10QSB 1 aspe10q33108.txt U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON D.C. 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED MARCH 31, 2008 OR [_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT Commission file number 000-21477 ASPEON, INC. -------------- (Exact name of the registrant as specified in its charter) Delaware 52-1945748 ---------- ------------ (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 2460 West 26th Avenue, Suite 380-C, Denver, Colorado 80211 ---------------------------------------------------------- (Address of principal executive offices) (303) 380-9784 -------------- (Issuer's telephone number) Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X ] No [ ] Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ] State the number of shares outstanding of each of the issuer's classes of equity, as of the latest practicable date: On May 16, 2008, the Company had 20,000,000 shares of its $0.01 par value, common stock issued and outstanding. Transitional Small Business Disclosure format: Yes [ ] No [ X ]
INDEX ASPEON, INC. PART I - FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) PAGE Consolidated Balance Sheet - March 31, 2008. Consolidated Statements of Operations - For the Three and Nine Months Ended March 31, 2008 and 2007 4 Consolidated Statement of Cash Flows - For the Nine Months Ended March 31, 5 2008 and 2007 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis or Plan of Operations 11 Item 3. Controls and Procedures 17 Item 3A(T) Controls and Procedures 17 PART II - OTHER INFORMATION Item 1. Legal Proceedings 17 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 17 Item 3. Defaults on Senior Securities 17 Item 4. Submission of Matters to a Vote of Security Holders 17 Item 5. Other Information 19 Item 6. Exhibits 19 SIGNATURES 20
2 Part I. FINANCIAL INFORMATION Item I. Financial Statements
Aspeon, Inc. and Subsidiaries Consolidated Balance Sheet March 31, 2008 (Unaudited) ASSETS Current Assets Cash & Cash Equivalents $ 33 Prepaid Expenses 1,000 ------------------ Total Current Assets 1,033 ------------------ TOTAL ASSETS $ 1,033 ================== LIABILITIES & STOCKHOLDERS' DEFICIT Current Liabilities Accounts Payable $ 4,991,402 Unearned Income & Customer Deposits 236,128 Accrued Expenses 639,390 Notes Payable 331,202 ------------------ Total Current Liabilities 6,198,122 COMMITMENTS AND CONTINGENCIES (Note 9) STOCKHOLDERS' DEFICIT Preferred Stock, $0.01 par value: 990,000 shares authorized (1,000,000 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 shares issued and outstanding Additional Paid In Capital 84,846,966 Treasury Stock (60,000) Accumulated Deficit (91,184,055) ------------------ Total Stockholders' Deficit (6,197,089) ------------------ TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 1,033 ================== See accompanying Notes to Consolidated Financial Statements. 3
Aspeon, Inc. and Subsidiaries Consolidated Statements of Operations (Unaudited) Three Months Ended Nine Months Ended March 31, March 31, 2008 2007 2008 2007 ----------------- ---------------- ---------------- ----------------- Operating Expenses General & Administrative Expenses 43,600 18,093 80,068 65,750 Gain on Statute Barred Liabilities (2,102,917) - (2,102,917) - ----------------- ---------------- ---------------- ----------------- Total Operating (Income) Expenses (2,059,317) 18,093 (2,022,849) 65,750 Operating Income (Loss) 2,059,317 (18,093) 2,022,849 (65,750) Interest and Other Income (Expenses) Net (6,281) (4,792) (17,677) (13,226) ----------------- ---------------- ---------------- ----------------- Income (Loss) before Income Taxes 2,053,036 (22,885) 2,005,172 (78,976) Provision for Income Taxes - - - - ----------------- ---------------- ---------------- ----------------- Net Income (Loss) $ 2,053,036 $ (22,885) $ 2,005,172 $ (78,976) ================= ================ ================ ================= NET LOSS PER COMMON SHARE Basic & Diluted $0.10 * $0.10 * ================= ================ ================ ================= WEIGHTED AVERAGE COMMON SHARES OUTSTANDING Basic & Diluted 20,000,000 20,000,000 20,000,000 20,000,000 ================= ================ ================ ================= * Less than ($0.01) per share. See accompanying Notes to Consolidated Financial Statements. 4
