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 DECEMBER 31, 2005.

                                       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 Identifica-
   incorporation or organization)                     tion No.)

           2460 West 26th Avenue, Suite 380-C, Denver, Colorado, 80211
         ---------------------------------------------------------------
                    (Address of principal executive offices)

                                 (303) 380 9784
                               ------------------
                           (Issuer's telephone number)

Check whether the issuer:  (1) filed all reports required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days. Yes [ X ] No [ ]

Indicate by check mark whether the  Registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [X] No [ ]

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

              Class                            Outstanding February 15, 2006
------------------------------                 -----------------------------
Common Stock, $ 0.01 par value                       9,436,225 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 - December 31, 2005.                              3

Consolidated Statements of Operations - Three Months and Six Months ended    4
December 31, 2005 and 2004.

Consolidated Statement of Cash Flows - Six Months ended December 31, 2005    5
and 2004

Notes to Consolidated Financial Statements.                                  6


Item 2.           Management's Discussion and Analysis of Financial
                  Condition and Results of Operations                       19

Item 3.           Controls and Procedures                                   33




PART II - OTHER INFORMATION

Item 1.           Legal Proceedings                                         33
Item 2.           Changes in Securities                                     34
Item 3.           Defaults on Senior Securities                             34
Item 4.           Submission of Matters to a Vote of Security Holders       34
Item 5.           Other Information                                         34
Item 6.           Exhibits and Reports on Form 8-K.                         34














                                       2
<PAGE>

Part I.   FINANCIAL INFORMATION

Item I. Financial Statements

<TABLE>
<CAPTION>

                                          Aspeon, Inc.
                                   Consolidated Balance Sheet
                                          (Unaudited)


                                                                                              December 31,
                                                                                                  2005
<S>                                                                                          <C>
ASSETS

Current Assets
      Cash & Cash Equivalents                                                                $               7
      Other Receivables                                                                                      0
      Prepaid Expenses                                                                                       0
                                                                                             ------------------
                   Total Current Assets                                                                      7

Fixed Assets                                                                                                 0

Other Assets                                                                                                 0
                                                                                             ------------------
TOTAL ASSETS                                                                                 $               7
                                                                                             ==================

LIABILITIES & STOCKHOLDERS' DEFICIT

Current Liabilities
      Accounts Payable                                                                       $       6,757,616
      Unearned Income & Customer Deposits                                                              236,128
      Accrued Expenses                                                                                 584,386
      Notes Payable                                                                                    266,563
      Deferred Earnouts                                                                                208,195
                                                                                             ------------------
                   Total Current Liabilities                                                         8,052,888

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,  9,436,225                           94,361
      shares issued and outstanding.
      Additional Paid In Capital                                                                    84,938,361
      Treasury Stock                                                                                   (60,000)
      Accumulated Deficit                                                                          (93,025,603)
                                                                                             ------------------
                   Total Stockholders' Deficit                                                      (8,052,881)
                                                                                             ------------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                                                  $               7
                                                                                             ==================

         See accompanying Notes to Consolidated Financial Statements.
</TABLE>


                                       3
<PAGE>

<TABLE>
<CAPTION>

                                          Aspeon, Inc.
                             Consolidated Statements of Operations
                                          (Unaudited)



                                                           Three Months Ended                    Six Months Ended
                                                               December 31,                          December 31,
                                                         2005              2004                2005                2004
                                                   ---------------    --------------     ----------------   ----------------
<S>                                                <C>                <C>                <C>                <C>

Operating Expenses

      General & Administrative Expenses                    30,947                 0               61,532                  0

      Loss on Assignment For Benefit of Creditors          20,000                 0               20,000                  0
                                                   ---------------    --------------     ----------------   ----------------
      Total Operating Expenses                            (50,947)                0              (81,532)                 0

      Operating (Loss)                                    (50,947)                0              (81,532)                 0

Interest and Other Income / (Expenses) Net                 (2,538)                0               (4,594)                 0
                                                   ---------------    --------------     ----------------   ----------------
Profit / (Loss) before Income Taxes                       (53,485)                0              (86,126)                 0

Provision for Income Taxes                                -                  -                   -                  -
                                                   ---------------    --------------     ----------------   ----------------
Net Profit / (Loss)                                $      (53,485)    $           0      $       (86,126)   $             0
                                                   ===============    ==============     ================   ================

NET PROFIT / (LOSS) PER COMMON SHARE

      Basic & Diluted                                      ($0.01)            $0.00               ($0.01)             $0.00
                                                   ===============    ==============     ================   ================

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING

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

           See accompanying Notes to Consolidated Financial Statements.


