UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                   FORM 10-QSB

     (Mark  One)
           [X]     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended September 30, 2004

                                       OR

           [ ]     TRANSITION PERIOD PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934



                         COMMISSION FILE NUMBER 0-27507

                                  AUXILIO, INC.
             (Exact name of registrant as specified in its charter)



                      NEVADA                              88-0350448
       (State or other jurisdiction of                    (I.R.S. Employer
    incorporation or organization)                    Identification Number)



                         27130A PASEO ESPADA, SUITE 1427
                      SAN JUAN CAPISTRANO, CALIFORNIA 92675
          (Address, including zip code, of principal executive offices)

                                 (949) 481-7550
              (Registrant's telephone number, including area code)



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   X       No ____
                                  -----


The  number  of  shares  of  the  Registrant's  Common  Stock, $0.001 par value,
outstanding  as  of  November  10,  2004  was  14,119,669.

<PAGE>
                                  AUXILIO, INC.

                                   FORM 10-QSB

                                TABLE OF CONTENTS


PART  I  -  FINANCIAL  INFORMATION
----------------------------------

                                                                      Page


                                                                      ----
Item  1.     Financial  Statements  (unaudited):

             Consolidated  Balance  Sheet                               3
              as  of  September  30,  2004

              Consolidated  Statements  of Operations                   4
               for the Three and Nine Month periods ended
               September 30, 2004 and 2003

              Consolidated  Statements  of  Comprehensive  Income       5
               for  the  Three  and  Nine  Month  periods  ended
               September 30, 2004 and 2003

              Consolidated  Statement  of  Stockholders'  Equity
               for  the  Nine Months Ended September 30, 2004           6

              Consolidated  Statements  of  Cash  Flows                 7-8
               for  the  Nine  Months  Ended  September  30,
               2004  and  2003


              Notes to Condensed Consolidated Financial Statements      9-13

Item  2.      Management's Discussion and Analysis of
               Financial Condition and Results of Operations            14-18

Item  3.      Controls  and  Procedures                                 18

PART  II  -  OTHER  INFORMATION
-------------------------------

Item  1:     Legal Proceedings                                          18

Item  2:     Changes  in  Securities  and  Use  of  Proceeds            18

Item 3:      Defaults upon Senior Securities                            18

Item  4:     Submission of Matters to Vote of Security Holders          18

Item  5:     Other  Information                                         19

Item 6.     Exhibits and Report on Form 8-K                             19

Signatures                                                              20

                                    -2-
 <PAGE>

PART  I  -  FINANCIAL  INFORMATION
 ----------------------------------

ITEM  1.                 FINANCIAL  STATEMENTS
<TABLE>
<CAPTION>

                 AUXILIO, INC. AND SUBSIDIARIES

                   CONSOLIDATED BALANCE SHEET

                 SEPTEMBER 30, 2004 - UNAUDITED
                            ASSETS
<S>                                                       <C>
CURRENT ASSETS:
   Cash. . . . . . . . . . . . . . . . . . . . . . . . .  $   644,982
   Accounts and other receivable, net of allowance
      for doubtful accounts of $18,603 . . . . . . . . .      535,700
   Supplies. . . . . . . . . . . . . . . . . . . . . . .      293,675
   Prepaid and other current assets. . . . . . . . . . .       44,485
   Deposits. . . . . . . . . . . . . . . . . . . . . . .       27,605
   Investment in marketable securities . . . . . . . . .      761,331
                                                          -----------
          Total current assets . . . . . . . . . . . . .    2,307,778

PROPERTY AND EQUIPMENT, net of accumulated
      depreciation and amortization of $86,075 . . . . .      213,668
EXCESS OF PURCHASE PRICE OVER ASSETS ACQUIRED. . . . . .    2,747,017
                                                          -----------
                                                          $ 5,268,463
                                                          ===========
                 LIABILITIES AND STOCKHOLDERS EQUITY
CURRENT LIABILITIES:
   Line of credit and note payable . . . . . . . . . . .  $   191,107
   Current portion of long-term debt . . . . . . . . . .       18,861
   Accounts payable and accrued expenses . . . . . . . .    1,467,263
   Lease buy-out provision . . . . . . . . . . . . . . .      260,733
   Deferred revenue. . . . . . . . . . . . . . . . . . .      344,071
                                                          -----------
          Total current liabilities. . . . . . . . . . .    2,282,035

STOCKHOLDERS' EQUITY:
   Common stock, par value at $0.001, 33,333,333 shares
    authorized, 14,119,669 shares issued and outstanding       14,121
   Additional paid-in capital. . . . . . . . . . . . . .   11,597,316
   Accumulated deficit . . . . . . . . . . . . . . . . .   (8,716,362)
   Total accumulated comprehensive income. . . . . . . .       91,353
                                                          -----------
          Total stockholders' equity . . . . . . . . . .    2,986,428
                                                          -----------
                                                          $ 5,268,463
                                                          ===========
                The accompanying notes are an integral
                  part of these financial statements.
</TABLE>
                                -3-
<PAGE>


                                    AUXILIO, INC. AND SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF OPERATIONS UNAUDITED

<TABLE>
<CAPTION>

                                                  THREE MONTHS                NINE MONTHS
                                               ENDED SEPTEMBER 30          ENDED SEPTEMBER 30
                                               ------------------          ------------------
                                               2004          2003          2004          2003
                                               ----          ----          ----          ----

<S>                                       <C>           <C>          <C>           <C>
REVENUES . . . . . . . . . . . . . . . .  $   975,363   $        -   $ 5,565,142   $         -

COST OF REVENUES . . . . . . . . . . . .      178,585            -     2,912,942             -
                                          ------------  -----------  ------------  ------------
GROSS PROFIT . . . . . . . . . . . . . .      796,778            -     2,652,200             -

OPERATING EXPENSES:
   Sales and marketing . . . . . . . . .      357,805            -     1,003,403             -
   General and administrative
       expenses. . . . . . . . . . . . .      353,524       96,516       992,561        83,803
                                          ------------  -----------  ------------  ------------
INCOME (LOSS) FROM OPERATIONS. . . . . .       85,449      (96,516)      656,236       (83,803)
                                          ------------  -----------  ------------  ------------
OTHER INCOME (EXPENSE):
   Interest expense. . . . . . . . . . .         (931)      (1,848)       (9,364)      (14,168)
   Interest income . . . . . . . . . . .        3,597        2,093         5,732         2,796
   Recovery of bad debts . . . . . . . .            -           87             -       158,471
   Gain (loss) on disposal of fixed
       assets. . . . . . . . . . . . . .            -            -             -        (3,518)
                                          ------------  -----------  ------------  ------------
          Total other income (expense) .        2,666          332        (3,632)      143,581
                                          ------------  -----------  ------------  ------------
INCOME (LOSS) BEFORE PROVISION
   FOR INCOME TAXES. . . . . . . . . . .       88,115      (96,184)      652,604        59,778

PROVISION FOR INCOME TAXES . . . . . . .            -            -        (2,400)         (800)
                                          ------------  -----------  ------------  ------------
NET INCOME (LOSS) FROM
     CONTINUING OPERATIONS . . . . . . .       88,115      (96,184)      650,204        58,978