Aspeon, Inc. and Subsidiaries Consolidated Statements of Cash Flows (Unaudited) Nine Months Ended March 31, 2008 2007 ---------------- ----------------- CASH FLOW USED IN OPERATING ACTIVITIES: NET INCOME (LOSS) $ 2,005,172 $ (78,976) ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET CASH USED IN OPERATING ACTIVITIES: Gain on Statute Barred Liabilities (2,102,917) - CHANGES IN OPERATING ASSETS & LIABILITIES: Increase (Decrease) in Accounts Payable 508 (11) Increase in Accrued Expenses 40,146 13,226 ---------------- ----------------- Total Cash Flow used in Operating Activities (57,091) (65,761) CASH FLOW FROM INVESTING ACTIVITIES: - - ---------------- ----------------- Total Cash Flow provided by / (used in) Investing Activities - - CASH FLOW FROM FINANCING ACTIVITIES: Advances under Notes Payable 57,124 65,754 ---------------- ----------------- Total Cash Flow provided by Financing Activities 57,124 65,754 ---------------- ----------------- INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS $ 33 $ (7) ---------------- ----------------- Cash and Cash Equivalents at the beginning of the period $ - $ 7 ---------------- ----------------- Cash and Cash Equivalents at the end of the period $ 33 $ - ================ ================= SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION Cash paid for interest $ - $ - ================ ================= Cash paid for income tax $ - $ - ================ ================= See accompanying Notes to Consolidated Financial Statements. 5
ASPEON, INC. AND SUBISIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2008 AND 2007 (UNAUDITED) Note 1. Business We were incorporated in the State of Delaware in September 1995, under the name Sunwood Research, Inc. We changed our name to Javelin Systems, Inc. in October 1996 and to Aspeon, Inc. in December 1999. 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, maintaining our financial records and Securities and Exchange Commission (`SEC') filings on a current basis, 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. In January 2008, Pennaluna & Co, a broker dealer, submitted a Form 15c-211 on our behalf seeking to have our shares of common stock re-listed on the over the counter bulletin board. Effective January 21, 2008, our shares were re-listed on the over the counter bulletin board and trades under the symbol ASPE.OB. On April 2, 2008, we held an annual meeting of stockholders at which the majority of stockholders voted to re-elect Messrs. Cutler, Whiting and Green as directors, authorize a reverse split of our common stock on a fifteen for one basis, appoint Larry O'Donnell, CPA, P.C. as our independent auditor, change our name to a name to be determined by the Board of Directors, increase the authorized number of our Common Shares from twenty million (20,000,000) to one hundred million (100,000,000) and increase the authorized number of our Preferred Shares from one million (1,000,000) to twenty five million (25,000,000). Note 2. Basis of Presentation The accompanying unaudited consolidated financial statements of Aspeon, Inc. have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In our opinion the financial statements include all adjustments (consisting of normal recurring accruals) necessary in order to make the financial statements not misleading. Operating results for the three and nine month periods ended March 31, 2008 are not necessarily indicative of the results that may be expected for the year ended June 30, 2008. For more complete financial information, these unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in our Annual Report for the year ended June 30, 2007 filed with the SEC. Note 3. Going Concern As of March 31, 2008, we had $33 cash on hand, $1,033 of total assets, no operating business or other source of income, outstanding liabilities, all current, of $6,198,122 and a stockholders' deficit of $6,197,089. 6 In our Annual Reports on Form 10-KSB for the fiscal years ended June 30, 2007 and 2006, the Report of the Independent Registered Public Accounting Firm included an explanatory paragraph that describes substantial doubt about our ability to continue as a going concern. Our interim financial statements for the nine months ended March 31, 2008 have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. We reported an accumulated deficit of $91,184,055 and a working capital deficiency of $6,197,089 as of March 31, 2008. 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 $100,743 and $98,936 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. $14,000 of this loan was converted to 10,563,775 shares of our common stock effective May 31, 2006. In the nine months ended March 31, 2008 Mr. Cutler and a company controlled by him has made further advances to us of $57,124 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. 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, maintain our financial records and SEC filings on a current basis, raise debt and, or, equity financing to fund the negotiated settlements with our creditors and to meet 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. There is no assurance that this series of events will be satisfactorily completed. Note 4. Basis of Consolidation The accompanying consolidated unaudited financial statements include the accounts of Aspeon and its wholly-owned subsidiaries. All significant inter-company transactions and balances have been eliminated Note 5: Significant Accounting Policies Cash and Cash Equivalents -- Cash and cash equivalents consist of cash and highly liquid debt instruments with original maturities of less than three months. 