| Nevada                               | 88-0350448               |
|--------------------------------------|--------------------------|
| (State      or other jurisdiction of | (I.R.S.      Employer    |
| incorporation      or organization)  | Identification      No.) |

----

| Item      1.  | Financial      Statements (Unaudited):                              |   |
|---------------|---------------------------------------------------------------------|--------|
|          |                                                                |   |
|          | Condensed      Consolidated Balance Sheet                           |   |
|          | as      of March 31, 2008                                           | 3      |
|          |                                                                |   |
|          | Condensed      Consolidated Statements of Operations                |   |
|          | for      the Three Months Ended  March 31, 2008 and 2007  | 4      |
|          |                                                                |   |
|          | Condensed      Consolidated Statement of Stockholders’ Equity |   |
|          | for      the Three Months Ended March 31, 2008                      | 5      |
|          |                                                                |   |
|          | Condensed      Consolidated Statements of Cash Flows                |   |
|          | for      the Three Months Ended March 31, 2008 and 2007             | 6      |
|          |                                                                |   |
|          | Notes      to Condensed Consolidated Financial Statements           | 8      |
|          |                                                                |   |
| Item      2.  | Management's      Discussion and Analysis of Results                |   |
|          | of      Operation and Financial Condition                           | 14     |
|          |                                                                |   |
| Item      4T. | Controls      and Procedures.                                       | 20     |

| Item      1. | Legal      Proceedings.                                           | 21     |
|--------------|-------------------------------------------------------------------|--------|
|         |                                                              |   |
| Item      2. | Unregistered      Sales of Equity Securities and Use of Proceeds. | 21     |
|         |                                                              |   |
| Item      3. | Defaults      Upon Senior Securities.                             | 21     |
|         |                                                              |   |
| Item      4. | Submission      of Matters to a Vote of Security Holders.         | 21     |
|         |                                                              |   |
| Item      5. | Other      Information.                                           | 21     |
|         |                                                              |   |
| Item      6. | Exhibits.                                                         | 21     |
|         |                                                              |   |
|         |                                                              |   |
| Signatures   |                                                              | 22     |
|         |                                                              |   |

----

| ITEM      1. | FINANCIAL      STATEMENTS. |
|--------------|----------------------------|

| AUXILIO,      INC. AND SUBSIDIARIES                                                                               |   |
|-------------------------------------------------------------------------------------------------------------------|--------|
| CONDENSED      CONSOLIDATED BALANCE SHEET                                                                         |   |
| MARCH      31, 2008                                                                                               |   |
| (UNAUDITED)                                                                                                       |   |
|                                                                                                              |   |   |   |
| ASSETS                                                                                                            |   |
| Current      assets:                                                                                              |   |   |   |
|    Cash      and cash equivalents                                                                  |   | $ | 505,163 |   |
|    Accounts      receivable, net                                                                   |   |   | 1,891,547 |   |
|    Prepaid      and other current assets                                                           |   |   | 63,328 |   |
|    Supplies                                                                                        |   |   | 681,116 |   |
|          Total      current assets                                   |   |   | 3,141,154 |   |
|                                                                                                              |   |   |   |   |
| Property      and equipment, net                                                                                  |   |   | 194,528 |   |
| Deposits                                                                                                          |   |   | 28,790 |   |
| Loan      acquisition costs, net                                                                                  |   |   | 168,107 |   |
| Intangible      assets, net                                                                                       |   |   | 143,230 |   |
| Goodwill                                                                                                          |   |   | 1,517,017 |   |
|           Total      assets                                     |   | $ | 5,192,826 |   |
|                                                                                                              |   |   |   |   |
| LIABILITIES      AND STOCKHOLDERS' EQUITY                                                                         |   |
|                                                                                                              |   |   |   |   |
| Current      liabilities:                                                                                         |   |   |   |   |
|    Accounts      payable and accrued expenses                                                      |   | $ | 1,418,727 |   |
|    Accrued      compensation and benefits                                                          |   |   | 314,218 |   |
|    Deferred      revenue                                                                           |   |   | 365,989 |   |
|    Current      portion of long-term debt                                                          |   |   | 600,000 |   |
|    Current      portion of capital lease obligations                                               |   |   | 20,923 |   |
|    Revolving      loan payable, net of discount of $49,271                                         |   |   | 695,729 |   |
|           Total      current liabilities                        |   |   | 3,415,586 |   |
|                                                                                                              |   |   |   |   |
| Note      payable, less current portion, net of discount of $88,583                                               |   |   | 1,093,417 |   |
|                                                                                                              |   |   |   |   |
| Commitments      and contingencies                                                                                |   |   | - |   |
|                                                                                                              |   |   |   |   |
| Stockholders'      equity:                                                                                        |   |   |   |   |
|    Common      stock, par value at $0.001, 33,333,333 shares                                       |   |   |   |   |
|      authorized,16,235,309      shares issued and outstanding                            |   |   | 16,237 |   |
|    Additional      paid-in capital                                                                 |   |   | 17,473,019 |   |
|    Accumulated      deficit                                                                        |   |   | (16,805,433 | ) |
|           Total      stockholders' equity                       |   |   | 683,823 |   |
|           Total      liabilities and stockholders’ equity |   | $ | 5,192,826 |   |