INCOME (LOSS) FROM DISCONTINUED
   OPERATIONS, (INCLUDING GAIN (LOSS)
   ON DISPOSAL OF ($93,750) AND
   $674,942, FOR THE THREE AND NINE
   MONTHS ENDED SEPTEMBER 30, 2004,
   RESPECTIVELY) NET OF
   TAX BENEFIT . . . . . . . . . . . . .      (39,000)    (852,529)      501,895    (2,269,035)
                                          ------------  -----------  ------------  ------------
NET INCOME (LOSS). . . . . . . . . . . .  $    49,115   $ (948,713)  $ 1,152,099   $(2,210,057)
                                          ============  ===========  ============  ============
NET INCOME (LOSS) PER SHARE - BASIC:
  INCOME (LOSS) PER SHARE-CONTINUING
     OPERATIONS. . . . . . . . . . . . .  $      0.00       ($0.01)  $      0.05   $      0.01
  INCOME (LOSS) PER SHARE-DISCONTINUED
     OPERATIONS. . . . . . . . . . . . .       ($0.00)      ($0.11)  $      0.04        ($0.38)
                                          ------------  -----------  ------------  ------------
NET INCOME (LOSS) PER SHARE - BASIC. . .  $      0.00       ($0.12)  $      0.09        ($0.37)
                                          ============  ===========  ============  ============
NET INCOME (LOSS) PER SHARE - DILUTED:
  INCOME (LOSS) PER SHARE-CONTINUING
     OPERATIONS. . . . . . . . . . . . .  $      0.00       ($0.01)  $      0.05   $      0.01
  INCOME (LOSS) PER SHARE-DISCONTINUED
     OPERATIONS. . . . . . . . . . . . .       ($0.00)      ($0.11)  $      0.04        ($0.38)
                                          ------------  -----------  ------------  ------------
NET INCOME (LOSS) PER SHARE - DILUTED. .  $      0.00       ($0.12)  $      0.09        ($0.37)
                                          ============  ===========  ============  ============
NUMBER OF WEIGHTED AVERAGE SHARES -
    BASIC. . . . . . . . . . . . . . . .   14,119,669    7,751,615    12,230,113     5,996,019
                                          ============  ===========  ============  ============
    DILUTED. . . . . . . . . . . . . . .   14,388,769    7,751,615    12,499,212     5,996,019
                                          ============  ===========  ============  ============
</TABLE>
                     The accompanying notes are an integral
                       part of these financial statements.

                                           -4-
<PAGE>



                          AUXILIO, INC. AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - UNAUDITED

                              THREE MONTHS           NINE MONTHS
                           ENDED SEPTEMBER 30     ENDED SEPTEMBER 30
                           ------------------     ------------------
                             2004      2003        2004        2003
                             ----      ----        ----        ----
<TABLE>
<CAPTION>
<S>                        <C>      <C>         <C>         <C>

NET INCOME (LOSS) . . . .  $49,115  ($948,713)  $1,152,099  ($2,210,057)

UNRECOGNIZED GAIN ON
   MARKETABLE SECURITIES.   23,103          -       91,353            -
                           --------  ---------  -----------  -----------
COMPREHENSIVE INCOME
   (LOSS) . . . . . . . .  $72,218  ($948,713)  $1,243,452  ($2,210,057)
                           ======== ==========  =========== ============
</TABLE>
                     The accompanying notes are an integral
                       part of these financial statements.

                                    -5-
<PAGE>



                         AUXILIO, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004


<TABLE>
<CAPTION>

                                               Additional                 Compre-     Total
                              Common stock       paid-in    Accumulated   hensive stockholders'
                           Shares     Amount     capital       deficit     income    equity
                         ----------  ---------  -----------  ------------  -------  ---------
<S>                      <C>         <C>        <C>          <C>           <C>      <C>
Balance as of
December 31, 2003, as
restated for effect of
one to three reverse
stock split on May 15,
 2004 . . . . . . . . .   8,345,766  $ 25,037   $ 9,833,091  $(9,868,461)  $     -  $  (10,333)

Issuance of common
 stock-Private
 Placement
 (unaudited). . . . . .   1,733,833     1,733       518,417            -         -     520,150

Issuance of common
 stock-acquistion
 (unaudited). . . . . .   4,000,070     4,000     1,196,022            -         -    1,200,022

Shares issued for
 payables (unaudited)
                             40,000       120        29,880             -        -       30,000

Reclass of par value
 due to reverse stock
 split. . . . . . . . .           -   (16,769)       16,769            -         -           -

Fair market value of
 warrants issued for
services. . . . . . . .           -         -         3,137            -         -       3,137

Unrecognized gain on
 marketable securities
                                  -         -             -             -    91,353     91,353

Net income
 (unaudited). . . . . .           -         -             -    1,152,099         -   1,152,099
                         ----------  ---------  -----------  ------------  -------  ----------
Balance at September
 30, 2004 (unaudited) .  14,119,669  $ 14,121   $11,597,316  $(8,716,362)  $91,353  $2,986,428
                         ==========  =========  ===========  ============  =======  ==========
</TABLE>
                     The accompanying notes are an integral
                       part of these financial statements.

                                                -6-
<PAGE>
<TABLE>
<CAPTION>
                           AUXILIO, INC. AND SUBSIDIARIES

                  CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED

                   INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

                                                       NINE MONTHS ENDEDSEPTEMBER 30,
                                                      --------------------------------
                                                           2004                 2003
                                                      --------------------------------
<S>                                                   <C>                <C>
CASH FLOWS PROVIDED BY (USED FOR) OPERATING
Net income (loss) . . . . . . . . . . . . . . . . . . $      1,152,099   $(2,210,057)

ADJUSTMENTS TO RECONCILE NET INCOME
TO NET CASH PROVIDED
  BY (USED FOR) OPERATING ACTIVITIES:
    Depreciation and amortization . . . . . . . . . .           27,825       150,242
    Bad debt. . . . . . . . . . . . . . . . . . . . .           18,603             -
    Loss on disposition of property and equipment . .                -         3,518
    Gain on sale of certain assets. . . . . . . . . .         (635,941)            -
    Interest expense. . . . . . . . . . . . . . . . .            3,137         9,405
    Expense for repricing of stock in private
     placement . . . . . . . . . . . . . . . . . . .                 -        10,000
CHANGES IN ASSETS AND LIABILITIES:
   (INCREASE) DECREASE IN ASSETS
    Accounts receivable . . . . . . . . . . . . . . .         (502,201)      142,652
    Supplies. . . . . . . . . . . . . . . . . . . . .         (135,161)            -
    Prepaid and other current assets. . . . . . . . .           52,118        46,300
   Deposits . . . . . . . . . . . . . . . . . . . . .             (250)
    Other assets. . . . . . . . . . . . . . . . . . .                -        (4,508)
 INCREASE (DECREASE) IN LIABILITIES
    Accounts payable and accrued expenses . . . . . .          188,511       (16,735)
    Lease buy-out provision . . . . . . . . . . . . .          260,733             -
    Deferred revenue. . . . . . . . . . . . . . . . .          127,133       (49,506)
                                                          -------------  ------------
Net cash provided by (used for) operating activities.          556,606    (1,918,689)
                                                          -------------  ------------