                                       4
<PAGE>

<TABLE>
<CAPTION>


                                          Aspeon, Inc.
                             Consolidated Statements of Cash Flows
                                          (Unaudited)

                                                                                           Six Months Ended
                                                                                              December 31,
                                                                                       2005                  2004
                                                                                 ----------------     -----------------
<S>                                                                              <C>                  <C>
CASH FLOW PROVIDED BY / (USED IN) OPERATING ACTIVITIES

NET  PROFIT / (LOSS)                                                             $       (86,126)     $              0

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                                             5,134                     0
      (Increase)/Decrease in Prepaid Expenses                                              1,150                     0
      Increase/(Decrease) in Accounts Payable                                             (4,909)                    0
      Increase/(Decrease) in Accrued Expenses                                             14,593                     0

                                                                                 ----------------     -----------------
      Total Cash Flow provided by / (used in) Operating Activities                       (70,158)                    0

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                                                        50,165                     0

                                                                                 ----------------     -----------------
      Total Cash Flow provided by / (used in)  Financing Activities                       50,165                     0

INCREASE / (DECREASE) IN CASH & CASH EQUIVALENTS                                 $       (19,993)     $              0
                                                                                 ================     =================

Cash and Cash Equivalents at the beginning of the period                         $        20,000      $              0
                                                                                 ================     =================
Cash and Cash Equivalents at the end of the period                               $             7      $              0
                                                                                 ================     =================

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

         Aspeon, Inc. ("Aspeon" or the "Company",  which may also be referred to
as "we",  "us" or "our") was  incorporated  in the Sate 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,  winning the outstanding
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") (collectively  "RGB/Jade"),  (subsequently
renamed Javelin  Holdings  International  Limited (UK)),  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 area  network 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.

         In December  1997, we acquired all of the  outstanding  common stock of
POSNET Computers,  Inc.  ("Posnet") and CCI Group, Inc. ("CCI").  Posnet and CCI


                                       6
<PAGE>

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  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 had experienced
negative cash flows from our operations since inception.  As at June 30, 2000 we


                                       7
<PAGE>

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  Aspeon  Systems  (Asia  Pacific)  Pty  Ltd  and  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 the shares of our common stock while it sought  additional  information  from
us. On November 9, 2000, we  participated in a hearing before the Nasdaq Listing
Qualifications  Panel which was held for the purpose of  evaluating  whether the
shares of our  common  stock  would  continue  to be listed on Nasdaq or if they
would be delisted.

         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 appeal was heard by the United  States  District
Court of Appeal for the 9th Circuit on February  8, 2006.  We have been  advised
that it may be several months before the Court's decision is announced.

         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


                                       8
<PAGE>

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 Series A 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 the  shares of our common  stock were
delisted  from Nasdaq.  As we were in arrears with our filings with the SEC, our
the shares of our common  stock were not  eligible  to be traded on the over the
counter  bulletin board and  consequently  commenced  trading on the Pink Sheets
under the symbol ASPE.PK.  Subsequently the shares of our common stock ceased to
be traded on the Pink Sheets and are now traded on the Gray Sheets.

         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.

         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.  The
relegation  of the trading in shares of our common  stock 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
law  suits  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


                                       9
<PAGE>

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.

         During  fiscal  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 in, and be
bound by the  terms  of,  the  assignment  for the  benefit  of  Aspeon  and CCI
creditors  under which they no longer had any further  claim  against  Aspeon or
CCI.  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  remain as
outstanding liabilities of Aspeon and CCI.

         Following the establishment of 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


                                       10
<PAGE>

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 traded 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,  winning the
outstanding 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. There can be no assurance that this series of events
will be successfully completed.

         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.
The number of shares of our common  stock to be issued to Mr.  Cutler in respect
of this investment has yet to be finalized.

         During the fiscal year ended June 30, 2005, our sole director,  David J
Cutler,  advanced to us $88,000 by way of loan,  bearing interest at 8%, to meet
our ongoing  operating  expenses  and fund the costs of bringing  our  financial
statements  and SEC reporting up to date.  In the six months ended  December 31,
2005 Mr.  Cutler has made  further  advances  to us of $50,000 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 as required.  There is no guarantee that
Mr. Cutler will continue to provide further funding to us in the future.

