10-Q Q2 2017



AUXILIO INC – Form 10-Q SEC filing




AUXILIO INC
0001011432
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auxo
Smaller Reporting Company
Yes
No
No
false
2017
Q2





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SECURITIES AND EXCHANGE COMMISSION

 

Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2017

[  ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

Commission file number 000-27507

AUXILIO, INC.

(Exact name of registrant as specified in its charter)

Nevada

880350448

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

 

27271 Las Ramblas, Suite 200

Mission Viejo, California 92691

(Address of principal executive offices, zip code)

(949) 614-0700

(Issuer’s telephone number)

N/A
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ  No o

Indicated by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes þ No o.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer oAccelerated filer o 

Non-accelerated filer oSmaller reporting company þ 

Emerging growth company  ¨

Indicate by check mark whether the registrant is a shell company (as defined by Section 12b-2 of the Exchange Act).  Yes oNo þ. 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standard provided pursuant to Section 13(a) of the Exchange Act.

 

The number of shares of the issuer’s common stock, $0.001 par value, outstanding as of August 9, 2017 was 9,501,760.



AUXILIO, INC.

FORM 10-Q

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

 

Item 1.

Financial Statements

 

 

Condensed Consolidated Balance Sheets as of June 30, 2017 (unaudited) and December 31, 2016

3

 

Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2017 and 2016 (unaudited)

4

 

Condensed Consolidated Statement of Stockholders’ Equity for the Six Months Ended June 30, 2017 (unaudited)

5

 

Condensed Consolidated Statements of Cash Flowsfor the Six Months Ended June 30, 2017 and 2016 (unaudited)

6

 

Notes to Unaudited Condensed Consolidated Financial Statements

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

20

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

27

Item 4.

Controls and Procedures

28

PART –II – OTHER INFORMATION

 

Item 1a.

Risk Factors

28

Item 6.

Exhibits

29

Signatures

 

30


2



PART I – FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS.

 

AUXILIO, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

 

 

June 30, 2017

 

December 31, 2016

 

(unaudited)

 

 

ASSETS

 

 

 

Current assets:

 

 

 

 Cash and cash equivalents

$2,834,859 

 

$6,090,844 

 Accounts receivable

11,286,721 

 

9,614,486 

 Supplies

1,073,091 

 

1,087,318 

 Prepaid and other current assets

1,514,589 

 

438,140 

   Total current assets

16,709,260 

 

17,230,788 

 

 

 

 

Property and equipment, net

940,906 

 

689,418 

Deposits

87,376 

 

41,522 

Deferred income taxes

5,282,531 

 

5,282,531 

Intangible assets, net

12,121,709 

 

1,112,395 

Goodwill

18,525,206 

 

2,109,143 

   Total assets

$53,666,988 

 

$26,465,797 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 Accounts payable and accrued expenses

$9,647,313  

 

$7,736,207  

 Accrued compensation and benefits

2,890,213  

 

2,495,156  

 Deferred revenue

1,653,904  

 

562,679  

 Current portion of long-term liabilities

4,022,339  

 

606,686  

   Total current liabilities

18,213,769  

 

11,400,728  

 

 

 

 

Long-term liabilities:

 

 

 

 Term loan, less current portion

10,628,333  

 

750,000  

 Promissory notes to related parties, less current portion

7,500,000  

 

-  

 Capital lease obligations, less current portion

187,091  

 

199,644  

   Total long-term liabilities

18,315,424  

 

949,644  

   Total liabilities

36,529,193  

 

12,350,372  

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 Common stock, par value at $0.001, 33,333,333 shares authorized,

 9,499,016 and 8,185,936 shares issued and outstanding at June 30, 2017

 and December 31, 2016

9,499  

 

8,186  

 Additional paid-in capital

30,926,034  

 

27,985,448  

 Accumulated deficit

(13,797,738) 

 

(13,878,209) 

   Total stockholders’ equity

17,137,795  

 

14,115,425  

   Total liabilities and stockholders’ equity

$53,666,988  

 

$26,465,797  

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.