CASH FLOWS USED FOR INVESTING ACTIVITIES:
    Acquisition of fixed assets and computer software         (136,793)      (25,499)
    Payment for purchase of Mayo Group, net of cash
     acquired. . . . . . . . . . . . .                        (550,613)            -
    Proceeds from sale of certain assets. . . . . . .          250,000             -
    Proceeds from sale of property and equipment. . .                -           600
                                                          -------------  ------------
Net cash used for investing activities. . . . . . . .         (437,406)      (24,899)
                                                          -------------  ------------

CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
   Payments on note payable and long-term debt. . . .         (220,766)      (15,564)
   Proceeds from issuance of common stock . . . . . .          520,150     2,508,411
                                                          -------------  ------------
Net cash provided by financing activities . . . . . .          299,384    2, 492,847
                                                          -------------  ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS . . . . . .          418,584       549,259
CASH AND CASH EQUIVALENTS, beginning of year. . . . .          226,398       320,364
                                                      -----------------  ------------
CASH AND CASH EQUIVALENTS, end of year. . . . . . . . $        644,982   $   869,624
                                                      =================  ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
    Interest paid . . . . . . . . . . . . . . . . . . $         12,376   $     4,763
                                                      =================  ============
    Income tax paid . . . . . . . . . . . . . . . . . $            800   $       800
                                                      =================  ============
                                        -7-
<PAGE>

SUPPLEMENTAL DISCLOSURE OF NON CASH OPERATING
AND FINANCING ACTIVITIES
    Increase in line of credit from accrued
     interest payable. . . . . . . . . . . . . . . . .$              -   $     5,174
                                                      =================  ============

    Receivable issued for sale of equipment . . . . . $              -   $     4,401
                                                      =================  ============
  Stock issued for payables . . . . . . . . . . . . . $         30,000   $         -
                                                      =================  ============
   Net assets acquired (liabilities assumed),
    net of bank overdraft, through acquisition
    of Mayo Group. . . . . . . . . . . . . . . . . .  $       (181,254)  $         -
                                                      =================  ============
   Stock and note payable issued in conjunction
    with acquisition.                                 $      2,015,150   $         -
                                                      =================  ============

                     The accompanying notes are an integral
                       part of these financial statements.
</TABLE>
                                       -8-


<PAGE>
                         AUXILIO, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                NINE MONTHS ENDED SEPTEMBER 30, 2004 (UNAUDITED)

1.     BASIS  OF  PRESENTATION
The  accompanying  unaudited  condensed  consolidated  financial  statements  of
Auxilio,  Inc.  and  Subsidiaries (the Company) have been prepared in accordance
with  accounting  principles  generally accepted in the United States of America
for  interim  financial  statements pursuant to the rules and regulations of the
Securities  and  Exchange  Commission.  Accordingly, they do not include certain
information and footnote disclosures normally included in consolidated financial
statements  prepared in accordance with accounting principles generally accepted
in the United States of America.  These consolidated financial statements should
be  read  in  conjunction with the consolidated financial statements and related
notes  included in the Company's Annual Report on Form 10-KSB for the year ended
December  31,  2003.

The  unaudited  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 the 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 accounting principles
generally  accepted  in the United States of America requires management to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities  and  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. Actual results could differ from those estimates.

The  accompanying  financial  statements  have  been prepared in conformity with
accounting  principles generally accepted in the United States of America, which
contemplate  continuation  of  the  Company  as  a  going concern.  Although the
Company  has reported net income of $1,152,099 (unaudited) through September 30,
2004, it has reported a loss for its year ended December 31, 2003 of $3,405,020,
and  has  an  accumulated  deficit  of  $8,716,362  (unaudited) since inception.

Management  has taken the following steps that it believes will be sufficient to
provide  the  Company  with  the  ability  to  continue  in  existence:
-     Acquired  the  assets  of  The  Mayo  Group.
-     Raised  funds  through  the  sale  of  its  stock  in  private placements.

The  Company sold its previous product offering, HCM tools, to WorkStream during
the  first  quarter  of  2004. In the second quarter, the Company and WorkStream
executed  an  Addendum  to  Asset Purchase Agreement as a settlement pursuant to
issues  with  the  HCM  Tools  product  offering.  (See  Note  7.)

As  a  result  of the acquisition and disposal, the financial statements for the
period  ended September 30, 2004, are not comparable to the financial statements
for  the  period  ended  September  30,  2003.

OPTIONS/WARRANTS

On  May  28,  2004, the Company granted 651,663 options to employees to purchase
common  stock  at  an  exercise price of $0.90 per share, which was equal to the
market price on the date of grant. The options have graded vesting annually over
three years, starting  June  2005.   The  Company  accounts  for options granted
to employees under APB  25.  If the Company accounted for the options under FASB
123 expense totaling $563,554 would  be  recognized over the next three years of
service.  The  fair  market value was determined using the Black Scholes pricing
model.  The  assumptions used to calculate the fair market value are as follows:
risk-free  interest  rate  of  1.21%;  estimated volatility of 205.30%; dividend
yield  of  0.0%;  and  expected  life  of  the  options  of  four  years.

On  August  4,  2004 the Company granted 82,500 options to employees to purchase
common  stock  at  an  exercise price of $1.04 per share, which was equal to the
market price on the date of grant. The options have graded vesting annually over
three years, starting  August  2005.   The  Company accounts for options granted
to employees under APB  25.  If the Company accounted for the options under FASB
123 expense totaling  $84,854  would be  recognized over the next three years of
service.  The  fair  market value was determined using the Black Scholes pricing
model.  The  assumptions used to calculate the fair market value are as follows:
risk-free  interest  rate  of  1.25%;  estimated volatility of 253.31%; dividend
yield  of  0.0%;  and  expected  life  of  the  options  of  four  years.

                                        -9-
<PAGE>

Had  the  Company  accounted  for  the  options under FASB123, the Company's net
income  and  net  income  per  share  would have been decreased to the pro forma
amounts indicated below for the three and nine month periods ended September 30,
2004 and 2003:

                                      2004
                                      ----
<TABLE>
<CAPTION>
<S>                                     <C>             <C>
                                        Three-months    Nine Months
                                        --------------  -------------
   Net income:
    As reported. . . . . . . . . . . .  $      49,115   $  1,152,099
    Deduct: Total stock-based employee
      compensation expense determined
      under fair value based method. .         51,677         82,985
                                        --------------  -------------
    Pro forma. . . . . . . . . . . . .  $      (2,562)  $  1,069,114
                                        ==============  =============

    Basic earnings per share:
      As reported. . . . . . . . . . .  $        0.00   $       0.09
                                        ==============  =============
      Pro forma. . . . . . . . . . . .  $        0.00   $       0.09
                                        ==============  =============

    Diluted earnings per share:
      As reported. . . . . . . . . . .  $        0.00   $       0.09
                                        ==============  =============
      Pro forma. . . . . . . . . . . .  $        0.00   $       0.09
                                        ==============  =============

                                    2003
                                    -----

                                         Three-months   Nine Months
                                         ------------   ------------
    Net loss:
    As reported. . . . . . . . . . . .  $    (948,713)  $ (2,210,057)
    Deduct: Total stock-based employee
      compensation expense determined
      under fair value based method. .         22,147         22,147
                                        --------------  -------------
    Pro forma. . . . . . . . . . . . .  $    (970,860)  $ (2,232,204)
                                        ==============  =============

    Basic earnings per share:
      As reported. . . . . . . . . . .  $       (0.12)  $      (0.37)
                                        ==============  =============
      Pro forma. . . . . . . . . . . .  $       (0.13)  $      (0.37)
                                        ==============  =============

