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 QUARTERLY PERIOD ENDED SEPTEMBER 30, 2006

                                       OR

  [___]  TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT

                        Commission file number 000-21477

                                  ASPEON, INC.
        (Exact name of small business issuer 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 [ ] No [ 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 [ ]

State the  number of  shares  outstanding  of each of the  issuer's  classes  of
equity, as of the latest practicable date:

              CLASS                               OUTSTANDING NOVEMBER 15, 2006
-------------------------------                  -------------------------------
Common Stock, $ 0.01 par value                           20,000,000 shares

Transitional Small Business Disclosure format: Yes [ ] No [ X ]

<PAGE>

                                      INDEX

                                  ASPEON, INC.


PART I - FINANCIAL INFORMATION

ITEM 1.           FINANCIAL STATEMENTS (UNAUDITED)                          PAGE

Consolidated Balance Sheet - September 30, 2006.                               3

Consolidated Statements of Operations - Three Months ended September 30,       4
2006 and 2005.

Consolidated Statement of Cash Flows - Three Months ended September 30,        5
2006 and 2005.

Notes to Consolidated Financial Statements.                                    6


ITEM 2.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                  CONDITION AND RESULTS OF OPERATIONS                         22

ITEM 3.           CONTROLS AND PROCEDURES                                     28




PART II - OTHER INFORMATION

Item 1.           Legal Proceedings                                           28
Item 2.           Changes in Securities                                       28
Item 3.           Defaults on Senior Securities                               29
Item 4.           Submission of Matters to a Vote of Security Holders         29
Item 5.           Other Information                                           29
Item 6.           Exhibits and Reports on Form 8-K                            29














                                       2
<PAGE>
PART I.   FINANCIAL INFORMATION

ITEM I. FINANCIAL STATEMENTS

                                  ASPEON, INC.
                           CONSOLIDATED BALANCE SHEET
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                                                SEPTEMBER 30,
                                                                                                    2006
                                                                                             -----------------
ASSETS

CURRENT ASSETS

<S>   <C>                                                                                    <C>
      Cash & Cash Equivalents                                                                $              1
      Prepaid Expenses                                                                                    198
                                                                                             -----------------
                   Total Current Assets                                                                   199
                                                                                             -----------------
TOTAL ASSETS                                                                                 $            199
                                                                                             =================

LIABILITIES & STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES

      Accounts Payable                                                                       $      6,757,616
      Unearned Income & Customer Deposits                                                             236,128
      Accrued Expenses                                                                                584,811
      Notes Payable                                                                                   339,696
      Deferred Earnouts                                                                               208,195
                                                                                             -----------------
                   Total Current Liabilities                                                        8,126,445

STOCKHOLDERS' DEFICIT

      Preferred Stock, $0.01 par value: 990,000 shares authorized (1,000,000                                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
      shares issued and outstanding.
      Additional Paid In Capital                                                                   84,846,966
      Treasury Stock                                                                                  (60,000)
      Accumulated Deficit                                                                         (93,113,212)
                                                                                             -----------------
                   Total Stockholders' Deficit                                                     (8,126,246)
                                                                                             -----------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                                                  $            199
                                                                                             =================
</TABLE>

         See accompanying notes to consolidated financial statements.

                                        3
<PAGE>
                                  ASPEON, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                              THREE MONTHS ENDED
                                                                                 SEPTEMBER 30,
                                                                           2006                 2005
                                                                    -----------------     ----------------


Operating Expenses / (Income)

<S>   <C>                                                           <C>                  <C>
      General & Administrative Expenses                                       22,601               30,584
                                                                    -----------------     ----------------
      Total Operating Expenses / (Income)                                     22,601               30,584

      Operating Profit / (Loss)                                              (22,601)             (30,584)

Interest and Other Income / (Expenses) Net                                    (3,952)              (2,056)
                                                                    -----------------     ----------------
Profit / (Loss) before Income Taxes                                          (26,553)             (32,640)

Provision for Income Taxes                                                         -                    -
                                                                    -----------------     ----------------
Net Profit / (Loss)                                                 $        (26,553)     $       (32,640)
                                                                    =================     ================

NET PROFIT / (LOSS) PER COMMON SHARE

      Basic & Diluted                                                         ($0.00)              ($0.00)
                                                                    =================     ================

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING

      Basic & Diluted                                                     20,000,000            9,436,225
                                                                    =================     ================
</TABLE>

          See accompanying notes to consolidated financial statements.

                                        4
<PAGE>
                                  ASPEON, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)
<TABLE>
<CAPTION>
                                                                                          THREE MONTHS ENDED
                                                                                             SEPTEMBER 30,
                                                                                       2006                 2005
                                                                                -----------------     ----------------
CASH FLOW PROVIDED BY / (USED IN) OPERATING ACTIVITIES

<S>                                                                             <C>                   <C>
NET  PROFIT / (LOSS)                                                            $        (26,553)     $       (32,640)

ADJUSTMENTS TO RECONCILE NET PROFIT / (LOSS) TO NET CASH                                       0                    0
PROVIDED BY / (USED IN) OPERATING ACTIVITIES

CHANGES IN OPERATING ASSETS & LIABILITIES

      (Increase)/Decrease in Other Receivables                                                 0               (3,629)
      Increase/(Decrease) in Accounts Payable                                                (11)               3,853
      Increase/(Decrease) in Accrued Expenses                                              4,003                2,056