3



AUXILIO, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

Three Months

 

Six Months

 

Ended June30,

 

Ended June30,

 

2017

 

2016

 

2017

 

2016

Revenues   

16,798,912   

 

15,162,070   

 

35,053,601   

 

29,677,709   

Cost of revenues   

12,435,758   

 

12,070,163   

 

26,103,300   

 

24,276,490   

 

 

 

 

 

 

 

 

Gross profit   

4,363,154   

 

3,091,907   

 

8,950,301   

 

5,401,219   

 

 

 

 

 

 

 

 

Operating expenses:   

 

 

 

 

 

 

 

 Sales and marketing   

1,371,847   

 

730,149   

 

2,740,855   

 

1,401,496   

 General and administrative expenses   

2,472,576   

 

1,649,006   

 

5,258,577   

 

3,412,027   

 

 

 

 

 

 

 

 

   Total operating expenses   

3,844,423   

 

2,379,155   

 

7,999,432   

 

4,813,523   

 

 

 

 

 

 

 

 

   Income from operations   

518,731   

 

712,752   

 

950,869   

 

587,696   

 

 

 

 

 

 

 

 

Other income (expense):   

 

 

 

 

 

 

 

 Other income   

3   

 

   

 

22   

 

   

 Interest expense   

(376,547)  

 

(23,554)  

 

(788,881)  

 

(49,254)  

 

 

 

 

 

 

 

 

   Total other income (expense)  

(376,544   

 

(23,554)  

 

(788,859)  

 

(49,254)  

 

 

 

 

 

 

 

 

Income before provision for income taxes   

142,187   

 

689,198   

 

162,010   

 

538,442   

 

 

 

 

 

 

 

 

Income tax expense   

(68,000)  

 

(41,600)  

 

(81,539)  

 

(44,000)  

 

 

 

 

 

 

 

 

Net income   

74,187   

 

647,598   

 

80,471   

 

494,442   

 

 

 

 

 

 

 

 

Net income per share:   

 

 

 

 

 

 

 

 Basic   

0.01   

 

0.08   

 

0.01   

 

0.06   

 Diluted   

0.01   

 

0.08   

 

0.01   

 

0.06   

 

 

 

 

 

 

 

 

Number of weighted average shares:   

 

 

 

 

 

 

 

 Basic   

9,438,990   

 

8,170,328   

 

9,328,759   

 

8,160,457   

 Diluted   

10,281,042   

 

8,270,914   

 

10,038,271   

 

8,302,490   

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.


4



AUXILIO, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

SIX MONTHS ENDED JUNE 30, 2017

(UNAUDITED)

 

 

 

 

 

 

Additional

 

 

 

Total

 

Common Stock

 

Paid-in

 

Accumulated

 

Stockholders’

 

Shares

 

Amount

 

Capital

 

Deficit

 

Equity

Balance at December 31, 2016

8,185,936 

 

$8,186 

 

$27,985,448  

 

$(13,878,209) 

 

$14,115,425 

Stock compensation expense for options and warrants granted to employees and directors

- 

 

- 

 

59,265  

 

-  

 

59,265 

Stock compensation expense for restricted stock units granted to employees

- 

 

- 

 

44,183  

 

-  

 

44,183 

Common stock issued in connection with the acquisition of CynergisTek, Inc.

1,166,666 

 

1,166 

 

2,770,833  

 

-  

 

2,771,999 

Stock options and warrants exercised

146,204 

 

31 

 

66,421  

 

-  

 

66,452 

Reverse stock split round-up shares issued

210 

 

116 

 

(116) 

 

-  

 

- 

Net income

- 

 

- 

 

-  

 

80,471  

 

80,471 

Balance at June 30, 2017

9,499,016 

 

$9,499 

 

$30,926,034  

 

$(13,797,738) 

 

$17,137,795 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements

.


5



AUXILIO, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

Six Months Ended June 30,

 

2017

 

2016

Cash flows from operating activities:

 

 

 

 Net income

$80,471  

 

$494,442  

Adjustments to reconcile net income to net cash used for operating activities:

 

 

 

 Depreciation

190,159  

 

101,854  

 Amortization of intangible assets

1,040,686  

 

270,833  

 Stock compensation expense for warrants and options granted to employees and directors

59,265  

 

102,192  

 Stock compensation expense for restricted stock units granted to employees

44,183  

 

-  

Changes in operating assets and liabilities:

 

 

 

 Accounts receivable

54,163  

 

(1,314,263) 

 Supplies

14,227  

 

131,845  

 Prepaid and other current assets

(730,009) 

 

135,374  

 Deposits

(45,854) 

 

16,596  

 Accounts payable and accrued expenses

(1,104,097) 

 

(550,036) 

 Accrued compensation and benefits

(640,465) 