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 notes 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 7 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. Unearned Income & Customer Deposits -- Customer deposits represent cash received in advance of product shipment while deferred revenues represents cash received in advance of the performance of service contract revenues. 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 three and nine months ended March 31, 2008 and 2007 our net income (loss) was identical to our comprehensive income (loss). 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 during the three and nine months ended March 31, 2008 and 2007 as we had no stock options or warrants outstanding during periods. Stock-Based Compensation-- Beginning July 1, 2006, the Company adopted the provisions of and accounts for stock-based compensation in accordance with Statement of Financial Accounting Standards (SFAS) No. 123 - revised 2004 (SFAS 123R), Share-Based Payment, which replaced SFAS No. 123 (SFAS 123), Accounting for Stock-based Compensation, and supersedes APB Opinion No. 25 (APB 25), Accounting for Stock Issued to Employees. Under the fair value recognition provisions of this statement, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense on a straight-line basis over the requisite service period, which generally is the vesting period. The Company elected the modified-prospective method, under which prior periods are not revised for comparative purposes. The valuation provisions of SFAS 123R apply to new grants and to grants that were outstanding as of the effective date and are subsequently modified. All options granted prior to the adoption of SFAS 123R and outstanding during the periods presented were fully-vested at the date of adoption. 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. Business Segments -- We believe that our activities during the three and nine months ended March 31, 2008 and 2007 comprised a single segment. Recently Issued Accounting Policies In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. This statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. This statement applies under other accounting pronouncements that require or permit fair value measurements. SFAS No. 157 will be effective for the Company for its fiscal year beginning on July 1, 2008. The Company is currently assessing the impact the adoption of SFAS No. 157 may have on its consolidated financial statements. 8 In September 2006, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) No. 108 in order to eliminate the diversity of practice surrounding how public companies quantify financial statement misstatements. In SAB 108, the SEC staff established an approach that requires quantification of financial statement misstatements based on the effects of the misstatements on each of the Company's financial statements and the related financial statement disclosures. SAB No. 108 was effective for the Company's current 2007 fiscal year end. The adoption of SAB No. 108 did not have an impact on the Company's consolidated financial statements. In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (SFAS No. 159). SFAS No. 159 permits entities to choose to measure, on an item-by-item basis, specified financial instruments and certain other items at fair value. Unrealized gains and losses on items for which the fair value option has been elected are required to be reported in earnings at each reporting date. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007, the provisions of which are required to be applied prospectively. We believe that SFAS 159 should not have a material impact on our financial position or results of operations In December 2007, the FASB issued SFAS No. 141 (Revised 2007), Business Combinations, or SFAS No. 141R. SFAS No. 141R will change the accounting for business combinations. Under SFAS No. 141R, an acquiring entity will be required to recognize all the assets acquired and liabilities assumed in a transaction at the acquisition-date fair value with limited exceptions. SFAS No. 141R will change the accounting treatment and disclosure for certain specific items in a business combination. SFAS No. 141R applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Accordingly, any business combinations we engage in will be recorded and disclosed following existing GAAP until January 1, 2009. We expect SFAS No. 141R will have an impact on accounting for business combinations once adopted but the effect is dependent upon