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Expanding Sales Pipelines Expected to Drive Additional Market Share Gains in Key Healthcare IT Segments

MISSION VIEJO, CA — May 12, 2016 — CynergisTek, Inc. (OTCQB: AUXO), a leading provider of Managed Print Services (MPS) and IT Security for the healthcare industry, today announced record revenues of $14.5 million for the quarter ended March 31, 2016, a 5% increase for the period year over year.

“We’re pleased with progress made during the first quarter of 2016. We continue to see strong revenue growth, when adjusted for the drop in equipment revenue which has historically fluctuated quarter to quarter, our revenue grew 16% year over year,” stated Joseph J. Flynn, President and CEO. Flynn continued, “One very encouraging sign from the first quarter was the continued increase in activity that our security sales pipeline is experiencing. We are beginning to see our security service offerings being looked at as a part of a comprehensive suite of services offered by CynergisTek, rather than a separate product entirely. In addition, we are continuing to expand our service offerings which now include document workflow solutions. This service provides our customers the opportunity to further enhance their investment in electronic medical records, or ‘EMR.’ Strong pipelines within both segments should continue to drive increases in market share in these critical areas of healthcare IT.”

Flynn also added, “We recently announced a $1 million share-buyback authorization providing additional options for how we can best use our capital to drive shareholder value going forward. I think it is important for investors to understand that we are building a brand with a presence in healthcare IT, a multi-billion-dollar market. Our vision is to create a healthcare IT platform from which we can continue to expand with higher margin service offerings with the objective of driving long term customer relationships. We are actively looking at opportunities to accelerate this both organically and potentially by acquisition. We are entering into a new phase of opportunity in Healthcare IT, given that the EMR is a reality in most institutions, the benefits of which have not lived up to expectations. This reality presents us with enormous opportunities for growth as our customers look to CynergisTek to solve their problems related to print management, document workflow and cyber security.”

Financial Results for the three months ended March 31, 2016

For the three months ended March 31, 2016, the Company reported revenues of $14.5 million, an increase of 5% when compared to $13.8 million reported in the first quarter of 2015. Approximately $2.0 million of the increase is a net result of the addition of new recurring service revenue contracts offset by lower volumes related to seasonality and completed projects. Equipment revenues in the first quarter were $0.5 million compared to approximately $1.8 million in the first quarter of 2015.

Cost of revenue was $12.2 million, compared to $11.7 million in 2015. The increase in the cost of revenues in the first quarter of 2016 is primarily attributable to the addition of new recurring service revenue contracts, incurring approximately $1.0 million in additional staffing costs, including contract labor, approximately $0.1 million of additional travel costs, and approximately $0.6 million in additional service and supply costs, principally as a result of implementation work for new contracts. Gross profit for the first quarter of 2016 was $2.3 million, or 16% of revenues, compared to $2.1 million or 15% of revenues, for the same period in 2015. As the implementation phase for many of these large contracts is completed and transfers into full service phase during the next twelve months, margins are expected to improve.

Operating expenses for the first quarter were $2.4 million, an increase of $0.3 million compared to the first quarter of 2015. Sales and marketing expenses decreased by 10% due to decreased marketing spend when compared to the same period in 2015. General and administrative expenses increased 27% to $1.8 million. The increase in general and administrative expenses is attributed to approximately $0.2 million in staffing cost due to the addition of three employees to a newly formed human resources department, an additional IT headcount, and an approximate $30,000 increase from an executive consulting contract stemming from the acquisition of Redspin. Also there was an increase of approximately $0.1 million in amortization of intangible assets from the acquisitions of Delphiis, Inc. and Redspin and an increase in building rent of approximately $0.1 million as a result of moving to a larger office space in December 2015 along with the addition of office space from the Redspin acquisition.

Net loss for the three months ended March 31, 2016, was $0.15 million, or $0.01 per basic and diluted share, compared to a net loss of $0.03 million, or $0.00 per basic and diluted share, in the same period of 2015. Excluding $0.2 million in charges related to stock based compensation and amortization of intangibles, the Company achieved an adjusted income from operations of $0.1 million in the first quarter of 2016, compared to $0.1 million, after excluding charges of $0.1 million related to stock-based compensation and amortization of intangibles, for the same period last year.

At March 31, 2016, the Company had $5.3 million of cash and cash equivalents and working capital of $3.1 million. Cash used in operating activities for the three months ended March 31, 2016 was $0.8 million, compared to cash provided by operating activities of $0.4 million during the same period in 2015. The Company maintains a line of credit with a commercial bank for up to $2 million.

Conference Call Information

CEO Joe Flynn and CFO Paul Anthony will host a conference call with investors to discuss its first quarter 2016 earnings results.

Date: Thursday, May 12, 2016
Time: 1:30pm PT, 4:30 pm ET
US: 1-888-778-9052
International: 1-913-312-0724
Conference ID: 7160544
Webcast: http://public.viavid.com/index.php?id=119646

A replay of the call will be available from 7:30pm ET on May 12, 2016 to 11:59 pm ET on May 27, 2016. To access the replay, please dial 1-877-870-5176 from the U.S. and 1-858-384-5517 from outside the U.S. The PIN is 7160544.

About CynergisTek, Inc.

Since 2004, CynergisTek has led the Managed Print Services industry by offering an innovative and customer driven approach for healthcare organizations. CynergisTek takes full responsibility for healthcare customers’ on-site 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.

CynergisTek serves a national portfolio of nearly 220 hospital campuses and manages over 1.5 billion documents annually from over 90,000 devices, supporting over 280,000 caregivers. CynergisTek’s Managed Print Services’ business model is vendor neutral, provides a dedicated resident team and is exclusive to the healthcare industry.

Through its Cyber Security Professional Services Group, Redspin (a subsidiary of CynergisTek) provides an end-to-end security offering that specifically addresses hospital security challenges or when a breach has occurred. Redspin’s fully comprehensive portfolio of services and technology includes penetration testing, HIPAA security risk assessments, security program strategy, and a SaaS technology solution, Redspin™ Risk Manager to more than 140 hospitals. This complete service offering of Redspin is unique to the marketplace and helps ensure enterprise-wide security and improved patient experiences through its ability to mitigate risk and improve efficiency across the hospital or health system.

For more information about CynergisTek, visit https://cynergistek.com.

Forward Looking Statements

This release contains certain forward-looking statements relating to the business of CynergisTek, 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, expectations relating to momentum of the business, expectations of increased demand for CynergisTek’s services, growth of CynergisTek’s vertical framework, anticipated results from cross-selling efforts, growing demand for CynergisTek’s MPS programs, 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. CynergisTek, 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.

Contact:

Investor Relations:

MZ North America

Mike Cole, 949-259-4988

Vice President

mike.cole@mzgroup.us

www.mzgroup.us

or

Media Relations:

CynergisTek Inc.

Carrie Mulcahy, 949-310-2548

Director of Corporate Marketing

carrie.mulcahy@auxilioinc.com

https://cynergistek.com

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