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 June 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  September 17,  2004  was  14,119,669.

<PAGE>
                                  AUXILIO, INC.

                                   FORM 10-QSB

                                TABLE OF CONTENTS

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

Item 1.  Financial Statements (unaudited)                                Page
                                                                         ----
  Consolidated Balance Sheet                                              3
   as of June  30, 2004

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

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

Consolidated Statement of Stockholders' Equity                            6
   for the Six Months Ended June  30, 2004

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

  Notes to Condensed Consolidated Financial Statements                    9-13

Item 2.  Managements Discussion and Analysis of Financial                14-18
          Condition and Results of Operations

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 Reports 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



                                JUNE 30, 2004 - UNAUDITED
                                         ASSETS
<S>                                                                         <C>
CURRENT ASSETS:
   Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $ 2,115,667
   Accounts and other receivable, net. . . . . . . . . . . . . . . . . . .       65,575
   Supplies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      205,135
   Prepaid and other current assets. . . . . . . . . . . . . . . . . . . .      123,827
   Deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       27,355
   Investment in marketable securities . . . . . . . . . . . . . . . . . .      777,229
                                                                            -----------
          Total current assets . . . . . . . . . . . . . . . . . . . . . .    3,314,788

PROPERTY AND EQUIPMENT, net of accumulated
 depreciation and amortization . . . . . . . . . . . . . . . . . . . . . .      125,864
EXCESS OF PURCHASE PRICE OVER ASSETS ACQUIRED. . . . . . . . . . . . . . .    2,631,511
                                                                            -----------
                                                                            $ 6,072,163
                                                                            ===========
                        LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
   Line of credit and note payable . . . . . . . . . . . . . . . . . . . .  $   415,400
   Current portion of long-term debt . . . . . . . . . . . . . . . . . . .       19,235
   Accounts payable and accrued expenses . . . . . . . . . . . . . . . . .    1,573,626
   Lease buy-out provision. . . . . . . . . . . . . . . . . . . . . . . .       600,000
   Deferred revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . .      552,828
                                                                            -----------

          Total current liabilities. . . . . . . . . . . . . . . . . . . .    3,161,089

STOCKHOLDERS' EQUITY:
   Common stock, par value at $0.001,33,000,000 shares
    authorized, 14,119,669 shares issued and outstanding . . . . . . . . .       14,121
   Additional paid-in capital. . . . . . . . . . . . . . . . . . . . . . .   11,594,179
   Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . .   (8,765,476)
   Comprehensive income. . . . . . . . . . . . . . . . . . . . . . . . . .       68,250
                                                                            -----------
          Total stockholders' equity . . . . . . . . . . . . . . . . . . .    2,911,074
                                                                            -----------
                                                                            $ 6,072,163
                                                                            ===========
      The accompanying notes are an integral part of these financial statements.
</TABLE>
                                        3
<PAGE>

<TABLE>
<CAPTION>

                                AUXILIO, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)



                                           THREE MONTHS                SIX MONTHS
                                           ENDED JUNE 30              ENDED JUNE 30
                                      ------------------------  --------------------------

                                         2004          2003          2004          2003
                                         ----          ----          ----          ----


<S>                                   <C>           <C>          <C>           <C>
REVENUES . . . . . . . . . . . . . .  $ 4,589,779   $        -   $ 4,589,779   $          -

COST OF REVENUES . . . . . . . . . .    3,079,276            -     3,079,276              -
                                      -----------   ----------   -----------   ------------
GROSS PROFIT . . . . . . . . . . . .    1,510,503            -     1,510,503              -