                                                                                -----------------     ----------------
      Total Cash Flow provided by / (used in) Operating Activities                       (22,561)             (30,360)

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                                                        22,555               30,717

                                                                                -----------------     ----------------
      Total Cash Flow provided by / (used in)  Financing Activities                       22,555               30,717

INCREASE / (DECREASE) IN CASH & CASH EQUIVALENTS                                $             (6)     $           357
                                                                                =================     ================

Cash and Cash Equivalents at the beginning of the period                        $              7      $        20,000
                                                                                =================     ================
Cash and Cash Equivalents at the end of the period                              $              1      $        20,357
                                                                                =================     ================

SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION
Cash paid for interest                                                          $              0      $             0
                                                                                -----------------     ----------------
Cash paid for income tax                                                        $              0      $             0
                                                                                -----------------     ----------------
</TABLE>

          See accompanying notes to consolidated financial statements.

                                        5
<PAGE>


                                  ASPEON, INC.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1. GENERAL

         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  subsequently  to Aspeon,  Inc. in December  1999.  Our mailing
address is 2460 West 26th Avenue, Suite 380-C, Denver,  Colorado,  80211 and our
telephone number is 303-380-9784.

         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  defending
against any further  appeal that may be made  against our  currently  successful
defense of the law suit  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.

         Prior to our cessation of operations, 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"), 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.

         An over view of the major events since incorporation is as follows:

         On November 1, 1996,  we  completed  an initial  public  offering  (the
"IPO")  of  850,000  shares of our  common  stock at $5.00  per  share,  netting
proceeds of approximately $3.2 million. Proceeds were used to repay debt with an
outstanding  balance  of  approximately   $745,000  and  for  general  corporate
purposes.


                                       6

<PAGE>
                                  ASPEON, INC.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1. GENERAL (CONTINUED)

         In December  1997, we acquired all of the  outstanding  common stock of
POSNET Computers,  Inc.  ("Posnet") and CCI Group, Inc. ("CCI").  Posnet and CCI
provided  full  turn-key   systems   integration   services,   including  system
consulting, staging, training, deployment, product support and maintenance.

         In  March  and  April  1998,   we   established   three   international
subsidiaries to expand our sales and distribution  channels in the international
marketplace.  The  international  subsidiaries  were:  Javelin Systems  (Europe)
Limited   ("Javelin   Europe")   headquartered   in  England;   Javelin  Systems
International Pte Ltd ("Javelin Asia")  headquartered in Singapore;  and Javelin
Systems Australia Pty Limited ("Javelin Australia"), subsequently renamed Aspeon
Systems (Asia Pacific) Pty Ltd, headquartered in Australia.

         In May 1998,  Javelin Asia acquired all of the outstanding common stock
of Aspact IT Services  (Singapore) Pte Ltd ("Aspact").  Aspact was headquartered
in Singapore and provided consulting and system integration services.

         In November 1998, we completed a public offering of 1,395,000 shares of
our common  stock at $6.75 per share,  netting  proceeds of  approximately  $8.1
million. Proceeds were used to repay borrowings under a revolving line of credit
of approximately  $3.2 million,  to purchase all of the outstanding common stock
of RGB/Trinet Limited ("RGB"),  which was subsequently  renamed Javelin Holdings
International Limited (UK), and Jade Communications Ltd ("Jade") and for general
corporate  purposes.  RGB and Jade were  headquartered  in England and  provided
complementary  Wide Area  Networking  (WAN)  products and services  primarily to
large retail, hospitality, and telecommunications companies.

         During the course of 1998 we established a 75% owned subsidiary,  Teneo
Ltd  ("Teneo"),  in an effort to expand  our  service  management  and wide area
network solutions business.

         In January 1999 the business and assets of Posnet were transferred from
Posnet and merged with the business and assets of CCI.

         In February 1999, we completed a public offering of 2,375,000 shares of
our common stock at $12.25 per share,  netting proceeds of  approximately  $26.9
million.  Proceeds were used to purchase the outstanding common stock of Dynamic
Technologies,  Inc. ("DTI") and SB Holdings, Inc. ("SB") and for working capital
and general  corporate  purposes.  DTI and SB provided custom  Internet/Intranet
software and services.

         In August 1999,  we acquired all of the  outstanding  capital  stock of
Restaurant  Consulting  Services,  Inc. ("RCS").  RCS implemented,  operated and
supported packaged software applications for the restaurant industry.

         In January 2000, we created Aspeon Solutions, Inc. ("Aspeon Solutions")
as a wholly owned subsidiary to centralize and continue the rapid development of
our ASP service business.

         On March 8, 2000 we completed a private  placement of  securities  with
Marshall Capital  Management,  Inc., an affiliate of Credit Suisse First Boston,
in  which  we sold an  aggregate  of  10,000  shares  of  Series  A  Convertible
Exchangeable  Preferred  Stock  (the  "Preferred  Stock"),  a warrant to acquire
583,334 shares of our common stock and a warrant to acquire  1,250,000 shares of
Aspeon Solutions, one of our wholly-owned subsidiaries. Proceeds to us from this
placement amounted to $9.6

                                       7
<PAGE>

                                  ASPEON, INC.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1. GENERAL (CONTINUED)

million,  net of offering costs,  which were used primarily to acquire  Monument
Software Corporation ("Monument"),  settle future contingent payments associated
with the  acquisition  of RCS,  hire  management  and  staff  personnel,  expand
corporate facilities and fund our ASP Services operations.  Monument specialized
in the  rapid  implementation  of  enterprise-class  financial  systems  with an
emphasis on Oracle Financials.