----

| AUXILIO,      INC. AND SUBSIDIARIES                        |   |
|------------------------------------------------------------|--------|
| CONDENSED      CONSOLIDATED STATEMENTS OF OPERATIONS       |   |
| (UNAUDITED)                                                |   |
|                                                       |   |   |   |   |   |   |
|                                                       |   | Three      Months Ended March 31, |   |
|                                                       |   | 2008 |   |   | 2007 |   |
| Revenues                                                   |   | $ | 3,773,316 |   |   | $ | 5,862,911 |   |
| Cost      of revenues                                      |   |   | 3,118,528 |   |   |   | 4,300,071 |   |
| Gross      profit                                          |   |   | 654,788 |   |   |   | 1,562,840 |   |
| Operating      expenses:                                   |   |   |   |   |   |   |   |   |
|  Sales      and marketing                             |   |   | 322,148 |   |   |   | 274,476 |   |
|  General      and administrative expenses             |   |   | 609,576 |   |   |   | 675,033 |   |
|  Intangible      asset amortization                   |   |   | 47,743 |   |   |   | 59,541 |   |
|        Total operating expenses                       |   |   | 979,467 |   |   |   | 1,009,050 |   |
| (Loss)      income from operations                         |   |   | (324,679 | ) |   |   | 553,790 |   |
| Other      income (expense):                               |   |   |   |   |   |   |   |   |
|  Interest      expense                                |   |   | (273,138 | ) |   |   | (204,882 | ) |
|  Interest      income                                 |   |   | 2,872 |   |   |   | 2,389 |   |
|        Total other income (expense)                   |   |   | (270,266 | ) |   |   | (202,493 | ) |
|  (Loss)      income before provision for income taxes |   |   | (594,945 | ) |   |   | 351,297 |   |
| Income      tax expense                                    |   |   | 2,400 |   |   |   | 5,600 |   |
| Net      (loss) income                                     |   | $ | (597,345 | ) |   | $ | 345,697 |   |
|                                                       |   |   |   |   |   |   |   |   |
| Net      (loss) income per share:                          |   |   |   |   |   |   |   |   |
| Basic                                                      |   | $ | (0.04 | ) |   | $ | 0.02 |   |
| Diluted                                                    |   | $ | (0.05 | ) |   | $ | (0.01 | ) |
|                                                       |   |   |   |   |   |   |   |   |
| Number      of weighted average shares:                    |   |   |   |   |   |   |   |   |
| Basic                                                      |   |   | 16,235,309 |   |   |   | 16,122,809 |   |
| Diluted                                                    |   |   | 17,324,448 |   |   |   | 18,719,135 |   |

----

| AUXILIO,      INC. AND SUBSIDIARIES                                                   |
|---------------------------------------------------------------------------------------|
| CONDENSED      CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY                         |
| THREE      MONTHS ENDED MARCH 31, 2008                                                |
| (UNAUDITED)                                                                           |
|                                                                                  |
|                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                  |   |   |   |   |   |   |   | Additional |   |   |   |   |   | Total |   |
|                                                                                  |   | Common      Stock |   |   | Paid-in |   |   | Accumulated |   |   | Stockholders' |   |
|                                                                                  |   | Shares |   |   | Amount |   |   | Capital |   |   | Deficit |   |   | Equity |   |
| Balance      at December 31, 2007                                                     |   |   | 16,235,309 |   |   | $ | 16,237 |   |   | $ | 17,364,202 |   |   | $ | (16,208,088 | ) |   | $ | 1,172,351 |   |
| Stock      compensation expense for options granted to employees and      consultants |   |   | - |   |   |   | - |   |   |   | 108,817 |   |   |   | - |   |   |   | 108,817 |   |
| Net      (loss)                                                                       |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (597,345 | ) |   |   | (597,345 | ) |
| Balance      at March 31, 2008                                                        |   |   | 16,235,309 |   |   | $ | 16,237 |   |   | $ | 17,473,019 |   |   | $ | (16,805,433 | ) |   | $ | 683,823 |   |

