| [X]                  | Quarterly      Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of      1934  |
|----------------------|----------------------------------------------------------------------------------------------------|
|                 |                                                                                               |
|                 | For      the quarterly period ended March 31, 2008                                                 |
|                 | OR                                                                                                 |
| [   ] | Transition      Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of      1934 |
|                 |                                                                                               |

| DELAWARE                                      | 75-2626358            |
|-----------------------------------------------|-----------------------|
| (State      or other jurisdiction             | (I.R.S.      Employer |
| Of      incorporation or organization)        | Identification        |
|                                          | No.)                  |
|                                          |                  |
| 10226      SAN PEDRO AVENUE, SUITE 200        |                  |
| SAN      ANTONIO, TEXAS                       | 78216                 |
| (Address      of principal executive offices) | (Zip      Code)       |

|                         |   |                   |   |                       |   |                               |
|------------------------------|--------|------------------------|--------|----------------------------|--------|------------------------------------|
| Large      accelerated filer |   | Accelerated      filer |   | Non-accelerated      filer |   | Smaller      reporting company [X] |
|                         |   |                   |   |                       |   |                               |

----

----

----

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

|                                                                                                                                                                                                                                                                                 |   | March      31,2008 |   | December      31, 2007 |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|--------|------------------------|
| ASSETS                                                                                                                                                                                                                                                                               |   |               |   |                   |
| Current      Assets:                                                                                                                                                                                                                                                                 |   |               |   |                   |
| Cash      and cash equivalents                                                                                                                                                                                                                                                       | $      | 2,226              | $      | 1,374                  |
| Restricted      cash                                                                                                                                                                                                                                                                 |   | 442                |   | 455                    |
| Trade      accounts receivable, net                                                                                                                                                                                                                                                  |   | 1,489              |   | 1,914                  |
| Inventories                                                                                                                                                                                                                                                                          |   | 488                |   | 318                    |
| Prepaid      expenses and other current assets                                                                                                                                                                                                                                       |   | 490                |   | 247                    |
| Note      receivable – related party                                                                                                                                                                                                                                           |   | 986                |   | 986                    |
| Total      current assets                                                                                                                                                                                                                                                            |   | 6,121              |   | 5,294                  |
| Property      and Equipment, net                                                                                                                                                                                                                                                     |   | 8,366              |   | 8,382                  |
| Other      Assets:                                                                                                                                                                                                                                                                   |   |               |   |                   |
| Goodwill                                                                                                                                                                                                                                                                             |   | 7,971              |   | 7,971                  |
| Other      intangible assets                                                                                                                                                                                                                                                         |   | 1,144              |   | 1,260                  |
| Other      assets                                                                                                                                                                                                                                                                    |   | 579                |   | 608                    |
| Total      assets                                                                                                                                                                                                                                                                    | $      | 24,181             | $      | 23,515                 |
|                                                                                                                                                                                                                                                                                 |   |               |   |                   |
| LIABILITIES      AND STOCKHOLDERS’ EQUITY                                                                                                                                                                                                                                      |   |               |   |                   |
| Current      Liabilities:                                                                                                                                                                                                                                                            |   |               |   |                   |
| Bank      line of credit                                                                                                                                                                                                                                                             | $      | 370                | $      | 355                    |
| Accounts      payable                                                                                                                                                                                                                                                                |   | 1,312              |   | 879                    |
| Accounts      payable – contractors                                                                                                                                                                                                                                            |   | 2,841              |   | 1,472                  |
| Accrued      expenses                                                                                                                                                                                                                                                                |   | 713                |   | 736                    |
| Accrued      compensation                                                                                                                                                                                                                                                            |   | 421                |   | 564                    |
| Current      maturities of long-term debt                                                                                                                                                                                                                                            |   | 20                 |   | 32                     |
| Other      current liabilities                                                                                                                                                                                                                                                       |   | 510                |   | 440                    |
| Deferred      revenue                                                                                                                                                                                                                                                                |   | 421                |   | 408                    |
| Total      current liabilities                                                                                                                                                                                                                                                       |   | 6,608              |   | 4,886                  |
| Long-Term      Liabilities                                                                                                                                                                                                                                                           |   |               |   |                   |
| Note      payable                                                                                                                                                                                                                                                                    |   | 5,500              |   | 5,500                  |
| Other      long-term liabilities                                                                                                                                                                                                                                                     |   | 206                |   | 224                    |
|                                                                                                                                                                                                                                                                                 |   |               |   |                   |
| Total      Liabilities                                                                                                                                                                                                                                                               |   | 12,314             |   | 10,610                 |
| Commitments      and Contingencies                                                                                                                                                                                                                                                   |   |               |   |                   |
| Stockholders’      Equity:                                                                                                                                                                                                                                                     |   |               |   |                   |
| Preferred      stock, $5 par value, issuable in series; 2,000,000 shares authorized;      Series A, LIBOR+2% cumulative convertible; 195,351 shares authorized and      issued; including unpaid dividends of $53 and $45 at March 31, 2008 and      December 31, 2007, respectively |   | 1,030              |   | 1,022                  |
| Common      stock, $0.01 par value; 100,000,000 shares authorized; 37,106,302 issued      at March 31, 2008 and December 31, 2007, respectively                                                                                                                                      |   | 371                |   | 371                    |
| Additional      paid-in-capital                                                                                                                                                                                                                                                      |   | 148,770            |   | 148,657                |
| Stock      subscription receivable                                                                                                                                                                                                                                                   |   | (2,600)            |   | (2,600)                |
| Accumulated      deficit                                                                                                                                                                                                                                                             |   | (135,704)          |   | (134,545)              |
| Total      stockholders’ equity                                                                                                                                                                                                                                                |   | 11,867             |   | 12,905                 |
| Total      liabilities and stockholders’ equity                                                                                                                                                                                                                                | $      | 24,181             | $      | 23,515                 |

