10KSB 1 aspeon10k63007.txt ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------- FORM 10-KSB [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED JUNE 30, 2007. [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NO. 000-21477 ASPEON, INC. (EXACT NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER) DELAWARE 52-1945748 (STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER) 2460 WEST 26th AVENUE, SUITE 380-C DENVER, COLORADO 80211 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) (303) 380 9784 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) Securities registered pursuant to Section 12(b) of the Act: NONE Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, $0.01 PAR VALUE Check 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 [ ] No [X] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-B is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [X] Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ] The Registrant's revenues for its fiscal year ended June 30, 2007 were $0. The aggregate market value of the voting common stock held by non-affiliates of the Registrant on September 14, 2007 was approximately $9,010 based upon the reported closing sale price of such shares on the Grey Sheets for that date. As of September 14, 2007, there were 20,000,000 shares outstanding of which 9,010,084 shares were held by non-affiliates. Transitional Small Business Disclosure Format. Yes [ ] No [X] 1 ASPEON, INC. 2007 ANNUAL REPORT ON FORM 10-KSB TABLE OF CONTENTS ITEM DESCRIPTION PAGE Part I Item 1. Description of Business........................................... 3 Item 2. Description of Properties......................................... 7 Item 3. Legal Proceedings................................................. 8 Item 4. Submission of Matters to a Vote of Security Holders............... 8 Part II Item 5. Market for Common Equity and Related Stockholder Matters.......... 8 Item 6. Management's Discussion and Analysis of Financial Condition and Results of Operations......................................... 9 Item 7. Financial Statements.............................................. 17 Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.......................................... 17 Item 8a. Controls and Procedures........................................... 17 Part III Item 9. Directors, Executive Officers, Promoters and Control Persons: Compliance with Section 16(a) of the Exchange Act................. 18 Item10. Executive Compensation............................................ 20 Item 11. Security Ownership of Certain Beneficial Owners and Management........................................................ 21 Item 12. Certain Relationships and Related Transactions.................... 22 Item 13. Exhibits ......................................................... 22 Item 14. Principal Accountant Fees and Services............................ 25 2 FORWARD-LOOKING STATEMENTS In addition to historical information, some of the information presented in this Annual Report on Form 10-KSB contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (the"Reform Act"). Although Aspeon, Inc. ("Aspeon" or the "Company", which may also be referred to as "we", "us" or "our") believes that its expectations are based on reasonable assumptions within the bounds of its knowledge of its business and operations: there can be no assurance that actual results will not differ materially from our expectations. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those anticipated, including but not limited to, our ability to reach satisfactorily negotiated settlements with our outstanding creditors, vigorously defend against any further appeal that may be made against our currently successful defense of the lawsuit brought against us by certain of our shareholders, bring our financial records and SEC filings up to date, achieve a listing on the over the counter bulletin board, raise debt and, or, equity to fund negotiated settlements with our creditors and to meet our ongoing operating expenses and merge with another entity with experienced management and opportunities for growth in return for shares of our common stock to create value for our shareholders. Cautionary statements regarding the risks, uncertainties and other factors associated with these forward-looking statements are discussed under "Risk Factors" in this Form 10-KSB. You are urged to carefully consider these factors, as well as other information contained in this Form 10-KSB and in our other periodic reports and documents filed with the SEC. PART I ITEM 1. DESCRIPTION OF BUSINESS INTRODUCTION We were incorporated in the State of Delaware in September 1995, as Sunwood Research, Inc. In December 1999, we changed our name to Aspeon, Inc. Our mailing address is 2460 West 26th Avenue, Suite 380-C, Denver, Colorado, 80211, and our telephone number is 303-380-9784. On January 4, 2001, our shares of common stock were delisted from Nasdaq, due to a failure to maintain timely filings with the SEC, our shares of common stock were not eligible to be traded on the over the counter bulletin board and commenced trading on the Pink Sheets under the symbol ASPE.PK. Subsequently, our shares of common stock ceased to be traded on the Pink Sheets and are now traded on the Gray Sheets. On June 30, 2003, we ceased the operations of all of existing operating subsidiaries and are now focused on reaching satisfactory negotiated settlements with our outstanding creditors, vigorously defending against any further appeal that may be made against our currently successful defense of the lawsuit brought against us by certain of our shareholders, bringing our financial records and SEC filings up to date, raising debt and/or, equity to fund negotiated settlements with our creditors and to meet our ongoing operating expenses and attempting to merge with another entity with experienced management and opportunities for growth in return for shares of our common stock to create value for our shareholders. There can be no assurance that this series of events will be successfully completed. HISTORICAL BUSINESS OPERATIONS Prior to our cessation of operations in 2003, our principal business activities were: - POS PRODUCTS. Javelin Systems, a division of Aspeon, Inc. ("Javelin") and CCI Group, Inc. ("CCI"), a subsidiary of Aspeon, Inc., designed, manufactured, marketed and sold open system touch screen point of sale ("POS") computers primarily to the foodservice and retail industries (the "POS Products"). -SOLUTION SERVICES. Through our CCI, Jade Communications Limited ("Jade"), RGB/Trinet Limited ("RGB"), (subsequently renamed Javelin Holdings International Limited (UK)), (collectively "RGB/Jade") and Aspact IT Services (Singapore) Pte Ltd. ("Aspact") subsidiaries, we provided information technology management services for customers that did not intend or were not able to hire their own information technology personnel (the "Solution Services"). These services included network design and management, installation of computer systems, local and wide area network support, maintenance and repair, and help desk support. - APPLICATION SERVICES PROVIDER. Through our Aspeon Solutions, Inc. ("Aspeon Solutions"), Dynamic Technologies, Inc. ("DTI"), SB Holdings, Inc. ("SB"), 3 Restaurant Consulting Services ("RCS") and Monument Software Corporation ("Monument") subsidiaries, we operated as an application service provider ("ASP"). Our ASP services enabled software applications to be deployed, managed, supported and upgraded from centrally located servers, rather than on individual computers (the "ASP Services"). Our ASP Services primarily were directed toward customers in the foodservice industry. Beginning in 2000 through the 2003, we took steps to consolidate, streamline, and minimize operations in an attempt to continue operations. These attempts failed and through a series of business activities, we subsequently ceased all operations. In December 2003, we appointed Frank G Blundo Jr. P.C. as trustee in an assignment for the benefit of the creditors of Aspeon and CCI commencing January 1, 2004. On January 1, 2004, all of Aspeon's and CCI's assets were transferred to the trustee for the benefit of those Aspeon and CCI creditors who elected to participate in the assignment. The assets transferred had a fair market value of $496,000. There were outstanding creditors of $3.7 million who elected to participate in and be bound by the terms of the assignment under which they would no longer have any further claim against Aspeon or CCI. Consequently, we recognized a gain of $3.2 million on the establishment of the assignment for the benefit of Aspeon and CCI creditors. Creditors, totaling in excess of $3.1 million, elected not to participate in the assignment for the benefit of Aspeon and CCI creditors and remained as outstanding liabilities of Aspeon and CCI. Following the establishment for the assignment for the benefit of Aspeon and CCI creditors in January 2004, we did not have any assets, no operating business or other source of income, outstanding liabilities in excess of $7.9 million, an outstanding shareholder lawsuit, were substantially in arrears in respect of maintaining our financial records and our SEC filings, were no longer listed on Nasdaq or the over the counter bulletin board and in due course ceased to be listed on the Pink Sheets. In April 2005, David J. Cutler was appointed as a director and Chief Executive Officer. Mr. Cutler was appointed to focus on reaching satisfactory negotiated settlements with our outstanding creditors, vigorously defending against any further appeal that may be made against our currently successful defense of the lawsuit brought against us by certain of our shareholders, bringing our financial records and SEC filings up to date, raising additional debt and, or, equity to finance settlements with creditors and to meet our ongoing operating expenses and attempting to merge with another entity with experienced management and opportunities for growth in return for shares of our common stock to create value for our shareholders. In April 2005, Mr. Cutler entered into an agreement with Frank G. Blundo, Jr. P.C., trustee of the assignment for the benefit of Aspeon and CCI creditors, subject to due diligence, to invest up to $50,000 cash in us for the benefit of our creditors in return for a number of shares of our common stock. Following the completion of the due diligence, Mr. Cutler agreed to invest $20,000 in us for the benefit of Aspeon and CCI creditors in return for a number of shares of our common stock. The $20,000 was used to satisfy outstanding creditors. In May 2006, based on an independent third party valuation, the majority of our independent directors approved the issue of 10,536,775 shares of our common stock to Mr. Cutler for the conversion of $14,243 of his debt into equity. As a result of the issuance, Mr. Cutler owned 52.7% of our issued and outstanding stock and we still owed him, at the time, approximately $178,000. In September 2005, we were notified by the SEC that unless we came into compliance with the reporting requirements under the Securities Exchange Act of 1934, within 15 days, we may be deregistered. On September 12, 2005. we faxed a letter to the SEC's Office of Enforcement Liaison indicating our intention to come into compliance with the reporting requirements under the Securities Exchange Act of 1934 by November 15, 2005. By November 15, 2005. we completed all required SEC filings for the period July 1, 2003 through September 30, 2005. However, we had not completed all required SEC filings in respect of the period April 1, 2001 through June 30, 2003, although we had included substantial financial extracts and all material disclosures in respect of these periods in the filings we had completed in respect of subsequent periods. We believed the cost to shareholders in completing these filings in respect of these earlier periods exceeded any benefit to shareholders in completing these filings as the information in these filings was at least two to four years old, no longer relevant to our shareholders given our decision to cease all trading operations made on June 30, 2003 and that all material information in respect of these earlier periods has been made available to our shareholders in our SEC filings for later periods. In January 2006. we were contacted by the SEC's Office of Enforcement Liaison, who notified us that while they recognized the progress we had made in bringing our SEC filings up to date, they still considered us to be delinquent in our filings because of our failure to complete filings in respect of the period April 1, 2001 through June 30, 2003. In August 2006, on the basis of further audit work and a review of subsequent events our independent auditor completed 4 the audit of our June 30, 2001 financial statements. In September 2006, we filed forms 10-QSB for the quarters ended September 30, 2001, December 31, 2001 and March 31, 2002. We are currently establishing the likely costs and practicality of completing the SEC filings and related financial statements for the period April 1, 2002 through June 30, 2003. In the meantime there continues to be a risk that our shares of common stock may be deregistered by the SEC's Office of Enforcement Liaison due the continued delinquency of our SEC filings for the period April 1, 2002 through June 30, 2003. On March 13, 2006, Mr. Cutler, at that time our sole director and officer, appointed Messrs. Wesley F. Whiting and Redgie Green, as independent directors on our board of directors. PLANNED OPERATIONS Our plan of operation is to reach satisfactory negotiated settlements with our outstanding creditors, vigorously defend against any further appeal that may be made against our currently successful defense of the lawsuit brought against us by certain of our shareholders, bring our financial records and SEC filings up to date, obtain debt or equity finance to meet our ongoing operating expenses, seek re-listing on the over the counter bulletin board and attempt to merge with another entity with experienced management and opportunities for growth in return for shares of our common stock to create value for our shareholders. There is can be no assurance that this series of events can be successfully completed, that any such business will be identified or that any stockholder will realize any return on their shares after such a transaction has been completed. Any merger or acquisition completed by us can be expected to have a significant dilutive effect on the percentage of shares held by our current stockholders. General Business Plan ---------------------- We intend to seek, investigate and, if such investigation warrants, acquire an interest in business opportunities presented to us by persons or firms which desire to seek the advantages of an issuer who has complied with the Securities Act of 1934 (the "1934 Act"). We will not restrict our search to any specific business, industry or geographical location, and we may participate in business ventures of virtually any nature. This discussion of our proposed business is purposefully general and is not meant to be restrictive of our virtually unlimited discretion to search for and enter into potential business opportunities. We anticipate that we may be able to participate in only one potential business venture because of our lack of financial resources. We may seek a business opportunity with entities which have recently commenced operations, or that desire to utilize the public marketplace in order to raise additional capital in order to expand into new products or markets, to develop a new product or service, or for other corporate purposes. We may acquire assets and establish wholly owned subsidiaries in various businesses or acquire existing businesses as subsidiaries. We expect that the selection of a business opportunity will be complex and risky. Due to general economic conditions, rapid technological advances being made in some industries and shortages of available capital, we believe that there are numerous firms seeking the benefits of an issuer who has complied with the 1934 Act. Such benefits may include facilitating or improving the terms on which additional equity financing may be sought, providing liquidity for incentive stock options or similar benefits to key employees, providing liquidity (subject to restrictions of applicable statutes) for all stockholders and other factors. Potentially, available business opportunities may occur in many different industries and at various stages of development, all of which will make the task of comparative investigation and analysis of such business opportunities extremely difficult and complex. We have, and will continue to have, essentially no assets to provide the owners of business opportunities. However, we will be able to offer owners of acquisition candidates the opportunity to acquire a controlling ownership interest in an issuer who has complied with the 1934 Act without incurring the cost and time required to conduct an initial public offering. The analysis of new business opportunities will be undertaken by, or under the supervision of, our board of directors. We intend to concentrate on identifying preliminary prospective business opportunities which may be brought to our attention through present associations of our director, professional advisors or by our stockholders. In analyzing prospective business opportunities, we will consider such matters as (i) available technical, financial and managerial resources; (ii) working capital and other financial requirements; (iii) history of operations, if any, and prospects for the future; (iv) nature of present and expected competition; (v) quality, experience and depth of management services; (vi) potential for further research, development or exploration; (vii) specific risk factors not now foreseeable but that may be anticipated to impact the proposed activities of the company; (viii) potential for growth or expansion; (ix) potential for profit; (x) public recognition and acceptance of products, services or trades; (xi) name identification; and (xii) other factors that we consider relevant. As part of our investigation of the business opportunity, we expect to meet personally with management and key personnel. To the extent possible, we intend to utilize written reports and personal investigation to evaluate the above factors. 