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

----

| AUXILIO,      INC. AND SUBSIDIARIES                                                               |   |
|---------------------------------------------------------------------------------------------------|--------|
| CONDENSED      CONSOLIDATED STATEMENTS OF CASH FLOWS                                              |   |
| (UNAUDITED)                                                                                       |   |
|                                                                                              |   |   |   |
|                                                                                              |   | Three      Months Ended March 31, |   |
|                                                                                              |   | 2008 |   |   | 2007 |   |
| Cash      flows provided by operating activities:                                                 |   |   |   |   |   |   |
| Net      (loss) income                                                                            |   | $ | (597,345 | ) |   | $ | 345,697 |   |
| Adjustments      to reconcile net (loss) income to net cash                                       |   |   |   |   |   |   |   |   |
| provided      by operating activities:                                                            |   |   |   |   |   |   |   |   |
| Depreciation                                                                                      |   |   | 29,728 |   |   |   | 33,822 |   |
| Amortization      of intangible assets                                                            |   |   | 47,743 |   |   |   | 59,541 |   |
| Stock      compensation expense for warrants and options issued to employees and      consultants |   |   | 108,817 |   |   |   | 142,683 |   |
| Interest      expense related to amortization of warrants issued with    loans                    |   |   | 21,723 |   |   |   | 41,781 |   |
| Interest      expense related to amortization of loan acquisition costs                           |   |   | 41,225 |   |   |   | 71,865 |   |
| Interest      expense related to accretion of loan discount                                       |   |   | 147,812 |   |   |   | - |   |
| Changes      in operating assets and liabilities:                                                 |   |   |   |   |   |   |   |   |
| Accounts      receivable                                                                          |   |   | 542,491 |   |   |   | (260,572 | ) |
| Recovery      of bad debts                                                                        |   |   | (28,510 | ) |   |   | - |   |
| Supplies                                                                                          |   |   | 48,488 |   |   |   | 47,278 |   |
| Prepaid      and other current assets                                                             |   |   | (16,348 | ) |   |   | (137,027 | ) |
| Accounts      payable and accrued expenses                                                        |   |   | (147,533 | ) |   |   | (96,746 | ) |
| Accrued      compensation and benefits                                                            |   |   | (171,892 | ) |   |   | (9,761 | ) |
| Deferred      revenue                                                                             |   |   | (16,906 | ) |   |   | (31,564 | ) |
| Net      cash provided by operating activities                                                    |   |   | 9,493 |   |   |   | 206,997 |   |
| Cash      flows (used for) investing activities:                                                  |   |   |   |   |   |   |   |   |
| Purchases      of property and equipment                                                          |   |   | (15,320 | ) |   |   | (3,939 | ) |
| Net      cash (used for) investing activities                                                     |   |   | (15,320 | ) |   |   | (3,939 | ) |
| Cash      flows (used for) financing activities:                                                  |   |   |   |   |   |   |   |   |
| Payments      on capital leases                                                                   |   |   | (5,438 | ) |   |   | (4,897 | ) |
| Payments      on notes payable and long-term debt                                                 |   |   | (150,000 | ) |   |   | (150,000 | ) |
| Net      cash (used for) financing activities                                                     |   |   | (155,438 | ) |   |   | (154,897 | ) |
| Net      (decrease) increase in cash and cash equivalents                                         |   |   | (161,265 | ) |   |   | 48,161 |   |
| Cash and cash      equivalents, beginning of period                                               |   |   | 666,428 |   |   |   | 319,437 |   |
| Cash and cash equivalents,      end of period                                                     |   | $ | 505,163 |   |   | $ | 367,598 |   |

