CynergisTek (CTEK) 10-Q 14 Aug 15 2015 Q2 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2015	Aug. 13, 2015
Document and Entity Information
Entity Registrant Name	AUXILIO INC
Document Type	10-Q
Document Period End Date	Jun. 30, 2015
Amendment Flag	false
Entity Central Index Key	1,011,432
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		24,223,167
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	2,015
Document Fiscal Period Focus	Q2
Trading Symbol	auxo

CONDENSED CONSOLIDATED BALANCE

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($)	Jun. 30, 2015	Dec. 31, 2014
Current assets:
Cash and cash equivalents	$ 5,088,623	$ 4,743,395
Accounts receivable, net	8,147,778	6,808,183
Supplies	1,135,534	1,066,132
Prepaid and other current assets	848,302	214,105
Total current assets	15,220,237	12,831,815
Property and equipment, net	291,133	215,747
Deposits	109,011	34,413
Intangible assets, net	3,018,750	1,265,000
Goodwill	3,789,656	2,473,656
Total assets	22,428,787	16,820,631
Current liabilities:
Accounts payable and accrued expenses	10,274,028	7,417,361
Accrued compensation and benefits	2,174,424	1,447,132
Line of credit		200,000
Deferred revenue	957,296	921,771
Current portion of long-term liabilities	571,181	55,546
Total current liabilities	13,976,929	10,041,810
Long-term liabilities:
Term loan, less current portion	1,500,000
Notes payable to related parties, net of discount of $3,007 and $30,189 at June 30, 2015 and December 31, 2014, respectively	49,937	333,534
Capital lease obligations less current portion	113,287	49,822
Total long-term liabilities	$ 1,663,224	$ 383,356
Commitments and contingencies
Stockholders' (deficit) equity:
Common stock, par value at $0.001, 33,333,333 shares authorized, 24,223,167 and 23,623,619 shares issued and outstanding at June 30, 2015 and December 31, 2014, respectively	$ 24,224	$ 23,625
Additional paid-in capital	27,651,355	26,576,506
Accumulated deficit	(20,886,945)	(20,204,666)
Total stockholders' (deficit) equity	6,788,634	6,395,465
Total liabilities and stockholders' equity	$ 22,428,787	$ 16,820,631

CONDENSED CONSOLIDATED BALANCE3

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($)	Jun. 30, 2015	Dec. 31, 2014
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	24,223,167	23,623,619
Common Stock, shares outstanding	24,223,167	23,623,619
Convertible notes payable, discount	$ 3,007	$ 30,189

CONDENSED CONSOLIDATED STATEMEN

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Income Statement
Revenues	$ 15,616,530	$ 10,377,272	$ 29,464,445	$ 20,621,844
Cost of revenues	13,500,076	8,658,202	25,215,670	17,163,142
Gross profit	2,116,454	1,719,070	4,248,775	3,458,702
Operating expenses:
Sales and marketing	808,816	582,503	1,550,888	1,090,714
General and administrative expenses	1,923,027	1,044,756	3,309,369	2,246,626
Total operating expenses	2,731,843	1,627,259	4,860,257	3,337,340
(Loss) income from operations	(615,389)	91,811	(611,482)	121,362
Other income (expense):
Interest expense	(34,347)	(105,070)	(68,397)	(203,893)
Total other income (expense)	(34,347)	(105,070)	(68,397)	(203,893)
Loss before provision for income taxes	(649,736)	(13,259)	(679,879)	(82,531)
Income tax expense			(2,400)	(1,600)
Net loss	$ (649,736)	$ (13,259)	$ (682,279)	$ (84,131)
Net loss per share:
Basic	$ (0.03)	$ 0	$ (0.03)	$ 0
Diluted	$ (0.03)	$ 0	$ (0.03)	$ 0
Number of weighted average shares:
Basic	24,191,316	20,877,949	23,936,832	20,768,735
Diluted	24,191,316	20,877,949	23,936,832	20,768,735

CONDENSED CONSOLIDATED STATEME5

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY - 6 months ended Jun. 30, 2015 - USD ($)	Common Stock	Additional Paid-in Capital	Accumulated Deficit	Total
Stockholders' Equity, beginning of period, Value at Dec. 31, 2014	$ 23,625	$ 26,576,506	$ (20,204,666)	$ 6,395,465
Stockholders' Equity, beginning of period, Shares at Dec. 31, 2014	23,623,619
Stock compensation expense for options and warrants granted to employees and directors		184,000		184,000
Stock compensation expense for restricted stock granted to key employee		40,613		$ 40,613
Stock options exercised, Value	$ 18	(18)
Stock options exercised, Shares	18,347			18,347
Conversion of related party note payable to common stock, Value	$ 129	257,706		$ 257,835
Conversion of related party note payable to common stock, Shares	128,917
Common stock issued in connection with the acquisition of Redspin, Value	$ 452	592,548		593,000
Common stock issued in connection with the acquisition of Redspin, Shares	452,284
Net loss			(682,279)	(682,279)
Stockholders' Equity, end of period, Value at Jun. 30, 2015	$ 24,224	$ 27,651,355	$ (20,886,945)	$ 6,788,634
Stockholders' Equity, end of period, Shares at Jun. 30, 2015	24,223,167

CONDENSED CONSOLIDATED STATEME6

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Cash flows from operating activities:
Net loss	$ (682,279)	$ (84,131)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation	71,830	48,706
Amortization of intangible assets	196,250
Stock compensation expense for warrants and options issued to employees and directors	184,000	253,312
Stock compensation expense for restricted stock issued to key employee	40,613
Interest expense related to accretion of debt discount costs	27,182	70,500
Interest expense related to amortization of loan acquisition costs		43,853
Changes in operating assets and liabilities:
Accounts receivable	(1,159,186)	(639,871)
Supplies	(69,402)	(15,710)
Prepaid and other current assets	(624,637)	39,216
Deposits	(71,420)
Accounts payable and accrued expenses	2,010,470	902,822
Accrued compensation and benefits	609,283	(104,439)
Deferred revenue	4,279	(32,255)
Net cash provided by operating activities	536,983	482,003
Cash flows from investing activities:
Purchases of property and equipment	(12,010)	(25,466)
Payment for purchase of Redspin	(1,876,966)
Net cash used for investing activities	(1,888,976)	(25,466)
Cash flows from financing activities:
Net repayments on line of credit agreement	(200,000)	(200,000)
Proceeds from term loan	2,000,000
Net proceeds from issuance of common stock through employee stock options		60,000
Payments on notes payable to related party	(52,944)
Payments on capital leases	(49,835)	(38,612)
Net cash provided by (used for) financing activities	1,697,221	(178,612)
Net increase in cash and cash equivalents	345,228	277,925
Cash and cash equivalents, beginning of period	4,743,395	4,668,624
Cash and cash equivalents, end of period	5,088,623	4,946,549
Supplemental disclosure of cash flow information:
Interest paid	41,215	89,472
Income taxes paid	135,480	56,460
Non-cash investing and financing activities:
Property and equipment acquired through capital leases	128,935	42,739
Conversion of convertible notes payable		$ 150,000
Conversion of note payable to related party	257,835
Common stock issued in connection with the acquisition of Redspin	$ 593,000

1. Basis of Presentation

1. Basis of Presentation	6 Months Ended
	Jun. 30, 2015
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, 2014, as filed with the Securities and Exchange Commission (“SEC”) on March 30, 2015. 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 of our Form 10-Q with the SEC.