    Diluted earnings per share:
      As reported. . . . . . . . . . .  $       (0.12)  $      (0.37)
                                        ==============  =============
      Pro forma. . . . . . . . . . . .  $       (0.13)  $      (0.37)
                                        ==============  =============
</TABLE>

During  the  nine  month  period  ended  September 30, 2004, the Company granted
warrant  agreements  to purchase 710,000 shares of the Company's common stock to
three  officers  at  an exercise price of $0.30 per share, which is equal to the
price  the  Company sold shares in a private placement. The warrants granted are
restricted  from  vesting  for  a minimum of one year, while certain shares only
vest  pursuant  to  certain earning targets being achieved, and accordingly, the
intrinsic value measurement will be made when the earnings targets are met.  The
Company accounts for warrants granted to employees under APB 25.  If the Company
accounted  for  the  options  under  FASB 123 expense totaling $204,668 would be
recognized annually for three years.  The warrants are earned after each year of
service,  therefore  the  first  period  an  expense  would be recognized is the
quarter  ended  June  30, 2005.   The fair market value was determined using the
Black  Scholes pricing model.  The assumptions used to calculate the fair market
value  are as follows: risk-free interest rate of 1.21%; estimated volatility of
205.30%; dividend yield of 0.0%; and expected life of the options of four years.

The  Company  granted a warrant agreement to purchase 5,000 shares to a "finder"
whom  introduced  the  Company  to  WorkStream.  The  fair  market  value of the
warrants was calculated using the Black Scholes pricing model with the following
assumptions:  risk-free interest rate of 1.21%; estimated volatility of 205.30%;
dividend  yield  of  0.0%;  and  expected  life of the options of one year.  The
expense  recorded  equaled  $3,137.


2.     NET  EARNINGS  PER  SHARE

Basic  income  (loss)  per  share  is  calculated  by dividing net income (loss)
attributable to common shareholders, by the weighted average number of shares of
common  stock outstanding during the period.  Diluted income (loss) per share is
calculated  by dividing net income (loss) attributable to common shareholders by

the  weighted  average  number  of  common  shares  outstanding,  adjusted  for
potentially dilutive securities, which are options and warrants, known as common
stock  equivalents.

Common  stock  equivalents consist of 2,299,038 and 1,286,115 equity instruments
at September 30, 2004 and 2003.  Of these common stock equivalents, 500,838 were
included  in  the computation of diluted EPS for the nine months ended September
30, 2004.  The other 1,798,200 equity instruments at September 30, 2004 were not
included  as  their  exercise price was greater than the average market value of
the  common  shares  thus  being  anti-dilutive.  None  of  the 1,286,115 equity
instruments  outstanding  at  September  30,  2003  have  been  included  in the
computation  of diluted EPS for the nine months ended September 30, 2003, due to
the exercise prices of those options being greater than the average market price
of  the  common  shares,  and  thus  are  anti-dilutive


3.     INVESTMENTS  IN  MARKETABLE  SECURITIES

Investments  in marketable securities consist of equity securities classified as
"available  for sale" under Statements of Financial Accounting Standards No. 115
and  reported  at  fair  value  and  warrants  being accounted for under APB 18.
Accordingly,  unrealized gains and losses on the equity securities are reflected
in  the  statement  of  comprehensive income.  The warrants are accounted for at
cost.


4.     LEASE  BUY-OUT  PROVISION


Lease  buy-out  provision consists of amounts expected to be paid to third party
lessors  on  equipment current located at new customer's locations.  The Company
will  buy-out  existing  lease  agreements  at  a  customer's  location if it is
beneficial  to  the  Company to do so.  This liability represents an estimate of
the amounts that are to be paid to end the current lease agreements that certain
customers  have.


5.     DEFERRED  REVENUE


Deferred  revenue  is an estimate of revenue expected to be earned in the future
under  the  equipment  contracts  for  additional equipment (printers and faxes)
to  be  placed at the customer's location that is included in the original
contract  amount.  This additional equipment is identified by the Company at the
start  of  a  contract.


6.     PRIVATE  PLACEMENT

The  Company  entered  into  an  arrangement  to  sell  stock  through a private
placement  at  $0.10 per share ($0.30 per share post split), which closed in May
2004.  As  of  May 15, 2004, 1,733,833 shares (post split) had been sold for net
proceeds  of  $520,150.

                                        -10-

<PAGE>
7.     DISCONTINUED  OPERATIONS

In  March  2004,  the  Company  entered  into an agreement with WorkStream, Inc.
whereby  the  Company  sold  to  WorkStream  the following: accounts receivable,
certain  computer  equipment,  customer  list,  existing customer contracts, the
PeopleView name, and the technology and product offerings that had been recently
revised  and  improved,  including  ClimateSight(TM),  SkillSight(TM),
PerformanceSight(TM),  ComplianceSight(TM)  and  HCM  TOOLS(TM), essentially the
operations  of  e-Perception  Technologies,  Inc.

The  original  agreement called for the Company to receive cash consideration of
$300,000,  of  which  $50,000  was  subject  to  certain "hold back" conditions.
Additionally,  the  Company  was  to receive 350,000 shares of WorkStream common
stock,  of  which  50,000 shares were subject to certain "hold back" conditions,
and  a  warrant  to purchase an additional 50,000 shares at an exercise price of
$3.00  per  share.  Pursuant to an Addendum to the original Agreement, the final
consideration  the  Company  received  was  cash  of $250,000, 246,900 shares of
WorkStream  common  stock, and a warrant to purchase an additional 50,000 shares
at  an  exercise  price  of  $3.00  per  share.


8.     EMPLOYMENT  AGREEMENTS

In May 2004, the Company entered into employment agreements with key management.
The agreements called for the issuing of warrants to the individuals pursuant to
certain  earnings  and  revenue  targets being accomplished. The Company entered
into  an  employment agreement with Joseph Flynn to serve as its Chief Executive
Officer,  effective April 1, 2004.  Mr. Flynn's agreement has a term of two year
and  provides  for  a  base annual salary of $165,000.  Mr. Flynn may receive an
annual bonus if certain earnings and revenue targets are accomplished. Effective
April  1,  2004,  the  Company entered into an employment agreement with Etienne
Weidemann,  to  serve as President and Chief Operating Officer.  Mr. Weidemann's
agreement  has  a  term  of  two years, and provides for a base annual salary of
$160,000.  Mr.  Weidemann  may  receive  an annual bonus if certain earnings and
revenue  targets  are accomplished. Effective April 1, 2004, the Company entered
into  an  employment  agreement  with  James  P.  Stapleton,  to  serve as Chief
Operating  Officer.  Mr.  Stapleton's  agreement  has  a  term of two years, and
provides  for  a  base  annual salary of $145,000.  Mr. Stapleton may receive an
annual  bonus  if  certain  earnings  and  revenue  targets  are  accomplished.