         During  fiscal  2000,  we  sustained  significant  losses  and  we  had
experienced negative cash flows from our operations since inception.  As at June
30,  2000 we were in default of  certain  covenants  under the terms of both our
credit  facility  and  Preferred  Stock and were  delinquent  in the  payment of
various  trade  payables.  Our ability to meet our  obligations  in the ordinary
course of business was  dependent  upon the success of our attempts to return to
profitability,  obtain a waiver of credit  line and  Preferred  Stock  defaults,
raise additional financing through public and, or, private equity financings and
evaluate potential strategic opportunities. We sought to return to profitability
by  streamlining  operations  and  generating  on-going  cost  savings and began
evaluating  strategic  opportunities  for our sale or the sale of certain of our
subsidiaries.

         As part of our efforts to streamline our operations, during fiscal 2001
we merged the  business  of Javelin  Asia into  Javelin  Australia  and  renamed
Javelin  Australia as Aspeon  Systems  (Asia  Pacific) Pty Ltd and we merged the
operations of Monument into those of RCS.

         In August  2000,  we executed a sale  agreement  with the then  current
director of Aspact (the "Purchaser"). The initial purchase price of $350,000 was
payable  to us in  monthly  installments  of  $14,600  commencing  in July 2001.
Consequently,  a loss on sale of  approximately  $229,000 was  recognized in the
three months ended September 30, 2000. In the event the Purchaser consummated an
initial  public  offering or disposed  of all or  substantially  all of Aspact's
common stock,  the  Purchaser was required to pay: a) the unpaid  balance of the
initial  consideration  and b) 50% of the net proceeds received from the initial
public  offering  less the amount  paid  under  (a),  in an amount not to exceed
$200,000. Concurrent with the sale agreement, the Purchaser was terminated as an
employee of ours.

         In   September    2000,   at   the    insistence   of   our   auditors,
PricewaterhouseCoopers,  LLC  ("PWC"),  we announced  that we would  restate our
first quarter 2000 financial statements as a result of accounting misstatements.
In October 2000 we announced we would require  additional  time to file our form
10-K report for the fiscal year ended June 30, 2000.

         In October 2000, the Nasdaq Stock Market  ("Nasdaq")  suspended trading
in 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 shares of our common
stock would continue to be listed on Nasdaq or if they would be delisted.

         In October and November 2000,  eight  purported  class action  lawsuits
were  filed  against  us, our 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

                                       8
<PAGE>

                                  ASPEON, INC.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1. GENERAL (CONTINUED)

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  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.  There can be no
assurance that the  shareholders  who have brought this suit against us will not
file a further  appeal  against the Courts'  latest ruling in which case we will
continue to vigorously defend against the claims.

         In December 2000 we restated the results for the fiscal  quarters ended
September 30, 1999, December 31, 1999 and March 31, 2000 by an aggregate of $1.7
million or $0.19 per share.  Revenue was reduced by $679,000 or 1.05%, our gross
profit was  decreased  by $206,000  or 1.22%,  $1.4  million of the  restatement
related to an  adjustment  to increase the amount  recorded  for the  beneficial
conversion  feature associated with the issuance of our Preferred Stock in March
2000 based upon an independent  valuation and the remaining  adjustments related
to unrecorded compensation expense, amortization of intangible assets, expensing
costs previously capitalized and the additional accrual of general expenses.

         Effective  as of  January  4,  2001 our  shares of  common  stock  were
delisted  from Nasdaq.  As we were in arrears with our 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.

         In January 2001 our auditors,  PWC, notified us that it was terminating
its auditor relationship with us effective immediately.

         In February  2001 our  subsidiary,  RGB,  sold its interest in Teneo to
employees of Teneo for the consideration of a $350,000 note. Consequently a gain
on sale of $432,000 was recognized during the quarter ended March 31, 2001.

         On March 1, 2001 we completed the sale of the consulting  contracts and
certain of the fixed assets our DTI subsidiary to a company  controlled by DTI's
former owners and certain of our  shareholders  for a purchase price of $900,000
and the return for  cancellation of 200,000 of shares of our common stock valued
at $60,000.  With the  completion of the transfer of its help desk business to a
third party on April 27, 2001, the business  activities of DTI ceased. A gain on
the sale of the net assets of DTI totaling  $820,900 was  recognized  during the
quarter ended March 31, 2001.

         On  March  19,  2001  we  retained  BDO  Seidman,  LLP  ("BDO")  as our
independent auditing firm. However, as PWC, our previous  independent  auditors,
refused to allow BDO access to PWC's prior year work  papers,  BDO was unable to
complete an audit of our financial statements for later periods at that time.