2. Recently Issued Accounting P

2. Recently Issued Accounting Pronouncements	6 Months Ended
	Jun. 30, 2015
Notes
2. Recently Issued Accounting Pronouncements	2 RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In April 2015, the Financial Accounting Standards Board (“FASB”) issued new accounting guidance that requires debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability instead of being presented as an asset. Debt disclosures will include the face amount of the debt liability and the effective interest rate. The guidance requires retrospective application and represents a change in accounting principle. This guidance will be effective for us in the first quarter of 2016, and early adoption is permitted for financial statements that have not been previously issued. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements. In November 2014, the FASB issued new guidance on determining whether a host contract in a hybrid financial instrument issued in the form of a share is more akin to debt or to equity. This guidance does not change the current criteria in GAAP for determining when separation of certain embedded derivative features in a hybrid financial instrument is required, but instead clarifies how current GAAP should be interpreted in the evaluation of the economic characteristics and risks of a host contract in a hybrid financial instrument that is issued in the form of a share, thereby reducing existing diversity in practice. The guidance is effective for fiscal years beginning after December 15, 2015 and for interim periods within that fiscal year. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements. In August 2014, the FASB issued new guidance requiring management of all entities to evaluate whether there are conditions and events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the financial statements are issued (or available to be issued when applicable). The guidance is effective for fiscal years beginning after December 15, 2016 and for interim periods within that fiscal year. We do not expect the adoption of this guidance to have a material effect on our consolidated financial statements. In May 2014, the FASB issued new accounting guidance regarding revenue recognition from contracts with customers, which when effective will supersede existing revenue recognition requirements and will eliminate most industry-specific guidance from generally accepted accounting principles. The core principle of the new guidance is to require an entity to recognize as revenue the amount that reflects the consideration to which it expects to be entitled in exchange for goods or services as it transfers control to its customers. The new guidance requires additional qualitative and quantitative disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. An entity can apply the new guidance retrospectively to each prior reporting period presented (i.e., the full retrospective method) or retrospectively with the cumulative effect of initially applying the standard recognized at the date of initial application in retained earnings. As originally issued, the new revenue recognition standard would be effective for us beginning January 1, 2017. However, in 2015, the FASB voted to defer the effective date of the new guidance for one year. We are currently evaluating the appropriate transition method and any further impact of this guidance on our consolidated financial statements and related disclosures. In April 2014, FASB amended guidance to clarify the accounting for disposals of groups of assets and business units. The amendments alter the definition of a discontinued operation to cover only asset disposals that are a strategic shift with a major effect on an entity’s operations and finances. The changes should be applied in fiscal years that start on December 15, 2014, or later, but the changes can be applied ahead of the effective date for asset disposals that have not been reported in a set of financial statements. We do not believe adoption of this guidance will have a material impact on our consolidated financial statements. Additionally, from time to time, new accounting pronouncements are issued that we adopt as of the specified effective date. Unless otherwise discussed in these financial statements and notes or in our financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2014, we believe the impact of any other recently issued standards that are not yet effective are either not applicable to us at this time or will not have a material impact on our consolidated financial statements upon adoption.

3. Options and Warrants

3. Options and Warrants	6 Months Ended
	Jun. 30, 2015
Notes
3. Options and Warrants	3. OPTIONS AND WARRANTS Below is a summary of stock option and warrant activity during the six month period ended June 30, 2015: Options Shares Weighted Average Exercise Price Weighted Average Remaining Term in Years Aggregate Intrinsic Value Outstanding at December 31, 2014 4,886,829 $1.05 Granted 227,750 1.17 Exercised (18,347) 0.47 Cancelled (292,736) 1.67 Outstanding at June 30, 2015 4,803,496 $1.02 4.77 $673,235 Exercisable at June 30, 2015 4,343,937 $1.01 4.31 $665,860 During the six months ended June 30, 2015, we granted a total of 227,750 options to our employees and directors to purchase shares of our common stock at an exercise price range of $1.09 to $1.22 per share. The exercise price equals the fair value of our stock on the grant date. The options have graded vesting annually over three years starting January 2015. The fair value of the options was determined using the Black-Scholes option-pricing model. The assumptions used to calculate the fair market value are as follows: (i) risk-free interest rate range of 0.08% to 0.12%; (ii) estimated volatility range of 53.57% to 54.98%; (iii) dividend yield of 0.0%; and (iv) expected life of the options of three years. Warrants Shares Weighted Average Exercise Price Weighted Average Remaining Term in Years Aggregate Intrinsic Value Outstanding at December 31, 2014 2,208,565 $1.11 Granted - - Exercised - - Cancelled - - Outstanding at June 30, 2015 2,208,565 $1.11 4.34 $141,750 Exercisable at June 30, 2015 1,508,565 $1.16 2.86 $113,750 For the three and six months ended June 30, 2015 and 2014, stock-based compensation expense recognized in the consolidated statements of operations as follows: Three Months Ended June 30, Six months Ended June 30, 2015 2014 2015 2014 Cost of revenues $9,030 $2,815 $16,944 $129,979 Sales and marketing 8,302 8,337 17,565 23,412 General and administrative expense 112,748 41,558 149,491 99,921 Total stock based compensation expense $130,080 $52,710 $184,000 $253,312

4. Restricted Stock

4. Restricted Stock	6 Months Ended
	Jun. 30, 2015
Notes
4. Restricted Stock	4. RESTRICTED STOCK In July 2014, in connection with our acquisition of the common stock of Delphiis, Inc., we issued 400,000 shares of restricted stock to a key employee as part of his employment agreement. The shares vest as follows: Vesting Date Shares July 1, 2016 100,000 July 1, 2017 100,000 July 1, 2018 100,000 July 1, 2019 100,000 The stock compensation expense recognized for these shares totaled $30,298 for the six months ended June 30, 2015.