acquisitions at that time. We are still assessing the impact of this pronouncement. In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements--An Amendment of ARB No. 51, or SFAS No. 160. SFAS No. 160 establishes new accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS No. 160 is effective for fiscal years beginning on or after December 15, 2008. We believe that SFAS 160 should not have a material impact on our financial position or results of operations. In December 2007, the Emerging Issues Task Force issued EITF No. 07-1, Accounting for Collaborative Arrangements. EITF No. 07-1 requires that transactions with third parties (i.e., revenue generated and costs incurred by the partners) should be reported in the appropriate line item in each company's financial statement and includes enhanced disclosure requirements regarding the nature and purpose of the arrangement, rights and obligations under the arrangement, accounting policy, amount and income statement classification of collaboration transactions between the parties. EITF No. 07-1 is effective January 1, 2009 and shall be applied retrospectively to all prior periods presented for all collaborative arrangements existing as of the effective date. The Company does not expect that the adoption of EITF No. 07-1 will have a material effect on its consolidated results of operations or financial condition. In March 2008, the FASB issued FAS No. 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133. FAS No. 161 changes the disclosure requirements for derivative instruments and hedging activities. Entities are required to provide disclosures about (a) how and why derivative instruments are used, (b) how derivative instruments and related hedged items are accounted for under FAS No. 133, Accounting for Derivative Instruments and Hedging Activities, and its related interpretations, and (c) how derivative instruments and related hedged items affect the entity's 9 financial position, financial performance, and cash flows. FAS No. 161 is effective July 1, 2009. The Company does not expect that the adoption of FAS No. 161 will have a material effect on its consolidated results of operations or financial condition. Note 6. Notes Payable At December 31, 2007, the balance of notes payable, included a note payable of $128,000 to an individual who had previously sold his business to us. We had renegotiated the terms of the deferred earn out due to him on the sale of his business, such that the note payable represented the balance due to him. We were in default in repayment of the note payable as of December 31, 2007. This liability became statute barred during the three months ended March 31, 2008. Consequently, we recognized a gain on statute barred liabilities of $128,000 during the three months ended March 31, 2008 in respect of this note payable. Note Payable, Related Parties: Prior to June 30, 2007, David J Cutler, our sole officer and one of our directors, advanced $288,078 to us in the form of a promissory note, bearing interest at 8% per annum, to meet our ongoing operating expenses and fund the costs of bringing our financial statements and SEC reporting current. On May 31, 2006, $14,000 of this loan was converted to 10,563,775 shares of our common stock. The note is due on demand. During the nine months ended March 31, 2008, Mr. Cutler and a company controlled by him advanced an additional $57,124 to us under the same terms as the original promissory note. The loan was made to meet our ongoing operating expenses and fund the costs of bringing our financial statements and SEC reporting up to date. There can be no assurance that Mr. Cutler will continue to provide us with further funding in the future. Note 7. Stockholders' Deficit Common Stock We did not issue any shares of our common stock during the nine months ended March 31, 2008 or 2007. On April 2, 2008, we held an annual meeting of stockholders at which the majority of stockholders voted to authorize a reverse split of our common stock on a fifteen for one basis and to increase the authorized number of our Common Shares from twenty million (20,000,000) to one hundred million (100,000,000). We are in the process of filing the necessary documentation to effect these actions. Preferred Stock. On April 2, 2008, we held an annual meeting of stockholders at which the majority of stockholders voted to increase the authorized number of our Preferred Shares from one million (1,000,000) to twenty five million (25,000,000). We are in the process of filing the necessary documentation to effect these actions. Note 8. Related Party Transactions Prior to June 30, 2007, David J. Cutler, our sole officer and one of our directors, advanced $288,078 to us in the form of a promissory note, 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. $14,000 of this loan was converted to 10,563,775 shares of our common stock effective May 31, 2006. 