                                       9
<PAGE>

                                  ASPEON, INC.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1. GENERAL (CONTINUED)

         During fiscal 2001,  despite our efforts to return to profitability and
the sale of certain of our  subsidiaries,  we continued to generate  significant
losses,  to be in default of certain  covenants under the terms of our Preferred
Stock,  to be delinquent  in the payment of various trade  payables and had been
unable to replace  our line of credit  which had been  repaid in full during the
course of the year.  While we had  appointed  new  auditors,  we were  unable to
generate  audited  financial  accounts due to the lack of  cooperation  from our
previous  auditors  and  consequently  were  unable to comply  with the  listing
requirements  of  either  Nasdaq or the over the  counter  bulletin  board.  Our
relegation  to the Pink Sheets had  serious  adverse  consequences  for both the
confidence  of our  customers or potential  customers and our ability to attract
new debt or equity financing.  The lawsuits brought against us by certain of our
shareholders  diverted a significant  amount of our  management's  time from our
operations which were also severely  effected by the collapse of the tech market
in early 2001.  Nevertheless we continued press ahead by attempting to return to
profitability  through  further cost  reductions,  renegotiate  the terms of our
Preferred  Stock,  settle  the  outstanding  shareholder  litigation,   evaluate
strategic  opportunities for our sale or the sale of certain of our subsidiaries
and raise additional debt and, or, equity funding.

         In August 2001 we, together with our Chief Executive  Officer,  filed a
six count complaint  against our former  auditors,  PWC,  alleging  professional
negligence,   intentional  interference  with  prospective  business  advantage,
negligent  interference  with  prospective  economic  advantage,   violation  of
California   Business  and  Professions  Code  Sections  17200  and  17500,  and
defamation.

         On March 22, 2002 we signed an  agreement  to sell our  subsidiary  RGB
(renamed  Javelin Holdings  International  Ltd.), the UK holding company that in
turn owned our Javelin Europe and Jade subsidiaries, to an investment group that
included  members  of the  existing  UK  management  team for  $125,995  and the
repayment of inter-company  debt.  $750,000 was paid on signing with $175,000 to
be paid upon completion of a technology escrow agreement

         On May 1, 2002 we signed an agreement  with the holder of our Preferred
Shares  that had been in  default.  Under that  agreement,  in return for a cash
payment of $447,500 by us (a) we were released from all liabilities  relating to
our  outstanding  Series A  Convertible  Exchangeable  Preferred  Stock  and the
documents under which those securities had been issued and were outstanding; (b)
all of our outstanding  Series A Convertible  Exchangeable  Preferred Stock were
cancelled; (c) a warrant previously issued by us entitling the holder thereof to
purchase  583,334  shares of our common stock was  cancelled;  and (d) a warrant
previously  issued by our  subsidiary,  Aspeon  Solutions,  entitling the holder
thereof to purchase 1,250,000 shares of the common stock of Aspeon Solutions was
cancelled.  We believed  that the  settlement  had a net positive  effect on our
balance sheet of approximately $19 million.

         In June 2002 we terminated the activities of RCS.

         On  January  17,  2003,  we sold  our  Australian  subsidiary,  Javelin
Australia,  to Mr. Matthew Maley. Prior to the sale, Mr. Maley had served as our
general manager of that  subsidiary.  We received $80,000 at the closing of this
transaction.  Under the Share Sale Agreement  relating to this transaction,  Mr.
Maley agreed to cause Javelin  Australia to pay its account payable to us in the
amount of $239,000 in monthly installments of $10,000 each until the full amount
of the account  payable has been paid.  Mr. Maley  personally  guaranteed  these
payments.

                                       10
<PAGE>

                                  ASPEON, INC.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1. GENERAL (CONTINUED)

         During the fiscal  years  ending June 30, 2002 and 2003,  we used every
effort to return to profitability  through  on-going cost  reductions,  to raise
additional debt and, or, equity funding and to identify strategic  opportunities
for our sale or the sale of certain of our subsidiaries  However,  the weak tech
market,  together with our inability to produce  audited  accounts and come into
compliance  with the listing  conditions of Nasdaq or over the counter  bulletin
board  markets,  meant we were  unable to attract new  customers  or the debt or
equity financing necessary to secure our financial future.

         On June 30, 2003 we decided to  discontinue  the operations of our last
two  operating  businesses,  Javelin and CCI.  Javelin  ceased  operations  with
immediate effect while CCI completed certain outstanding  customer orders before
ceasing  production  on August  3, 2003 and  continued  to  subcontract  certain
maintenance activities through December 31, 2003.

         In August  2003 we reached an out of court  settlement  in our law suit
against  PWC.  Under the terms of the  settlement  we received a payment of $1.3
million and agreement to write off certain  outstanding  invoices for accounting
and  legal  fees.  Consequently  we  recognized  a  gain  of  $1,007,000  on the
settlement  although  the net cash we  received  after  all costs  totaled  only
$136,000.

         In December  2003,  we appointed  attorney  Frank G. Blundo Jr. P.C. as
trustee in an  assignment  for the  benefit of the  creditors  of Aspeon and CCI
commencing effective January 1, 2004. Effective 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 participate 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.  Consequently
we recognized a gain of $3.2 million on the  establishment of the assignment for
the  benefit  of Aspeon and CCI  creditors.  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.