5. Net Loss Per Share

5. Net Loss Per Share	6 Months Ended
	Jun. 30, 2015
Notes
5. Net Loss Per Share	5. 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 the Company’s 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. For the three and six months ended June 30, 2015, potentially dilutive securities consisted of options and warrants to purchase 7,012,061 shares of common stock at prices ranging from $0.30 to $2.15 per share. For the three months and six months ended June 30, 2015, of these potentially dilutive securities, all of the shares to purchase common stock from the options and warrants are excluded from the computation of diluted earnings per share as their effect would be anti-dilutive. For the three and six months ended June 30, 2014, potentially dilutive securities consisted of options and warrants to purchase 7,488,954 shares of common stock at prices ranging from $0.30 to $2.15 per share, and convertible notes that could convert into 1,550,000 shares of common stock. For the three months and six months ended June 30, 2014, of these potentially dilutive securities, all of the shares to purchase commons stock from the options and warrants and the convertible notes are excluded from the computation of diluted earnings per share as their effect would be anti-dilutive. The following table sets forth the computation of basic and diluted net loss per share: Three Months Ended June 30, Six Months Ended June 30, 2015 2014 2015 2014 Numerator: Net loss $(649,736) $(13,259) $(682,279) $(84,131) Denominator: Denominator for basic calculation weighted average shares 24,191,316 20,877,949 23,936,832 20,768,735 Denominator for diluted calculation weighted average shares 24,191,316 20,877,949 23,936,832 20,768,735 Net loss per share: Basic net loss per share (.03) (.00) (.03) (.00) Diluted net loss per share (.03) (.00) (.03) (.00)

6. Accounts Receivable

6. Accounts Receivable	6 Months Ended
	Jun. 30, 2015
Notes
6. Accounts Receivable	6. ACCOUNTS RECEIVABLE A summary of accounts receivable is as follows: June 30,2015 December 31,2014 Trade receivables $8,728,737 $8,105,330 Unapplied advances and unbilled revenue (580,959) (1,297,147) Allowance for doubtful accounts - - Total accounts receivable $8,147,778 $6,808,183

7. Intangible Assets

7. Intangible Assets	6 Months Ended
	Jun. 30, 2015
Notes
7. Intangible Assets	7. INTANGIBLE ASSETS Intangible assets consist of the following: Gross Carrying Amount Accumulated Amortization Net Carrying Amount Useful Life (years) Delphiis, Inc. Acquired technology $900,000 $(90,000) $810,000 10 Customer relationships 400,000 (80,000) 320,000 5 Trademarks 50,000 (33,333) 16,667 1.5 Non-compete agreements 20,000 (6,667) 13,333 3 Total intangible assets, Delphiis, Inc. $1,370,000 $(210,000) $1,160,000 Redspin Acquired technology $1,050,000 $(26,250) $1,023,750 10 Customer relationships 600,000 (50,000) 550,000 3 Trademarks 200,000 (10,000) 190,000 5 Non-compete agreements 100,000 (5,000) 95,000 5 Total intangible assets, Redspin $1,950,000 $(91,250) $1,858,750 Total intangible assets $3,320,000 $(301,250) $3,018,750 Please see Notes 15 and 16 below for further discussion of the origin of these intangible assets.

8. Line of Credit

8. Line of Credit	6 Months Ended
	Jun. 30, 2015
Notes
8. Line of Credit	8. 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 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 June 30, 2015, the interest rate was 4.00%. 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). 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. 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. 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. 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 this filing. We were in compliance with all of the Avidbank agreement covenants as of June 30, 2015 and December 31, 2014. 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 $1.387 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 $16,347 and $18,432, respectively, for the six months ended June 30, 2015 and 2014, respectively. Interest charges associated with the Avidbank term loan, including loan origination costs totaled $11,726 for the six months ended June 30, 2015.

9. Notes Payable - Related Part

9. Notes Payable - Related Parties	6 Months Ended
	Jun. 30, 2015
Notes
9. Notes Payable - Related Parties	9. NOTES PAYABLE – RELATED PARTIES We assumed debt totaling $463,723 when we acquired Delphiis, Inc. effective July 1, 2014 (see Note 15). In July 2014, we paid $100,000 to the note holders upon Delphiis’s collection of $100,000 from accounts receivable outstanding as of June 30, 2014. On February 19, 2015, a holder of $257,835 of the notes agreed to convert the principal amount of his note into 257,835 shares of our common stock and the other note holder was paid $52,943. For the remaining $52,944 principal, less unaccreted costs of $3,007, we have an outstanding promissory note payable to a former owner of Delphiis, Inc. The note bears interest at the rate of 4% per annum, upon which we are to make quarterly interest-only payments on the total principal amount outstanding at the end of each calendar quarter. The note matures on July 31, 2016 and contain no prepayment penalty. Pursuant to the terms of the note, we will accelerate payment on the outstanding amount due under such note at such time as Delphiis, Inc. achieves $4,000,000 of bookings measured from July 1, 2014. Pursuant to a note conversion agreement, the holder of the $257,835 note agreed to convert the principal amount of his note into 257,835 shares of our common stock and received 128,917 shares of common stock and 128,918 shares of restricted stock units with the restriction being removed, and common shares being issued at the earlier of the achievement of when $4,000,000 of bookings target is reached, or July 31, 2016. The foregoing summary of the note conversion is qualified in its entirety by reference to the full context of the Note Conversion Agreement which is found as Exhibit 99.1 to our 8-K filing on February 27, 2015. Interest expense on the notes, including amortization of the discount, for the six months ended June 30, 2015 totaled $29,899.

10. Convertible Notes Payable

10. Convertible Notes Payable	6 Months Ended
	Jun. 30, 2015
Notes
10. Convertible Notes Payable	10. CONVERTIBLE NOTES PAYABLE Effective July 29, 2011, we closed on a private offering of secured convertible promissory notes and warrants (“Units”) for gross proceeds of $1,850,000. Each of the Units consisted of (i) a $5,000 secured convertible promissory note (each a “Note” and collectively “Notes”) and (ii) a warrant (each a “Warrant” and collectively “Warrants”) to purchase 1,000 shares of our common stock at an exercise price of $1.50 per share. The Notes matured July 29, 2014 and were secured by our tangible and intangible assets, subject to the senior security interest of AvidBank, as discussed in Note 8. The Notes accrued interest at a rate of eight percent (8%) per annum, compounded annually, and the interest on the outstanding balance of the Notes was payable no later than thirty (30) days following the close of each calendar quarter. The Notes were convertible into 1,850,000 shares of common stock. The Warrants expire April 29, 2016 and are exercisable to purchase up to 370,000 shares of our common stock. We additionally granted piggyback registration rights to the investors in this offering. Several members of our Board at the time, including John Pace, Michael Joyce, Mark St. Clare and Michael Vanderhoof, participated in the offering. We also paid Cambria Capital, LLC a placement fee of $149,850 in sales commissions, reimbursement for costs associated with the placement of the Units and issued a warrant to purchase up to 199,800 shares of common stock exercisable at a price of $1.50 per share. Cambria Capital, LLC is an affiliate of Michael Vanderhoof, a member of the Board. The engagement of Cambria Capital, LLC, the payment of the placement fee and the issuance of the warrant to Cambria Capital, LLC were approved by a majority of the disinterested members of the Board. We additionally granted piggyback registration rights to Cambria Capital, LLC that are the same as those afforded to the investors in the offering. The holders of the Notes elected to convert all of the principal into 1,850,000 shares of common stock with 150,000 shares converted during 2012 and 2013, 150,000 shares converted from March 2014 to June 2014 and the remaining 1,550,000 shares converted in July 2014. The warrants remain outstanding until their exercise or expiration. Interest charges associated with the convertible notes payable, including amortization of the discounts and loan acquisition costs totaled $180,064 for the six months ended June 30, 2014.