9.     ACQUISITION

On  April  1, 2004, one of the Company's subsidiaries, PPVW Acquisition Company,
completed  an acquisition of Alan Mayo and Associates, Inc., dba The Mayo Group.
The  Mayo  Group  provides outsourced  document  image  management  services for
the healthcare industry.  The  purchase  price  was  as follows:  $255,000 cash
and 1,700,030
shares of common stock (post split) upon closing; $45,000 placed in an indemnity
escrow  account;  300,005  shares  of  common  stock  (post split) placed in the
indemnity  escrow  account,  2,000,035 shares of common stock (post split) to be
put  in  an  escrow  account as contingency based on certain earn-out and a note
payable  in  the  amount  of $315,000 due April 15, 2005 also subject to certain
earnout  provisions.  The  value of the common stock issued was determined based
on  the  price  of the Company's common stock in the recent private placement of
$0.30  per share (post split).  This value is more indicative of the fair market

value  of  the  stock  due to the stock being thinly traded and the shares being
issued in the acquisition have trading restrictions that are similar to those on
the  shares  sold  in  the  private  placement.  All contingent amounts from the
original agreement have subsequently been paid (both cash and stock).  Therefore
the  amounts  are  included in the purchase price as is required under FASB 141.
In  addition  to  the above amounts, the Company has included severance payments
totaling  $465,500.  Other  acquisition  costs  totaling  $148,668 were incurred
during  the  three  months ended June 30, 2004 and $115,506 were incurred during
the  three months ended September 30, 2004 for a total of $264,174 that has been
included  in  the  purchase  price.  Operations  from  April  1,  2004  are  the
operations  of  The Mayo Group.  As of April, 1, 2004, the Company has estimated
the  allocation  of  the  purchase  price  as  follows:
<TABLE>
<CAPTION>



Purchase price:
<S>                                  <C>
 Cash
    Originally paid . . . . . . . .  $        255,000
    Contingent. . . . . . . . . . .            45,000
    Note payable. . . . . . . . . .           315,000
  Stock at FMV
    Originally issued . . . . . . .           510,009
    Contingent. . . . . . . . . . .           690,012
  Expenses related to acquisition:
    Legal and accounting. . . . . .           264,174
    Severance . . . . . . . . . . .           465,500
                                     -----------------

  Total purchase price. . . . . . .  $      2,544,695
                                     -----------------
                            -11-

<PAGE>
  Allocated to:
    Accounts receivable . . . . . .  $        158,177
    Supplies. . . . . . . . . . . .           158,514
    Prepaids. . . . . . . . . . . .            30,788
    Deposits. . . . . . . . . . . .            27,355
    Property and equipment. . . . .            52,793
    Bank overdraft. . . . . . . . .           (21,067)
    Accounts payable. . . . . . . .          (391,944)
    Deferred revenue. . . . . . . .          (216,938)
                                     -----------------

  Net assets (liabilities). . . . .  $       (202,322)
                                     -----------------

  Net amount allocated to excess
     of purchase price. . . . . . .  $      2,747,017
                                     =================
</TABLE>




The Company is in the process of obtaining a formal valuation which will be done
within  the  time  allowed  in  accordance  with  FASB  141.

The  following  unaudited  pro  forma  financial  information  presents  the
consolidated  operations of the Company as if the acquisition had occurred as of
the  beginning  of  the periods presented.  This information is provided for the
illustrative  purposes  only, and is not necessarily indicative of the operating
results  that  would  have  occurred had the acquisition been consummated at the
beginning  of  the  periods  presented,  nor is it necessarily indicative of any
future  operating  results.  The  weighted  average shares outstanding have been
calculated to include the shares issued in the acquisition as if the acquisition
took  place  at  the  beginning  of  the  period  presented.
<TABLE>
<CAPTION>



                                                                 Three Months Ended    Three Months Ended
                                                                    Sept 30, 2004        Sept 30, 2003
<S>                                                              <C>                  <C>
Net revenues, as reported . . . . . . . . . . . . . . . . . . . .$           975,363  $                 -
Net revenues, pro forma . . . . . . . . . . . . . . . . . . . . .$           975,363  $         1,251,301
Net income (loss) from continuing operations, as reported . . . .$            88,115  $           (96,194)
Net income (loss) from continuing operations, pro forma . . . . .$            88,115  $          (216,482)
Income (loss) per share - continuing operations, basic, as
 reported . . . . . . . . . . . . . . . . . . . . . . . . . . . .$              0.00  $             (0.01)
Income (loss) per share - continuing operations, basic, pro forma$              0.00  $             (0.02)
Income (loss) per share - continuing operations, diluted, as
 reported . . . . . . . . . . . . . . . . . . . . . . . . . . . .$              0.00  $             (0.01)
Income (loss) per share - continuing operations, diluted,
 pro forma. . . . . . . . . . . . . . . . . . . . . . . . . . . .$              0.00  $             (0.02)
Weighted average shares outstanding - basic, as reported. . . . .         14,119,669            7,751,615
Weighted average shares outstanding - basic, proforma . . . . . .         14,119,669            9,981,436
Weighted average shares outstanding - diluted, as reported. . . .         14,388,769            7,751,615
Weighted average shares outstanding - diluted, proforma . . . . .         14,388,769            9,981,436
</TABLE>


<TABLE>
<CAPTION>



                                                                Nine Months Ended    Nine Months Ended
                                                                  Sept 30, 2004        Sept 30, 2003
<S>                                                             <C>                 <C>
Net revenues, as reported. . . . . . . . . . . . . . . . . . .  $        5,565,142  $                -
Net revenues, pro forma. . . . . . . . . . . . . . . . . . . .  $        6,175,024  $        3,536,069
Net income from continuing operations, as reported . . . . . .  $        1,152,097  $         (194,322)
Net income from continuing operations, pro forma . . . . . . .  $          364,939  $           48,618
Income per share - continuing operations, basic, as reported .  $             0.05  $            (0.03)
Income per share - continuing operations, basic,  pro forma. .  $             0.03  $             0.00
Income per share - continuing operations, diluted, as reported  $             0.05  $            (0.03)
Income per share - continuing operations, diluted,  pro forma.  $             0.03  $             0.00
Weighted average shares outstanding - basic, as reported . . .          12,230,113           5,996,019
Weighted average shares outstanding - basic, proforma. . . . .          13,558,603          11,751,685
Weighted average shares outstanding - diluted, as reported . .          12,499,212           5,996,019
Weighted average shares outstanding - diluted, proforma. . . .          13,692,331          11,751,685
</TABLE>

                                         -12-


10.     REVERSE  SPLIT

At  the  Company's  annual  shareholder  meeting  on May 12, 2004,  shareholders
approved a proposal to amend the Company's Articles of Incorporation effecting a
one-for-three  (1:3)  reverse  split of the Company's common stock and to reduce
the  number  of  shares  of  authorized  common stock from 100,000,000 shares to
33,333,333  shares.  After  the  reverse  split,  and  adjusting  for fractional
shares,  14,119,669  shares are issued and outstanding. All references to common
stock/shares  are  reflected  post  split.