         Following  the  establishment  for the  assignment  for the  benefit of
Aspeon  and CCI  creditors  in January  2004,  we had no  assets,  no  operating
business or other source of income,  outstanding  liabilities  in excess of $7.9
million,  an  outstanding  law  suit  brought  against  us  by  certain  of  our
shareholders,  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, we appointed David J. Cutler as a new director and Chief
Executive   Officer  and   subsequent  to  that  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  law  suit  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  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.

                                       11
<PAGE>

                                  ASPEON, INC.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1. GENERAL (CONTINUED)

         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 $212,000.

         On  September  9, 2005 we received a letter from the SEC dated June 24,
2005  indicating  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.

         On  September  12,  2005  we  retained  Larry   O'Donnell,   CPA,  P.C.
(`O'Donnell') as our independent auditing firm.

         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  performed by O'Donnell,
O'Donnell  completed  the audit of our June 30, 2001  financial  statements.  In
September  2006 we filed forms 10-QSB for the three months ended  September  30,
2001, the six months ended December 31, 2001 and the nine months ended 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.

                                       12
<PAGE>

                                  ASPEON, INC.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1. GENERAL (CONTINUED)

         Effective March 13, 2006, David Cutler,  at that time our sole director
and officer,  appointed Wesley F. Whiting and Redgie Green as new, non executive
directors to join him on our board of directors.

         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.

         In August  2006,  on the basis of  further  audit  work and a review of
subsequent events performed by O'Donnell,  O'Donnell  completed the audit of our
June 30, 2001 financial statements.  In September 2006 we filed forms 10-QSB for
the three months ended  September  30, 2001,  the six months ended  December 31,
2001 and the nine months ended 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.

NOTE 2. BASIS OF PRESENTATION

         The accompanying  unaudited  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 month period ended  September 30, 2006 are not  necessarily  indicative of
the results  that may be  expected  for the year ended June 30,  2007.  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, 2006 filed
with the SEC.

NOTE 3.  LIQUIDITY

         As of September  30, 2006, we had $1 cash on hand,  $199 of assets,  no
operating  business  or other  source  of  income,  outstanding  liabilities  of
approximately  $8.1  million,  a  stockholders'  deficit of  approximately  $8.1
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,  2006 and 2005,  one of our
directors,  David J. Cutler, advanced to us $115,000 and $88,000 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

                                       13
<PAGE>

                                  ASPEON, INC.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

NOTE 3. LIQUIDITY (CONTINUED)

reporting up to date. $14,000 of this loan was converted to equity effective May
31, 2006.  In the three months ended  September 30, 2006 Mr. Cutler made further
advances to us of $23,000 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,  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.

NOTE 4. BASIS 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.

NOTE 5. ACQUISITIONS AND DISPOSITIONS

         From  December   1997  to  March  2000  we   established  a  number  of
subsidiaries   to  conduct  our  operating   activities   and  purchased   other
subsidiaries  for a  combination  of shares of our common  stock and cash.  From
August  2000 to  December  2003 our  liquidity  problems  were such that we were
forced to sell,  or  discontinue,  all of our  operating  businesses.  Our final
operating  activities  terminated in December 2003 and our remaining assets were
transferred  to the trustee of the  assignment for the benefit of the Aspeon and
CCI  creditors  effective  January 1, 2004.  A summary of our  acquisitions  and
disposals is as follows:


                                       14
<PAGE>

                                  ASPEON, INC.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

NOTE 5. ACQUISITIONS AND DISPOSITIONS (CONTINUED)

<TABLE>
<CAPTION>
<S>                                         <C>                                 <C>
Aspeon, Inc.                                established September 1995.         ceased trading operations as
                                                                                at June 30, 2003.

                                                                                assets transferred to the trustee
                                                                                for the assignment for the benefit
                                                                                of Aspeon and CCI creditors in
                                                                                January 2004.

CCI Group, Inc.                             acquired December 1997.             ceased manufacturing in August
                                                                                2003.

                                                                                ceased providing services December
                                                                                2003.

                                                                                assets transferred to trustee for
                                                                                the assignment for the benefit of
                                                                                Aspeon and CCI creditors January
                                                                                2004.

Posnet Computers, Inc.                      acquired December 1997.             merged into CCI Group, Inc.
                                                                                in January 1999.

Javelin Systems Europe, Ltd.                established March 1998.             sold March 2002.

Javelin Systems International Ltd           established March 1998.             merged into Javelin Systems
                                                                                Australia Pty Ltd between
                                                                                June - September 2000.

Javelin Systems Australia Pty Ltd           established March 1998.             sold January 2003.

Aspact IT Services (Singapore) Pte Ltd      acquired May 1998.                  sold August 2000.

Javelin Holdings International Ltd          acquired November 1998.             sold March 2002.
(formerly RGB Trinet Ltd)

Jade Communications, Ltd                    acquired November 1998.             sold March 2002.

Dynamic Technologies, Inc.                  acquired April 1999.                assets sold March 2001.

SB Holdings, Inc.                           acquired April 1999.                assets sold March 2001.

Restaurant Consulting Services, Inc.        acquired August 1999.               ceased trading in June 2002.

Aspeon Solutions, Inc.                      established February 2000.          dormant from June 2002.

Teneo Ltd (75% ownership)                   established March 2000.             sold March 2001.

