. In fulfilling its oversight responsibilities, the Audit Committee reviewed and discussed the audited financial statements in the Annual Report for fiscal year 2012 with management.

The Audit Committee also reviewed with Haskell & White LLP, our independent registered public accounting firm, their judgments as to the quality, not just the acceptability, of our accounting principles and such other matters as are required to be discussed with the Audit Committee under generally accepted auditing standards (including Statement on Auditing Standards No. 61). The independent registered public accounting firm also provided the Audit Committee with the written disclosures required by Rule 3526 of the Public Company Accounting Oversight Board, “Communications with Audit Committees Concerning Independence (Rule 3526)”. The Audit Committee has also considered whether the provision of non-audit services by Haskell & White LLP is compatible with their independence.

The Audit Committee discussed with the Company’s independent registered public accountants the overall scope and plans for their audit. The Audit Committee met with the independent registered public accountants, with and without management present, to discuss the results of their examinations, their evaluations of our internal controls, and the overall quality of our financial reporting.

In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board that the audited financial statements be included in the Annual Report on Form 10-K for the year ended December 31, 2012 for filing with the SEC.

No portion of the information in this report shall be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, through any general statement incorporating by reference in its entirety the Proxy Statement in which this report appears, except to the extent that the Company specifically incorporates this report or a portion of it by reference. In addition, this report shall not be deemed to be filed under either the Securities Act or the Exchange Act.

By the Audit Committee,

Edward B. Case, Chairperson

Max Poll

April 5, 2013

ANNUAL REPORT

The Company’s Annual Report on Form 10-K, including financial statements, for the fiscal year ended December 31, 2012, accompanies this Proxy Statement or is available via the Internet at www.colonialstock.com/auxilio2013 or www.sec.gov.

IN ADDITION, THE COMPANY WILL PROVIDE WITHOUT CHARGE, AT THE WRITTEN REQUEST OF ANY BENEFICIAL OWNER OF SHARES ENTITLED TO VOTE AT THE ANNUAL MEETING OF STOCKHOLDERS, A COPY (WITHOUT EXHIBITS) OF THE COMPANY’S ANNUAL REPORT ON FORM 10-K AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE FISCAL YEAR ENDED DECEMBER 31, 2012. REQUESTS SHOULD BE MAILED TO THE SECRETARY, AUXILIO, INC., 26300 LA ALAMEDA, SUITE 100, MISSION VIEJO, CALIFORNIA.

INTERNET AVAILABILITY OF PROXY MATERIALS

OTHER MATTERS

As of the date of this proxy statement, the Board of Directors is not aware of any matters other than those set forth herein and in the Notice of Annual Meeting of Stockholders that will come before the meeting. Should any other matters arise requiring the vote of stockholders, it is intended that proxies will be voted in respect thereto in accordance with the best judgment of the person or persons voting the proxies.

Please return your proxy as soon as possible. Unless a quorum consisting of a majority of the outstanding shares entitled to vote is represented at the meeting, no business can be transacted. Therefore, please be sure to date and sign your proxy exactly as your name appears on your stock certificate and return it in the enclosed postage prepaid return envelope. Please act promptly to ensure that you will be represented at this important meeting.

By Order of the Board of Directors,

AUXILIO, INC.

/s/ John D. Pace

John D. Pace

Chairman of the Board

Mission Viejo, California

April 5, 2013

Auxilio, Inc.

26300 La Alameda, Suite 100

Mission Viejo, California 92691

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby nominates, constitutes and appoints each of Joseph J. Flynn and Paul T. Anthony the attorney, agent and proxy of the undersigned (the “Proxies”), with full power of substitution, to vote all stock of Auxilio, Inc. which the undersigned is entitled to represent and vote at the Annual Meeting of Stockholders of the Company to be held May 16, 2013, at 3:00 p.m. Pacific Standard Time at 26300 La Alameda, Suite 100, Mission Viejo, California, and at any and all adjournments or postponements thereof, as fully as if the undersigned were present and voting at the meeting, as follows:

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” PROPOSAL 1

1. ELECTION OF DIRECTORS:

o FOR

all nominees listed below (except as marked to the contrary below)

o WITHHOLD AUTHORITY

To vote for all nominees listed below

Election of the following nominees as directors: Edward B. Case, Joseph J. Flynn, Michael Joyce, William Leonard, John D. Pace, Max Poll and Michael Vanderhoof.

(Instructions: To withhold authority to vote for any nominee, print that nominee’s name in the space provided below.)

________________

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” PROPOSAL 2

2. APPROVAL, BY NON-BINDING VOTE, OF EXECUTIVE COMPENSATION:

o FOR

o AGAINST

o ABSTAIN

Approval, by non-binding vote, of executive compensation.

_______________

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR 3 YEARS ON PROPOSAL 3

3. RECOMMENDATION, BY NON-BINDING VOTE, ON THE FREQUENCY OF EXECUTIVE COMPENSATION VOTES:

o 1 YEAR

o 2 YEARS

o 3 YEARS

o ABSTAIN

Recommendation, by non-binding vote, on the frequency of executive compensation votes.

________________

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” PROPOSAL 4

4. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS:

o FOR

o AGAINST

o ABSTAIN

Ratification of the appointment of Haskell & White LLP as the Company’s independent auditors.

_________________

5. In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof.

THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR PROPOSAL 1, PROPOSAL 2 AND PROPOSAL 4 AND FOR 3 YEARS FOR PROPOSAL 3.

IMPORTANT – PLEASE SIGN, DATE AND RETURN PROMPTLY

DATED:

______________________________________, 2013

___________________________________________________

(Signature)

Please sign exactly as the name appears above. When shares are held by joint tenants, both should sign. When signing as an attorney, executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign in full corporate name by the President or other authorized officer. If a partnership, please sign in the partnership name by an authorized person

PLEASE SIGN THIS CARD AND RETURN PROMPTLY. IF YOUR ADDRESS IS INCORRECTLY SHOWN, PLEASE PRINT CHANGES. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE URGED TO SIGN AND RETURN THIS PROXY, WHICH MAY BE REVOKED AT ANY TIME PRIOR TO ITS USE.

CynergisTek (CTEK) DEF 14ADefinitive proxy