OPERATING EXPENSES:
   Sales and marketing . . . . . . .      297,352            -       297,352              -
   General and administrative
      expenses . . . . . . . . . . .      592,293       44,515       642,364         83,803
                                      -----------   ----------   -----------   ------------
INCOME (LOSS) FROM OPERATIONS. . . .      620,858      (44,515)      570,787        (83,803)
                                      -----------   ----------   -----------   ------------
OTHER INCOME (EXPENSE):
   Interest expense. . . . . . . . .       (6,501)      (2,766)       (8,433)       (12,320)
   Interest income . . . . . . . . .        1,689          434         2,136            703
   Gain (loss) on disposal of fixed
      assets . . . . . . . . . . . .            -       (2,399)            -         (3,518)
                                      -----------   ----------   -----------   ------------
      Total other income (expense) .       (4,812)      (4,731)       (6,297)       (15,135)
                                      -----------   ----------   -----------   ------------
INCOME (LOSS) BEFORE PROVISION
     FOR INCOME TAXES. . . . . . . .      616,046      (49,246)      564,490        (98,938)

PROVISION FOR INCOME TAXES . . . . .            -            -        (2,400)          (800)
                                      -----------   ----------   -----------   ------------
NET INCOME (LOSS) FROM
  CONTINUING OPERATIONS. . . . . . .      616,046      (49,246)      562,090        (99,738)


INCOME (LOSS) FROM DISCONTINUED
  OPERATIONS, (INCLUDING GAIN (LOSS)
  ON DISPOSAL OF ($93,750) AND
  $674,942, FOR THE THREE AND SIX
  MONTHS ENDED JUNE 30, 2004,
  RESPECTIVELY) NET OF TAX
  BENEFIT. . . . . . . . . . . . . .      (62,365)    (673,267)      540,895     (1,161,606)
                                      -----------   ----------   -----------   ------------
NET INCOME (LOSS). . . . . . . . . .  $   553,681    ($722,513)  $ 1,102,985    ($1,261,344)
                                      ===========   ==========   ===========   ============
NET INCOME (LOSS) PER
   SHARE - BASIC:
  INCOME (LOSS) PER SHARE-
    CONTINUING OPERATIONS. . . . . .  $      0.04       ($0.01)  $      0.05         ($0.02)
  INCOME (LOSS) PER SHARE-
    DISCONTINUED OPERATIONS. . . . .       ($0.00)      ($0.12)  $      0.05         ($0.23)
                                      -----------   ----------   -----------   ------------
NET INCOME (LOSS) PER SHARE
- BASIC. . . . . . . . . . . . . . .  $      0.04       ($0.13)  $      0.10         ($0.25)
                                      -----------   ----------   -----------   ------------
NET INCOME (LOSS) PER SHARE
 - DILUTED:
  INCOME (LOSS) PER SHARE-
    CONTINUING OPERATIONS. . . . . .  $      0.04       ($0.01)  $      0.05         ($0.02)
  INCOME (LOSS) PER SHARE-
    DISCONTINUED OPERATIONS. . . . .       ($0.00)      ($0.12)  $      0.05         ($0.23)
                                      -----------   ----------   -----------   ------------
NET INCOME (LOSS) PER SHARE
 - DILUTED . . . . . . . . . . . . .  $      0.04       ($0.13)  $      0.10         ($0.25)
                                      -----------   ----------   -----------   ------------
NUMBER OF WEIGHTED AVERAGE
    SHARES -
    BASIC. . . . . . . . . . . . . .   13,986,866    5,481,318    11,275,045      5,103,671
                                      -----------   ----------   -----------   ------------
    DILUTED. . . . . . . . . . . . .   14,110,059    5,481,318    11,398,239      5,103,671
                                      -----------   ----------   -----------   ------------
</TABLE>
     The accompanying notes are an integral part of these financial statements.

                                       4
<PAGE>

<TABLE>
<CAPTION>
                          AUXILIO, INC. AND SUBSIDIARY

           CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - UNAUDITED

                                  THREE MONTHS             SIX MONTHS
                                  ENDED JUNE 30           ENDED JUNE 30
                              ---------------------  ------------------------
                                2004        2003        2004         2003
                              ---------  ----------  ----------  ------------

<S>                           <C>        <C>         <C>         <C>
NET INCOME (LOSS). . . . . .  $553,681   ($722,513)  $1,102,985  ($1,261,344)

UNRECOGNIZED GAIN (LOSS) ON
  MARKETABLE SECURITIES. . .   (30,750)          -       68,250            -
                              ---------  ----------  ----------  ------------
COMPREHENSIVE INCOME (LOSS).  $522,931   ($722,513)  $1,171,235  ($1,261,344)
                              =========  ==========  ==========  ============
</TABLE>
    The accompanying notes are an integral part of these financial statements.