11. Employment Agreements

11. Employment Agreements	6 Months Ended
	Jun. 30, 2015
Notes
11. Employment Agreements	11. EMPLOYMENT AGREEMENTS Effective January 1, 2014, we entered into a new 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, and will automatically renew for subsequent twelve 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 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 $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. 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, 2014, we entered into a new 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. The 2014 Anthony Agreement will automatically renew for subsequent twelve 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 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 $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. 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.

12. Concentrations

12. Concentrations	6 Months Ended
	Jun. 30, 2015
Notes
12. Concentrations	12. 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 35% of our revenues for the six months ended June 30, 2015 and our three largest customers accounted for approximately 41% of our revenues for the six months ended June 30, 2014. Our largest customers had net accounts receivable totaling approximately $2,600,000 and $2,800,000 as of June 30, 2015 and December 31, 2014 respectively.

13. Segment Reporting

13. Segment Reporting	6 Months Ended
	Jun. 30, 2015
Notes
13. Segment Reporting	13. SEGMENT REPORTING We have adopted ASC 280, “Segment Reporting”. Because we operate in one business segment based on our integration and management strategies, segment disclosure has not been presented.

14. Goodwill

14. Goodwill	6 Months Ended
	Jun. 30, 2015
Notes
14. Goodwill	14. GOODWILL We performed an impairment test of goodwill as of December 31, 2014, determining that the implied fair value of goodwill based on the Company’s market capitalization was greater than the carrying amount of goodwill. We did not perform step 2 since the fair value was greater than the carrying amount. Although the Company has experienced a net loss for the six months ended June 30, 2015, the net cash provided by operating activities totaled $536,983. No other triggering events were noted during the six months ended June 30, 2015, therefore management did not feel it was necessary to perform an interim impairment test.

15. Stock Purchase Agreement -

15. Stock Purchase Agreement - Delphiis, Inc.	6 Months Ended
	Jun. 30, 2015
Notes
15. Stock Purchase Agreement - Delphiis, Inc.	15. STOCK PURCHASE AGREEMENT – DELPHIIS, INC. As previously disclosed in our Current Report on Form 8-K, filed with the SEC on July 8, 2014, on July 7, 2014 we entered into a Stock Purchase Agreement (the “Agreement”) with Delphiis, Inc., a California corporation (“Delphiis”), certain stockholders of Delphiis (the “Stockholders”), and Mike Gentile, as seller representative (“Gentile”). By agreement of the parties, the effective date of the Agreement was July 1, 2014. Pursuant to the Agreement, we acquired 100% of the issued and outstanding shares of common stock (the “Shares”) of Delphiis from the Stockholders. The purchase price paid for the Shares consisted of three components: the Securities Consideration, the Cash Consideration, and the Debt Assumption. - The Securities Consideration consisted of 930,406 shares of our common stock, which was the number of shares having an aggregate value of $1,250,000, with the price per share equal to the average of the closing price of our common stock on the OTC Markets for the 20 most recent trading days prior to the closing date, rounded up to the nearest whole number of shares. - The Cash Consideration was equal to $1,000,000. - The Debt Assumption was equal to $463,723 which was owed by Delphiis to Gentile and two other parties. By way of background, of such amount, $363,723 is represented by certain amended and restated promissory notes (the “Notes”) dated of even date with the Agreement, which bear interest at the rate of 4% per annum, and pursuant to which Delphiis was to make quarterly interest-only payments on the total principal amount outstanding at the end of each calendar quarter. The Notes have a maturity date which is 24 months from the date of the Agreement and contain no prepayment penalty. Pursuant to the terms of the Notes, Delphiis will accelerate payment on (i) fifty percent (50%) of the outstanding amount due under such Notes at such time as Delphiis achieves $1,500,000 of bookings measured from the date of the Agreement, and (ii) the remaining fifty percent (50%) will be paid at such time as Delphiis achieves $4,000,000 of bookings measured from the date of the Agreement, all as set forth in the Notes. Delphiis also agreed to pay the remaining $100,000 to Gentile and the other noteholders upon Delphiis’s collection of $100,000 from accounts receivable outstanding as of June 30, 2014. Pursuant to the Agreement, Auxilio, as the sole owner of Delphiis, agreed to assume the obligations of Delphiis and to make the payments pursuant to the terms of the Notes. The allocation of the purchase price of the assets acquired and liabilities assumed based on their fair values was as follows: Acquired technology $900,000 Customer relationships 400,000 Trademarks 50,000 Non-compete agreements 20,000 Goodwill 956,639 Other assets received 376,775 Deferred revenue (154,089) Notes payable (424,000) Other liabilities assumed (113,325) Total $2,012,000 Purchased identifiable intangible assets are amortized on a straight-line basis over the respective useful lives. Our estimated useful life of the identifiable intangible assets acquired ranges from 1.5 to 10 years. We recognized goodwill of $956,639. 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 Delphiis products and services to Auxilio’s customers. The Company incurred approximately $98,000 in legal, accounting and other professional fees related to this acquisition, all of which were expensed during the nine months ended September 30, 2014. Escrow Agreement In connection with the Agreement, we entered into an escrow agreement with the Stockholders and Colonial Stock Transfer (the “Escrow Agent”), pursuant to which we deposited $100,000 of the Cash Consideration into an escrow to be held by the Escrow Agent to cover any indemnification claims made pursuant to the Agreement. Under this escrow agreement, if no indemnification claims have been made prior to July 7, 2015, the Escrow Agent is to release the escrowed funds to the Stockholders. On July 28, 2015, the remaining $100,000 was distributed to the Stockholders by the Escrow Agent. Employment Agreement In connection with the Agreement, we entered into an employment agreement with Mr. Gentile (the “Gentile Employment Agreement”), pursuant to which Gentile was employed to serve as our Executive Vice President of Innovation and Security. The initial term of the Gentile Employment Agreement is for three years (unless sooner terminated), and automatically renews for subsequent twelve-month periods unless either party determines to not renew. Gentile’s base annual salary will be $200,000, and Gentile will be eligible to receive incentive compensation. Pursuant to the Gentile Employment Agreement, Gentile also received 400,000 restricted shares of our common stock, vesting as follows: 100,000 shares will vest 2 years from the date of the Gentile Employment Agreement; 100,000 shares will vest 3 years from the date of the Gentile Employment Agreement; 100,000 shares will vest 4 years from the date of the Gentile Employment Agreement; and 100,000 shares will vest 5 years from the date of the Gentile Employment Agreement (see Note 4). 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 and six months ended June 30, 2015 and 2014, 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 June 30 Six months Ended June 30, 2015 2014 2015 2014 Pro forma revenue $15,616,530 $10,714,367 $29,464,445 $21,215,447 Pro forma net loss $(649,736) $(41,576) $(682,279) $(35,297) Pro forma basic net loss per share $(0.03) $(0.00) $(0.03) $(0.00) Pro forma diluted net loss per share $(0.03) $(0.00) $(0.03) $(0.00)