11.     COMMITMENTS

On  July  22,  2004,  the  Company entered into a Severance Agreement and Mutual
Release  of All Claims with Alan Mayo, one of the three original founders of The
Mayo  Group.  Pursuant  to the agreement, the Company will arrange for a private
sale  of all the common stock Mr. Mayo received in the April 1, 2004 transaction
with the Company including the contingent shares released to him as part of this
agreement.  The  Company  agreed  to  pay  salary,  bonus,  and  contingent
consideration  amounts pursuant to an employment agreement, in increments.  Such
amounts  have  been  accounted for in the financial statements.  The Company has
made an accrual of $465,500 for the compensation due to Mr. Mayo pursuant to the
employment  agreement  and  has  included this amount as part of the cost of the
acquisition.  Included  in the acquisition was total cash contingency of $45,000
and  a  note  payable  in  the  amount  of  $315,000 that was also being held in
contingency.  Of  these  contingency  amounts,  Mr.  Mayo  was  owed $277,020 or
76.95%,  which was equivalent to his ownership percentage of The Mayo Group.  As
consideration  for  Mr.  Mayo  entering  into the Severance Agreement and Mutual
Release  of  All  Claims,  the  Company  and Mr. Mayo agreed that all contingent
payments (cash, stock and note) due and payable to Mr. Mayo would be released to
Mr. Mayo.  In doing so, the Company agreed to pay Mr. Mayo $138,510 at execution
of  the agreement, and pay the balance of $138,510 on April 1, 2005. The Company
pledged  a  portion  of the WorkStream shares it owns as collateral security for
the  performance  of  the  note.

On  September 14, 2004, the Company presented to the two other original founders
(owners)  of  The  Mayo  Group,  Mr.  Nickell  and  Mr.  Davis,  an Amendment to
Employment  Agreement  and  Modification  of  Merger  Agreement,  whereby  the
Contingent  Securities  representing  461,009  shares,  and  Contingent  Cash
Consideration  of  $82,979  due  and  payable  to  both  would be released/paid.


12.     SUBSEQUENT  EVENT


On November 4, 2004 the Company granted 187,500 options to employees to purchase
common  stock  at  an  exercise price of $1.60 per share, which was equal to the
market  price on the date of grant.  The options have graded vesting annually
over three years,
starting  November 2005.   The Company accounts for options granted to employees
under  APB  25.  If the Company accounted for the options under FASB 123 expense
totaling $296,713 would be recognized over the next three years of service.  The
fair  market  value  was  determined using the Black Scholes pricing model.  The
assumptions  used  to  calculate the fair market value are as follows: risk-free
interest rate of 1.25%; estimated volatility of 253.54%; dividend yield of 0.0%;
and  expected  life  of  the  options  of  four  years.

                                      -13-

<PAGE>
ITEM  2.     MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF FINANCIAL CONDITION AND
RESULTS  OF  OPERATIONS

With  the  exception  to  historical information, the statements set forth below
include  forward-looking  statements  within  the  meaning of Section 27A of the
Securities  Act  of 1933 and Section 21E of the Securities Exchange Act of 1934.
These  forward-looking  statements  include  statements  regarding  potential
strategic collaborations, future capital needs and funding requirements, product
development  plans,  and  market  assessments.  These  statements are subject to
risks  and  uncertainties  that  could cause actual results to differ materially
from  those  in  the  forward-looking statements.  These risks and uncertainties
include:

-     general  economic  and  business  conditions;
-     industry  trends;
-     our  overall  market  penetration  and  competition  from  providers  of
      alternative  products  and  services;
-     our  actual  funding  requirements;  and
-     availability,  terms  and  deployment  of  capital.


OVERVIEW

     In  May  2004,  the  Company  received  shareholder  approval to change the
Company  name  to  Auxilio,  Inc., from PeopleView, Inc. The new stock symbol is
AUXO.OB.

For  the  fiscal  year  ended  December  31, 2003, and including the period from
January  1,  to  March  31,  2004, Auxilio developed, marketed and supported web
based  assessment  and  reporting  tools  and  provided consulting services that
enable  companies  to  manage  their  Human  Capital  Management  (HCM) needs in
real-time.  Companies  ranging  in  size  from  50  person  firms to Fortune 500
companies  implemented  our  solutions  in order to have deep insight into their
human  capital  assets.

In  March,  2004,  the  Company  entered into an agreement with WorkStream, Inc.
whereby  the  Company  sold  to  WorkStream  the following: Accounts receivable,
certain  computer  equipment,  customer  list,  existing customer contracts, the
PeopleView name, and the technology and product offerings that had been recently
revised  and  improved,  including  ClimateSight(TM),  SkillSight(TM),
PerformanceSight(TM),  ComplianceSight(TM) and HCM TOOLS(TM).   Pursuant to this
transaction,  the  Company is focusing its efforts in providing outsourced image
management  services  to  healthcare  facilities.

In  April  2004,  one  of  the Company's subsidiaries, PPVW Acquisition Company,
completed  an  acquisition  of  Alan Mayo & Associates, dba The Mayo Group ("The
Mayo  Group").  Effective with the acquisition, PPVW Acquisition Company changed
its  name  to  The  Mayo  Group,  and  subsequently  changed the name to Auxilio
Solutions,  Inc.  ("ASI").  ASI  provides outsourced document image services for
healthcare  facilities.  Operations  from  April  1,  2004  will  include  the
operations of ASI.  An 8-K was filed with the Securities and Exchange Commission
(SEC)  on  April  16,  2004  reporting  this transaction.  The audited financial
statements  of  The  Mayo  Group  were  filed  on  September  27,  2004.

ASI  provides  integration strategies and outsourced services for document image
management  in  healthcare  facilities.  ASI helps hospitals and health
systems  reduce  expenses  and  create  manageable,  dependable  document  image
management  programs  by  managing  their  back-office processes. The process is
initiated  through a detailed proprietary TeqTrak(TM) analysis. TeqTrak(TM) is a
financial  analysis  that  is  performed  at  the  customer  premises  using  a
combination  of  proprietary  processes  and innovative web based technology for
data  collection  and  report generation. After TeqTrak(TM) and upon engagement,
ASI  capitates  the cost of the entire document image management process for the
customer  and  places  a  highly  trained  resident  team  on site to manage the
process.  ASI  is  focused  solely  on  the  healthcare  industry

     Where  appropriate,  references  to "Auxilio", the "Company," "we" or "our"
include  Auxilio,  Inc.,  e-Perception  Technologies, Inc., and PPVW Acquisition
Company/The  Mayo  Group,  Inc/Auxilio  Solutions,  Inc.


APPLICATION  OF  CRITICAL  ACCOUNTING  POLICIES


Our discussion and analysis of our financial condition and results of operations
are  based upon our financial statements, which have been prepared in accordance
with  accounting  principles generally accepted in the United States of America.
The  preparation of these financial statements requires us to make estimates and
judgments  that affect the reported amounts of assets, liabilities, revenues and
expenses,  and  related  disclosure  of contingent assets and liabilities. On an
on-going basis, we evaluate these estimates, including those related to customer
programs  and  incentives, product returns, bad debts, inventories, investments,
intangible  assets,  income  taxes,  contingencies  and  litigation. We base our
estimates  on  historical  experience  and on various other assumptions that are
believed to be
                                        -14-
<PAGE>

reasonable under the circumstances, the results of which form the
basis  for  making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these  estimates  under  different  assumptions  or  conditions.