10 During the nine months ended March 31, 2008, Mr. Cutler and a company controlled by him advanced an additional $57,124 to us under the same terms as the original promissory note. The loan was made to meet our ongoing operating expenses and fund the costs of bringing our financial statements and SEC reporting up to date. There can be no assurance that Mr. Cutler will continue to provide us with further funding in the future. During the nine months ended March 31, 2008, we incurred $25,000 in consulting fees payable to Burlingham Corporate Finance, Inc. ("Burlingham") in respect of remuneration for Mr. Cutler's services to us as a director and officer. Mr. Cutler is the principal shareholder of Burlingham. Note 9. Contingencies and Commitments Leases As at March 31, 2008 and 2007, 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 these leases is recorded as current liabilities included in our balance of accounts payable. 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. Note 10. Subsequent Events On April 2, 2008, we held an annual meeting of stockholders at which the majority of stockholders voted to re-elect Messrs. Cutler, Whiting and Green as directors, authorize a reverse split of our common stock on a fifteen for one basis, appoint Larry O'Donnell, CPA, P.C. as our independent auditors, change our name to a name to be determined by the board of Directors, increase the authorized number of our Common Shares from twenty million (20,000,000) to one hundred million (100,000,000) and increase the authorized number of our Preferred Shares from one million (1,000,000) to twenty five million (25,000,000). 11 ITEM 2. Management's Discussion and Analysis or Plan of Operations. The following discussion should be read in conjunction with the consolidated financial statements included 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 but not limited to, our ability to reach satisfactorily negotiated settlements with our outstanding creditors, maintain our financial records and SEC filings on a current basis, 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. Overview During the nine month period ended March 31, 2008 and 2007, our primary activities have been to maintain our financial statements and SEC filings on a current basis, attempt to negotiate satisfactory settlements with our outstanding creditors, obtain a listing on the over the counter bulletin board and raise debt and/or, equity to fund these activities. Results of Operations - Three Months Ended March 31, 2008 Compared to the Three Months Ended March 31, 2007 General and Administrative Expenses. During the three months ended March 31, 2008, we incurred general and administrative expenses of $43,600 compared to $18,093 during the three months ended March 31, 2007, an increase of $25,507. The increase arose due increased legal fees arising in the three months ended March 31, 2008 relating to our re-listing on the OTC Bulletin Board. Gain on Statute Barred Liabilities During the three months ended March 31, 2008, we recognized a gain on statute barred liabilities of $2,102,917 compared to no gain on statute barred liabilities in the three months ended March 31, 2007, an increase of $2,102,917. During the three months ended March 31, 2008, outstanding liabilities, which had been incurred more than four years ago, were statute barred under the state laws of California and we recognized a gain on these statute barred liabilities of $$2,102,917. No outstanding liabilities had become statute barred in the three months ended March 31, 2007. Net Interest (Expense) and Other Income (Expense). We recognized an interest expense of $6,281 in the three months ended March 31, 2008 compared to $4,792 in the three months ended March 31, 2007, an increase of $1,489. This expense relates to the interest expense accrued on the loan made to us by our sole officer and one of our directors, Mr. David Cutler. The increase in the amount of interest between the two periods reflects the increase in the principal balance of the loan. Provision for Income Taxes. No provision for income taxes was required in the three months ended March 31, 2008 or 2007. We had sufficient carried forward tax losses to offset the profit arising in the three months ended March 31, 2008 and we incurred taxable losses in the three months ended March 31, 2007. Net Income (Loss) and Comprehensive Income (Loss). We recognized net income of $2,053,036 for the three months ended March 31, 2008 compared a net loss of $22,885 for the three months ended March 31, 2007, an increase of $2,075,921 due to the gain we recognized on statute barred liabilities, slightly offset by increased general and administrative costs. 