16. Asset Purchase Agreement -

16. Asset Purchase Agreement - Redspin	6 Months Ended
	Jun. 30, 2015
Notes
16. Asset Purchase Agreement - Redspin	16. ASSET PURCHASE AGREEMENT - REDSPIN On April 6, 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 “Securities Consideration”). The Company also agreed to pay a cash Earn-out Payment and the Employee Bonus Shares, as each are 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 approximately $750,000. If no indemnification claims have been made prior to June 30, 2016, the Company’s secretary will release the holdback funds to Redspin. 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 1,316,000 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 3,292,966 Purchased identifiable intangible assets are amortized on a straight-line basis over the respective useful lives. Our estimated useful life of the identifiable intangible assets acquired ranges from 3 to 10 years. We recognized goodwill of $1,316,000. 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 six months ended June 30, 2015. As of the date of this report, management is still in the process of determining the final accounting related to the acquisition of assets and assumption of liabilities of Redspin that closed in April 2015. Specifically, management is analyzing the Earn-out provisions of the Purchase Agreement to determine if any portion of the estimated Earn-out relates to post-combination compensation. Because management’s analysis has not yet been completed, the Company’s determination of the purchase price and the resulting purchase price allocation is preliminary. Management expects to complete its analysis during the quarter ending September 30, 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 and six ended June 30, 2015 and 2014, 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 June 30, Six months Ended June 30, 2015 2014 2015 2014 Pro forma revenue $15,616,530 $10,926,192 $30,163,121 $21,648,081 Pro forma net loss $(649,736) $(170,555) $(883,158) $(500,610) Pro forma basic net loss per share $(0.03) $(0.01) $(0.04) $(0.02) Pro forma diluted net loss per share $(0.03) $(0.01) $(0.04 $(0.02)

3. Options and Warrants_ Schedu

3. Options and Warrants: Schedule of Stock Options, Activity (Tables)	6 Months Ended
	Jun. 30, 2015
Tables/Schedules
Schedule of Stock Options, Activity	Below is a summary of stock option and warrant activity during the six month period ended June 30, 2015: Options Shares Weighted Average Exercise Price Weighted Average Remaining Term in Years Aggregate Intrinsic Value Outstanding at December 31, 2014 4,886,829 $1.05 Granted 227,750 1.17 Exercised (18,347) 0.47 Cancelled (292,736) 1.67 Outstanding at June 30, 2015 4,803,496 $1.02 4.77 $673,235 Exercisable at June 30, 2015 4,343,937 $1.01 4.31 $665,860

3. Options and Warrants_ Sche24

3. Options and Warrants: Schedule of Warrants, Activity (Tables)	6 Months Ended
	Jun. 30, 2015
Tables/Schedules
Schedule of Warrants, Activity	Warrants Shares Weighted Average Exercise Price Weighted Average Remaining Term in Years Aggregate Intrinsic Value Outstanding at December 31, 2014 2,208,565 $1.11 Granted - - Exercised - - Cancelled - - Outstanding at June 30, 2015 2,208,565 $1.11 4.34 $141,750 Exercisable at June 30, 2015 1,508,565 $1.16 2.86 $113,750

3. Options and Warrants_ Sche25

3. Options and Warrants: Schedule of Stock-Based Compensation Exprense Allocation (Tables)	6 Months Ended
	Jun. 30, 2015
Tables/Schedules
Schedule of Stock-Based Compensation Exprense Allocation	For the three and six months ended June 30, 2015 and 2014, stock-based compensation expense recognized in the consolidated statements of operations as follows: Three Months Ended June 30, Six months Ended June 30, 2015 2014 2015 2014 Cost of revenues $9,030 $2,815 $16,944 $129,979 Sales and marketing 8,302 8,337 17,565 23,412 General and administrative expense 112,748 41,558 149,491 99,921 Total stock based compensation expense $130,080 $52,710 $184,000 $253,312

4. Restricted Stock_ Restricted

4. Restricted Stock: Restricted Stock Vesting Schedule for Key Employee from Delphiis, Inc. (Tables)	6 Months Ended
	Jun. 30, 2015
Tables/Schedules
Restricted Stock Vesting Schedule for Key Employee from Delphiis, Inc.	The shares vest as follows: Vesting Date Shares July 1, 2016 100,000 July 1, 2017 100,000 July 1, 2018 100,000 July 1, 2019 100,000

5. Net Loss Per Share_ Schedule

5. Net Loss Per Share: Schedule of Computation of Earnings Per Share, Basic and Diluted (Tables)	6 Months Ended
	Jun. 30, 2015
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 June 30, Six Months Ended June 30, 2015 2014 2015 2014 Numerator: Net loss $(649,736) $(13,259) $(682,279) $(84,131) Denominator: Denominator for basic calculation weighted average shares 24,191,316 20,877,949 23,936,832 20,768,735 Denominator for diluted calculation weighted average shares 24,191,316 20,877,949 23,936,832 20,768,735 Net loss per share: Basic net loss per share (.03) (.00) (.03) (.00) Diluted net loss per share (.03) (.00) (.03) (.00)

6. Accounts Receivable_ Schedul

6. Accounts Receivable: Schedule of Accounts Receivable (Tables)	6 Months Ended
	Jun. 30, 2015
Tables/Schedules
Schedule of Accounts Receivable	A summary of accounts receivable is as follows: June 30,2015 December 31,2014 Trade receivables $8,728,737 $8,105,330 Unapplied advances and unbilled revenue (580,959) (1,297,147) Allowance for doubtful accounts - - Total accounts receivable $8,147,778 $6,808,183

7. Intangible Assets_ Schedule

7. Intangible Assets: Schedule of Intangible Assets (Tables)	6 Months Ended
	Jun. 30, 2015
Tables/Schedules
Schedule of Intangible Assets	Intangible assets consist of the following: Gross Carrying Amount Accumulated Amortization Net Carrying Amount Useful Life (years) Delphiis, Inc. Acquired technology $900,000 $(90,000) $810,000 10 Customer relationships 400,000 (80,000) 320,000 5 Trademarks 50,000 (33,333) 16,667 1.5 Non-compete agreements 20,000 (6,667) 13,333 3 Total intangible assets, Delphiis, Inc. $1,370,000 $(210,000) $1,160,000 Redspin Acquired technology $1,050,000 $(26,250) $1,023,750 10 Customer relationships 600,000 (50,000) 550,000 3 Trademarks 200,000 (10,000) 190,000 5 Non-compete agreements 100,000 (5,000) 95,000 5 Total intangible assets, Redspin $1,950,000 $(91,250) $1,858,750 Total intangible assets $3,320,000 $(301,250) $3,018,750