5 We will not acquire or merge with any company for which audited financial statements cannot be obtained within a reasonable period of time after closing of the proposed transaction. Acquisition Opportunities ------------------------------ In implementing a structure for a particular business acquisition, we may become a party to a merger, consolidation, reorganization, joint venture, or licensing agreement with another company or entity. We may also acquire stock or assets of an existing business. Upon consummation of a transaction, it is probable that our present management and stockholders will no longer be in control of us. In addition, our sole director may, as part of the terms of the acquisition transaction, resign and be replaced by new directors without a vote of our stockholders, or sell his stock in us. Any such sale will only be made in compliance with the securities laws of the United States and any applicable state. It is anticipated that any securities issued in any such reorganization would be issued in reliance upon exemption from registration under application federal and state securities laws. In some circumstances, as a negotiated element of the transaction, we may agree to register all or a part of such securities immediately after the transaction is consummated or at specified times thereafter. If such registration occurs, it will be undertaken by the surviving entity after it has successfully consummated a merger or acquisition and is no longer considered an inactive company. The issuance of substantial additional securities and their potential sale into any trading market which may develop in our securities may have a depressive effect on the value of our securities in the future. There is no assurance that such a trading market will develop. While the actual terms of a transaction cannot be predicted, it is expected that the parties to any business transaction will find it desirable to avoid the creation of a taxable event and thereby structure the business transaction in a so-called "tax-free" reorganization under Sections 368(a)(1) or 351 of the Internal Revenue Code (the "Code"). In order to obtain tax-free treatment under the Code, it may be necessary for the owner of the acquired business to own 80% or more of the voting stock of the surviving entity. In such event, our stockholders would retain less than 20% of the issued and outstanding shares of the surviving entity. This would result in significant dilution in the equity of stockholders. As part of our investigation, we expect to meet personally with management and key personnel, visit and inspect material facilities, obtain independent analysis of verification of certain information provided, check references of management and key personnel, and take other reasonable investigative measures, to the extent of our limited financial resources and management expertise. The manner in which we participate in an opportunity will depend on the nature of the opportunity, the respective needs and desires of both parties, and the management of the opportunity. With respect to any merger or acquisition, and depending upon, among other things, the target company's assets and liabilities, our stockholders will in all likelihood hold a substantially lesser percentage ownership interest in us following any merger or acquisition. The percentage ownership may be subject to significant reduction in the event we acquire a target company with assets and expectations of growth. Any merger or acquisition can be expected to have a significant dilutive effect on the percentage of shares held by our stockholders. We will participate in a business opportunity only after the negotiation and execution of appropriate written business agreements. Although the terms of such agreements cannot be predicted, generally we anticipate that such agreements will (i) require specific representations and warranties by all of the parties; (ii) specify certain events of default; (iii) detail the terms of closing and the conditions which must be satisfied by each of the parties prior to and after such closing; (iv) outline the manner of bearing costs, including costs associated with the Company's attorneys and accountants; (v) set forth remedies on defaults; and (vi) include miscellaneous other terms. As stated above, we will not acquire or merge with any entity which cannot provide independent audited financial statements within a reasonable period of time after closing of the proposed transaction. We are subject to all of the reporting requirements included in the 1934 Act. Included in these requirements as part of a Current Report on Form 8-K, required to be filed with the SEC upon 6 consummation of a merger or acquisition, as well as audited financial statements included in an Annual Report on Form 10-K (or Form 10-KSB as applicable). If such audited financial statements are not available at closing, or within time parameters necessary to insure our compliance within the requirements of the 1934 Act, or if the audited financial statements provided do not conform to the representations made by that business to be acquired, the definitive closing documents will provide that the proposed transaction will be voidable, at the discretion of our present management. If such transaction is voided, the definitive closing documents will also contain a provision providing for reimbursement for our costs associated with the proposed transaction. Competition ------------- We believe we are an insignificant participant among the firms which engage in the acquisition of business opportunities. There are many established venture capital and financial concerns that have significantly greater financial and personnel resources and technical expertise than we have. In view of our limited financial resources and limited management availability, we will continue to be at a significant competitive disadvantage compared to our competitors. Investment Company Act 1940 ----------------------------- Although we will be subject to regulation under the Securities Act of 1933, as amended, and the 1934 Act, we believe we will not be subject to regulation under the Investment Company Act of 1940 (the "1940 Act") insofar as we will not be engaged in the business of investing or trading in securities. In the event we engage in business combinations that result in us holding passive investment interests in a number of entities, we could be subject to regulation under the 1940 Act. In such event, we would be required to register as an investment company and incur significant registration and compliance costs. We have obtained no formal determination from the SEC as to our status under the 1940 Act and, consequently, any violation of the 1940 Act would subject us to material adverse consequences. We believe that, currently, we are exempt under Regulation 3a-2 of the 1940 Act. INTELLECTUAL PROPERTY We do not hold any patents or patent applications. EMPLOYEES As of June 30, 2007 and 2006, we did not have any operational activities and those activities necessary to the continual existence of the Company were performed by our directors and officers, as required. FACTORS AFFECTING FUTURE PERFORMANCE The factors affecting our future performance changed dramatically as a result of our decision to discontinue the last of our operating businesses in June 2003 and the transfer of our remaining assets to the trustee for the benefit of the creditors of Aspeon and CCI on January 1, 2004. Rather than an operating business, our business is to reach satisfactory negotiated settlements with our outstanding creditors, vigorously defend against any further appeal that may be made against our currently successful defense of the lawsuit brought against us by certain of our shareholders, bring our financial records and SEC filings up to date, obtain debt and, or, equity finance to fund negotiated settlements with our creditors and to meet our ongoing operating expenses and attempt to merge with another entity with experienced management and opportunities for growth in return for shares of our common stock to create value for our shareholders. Although there is no assurance that this series of events will be successfully completed, we believe we can successfully complete an acquisition or merger which will enable us to continue as a going concern. Any acquisition or merger will most likely be dilutive to our existing stockholders. The factors affecting our future performance are listed and explained below under the section "Risk Factors" in Management's Discussion and Analysis of Financial Condition and Results of Operations. ITEM 2. DESCRIPTION OF PROPERTIES Our mailing address is 2460 West 26th Avenue, Suite 380-C, Denver, Colorado, 80211 and we maintain two small storage units in Dana Point, California for our corporate records. Currently, we lease two storage units in Dana Point, California on month to month leases providing us with a total of approximately 250 square feet of storage space to maintain certain of our corporate records returned to us by our attorneys. The rent on these units is $425 per month. 7 In March 2005, we entered into a three month lease for a 300 square foot executive office suite in Laguna Hills, California at $1,150 per month to facilitate bringing our financial statements and SEC filings up to date . This lease was terminated in September 2005. ITEM 3. LEGAL PROCEEDINGS There is no pending legal actions against the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted by us to a vote of our security holders during the fiscal years ended June 30, 2007 and 2006 or subsequent to that date. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Our shares of common stock were listed on the Nasdaq National Market System under the symbol "ASPEE." On October 10, 2000, the Nasdaq Stock Market ("Nasdaq") suspended trading in our shares of common stock while it sought additional information from us. On October 11, 2000, Nasdaq sent a letter to us stating that our shares of common stock would be delisted from Nasdaq if we did not file our Form 10-K for the fiscal year ended June 30, 2000 with the Securities and Exchange Commission ("SEC") by October 18, 2000. Our Form 10-K for the fiscal year ended June 30, 2000 was not filed with the SEC by the October 18, 2000 deadline. On November 9, 2000 we participated in a hearing before the Nasdaq Listing Qualifications Panel which was held for the purpose of evaluating whether our shares of common stock would continue to be listed on Nasdaq or if they would be delisted. Effective January 4, 2001 our shares of common stock were delisted from Nasdaq. As we were delinquent in our SEC filings our shares of common stock were not eligible to be listed on the over the counter bulletin board and consequently commenced trading on the Pink Sheets under the symbol ASPE.PK. Subsequently, our shares of common stock have ceased to be traded on the Pink Sheets and are now traded on the Grey Sheets. Last Reported Price. On September 14, 2007, the last reported bid price of the common stock reported on the Grey Sheets was $0.001 per share. Holders. As of September 14, 2007, there were 129 holders of record of the common stock. We believe that we have approximately 2,000 beneficial owners of our common stock. In many instances, a registered stockholder is a broker or other entity holding shares in street name for one or more customers who beneficially own the shares. Our transfer agent is Mountain Share Transfer, Inc., 1625 Abilene Drive, Broomfield, Colorado, 80020. Mountain Share Transfer's telephone number is 303-460-1149. Dividends. We have not paid or declared cash distributions or dividends on our common stock and do not intend to pay cash dividends in the foreseeable future. Future cash dividends will be determined by our board of directors based upon our earnings, financial condition, capital requirements and other relevant factors. Penny Stock Regulation Broker-dealer practices in connection with transactions in "penny stocks" are regulated by certain penny stock rules adopted by the Securities and Exchange Commission. Penny stocks generally are equity securities with a price of less than $5.00. Excluded from the penny stock designation are securities registered on certain national securities exchanges or quoted on NASDAQ, provided that current price and volume information with respect to transactions in such securities is provided by the exchange/system or sold to established customers or accredited investors. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in connection with the transaction, and the monthly account statements showing the market value of each penny stock held in the customer's account. In addition, the penny stock rules generally require that prior to a transaction in a penny stock, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. 8 These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for a stock that becomes subject to the penny stock rules. As our securities have become subject to the penny stock rules, investors may find it more difficult to sell their securities. ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the consolidated financial statements and notes thereto and the other financial information included elsewhere in this report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward looking statements as a result of any number of factors, including those set forth under "Risk Factors" and elsewhere in this report. PLAN OF OPERATION We intend to seek private merger candidates to acquire in a reverse merger. There is no assurance that any such business will be located or that any stockholder will realize any return on their shares after such a transaction. Any merger or acquisition completed by us can be expected to have a significant dilutive effect on the percentage of shares held by our current stockholders. We believe we are an insignificant participant among the firms which engage in the acquisition of business opportunities. There are many established venture capital and financial concerns that have significantly greater financial and personnel resources and technical expertise than we have. In view of our limited financial resources and limited management availability, we will continue to be at a significant competitive disadvantage compared to our competitors. LIQUIDITY AND CAPITAL RESOURCES As of June 30, 2007, we had $0 in cash and cash equivalents, $1,000 of assets, consisting of prepaid expenses, no operating business or other source of income, outstanding current liabilities of $8,203,262, and a stockholders' deficit of $8,202,262. We are dependent on raising additional equity and/or, debt to fund any negotiated settlements with our outstanding creditors and meet our ongoing operating expenses. There is no assurance that we will be able to raise the necessary equity and/or debt that we will need to be able to negotiate acceptable settlements with our outstanding creditors or fund our ongoing operating expenses. During the fiscal years ended June 30, 2007 and 2006, one of our directors, Mr. Cutler, advanced to us $85,000 and $115,000, respectively, by way of loan, bearing interest at 8%, to meet our ongoing operating expenses and fund the costs of bringing our financial statements and SEC reporting up to date. In May 2006, $14,243 of this loan was converted into 10,536,775 shares of our common stock. At that time, Mr. Cutler gained a 53% controlling interest in the Company. Since June 30, 2007, Mr. Cutler has continued to make further advances to us by way of loan to meet our ongoing operating expenses and fund the costs of bringing our financial statements and SEC reporting current, as required. There is no assurance that Mr. Cutler will continue to provide us with further funding in the future. CRITICAL ACCOUNTING POLICIES Financial Reporting Release No. 60 requires all companies to include a discussion of critical accounting policies and estimates used in the preparation of their financial statements. On an on-going basis, we evaluate our critical accounting policies and estimates. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form our 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. Our significant accounting policies are described in Note 1 to the financial statements on page 32 below. These policies were selected because they represent the more significant accounting policies and methods that are broadly applied in the preparation of our financial statements. However, it should be noted that we intend to acquire a new operating business. The critical accounting policies and estimates for such new operations will, in all likelihood, be significantly different from our current policies and estimates. 9 OFF BALANCE SHEET ARRANGEMENTS, CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS Financial Reporting Release No. 61 requires all companies to include a discussion to address, among other things, liquidity, off-balance sheet arrangements, contractual obligations and commercial commitments. Details of the arrangements, contractual obligations and commercial commitments are described in Note. 6 to the financial statements on page 34 below. RESULTS OF OPERATIONS THE FISCAL YEAR ENDED JUNE 30, 2007 COMPARED TO THE FISCAL YEAR ENDED JUNE 30, 2006 General and Administrative Expenses General and administrative expenses for the fiscal year ended June 30, 2007, were $84,000 compared to $116,000 for the fiscal year ended June 30, 2006, a decrease of $32,000. The decrease in general and administrative expenses was due the fact that in the year ended June 30, 2006, we incurred significant travel, rent and contract labor costs during the initial phase of bringing our financial records and SEC filings up to date. We incurred significantly lower costs in respect of travel, rent and contract labor in the year ended June 30, 2007 and are now making significant progress in bringing our financial records and SEC filings up to date. Loss on Assignment for the Benefit of Creditors During the year ended June 30, 2007, we did not recognize any gains or losses on our assignment for the benefit of creditors of Aspeon and CCI. During the year ended June 30, 2006, we did recognize a loss of $20,000 on our assignment for the benefit of creditors of Aspeon and CCI. This was loss was a result of the $20,000 payment that was made to the trustee of the assignment for the benefit of Aspeon and CCI creditors. On April 22, 2005, our sole director, Mr. Cutler entered into an agreement with the trustee of the assignment for the benefit of Aspeon and CCI creditors, to invest up to $50,000 cash in us for the benefit of our creditors in return for a number of shares of our common stock to be determined. Following the completion of the due diligence process during the six months ended December 31, 2005, it was agreed with Frank G Blundo, Jr. P.C., trustee of the assignment for the benefit of Aspeon and CCI creditors, that Mr. Cutler would invest $20,000 in us for the benefit of Aspeon and CCI creditors in return for a number of shares of our common stock to be determined. Accordingly, in December 2005, the $20,000, which had been placed in escrow with the trustee was released for the benefit of Aspeon and CCI creditors. Loss from Operations The loss from operations during the fiscal year ended June 30, 2007 was $84,000 compared to a loss from operations of $136,000 during the fiscal year ended June 30, 2006, a decrease of $52,000. Other Expense During the fiscal year ended June 30, 2007, we incurred interest expenses of $18,000 compared to interest expense of $11,000 for the fiscal year ended June 30, 2006, an increase of $7,000. The increase was a result of the increase in the average principal balance of the loan made to us by our director, Mr. Cutler, to fund our ongoing operating costs between the two periods. No interest expense was accrued in the fiscal years ended June 30, 2007 and 2006 in respect of liabilities outstanding as at January 1, 2004, as these liabilities are anticipated to be settled at, or at less than, the carrying value at which they are currently recorded in our balance sheet. Provision for Income Taxes No provision for income taxes was required in the fiscal years ended June 30, 2007 and 2006, as we generated taxable losses in both fiscal years. Net Loss We recognized a net loss of $103,000 during the fiscal year ended June 30, 2007, compared to a net loss of $147,000 for the fiscal year ended June 30, 2006, the increase of $44,000 was due to the factors discussed above. 10 CASH FLOW INFORMATION FOR THE FISCAL YEARS ENDED JUNE 30, 2007 AND 2006 As of June 30, 2007, we had $0 in cash and cash equivalents, $1,000 of assets, consisting of prepaid expenses, no operating business or other source of income, outstanding current liabilities of $8,203,262, a stockholders' deficit of $8,202,262. Consequently, we are now dependent on raising additional equity and, or, debt to fund any negotiated settlements with our outstanding creditors and meet our ongoing operating expenses. There is no assurance that we will be able to raise the necessary equity and, or, debt that we will need to be able to negotiate acceptable settlements with our outstanding creditors or fund our ongoing operating expenses. For the year ended June 30, 2007, net cash used in operations was $84,943 compared to net cash used in operations of $134,979 for the year ended June 30, 2006, a increase of $50,036. This increase was a result of the decrease in net losses offset by an increase in accounts payable in the period. During the fiscal years ended June 30, 2007 and 2006, we did not receive or use any cash in investing activities. During the fiscal year ended June 30, 2007, we received $84,936 from financing activities. Mr. Cutler, an officer and director of the Company advanced $84,936 to us to support on going activities. During the fiscal year ended June 30, 2006, the Company received funds of $114,986 from financing activities. These funds included advances of $100,743 from Mr. Cutler and conversion of $14,243 of a note payable owed to Mr. Cutler into 10,563,775 shares of our common stock. ACCOUNTING PRONOUNCEMENTS In February 2006, the FASB issued FASB Statement No. 155, which is an amendment of FASB Statements No. 133 and 140. This Statement; a) permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation, b) clarifies which interest-only strip and principal-only strip are not subject to the requirements of Statement 133, c) establishes a requirement to evaluate interests in securitized financial assets to identify interest that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation, d) clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives, e) amends Statement 140 to eliminate the prohibition on a qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. This Statement is effective for financial statements for fiscal years beginning after September 15, 2006. Earlier adoption of this Statement is permitted as of the beginning of an entity's fiscal year, provided the entity has not yet issued any financial statements for that fiscal year. We does not believe that the adoption of FASB Statement No. 155 will have a material impact on our financial conditions or results of operation In March 2006, the Financial Accounting Standards Board (`FASB') issued FASB Statement No. 156, which amends FASB Statement No. 140. This Statement establishes, among other things, that accounting for all separately recognized servicing assets and servicing liabilities. This Statement amends Statement 140 to require that all separately recognized servicing assets and servicing liabilities be initially measured at fair value, if practicable. This Statement permits, but does not require, the subsequent measurement of separately recognized servicing assets and servicing liabilities at fair value. An entity that uses derivative instruments to mitigate the risks inherent in servicing assets and servicing liabilities is required to account for those derivative instruments at fair value. Under this Statement, an entity can elect subsequent fair value measurement to account for its separately recognized servicing assets and servicing liabilities. By electing that option, an entity may simplify its accounting because this Statement permits income statement recognition of the potential offsetting changes in fair value of those servicing assets and servicing liabilities and derivative instruments Is the same accounting period. This Statement is effective for financial statements for fiscal years beginning after September 15, 2006. Earlier adoption of this Statement is permitted as of the beginning of an entity's fiscal year, provided the entity has not yet issued any financial statements for that fiscal year. We do not believe that the adoption of FASB Statement No. 156 will have a material impact on our financial conditions or results of operation. In June 2006, the FASB issued Interpretation ("FIN") No. 48, "Accounting for Uncertainty in Income Taxes--an interpretation of FASB Statement No. 109." This Interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, and provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. This Interpretation is effective for fiscal years beginning after December 15, 2006. We believe that FIN No. 48 should not have a material impact on our financial position or results of operations. 11 In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" ("SFAS No. 157"). SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles ("GAAP"), and expands disclosures about fair value measurements. This statement applies under other accounting pronouncements that require or permit fair value measurement where the FASB has previously determined that under those pronouncements fair value is the appropriate measurement. This statement does not require any new fair value measurements but may require companies to change current practice. This statement is effective for those fiscal years beginning after November 15, 2007 and to the interim periods within those fiscal years. We believe that SFAS No. 157 should not have a material impact on our financial position or results of operations. In September 2006, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans" ("SFAS No. 158"). SFAS No. 158 requires employers to recognize the overfunded or underfunded status of a defined benefit postretirement plan as an asset or liability in its statement of financial position, recognize changes in that funded status in the year in which the changes occur through comprehensive income and measure a plan's assets and its obligations that determine its funded status as of the end of the employer's fiscal year. The provisions of SFAS No. 158 are effective for fiscal years ending after December 15, 2006. We believe that SFAS No. 158 should not have a material impact on our financial position or results of operations. In September 2006, the SEC issued Staff Accounting Bulletin ("SAB") No. 108, "Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements." SAB No. 108 addresses how the effects of prior year uncorrected misstatements should be considered when quantifying misstatements in current year financial statements. SAB No. 108 requires companies to quantify misstatements using a balance sheet and income statement approach and to evaluate whether either approach results in quantifying an error that is material in light of relevant quantitative and qualitative factors. SAB No. 108 is effective for period ending after November 15, 2006. The adoption of this SAB is not expected to have a material effect on our financial statements. In February 2007, the Financial Accounting Standards Board (FASB) issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities - Including an Amendment of FASB Statement No. 115". This statement permits entities to choose to measure many financial instruments and certain other items at fair value. Most of the provisions of SFAS No. 159 apply only to entities that elect the fair value option. However, the amendment to SFAS No. 115 "Accounting for Certain Investments in Debt and Equity Securities" applies to all entities with available-for-sale and trading securities. SFAS No. 159 is effective as of the beginning of an entity's first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provision of SFAS No. 157, "Fair Value Measurements." The adoption of this statement is not expected to have a material effect on our financial statements. In March 2007, the FASB ratified the Emerging Issues Task Force ("EITF") Issue No. 06-11, Accounting for Income Tax Benefits of Dividends on Share Based Payment Awards ("EITF 06-11"). EITF 06-11 requires companies to recognize the income tax benefit realized from dividends or dividend equivalents that are charged to retained earnings and paid to employees for nonvested equity-classified employee share-based awards as an increase to additional paid-in capital. EITF 06-11 is effective for fiscal years beginning after September 15, 2007. The adoption of EITF 06-11 is not expected to have a material effect on our financial statements. In June 2007, the FASB ratified EITF Issue No. 07-03, Accounting for Nonrefundable Advance Payments for Goods and Services Received for Use in Future Research and Development Activities ("EITF 07-03"). EITF 07-03 requires companies to defer nonrefundable advance payments for goods and services and to expense that advance payment as the goods are delivered or services are rendered. If the company does not expect to have the goods delivered or services performed, the advance should be expensed. EITF 07-03 is effective for fiscal years beginning after December 15, 2007. The adoption of EITF 07-03 is not expected to have a material effect on our financial statements. EFFECTS OF INFLATION Although we cannot accurately anticipate the effect of inflation on our operations, we do not believe that inflation has had, or is likely in the future to have, a material effect on our results or financial condition. SUBSEQUENT EVENTS None. 12 RISK FACTORS You should be aware that there are various risks associated with our business, and us, including the ones discussed below. You should carefully consider these risk factors, as well as the other information contained in this Form 10-KSB, in evaluating us and our business. The factors affecting our future performance changed dramatically as a result of the discontinuance of the last of our operating businesses effective June 30, 2003 and the transfer of all of our assets to a trustee of the assignment for the benefit of Aspeon and CCI creditors effective January 1, 2004. Rather than an operating business, our business is to reach satisfactory negotiated settlements with our outstanding creditors, vigorously defend against any further appeal that may be made against our currently successful defense of the lawsuit brought against us by certain of our shareholders, bring our financial records and SEC filings up to date, raise debt and/or, equity to fund the settlements with creditors or meet our ongoing operating costs and attempt to merge with another entity with experienced management and opportunities for growth in return for shares of our common stock to create value for our shareholders. There is no assurance that this series of events will be successfully completed. Although there is no assurance, we believe we can successfully complete an acquisition or merger, which will enable us to continue as a going concern. Any acquisition or merger will most likely be dilutive to our existing stockholders. WE HAVE A SUBSTANTIAL BALANCE OF OUTSTANDING LIABILITIES At June 30, 2007, we had outstanding liabilities of approximately $ 8.2 million due to creditors who were not eligible to be part of the assignment for the benefit of Aspeon and CCI creditors, or who elected not to participate in our assignment for the benefit of Aspeon and CCI creditors. We have no assets, no operating business or our source of income from which to pay these creditors. Accordingly we must attempt to negotiate acceptable settlements with these outstanding creditors and then attempt to