         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.


                                       11
<PAGE>

         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.  We are currently  establishing  the
likely costs and practicality of completing the SEC filings for the period April
1, 2001 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, 2001 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
six month period ended December 31, 2005 are not  necessarily  indicative of the
results that may be expected for the year ended June 30, 2006. 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,  2005 filed with the
SEC.

Note. 3           Liquidity

         As of  December  31,  2005,  we had $7 cash on hand,  $7 of assets,  no
operating  business  or other  source  of  income,  outstanding  liabilities  of
approximately  $8.1 million and an  outstanding  law suit brought  against us by
certain of our shareholders.

         Consequently we are now dependent on raising additional equity and, or,
debt to fund our ongoing operating  expenses and to fund negotiated  settlements
with our  outstanding  creditors.  There is no assurance that we will be able to
negotiate acceptable  settlements with our outstanding creditors or to raise the
necessary  equity and,  or,  debt to fund the  negotiated  settlements  with our
creditors or meet our ongoing operating expenses.

         If we were to lose the  outstanding  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.

         During the fiscal year ended June 30, 2005, our sole director,  David J
Cutler,  advanced to us $88,000 by way of loan,  bearing interest at 8%, to meet
our ongoing  operating  expenses  and fund the costs of bringing  our  financial
statements  and SEC reporting up to date.  In the six months ended  December 31,
2005 Mr.  Cutler made  further  advances to us of $50,000 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 can be no assurance Mr. Cutler
will continue to provide us with further funding in the future.

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.


                                       12
<PAGE>

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:

<TABLE>
<CAPTION>

<S>                                         <C>                                 <C>    <C>    <C>    <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 in
                                                                                December 2003.


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


                                       13
<PAGE>

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>

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


                                       14
<PAGE>

short-term  maturities  of these  instruments.  The fair value of notes  payable
approximated to their carrying value as generally their interest rates reflected
our effective annual borrowing rate.

Income Taxes -- We account for income taxes under the  liability  method,  which
requires  recognition  of deferred tax assets and  liabilities  for the expected
future tax  consequences  of events  that have been  included  in the  financial
statements  or  tax  returns.  Under  this  method,   deferred  tax  assets  and
liabilities  are  determined  based  on the  difference  between  the  financial
statements  and tax bases of assets and  liabilities  using enacted tax rates in
effect for the year in which the differences are expected to reverse.

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 and six
months ended December 31, 2005 and 2004 our net income / (loss) was identical to
our comprehensive income / (loss).

Income  (Loss)  Per  Share  -- The  income  (loss)  per  share is  presented  in
accordance  with the provisions of Statement of Financial  Accounting  Standards
(SFAS) No. 128,  Earnings Per Share.  SFAS No. 128 replaced the  presentation of
primary and fully diluted earnings (loss) per share (EPS) with a presentation of
basic EPS and diluted  EPS.  Basic EPS is  calculated  by dividing the income or
loss available to common  stockholders by the weighted  average number of common
stock  outstanding for the period.  Diluted EPS reflects the potential  dilution
that could occur if  securities  or other  contracts  to issue common stock were
exercised or converted  into common  stock.  Basic and diluted EPS were the same


                                       15
<PAGE>

during the three  months and six months  ended  December 31, 2005 and 2004 as we
had no stock  options or warrants  outstanding  during the three  months and six
months  ended  December  31, 2005 while in the three months and six months ended
December  31,  2004 our  share  price was less  than the  exercise  price of all
outstanding stock options and there were no warrants outstanding.

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
and six months ended  December 31, 2005 and 2004  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 December  31, 2005 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  December  31,
2005.

            The remainder of the balance of notes  payable  represents a loan to
us of $138,000 by David J Cutler, our sole director.  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.

Note. 8  Stockholders' Equity

Common Stock

         There was no issue of common  stock in the three  months and six months
ended December 31, 2005 or 2004.

         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


                                       16
<PAGE>

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.
The number of shares of our common  stock to be issued to Mr.  Cutler in respect
of this investment has yet to be finalized.

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.