We consider the following accounting policies to be both those most important to
the  portrayal  of  our  financial  condition  and  those  that require the most
subjective  judgment:

-     Revenue  recognition/deferred  revenue
-     Accounts  receivable  valuation  and  related  reserves
-     Valuation  of  fixed  assets
-     Accounting  for  income  taxes
-     Impairment  of  intangible  assets

Our  critical  accounting policies have changed since we filed our Annual Report
on  Form  10-KSB  on  April  14,  2004.  They  are  now  as  follows:

REVENUE  RECOGNITION:

Revenues  from  equipment  sales  transactions  are  earned upon equipment being
accepted  by  the customer.  For equipment that is to be placed at the customers
location  at  a  future date revenue is deferred until that equipment is placed.
Monthly  service  and  supply  revenue  is earned monthly during the term of the
contract, as services and supplies are provided monthly.  Overages as defined in
the  contract  are billed to customers monthly and are earned when the number of
images  in  any period exceeds the number allowed for in the contract.  Pursuant
to  historical  challenges  incurred  in  collecting  payments for overages, the
Company  creates  an allowance for doubtful accounts equal to any revenue earned
from  overages.

DEFERRED  REVENUE:

Deferred  revenue  is an estimate of revenue expected to be earned in the future
under  the  equipment contracts  for additional equipment (printers and faxes)
to  be  placed at the customer's location that is included in the original
contract  amount.  This additional equipment is identified by the Company at the
start  of  a  contract.

ACCOUNTS  RECEIVABLE:

The  Company  provides an allowance for doubtful accounts equal to the estimated


uncollectible amounts.  The Company's estimate is based on historical collection
experience  and a review of the current status of trade accounts receivable.  It
is reasonably possible that the Company's estimate of the allowance for doubtful
accounts  will  change.

PROPERTY  AND  EQUIPMENT:

Property  and  equipment  are carried at cost.  Depreciation of the property and
equipment  is  provided  using  the  straight line method based on the following
estimated  useful  life:

                                             Years
                                             -----
     Machinery  and  Equipment                 5
     Furniture  and  Fixture                   7
     Software                                  3

Expenditures for maintenance and repairs are charged to expense as incurred.

                                       -15-

<PAGE>

RESULTS  OF  OPERATIONS

FOR  THE  NINE  MONTH  PERIOD  ENDED  SEPTEMBER  30,  2004
----------------------------------------------------------


NET  REVENUE

Net  revenue  increased  $4,361,858 or 362 percent, to $5,565,142 in the current
nine-month period of 2004, as compared to the same period in 2003.  Revenues for
2003 and the first quarter of 2004 related to the disposed business are included
in  discontinued operations.  This increase was primarily due to the acquisition
of  The  Mayo  Group.  Approximately  100%  of the Company's net revenue for the
nine-month period of 2004 was derived from the sale and service support document
imaging  equipment,  and  0%  was derived from solutions related to its previous
business  operations,  Human  Capital  Management.

COST  OF  REVENUE

Cost  of  revenue  consists  of document imaging equipment, parts, and supplies.
Cost  of  revenue  increased by $2,217,752 to $2,912,942, or 52 percent of sales
for  the  current  nine-month  period, as compared to $695,190, or 57 percent of
sales  in  the prior nine-month period.  Cost of revenues for 2003 and the first
quarter  of  2004  related to the disposed business are included in discontinued
operations.  The  increase  in  cost  of  revenues  was  due  to the increase in
revenues  associated  with  service  and support for document imaging equipment.

RESEARCH  AND  DEVELOPMENT

Pursuant  to  the  WorkStream transaction, the Company no longer incurs research
and  development expenses. For the previous year and the first quarter of
2004,  research  and  development  expenses  consisted of personnel expenses and
associated  overhead  and are included in discontinued operations. The Company's
investment in research and development decreased $477,364 to $0, or 0 percent of
sales  for the current nine-month period, as compared to $477,364, or 40 percent
of  sales  in  the  prior  nine-month period. Costs incurred in the research and
development  of  new software products were expensed as incurred. Auxilio is not
involved  in  research  and  development  expenses as the Company has changed it
business  pursuant  to  the  acquisition  of  The  Mayo  Group.

SALES  AND  MARKETING

Sales  and  marketing  expenses  include  salaries  and  expenses  of  sales and
marketing  personnel,  travel and entertainment, and other selling and marketing
costs.  Sales  and marketing expenses decreased by $171,630 to $1,003,403, or 18
percent  of  sales for the current nine-month period, as compared to $1,175,033,
or  97  percent of sales in the prior nine-month period. Sales and marketing for
2003 and the first quarter of 2004 related to the disposed business are included
in  discontinued  operations.  This  decrease was primarily due to the change in
business  activity, as marketing related expenses for the business activities in
document  imaging  are  lower.

GENERAL  AND  ADMINISTRATIVE

General  and administrative expenses, which include personnel costs for finance,
administration,  information  systems,  and  general  management,  as  well  as
facilities expenses, professional fees, legal expenses, and other administrative
costs, decreased by $215,974 to $992,561, or 18 percent of sales for the current
nine-month  period,  as  compared  to $1,208,535, or 100 percent of sales in the
prior  nine-month  period.  Certain  of  general and administrative expenses for
2003  and  first  quarter of 2004 which are related to the disposed business are
included  in  discontinued  operations.  The decrease for the current nine-month
period  was  primarily  due  to  the  higher  general and administration related
expenses  incurred  in  the  2003  period.

OTHER  INCOME  (EXPENSE)

Other income and expense includes interest income and interest expense. Interest
income  is  primarily  derived  from  short-term interest-bearing securities and
money  market  accounts.  Interest  expense for the current nine-month period of
2004  was  $9,364  compared  to  $14,168 interest expense for the same period in
2003.  Interest  income for the nine-month period of 2004 was $5,732 compared to
$2,796  for the same period in 2003, primarily due to an increase in the average
balance  of  invested  cash  and  short-term  investments.

                                   -16-

LIQUIDITY  AND  CAPITAL  RESOURCES  -  NINE  MONTHS

At  September  30,  2004,  our cash and cash equivalents were equal to $644,982.
The  Company's principal cash requirements are for operating expenses, including
equipment,  supplies,  employee  costs,  capital expenditures and funding of the
operations.  The Company's primary sources of cash are from revenues and private
placements  of  the  Company's  common  stock.

During  the  current  nine-month  period of 2004, the Company generated $556,606
from  operating  activities,  as  compared  to  $1,918,689  used  for  operating
activities  for the same period in 2003.  The increase in cash generated use was
primarily due to the increase in revenue and related collections, as a result of
the  acquisition  of  The  Mayo  Group

On  April  29,  2002,  Avintaquin  Capital, LLC, ("Avintaquin"), an affiliate of
three  of the Company's shareholders, provided the Company with a bridge loan in
the  original principal amount of $60,000. The bridge loan is secured by certain
assets  of the Company and is included in line of credit and note payable on the
balance  sheet.  The  bridge  loan bears interest at a rate of 12% per annum. On
September  29, 2002, Avintaquin and the Company entered into an amendment to the
bridge  loan  and  extended  the maturity date of the loan until April 29, 2003.
On  April  29, 2003, Avintaquin and the Company entered into an amendment to the
bridge  loan and extended the maturity date of the loan until December 31, 2004.


In  connection with the original amendment, and, as additional consideration for
extending  the  bridge  loan, the Company issued a warrant to Avintaquin for the


purchase  of 60,000 shares on the Company's common stock at an exercise price of
$1.60  per share.  This warrant has a term of four years.  On December 31, 2002,
the  Company  converted  $10,000  of the principal balance outstanding to common
stock  of  the Company.  On July 16, 2004, the Company paid off the bridge loan.