 

(689,213) 

 Deferred revenue

(287,087) 

 

(314,332) 

 Net cash used for operating activities

(1,324,358) 

 

(1,614,708) 

Cash flows from investing activities:

 

 

 

 Purchases of property and equipment

(220,126) 

 

(128,184) 

 Amount paid to purchase CynergisTek, net of cash received

(13,448,522) 

 

-  

 Net cash used for investing activities

(13,668,648) 

 

(128,184) 

Cash flows from financing activities:

 

 

 

 Proceeds from term loan

14,000,000  

 

-  

 Payments on term loans

(2,241,667) 

 

(250,000) 

 Payments on capital leases

(87,764) 

 

(54,978) 

 Proceeds from issuance of common stock through stock options

66,452  

 

60,151  

Net cash provided by (used for) financing activities

11,737,021  

 

(244,827) 

Net decrease in cash and cash equivalents

(3,255,985) 

 

(1,987,719) 

Cash and cash equivalents, beginning of period

6,090,844  

 

6,436,732  

Cash and cash equivalents, end of period

$2,834,859  

 

$4,449,013  

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.


6



AUXILIO, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(UNAUDITED)

 

Six Months Ended June 30,

 

2017

 

2016

Supplemental disclosure of cash flow information:

 

 

 

Interest paid

$547,672 

 

$49,254 

Income taxes paid

$178,950 

 

$71,703 

 

 

 

 

Non-cash investing and financing activities:

 

 

 

Property and equipment acquired through capital leases

$110,864 

 

$22,170 

Common stock issued in connection with the acquisition of Cynergis Tek, Inc.   

$2,772,000 

 

$- 

Promissory note sissued in connection with the acquisition of Cynergis Tek,Inc.   

$9,000,000 

 

$- 

Fair value of  earn-out liability in connection with the acquisition of Cynergis Tek, Inc.   

$2,356,000 

 

$- 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.


7



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED JUNE 30, 2017 AND 2016

(UNAUDITED)

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, 2016, as filed with the Securities and Exchange Commission (“SEC”) on March 29, 2017.

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 unaudited condensed consolidated financial statements include the accounts of Auxilio and its wholly owned subsidiaries.  All intercompany balances and transactions have been eliminated.

Based on our integration and management strategies, we operate in a single business segment. For the periods presented, all revenues were derived from domestic operations.

As described in Note 11, the Company acquired the outstanding shares of CynergisTek, Inc. on January 13, 2017.

We have performed an evaluation of subsequent events through the date of filing these unaudited condensed consolidated financial statements with the SEC.

2.RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS 

In November 2015, the FASB issued guidance related to the presentation of deferred income taxes. The guidance requires that deferred tax assets and liabilities be classified as non-current in a consolidated balance sheet. This guidance was adopted early by us and resulted in the Company classifying its deferred tax assets as non-current assets.

In May 2014, the FASB issued guidance which provides a single, comprehensive accounting model for revenue arising from contracts with customers. This guidance supersedes most of the existing revenue recognition guidance, including industry-specific guidance. Under this model, revenue is recognized at an amount that a company expects to be entitled to upon transferring control of goods or services to a customer, as opposed to when risks and rewards transfer to a customer. The new guidance also requires additional disclosures about the nature, timing and uncertainty of revenue and cash flow arising from customer contracts, including significant judgments and changes in judgments. Considering the one-year delay in the required adoption date for the guidance as issued in July 2015, the new guidance is effective for us beginning in 2018 and may be applied retrospectively to all prior periods presented or through a cumulative adjustment to the opening retained earnings balance in the year of adoption. While the Company is in the process of evaluating the impact of the new guidance, primarily by analyzing our revenue streams, currently we do not expect that this standard will have a material impact on the Company’s consolidated financial statements.


8



In March 2016, the FASB issued a new accounting standard regarding stock compensation: improvements to employee share-based payment accounting, that simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The new standard was effective for fiscal years beginning after December 15, 2016, including interim periods within those annual years, and early adoption was permitted. We adopted the new standard prospectively in 2017. The adoption of the new standard did not have a material effect on our consolidated financial statements for the three months and six months ended June 30, 2017, and we do not expect that the adoption of the new standard will have a material effect on our consolidated financial statements for the year ended December 31, 2017.