12 Our comprehensive income (loss) was identical to our net income (loss) for the three months ended March 31, 2008 and 2007. Results of Operations - Nine Months Ended March 31, 2008 Compared to the Nine Months Ended March 31, 2007 General and Administrative Expenses. During the nine months ended March 31, 2008, we incurred general and administrative expenses of $80,068 compared to $65,750 during the nine months ended March 31, 2007, an increase of $14,318. The increase arose due increased legal fees arising in the nine months ended March 31, 2008 relating to our re-listing on the OTC Bulletin Board Gain on Statute Barred Liabilities During the nine months ended March 31, 2008, we recognized a gain on statute barred liabilities of $2,102,917 compared to no gain on statute barred liabilities in the nine months ended March 31, 2007, an increase of $2,102,917. During the nine months ended March 31, 2008, outstanding liabilities, which had been incurred more than four years ago, were statute barred under the state laws of California and we recognized a gain on these statute barred liabilities of $$2,102,917. No outstanding liabilities had become statute barred in the nine months ended March 31, 2007. Net Interest (Expense) and Other Income (Expense). We recognized an interest expense of $17,677 during the nine months ended March 31, 2008, compared to $13,226 during the nine months ended March 31, 2007, an increase of $4,451. This expense relates to the interest expense accrued on the loan made to us by our sole officer and one of our directors, Mr. David Cutler. The increase in the amount of interest between the two periods reflects the increase in the principal balance of the loan. Provision for Income Taxes. No provision for income taxes was required in the nine months ended March 31, 2008 or 2007. We had sufficient carried forward tax losses to offset the profit arising in the nine months ended March 31, 2008 and we incurred taxable losses in the nine months ended March 31, 2007. Net Loss and Comprehensive Loss. We recognized net income of $2,005,172 for the nine months ended March 31, 2008 compared a net loss of $78,976 for the nine months ended March 31, 2007, an increase of $2,084,148 due to the gain we recognized on statute barred liabilities, slightly offset by increased general and administrative costs. Our comprehensive income (loss) was identical to our net income(loss) for the nine months ended March 31, 2008 and 2007. Cash Flow Information - Nine Months Ended March 31, 2008 Compared to the Nine Months Ended March 31, 2007 As of March 31, 2008, we had $33 cash on hand, $1,033 of total assets, no operating business or other source of income, outstanding liabilities, all current, of $6,198,122 and a stockholders' deficit of $6,197,089. In our Annual Reports on Form 10-KSB for the fiscal years ended June 30, 2007 and 2006, the Report of the Independent Registered Public Accounting Firm included an explanatory paragraph that describes substantial doubt about our ability to continue as a going concern. Our interim financial statements for the nine months ended March 31, 2008 have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. We reported an accumulated deficit of $91,184,055 and a working capital deficiency of $6,197,089 as of March 31, 2008. 13 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 $100,743 and $98,936 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. $14,000 of this loan was converted to 10,563,775 shares of our common stock effective May 31, 2006. In the nine months ended March 31, 2008 Mr. Cutler and a company controlled by him has made further advances to us of $57,124 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. 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, maintain our financial records and SEC filings on a current basis, raise debt and, or, equity financing to fund the negotiated settlements with our creditors and to meet 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. There is no assurance that this series of events will be satisfactorily completed. Net cash used in operations during the nine months ended March 31, 2008, was $57,091 compared to $65,761 in the nine months ended March 31, 2007, a decrease of $8,670. In the nine months ended March 31, 2008 our net income, adjusted for non-cash items, resulted in a negative cash flow of $97,745 which was partially offset by a positive cash flow of $40,654 generated from the net movement in our operating assets and liabilities. This compares to our net loss for the nine months ended March 31, 2007 which, without any requirement for an adjustment for non-cash items, resulted in a negative cash flow of $78,976, which was partially offset by a positive cash flow of $13,215 generated from the net movement in our operating assets and liabilities. No cash was provided by (used in) investing activities during the nine months ended March 31, 2008 or 2007, as we had no investments to sell and no available cash to purchase investments. Net cash was provided by financing activities during the nine months ended March 31, 2008 was $57,124 compared to $65,754 in the nine months ended March 31, 2007, a decrease of $8,630 reflecting the reduced need for funding from one of our directors. PLAN OF OPERATIONS It is our current plan of operation is to seek to reach satisfactory negotiated settlements with our outstanding creditors, maintain our financial records and SEC filings on a current basis, 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 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. 