----

|                                                       |   | Three      months ended March 31, |
|------------------------------------------------------------|--------|-----------------------------------|
|                                                       |   | 2008                              |   | 2007 |
| Net      sales                                             | $      | 3,424                             | $ | 2,263 |
| Cost      of sales                                         |   | 1,762                             |   | 934 |
| Gross      profit                                          |   | 1,662                             |   | 1,329 |
| Other      operating costs:                                |   |                              |   |   |
| Selling,      general and administrative                   |   | 2,559                             |   | 2,147 |
| Depreciation      and amortization                         |   | 220                               |   | 28 |
|                                                       |   | 2,779                             |   | 2,175 |
| Operating      loss                                        |   | (1,117)                           |   | (846) |
| Other      income (expense):                               |   |                              |   |   |
| Interest      income (expense), net                        |   | (66)                              |   | (19) |
| Gain      (loss) on sale or disposal of assets             |   | -                                 |   | (5) |
| Other,      net                                            |   | 33                                |   | (29) |
|                                                       |   | (33)                              |   | (53) |
|                                                       |   |                              |   |   |
| Loss      before income taxes                              |   | (1,150)                           |   | (899) |
| Income      taxes                                          |   | (1)                               |   | (1) |
| Net      loss                                              |   | (1,151)                           |   | (900) |
| Dividend      requirements on preferred stock              |   | (8)                               |   | (8) |
| Net      loss allocable to common stockholders             | $      | (1,159)                           | $ | (908) |
| Basic      and diluted loss per share from:                |   |                              |   |   |
| Continuing      operations                                 | $      | (0.03)                            | $ | (0.03) |
| Discontinued      operations                               |   | -                                 |   | - |
| Basic      and diluted loss per share                      | $      | (0.03)                            | $ | (0.03) |
|                                                       |   |                              |   |   |
| Basic      and diluted weighted average shares outstanding |   | 37,106,302                        |   | 26,234,911 |
|                                                       |   |                              |   |   |
|                                                       |   |                              |   |   |