             Stock options issued and  outstanding  during the six months ending
December31, 2005 and 2004 were as follows:

<PAGE>
<TABLE>
<CAPTION>

                                                           SIX MONTHS ENDED DECEMBER 31

                                                2005                                     2004

                                                             WEIGHTED                        WEIGHTED
                                                              AVERAGE                        AVERAGE
                                               OPTIONS       EXERCISE PRICE      OPTIONS     EXERCISE PRICE
<S>                                              <C>           <C>        <C>                 <C>
FOR OPTIONS GRANTED AT FAIR MARKET
VALUE ON THE DATE OF GRANT:

Options outstanding beginning of
period................                              --            --        850,000              $0.063
  Granted..........................                 --            --          --                  --
  Exercised........................                 --            --          --                  --
  Canceled.........................                 --            --          --                  --
                                                 -----------   -------    ----------           ----------
Options outstanding................                  0         $0.000       850,000              $0.063
                                                 ===========   =======    ==========           ==========
Options exercisable................                  0         $0.000       516,667              $0.063
                                                 ===========   =======    ==========           ==========
</TABLE>

                                       17

<PAGE>

All the above options  outstanding as at December 31, 2004 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.

Warrants

         We had no warrants  issued or  outstanding  during the three months and
six months ended December 31, 2005 or 2004.

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.
The number of shares of our common  stock to be issued to Mr.  Cutler in respect
of this investment has yet to be finalized

            During the fiscal year ended June 30, 2005, our sole director, David
J Cutler, advanced to us $88,000 by way of loan, bearing interest at 8%, to meet
our ongoing  operating  expenses  and fund the costs of bringing  our  financial
statements  and SEC reporting up to date.  In the six months ended  December 31,
2005 Mr.  Cutler has made  further  advances  to us of $50,000 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

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 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


                                       18
<PAGE>

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 appeal was heard by the United States District Court of Appeal
for the 9th  Circuit on February 8, 2006.  We have been  advised  that it may be
several months before the Court's decision is announced.

At  present we believe  that the  proceeds  from our  Directors'  and  Officers'
insurance policy will be sufficient to meet the legal cost incurred in defending
the consolidated law suit. However, there is no assurance that the proceeds from
our  Directors'  and Officers'  insurance  policy will be sufficient to meet the
legal cost  incurred  in  defending  the  consolidated  law suit and if they are
exhausted  there are no  further  funds to defend  the suit and we would have no
alternative  but to file for  bankruptcy.  Moreover,  if we were to lose the law
suit it is  unlikely  that  the  proceeds  from  the  Directors'  and  Officers'
insurance  policy would be sufficient to cover any damages assessed and again 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

         In January  2006 we were  contacted  by the SEC  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.  We are currently  establishing  the
likely costs and practicality of completing the SEC filings for the period April
1, 2001 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, 2001 through June 30, 2003.

         On February 8, 2006 the appeal  against the dismissal of the court case
brought against us by certain of our shareholders was heard by the United States
District  Court of Appeal for the 9th Circuit.  We have been advised that it may
be several months before the Court's decision is announced.

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,  win the  outstanding  law suit  brought  against  us by
certain of our  shareholders,  bring our financial records and SEC filings up to


                                       19
<PAGE>

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  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,  winning the outstanding
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") (collectively  "RGB/Jade"),  (subsequently
renamed Javelin  Holdings  International  Limited (UK)),  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 area  network 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.

         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.


                                       20
<PAGE>

         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  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 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.


                                       21
<PAGE>

         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  Aspeon  Systems  (Asia  Pacific)  Pty  Ltd  and  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 the 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 the shares of our common stock while it sought  additional  information  from
us. On November 9, 2000, we  participated in a hearing before the Nasdaq Listing
Qualifications  Panel which was held for the purpose of  evaluating  whether the
shares of our  common  stock  would  continue  to be listed on Nasdaq or if they
would be delisted.

         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 appeal was heard by the United  States  District
Court of Appeal for the 9th Circuit on February  8, 2006.  We have been  advised
that it may be several months before the Court's decision is announced.

         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 Series A 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.


                                       22
<PAGE>

         Effective  as of January  4, 2001 the  shares of our common  stock were
delisted  from Nasdaq.  As we were in arrears with our filings with the SEC, our
the shares of our common  stock were not  eligible  to be traded on the over the
counter  bulletin board and  consequently  commenced  trading on the Pink Sheets
under the symbol ASPE.PK.  Subsequently the shares of our common stock ceased to
be traded on the Pink Sheets and are now traded on the Gray Sheets.

         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.