In March 2004, the Company initiated a private placement of its common stock, at
$0.10  per  share ($0.30 post split). As of May 15, 2004, the Company closed the
offering,  selling 1,733,833 shares, with net proceeds of $520,150.  The Company
had  been  dependent  upon  the successful completion of this private placement.
Our  need  for  such  additional  financing  depends  in  part  on  our  future
performance,  which,  in  turn,  is  subject to general economic conditions, and
business  and  other  factors  beyond  our  control.


FOR  THE  THREE  MONTH  PERIOD  ENDED  SEPTEMBER  30,  2004
-----------------------------------------------------------

NET  REVENUE

Net  revenue  increased  $666,269  or  215  percent,  to $975,363 in the current
three-month  period  of  2004, as compared to the same period in 2003.  Revenues
for  2003  related  to  the  disposed  business  are  included  in  discontinued
operations.  This  increase  was  primarily  due  to the acquisition of The Mayo
Group.  Approximately  100%  of  the  Company's  net revenue for the three-month
period  of  2004  was derived from the sale and service support document imaging
equipment,  and  0%  was derived from solutions related to its previous business
operations,  Human  Capital  Management.


COST  OF  REVENUE

Cost  of  revenue  consists  of document imaging equipment, parts, and supplies.
Cost  of  revenue  decreased by $114,395 to $178,585, or 18 percent of sales for
the  current three-month period, as compared to $292,980, or 94 percent of sales
in  the  prior  three-month  period.  Cost  of  revenues for 2003 related to the
disposed business are included in discontinued operations.  The decrease in cost
of  revenues  was  primarily  due  to  the  decrease in expenses associated with
service  and  support  for  document  imaging  equipment.

RESEARCH  AND  DEVELOPMENT

Pursuant  to  the  WorkStream transaction, the company no longer incurs research
and development expenses. For the previous year, research and development
expenses  consisted of personnel expenses and associated overhead. The Company's
investment in research and development decreased $208,691 to $0, or 0 percent of
sales,  for  the  current  three-month  period,  as  compared to $208,691, or 68
percent  of sales in the prior three-month period. Research and development cost
for  2003  related  to  the  disposed  business  are  included  in  discontinued
operations.  Costs  incurred  in  the  research  and development of new software
products  were  expensed  as incurred. Auxilio does not expect to incur research
and  development  expenses  in the future due to the change in business activity
pursuant  to  the  acquisition  of  The  Mayo  Group.

                                     -17-
<PAGE>
SALES  AND  MARKETING

Sales  and  marketing  expenses  include  salaries  and  expenses  of  sales and
marketing  personnel,  travel and entertainment, and other selling and marketing
costs.  Sales  and  marketing  expenses  decreased by $28,164 to $357,805, or 37
percent of sales for the current three-month period, as compared to $385,969, or
124  percent  of  sales  in  the  prior  three-month period. Sales and marketing
expenses  for 2003 related to the disposed business are included in discontinued
operations.  This decrease was primarily due to the change in business activity,


as  marketing  related  expenses for the business activities in document imaging
are  lower.

GENERAL  AND  ADMINISTRATIVE

General  and administrative expenses, which include personnel costs for finance,
administration,  information  systems,  and  general  management,  as  well  as
facilities expenses, professional fees, legal expenses, and other administrative
costs,  decreased  by $16,975 to $353,524 for the current three-month period, as
compared  to  $370,499  for  the  same  period  in 2003.  Certain of general and
administrative  expenses for 2003 which are related to the disposed business are
included  in  discontinued  operations.  The  decrease  was primarily due to the
change  in  business  related  to  the  acquisition  of  The  Mayo  Group.


OTHER  INCOME  (EXPENSE)

Other income and expense includes interest income and interest expense. Interest
income  is  primarily  derived  from  short-term interest-bearing securities and
money  market  accounts.  Interest expense for the current three-month period of
2004  was  $931 compared to $1,848 interest expense for the same period in 2003.
Interest income for the three-month period of 2004 was $3,597 compared to $2,093
for the same period in 2003, primarily due to an increase in the average balance
of  invested  cash  and  short-term  investments.


ITEM  3.     CONTROLS  AND  PROCEDURES

(a)  Under  the  supervision  and  with  the  participation  of  our management,
including  our  principal  executive officer and principal financial officer, we
conducted  an evaluation of our disclosure controls and procedures, as such term


is defined under Rule 13a-14(c) promulgated under the Securities Exchange Act of
1934,  as  amended  (the "Exchange Act"), as of the end of the period covered by
this  report.  Based  on  their  evaluation, our principal executive officer and
principal  financial  officer  concluded  that  our  disclosure  controls  and
procedures  are  effective.

(b)  There  have  been no significant changes (including corrective actions with
regard  to  significant  deficiencies  or  material  weaknesses) in our internal
controls  or  in  other  factors  that could significantly affect these controls
subsequent  to  the  date  of  the evaluation referenced in paragraph (a) above.


PART  II  -  OTHER  INFORMATION
-------------------------------


ITEM  1.     LEGAL  PROCEDURES

None.

ITEM  2.     CHANGES  IN  SECURITIES  AND  USE  OF  PROCEEDS

None.

ITEM  3.     DEFAULTS  UPON  SENIOR  SECURITIES

None.

ITEM  4.     SUBMISSION  OF  MATTERS  TO  VOTE  OF  SECURITY  HOLDERS

None.
                                      -18-

ITEM  5.     OTHER  INFORMATION

None

ITEM  6.     EXHIBITS  AND  REPORTS  ON  FORM  8-K

(a)     Exhibits
        --------

31.1     Certification  of  CEO pursuant to Securities Exchange Act rules 13a-15
         and  15d-15(c)  as  adopted pursuant to section 302 of the Sarbanes-
         Oxley act of 2002.

31.2     Certification  of  CFO pursuant to Securities Exchange Act rules 13a-15
         and  15d-15(c)  as  adopted pursuant to section 302 of the Sarbanes-
         Oxley act of 2002.

32.1     Certification  of  CEO  pursuant  to 18 U.S.C. section 1350, as adopted
         pursuant  to  section  906 of  the  Sarbanes-Oxley  act  of  2002.

32.2     Certification  of  CFO  pursuant  to 18 U.S.C. section 1350, as adopted
         pursuant  to  section  906  of  the  Sarbanes-Oxley  act  of  2002.

(b)     Reports  on  Form  8-K
        ----------------------
On August 3, 2004, the Company filed its current report on Form 8-K/A amending
its Form 8-K filed on April 2, 2004 discussing the sale of its employee climate
and skills survey assets to Workstream, Inc.

On September 27, 2004, the Company filed its current report on Form 8-K/A
Amending its Form 8-K filed on April 16, 2004, disclosing the financial
information required in connection its acquisition of the Mayo Group.


                                     -19-
<PAGE>
SIGNATURES


Pursuant  to  the  requirements  of  the  Securities  Exchange  Act of 1934, the
Registrant  has  duly  caused  this  report  to  be  signed on its behalf by the
undersigned  thereunto  duly  authorized.


                                          AUXILIO,  INC.


Date:  November 16,  2004               By: /s/   Joseph  Flynn
                                          -------------------------------
                                          Joseph  Flynn
                                          Chief  Executive  Officer
                                          (Principal  Executive  Officer)


                                           /s/   James  P.  Stapleton
                                           -------------------------------
                                           James  P.  Stapleton
                                           Chief  Financial  Officer

                                           (Principal  Financial  Officer)


                                      20