14 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 sole director. 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. 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. 15 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 16 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 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. ITEM 3. Controls and Procedures As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the 1934 Act). Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the 1934 Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms. ITEM 3A(T). Controls and Procedures There have been no changes in the registrant's internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 240.15d-15 that occurred during the registrant's last fiscal quarter that has materially affected, or is reasonable likely to materially affect, the registrant's internal control over financial reporting. PART II OTHER INFORMATION Item 1. Legal Proceedings None Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. None Item 3. Defaults upon Senior Securities We are in default on a number of loans, operating and capital leases either directly or as guarantor for our subsidiary companies. These liabilities have all been included our balance sheet. We will attempt to negotiate settlement of all of our shortfalls to creditors in respect of these defaults upon senior securities, or seek other alternatives to eliminate these liabilities. 17 There are no defaults on any liabilities that we have incurred since April 2005. Item 4. Submission of Matters to Vote of Security Holders We held an Annual Meeting of Stockholders on April 2, 2008 and the results of the stockholder voting was as follows: Resolution 1: To elect three (3) directors to hold office until the next annual meeting of stockholders or until their respective successors have been elected and qualified: Nominees David Cutler, Wesley Whiting and Redgie Green: FOR 11,606,228 WITHHOLD 6,422 Resolution 2: To authorize a reverse split of common stock on a fifteen for one basis, by which each fifteen shares shall become one share: and the appropriate Articles of Amendment to implement the reverse spilt. Fractional shares will be rounded up to the next whole share: FOR 11,494,448 AGAINST 103,652 ABSTAIN 14,550 Resolution 3: To appoint Larry O'Donnell, CPA, P.C. of Aurora, Colorado as independent auditor for the fiscal year ended June 30, 2008: FOR 11,605,578 AGAINST 1,422 ABSTAIN 5,650 Resolution 4: To change the Company's name to a name to be determined by the Board of Directors; and the appropriate Articles of Amendment to implement the name change: FOR 11,605,453 AGAINST 3,447 ABSTAIN 3,750 Resolution 5: To authorize the officers and directors of the Company to amend the Company's Articles of Incorporation to increase the number of Common Shares authorized from twenty million (20,000,000) to one hundred million (100,000,000) FOR 11,498,639 AGAINST 107,991 18 ABSTAIN 6,020 Resolution 6: To authorize the officers and directors of the Company to amend the Company's Articles of Incorporation to increase the number of Preferred Shares authorized from one million (1,000,000) to twenty five million (25,000,000) in such classes and series and with such rights, privileges and preferences as the Board may hereafter determine: FOR 11,492,339 AGAINST 83,391 ABSTAIN 36,920 Resolution 7: To transact such other business as may properly come before the Annual Meeting:: FOR 11,600,378 AGAINST 4,122 ABSTAIN 8,150 Item 5. Other Information None Item 6. Exhibits Exhibits. The following is a complete list of exhibits filed as part of this Form 10-QSB. Exhibit numbers correspond to the numbers in the Exhibit Table of Item 601 of Regulation S-K. Exhibit 31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act Exhibit 32.1 Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act 19 SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ASPEON, INC, (Registrant) Date: May 20, 2008 /s/ David J. Cutler ----------------------------------------- David J. Cutler, President, Chief Executive Officer Chief Financial Officer and Director 20