----

| AUXILIO,      INC. AND SUBSIDIARIES                                   |   |
|-----------------------------------------------------------------------|--------|
| CONDENSED      CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) |   |
| (UNAUDITED)                                                           |   |
|                                                                  |   |   |   |   |   |   |
|                                                                  |   | Three Months      Ended March 31, |   |
|                                                                  |   | 2008 |   |   | 2007 |   |
| Supplemental      disclosure of cash flow information:                |   |   |   |   |   |   |
|                                                                  |   |   |   |   |   |   |
| Interest      paid                                                    |   | $ | 65,630 |   |   | $ | 91,237 |   |
|                                                                  |   |   |   |   |   |   |   |   |
| Income      taxes paid                                                |   | $ | 11,500 |   |   | $ | - |   |

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

----

|   | NOTES      TO CONDENSED CONSOLIDATED FINANCIALSTATEMENTS |
|--------|----------------------------------------------------------|

|   | THREE      MONTHS ENDED MARCH 31, 2008 and2007 |
|--------|------------------------------------------------|

|   | (UNAUDITED) |
|--------|-------------|

----

| Options                               |   |   |      |   |                                 |   |
|---------------------------------------|--------|--------|-----------|--------|--------------------------------------|--------|
|                                  |   | Shares |      |   | Weighted      Average Exercise Price |   |   | Weighted      Average Remaining Term in Years |   |   | Aggregate      Intrinsic Value |   |
| Outstanding      at December 31, 2007 |   |   | 4,257,648 |   |                                 | $      | 1.12 |   |   |   |   |   |   |   |
|    Granted             |   |   | 21,500    |   |                                 | $      | 1.56 |   |   |   |   |   |   |   |
|    Exercised           |   |   | -         |   |                                 |   | - |   |   |   |   |   |   |   |
|    Cancelled           |   |   | (23,182   | )      |                                 | $      | 1.07 |   |   |   |   |   |   |   |
| Outstanding      at March 31, 2008    |   |   | 4,255,966 |   |                                 | $      | 1.13 |   |   |   | 7.96 |   |   | $ | 3,046,912 |   |
| Exercisable      at March 31, 2008    |   |   | 1,988,648 |   |                                 | $      | 1.24 |   |   |   | 6.67 |   |   | $ | 1,286,768 |   |

| Warrants                              |   |   |      |   |                                 |   |
|---------------------------------------|--------|--------|-----------|--------|--------------------------------------|--------|
|                                  |   | Shares |      |   | Weighted      Average Exercise Price |   |   | Weighted      Average Remaining Term in Years |   |   | Aggregate      Intrinsic Value |   |
| Outstanding      at December 31, 2007 |   |   | 3,063,021 |   |                                 | $      | 1.14 |   |   |   |   |   |   |   |
|    Granted             |   |   | -         |   |                                 |   | - |   |   |   |   |   |   |   |
|    Exercised           |   |   | -         |   |                                 |   | - |   |   |   |   |   |   |   |
|    Cancelled           |   |   | -         |   |                                 |   | - |   |   |   |   |   |   |   |
| Outstanding      at March 31, 2008    |   |   | 3,063,021 |   |                                 | $      | 1.14 |   |   |   | 3.61 |   |   | $ | 2,341,970 |   |
| Exercisable      at March 31, 2008    |   |   | 2,685,521 |   |                                 | $      | 1.20 |   |   |   | 3.61 |   |   | $ | 1,934,270 |   |

|                                                          |   | 2008   |    |   | 2007   |   |
|---------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
| Cost      of revenues                                         |   | $      | 37,236  |   |   | $      | 27,638 |   |
| Sales      and marketing                                      |   |   | 22,032  |   |   |   | 30,196 |   |
| General      and administrative expenses                      |   |   | 49,549  |   |   |   | 84,849 |   |
|    Total      stock based compensation expense |   | $      | 108,817 |   |   | $      | 142,683 |   |