15. Stock Purchase Agreement 30

15. Stock Purchase Agreement - Delphiis, Inc.: Schedule of Allocation of the Purchase Price of the Assets Acquired and Liabilities Assumed (Tables)	6 Months Ended
	Jun. 30, 2015
Delphiis, 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 $900,000 Customer relationships 400,000 Trademarks 50,000 Non-compete agreements 20,000 Goodwill 956,639 Other assets received 376,775 Deferred revenue (154,089) Notes payable (424,000) Other liabilities assumed (113,325) Total $2,012,000

15. Stock Purchase Agreement 31

15. Stock Purchase Agreement - Delphiis, Inc.: Business Acquisition, Pro Forma Information (Tables)	6 Months Ended
	Jun. 30, 2015
Delphiis, Inc.
Business Acquisition, Pro Forma Information	Three Months Ended June 30 Six months Ended June 30, 2015 2014 2015 2014 Pro forma revenue $15,616,530 $10,714,367 $29,464,445 $21,215,447 Pro forma net loss $(649,736) $(41,576) $(682,279) $(35,297) Pro forma basic net loss per share $(0.03) $(0.00) $(0.03) $(0.00) Pro forma diluted net loss per share $(0.03) $(0.00) $(0.03) $(0.00)

16. Asset Purchase Agreement 32

16. Asset Purchase Agreement - Redspin: Schedule of Allocation of the Purchase Price of the Assets Acquired and Liabilities Assumed (Tables)	6 Months Ended
	Jun. 30, 2015
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 1,316,000 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 3,292,966

16. Asset Purchase Agreement 33

16. Asset Purchase Agreement - Redspin: Business Acquisition, Pro Forma Information (Tables)	6 Months Ended
	Jun. 30, 2015
Redspin, Inc.
Business Acquisition, Pro Forma Information	Three Months Ended June 30, Six months Ended June 30, 2015 2014 2015 2014 Pro forma revenue $15,616,530 $10,926,192 $30,163,121 $21,648,081 Pro forma net loss $(649,736) $(170,555) $(883,158) $(500,610) Pro forma basic net loss per share $(0.03) $(0.01) $(0.04) $(0.02) Pro forma diluted net loss per share $(0.03) $(0.01) $(0.04 $(0.02)

3. Options and Warrants_ Sche34

3. Options and Warrants: Schedule of Stock Options, Activity (Details) - Jun. 30, 2015 - USD ($)	Total
Details
Outstanding, Beginning Balance	4,886,829
Outstanding, Weighted Average Exercise Price, Beginning Balance	$ 1.05
Granted	227,750
Granted, Weighted Average Exercise Price	$ 1.17
Exercised	(18,347)
Exercised, Weighted Average Exercise Price	$ 0.47
Cancelled	(292,736)
Cancelled, Weighted Average Exercise Price	$ 1.67
Outstanding, Ending Balance	4,803,496
Outstanding, Weighted Average Exercise Price, Ending Balance	$ 1.02
Outstanding, Weighted Average Remaining Term in Years	4 years 9 months 7 days
Outstanding, Aggregate Intrinsic Value	$ 673,235
Exercisable	4,343,937
Exercisable, Weighted Average Exercise Price	$ 1.01
Exercisable, Weighted Average Remaining Term in Years	4 years 3 months 22 days
Exercisable, Aggregate Intrinsic Value	$ 665,860

3. Options and Warrants (Detail

3. Options and Warrants (Details) - 6 months ended Jun. 30, 2015 - Employee Stock Option	Total
Fair Value Assumptions, Method Used	Black-Scholes option-pricing model
Dividend yield	0.00%
Expected life	3 years
Minimum
Risk-free interest rate	0.08%
Estimated volatility	53.57%
Maximum
Risk-free interest rate	0.12%
Estimated volatility	54.98%

3. Options and Warrants_ Sche36

3. Options and Warrants: Schedule of Warrants, Activity (Details) - Jun. 30, 2015	USD ($)$ / sharesshares
Details
Warrants, Outstanding, Beginning Balance | shares	2,208,565
Outstanding, Weighted Average Exercise Price, Starting Balance	$ 1.11
Granted | shares	0
Granted, Weighted Average Exercise Price	$ 0
Exercised | shares	0
Exercised, Weighted Average Exercise Price	$ 0
Cancelled | shares	0
Cancelled, Weighted Average Exercise Price	$ 0
Warrants, Outstanding, Ending Balance | shares	2,208,565
Outstanding, Weighted Average Exercise Price, Ending Balance	$ 1.11
Outstanding, Weighted Average Remaining Contractual Life	4 years 4 months 2 days
Outstanding, Intrinsic Value | $	$ 141,750
Exercisable	1,508,565
Exercisable, Weighted Average Exercise Price	$ 1.16
Exercisable, Weighted Average Remaining Contractual Life	2 years 10 months 10 days
Exercisable, Intrinsic Value | $	$ 113,750

3. Options and Warrants_ Sche37

3. Options and Warrants: Schedule of Stock-Based Compensation Exprense Allocation (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Stock-based compensation expense	$ 130,080	$ 52,710	$ 184,000	$ 253,312
Cost of Sales
Stock-based compensation expense	9,030	2,815	16,944	129,979
Selling and Marketing Expense
Stock-based compensation expense	8,302	8,337	17,565	23,412
General and Administrative Expense
Stock-based compensation expense	$ 112,748	$ 41,558	$ 149,491	$ 99,921

4. Restricted Stock (Details)

4. Restricted Stock (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Shares, Granted			0
Stock-based compensation expense	$ 130,080	$ 52,710	$ 184,000	$ 253,312
Common Stock | Restricted Stock
Shares, Granted			400,000
Stock-based compensation expense			$ 30,298

4. Restricted Stock_ Restrict39

4. Restricted Stock: Restricted Stock Vesting Schedule for Key Employee from Delphiis, Inc. (Details)	6 Months Ended
	Jun. 30, 2015shares
July 1, 2016
Shares	100,000
July 1, 2017
Shares	100,000
July 1, 2018
Shares	100,000
July 1, 2019
Shares	100,000

5. Net Loss Per Share (Details)

5. Net Loss Per Share (Details) - $ / shares	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Stock Options and Warrants
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	7,012,061	7,488,954
Exercise Price Range, Lower Range Limit	$ 0.30	$ 0.30
Exercise Price Range, Upper Range Limit	$ 2.15	$ 2.15
Convertible Debt Securities
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount		1,550,000

5. Net Loss Per Share_ Schedu41

5. Net Loss Per Share: Schedule of Computation of Earnings Per Share, Basic and Diluted (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Numerator:
Net loss	$ (649,736)	$ (13,259)	$ (682,279)	$ (84,131)
Denominator:
Denominator for basic calculation weighted averages	24,191,316	20,877,949	23,936,832	20,768,735
Denominator for diluted calculation weighted average shares	24,191,316	20,877,949	23,936,832	20,768,735
Net loss per share:
Basic net loss per share	$ (0.03)	$ 0	$ (0.03)	$ 0
Diluted net loss per share	$ (0.03)	$ 0	$ (0.03)	$ 0