----

|                                                                                  |   | Three      months ended March 31, |
|---------------------------------------------------------------------------------------|--------|-----------------------------------|
|                                                                                  |   | 2008                              |   | 2007 |
|                                                                                  |   |                              |   |   |
| Operating      Activities:                                                            |   |                              |   |   |
| Net      loss                                                                         | $      | (1,151)                           | $ | (900) |
| Adjustments      to reconcile net loss to net cash used in operating      activities: |   |                              |   |   |
| (Gain)      loss on sale or disposal of assets                                        |   | -                                 |   | 4 |
| Amortization      of deferred loan costs                                              |   | 14                                |   | - |
| Non-cash      stock compensation                                                      |   | 113                               |   | 168 |
| Rent      forgiveness for warrants issued                                             |   | -                                 |   | 46 |
| Non-cash      interest income on note receivable – related party                |   | (19)                              |   | - |
| Depreciation      and amortization                                                    |   | 220                               |   | 27 |
| Provision      for losses on accounts receivable                                      |   | 13                                |   | 4 |
| Loss      on early collection of notes receivable                                     |   | -                                 |   | 29 |
| Changes      in operating assets and liabilities, net of dispositions:                |   |                              |   |   |
| Trade      accounts receivable                                                        |   | 411                               |   | (408) |
| Inventories                                                                           |   | (170)                             |   | 41 |
| Prepaid      and other current assets                                                 |   | (197)                             |   | 169 |
| Trade      accounts payable                                                           |   | 433                               |   | 129 |
| Contractors      payable                                                              |   | 1,369                             |   | - |
| Accrued      and other current liabilities                                            |   | (113)                             |   | 138 |
| Net      cash provided (used) in operating activities                                 |   | 923                               |   | (553) |
|                                                                                  |   |                              |   |   |
| Investing      Activities:                                                            |   |                              |   |   |
| Purchases      of property and equipment                                              |   | (87)                              |   | (25) |
| Changes      in restricted cash                                                       |   | 13                                |   | - |
| Net      cash provided by (used) in investing activities                              |   | (74)                              |   | (25) |
|                                                                                  |   |                              |   |   |
| Financing      Activities:                                                            |   |                              |   |   |
| Issuance      of common stock                                                         |   | -                                 |   | 196 |
| Payments      of short term debt                                                      |   | (12)                              |   | - |
| Borrowings      from line of credit                                                   |   | 15                                |   |   |
| Net      proceeds from (repayment of) factoring payable                               |   | -                                 |   | (35) |
| Net      cash provided by financing activities                                        |   | 3                                 |   | 161 |
| Net      increase (decrease) in unrestricted cash and cash    equivalents             |   | 852                               |   | (417) |
| Unrestricted      cash and cash equivalents, beginning of period                      |   | 1,374                             |   | 452 |
| Unrestricted      cash and cash equivalents, end of period                            | $      | 2,226                             | $ | 35 |
|                                                                                  |   |                              |   |   |
| Non      cash Investing:                                                              |   |                              |   |   |
| Subscription      receivable for shares of common stock                               | $      | -                                 | $ | 2,600 |
|                                                                                  |   |                              |   |   |
| Supplemental      cash flow information:                                              |   |                              |   |   |
| Cash      paid during the year for:                                                   |   |                              |   |   |
| Interest                                                                              | $      | 110                               | $ | 15 |
| Income      taxes                                                                     | $      | -                                 | $ | - |
|                                                                                  |   |                              |   |   |
|                                                                                  |   |                              |   |   |

----

|                         | March      31,2008 |   | March      31,2007 |
|------------------------------|--------------------|--------|--------------------|
| Expected      life in years  | 2.5                |   | 2.5                |
| Expected      volatility     | 103%               |   | 84%                |
| Risk-free      interest rate | 2.9%               |   | 4.8%               |