                                       5
<PAGE>

<TABLE>
<CAPTION>
                                     AUXILIO, INC. AND SUBSIDIARIES

                            CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                                 FOR THE SIX MONTHS ENDED JUNE 30, 2004

                                                        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            -

Unrecognized gain on
   marketable securities. . . .           -         -             -            -    68,250      68,250

Net income (unaudited). . . . .           -         -             -    1,102,985         -   1,102,985
                                 ----------  --------   -----------  -----------   -------  ----------
Balance at June 30, 2004
  (unaudited) . . . . . . . . .  14,119,669  $ 14,121   $11,594,179  $(8,765,476)  $68,250  $2,911,074
                                 ==========  ========   ===========  ===========   =======  ==========
</TABLE>
     The accompanying notes are an integral part of these financial statements.
                                                   6
<PAGE>



                         AUXILIO, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED

                INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

<TABLE>
<CAPTION>
                                                               SIX MONTHS ENDED JUNE 30,
                                                               -------------------------
                                                                  2004          2003
                                                               -----------  ------------
<S>                                                            <C>          <C>
CASH FLOWS USED FOR OPERATING
Net income (loss) . . . . . . . . . . . . . . . . . . . . . .  $1,102,985   $(1,261,344)

ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
USED FOR OPERATING ACTIVITIES:
    Depreciation and amortization . . . . . . . . . . . . . .      13,141       104,007
    Loss on disposition of property and equipment . . . . . .           -         3,518
    Gain on sale of certain assets. . . . . . . . . . . . . .    (674,942)            -
    Interest expense. . . . . . . . . . . . . . . . . . . . .       3,789         7,641
    Expense for repricing of stock in private placement . . .           -        10,000
CHANGES IN ASSETS AND LIABILITIES:
   (INCREASE) DECREASE IN ASSETS
    Accounts receivable . . . . . . . . . . . . . . . . . . .     (13,474)      (24,401)
    Supplies. . . . . . . . . . . . . . . . . . . . . . . . .     (46,621)            -
    Prepaid and other current assets. . . . . . . . . . . . .     (27,223)       37,764
    Other assets. . . . . . . . . . . . . . . . . . . . . . .           -        (4,988)
 INCREASE (DECREASE) IN LIABILITIES
    Accounts payable and accrued expenses . . . . . . . . . .     294,874        31,073
    Lease buy-out provision . . . . . . . . . . . . . . . . .     600,000             -
    Deferred revenue. . . . . . . . . . . . . . . . . . . . .     335,890        96,573

                                                               -----------  ------------
Net cash provided by (used for) operating activities. . . . .   1,588,419    (1,000,157)
                                                               -----------  ------------

CASH FLOWS PROVIDED BY (USED FOR) INVESTING ACTIVITIES:
    Acquisition of fixed assets and computer software . . . .     (34,305)      (25,499)
    Payment for purchase of Mayo Group, net of cash acquired.    (435,107)            -
    Proceeds from sale of certain assets. . . . . . . . . . .     250,000             -
    Proceeds from sale of property and equipment. . . . . . .           -           600
                                                               -----------  ------------
Net cash provided by (used for) investing activities. . . . .    (219,412)      (24,899)
                                                               -----------  ------------

CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
   Proceeds from notes payables . . . . . . . . . . . . . . .         112
   Payments on notes payables   . . . . . . . . . . . . . . .           -       (15,359)
   Proceeds from issuance of common stock . . . . . . . . . .     520,150     1,008,338
                                                               -----------  ------------
Net cash provided by financing activities . . . . . . . . . .     520,262       992,979
                                                               -----------  ------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS. . . . .   1,889,269       (32,077)
CASH AND CASH EQUIVALENTS, beginning of year. . . . . . . . .     226,398       320,364
                                                               ----------   -----------
CASH AND CASH EQUIVALENTS, end of year. . . . . . . . . . . .  $2,115,667   $   288,287
                                                               ==========   ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
    Interest paid . . . . . . . . . . . . . . . . . . . . . .  $    8,587   $     4,735
                                                               ===========  ============
    Income tax paid . . . . . . . . . . . . . . . . . . . . .  $      800   $       800
                                                               ===========  ============

SUPPLEMENTAL DISCLOSURE OF NON CASH OPERATING AND FINANCING ACTIVITIES

                                       7
<PAGE>


    Increase in line of credit from accrued interest payable.  $        -   $     3,410
                                                               ==========   ===========
    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   $         -
                                                               ==========   ===========

</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                         8
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   SIX MONTHS ENDED JUNE 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 $1,102,985 (unaudited) through June 30, 2004,
it  has  reported a loss for its year ended December 31, 2003 of $3,405,020, and
has  an  accumulated  deficit  of  $8,765,476  (unaudited)  since  inception.

Management  has taken or plans to take 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 5.)

The accompanying financial statements do not include any adjustments relative to
the  recoverability  and classification of assets carrying amounts or the amount
and  classification  of  liabilities  that might result from the outcome of this
uncertainty.

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

OPTIONS/WARRANTS

During  the  six  month  period ended June 30, 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
vest  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.

No  proforma  disclosure is being provided as there is no current expense to the
statements  for  the  quarter  ended  June  30,  2004.

                                      9
<PAGE>

During  the  six  month  period ended June 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.   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  is  immaterial  to  the  statements.


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 478,560 and 920,056 equity instruments at
June  30,  2004  and  2003.  These common stock equivalents were included in the
computation  of diluted EPS for the six months ended June 30, 2004, but were not
included  in  the  computation of diluted EPS for the six months ended March 31,
2003  because the exercise prices of those options were 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.     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 it closed in
May  2004.  As  of May 15, 2004, 1,733,833 shares (post split) had been sold for
net  proceeds  of  $520,150.


5.     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.

                                        10

<PAGE>

6.     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. See Note 4. 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.


7.     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 financial and business processes for image
management in healthcare.  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  provisionsThe 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 excess of purchase price over assets acquired as is
required  under  FASB  141.  In  addition  to the above amounts, the Company has
included  severance  payments  totaling  $465,500  and  other  acquisition costs
totaling $148,668 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>
<S>                                  <C>
Purchase price:
  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. . . . . .           148,668
    Severance . . . . . . . . . . .           465,500
                                     -----------------

  Total purchase price. . . . . . .  $      2,429,189
                                     -----------------

  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. . . . . . .  $      2,631,511
                                     =================
</TABLE>
                                     11
<PAGE>

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    Three  Months
                                                                    Ended            Ended
                                                                June 30, 2004    June 30, 2003
<S>                                                             <C>             <C>
Net revenues, as reported. . . . . . . . . . . . . . . . . . .  $    4,589,779  $            -
Net revenues, pro forma. . . . . . . . . . . . . . . . . . . .  $    4,589,779  $      869,050
Net income from continuing operations, as reported . . . . . .  $      616,046  $      (49,246)
Net income from continuing operations, pro forma . . . . . . .  $      616,046  $     (205,123)
Income per share - continuing operations, basic, as reported .  $         0.04  $        (0.01)
Income per share - continuing operations, basic,  pro forma. .  $         0.04  $        (0.02)
Income per share - continuing operations, diluted, as reported  $         0.04  $        (0.01)
Income per share - continuing operations, diluted,  pro forma.  $         0.04  $        (0.02)
Weighted average shares outstanding - basic, as reported . . .      13,986,866       5,481,318
Weighted average shares outstanding - basic, proforma. . . . .      14,030,822       9,481,388
Weighted average shares outstanding - diluted, as reported . .      14,110,059       5,481,318
Weighted average shares outstanding - diluted, proforma. . . .      14,154,016       9,481,388