Monument Software Corporation               acquired March 2000.                merged with RCS in fiscal 2001.
</TABLE>
                                       15
<PAGE>

                                  ASPEON, INC.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)


NOTE 6. SUMMARY OF 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.

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.

PROPERTY AND EQUIPMENT -- Property and  equipment  were stated at fair value and
depreciated using the straight-line  method over the following  estimated useful
lives:

Leasehold improvements.                                        2 - 10  years.
Office furniture, fixtures and equipment.                      5 - 7   years.
Computer equipment and software.                               3 - 5   years.
Equipment on lease.                                              3     years.
Warehouse equipment.                                             7     years.
Test equipment.                                                  7     years.
Depot spares.                                                    7     years
Vehicles.                                                        5     years.

Maintenance  and repairs were  charged to expense as incurred,  and the costs of
additions  and  betterments  were  capitalized.   Leasehold   improvements  were
amortized  over the  shorter of the useful  life of the asset or the life of the
related  lease.  When assets were sold or  otherwise  disposed  of, the cost and
related accumulated depreciation and amortization were removed from the accounts
and any resulting gain or loss was recognized.

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.

IMPAIRMENT OF LONG-LIVED  AND  INTANGIBLE  ASSETS -- In the event that facts and
circumstances indicated that the cost of long-lived and intangible assets may be
impaired,  an evaluation of recoverability  was performed.  If an evaluation was
required, the estimated future undiscounted cash flows associated with the asset
was compared to the asset's  carrying  amount to  determine  if a write-down  to
market value or discounted cash flow value was required.

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.

                                       16
<PAGE>
                                  ASPEON, INC.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

NOTE 6. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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.

REVENUE  RECOGNITION -- We sold our hardware and third-party  software  products
both as part of a solutions  package and on a  stand-alone  basis.  Sales of our
products which were part of a solutions  package  typically  included  hardware,
third-party   software  and   installation.   Revenues   associated  with  these
arrangements  were  recognized  upon the completion of the  installation  of the
product.  Sales of  products,  which were part of a solution,  were  included in
products  revenue while  installation  and consulting  services were included in
services  revenue.  Revenues from sales of products sold on a stand-alone  basis
were  recognized  upon shipment to the customer.  Estimated  product returns and
sales allowances were provided for when revenue was recognized.

Service contract  revenues were recognized  ratably over the term of the related
contract.  These  revenues  were  generally  from  maintenance,  help  desk  and
application services arrangements.  Revenues earned under time and material type
arrangements  were  recognized as services were  performed,  and primarily  were
comprised of information technology services.

Revenues  from  fixed  fee  arrangements   under  which  we  provided   software
customization,   development  services,  or  significant   implementations  were
recognized on the  percentage-of-completion  method of accounting,  based on the
costs incurred to total estimated costs. We provided for anticipated losses by a
charge to income in the period the losses were first identified.

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.

WARRANTIES--  Our products were sold under  warranty for defects in material and
workmanship  for one year.  Certain  components  included in our  products  were
covered by  manufacturers'  warranties.  We established an accrual for estimated
warranty costs when the related revenue was recognized.

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 months ended
September  30,  2006 and 2005 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

                                       17
<PAGE>
                                  ASPEON, INC.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

NOTE 6. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

issue common stock were  exercised or  converted  into common  stock.  Basic and
diluted EPS were the same during the three months ended  September  30, 2006 and
2005 as we had no stock options or warrants outstanding during periods.

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.

BUSINESS  SEGMENTS -- In June 1997,  the Financial  Accounting  Standards  Board
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  that  following  our decision to terminate  the last of our  operating
businesses  effective June 30, 2003, that our activities during the three months
ended  September  30,  2006 and 2005  comprised  only one  segment  and as such,
adoption of SFAS No. 131 does not impact the  disclosures  made in our financial
statements.

NOTE 7.  NOTES PAYABLE

         As at September 30, 2006 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 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 the note  payable as at  September  30,
2006.

         The remainder of the balance of notes  payable  represents a loan to us
of $212,000 by David J. Cutler, one of our directors. The loan, bearing interest
at 8%, 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 provide us with further funding in the future.

                                       18

<PAGE>
                                  ASPEON, INC.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

NOTE 8. STOCKHOLDERS' EQUITY

COMMON STOCK

         There was no issue of common stock in the three months ended  September
30, 2006 or 2005.

         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 $212,000.

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.

         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  options were  cancelled  during the fiscal year ended
June 30, 2005 with the  resignation of Richard P. Stack as our sole director and
officer in April 2005 and consequently no stock options were outstanding  during
the three months ended September 30, 2006 and 2005.

                                       19
<PAGE>
                                  ASPEON, INC.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

NOTE 8. STOCKHOLDERS' EQUITY (CONTINUED)

WARRANTS

         We had no warrants issued or outstanding  during the three months ended
September 30, 2006 or 2005.

NOTE 9.  TREASURY STOCK

         In connection  with the sale of certain  assets  related to the sale of
DTI in March 2001,  200,000  shares of common  stock,  valued at  $60,000,  were
cancelled.

NOTE 10. 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 $212,000.

         During  the  fiscal  years  ended  June 30,  2006 and 2005,  one of our
directors,  David J. Cutler, advanced to us $115,000 and $88,000 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.  $14,000 of this loan was  converted to equity  effective May 31, 2006. In
the three months ended September 30, 2006 Mr. Cutler made further advances to us
of $23,000 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.