6. Accounts Receivable_ Sched42

6. Accounts Receivable: Schedule of Accounts Receivable (Details) - USD ($)	Jun. 30, 2015	Dec. 31, 2014
Details
Trade receivables	$ 8,728,737	$ 8,105,330
Unapplied advances and unbilled revenue	(580,959)	(1,297,147)
Allowance for doubtful accounts	0	0
Total accounts receivable	$ 8,147,778	$ 6,808,183

7. Intangible Assets_ Schedul43

7. Intangible Assets: Schedule of Intangible Assets (Details) - Jun. 30, 2015 - USD ($)	Total
Gross Carrying Amount	$ 3,320,000
Accumulated Amortization	(301,250)
Net Carrying Amount	3,018,750
Delphiis, Inc.
Gross Carrying Amount	1,370,000
Accumulated Amortization	(210,000)
Net Carrying Amount	1,160,000
Delphiis, Inc. | Acquired Technology
Gross Carrying Amount	900,000
Accumulated Amortization	(90,000)
Net Carrying Amount	$ 810,000
Useful life (years)	10 years
Delphiis, Inc. | Customer Relationships
Gross Carrying Amount	$ 400,000
Accumulated Amortization	(80,000)
Net Carrying Amount	$ 320,000
Useful life (years)	5 years
Delphiis, Inc. | Trademarks
Gross Carrying Amount	$ 50,000
Accumulated Amortization	(33,333)
Net Carrying Amount	$ 16,667
Useful life (years)	1 year 6 months
Delphiis, Inc. | Noncompete Agreements
Gross Carrying Amount	$ 20,000
Accumulated Amortization	(6,667)
Net Carrying Amount	$ 13,333
Useful life (years)	3 years
Redspin, Inc.
Gross Carrying Amount	$ 1,950,000
Accumulated Amortization	(91,250)
Net Carrying Amount	1,858,750
Redspin, Inc. | Acquired Technology
Gross Carrying Amount	1,050,000
Accumulated Amortization	(26,250)
Net Carrying Amount	$ 1,023,750
Useful life (years)	10 years
Redspin, Inc. | Customer Relationships
Gross Carrying Amount	$ 600,000
Accumulated Amortization	(50,000)
Net Carrying Amount	$ 550,000
Useful life (years)	3 years
Redspin, Inc. | Trademarks
Gross Carrying Amount	$ 200,000
Accumulated Amortization	(10,000)
Net Carrying Amount	$ 190,000
Useful life (years)	5 years
Redspin, Inc. | Noncompete Agreements
Gross Carrying Amount	$ 100,000
Accumulated Amortization	(5,000)
Net Carrying Amount	$ 95,000
Useful life (years)	5 years

8. Line of Credit (Details)

8. Line of Credit (Details) - Avidbank - USD ($)	6 Months Ended		12 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2012	Jun. 19, 2015	May. 09, 2012	May. 04, 2012
Line of Credit
Interest Charges	$ 16,347	$ 18,432
Term Loan
Line of Credit Facility, Maximum Borrowing Capacity				$ 4,000,000
Long-term Line of Credit				$ 2,000,000
Debt Instrument, Interest Rate Terms	prime plus 1.25% per annum
Warrants, Outstanding					72,098
Exercise Price of Warrants					$ 1.387
Interest Charges	$ 11,726
Loan and Security Agreement
Line of Credit Facility, Initiation Date	May 4, 2012
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).
Loan and Security Agreement | Line of Credit
Debt Instrument, Description of Variable Rate Basis			prime plus 1.0% per annum
Debt Instrument, Interest Rate, Effective Percentage	4.00%
Loan and Security Agreement | 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.

9. Notes Payable - Related Pa45

9. Notes Payable - Related Parties (Details) - USD ($)	1 Months Ended	4 Months Ended	6 Months Ended	24 Months Ended
	Jul. 31, 2014	Jun. 30, 2014	Jun. 30, 2015	Dec. 31, 2013
Common Stock
Debt Conversion, Converted Instrument, Shares Issued	1,550,000	150,000		150,000
Delphiis, Inc.
Acquisition, Debt Assumed			$ 463,723
Revenue Bookings Target			4,000,000
Delphiis, Inc. | $100,000 Promissory Note
Repayments of Debt			100,000
Debt Instrument, Face Amount			$ 100,000
Delphiis, Inc. | Delphiis Noteholder 1 | Common Stock
Stock Issued During Period, Shares, Share-based Compensation			128,917
Delphiis, Inc. | Delphiis Noteholder 1 | Common Stock | Restricted Stock Units (RSUs)
Stock Issued During Period, Shares, Share-based Compensation			128,918
Delphiis, Inc. | Delphiis Noteholder 1 | Conversion 1
Debt Conversion, Original Debt, Amount			$ 257,835
Delphiis, Inc. | Delphiis Noteholder 1 | Conversion 1 | Common Stock
Debt Conversion, Converted Instrument, Shares Issued			257,835
Delphiis, Inc. | Delphiis Noteholder 2
Repayments of Notes Payable			$ 52,943
Delphiis, Inc. | Delphiis Noteholder 3
Debt Instrument, Face Amount			52,944
Unaccreted costs			$ 3,007
Debt Instrument, Interest Rate, Stated Percentage			4.00%
Debt Instrument, Maturity Date			Jul. 31, 2016
Delphiis, Inc. | $363,723 Promissory Note
Debt Instrument, Face Amount			$ 363,723
Debt Instrument, Interest Rate, Stated Percentage			4.00%
Amortization of Debt Discount			$ 29,899

10. Convertible Notes Payable (

10. Convertible Notes Payable (Details)	1 Months Ended	4 Months Ended	6 Months Ended		12 Months Ended	24 Months Ended
	Jul. 31, 2014shares	Jun. 30, 2014shares	Jun. 30, 2015shares	Jun. 30, 2014USD ($)	Dec. 31, 2011USD ($)	Dec. 31, 2013shares	Jul. 29, 2011$ / sharesshares
Common Stock
Debt Conversion, Converted Instrument, Shares Issued | shares	1,550,000	150,000				150,000
Convertible Debt Securities
Private Offering of Secured Convertible Notes And Warrants Closed Date			Jul. 29, 2011
Proceeds From Convertible Notes and Warrants					$ 1,850,000
Debt Instrument, Description			Each of the Units consisted of (i) a $5,000 secured convertible promissory note (each a “Note” and collectively “Notes”) and (ii) a warrant (each a “Warrant” and collectively “Warrants”) to purchase 1,000 shares of our common stock at an exercise price of $1.50 per share
Debt Instrument, Maturity Date			Jul. 29, 2014
Debt Instrument, Interest Rate, Stated Percentage			8.00%
Warrant Expiration Date			Apr. 29, 2016
Warrants, Outstanding | shares			370,000
Sales Commissions and Fees					$ 149,850
Interest Charges				$ 180,064
Convertible Debt Securities | Cambria Capital LLC
Warrants, Outstanding | shares							199,800
Exercise Price of Warrants | $ / shares							$ 1.50
Convertible Debt Securities | Common Stock
Debt Instrument, Convertible, Number of Equity Instruments			1,850,000

11. Employment Agreements (Deta

11. Employment Agreements (Details) - 6 months ended Jun. 30, 2015 - USD ($)	Total
Chief Executive Officer
Base Salary, Annual Amount	$ 275,000
Salary Bonus, Annual Amount	$ 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. The warrants will vest contingent with the achievement of certain financial performance metrics of the Company for calendar years 2015 and 2016.
Chief Financial Officer
Base Salary, Annual Amount	$ 225,000
Salary Bonus, Annual Amount	$ 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. The warrants will vest contingent with the achievement of certain financial performance metrics of the Company for calendar years 2015 and 2016.