                                                                  Six Months       Six Months
                                                                     Ended            Ended
                                                                 June 30, 2004    June 30, 2003

Net revenues, as reported. . . . . . . . . . . . . . . . . . .  $    4,589,779  $            -
Net revenues, pro forma. . . . . . . . . . . . . . . . . . . .  $    5,199,661  $    2,284,767
Net income from continuing operations, as reported . . . . . .  $      562,090  $      (99,738)
Net income from continuing operations, pro forma . . . . . . .  $      288,511  $      267,501
Income per share - continuing operations, basic, as reported .  $         0.05  $        (0.02)
Income per share - continuing operations, basic,  pro forma. .  $         0.02  $         0.03
Income per share - continuing operations, diluted, as reported  $         0.05  $        (0.02)
Income per share - continuing operations, diluted,  pro forma.  $         0.02  $         0.03
Weighted average shares outstanding - basic, as reported . . .      11,275,045       5,103,671
Weighted average shares outstanding - basic, proforma. . . . .      13,275,080       9,481,388
Weighted average shares outstanding - diluted, as reported . .      11,398,239       5,103,671
Weighted average shares outstanding - diluted, proforma. . . .      13,398,274       9,481,388
</TABLE>




8.     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.

                                        12
<PAGE>

9.     SUBSEQUENT  EVENT

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 June 30, 2004 financial statements.  The
Company  has  made  an  accrual of $465,000 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 at June 30, 2004.  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  at June 30, 2004.  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.

                                       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.
Effective with the acquisition, PPVW Acquisition Company changed its name to The
Mayo  Group,  and  subsequently  changed  the  name  to  Auxilio Solutions, Inc.
("Auxilio").  Auxilio  provides  outsourced financial and business processes for
Image  Management  in  the healthcare sector. Operations from April 1, 2004 will
include  the  operations  of  Auxilio.  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 will be filed upon completion.

Auxilio  provides  integration  strategies  and  outsourced  services  for Image
Management  in healthcare. The company helps hospitals and health systems reduce
expenses  and  create manageable, dependable image management infrastructures 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, the company capitates the
cost of the entire Image Management process for the customer and places a highly
trained  resident  team  on  site  to manage the process. The company 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 to for additional equipment (printers and faxes)
to  be  placed at the customer's location that has been included in the original
contract  amount.  This additional equipment is identified by the Company at the
start  of a contract based on the initial HUIA (see Note 1 - Business Activity).

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  SIX  MONTH  PERIOD  ENDED  JUNE  30,  2004
----------------------------------------------------


NET  REVENUE

Net  revenue  increased  $3,695,589 or 413 percent, to $4,589,779 in the current
six-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
six-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 $2,677,066 to $3,079,276, or 66 percent of sales
for  the  current  six-month  period,  as compared to $402,210, or 45 percent of
sales  in  the  prior six-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 primarily 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 period 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 $268,673 to $0, or 0 percent of
sales  for  the current six-month period, as compared to $268,673, or 30 percent
of  sales  in  the  prior  six-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 $491,712 to $297,352, or 6
percent  of  sales for the current six month period, as compared to $789,064, or
88  percent of sales in the prior six-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 $195,672 to $642,364, or 14 percent of sales for the current
six  month  period, as compared to $838,036, or 94 percent of sales in the prior
six-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 six 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 six-month period of
2004  was  $8,433  compared  to  $12,320 interest expense for the same period in
2003.  Interest  income  for the six-month period of 2004 was $2,136 compared to
$703  for  the  same period in 2003, primarily due to an increase in the average
balance  of  invested  cash  and  short-term  investments.

