[May 14, 2014]

AUXILIO Inc. Reports First Quarter 2014 Financial Results

AUXILIO, Inc. (OTCQB: AUXO) ("AUXILIO" or "the Company"), the nation's pioneer and leading Managed Print Services (MPS) company for health care, today reported financial results for the quarter ended March 31, 2014.

Highlights

• Q1 2014 revenues increased 2% to $10.2 million; service revenues increased 10% to $9.8 million
• Non-GAAP measure of adjusted income from operations were 2% of revenue in Q1 2014 vs. 3% in Q1 2013
• Generated $0.1 million of cash flows from operations in Q1 2014
• Added two new recurring revenue contracts in first three months of 2014
• Signed one renewal contract in the first three months of 2014

"We carried the positive momentum from 2013 into the first quarter of 2014 which included the signing of two new health systems and a key renewal," stated Joseph J. Flynn, president and CEO of AUXILIO, Inc. "Our value proposition is becoming more evident as more hospitals seek to outsource their print services to a trusted provider like AUXILIO, proven to deliver superior service while reducing the total cost of operating their print systems. We are also excited about expanding our IT consulting services for hospitals by leveraging our strong customer relationships with a network of new industry contacts through our Consulting and Managed IT Services Group to further drive incremental revenue and profit."

Financial Results

For the three months ended March 31, 2014

For the three months ended March 31, 2014, the company reported revenues of $10.2 million, an increase of 2% when compared to $10.1 million in the same period in 2013. Recurring service revenues increased 10% from four new contracts implemented since the first quarter of 2013 and expansion of services with existing customers. Equipment revenues were approximately $0.4 million in the first quarter of 2014 compared to $1.2 million for the same period in 2013.

Cost of revenue was $8.5 million, essentially unchanged from the same period a year ago. Gross profit for the first three months of 2014 was $1.7 million, or 17% of revenues, compared to $1.6 million or 16% for the same period of 2013. The gross margin improvement was a result of more contracts moving beyond the initial implementation phase, which require more upfront investment.

Operating expenses for 2014 were $1.71 million, an increase of 2% from $1.67 million in the first quarter of 2013. Sales and marketing expenses fell by 26% due to the termination of a joint marketing agreement with a channel partner in 2013. General and administrative expenses increased 21% to $1.2 million due to non-recurring severance compensation and additional travel incurred for the purpose of promoting customer relations and extended new business development opportunities. The Company generated $0.03 million of operating income in the first quarter of 2014 compared to an operating loss of $0.1 million in first quarter of 2013.

After excluding charges of $201,000 related to stock-based compensation, the non-GAAP measure of adjusted income from operations for the three months ended March 31, 2014 was $254,000 or 2% of revenue compared to $323,000 or 3% of revenue after excluding charges of $197,000 related to stock-based compensation and $190,000 in charges related to stock granted for marketing and consulting activities in the same period of 2013.

Net loss for the three months ended March 31, 2014 was $71,000, or $0.00 per basic share, compared to a net loss of $230,000 or $0.01 per share, in the same period of 2013. The weighted average diluted shares outstanding increased to 22.3 million shares from 20.1 million in the first quarter of 2013.

At March 31, 2014, the Company had $4.8 million of cash and cash equivalents, up from $4.7 million at December 31, 2013. Cash provided by operating activities amounted to $0.1 million compared to $1.0 million during the same period in 2013. Net working capital improved to $0.5 million at March 31, 2014 compared to $0.3 million at December 31, 2013.

Paul Anthony, CFO of AUXILIO, explained: "We generated our sixth consecutive quarter of positive adjusted income from operations. Our achievement was impressive given the upfront investments we made in new contracts and new business development opportunities. We will continue to balance our goal of maintaining solid margins with investing prudently in future growth initiatives."

Business Updates

Mark Dressel joined AUXILIO in March 2014 to head up the Company's new Consulting and Managed IT Services Group. The Company is expanding services beyond core MPS to meet the needs of existing and new customers in the health care market. Mark will be responsible for driving new sources of revenue from current and prospective customers through health care consulting, IT sourcing and other high demand offerings; integrate AUXILIO's MPS into strategic IT consulting opportunities; and develop non-MPS health care-related opportunities. Mr. Dressel has more than 25 years of experience in developing innovative solutions for health care companies. He served as Director and Global Practice Manager for Dell's (News - Alert) Healthcare Consulting Group prior to joining AUXILIO.

Conference Call Information

CEO Joe Flynn and CFO Paul Anthony will host a conference call with investors to discuss its first quarter 2014 earnings results.

A replay of the call will be available from 7:30 p.m. ET on March 14, 2014 to 11:59 p.m. ET on May 28, 2014. To access the replay, please dial 877-870-5176 from the U.S. and 858-384-5517 from outside the U.S. The PIN is 4682383.

About AUXILIO, Inc.

AUXILIO is the leading provider of Managed Print Services for healthcare. A true Management Services company, AUXILIO takes full responsibility for health care customers' onsite print environment through situation assessment, process analysis, strategy development and program implementation. Hospitals and health systems benefit from streamlined and aligned processes and infrastructure that result in print management programs that reduce cost, increase employee productivity and meet and exceed patient care standards.

Founded in 2004, AUXILIO serves a national portfolio in excess of 100 hospital campuses and manages over 1.3 billion documents annually from more than 59,000 devices supporting over 250,000 caregivers. AUXILIO's business model is vendor neutral, provides full-time, on-site customer service and technical experts and is exclusive to the health care industry.

For more information about AUXILIO, visit www.auxilioinc.com.

Forward Looking Statements

This release contains certain forward-looking statements relating to the business of AUXILIO, Inc. that can be identified by the use of forward-looking terminology such as "believes," "expects," "anticipates," "may" or similar expressions. Such forward-looking statements involve known and unknown risks and uncertainties, including uncertainties relating to product/services development, long and uncertain sales cycles, the ability to obtain or maintain patent or other proprietary intellectual property protection, market acceptance, future capital requirements, competition from other providers, the ability of our vendors to continue supplying the company with equipment, parts, supplies and services at comparable terms and prices and other factors that may cause actual results to be materially different from those described herein as anticipated, believed, estimated or expected. Certain of these risks and uncertainties are or will be described in greater detail in our Form 10-K and Form 10-Q filings with the Securities and Exchange Commission, which are available at http://www.sec.gov. AUXILIO, Inc. is under no obligation (and expressly disclaims any such obligation) to update or alter its forward-looking statements whether as a result of new information, future events or otherwise.

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