raise debt and, or, equity funding to finance the payment of the agreed settlements. There can be no assurance that we shall be able to negotiate acceptable settlements with our outstanding creditors or that we shall be able to raise the necessary debt and, or, equity finance to fund any such agreed settlements. If we are unable to settle these liabilities it is unlikely that we will be able to merge with another entity with experienced management and opportunities for growth in return for shares of our common stock to create value for our shareholders WE HAVE INCURRED SIGNIFICANT LOSSES AND ANTICIPATE FUTURE LOSSES At June 30, 2007, we had an accumulated deficit in excess $93 million and a stockholders' deficit of approximately $8.2 million. Future losses are likely to occur as we have no sources of income to meet our operating expenses. As a result of these, among other factors, we received a report on our consolidated financial statements for the years ended June 30, 2007 and 2006 from our independent accountants that include an explanatory paragraph stating that there is substantial doubt about our ability to continue as a going concern. Consistent with our business plan, we plan on reaching satisfactory negotiated settlements with our outstanding creditors, vigorously defend against any further appeal that may be made against our currently successful defense of the lawsuit brought against us by certain of our shareholders, bringing our financial records and SEC filings up to date, raising additional debt and/or, equity to fund settlements with our creditors and to meet our ongoing operating expenses and attempting to merge with another entity with experienced management and opportunities for growth in return for shares of our common stock to create value for our shareholders. There can be no assurance that this series of events will be successfully completed. No assurances can be given that we will be successful in acquiring operations, generating revenues or reaching or maintaining profitable operations. OUR EXISTING FINANCIAL RESOURCES ARE INSUFFICIENT TO MEET OUR ONGOING OPERATING EXPENSES We have no sources of income at this time and no existing cash balances that are adequate to meet our ongoing operating expenses. In the short term, unless we are able to raise additional debt and/or, equity we shall be unable to meet our ongoing operating expenses. On a longer term basis, we plan to acquire an entity with experienced management and the opportunities for growth in exchange for shares of our common stock and are dependent on achieving a successful merger with a profitable company. No assurances can be given that we will be successful in acquiring operations, generating revenues or reaching or maintaining profitable operations. WE INTEND TO PURSUE THE ACQUISITION OF AN OPERATING BUSINESS Our sole strategy is to acquire an operating business. Successful implementation of this strategy depends on our ability to identify a suitable acquisition candidate, acquire such company on acceptable terms and integrate its 13 operations. In pursuing acquisition opportunities, we compete with other companies with similar strategies. Competition for acquisition targets may result in increased prices of acquisition targets and a diminished pool of companies available for acquisition. Acquisitions involve a number of other risks, including risks of acquiring undisclosed or undesired liabilities, acquired in-process technology, stock compensation expense, diversion of management attention, potential disputes with the seller of one or more acquired entities and possible failure to retain key acquired personnel. Any acquired entity or assets may not perform relative to our expectations. Our ability to meet these challenges has not been established. SCARCITY OF, AND COMPEETITION FOR, BUSINESS OPPORTUNITIES AND COMBINATIONS We believe we are an insignificant participant among the firms which engage in the acquisition of business opportunities. There are many established venture capital and financial concerns that have significantly greater financial and personnel resources and technical expertise than we have. Nearly all such entities have significantly greater financial resources, technical expertise and managerial capabilities than us and, consequently, we will be at a competitive disadvantage in identifying possible business opportunities and successfully completing a business combination. Moreover, we will also compete in seeking merger or acquisition candidates with numerous other small public companies. In view of our limited financial resources and limited management availability, we will continue to be at a significant competitive disadvantage compared to our competitors. WE HAVE NOT EXECUTED ANY FORMAL AGREEMENT FOR A BUSINESS COMBINATION OR OTHER TRANSACTION AND HAVE ESTABLISHED NO STANDARDS FOR BUSINESS COMBINATIONS We have not executed any formal arrangement, agreement or understanding with respect to engaging in a merger with, joint venture with or acquisition of a private or public entity. There can be no assurance that we will be successful in identifying and evaluating suitable business opportunities or in concluding a business combination. We have not identified any particular industry or specific business within an industry for evaluation. There is no assurance we will be able to negotiate a business combination on terms favorable, if at all. We have not established a specific length of operating history or specified level of earnings, assets, net worth or other criteria which we will require a target business opportunity to have achieved, and without which we would not consider a business combination. Accordingly, we may enter into a business combination with a business opportunity having no significant operating history, losses, limited or no potential for earnings, limited assets, negative net worth or other negative characteristics. REDUCTION OF PERCENTAGE SHARE OWNERSHIP FOLLOWING BUSINESS COMBINATION AND DILUTION TO STOCKHOLDERS Our primary plan of operation is based upon a business combination with a private concern which, in all likelihood, would result in us issuing securities to stockholders of such private company. The issuance of previously authorized and unissued shares of our common stock would result in reduction in percentage of shares owned by present and prospective stockholders and may result in a change in control or management. In addition, any merger or acquisition can be expected to have a significant dilutive effect on the percentage of the shares held our stockholders. BECAUSE INSIDERS CONTROL OUR ACTIVITIES, THAT MAY CAUSE US TO ACT IN A MANNER THAT IS MOST BENEFICIAL TO THEM AND NOT TO OUTSIDE SHAREHOLDERS WHICH COULD CAUSE US NOT TO TAKE ACTIONS THAT OUTSIDE INVESTORS MIGHT VIEW FAVORABLY Our executive officers, directors, and holders of 5% or more of our outstanding common stock beneficially own approximately 70% of our outstanding common stock. As a result, they effectively control all matters requiring director and stockholder approval, including the election of directors, the approval of significant corporate transactions, such as mergers and related party transaction. These insiders also have the ability to delay or perhaps even block, by their ownership of our stock, an unsolicited tender offer. This concentration of ownership could have the effect of delaying, deterring or preventing a change in control of our company that you might view favorably. OUR DIRECTORS MAY HAVE CONFLICTS OF INTEREST WHICH MAY NOT BE RESOLVED FAVORABLY TO US. Certain conflicts of interest may exist between our directors and us. Our Directors have other business interests to which they devote their attention, and may be expected to continue to do so although management time should be devoted to our business. As a result, conflicts of interest may arise that can be resolved only through exercise of such judgment as is consistent with fiduciary duties to us. See "Directors, Executive Officers, Promoters and Control Persons" (page 25), and "Conflicts of Interest." (page 26). 14 OUR CHIEF EXECUTIVE OFFICER HAS THE ABILITY TO EFFECTIVELY CONTROL SUBSTANTIALLY ALL ACTIONS TAKEN BY STOCKHOLDERS Mr. Cutler, an officer and director of the Company owns in excess of our 50% of our issued and outstanding common stock and is able to effectively control substantially all actions taken by our stockholders, including the election of directors. Such concentration of ownership could also have the effect of delaying, deterring or preventing a change in control that might otherwise be beneficial to stockholders and may also discourage acquisition bids for us and limit the amount certain investors may be willing to pay for shares of common stock. LOSS OF CONTROL BY OUR PRESENT MANAGEMENT AND STOCKHOLDERS MAY OCCUR UPON ISSUANCE OF ADDITIONAL SHARES. We may issue further shares as consideration for the cash or assets or services out of our authorized but unissued common stock that would, upon issuance, represent a majority of our voting power and equity. The result of such an issuance would be those new stockholders and management would control us, and persons unknown could replace our management at this time. Such an occurrence would result in a greatly reduced percentage of ownership of us by our current stockholders. WE MAY DEPEND UPON OUTSIDE ADVISORS, WHO MAY NOT BE AVAILABLE ON REASONABLE TERMS AND AS NEEDED. To supplement the business experience of our officers and directors, we may be required to employ accountants, technical experts, appraisers, attorneys, or other consultants or advisors. Our Board without any input from stockholders will make the selection of any such advisors. Furthermore, it is anticipated that such persons may be engaged on an "as needed" basis without a continuing fiduciary or other obligation to us. In the event we consider it necessary to hire outside advisors, we may elect to hire persons who are affiliates, if they are able to provide the required services. WE ARE OUT OF COMPLIANCE WITH THE LISTING REQUIREMENTS OF THE NASDAQ MARKET AND HAVE NOT BEEN LISTED ON THE OVER THE COUNTER BULLETIN BOARD In October 2000, the Nasdaq Stock Market ("Nasdaq") suspended trading in the shares of our common stock while it sought additional information from us. On November 9, 2000, we participated in a hearing before the Nasdaq Listing Qualifications Panel which was held for the purpose of evaluating whether the shares of our common stock would continue to be listed on Nasdaq or if they would be delisted. Effective as of January 4, 2001, the shares of our common stock was delisted from the Nasdaq. As we were in arrears in our filings with the SEC the shares of our common stock was not eligible to be traded on the over the counter bulletin board and consequently commenced trading on the Pink Sheets under the symbol ASPE.PK. Subsequently the shares of our common stock ceased to be traded on the Pink Sheets and are now traded on the Gray Sheets. Failure obtain a listing on the over the counter bulletin board may adversely effective our ability to acquire another entity with experienced management and opportunities for growth in return for shares of our common stock in an attempt to create value for our shareholders. THE SEC HAS INDICATED THAT IT MAY DEREGISTER SHARES OF OUR COMMON STOCK In September 2005, we were notified by the SEC that unless we came into compliance with the reporting requirements under the Securities Exchange Act of 1934, within 15 days, we may be deregistered. On September 12, 2005 we faxed a letter to the SEC's Office of Enforcement Liaison indicating our intention to come into compliance with the reporting requirements under the Securities Exchange Act of 1934 by November 15, 2005. By November 15, 2005, we completed all required SEC filings for the period July 1, 2003 through September 30, 2005. However, we had not completed all required SEC filings in respect of the period April 1, 2001 through June 30, 2003, although we had included substantial financial extracts and all material disclosures in respect of these periods in the filings we had completed in respect of subsequent periods. We believed the cost to shareholders in completing these filings in respect of these earlier periods exceeded any benefit to shareholders in completing these filings as the information in these filings was at least two to four years old, no longer relevant to our shareholders given our decision to cease all trading operations made on June 30, 2003 and that all material information in respect of these earlier periods has been made available to our shareholders in our SEC filings for later periods. 15 In January 2006, we were contacted by the SEC's Office of Enforcement Liaison, who notified us that while they recognized the progress we had made in bringing our SEC filings up to date, they still considered us to be delinquent in our filings because of our failure to complete filings in respect of the period April 1, 2001 through June 30, 2003. In August 2006, on the basis of further audit work and a review of subsequent events our independent auditor completed the audit of our June 30, 2001 financial statements. In September 2006, we filed forms 10-QSB for the quarters ended September 30, 2001, December 31, 2001 and March 31, 2002. We are currently establishing the likely costs and practicality of completing the SEC filings and related financial statements for the period April 1, 2002 through June 30, 2003. In the meantime there continues to be a risk that our shares of common stock may be deregistered by the SEC's Office of Enforcement Liaison due the continued delinquency of our SEC filings for the period April 1, 2002 through June 30, 2003. THE REGULATION OF PENNY STOCKS BY SEC AND NASD MAY HAVE AN EFFECT ON THE TRADABILITY OF OUR SECURITIES. Our securities are currently listed on the GreySheets, and we are currently seeking to have them listed on the over the counter bulletin board. Our shares are subject to a Securities and Exchange Commission rule that imposes special sales practice requirements upon broker-dealers who sell such securities to persons other than established customers or accredited investors. For purposes of the rule, the phrase "accredited investors" means, in general terms, institutions with assets in excess of $5,000,000, or individuals having a net worth in excess of $1,000,000 or having an annual income that exceeds $200,000 (or that, when combined with a spouse's income, exceeds $300,000). For transactions covered by the rule, the broker-dealer must make a special suitability determination for the purchaser and receive the purchaser's written agreement to the transaction prior to the sale. Consequently, the rule may affect the ability of broker-dealers to sell our securities and also may affect the ability of purchasers in this offering to sell their securities in any market that might develop therefore. In addition, the Securities and Exchange Commission has adopted a number of rules to regulate "penny stocks." Such rules include Rules 3a51-1, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6, 15g-7, and 15g-9 under the Securities and Exchange Act of 1934, as amended. Because our securities constitute "penny stocks" within the meaning of the rules, the rules would apply to us and to our securities. The rules may further affect the ability of owners of Shares to sell our securities in any market that might develop for them. Shareholders should be aware that, according to Securities and Exchange Commission, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include (i) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (ii) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (iii) "boiler room" practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (iv) excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and (v) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired consequent investor losses. Our management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations to prevent the described patterns from being established with respect to our securities. OUR STOCK WILL IN ALL LIKELIHOOD BE THINLY TRADED AND AS A RESULT YOU MAY BE UNABLE TO SELL AT OR NEAR ASK PRICES OR AT ALL IF YOU NEED TO LIQUIDATE YOUR SHARES. The shares of our common stock may be thinly-traded on the OTC Bulletin Board, meaning that the number of persons interested in purchasing our shares of common stock at or near ask prices at any given time may be relatively small or non-existent. This situation is attributable to a number of factors, including the fact that we are a small company which is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven, early stage company such as ours or purchase or recommend the purchase of our shares of common stock until such time as we became more seasoned and viable. As a consequence, there may be periods of several days or more when trading activity in our shares of common stock is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on Securities price. We cannot give you any assurance that a broader or more active public trading market for our shares of Common Stock will develop or be sustained, or that any trading levels will be sustained. Due to these conditions, we can give investors no assurance that they will be able to sell their shares of common stock at or near ask prices or at all if you need money or otherwise desire to liquidate your shares of common stock of our Company. 