12. Concentrations (Details)

12. Concentrations (Details) - USD ($)	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Accounts receivable, net	$ 8,147,778		$ 6,808,183
Customer Concentration Risk
Accounts receivable, net	$ 2,600,000		$ 2,800,000
Sales | Customer Concentration Risk
Concentration Risk, Percentage	35.00%	41.00%

14. Goodwill (Details)

14. Goodwill (Details) - USD ($)	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Details
Net cash provided by operating activities	$ 536,983	$ 482,003

15. Stock Purchase Agreement 50

15. Stock Purchase Agreement - Delphiis, Inc. (Details) - Jun. 30, 2015 - USD ($)	Total
Cash Payments to Acquire Business	$ 1,876,966
Shares, Granted	0
Mike Gentile
Base Salary, Annual Amount	$ 200,000
Common Stock | Mike Gentile
Shares, Granted	400,000
Award Vesting Rights	100,000 shares will vest 2 years from the date of the Gentile Employment Agreement; 100,000 shares will vest 3 years from the date of the Gentile Employment Agreement; 100,000 shares will vest 4 years from the date of the Gentile Employment Agreement; and 100,000 shares will vest 5 years from the date of the Gentile Employment Agreement (see Note 4)
Delphiis, Inc.
Percentage of issued and outstanding shares of common stock acquired	100.00%
Cash Payments to Acquire Business	$ 1,000,000
Acquisition, Debt Assumed	463,723
Legal, accounting and other professional fees related to acquisition	98,000
Delphiis, Inc. | Funds to be Released from Escrow Upon Satisfaction of Indemnification Claims
Cash Payments to Acquire Business	$ 100,000
Delphiis, Inc. | Minimum
Estimated useful life of the identifiable intangible assets acquired	1 year 6 months
Delphiis, Inc. | Maximum
Estimated useful life of the identifiable intangible assets acquired	10 years
Delphiis, Inc. | $363,723 Promissory Note
Debt Instrument, Face Amount	$ 363,723
Debt Instrument, Interest Rate, Stated Percentage	4.00%
Debt Instrument, Maturity Date, Description	The Notes have a maturity date which is 24 months from the date of the Agreement and contain no prepayment penalty.
Debt Instrument, Payment Terms	Pursuant to the terms of the Notes, Delphiis will accelerate payment on (i) fifty percent (50%) of the outstanding amount due under such Notes at such time as Delphiis achieves $1,500,000 of bookings measured from the date of the Agreement, and (ii) the remaining fifty percent (50%) will be paid at such time as Delphiis achieves $4,000,000 of bookings measured from the date of the Agreement, all as set forth in the Notes.
Delphiis, Inc. | $100,000 Promissory Note
Debt Instrument, Face Amount	$ 100,000
Delphiis, Inc. | Common Stock
Business Acquisition, Equity Interest Issued, Number of Shares	930,406
Business Acquisition, Equity Interest Issued, Value Assigned	$ 1,250,000

15. Stock Purchase Agreement 51

15. Stock Purchase Agreement - Delphiis, Inc.: Schedule of Allocation of the Purchase Price of the Assets Acquired and Liabilities Assumed (Details) - Jun. 30, 2015 - Delphiis, Inc. - USD ($)	Total
Goodwill	$ 956,639
Other assets received	376,775
Deferred revenue	(154,089)
Notes payable	(424,000)
Other liabilities assumed	(113,325)
Total	2,012,000
Acquired Technology
Finite-lived Intangible Assets Acquired	900,000
Customer Relationships
Finite-lived Intangible Assets Acquired	400,000
Trademarks
Finite-lived Intangible Assets Acquired	50,000
Noncompete Agreements
Finite-lived Intangible Assets Acquired	$ 20,000

15. Stock Purchase Agreement 52

15. Stock Purchase Agreement - Delphiis, Inc.: Business Acquisition, Pro Forma Information (Details) - Delphiis, Inc. - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Pro forma revenue	$ 15,616,530	$ 10,714,367	$ 29,464,445	$ 21,215,447
Pro forma net loss	$ (649,736)	$ (41,576)	$ (682,279)	$ (35,297)
Pro forma basic net loss per share	$ (0.03)	$ 0	$ (0.03)	$ 0
Pro forma diluted net loss per share	$ (0.03)	$ 0	$ (0.03)	$ 0

16. Asset Purchase Agreement 53

16. Asset Purchase Agreement - Redspin (Details) - Jun. 30, 2015 - USD ($)	Total
Cash Payments to Acquire Business	$ 1,876,966
Common stock issued in connection with the acquisition of Redspin, Value	593,000
Daniel Berger
Base Salary, Annual Amount	250,000
John Abraham
Base Salary, Monthly Amount	$ 11,000
Common Stock
Common stock issued in connection with the acquisition of Redspin, Shares	452,284
Common stock issued in connection with the acquisition of Redspin, Value	$ 452
Redspin, Inc.
Cash Payments to Acquire Business	2,076,966
Allocated Holdback	200,000
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
Common stock issued in connection with the acquisition of Redspin, Shares	452,284
Common stock issued in connection with the acquisition of Redspin, Value	$ 500,000

16. Asset Purchase Agreement 54

16. Asset Purchase Agreement - Redspin: Schedule of Allocation of the Purchase Price of the Assets Acquired and Liabilities Assumed (Details) - Jun. 30, 2015 - Redspin, Inc. - USD ($)	Total
Goodwill	$ 1,316,000
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	3,292,966
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

16. Asset Purchase Agreement 55

16. Asset Purchase Agreement - Redspin: Business Acquisition, Pro Forma Information (Details) - Redspin, Inc. - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Pro forma revenue	$ 15,616,530	$ 10,926,192	$ 30,163,121	$ 21,648,081
Pro forma net loss	$ (649,736)	$ (170,555)	$ (883,158)	$ (500,610)
Pro forma basic net loss per share	$ (0.03)	$ (0.01)	$ (0.04)	$ (0.02)
Pro forma diluted net loss per share	$ (0.03)	$ (0.01)	$ (0.04)	$ (0.02)