NOTE 11. COMMITMENTS

LEASES

         As at  September  30,  2006 and 2005 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.

                                       20

<PAGE>

                                  ASPEON, INC.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

NOTE 11. COMMITMENTS (CONTINUED)

LITIGATION

         In October and November 2000,  eight  purported  class action  lawsuits
were  filed  against  us, our 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
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.  There can be no assurance  that the
shareholders  who have  brought  this  suit  against  us will not file a further
appeal  against  the  Courts'  latest  ruling in which case we will  continue to
vigorously defend against the claims.

         If we were to be subject  to any  further  appeal  which may be made in
respect of the law suit 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.

GUARANTEE

         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. We provided a guarantee for this facility that was
to be released on our sale of Javelin  Australia  in January 2003 and in respect
of which we were  indemnified by the purchaser of Javelin  Australia.  As yet we
have not received confirmation that our guarantee has been released.


NOTE 12. SUBSEQUENT EVENTS

         None.

                                       21
<PAGE>

ITEM 2. 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  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,  VIGOROUSLY DEFEND AGAINST ANY FURTHER APPEAL THAT MAY BE
MADE AGAINST OUR CURRENTLY SUCCESSFUL DEFENSE OF THE LAW SUIT 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.

OVERVIEW

         Effective March 13, 2006, David Cutler,  at that time our sole director
and officer,  appointed  Wesley F Whiting and Redgie Green as new, non executive
directors to join him on our board of directors.

         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 $212,000.

         In August  2006,  on the basis of  further  audit  work and a review of
subsequent events performed by O'Donnell,  O'Donnell  completed the audit of our
June 30, 2001 financial statements.  In September 2006 we filed forms 10-QSB for
the three months ended  September  30, 2001,  the six months ended  December 31,
2001 and the nine months ended 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.

LIQUIDITY AND CAPITAL RESOURCES

         As of September  30, 2006, we had $1 cash on hand,  $199 of assets,  no
operating  business  or other  source  of  income,  outstanding  liabilities  of
approximately  $8.1  million,  a  stockholders'  deficit of  approximately  $8.1
million and a law suit brought against us by certain of our  shareholders  which
had been  ruled in our favor by the  Courts  but  which  could be  subject  to a
further appeal by the shareholders in question.

                                       22
<PAGE>

         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.

         If we were to be subject  to any  further  appeal  which may be made in
respect of the law suit brought  against us by certain of our  shareholders  and
were to lose such appeal 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.

         During  the  fiscal  years  ended  June 30,  2006 and 2005,  one of our
directors,  David J. Cutler, advanced to us $115,000 and $88,000 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.  $14,000 of this loan was  converted to equity  effective May 31, 2006. In
the three months ended September 30, 2006 Mr. Cutler made further advances to us
of $23,000 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,  vigorously  defend  against  any
further appeal that may be made against our currently  successful defense of the
law suit 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.

RESULTS OF  OPERATIONS - THREE MONTHS ENDED  SEPTEMBER  30, 2006 COMPARED TO THE
THREE MONTHS ENDED SEPTEMBER 30, 2005

         GENERAL  AND  ADMINISTRATIVE   EXPENSES.  In  the  three  months  ended
September 30, 2006 we incurred  general and  administrative  expenses of $23,000
compared to $31,000 in the three months ended  September 30, 2005, a variance of
$8,000,  or 26%. The variance  arose due the fact that in the three months ended
September 30, 2005 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 three  months ended  September  30, 2006 now we have made
significant  progress in bringing  our  financial  records and SEC filings up to
date.

         OPERATING PROFIT / (LOSS). In the three months ended September 30, 2006
we had an operating  loss of $(23,000)  compared an operating  loss of $(31,000)
for the three months ended  September 30, 2005, a variance $8000, of 26%, due to
the factors outlined above.

         NET INTEREST  AND OTHER  INCOME / (EXPENSE).  We had a net interest and
other  (expense)  of $ (4,000) in the three  months  ended  September  30,  2006
compared to $(2,000) in the three months ended September 30, 2005, a variance of
$2,000 or 100%. This expense relates to the interest expense accrued on the loan
made to us by one of our  directors.  The  increase  in the  amount of  interest
between the two periods  reflects the increase in the  principal  balance of the
loan the director has advanced to us between the two periods.

                                       23

<PAGE>

         PROFIT  /  (LOSS)  BEFORE  INCOME  TAXES.  In the  three  months  ended
September  30, 2006 we had a loss before  income taxes of  $(27,000)  compared a
loss before income taxes of $(33,000)  for the three months ended  September 30,
2005, a variance of 6,000, or 18%, due to the factors outlined above.

         PROVISION FOR INCOME TAXES.  No provision for income taxes was required
in the three months ended September 30, 2006 or the three months ended September
30, 2005 as we generated tax losses in both periods.

         NET PROFIT / (LOSS)  AND  COMPREHENSIVE  PROFIT / (LOSS).  We had a net
loss of $(27,000)  for the three months ended  September 30, 2006 compared a net
loss of $(33,000)  for the three months ended  September 30, 2005, a variance of
$6,000, or 18%, due to the factors outlined above.