16 RULE 144 SALES IN THE FUTURE MAY HAVE A DEPRESSIVE EFFECT ON OUR STOCK PRICE. All of the outstanding shares of common stock held by our present officers, directors, and affiliate stockholders are "restricted securities" within the meaning of Rule 144 under the Securities Act of 1933, as amended. As restricted Shares, these Shares may be resold only pursuant to an effective registration statement or under the requirements of Rule 144 or other applicable exemptions from registration under the Act and as required under applicable state securities laws. We are registering all of our outstanding Shares so officers, directors and affiliates will be able to sell their Shares if this Registration Statement becomes effective. Rule 144 provides in essence that a person who has held restricted securities for one year may, under certain conditions, sell every three months, in brokerage transactions, a number of Shares that does not exceed the greater of 1.0% of a company's outstanding common stock or the average weekly trading volume during the four calendar weeks prior to the sale. There is no limit on the amount of restricted securities that may be sold by a nonaffiliate after the owner has held the restricted securities for a period of two years. A sale under Rule 144 or under any other exemption from the Act, may have a depressive effect upon the price of the common stock in any market that may develop. THE PRICE OF OUR COMMON STOCK COULD BE HIGHLY VOLATILE Our intention is for our shares of common stock to become listed on the Over the Counter Bulletin Board. If we do obtain a listing on the over the counter bulletin board it is likely that our common stock will be subject to price volatility, low volumes of trades and large spreads in bid and ask prices quoted by market makers. Due to the low volume of shares traded on any trading day, persons buying or selling in relatively small quantities may easily influence prices of our common stock. This low volume of trades could also cause the price of our stock to fluctuate greatly, with large percentage changes in price occurring in any trading day session. Holders of our common stock may also not be able to readily liquidate their investment or may be forced to sell at depressed prices due to low volume trading. If high spreads between the bid and ask prices of our common stock exist at the time of a purchase, the stock would have to appreciate substantially on a relative percentage basis for an investor to recoup their investment. Broad market fluctuations and general economic and political conditions may also adversely affect the market price of our common stock. No assurance can be given that an active market in our common stock will develop or be sustained. If an active market does not develop, holders of our common stock may be unable to readily sell the shares they hold or may not be able to sell their shares at all. WE DO NOT ANTICIPATE PAYING CASH DIVIDENDS ON OUR COMMON STOCK We do not anticipate paying any cash dividends on our common stock in the foreseeable future. ITEM 7. FINANCIAL STATEMENTS Our financial statements are included herein commencing on page 27. ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE As reported in the Current Report on Form 8-K filed on September 15, 2005, effective September 12, 2005, we appointed Larry O'Donnell, CPA as our auditor in succession to BDO Seidman, LLP. We have not had any disagreements with our auditors. ITEM 8A CONTROLS and PROCEDURES We conducted an evaluation of the effectiveness of the design and operation of our disclosure controls (as defined in Exchange Act Rules 13a-14(c)) ("Controls") as of June 30, 2007 (the "Evaluation Date"). The evaluation was supervised by David J. Cutler, our Chief Executive Officer and Principal Accounting Officer, to test the effectiveness of Controls. Controls are designed to reasonably assure that information required to be disclosed in our reports filed under the Exchange Act, such as this Annual Report, is recorded, processed, summarized and reported within the time periods as required. Controls are also designed to reasonably assure that such information is accumulated and communicated to our management. Management does not expect that the Controls will prevent all errors. No matter how well designed, Controls cannot provide absolute assurance that the system's objectives will be met. Due to resource constraints, the design of Controls must be considered relative to their costs. No evaluation can provide absolute assurance that all of the Company's control issues will be detected and 17 corrected. Controls can be circumvented by individual acts, by collusion of two or more people or by override of the controls. We have had only limited operations as of the Evaluation Date and the Controls in place at that time may be inadequate for future operations. After evaluating the effectiveness of our Controls, Mr. Cutler concluded that as of the Evaluation Date, our Controls were adequate and effective to ensure that material information relating to the Company would be made known to them by individuals within those entities, particularly during the period in which this Form 10-KSB was being prepared. There were no significant changes in our internal controls or in other factors that could significantly affect our disclosure controls and procedures subsequent to the Evaluation Date, nor any significant deficiencies or material weaknesses in such disclosure controls and procedures requiring corrective actions. As a result, no corrective actions were taken. However, it should be noted that we intend to acquire another operating business. The Controls necessary for such new operations will, in all likelihood, be significantly different from the current Controls. PART III ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT DIRECTORS AND EXECUTIVE OFFICERS On April 22, 2005, David J. Cutler was appointed as a director and as president and following such appointment, Robert P. Stack submitted his resignation as an officer and director. In March 2006, Messrs. Wesley F. Whiting and Redgie Green were appointed to our Board of Directors. As of June 30, 2007, our directors and officers were: NAME AGE POSITION David J. Cutler 51 President, Chief Executive Officer, Wesley F Whiting 74 Secretary and Director Redgie Green 52 Director David J. Cutler - President, Chief Executive Officer, Chief Financial Office and Director. Mr. Cutler became our sole director and officer on April 22, 2005. Mr. Cutler has more than 25 years of experience in international finance, accounting and business administration. He held senior positions with multi-national companies such as Reuters Group Plc and the Schlumberger Ltd. and has served as a director for two British previously publicly quoted companies -- Charterhall Plc and Reliant Group Plc. From March 1993 until 1999, Mr. Cutler was a self-employed consultant providing accounting and financial advice to small and medium-sized companies in the United Kingdom and the United States. Mr. Cutler was Chief Financial Officer and subsequently Chief Executive Officer of Multi-Link Telecommunications, Inc., a publicly quoted voice messaging business, from 1999 to 2005. Since March 2006, Mr. Cutler has been Chief Executive Officer, Chief Financial Officer and a director of Concord Ventures, Inc. (formerly Cavion Technologies, Inc.), a publicly listed shell company and Chief Executive Officer, Chief Financial Officer and a director of Atomic Paintball, Inc., a development stage owner and operator of paintball parks, since August 2006. Mr. Cutler has a masters degree from St. Catherine College in Cambridge, England and qualified as a British Chartered Accountant and as Chartered Tax Advisor with Arthur Andersen & Co. in London. He was subsequently admitted as a Fellow of the UK Institute of Chartered Accountants. Since arriving in the United States Mr. Cutler has qualified as a Certified Public Accountant, a Fellow of the AICPA Institute of Corporate Tax Management, a Certified Valuation Analyst of the National Association of Certified Valuation Analysts and obtained an executive MBA from Colorado State University. WESLEY F. WHITING, age 74, Secretary and Director. Mr. Whiting became our secretary and director in March 2006.. Mr. Whiting was President, Director, and Secretary of Berge Exploration, Inc. (1978-88) and President, Vice President, and director of NELX, Inc. (1994-1998), and was Vice President and director of Intermountain Methane Corporation (1988-1991), and President of Westwind Production, Inc. (1997-1998). He was a director of Kimbell deCar Corporation 18 from 1998, until 2000 and he has been President and a director of Dynadapt System, Inc. since 1998. He was a Director of Colorado Gold & Silver, Inc. from 1999 to 2000. He was President and director of Business Exchange Holding Corp. from 2000 to 2002 and Acquisition Lending, Inc. (2000-2002). He was director and Vice President of Utilitec, Inc, 1999 to 2002, and has been Vice President and director of Agro Science, Inc. since 2001. He was President and director of Premium Enterprises, Inc. from October 2002 to December 31, 2002. He is Vice President and director of Evergreen Associates, Inc. and Resource Science, Inc. He was appointed Director and Secretary of BSA SatelLINK, Inc. in 2002. He was President and Director of Fayber Group, Inc. from 2003 to 2005 when he resigned. He has also been Director of Life USA, Inc. since 2003. He has been appointed as an officer and director of Captech Financial, Inc. in May 2006. He served as a director of Baymark Technologies, Inc. 2005-2006. He is a director of Concord Ventures, Inc. (formerly Cavion Technologies, Inc.) (2006). Redgie Green, age 54. Director. Mr. Green has served as a director of the Company, since March 2006. Mr. Green has been Secretary and Director of Dynadapt Systems, Inc. since 1998. Mr. Green has been co-owner and operator of Green's B&R Enterprises, a wholesale donut baker since 1983. He has been an active investor in small capital and high-tech adventures since 1987. Mr. Green was a director of Colorado Gold & Silver, Inc. in 2000. He was a director for Houston Operating Company in late 2004 until December 2004. He recently served as a director for Mountains West Exploration, Inc in 2005. He is a director of Concord Ventures, Inc. (formerly Cavion Technologies, Inc.) (2006) and was appointed as an officer and director of Captech Financial, Inc. in May 2006. He served as a director of Baymark Technologies, Inc. 2005-2006. COMMITTEES OF THE BOARD OF DIRECTORS In the ordinary course of business, the board of directors maintains a compensation committee and an audit committee The primary function of the compensation committee is to review and make recommendations to the board of directors with respect to the compensation, including bonuses, of our officers and to administer the grants under our stock option plan. The functions of the audit committee are to review the scope of the audit procedures employed by our independent auditors, to review with the independent auditors our accounting practices and policies and recommend to whom reports should be submitted, to review with the independent auditors their final audit reports, to review with our internal and independent auditors our overall accounting and financial controls, to be available to the independent auditors during the year for consultation, to approve the audit fee charged by the independent auditors, to report to the board of directors with respect to such matters and to recommend the selection of the independent auditors. In the absence of a separate audit committee our Board of Directors functions as audit committee and performs some of the same functions of an audit committee, such as recommending a firm of independent certified public accountants to audit the annual financial statements; reviewing the independent auditors independence, the financial statements and their audit report; and reviewing management's administration of the system of internal accounting controls. CONFLICTS OF INTEREST - GENERAL. Our directors and officers are, or may become, in their individual capacities, officers, directors, controlling shareholder and/or partners of other entities engaged in a variety of businesses. Thus, there exist potential conflicts of interest including, among other things, time, efforts and corporation opportunity, involved in participation with such other business entities. While each officer and director of our business is engaged in business activities outside of our business, they devote to our business such time as they believe to be necessary. CONFLICTS OF INTEREST - CORPORATE OPPORTUNITIES Presently no requirement contained in our Articles of Incorporation, Bylaws, or minutes which requires officers and directors of our business to disclose to us business opportunities which come to their attention. Our officers and directors do, however, have a fiduciary duty of loyalty to us to disclose to us any business opportunities which come to their attention, in their capacity as an officer and/or director or otherwise. Excluded from this duty would be opportunities which the person learns about through his involvement as an officer and director of another company. We have no intention of merging with or acquiring an affiliate, associate person or business opportunity from any affiliate or any client of any such person. 19 SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Securities Exchange Act requires our Officers and Directors, and persons who own more than 10% of a registered class of our equity securities, to file reports of ownership and changes in ownership with the SEC. Officers, directors and greater than 10% shareholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file. Based solely on our review of copies of such reports received, and representations from certain reporting persons, we believe that, during the fiscal year ended June 30, 2007, all Section 16(a) filing requirements applicable to our officers, directors and greater than 10% beneficial owners were filed in compliance with all applicable requirements with the exception of David J Cutler, Wesley F Whiting and Redgie Green who had not filed. CODE OF ETHICS A code of ethics relates to written standards that are reasonably designed to deter wrongdoing and to promote; - Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; - Full, fair, accurate, timely and understandable disclosure in reports and documents that are filed with, or submitted to, the SEC and in other public communications made by an issuer; - Compliance with applicable governmental laws, rules and regulations; - The prompt internal reporting of violations of the code to an appropriate person or persons identified in the code; and - Accountability for adherence to the code. Due to the limited scope of our current operations, we have not adopted a corporate code of ethics that applies to our principal executive officer, principal accounting officer, or persons performing similar functions. ITEM 10. EXECUTIVE COMPENSATION The following table sets forth certain information concerning compensation paid by the Company to its sole officer for the fiscal years ended June 30, 2007 and 2006 (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE Noneequity Nonqualified incentive deferred Stock Option plan compensation All other Salary Bonus awards awards compensation earnings compensation Total Name & Position Year ($) ($) ($) ($) ($) ($) ($) ($) ----------------- ---------- ---------- ---------- --------- ---------- --------------- --------------- --------------- ---------- David J. Cutler, President, CEO, 2007 $60,000 $-0- $ -0- $ -0- $ -0- $-0- $-0- $60,000 CFO and Director 2006 $60,000 $-0- $ -0- $ -0- $ -0- $-0- $-0- $60,000
EMPLOYMENT AND CONSULTING AGREEMENTS There were no employment contracts or consulting agreements with our directors or officers during the fiscal years ended June 30, 2007 and 2006. 20 DIRECTOR COMPENSATON The following table sets forth certain information concerning compensation paid to the Company's directors during the year ended June 30, 2007:
Nonqualified Non-equity deferred Fees earned or incentive compensation All other paid in cash Stock awards Option awards plan earnings compensation Total Name ($) ($) ($) compensation ($) ($) (1) ($) ($) ------------------ ---------------- --------------- ---------------- --------------- ---------------- ---------------- ------------- David J. Cutler $ -0- $ -0- $ -0- $ -0- $ -0- $ 60,000 $ 60,000 ------------------ ---------------- --------------- ---------------- --------------- ---------------- ---------------- ------------- Wesley Whiting $ -0- $ -0- $ -0- $ -0- $ -0- $ -0- $ -0- ------------------ ---------------- --------------- ---------------- --------------- ---------------- ---------------- ------------- Redgie Green $ -0- $ -0- $ -0- $ -0- $-0- $ -0- $ -0- ------------------ ---------------- --------------- ---------------- --------------- ---------------- ---------------- -------------
(1) The other compensation consists of the individual's salary for his services as an officer of the Company for the year ended June 30, 2007 STOCK OPTION PLAN In August 1996, we adopted a stock incentive award plan (the "1996 Plan") under which the Board of Directors (the "Board"), or a committee appointed for such purpose, was authorized to grant options, restricted stock or other stock-based compensation to the directors, officers, eligible employees or consultants to acquire up to an aggregate of 300,000 shares of our common stock. Options issued under the Plan generally vested over a 3-year period based on the following schedule: 40% after year one, 30% after year two, and 30% at the end of year three. All options expired ten years from the date of grant. In December 1997, our stockholders approved our 1997 Equity Incentive Plan (the "1997 Plan") under which the Board, or a committee appointed for such purpose, was authorized to grant options, restricted stock or other stock-based compensation to the directors, officers, eligible employees or consultants to acquire up to an aggregate of 2,100,000 shares of our common stock. Options issued under the 1997 Plan generally vested 20% per year over a 5-year period. All options expired ten years from the date of grant In April 1999, the Board approved our 1999 Non-Officer Stock Option Plan (the "1999 Plan") under which the Board, or a committee appointed for such purpose, was authorized to grant non-statutory options to eligible employees or consultants who were not officers or members of the Board, to acquire up to an aggregate of 3,000,000 shares of our common stock. Options granted under the 1999 Plan vested 25% per year over a 4-year period, in equal monthly installments over thirty-six months or 100% upon grant issuance. All options expired ten years from the date of grant. No stock options were issued or outstanding during the fiscal years ended June 30, 2007 or 2006. ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following tables set forth certain information regarding beneficial ownership of our common stock, as of September 14, 2007, by: o each person who is known by Aspeon to own beneficially more than 5% of Aspeon's outstanding common stock, o each of Aspeon's named executive officers and directors, and o all executive officers and directors as a group. 21 Shares of common stock not outstanding but deemed beneficially owned by virtue of the right of an individual to acquire the shares of common stock within 60 days are treated as outstanding only when determining the amount and percentage of common stock owned by such individual. Except as noted below the table, each person has sole voting and investment power with respect to the shares of common stock shown. As of September 14, 2007: NUMBER OF PERCENT OF NAME AND ADDRESS OF BENEFICIAL OWNER (1) SHARES OUTSTANDING --------------------------------------------- ------------- ------------ David J. Cutler 10,989,916 Wesley F. Whiting 0 0% Redgie Green 0 0% ------------ ------------ All executive officers and directors as a group, 3 people. 10,989,916 55.0% (1) The above officers and directors' address is c/o Aspeon, Inc. 2460 West 26th Avenue, Suite 380-C, Denver, Colorado, 80211. ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS During the fiscal years ended June 30, 2007 and 2006, an officer and director, Mr. Cutler, advanced to us $85,000 and $115,000, respectively, by way of loan, bearing interest at 8%, to meet our ongoing operating expenses and fund the costs of bringing our financial statements and SEC reporting up to date. On May 31, 2006, $14,243 of this debt was converted to equity. Since June 30, 2007, Mr. Cutler has continued to make further advances to us by way of loan to meet our ongoing operating expenses and fund the costs of bringing our financial statements and SEC reporting up to date as required. There is no assurance that Mr. Cutler will continue to provide us with further funding in the future. PART IV ITEM 13. EXHIBITS The following documents are filed as a part of this Report. (i) Financial Statements. See Index to Financial Statements and Schedule on page 26 of this Report. (ii) Exhibits. The following is a complete list of exhibits filed as part of this Form 10-KSB. Exhibit numbers correspond to the numbers in the Exhibit Table of Item 601 of Regulation S-B. EXHIBIT NUMBER DESCRIPTION AND METHOD OF FILING -------- -------------------------------------------------------------- 2.0(15) Share Sale Agreement dated January 17, 2003 entered into by Aspeon, Inc. and Matthew James Maley. 3.1(8) Registrant's Amended and Restated Certificate of Incorporation 3.2 Registrant's Certificate of Amendment to Amended and Restated Certificate of Incorporation. 3.3(10) Registrant's Certificate of Designations, Preferences and Rights of the Series A Convertible Exchangeable Preferred Stock. 3.4(1) Registrant's Amended and Restated Bylaws. 4.1(1) Form of Common Stock Certificate of Registrant. 22 10.1(1) Form of Indemnity Agreement entered into between the Company and its directors and executive officers.* 10.1 (12) Agreement relating to the purchase of the whole of the issued share capital of Javelin Holdings International Limited. 10.1 (13) Mutual Release and Settlement Agreement dated a of March 22 between the Company and Castle Creek Technology Partners LLC 10.1 (14) Secured Convertible Promissory Note Purchase Agreement dated September 12, 2002 entered into by Aspeon, Inc., Richard Stack, Kenneth Kadlec and Horace Hertz. 10.2 (14) Security dated September 12, 2002 entered into by Aspeon, Inc., Richard Stack, Kenneth Kadlec and Horace Hertz. 10.2(1) 1996 Stock Incentive Award Plan (the "1996 Plan").* 10.3 (14) Form of Secured Convertible Promissory Note payable by Aspeon, Inc., to each of Richard Stack, Kenneth Kadlec and Horace Hertz. 10.3(1) Form of Director Non-Qualified Stock Option Agreement under the 1996 Plan.* 10.4(1) Form of Employee Non-Qualified Stock Option Agreement under the 1996 Plan.* 10.5(6) 1997 Equity Incentive Plan, as amended.* 10.6(6) Form of Incentive Stock Option Agreement under the 1997 Plan.* 10.7(6) Form of Nonstatutory Stock Option Agreement under the 1997 Plan.* 10.8(1) Employment Agreement dated August 19, 1996 by and between the Company and Richard P. Stack.* 10.9(6) Employment Agreement dated January 1, 1998 by and between CCI Group, Inc. and Robert Nichols.* 10.10(6) Standard Industrial/Commercial Multi-Tenant Lease-Modified Net dated January 27, 1998 by and between the Company and BRS- Campo Investment Company LP. 10.11(1) Standard Industrial/Commercial Single-Tenant Lease-Gross dated October 19, 1995 by and between the Company and Robert P. Peebles Trust, dated April 11, 1979. 10.12(2) Standard Sublease dated September 9, 1997 by and between the Company, D. Howard Lewis and William R. Miller. 10.13(6) The Business Center Office/Warehouse Lease dated April 4, 1997 by and between CCI Group, Inc and Nooney Krombech Company. 10.14(2) Distributor Agreement dated March 14, 1997 by and between the Company and ScanSource, Inc. 10.15(6) Loan and Security Agreement dated June 8, 1998 by and among the Company, CCI Group, Inc., Posnet Computers, Inc. and Finova Capital Corporation and related Secured Promissory Note, Pledge Agreement and Secured Continuing Corporate Guarranty. 10.16(6) Form of Warrant issued by the Company in favor of Finova Capital Corporation. 10.17(8) Second and Third Amendments to Loan and Security Agreement dated December 15, 1998 and January 10, 1999, respectively by and among the Company, CCI Group, Inc., Posnet Computers, Inc. and FINOVA Capital Corporation and related Security Promissory Note, Pledge Agreement and Secured Continuing Corporate Guaranty. 23 10.18(7) Stock Purchase Agreement, dated April 23, 1999 by and among Javelin Systems, Inc., Dynamic Technologies, Inc., SB Hold- ings, Inc., John Biglin, Denise Biglin and John Seitz. 10.19(9) 1999 Non-Officer Stock Option Plan.* 10.20(9) Form of non-qualified stock option agreement under the 1999 Non-Officer Stock Option Plan.* 10.21(9) Form of 1999 Plan Stock Option Grant Notice.* 10.22(10) Securities Purchase Agreement, dated as of March 7, 2000, by and among the Company, Aspeon Solutions, Inc. and Marshall Capital Management, Inc. 10.23(10) Warrant to Purchase Common Stock of the Company, dated as of March 8, 2000 issued by the Company in favor of Marshal Capital Management, Inc. 10.24(10) Warrant to Purchase Common Stock of Aspeon Solutions, Inc. dated as of March 8, 2000, issued by Aspeon Solutions, Inc. in favor of Marshall Capital Management, Inc. 10.25(10) Registration Rights Agreement, dated as of March 7, 2000 by and among the Company, Aspeon Solutions, Inc. and Marshal Capital Management, Inc. 10.26 Sixth Amendment and Waiver to Loan and Security Agreement Between Aspeon, Inc., CCI Group, Inc. and Finova Capital Corporation. 16.1 (11) Letter from PricewaterhouseCoopers, LLP addressed to the Securities and Exchange Commission. 16.1 (16) Letter from BDO Seidman, LLP addressed to the Securities and Exchange Commission. 31 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act. 32 Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act. (1) Filed as an exhibit to the Company's Registration Statement on Form SB-2, as amended (No. 333-11217), and incorporated herein by reference. (2) Filed as an exhibit to the Company's Annual Report on Form 10-KSB for the fiscal year ended June 30, 1997 and incorporated herein by reference. (3) Filed as an exhibit to the Company's Current Report on Form 8-K dated December 30, 1997 and incorporated herein by reference. (4) Filed as an exhibit to the Company's Current Report on Form 8-K/A dated March 4, 1998 and incorporated herein by reference. (5) Filed as an exhibit to the Company's Current Report on Form 8-K dated January 5, 1998 and incorporated herein by reference. (6) Filed as an exhibit to the Company's Annual Report on Form 10-KSB for the fiscal year ended June 30, 1998 and incorporated herein by reference. (7) Filed as an exhibit to the Company's Current Report on Form 8-K filed May 3, 1999, and incorporated herein by reference. (8) Filed as an exhibit to the Company's Quarterly report on Form 10-QSB for the quarter ended December 31, 1998 and incorporated herein by reference. (9) Filed as an exhibit to the Company's Annual Report on Form 10-KSB for the fiscal year ended June 30, 1999 and incorporated herein by reference. 24 (10) Filed as an exhibit to the Company's Current Report on Form 8-K dated March 9, 2000 and incorporated herein by reference. (11) Filed as an exhibit to the Company's Current Report on Form 8-K dated January 21, 2001 and incorporated herein by reference (12) Filed as an exhibit to the Company's Current Report on Form 8-K dated April 8, 2002 and incorporated herein by reference (13) Filed as an exhibit to the Company's Current Report on Form 8-K dated May 14, 2002 and incorporated herein by reference (14) Filed as an exhibit to the Company's Current Report on Form 8-K dated September 27, 2002 and incorporated herein by reference (15) Filed as an exhibit to the Company's Current Report on Form 8-K dated February 3, 2003 and incorporated herein by reference. (16) Filed as an exhibit to the Company's Current Report on Form 8-K dated September 15, 2005 and incorporated herein by reference. * Management contract or compensatory plan or arrangement of the Company. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES Audit Fees We incurred no aggregate fees and expenses to our former auditors, BDO, and $3,850 and $5,540 to our current auditors, O'Donnell, in the fiscal years ended June 30, 2007 and 2006 respectively. Tax Fees We did not incur any tax fees to our former auditor, BDO, or our current auditors, O'Donnell, in the fiscal years ended June 30, 2007 and 2006 for professional services rendered for tax compliance, tax advice, and tax planning. No tax fees were incurred in these fiscal years to conserve cash resources. All Other Fees We did not incur any other professional fees to our former auditor, BDO, or our current auditors, O'Donnell, in the fiscal years ended June 30, 2007 and 2006 to conserve cash resources. It is the role of the Audit Committee, or in the absence of an audit committee, the Board of Directors, to consider whether, and determine that, the auditor's provision of non-audit services would be compatible with maintaining the auditor's independence. As reported in the Form 8-K filed on September 15, 2005, effective September 12, 2005 we appointed O'Donnell as auditors in succession to BDO. 25 INDEX TO FINANCIAL STATEMENTS PAGE REPORT ON THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM......... 27 CONSOLIDATED BALANCE SHEETS - June 30, 2007 and 2006................ 28 CONSOLIDATED STATEMENTS OF OPERATIONS -- For the Years Ended June 30, 2007 and 2006....................................................... 29 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT - For the Years Ended June 30, 2007 and 2006.......................... 30 CONSOLIDATED STATEMENTS OF CASH FLOWS -- For the Years Ended June 30, 2007 and 2006....................................................... 31 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.......................... 32 26 REPORT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors Aspeon, Inc. Denver, Colorado I have audited the accompanying balance sheets of Aspeon, Inc. as of June 30, 2007 and 2006 and the related statements of operations, stockholders' deficit, and cash flows for the years ended June 30, 2007 and 2006. These financial statements are the responsibility of the Company's management. My responsibility is to express an opinion on these financial statements based on my audits. I conducted my audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audits provide a reasonable basis for my opinion. In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Aspeon, Inc. as of June 30, 2007 and 2006 and the results of it's operations and cash flows for the years ended June 30, 2007 and 2006 in conformity with accounting principles generally accepted in the United States. The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company had suffered significant losses, had a working capital deficit as of June 30, 2007 and 2006 and no ongoing source of income. Management's plans to address these matters are also included in Note 2 to the financial statements. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ Larry O'Donnell CPA, PC Larry O'Donnell CPA, PC Aurora, Colorado August 31, 2007 27
ASPEON, INC. CONSOLIDATED BALANCE SHEETS JUNE 30, 2007 2006 ---------------------------------- ASSETS CURRENT ASSETS Cash & Cash Equivalents $ 0 $ 7 Accounts Receivable 0 0 Other Receivables 0 0 Inventory 0 0 Prepaid Expenses 1,000 188 ---------------------------------- Total Current Assets 1,000 195 FIXED ASSETS 0 0 OTHER ASSETS 0 0 ---------------------------------- TOTAL ASSETS $ 1,000 $ 195 ================================== LIABILITIES & STOCKHOLDERS' DEFICIT CURRENT LIABILITIES Accounts Payable $ 6,757,616 $ 6,757,616 Unearned Income & Customer Deposits 236,128 236,128 Accrued Expenses 599,245 580,809 Notes Payable 402,078 317,141 Deferred Earnouts 208,195 208,195 ---------------------------------- Total Current Liabilities 8,203,262 8,099,889 COMMITMENTS AND CONTINGENCIES (Note. 8) STOCKHOLDERS' DEFICIT Preferred Stock, $0.01 par value: 990,000 shares authorized (1,000,000 0 0 authorized, net 10,000 designated as mandatorily redeemable stock), no shares issued and outstanding. Common Stock, $0.01 par value: 20,000,000 shares authorized, 20,000,000 200,000 200,000 shares issued and outstanding. Additional Paid In Capital 84,846,965 84,846,965 Treasury Stock (60,000) (60,000) Accumulated Deficit (93,189,227) (93,086,659) ---------------------------------- Total Stockholders' Deficit (8,202,262) (8,099,694) ---------------------------------- TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 1,000 $ 195 ================================== See accompanying Notes to Consolidated Financial Statements.