In February 2016, the FASB issued a new accounting standard on leasing. The new standard will require companies to record most leased assets and liabilities on the balance sheet, and also proposes a dual model for recognizing expense. This guidance will be effective in the first quarter of 2019 with early adoption permitted. We have evaluated the impact of adopting this guidance and we are preparing for the changes to be made to our consolidated financial statements. We expect the adoption of these accounting changes will materially increase our assets and liabilities, but will not have a material impact on our net income or equity.

In January 2017, the FASB issued a new accounting standard simplifying the test for goodwill impairment. Currently, the fair value of the reporting unit is compared with the carrying value of the reporting unit (identified as “Step 1”). If the fair value of the reporting unit is lower than its carrying amount, then the implied fair value of goodwill is calculated. If the implied fair value of goodwill is lower than the carrying value of goodwill an impairment is recognized (identified as “Step 2”). The new standard eliminates Step 2 from the impairment test; therefore, a goodwill impairment will be recognized as the difference of the fair value and the carrying value. The new standard becomes effective on January 1, 2020 with early adoption permitted. We are currently evaluating the impact that the new standard will have on our financial position, results of operations and cash flows.

3.OPTIONS, WARRANTS AND RESTRICTED STOCK UNITS 

Below is a summary of stock option, warrant and restricted stock activity during the six month period ended June 30, 2017:

Options

Shares

 

Weighted Average Exercise Price

 

Weighted Average Remaining Term in Years

 

Aggregate Intrinsic Value

Outstanding at December 31, 2016

1,454,241 

 

$2.87 

 

 

 

 

 Granted

25,000 

 

3.06 

 

 

 

 

 Exercised

(103,198) 

 

2.24 

 

 

 

 

 Cancelled

(150,398) 

 

2.32 

 

 

 

 

Outstanding at June 30, 2017

1,225,645 

 

$3.00 

 

4.47 

 

$1,950,719 

Exercisable at June 30, 2017

1,041,884 

 

$3.02 

 

4.47 

 

$1,637,159 

 

During the six months ended June 30, 2017, we granted a total of 25,000 options to our employees and directors to purchase shares of our common stock at an exercise price of $3.06 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.  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 of 0.38%; (ii) estimated volatility of 46.29%; (iii) dividend yield of 0.0%; and (iv) expected life of the options of 3 years.


9



 

 

Warrants

Shares

 

Weighted Average Exercise Price

 

Weighted Average Remaining Term in Years

 

Aggregate Intrinsic Value

Outstanding at December31,2016   

326,249  

 

$3.14 

 

 

 

 

 Granted   

-  

 

- 

 

 

 

 

 Exercised   

(43,005) 

 

3.03 

 

 

 

 

 Cancelled   

(83,807) 

 

3.35 

 

 

 

 

Outstanding at June30, 2017   

199,437  

 

$3.07 

 

5.39 

 

$297,768 

Exercisable at June30, 2017   

199,437  

 

$3.07 

 

5.39 

 

$297,768 

 

Restricted Stock Units

Shares

 

Weighted Average Price

 

Weighted Average Remaining Term in Years

Outstanding at December 31, 2016

- 

 

$- 

 

 

 Granted

120,000 

 

4.77 

 

 

 Exercised

- 

 

- 

 

 

 Cancelled

- 

 

- 

 

 

Outstanding at June 30, 2017

120,000 

 

$4.77 

 

2.75 

 

On April 1, 2017, we issued to key employees a total of 120,000 shares of restricted stock units. The shares vest after three years of continuous employment. The price of the stock on the grant date was $4.77. The cost recognized for these restricted stock units totaled $44,183 for the three and six months ended June 30, 2017, and is included in sales and marketing expense in the accompanying Condensed Consolidated Statement of Operations.

For the three and six months ended June 30, 2017 and 2016, stock-based compensation expense recognized in the consolidated statements of operations as follows:

 

Three Months

 

Six months

 

Ended June 30,

 

Ended June 30,

 

2017

 

2016

 

2017

 

2016

Cost of revenues

$16,403 

 

$14,512 

 

$26,924 

 

$23,915 

Sales and marketing

44,421 

 

8,268 

 

44,603 

 

16,601 

General and administrative expense

17,965 

 

33,895 

 

31,921 

 

61,676 

Total stock based compensation expense   

$78,789 

 

$56,675 

 

$103,448 

 

$102,192 

 

4.NET INCOME PER SHARE 

 

Basic net income per share is calculated using the weighted average number of shares of our common stock issued and outstanding during a certain period, and is calculated by dividing net loss by the weighted average number of shares of our common stock issued and outstanding during such period. Diluted net income per share is calculated using the weighted average number of common and potentially dilutive common shares outstanding during the period, using the as-if-converted method for secured convertible notes, and the treasury stock method for options and warrants. Diluted net income per share does not include potentially dilutive securities because such inclusion in the computation would be anti-dilutive.