         Our comprehensive loss was identical to our net loss for both the three
months ended September 30, 2006 and 2005.

CASH FLOW INFORMATION

         As of September  30, 2006, we had $1 cash on hand,  $199 of assets,  no
operating  business  or other  source  of  income,  outstanding  liabilities  of
approximately  $8.1  million,  a  stockholders'  deficit of  approximately  $8.1
million and a law suit brought against us by certain of our  shareholders  which
had been  ruled in our favor by the  Courts  but  which  could be  subject  to a
further appeal by the shareholders in question.

         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,  2006 and 2005,  one of our
directors,  David J. Cutler, advanced to us $115,000 and $88,000 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.  $14,000 of this loan was  converted to equity  effective May 31, 2006. In
the three months ended September 30, 2006 Mr. Cutler made further advances to us
of $23,000 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.

         Net cash (used in)  operations in the three months ended  September 30,
2006 was $(23,000) compared to $(30,000) in the three months ended September 30,
2005, a variance of $7,000, or 23%. In the three months ended September 30, 2006
our net loss,  without any  requirement  for an adjustment  for non-cash  items,
resulted in a negative cash flow of $(27,000)  which was  partially  offset by a
positive  cash flow of $4,000  generated  from the net movement in our operating
assets and liabilities. This compares a net loss, without any requirement for an
adjustment for non-cash items,  resulted in a negative cash flow of $(33,000) in
the three  months  ended  September  30,  2005 which was  partially  offset by a
positive  cash flow of $2,000  generated  from the net movement in our operating
assets and liabilities.

         No cash was provided by / (used in)  investing  activities in the three
months ended  September 30, 2006 or 2005 as we had no investments to sell and no
available cash to purchase investments.

         Net cash was provided by financing activities in the three months ended
September  30, 2006 was $23,000  compared to $31,000 in the three  months  ended
September 30, 2005, a variance of $8,000,  or 26%,  reflecting  the reduced need
for funding to be provided to us by one of our directors.

                                       24
<PAGE>


PLANNED OPERATIONS

         Our plan of operation is to reach satisfactory  negotiated  settlements
with our outstanding  creditors or otherwise eliminate debt, bring our financial
records and SEC filings up to date,  obtain debt or equity financing 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 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

                                       25
<PAGE>

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.

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

                                       26
<PAGE>

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  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.

ACCOUNTING PRONOUNCEMENTS

         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  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  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

                                       27
<PAGE>

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 February 2006, the FASB issued SFAS No. 155,  "ACCOUNTING FOR HYBRID
FINANCIAL  INSTRUMENTS"  ("SFAS No.  155").  SFAS No. 155 amends  SFAS No.  133,
"ACCOUNTING FOR DERIVATIVE  INSTRUMENTS AND HEDGING ACTIVITIES" and SFAS No. 140
"ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND  EXTINGUISHMENTS
OF  LIABILITIES-A  REPLACEMENT OF FASB STATEMENT NO. 125".  SFAS No. 155 permits
the fair value  re-measurement for any hybrid financial instrument that contains
an embedded  derivative that otherwise  would require  bifurcation and clarifies
that  both  interest-only  and  principal-only  strips  are not  subject  to the
provision of SFAS No. 133.  Further,  SFAS No. 155  establishes a requirement to
evaluate  interests in securitized  financial assets to identify  interests that
are freestanding  versus those that are embedded  derivatives.  Other provisions
relate to matters of  concentration  of credit risk and  application  of certain
provisions to special purpose entities. The effective date for the provisions of
SFAS No. 155 is for those instruments  acquired or issued after the beginning of
our fiscal  year 2007.  We believe  that SFAS No. 155 should not have a material
impact on our financial position or results of operations.


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 operating results or financial condition.


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.  There was no change in our  internal  control  over  financial
reporting during our most recently  completed fiscal quarter that has materially
affected,  or is reasonably  likely to materially  affect,  our internal control
over financial reporting.

PART II  OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         None.

ITEM 2.  CHANGES IN SECURITIES.

         All details of changes in our  securities  are set out in Note 8 to the
financial statements for the interim period - "Stockholders' Equity" above.



                                       28
<PAGE>



ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

         All details of our  defaults in respect of our debt are set out in Note
7 to the financial  statements for the interim period "Notes Payable." There are
no recent new defaults.

         We are in default on a number of operating  and capital  leases  either
directly or as guarantor for our subsidiary  companies.  These  liabilities have
been  included  in the  balance  of our  accounts  payable.  We will  attempt to
negotiate  settlement of all of our  shortfalls to creditors in respect of these
defaults upon senior securities, or otherwise eliminate debt.

ITEM 4.  SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

         No  matters  were  submitted  by us to a vote of our  security  holders
during our fiscal  years  ended June 30,  2001  through  September  30,  2006 or
subsequent to that date.

ITEM 5.  OTHER INFORMATION.

         None.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

A.       EXHIBITS.

                  EXHIBIT NO.                        DESCRIPTION
                        31                 Section 302 Certification
                        32                 Section 906 Certification

B.       REPORTS ON FORM 8-K.

                  None.




                                   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: November 15, 2006                     /s/     David J. Cutler
                                            -----------------------------------
                                            David J. Cutler,
                                            President, Chief Executive Officer
                                            Chief Financial Officer and Director


                                       29