28
ASPEON, INC. CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED JUNE 30, 2007 2006 --------------------------------- OPERATING EXPENSES / (INCOME) General & Administrative Expenses 84,132 116,166 Loss on Assignment for the Benefit of Creditors 0 20,000 --------------------------------- Total Operating Expenses / (Income) (84,132) (136,166) OPERATING PROFIT / (LOSS) (84,132) (136,166) Interest and Other Income / (Expenses) Net (18,436) (11,017) --------------------------------- Profit / (Loss) before Income Taxes (102,567) (147,183) Provision for Income Taxes - - --------------------------------- NET PROFIT / (LOSS) $ (102,567) $ (147,183) ================================= NET PROFIT / (LOSS) PER COMMON SHARE Basic & Diluted ($0.01) ($0.09) ================================= WEIGHTED AVERAGE COMMON SHARES OUTSTANDING Basic & Diluted 20,000,000 1,643,836 ================================= See accompanying Notes to Consolidated Financial Statements.
29
ASPEON, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT FOR THE YEARS ENDED JUNE 30, 2007 and 2006 Common Stock Treasury Stock Additional Accumulated Paid - in Accumulated Comprehensive Comprehensive Shares Amount Shares Amount Capital Deficit Profit/(Loss) Profit / (Loss) Total # $ # $ $ $ $ $ Balance, June 30, 2005 9,436,225 94,361 (200,000) (60,000) 84,938,361 (93,158,526) 71,867 (8,113,937) Net & Comprehen- sive (Loss) (147,183) (147,183) (147,183) =========== Issue of equity 10,563,775 105,639 (91,396) 14,243 ----------- -------- --------- -------- ----------- ------------- --------- ----------- Balance, June 30, 2006 20,000,000 $ 200,000 (200,000) $(60,000) $84,846,965 $ (93,158,526) $ 71,867 $(8,099,694) Net & Comprehen- sive (Loss) (102,567) (102,567) (102,567) =========== ---------- -------- -------- -------- ----------- ------------ --------- ---------- Balance, June 30, 2007 20,000,000 $ 200,000 (200,000) $(60,000) $84,846,965 $ (93,261,093) $ 71,867 $(8,202,261) =========== ======== ========= ======== =========== ============= ========= =========== See accompanying Notes to Consolidated Financial Statements.
30
ASPEON, INC. CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JUNE 30 2007 2006 ------------------------------- CASH FLOW PROVIDED BY / (USED IN) OPERATING ACTIVITIES NET PROFIT / (LOSS) $ (102,567) $ (147,183) ADJUSTMENTS TO RECONCILE NET PROFIT / (LOSS) TO NET CASH PROVIDED BY / (USED IN) OPERATING ACTIVITIES 0 0 CHANGES IN OPERATING ASSETS & LIABILITIES (Increase)/Decrease in Other Receivables 0 5,134 (Increase)/Decrease in Prepaid Expenses (812) 962 Increase/(Decrease) in Accounts Payable 0 (4,908) Increase/(Decrease) in Accrued Expenses 18,436 11,016 ------------------------------- Total Cash Flow provided by / (used in) Operating Activities (84,943) (134,979) CASH FLOW FROM INVESTING ACTIVITIES 0 0 ------------------------------- Total Cash Flow provided by / (used in) Investing Activities 0 0 CASH FLOW FROM FINANCING ACTIVITIES Advances under Notes Payable 84,936 100,743 Conversion on Notes Payable to Equity 0 14,243 ------------------------------- Total Cash Flow provided by / (used in) Financing Activities 84,936 114,986 INCREASE / (DECREASE) IN CASH & CASH EQUIVALENTS $ (7) $ (19,993) =============================== Cash and Cash Equivalents at the beginning of the period $ 7 $ 20,000 =============================== Cash and Cash Equivalents at the end of the period $ 0 $ 7 =============================== SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION Cash paid for interest $ 0 $ 0 ------------------------------- Cash paid for income tax $ 0 $ 0 ------------------------------- See accompanying Notes to Consolidated Financial Statements.
31 ASPEON, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES: Aspeon, Inc. (the "Company") was incorporated in September 1995 in the State of Delaware. Nature of Operations -- Effective June 30, 2003, we made the decision to discontinue all our remaining operating businesses and are now focused on reaching satisfactory negotiated settlements with our outstanding creditors, vigorously defend against any further appeal that may be made against our currently successful defense of the lawsuit brought against us by certain of our shareholders, bringing our financial records and SEC filings up to date, seeking a listing on the over the counter bulletin board, raising debt and/or equity to fund negotiated settlements with our creditors and to meet our ongoing operating expenses and attempting to merge with another entity with experienced management and opportunities for growth in return for shares of our common stock to create value for our shareholders. There can be no assurance that this series of events will be successfully completed. Significant Accounting Policies: Principles of Consolidation -- The accompanying consolidated financial statements include the accounts of Aspeon and its wholly-owned subsidiaries. All significant inter-company transactions and balances have been eliminated. Cash and Cash Equivalents -- Cash and cash equivalents consist of cash and highly liquid debt instruments with original maturities of less than three months. Inventories - Inventories consisted primarily of point of sale computer hardware and components and were stated at the lower of cost (first-in first-out) or market. All our remaining inventories were transferred to the trustee of the assignment for the benefit of Aspeon and CCI creditors effective January 1, 2004 after which we held no inventory. Property and Equipment- All our remaining property and equipment was transferred to the trustee of the assignment for the benefit of Aspeon and CCI creditors effective January 1, 2004 after which we held no property or equipment. Deferred Costs and Other -- Offering costs with respect to issue of common stock, warrants or options by us were initially deferred and ultimately offset against the proceeds from these equity transactions if successful or expensed if the proposed equity transaction is unsuccessful. Financial Instruments -- The estimated fair values for financial instruments was determined at discrete points in time based on relevant market information. These estimates involved uncertainties and could not be determined with precision. The carrying amounts of the note receivable, accounts receivable, accounts payable and accrued liabilities approximated fair value because of the short-term maturities of these instruments. The fair value of notes payable approximated to their carrying value as generally their interest rates reflected our effective annual borrowing rate. Income Taxes -- We account for income taxes under the liability method, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statements and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Comprehensive Income (Loss) -- Comprehensive income is defined as all changes in stockholders' equity (deficit), exclusive of transactions with owners, such as capital investments. Comprehensive income includes net income or loss, changes in certain assets and liabilities that are reported directly in equity such as translation adjustments on investments in foreign subsidiaries and unrealized gains (losses) on available-for-sale securities. During the fiscal years ended June 30, 2007 and 2006, our net (loss) was identical to our comprehensive (loss). 32 Income (Loss) Per Share -- The income (loss) per share is presented in accordance with the provisions of Statement of Financial Accounting Standards (SFAS) No. 128, Earnings Per Share. SFAS No. 128 replaced the presentation of primary and fully diluted earnings (loss) per share (EPS) with a presentation of basic EPS and diluted EPS. Basic EPS is calculated by dividing the income or loss available to common stockholders by the weighted average number of common stock outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. Basic and diluted EPS were the same for the fiscal years ended June 30 2007 and 2006, as we recorded losses during these years and any calculation of diluted EPS would be anti-dilutive. Stock-Based Compensation -- As permitted under the SFAS No. 123, Accounting for Stock-Based Compensation, we account for our stock-based compensation in accordance with the provisions of Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees. As such, compensation expense is recorded on the date of grant if the current market price of the underlying stock exceeds the exercise price. Certain pro forma net income and EPS disclosures for employee stock option grants are also included in the notes to the financial statements as if the fair value method as defined in SFAS No. 123 had been applied. Transactions in equity instruments with non-employees for goods or services are accounted for by the fair value method. Use of Estimates -- The preparation of our consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in these financial statements and accompanying notes. Actual results could differ from those estimates. Due to uncertainties inherent in the estimation process, it is possible that these estimates could be materially revised within the next year. Recently Issued Accounting Pronouncements -- In February 2006, the FASB issued FASB Statement No. 155, which is an amendment of FASB Statements No. 133 and 140. This Statement; a) permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation, b) clarifies which interest-only strip and principal-only strip are not subject to the requirements of Statement 133, c) establishes a requirement to evaluate interests in securitized financial assets to identify interest that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation, d) clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives, e) amends Statement 140 to eliminate the prohibition on a qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. This Statement is effective for financial statements for fiscal years beginning after September 15, 2006. Earlier adoption of this Statement is permitted as of the beginning of an entity's fiscal year, provided the entity has not yet issued any financial statements for that fiscal year. We do not believe that the adoption of FASB Statement No. 155 will have a material impact on our financial conditions or results of operation. In March 2006, the Financial Accounting Standards Board (`FASB') issued FASB Statement No. 156, which amends FASB Statement No. 140. This Statement establishes, among other things, that accounting for all separately recognized servicing assets and servicing liabilities. This Statement amends Statement 140 to require that all separately recognized servicing assets and servicing liabilities be initially measured at fair value, if practicable. This Statement permits, but does not require, the subsequent measurement of separately recognized servicing assets and servicing liabilities at fair value. An entity that uses derivative instruments to mitigate the risks inherent in servicing assets and servicing liabilities is required to account for those derivative instruments at fair value. Under this Statement, an entity can elect subsequent fair value measurement to account for its separately recognized servicing assets and servicing liabilities. By electing that option, an entity may simplify its accounting because this Statement permits income statement recognition of the potential offsetting changes in fair value of those servicing assets and servicing liabilities and derivative instruments Is the same accounting period. This Statement is effective for financial statements for fiscal years beginning after September 15, 2006. Earlier adoption of this Statement is permitted as of the beginning of an entity's fiscal year, provided the entity has not yet issued any financial statements for that fiscal year. We do not believe that the adoption of FASB Statement No. 156 will have a material impact on our financial conditions or results of operation. 33 In June 2006, the FASB issued Interpretation ("FIN") No. 48, "Accounting for Uncertainty in Income Taxes--an interpretation of FASB Statement No. 109." This Interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, and provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. This Interpretation is effective for fiscal years beginning after December 15, 2006. We believe that FIN No. 48 should not have a material impact on our financial position or results of operations In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" ("SFAS No. 157"). SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles ("GAAP"), and expands disclosures about fair value measurements. This statement applies under other accounting pronouncements that require or permit fair value measurement where the FASB has previously determined that under those pronouncements fair value is the appropriate measurement. This statement does not require any new fair value measurements but may require companies to change current practice. This statement is effective for those fiscal years beginning after November 15, 2007 and to the interim periods within those fiscal years. We believe that SFAS No. 157 should not have a material impact on our financial position or results of operations. In September 2006, the FASB issued Statement of Financial Accounting Standards ("SFAS") No. 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans" ("SFAS No. 158"). SFAS No. 158 requires employers to recognize the overfunded or underfunded status of a defined benefit postretirement plan as an asset or liability in its statement of financial position, recognize changes in that funded status in the year in which the changes occur through comprehensive income and measure a plan's assets and its obligations that determine its funded status as of the end of the employer's fiscal year. The provisions of SFAS No. 158 are effective for fiscal years ending after December 15, 2006. We believe that SFAS No. 158 should not have a material impact on our financial position or results of operations. In September 2006, the SEC issued Staff Accounting Bulletin ("SAB") No. 108, "Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements." SAB No. 108 addresses how the effects of prior year uncorrected misstatements should be considered when quantifying misstatements in current year financial statements. SAB No. 108 requires companies to quantify misstatements using a balance sheet and income statement approach and to evaluate whether either approach results in quantifying an error that is material in light of relevant quantitative and qualitative factors. SAB No. 108 is effective for period ending after November 15, 2006. The adoption of this SAB is not expected to have a material effect on our financial statements. In February 2007, the Financial Accounting Standards Board (FASB) issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities - Including an Amendment of FASB Statement No. 115." This statement permits entities to choose to measure many financial instruments and certain other items at fair value. Most of the provisions of SFAS No. 159 apply only to entities that elect the fair value option. However, the amendment to SFAS No. 115 "Accounting for Certain Investments in Debt and Equity Securities" applies to all entities with available-for-sale and trading securities. SFAS No. 159 is effective as of the beginning of an entity's first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provision of SFAS No. 157, "Fair Value Measurements." The adoption of this statement is not expected to have a material effect on our financial statements. In March 2007, the FASB ratified the Emerging Issues Task Force ("EITF") Issue No. 06-11, Accounting for Income Tax Benefits of Dividends on Share Based Payment Awards ("EITF 06-11"). EITF 06-11 requires companies to recognize the income tax benefit realized from dividends or dividend equivalents that are charged to retained earnings and paid to employees for nonvested equity-classified employee share-based awards as an increase to additional paid-in capital. EITF 06-11 is effective for fiscal years beginning after September 15, 2007. The adoption of EITF 06-11 is not expected to have a material effect on our financial statements. In June 2007, the FASB ratified EITF Issue No. 07-03, Accounting for Nonrefundable Advance Payments for Goods and Services Received for Use in Future Research and Development Activities ("EITF 07-03"). EITF 07-03 requires companies to defer nonrefundable advance payments for goods and services and to expense that advance payment as the goods are delivered or services are rendered. If the company does not expect to have the goods delivered or services performed, the advance should be expensed. EITF 07-03 is effective for fiscal years beginning after December 15, 2007. The adoption of EITF 07-03 is not expected to have a material effect on our financial statements. 