For the three months ended June 30, 2017, potentially dilutive securities consisted of options and warrants to purchase 1,425,082 shares of common stock at prices ranging from $0.90 to $6.45 per share. Of these potentially dilutive securities, only 842,052 of the shares to purchase common stock from the options and warrants are included


10



in the computation of diluted earnings per share because the effect of including the remaining instruments would be anti-dilutive.

For the six months ended June 30, 2017, potentially dilutive securities consisted of options and warrants to purchase 1,425,082 shares of common stock at prices ranging from $0.90 to $6.45 per share. Of these potentially dilutive securities, only 709,512 of the shares of common stock underlying the options and warrants are included in the computation of diluted earnings per share because the effect of including the remaining instruments would be anti-dilutive.

For the three months ended June 30, 2016, potentially dilutive securities consisted of options and warrants to purchase 1,992,040 shares of common stock at prices ranging from $0.90 to $6.45 per share. Of these potentially dilutive securities, only 100,586 of the shares of common stock underlying the options and warrants are included in the computation of diluted earnings per share because the effect of including the remaining instruments would be anti-dilutive.

For the six months ended June 30, 2016, potentially dilutive securities consisted of options and warrants to purchase 1,992,040 shares of common stock at prices ranging from $0.90 to $6.45 per share. Of these potentially dilutive securities, only 142,033 of the shares of common stock underlying the options and warrants are included in the computation of diluted earnings per share because the effect of including the remaining instruments would be anti-dilutive.

 

 

Three Months Ended June 30,

Six Months Ended June 30,

 

2017

 

2016

 

2017

 

2016

Numerator:

 

 

 

 

 

 

 

Net income

$74,187 

 

$647,598 

 

$80,471 

 

$494,442 

Denominator:

 

 

 

 

 

 

 

 Denominator for basic calculation

 weighted average shares

9,438,990 

 

8,170,328 

 

9,328,759 

 

8,160,457 

Dilutive common stock equivalents:

 

 

 

 

 

 

 

 Options and warrants

842,052 

 

100,586 

 

709,512 

 

142,033 

 

 

 

 

 

 

 

 

 Denominator for diluted

 calculation weighted average shares

10,281,042 

 

8,270,914 

 

10,038,271 

 

8,302,490 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

 Basic net income per share

$0.01 

 

$0.08 

 

$0.01 

 

$0.06 

 Diluted net income per share

$0.01 

 

$0.08 

 

$0.01 

 

$0.06 

 

5.ACCOUNTS RECEIVABLE 

A summary of accounts receivable is as follows:

 

 

June 30, 2017

 

December 31, 2016

Trade receivables

$10,312,345 

 

$8,046,561 

Unbilled revenue, net and unapplied advances

974,376 

 

1,567,925 

Allowance for doubtful accounts

- 

 

- 

Total accounts receivable

$11,286,721 

 

$9,614,486 


11



6.INTANGIBLE ASSETS 

Intangible assets are amortized over expected useful lives ranging from 1.5 to 10 years and consist of the following:

 

June 30, 2017

 

December 31, 2016

 

Gross

 

 

 

Gross

 

 

 

Carrying

 

Accumulated

 

Carrying

 

Accumulated

 

Amount

 

Amortization

 

Amount

 

Amortization

Delphiis, Inc.

 

 

 

 

 

 

 

Acquired technology

$900,000 

 

$(780,985) 

 

$900,000 

 

$(772,484) 

Customer relationships

400,000 

 

(333,487) 

 

400,000 

 

(316,859) 

Trademarks

50,000 

 

(50,000) 

 

50,000 

 

(50,000) 

Non-compete agreements

20,000 

 

(20,000) 

 

20,000 

 

(19,374) 

 Total intangible assets, Delphiis, Inc.

$1,370,000 

 

$(1,184,472) 

 

$1,370,000 

 

$(1,158,717) 

 

 

 

 

 

 

 

 

Redspin

 

 

 

 

 

 

 

Acquired technology