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Expansion into New Service Lines and Cross Selling Initiatives Continue to Accelerate

MISSION VIEJO, CA– (August 10, 2017) – Auxilio, Inc. (NYSE MKT: AUXO), a leading provider of enterprise security and document workflow solutions for the healthcare industry, today announced financial results for the second quarter ended June 30, 2017.

Financial and operational highlights for the second quarter of 2017 include:

Recent operational highlights include:

“Auxilio’s second quarter was one of strategic execution, and great progress was made.  We continue making considerable investments to expand our service offering platform and bolster our sales and marketing capabilities in both Security and Managed Document Solutions.  It is great to see that effort translating into new contract wins like those recently announced, and we expect the benefits of these investments to become increasingly apparent through the balance of the year,” stated Joseph J. Flynn, CEO of Auxilio.  “While the legislative uncertainty in Washington and status of the Affordable Care Act has created a new dynamic for the industry to contend with, it also provides an unfiltered view of where our healthcare customer’s budget priorities lie.  While we did see some delivery delays during the quarter in non-core areas, it was increasingly apparent that security is viewed as an absolute necessity regardless of extraneous factors such as those in Washington.  There is undoubtedly an urgent need to better protect patient health information as it is travels across the enterprise, and we are well positioned to provide an efficient and secure solution to our customers.”

Financial Results for the three and six months ended June 30, 2017

For the three months ended June 30, 2017, the Company reported revenues of $16.8 million, an increase of 10% when compared to $15.2 million reported in the second quarter of 2016.

Cost of revenue for the second quarter of 2017 was $12.4 million, compared to $12.1 million in 2016. Overall, the Company incurred approximately $1.2 million in additional professional services staffing costs.  Gross profit for the second quarter of 2017 was $4.4 million, or 26% of revenues, compared to $3.1 million or 20% of revenues, for the same period in 2016. The increase in gross margin is due to higher gross margins from professional services delivered by CynergisTek.

Operating expenses for the second quarter were $3.8 million, an increase from $2.4 million in the second quarter of 2016. Sales and marketing expenses increased by 88% in the second quarter to $1.4 million due to the addition of the CynergisTek’s sales and marketing teams. General and administrative expenses increased 50% to $2.5 million. The increase in G&A was primarily attributed to approximately $0.2 million in staffing costs, $0.1 million in rent, $0.1 million in professional fees, $0.4 million in amortization of intangibles; most of which are directly related to the CynergisTek acquisition. Operating expenses for the quarter included approximately $0.2 million of non-recurring expenses for severance, integration and acquisition related expenses.

Income from operations was $0.5 million for the three months ended June 30, 2017 compared to operating income of $0.7 million in the second quarter of 2016.

For the three months ended June 30, 2017, the Company reported net income of $0.1 million, or $0.01 per basic and diluted share, compared to net income of $0.6 million, or $0.08 per basic and diluted share, in the same period of 2016.

Non-GAAP adjusted earnings per share for the second quarter was $0.08 per basic and diluted share after adjusting for amortization of intangibles, stock based compensation and depreciation of $0.7 million, compared to $0.11 per basic and diluted share after adjusting for amortization of intangibles, stock based compensation and depreciation of $0.2 million for the same period of 2016.

For the six months ended June 30, 2017, the Company reported revenues of $35.1 million, an increase of 18% compared to $29.7 million reported in the same period of 2016.

Cost of revenue was $26.1 million compared to $24.3 million in 2016 representing an increase of $1.8 million. Gross profit for the six months ended June 30, 2017, was $9.0 million, or 26% of revenues, compared to $5.4 million, or 18% of revenues, for the same period in 2016.

Operating expenses for the six months ended June 30, 2017, were $8.0 million, an increase of 66% from $4.8 million in the same period of 2016. Operating expenses for the six months included approximately $0.4 million of non-recurring expenses for severance, integration and acquisition related expenses.

Net income for the six months ended June 30, 2017 was $0.1 million, or $0.01 per basic and diluted share, compared to net income of $0.5 million, or $0.06 per basic and diluted share, in the same period of 2016.  Non-GAAP adjusted earnings per share for the six months ended June 30, 2017 was $0.15 per basic and $0.14 per diluted share after adjusting for amortization of intangibles, stock based compensation and depreciation expense of $1.3 million, compared to $0.12 per basic and diluted share after adjusting for amortization of intangibles, stock based compensation and depreciation expense of $0.5 million for the same period of 2016.

At June 30, 2017, the Company had $2.8 million of cash and cash equivalents.  The Company maintains a line of credit, which was recently amended and increased to $5.0 million, subject to borrowing base limitations.

Conference Call Information
Date: Friday, August 11, 2017

Time: 9:30am PT, 12:30 pm ET

US: 1-800-406-5345

International: 1-913-312-1458

Conference ID: 9500978

Webcast: http://public.viavid.com/index.php?id=125736

A replay of the call will be available from 3:30 pm ET on August 11, 2017 to 11:59 pm ET on August 25, 2017. To access the replay, please dial 1-844-512-2921 from the U.S. and 1-412-317-6671 from outside the U.S. The PIN is 9500978.

About Auxilio, Inc.

Auxilio (www.auxilioinc.com) is a leading provider bundling best of breed IT security and workflow solutions into its managed document services program designed exclusively for the healthcare industry. Since 2004, the company has saved more than $80 million for its clients by providing a vendor neutral program that enhances security of printed, stored data and digital documents while driving out costs and inefficiencies within the patient information logistical chain. The company’s document management best practices and intelligent workflow automation suite transforms printed documents to digital workflows, reducing waste and improving end-user satisfaction.

About CynergisTek

CynergisTek, an Auxilio company, (www.cynergistek.com) is a top-ranked cybersecurity, privacy and compliance consulting firm. The company offers solutions to help organizations measure privacy, security and compliance programs against regulatory requirements and assists in developing risk management best practices. Since 2004 the company has served as a partner to hundreds in the healthcare industry and is dedicated to supporting and educating the industry by contributing to relevant industry associations. The company has been named in numerous research reports as one of the top firms that provider organizations turn to for privacy and security, and won the 2017 Best in KLAS award for Cyber Security Advisory Services.

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.

Investor Relations Contact:
MZ North America
Mike Cole
(949) 259-4988
Mike.cole@mzgroup.us

Media Contact:
Danielle Johns
Senior Account Executive
Aria Marketing
(617) 332-9999 x241
djohns@ariamarketing.com

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