----

|                                           |   | Three      months ended |
|------------------------------------------------|--------|-------------------------|
|                                           |   | March      31, 2007     |
|                                           |   |                    |
| Revenue                                        | $      |  3,693             |
| Loss      from operations                      |   | (630)                   |
| Net      loss allocable to common stockholders |   | (780)                   |
| Income      per share:                         |   |                    |
| Basic                                          | $      | (0.02)                  |
| Diluted                                        | $      | (0.02)                  |
|                                           |   |                    |

----

|                       |   | Physical      Security |   |  FAS |   | Non-segment |   |  Total |
|----------------------------|--------|------------------------|--------|-----------|--------|-------------|--------|-------------|
|                       |   |                   |   |      |   |        |   |        |
| Revenues                   | $      | 1,936                  | $      | 1,488     | $      | -           | $      | 3,424       |
| Loss      from operations  |   | (629)                  |   | (488)     |   | -           |   | (1,117)     |
| Interest      expense, net |   | -                      |   | -         |   | (66)        |   | (66)        |
| Other                      |   | -                      |   | -         |   | 32          |   | 32          |
| Net      loss              |   | (629)                  |   | (488)     |   | (34)        | $      | (1,151)     |
|                       |   |                   |   |      |   |        |   |        |

----

----

|                                     |                                   |                |                                   |                     |                              |   |                        |                                   |
|------------------------------------------|----------------------------------------|---------------------|----------------------------------------|--------------------------|-----------------------------------|--------|-----------------------------|----------------------------------------|
|                                     |                                   |                |                                   |                     |                              |   |                        |                                   |
|                                     | Three      months ended March 31, 2008 |                | Three      months ended March 31, 2007 |                     | Three      months ended March 31, |
|                                     |  Dollars                          | %      of Net Sales |                                   |  Dollars            | %      of Net Sales               |   | Change      In Dollar Value | Percentage      Change In Dollar Value |
|                                     |                                   |                |                                   |                     |                              |   |                        |                                   |
| Net      Sales                           | $   3,424               | 100%                |                                   | $   2,263 | 100%                              |   | $1,161                      | 51%                                    |
| Gross      profit                        | 1,662                                  | 49%                 |                                   | 1,329                    | 59%                               |   | 333                         | 25%                                    |
| Selling,      general and administrative | 2,559                                  | 75%                 |                                   | 2,147                    | 95%                               |   | 412                         | 19%                                    |
| Operating      loss                      | (1,117)                                | -33%                |                                   | (846)                    | -37%                              |   | (271)                       | 32%                                    |
| Net      loss                            | (1,151)                                | -34%                |                                   | (900)                    | -40%                              |   | (251)                       | 28%                                    |

|   | 31.1   |   |   | Certification      of Chief Executive Officer under Section 302 of the Sarbanes-Oxley      Act of 2002.                             |
|--------|--------|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |   |                                                                                                                                     |
|   | 31.2   |   |   | Certification      of Chief Financial Officer under Section 302 of the Sarbanes-Oxley      Act of 2002.                             |
|   |   |   |   |                                                                                                                                     |
|   | 32.1   |   |   | Certification      of Chief Executive Officer and Chief Financial Officer under      Section 906 of the Sarbanes-Oxley Act of 2002. |
|   |   |   |   |                                                                                                                                     |
|   | 32.2   |   |   | Certification      of Chief Financial Officer under Section 906 of the Sarbanes-Oxley      Act of 2002.                             |

|              | MDI,      INC. |                                                   |
|-------------------|----------------|--------------------------------------------------------|
|              |           |                                                   |   |
| May      15, 2008 | By:            | /s/ Michael      Sweet                            |   |
|              |           | Michael      Sweet                                     |   |
|              |           | Senior      Vice President and Chief Financial Officer |   |
|              |           |                                                   |   |