34 Business Segments -- In June 1997, the FASB issued SFAS No. 131, Disclosures About Segments of an Enterprise and Related Information ("SFAS No. 131"). SFAS No. 131 changes the way public companies report segment information in annual financial statements and also requires those companies to report selected segment information in interim financial reports to stockholders. It also establishes standards for related disclosures about products and services, geographic areas, and major customers. Management believes our operations during fiscal 2007 and 2006 comprised only one segment and as such, adoption of SFAS No. 131 does not impact the disclosures made in our financial statements. 2. GOING CONCERN AND LIQUIDITY: As of June 30, 2007, we had $0 cash on hand, $1,000 of assets, no operating business or other source of income, outstanding liabilities of approximately $8.2 million, a stockholders' deficit of approximately $8.2 million. Consequently, we are now dependent on raising additional equity and, or, debt to fund any negotiated settlements with our outstanding creditors and meet our ongoing operating expenses. There is no assurance that we will be able to raise the necessary equity and, or, debt that we will need to be able to negotiate acceptable settlements with our outstanding creditors or fund our ongoing operating expenses. During the fiscal years ended June 30, 2007 and 2006, one of our directors, David J Cutler, advanced to us $85,000 and $115,000 respectively by way of loan, bearing interest at 8%, to meet our ongoing operating expenses and fund the costs of bringing our financial statements and SEC reporting up to date. On May 31, 2006, $14,000 of this loan was converted to equity. Since June 30, 2007, Mr. Cutler has continued to make further advances to us by way of loan to meet our ongoing operating expenses and fund the costs of bringing our financial statements and SEC reporting up to date as required. There is no assurance that Mr. Cutler will continue to provide us with further funding in the future. It is our current intention to seek to reach satisfactory negotiated settlements with our outstanding creditors, vigorously defend against any further appeal that may be made against our currently successful defense of the lawsuit brought against us by certain of our shareholders, bring our financial records and SEC filings up to date, seek a listing on the over the counter bulletin board, raise debt and, or, equity financing to fund the negotiated settlements with our creditors and to meet ongoing operating expanses and attempt to merge with another entity with experienced management and opportunities for growth in return for shares of our common stock to create value for our shareholders.. There is no assurance that this series of events will be satisfactorily completed. 3. ASSETS Effective January 1, 2004, all our remaining assets, with the exception of certain other receivables, were transferred to the trustee of the assignment for benefit of the Aspeon and CCI creditors at a fair market value of $496,000. Our only remaining asset - other receivables - related to Directors' and Officers' insurance due from our insurance company to be paid to our attorneys for legal fees incurred in respect of the lawsuit brought against us by certain of our shareholders. This balance has now been paid in full to our attorneys. Since April 2005 we have accumulated certain other nominal current assets relating to prepaid expenses with funds provide to us by loan from our sole director, David J Cutler. 4. LIABILITIES In December 2003, we appointed attorney Frank Blundo Jr. P.C. as trustee of an assignment for the benefit of the Aspeon and CCI creditors commencing effective January 1, 2004. On January 1, 2004, all of Aspeon's and CCI's assets were transferred to the trustee for the benefit of those Aspeon and CCI creditors who elected to participate in the assignment for the benefit of Aspeon and CCI creditors. The assets transferred had a fair market value of $496,000 and creditors totaling $3.7 million elected to be participate in, and be bound by the terms of, the assignment for the benefit of Aspeon and CCI creditors under which they no longer had any further claim against Aspeon or CCI. Certain Aspeon and CCI creditors, totaling in excess of $3.1 million, elected not to participate in the assignment for the benefit of Aspeon and CCI creditors and remained as outstanding liabilities of Aspeon and CCI. 35 At June 30, 2007 and 2006, our total liabilities also included certain liabilities in respect of Javelin Asia and RCS that remained outstanding following the termination of their operations. No interest expense was accrued in the fiscal years ended June 30, 2007 and 2006 in respect to liabilities outstanding as at January 1, 2004, as these liabilities are anticipated to be settled at, or at less than, the carrying value at which they are currently recorded in our balance sheet. 5. NOTES PAYABLE Related Party During the fiscal years ended June 30, 2007 and 2006, one of our directors, David J Cutler, advanced to us $85,000 and $115,000, respectively, by way of loan, bearing interest at 8%, to meet our ongoing operating expenses and fund the costs of bringing our financial statements and SEC reporting up to date. On May 31, 2006 $14,000 of this debt was converted to equity. Since June 30, 2007, Mr. Cutler has continued to make further advances to us by way of loan to meet our ongoing operating expenses and fund the costs of bringing our financial statements and SEC reporting up to date as required. There is no assurance that Mr. Cutler will continue to provide us with further funding in the future. Others Also included in the balance on notes payable is a balance due to an individual who had previously sold his business to us. We had renegotiated the terms of the deferred earnout due to him on the sale of his business to us such that the note payable represented the balance due to him. We were in default in repayment of this note payable as at June 30, 2007 and 2006. 6. COMMITMENTS AND CONTINGENCIES: Leases At June 30, 2007 and 2006, we were in default on all of our outstanding capital and operating leases that had been entered into to prior to April 2005 and the full amount of our liability under theses lease is recorded as current liabilities included in our balance of accounts payable. Rent expense under operating lease agreements entered into after April 2005 aggregated to approximately $6,000 for the fiscal years ended June 30, 2007 and 2006 and were included in general and administrative expenses in our consolidated statements of operations. Litigation In October and November 2000, eight purported class action lawsuits were filed against us, our former Chief Executive Officer, and our former Chief Financial Officer in the United States District Court for the Central District of California for alleged violations of the Securities Exchange Act of 1934. After the defendants moved to dismiss each of the actions, the lawsuits were consolidated under a single action, entitled "In re Aspeon Securities Litigation," Case No. SACV 00-995 AHS (ANx), and the appointed lead plaintiff voluntarily filed an amended and consolidated complaint. The defendants moved to dismiss that complaint and on April 23, 2001 the Court entered an order dismissing the complaint without prejudice. On May 21, 2001 the appointed lead plaintiff filed a third complaint, styled as a "First Amended Consolidated Complaint." On June 4, 2001, the defendants moved to dismiss this complaint and on September 17, 2001 the United States District Court dismissed the suit with prejudice and entered judgment in favor of the us and our officers. On September 20, 2001, the lead plaintiff in the class action suit appealed against the dismissal of the case. On January 21, 2003 the decision to dismiss the case was upheld but the lead plaintiff was given the opportunity to remedy the deficiencies in the complaint that had been filed. Accordingly on May 30, 2003, the plaintiff filed its "Second Amended Consolidated Complaint" which again was subsequently dismissed by the District Court. On November 26, 2003 the lead plaintiff filed its "Third Amended Consolidated Complaint," which was again dismissed with prejudice in March 2004. The lead plaintiff once again appealed 36 against the dismissal and the United States Court of Appeals for the Ninth Circuit affirmed the dismissal with prejudice on February 23, 2006. This is the fifth time that the Courts have ruled in favor of us and against the shareholders who have brought this suit against us. On each of the previous occasions the shareholders who have brought this suit against us have filed an appeal against the decision of the Courts. We believe that all appeal periods have run, by April 2006, and no actions are pending to the best of our knowledge. If we were to be subject to any further action, which may be made in respect of the lawsuit brought against us by certain of our shareholders, it is unlikely that the proceeds from our Directors' and Officers' insurance policy would be sufficient to meet the damages assessed, and we would have no alternative but to file for bankruptcy. Guarantees In July, 2001, Javelin Australia entered into a factoring facility amounting to approximately $500,000 or a lesser amount based on eligible receivables. The facility was cancelable on 30 days notice by either party. The agreement provided for a discount rate of 1.75% + the bank's published overdraft index rate and a factoring service fee of 0.50%. Borrowings under the line were restricted to the operations of Javelin Australia and could not be used to support our other operations. Aspeon provided a guarantee for this facility that was to be released on its sale of Javelin Australia in January 2003 and in respect of which it was indemnified by the purchaser of Javelin Australia. 7. RELATED PARTY TRANSACTIONS On April 22, 2005, our sole director, David J Cutler entered into an agreement with Frank G Blundo, Jr. P.C., trustee of the assignment for the benefit of Aspeon and CCI creditors, subject to due diligence, to invest up to $50,000 cash in us for the benefit of our creditors in return for a number of shares of our common stock to be determined. Following the completion of the due diligence process during the three months ended December 31, 2005, it was agreed with Frank G Blundo, Jr. P.C., trustee of the assignment for the benefit of Aspeon and CCI creditors, that Mr. Cutler would invest $20,000 in us for the benefit of Aspeon and CCI creditors in return for a number of shares of our common stock to be determined. Accordingly during the three months ended December 31, 2005, $20,000 which had been placed in escrow with Frank G Blundo, Jr. P.C. by Mr. Cutler was released for the benefit of Aspeon and CCI creditors. On May 31, 2006, based on an independent third party valuation, the majority of our independent directors approved the issue of 10,536,775 shares of our common stock to Mr. Cutler for the conversion of $14,243 of his debt into equity. Following the issue of these shares of our common stock, Mr. Cutler owned 52.7% of our total authorized and issued share capital and still had a loan outstanding to us of approximately $178,000. During the fiscal years ended June 30, 2007 and 2006, Mr. Cutler, advanced to us $85,000 and $115,000 respectively by way of loan, bearing interest at 8%, to meet our ongoing operating expenses and fund the costs of bringing our financial statements and SEC reporting up to date. On May 31, 2006, $14,000 of this debt was converted to equity. Since June 30,2007, Mr. Cutler has continued to make further advances to us by way of loan to meet our ongoing operating expenses and fund the costs of bringing our financial statements and SEC reporting up to date as required. There is no assurance that Mr. Cutler will continue to provide us with further funding in the future. 8. STOCKHOLDERS' DEFICIT: Common Stock - During the fiscal year ended June 30, 2007, the Company did not issue any shares of its common stock. In May 2006, Mr. Cutler was issued 10,536,775 shares of common stock as payment of $14,253 of the debt owed to him (Note 7). Warrants -- During the financial years ended June 30, 2007 and 2006, no warrants were issued and outstanding. Stock Options - In August 1996, we adopted a stock incentive award plan (the "1996 Plan") under which the Board of Directors (the "Board"), or a committee appointed for such purpose, was authorized to grant options, restricted stock or other stock-based compensation to the directors, officers, eligible employees or consultants to acquire up to an aggregate of 300,000 shares of our common stock. Options issued under the Plan generally vested over a 3-year period based on the following schedule: 40% after year one, 30% after year two, and 30% at the end of year three. All options expired ten years from the date of grant. 37 In December 1997, our stockholders approved our 1997 Equity Incentive Plan (the "1997 Plan") under which the Board, or a committee appointed for such purpose, was authorized to grant options, restricted stock or other stock-based compensation to the directors, officers, eligible employees or consultants to acquire up to an aggregate of 2,100,000 shares of our common stock. Options issued under the 1997 Plan generally vested 20% per year over a 5-year period. All options expired ten years from the date of grant In April 1999, the Board approved our 1999 Non-Officer Stock Option Plan (the "1999 Plan") under which the Board, or a committee appointed for such purpose, was authorized to grant non-statutory options to eligible employees or consultants who were not officers or members of the Board, to acquire up to an aggregate of 3,000,000 shares of our common stock. Options granted under the 1999 Plan vested 25% per year over a 4-year period, in equal monthly installments over thirty-six months or 100% upon grant issuance. All options expired ten years from the date of grant. All outstanding stock options were cancelled on April 22, 2005. No options were issued or outstanding during the year ended June 30, 2007 or 2006. Pro Forma Stock-Based Compensation Disclosures -- We apply APB Opinion 25 and related interpretations in accounting for our stock options that are granted to employees. Accordingly, no compensation cost has been recognized for grants of options to employees since the exercise prices were not less than the quoted value of our common stock on the grant dates. Had compensation cost been determined based on the fair value at the grant dates for awards under the Plan consistent with the method of SFAS No. 123, our net income (loss) and earnings (loss) per share would have been unchanged as all expenses in respect of issued stock options were immaterial. 9. INCOME TAXES: We currently have very substantial net operating losses carried forward for Federal and State tax purposes which, unless utilized, expire from 2013 through 2025. However, following the issue of shares effective May 31, 2006, our ability to use these losses was substantially restricted by the impact of Section 382 of the Internal Revenue Code. 10. SUBSEQUENT EVENTS: None. 38 SIGNATURES In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ASPEON, INC. Date: September 27, 2007 By: /s/ DAVID J. CUTLER -------------------- David J Cutler Chief Executive Officer, & Chief Financial Officer In accordance with the Securities Exchange Act of 1924, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. SIGNATURE TITLE DATE /s/ David J. Cutler Chief Executive Officer September 27, 2007 -------------------------- David J. Cutler & Chief Financial Officer (Principal Financial and Accounting Officer) /s/ David J. Cutler Director September 27, 2007 -------------------------- David J. Cutler /s/ Wesley F. Whiting Director September 27, 2007 -------------------------- Wesley F. Whiting /s/ Redgie Green Director September 27, 2007 -------------------------- Redgie Green 39