                                      16
<PAGE>


LIQUIDITY  AND  CAPITAL  RESOURCES  -  SIX  MONTHS

At  June  30, 2004, our cash and cash equivalents were equal to $2,115,667.  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  six-month period of 2004, the Company generated $1,588,419
for  operating  activities,  as  compared  to  $1,000,157  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  Alan  Mayo  &  Associates,  Inc.

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.  As  of  June  30, 2004, the outstanding balance on the
bridge  loan was $63,822 including principal and interest. 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
has been dependent upon the successful completion of this private placement. The
Company  will  be  dependent  upon  the successful completion of other financing
activities, in order to operate its business over the next 12 months.  Given the
lack  of the Company's current cash position, such external sources of financing
will  be  critical  to  the  Company's  future  operations.  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.  There  can  be  no assurance that we would be able to obtain such
financing,  or  that  any  financing  would  result  in  a level of net proceeds
required.


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

NET  REVENUE

Net  revenue  increased  $4,048,677 or 748 percent, to $4,589,779 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 it's 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 $2,867,584 to $3,079,276, or 66 percent of sales
for  the  current  three-month period, as compared to $211,692, or 45 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 increase in cost
of  revenues  was  primarily  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 period, research and development
expenses  consisted of personnel expenses and associated overhead. The Company's
investment in research and development decreased $163,934 to $0, or 0 percent of
sales for the current three-month period, as compared to $163,934, or 30 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 $174,140 to $297,352, or 6
percent of sales for the current three-month period, as compared to $471,492, or
87  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,
were  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,  increased by $147,143 to $592,293 for the current three-month period, as
compared  to  $445,150  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  increase  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 $6,501 compared to $2,766 interest expense for the same period in 2003.
Interest  income  for the three-month period of 2004 was $1,689 compared to $434
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

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 aggregate purchase price was $1,815,022.  The purchase price with respect to
the common shares issued component was  as  follows:  1,700,030 shares of common
stock issued at closing; 300,005 shares of common  stock  placed in an indemnity
escrow  account,  and  2,000,035  shares  of  common stock to be put n an escrow
account  as  contingency  based  on  certain  earn-out provisions.  The value of
the common stock issued was $0.10 and was determined  based on the price of  the
Company's  common  stock in the recent private  placement.  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  restriction
that are similar to those on the shares sold  in  the  private placement.  Stock
was  issued  to a total of three  persons and was exempt from registration under
Section  4(2) of the  Securities Act of 1933 since it was an isolated  placement
and not a part of any public offering.


ITEM  3.     DEFAULTS  UPON  SENIOR  SECURITIES

None.

ITEM  4.     SUBMISSION  OF  MATTERS  TO  VOTE  OF  SECURITY  HOLDERS

The  Company's  Annual  Meeting of Stockholders was held on May 12, 2004. At the
Annual Meeting, the following directors were elected to serve as directors for a
one-year  term  and until their respective successors are elected and qualified.

                                        18
<PAGE>

Director                         Votes  For
--------                         ----------
Joseph  Flynn                    15,853,740
Ray  Gerrity                     15,853,740
Joe  DiDonato                    15,853,740
Robert  Miller                   15,853,740
Michael  Vanderhoof              15,853,740

In  addition,  the  stockholders  approved  the  following  proposals:



Approval  of  an  amendment to the Company's Articles of Incorporation to change
the  name  of  the  Company  to  Auxilio,  Inc.:

FOR               15,853,740
AGAINST                    0
ABSTAIN               50,000

Approval  of an amendment to 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:

FOR               15,803,740
AGAINST              100,000
ABSTAIN                    0

Approve  the  Company's  2004  Stock  Incentive  Plan:

FOR               15,507,765
AGAINST              218,750
ABSTAIN                    0

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
     A  Current  Report  on  Form  8-K  dated August 3, 2004, was filed with the
     Securities and Exchange Commission reporting the Addendum to the Workstream
     transaction.

                                         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:  September  17,  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)


                                      19