Mail Stop 4561
September 30, 2005
Mr. Paul T. Anthony
Chief Financial Officer
Auxilio, Inc.
27401 Los Altos, Suite 100
Mission Viejo, CA 92691
Re: Auxilio, Inc.
Form 10-KSB for Fiscal Year Ended December 31, 2004
Form 10-QSB for Quarterly Period Ended March 31, 2005
Form 10-QSB for Quarterly Period Ended June 30, 2005
File No. 0-27507
Dear Mr. Anthony:
We have reviewed your filings and have the following
comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
information so we may better understand your disclosure. After
reviewing this information, we may raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your
filings.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
Form 10-KSB for the Fiscal Year Ended December 31, 2004
Item 8A Controls and Procedures, page 18
1. We note your statement that the chief executive officer and
chief
financial officer have concluded that the company`s disclosure
controls and procedures are effective "except as discussed in the
next paragraph below." Given the exceptions noted, it remains
unclear whether your chief executive officer and chief financial
officer have concluded that your disclosure controls and
procedures
are effective. Please revise your disclosure to state, in clear
and
unqualified language, the conclusions reached by your chief
executive
officer and your chief financial officer on the effectiveness of
your
disclosure controls and procedures. For example, if true, you can
state that your disclosure controls and procedures are effective
including consideration of the identified matters, so long as you
provide appropriate disclosure explaining how the disclosure
controls
and procedures were determined to be effective in light of the
identified matters. Or, if true, you can state that given the
identified matters, your disclosure controls and procedures are
not
effective. You should not, however, state the conclusion in your
current disclosure, which appears to state that your disclosure
controls and procedures are effective except to the extent they
are
not effective.
2. We note your disclosure that "There have been no change in our
internal controls over financial reporting during the fourth
quarter
ended December 31, 2004 that has materially affected, or is
reasonably likely to materially affect, our internal controls over
financial reporting." In light of the fact that a material
weakness
existed, please revise to explain the basis for this assertion.
Note 1 - Summary of Significant Accounting Policies
Basis of Presentation, page F-8
3. We note your disclosure relating to your going concern
uncertainty. Please explain to us how you and your accountants
were
able to conclude that no substantial doubt exists about the
company`s
ability to continue as a going concern. See Section AU 341 of SAS
(SAS Nos. 59 and 64).
Note 2 - Acquisition, page F-14
4. With respect to your accounting for the acquisition of TMG, and
the severance agreement with Mr. Mayo disclosed in note 15 on page
F-
23, please explain to us the following:
* The factors that contributed to a purchase price with
significant
amounts of goodwill.
* Your methodology for allocating the purchase price, including
capitalizing the expenses related to the acquisition.
* Your basis in GAAP for capitalizing the compensation due to Mr.
Mayo under its employment agreement with you.
* Advise us of any intangible assets included in goodwill that do
not
meet the criteria for recognition apart from goodwill.
* The consideration that you gave to the guidance in EITF 95-8
when
determining how to account for these transactions.
As appropriate, please amend your filing and respond to
these
comments within 10 business days or tell us when you will provide
us
with a response. You may wish to provide us with marked copies of
the amendment to expedite our review. Please furnish a cover
letter
with your amendment that keys your responses to our comments and
provides any requested information. Detailed cover letters
greatly
facilitate our review. Please understand that we may have
additional
comments after reviewing your amendment and responses to our
comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings to be certain that the
filings include all information required under the Securities
Exchange Act of 1934 and that they have provided all information
investors require for an informed investment decision. Since the
company and its management are in possession of all facts relating
to
a company`s disclosure, they are responsible for the accuracy and
adequacy of the disclosures they have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that
* the company is responsible for the adequacy and accuracy of the
disclosure in the filings;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filings; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filings or
in
response to our comments on your filings.
You may contact Thomas Flinn, Staff Accountant, at (202)
551-
3469 or the undersigned at (202) 551-3414 if you have questions.
Sincerely,
Jorge Bonilla
Senior Staff Accountant
Mr. Paul T. Anthony
Auxilio, Inc.
September 30, 2005
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