Disclosures

Auxilio, Inc.

I, Andy DSilva , certify that this report reflects my personal beliefs about this company and that no portion of my compensation was, is or will be directly or indirectly related to the specific recommendations or views discussed in this report.

Disclosure

  • B. Riley & Co., LLC does and seeks to do business with companies covered in its research reports.
  • A portion of this analyst’s compensation is based on the sales, trading and investment banking activities of B. Riley & Co., LLC.
  • This report may be distributed by FBR Capital Markets & Co., an affiliate of B. Riley & Co., LLC and as such constitutes third party research. For additional information, please visit http://www.fbr.com/disclosures.
Disclosure Chart

Ratings Distribution as of June 24, 2017 % with Investment Banking Relationships
Rating Number of Companies Percent of Total
Buy 148 73.3%
Neutral 53 26.2%
Sell 1 0.5%
Total 202 100%
Ratings Distribution as of October 4, 2016 % with Investment Banking Relationships
Rating Number of Companies Percent of Total
Buy 21 95.5%
Neutral 1 4.5%
Sell 0 0.0%
Total 22 100%

Explanation of B. Riley & Co. LLC's Rating System

  • Buy: We generally expect "Buy" rated stocks to materially outperform both the S&P 500 and Russell 2000 as well as other stocks in their sector. Further, we believe that the potential reward relative to the potential risk is particularly attractive.
  • Neutral: We generally believe "Neutral" rated stocks will perform roughly in line with the S&P 500 and Russell 2000 over the intermediate and long term.
  • Sell: We generally expect "Sell" rated stocks to materially underperform both the S&P 500 and Russell 2000 as well as other stocks in their sector. Further, we believe that the potential reward relative to the potential risk is particularly unattractive.

Risks and Considerations

  • Acquisition/Integration - The Company actively evaluates potential acquisitions as part of its growth strategy. Acquisitions pursued by the Company could be dilutive to financial results and result in a difficult, dilutive or expensive integration.
  • Acquisition/Integration - The Company recently completed acquisition(s). If the Company fails to successfully integrate the acquisition, the deal may lead to disappointing returns.
  • Competition - The industry is highly competitive and many of the Company's competitors have greater resources.
  • Financial Results - Any slow down or other changes in the capital spending pattern of the industry may negatively affect the Company's sales.
  • Financial Results - Due to the Company's relatively small revenue base and fixed operating cost structure, the loss or delay of one large license deal or services contract could significantly impact the bottom line.
  • Financial Results - The Company has raised money via public offerings several times in the past and may need to do so again if it can not sustain positive cash flow.
  • Financial Results - The Company's business is affected by the general IT spending environment especially as customers delay purchases of IT equipment.
  • Financial Results - Unpredictable timing of customer orders.
  • Growth Plan - There are many factors that may impact the company's ability to achieve its stated growth objectives.
  • Industry Change - The industry is subject to rapid technological change.
  • Interest Rates - The Company's balance sheet is liability sensitive and fed rate cuts should have a beneficial effect on the net interest margin. However, most of the Company's liabilities are LIBOR-based and to the extent that LIBOR and fed funds rates diverge, the fed rate cuts will have lesser impact on the Company's funding costs.
  • Liquidity and Solvency - The Company has a significant debt load and interest expense, which may hamper its ability to invest in the business. Also, the Company may need to raise additional capital in the future and access to such capital is difficult to predict.
  • Loss of Key Personnel - In our opinion, the current management team will be instrumental in executing the Company's growth strategy. The resignation of a key member of management would have a negative impact on the Company.
  • General Industry - The Company could miss our estimates and/or their financial guidance.
  • Sales Cycle - The Company's sales cycle could lengthen beyond what is normal.
  • Further Potential Risks - See the Company's SEC filings, particularly its 10-K filing, for a discussion of further potential risks.

Additional Risks and Considerations

    • Adoption: If adoption of AUXO's solutions fails to materialize or does so at a slower rate than we estimate, our valuation could be materially impacted.
    • Limited capital: AUXO is a small company with limited resources which may force the company to scale back on aggressive sales and marketing efforts. AUXO may also need to raise capital to sustain operations which could further dilute existing shareholders.
    • Brutal competition: There are many larger companies that focus on AUXO's markets. These companies could develop new, more effective technologies that could decrease the company's ability to obtain market share.
    • Loss of management & other key employees: The loss of certain employees and executives could disrupt operations and severely impact the company.
    • Integration risk: The company recently completed a substantial acquisition. If not integrated properly, AUXO's brand and our valuation could be adversely impacted.
    • Loss of large clients: Currently, the majority of the company’s annual revenue is derived from a handful of MDS clients. If the company lost one or more of these customers to a competitive offering, the company’s revenue and our estimates would be materially impacted.