----

|                                                             |   | Three Months      Ended March 31, |       |
|------------------------------------------------------------------|--------|----------------------------------------|------------|
|                                                             |   | 2008                                   |       |   | 2007 |   |
| Numerator:                                                       |   |                                   |       |   |   |   |
| Net      (loss) income                                           |   | $                                      | (597,345   | ) |   | $ | 345,697 |   |
| Effects      of dilutive securities:                             |   |                                   |       |   |   |   |   |   |
| Convertible      note payable                                    |   |                                   | (217,800   | ) |   |   | (441,747 | ) |
| (Loss)      after effects of conversion of note payable          |   |                                   | (815,145   | ) |   | $ | (96,050 | ) |
|                                                             |   |                                   |       |   |   |   |   |   |
| Denominator:                                                     |   |                                   |       |   |   |   |   |   |
| Denominator      for basic calculation weighted average shares   |   |                                   | 16,235,309 |   |   |   | 16,122,809 |   |
|                                                             |   |                                   |       |   |   |   |   |   |
| Dilutive      common stock equivalents:                          |   |                                   |       |   |   |   |   |   |
| Secured      convertible notes                                   |   |                                   | 1,109,119  |   |   |   | 1,499,298 |   |
| Options      and warrants                                        |   |                                   | -          |   |   |   | 1,097,028 |   |
|                                                             |   |                                   |       |   |   |   |   |   |
| Denominator      for diluted calculation weighted average shares |   |                                   | 17,324,448 |   |   |   | 18,719,135 |   |
|                                                             |   |                                   |       |   |   |   |   |   |
| Net      income (loss) per share:                                |   |                                   |       |   |   |   |   |   |
|                                                             |   |                                   |       |   |   |   |   |   |
| Basic      net (loss) income per share                           |   | $                                      | (0.04      | ) |   | $ | 0.02 |   |
|                                                             |   |                                   |       |   |   |   |   |   |
| Diluted      net (loss) per share                                |   | $                                      | (0.05      | ) |   | $ | (0.01 | ) |

| Trade                                |   | $      | 1,891,547 |   |
|--------------------------------------|--------|--------|-----------|--------|
| Allowance      for doubtful accounts |   |   | -         |   |
|                                 |   | $      | 1,891,547 |   |

----

----

----

----

----

| ·   | revenue      recognition |
|--------------------|--------------------------|

| ·   | accounts      receivable valuation and relatedreserves |
|--------------------|--------------------------------------------------------|

| ·   | accounting      for income taxes |
|--------------------|----------------------------------|

| ·   | impairment      of intangible assets |
|--------------------|--------------------------------------|

| ·   | deferred      revenue |
|--------------------|-----------------------|

----

----

| ·   | the      emergence of competitors in our target market, and the quality and      development of their  products and services;  and |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the      market’s acceptance of our products and  services. |
|--------------------|-------------------------------------------------------------------|

| ·   | successfully      complete the development of our products and  services; |
|--------------------|---------------------------------------------------------------------------|

| ·   | modify      our products and services as necessary to meet the demands of our      market; |
|--------------------|--------------------------------------------------------------------------------------------|

| ·   | attract      and retain highly skilled employees;and |
|--------------------|------------------------------------------------------|

| ·   | respond      to competitive influences. |
|--------------------|-----------------------------------------|

----

| ·   | greater      name recognition and larger marketing budgets and    resources; |
|--------------------|------------------------------------------------------------------------------|

| ·   | established      marketing relationships and access to larger customer    bases; |
|--------------------|----------------------------------------------------------------------------------|

| ·   | substantially      greater financial, technical and other resources;  and |
|--------------------|---------------------------------------------------------------------------|

| ·   | larger      technical and support staffs. |
|--------------------|-------------------------------------------|

----

| ·   | develop      or enhance our service offerings; |
|--------------------|------------------------------------------------|

| ·   | take      advantage of future opportunities;or |
|--------------------|------------------------------------------------|

| ·   | respond      to customers and competition. |
|--------------------|--------------------------------------------|

----

| ·   | net      tangible assets of at least $2,000,000, if the issuer has been in      continuous operation for at least three years, or net tangible assets of      at least $5,000,000, if the issuer has been in continuous operation for      less than three years; or |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | average      annual revenue of at least $6,000,000 for the last three      years. |
|--------------------|-----------------------------------------------------------------------------------|

----

| No.  | Item                                                                                                                                                                              |
|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.1 | First      Amendment to Amended and Restated Loan and Security Agreement Between      Auxilio, Inc. and Cambria Investment Fund Effective as of April 20,      2008.              |
| 31.1 | Certification      of the Chief Executive Officer pursuant to Rule 13a-14(a) and Rule      15d-14(a) of the Securities Exchange Act of 1934, as    amended.                       |
| 31.2 | Certification  of      the Chief Financial Officer  pursuant to Rule 13a-14(a) and Rule      15d-14(a) of the Securities Exchange Act of 1934, as    amended. |
| 32.1 | Certification      of the CEO and CFO pursuant to Rule 13a-14(b) and Rule 15d-14(b) of the      Securities Exchange Act of 1934 and 18 U.S.C. Section  1350.                      |

----

----