         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.  The
relegation  of the trading in shares of our common  stock 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
law  suits  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


                                       23
<PAGE>

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.

         During  fiscal  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 in, and be
bound by the  terms  of,  the  assignment  for the  benefit  of  Aspeon  and CCI
creditors  under which they no longer had any further  claim  against  Aspeon or
CCI.  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  remain as
outstanding liabilities of Aspeon and CCI.

         Following the establishment of 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 traded 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,  winning the
outstanding 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


                                       24
<PAGE>

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. There can be no assurance that this series of events
will be successfully completed.

         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.
The number of shares of our common  stock to be issued to Mr.  Cutler in respect
of this investment has yet to be finalized.

         During the fiscal year ended June 30, 2005, our sole director,  David J
Cutler,  advanced to us $88,000 by way of loan,  bearing interest at 8%, to meet
our ongoing  operating  expenses  and fund the costs of bringing  our  financial
statements  and SEC reporting up to date.  In the six months ended  December 31,
2005 Mr.  Cutler has made  further  advances  to us of $50,000 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 as required.  There is no guarantee that
Mr. Cutler will continue to provide further funding to us in the future.

         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  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. We are currently establishing
the likely costs and  practicality  of completing the SEC filings for the period
April 1, 2001  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, 2001 through June 30, 2003.


                                       25
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

         As of  December  31,  2005,  we had $7 cash on hand,  $7 of assets,  no
operating  business  or other  source  of  income,  outstanding  liabilities  of
approximately  $8.1 million and an  outstanding  law suit brought  against us by
certain of our shareholders.

         Consequently we are now dependent on raising additional equity and, or,
debt to fund our ongoing operating  expenses and to fund negotiated  settlements
with our  outstanding  creditors.  There is no assurance that we will be able to
negotiate acceptable  settlements with our outstanding creditors or to raise the
necessary  equity and,  or,  debt to fund the  negotiated  settlements  with our
creditors or meet our ongoing operating expenses.

         If we were to lose the  outstanding  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.

         During the fiscal year ended June 30, 2005, our sole director,  David J
Cutler,  advanced to us $88,000 by way of loan,  bearing interest at 8%, to meet
our ongoing  operating  expenses  and fund the costs of bringing  our  financial
statements  and SEC reporting up to date.  In the six months ended  December 31,
2005 Mr.  Cutler made  further  advances to us of $50,000 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 can be no assurance Mr. Cutler
will continue to provide us with further funding in the future.

Delisting from NASDAQ Market and the Over the Counter Bulletin Board

            Shares of our common stock were listed on the Nasdaq National Market
System under the symbol  "ASPEE." On October 10,  2000,  the Nasdaq Stock Market
("Nasdaq")  suspended  trading in the shares of our common stock while it sought
additional  information from us. On October 11, 2000, Nasdaq sent a letter to us
stating that the shares of our common stock would be delisted  from Nasdaq if we
did not file our Form 10-K for the  fiscal  year  ended  June 30,  2000 with the
Securities  and Exchange  Commission  ("SEC") by October 18, 2000. Our Form 10-K
for the  fiscal  year  ended  June 30,  2000 was not  filed  with the SEC by the
October 18, 2000  deadline.  On  November 9, 2000 we  participated  in a hearing
before the Nasdaq Listing Qualifications Panel which was held for the purpose of
evaluating whether the shares of our common stock would continue to be listed on
Nasdaq or if they would be delisted. Effective January 4, 2001 the shares of our
common stock were delisted from Nasdaq. As we were delinquent in our SEC filings
the shares of our common  stock were not  eligible  to be listed on the over the
counter  bulletin board and  consequently  commenced  trading on the Pink Sheets
under the symbol  ASPE.PK.  Subsequently  the  shares of our  common  stock have
ceased to be traded on the Pink Sheets and are now traded on the Grey Sheets.

            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.

                  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


                                       26
<PAGE>

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  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. We are currently establishing
the likely costs and  practicality  of completing the SEC filings for the period
April 1, 2001  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 our  continued  delinquency  of our SEC filings for the
period April 1, 2001 through June 30, 2003.

Results of Operations - Three  Months Ended  December 31,  2005 Compared  to the
Three Months Ended December 31, 2004

         Following the  termination  of the last of our operating  businesses at
December 31, 2003, the transfer of the last of our assets to the trustee for the
assignment for the benefit of Aspeon and CCI creditors effective January 1, 2004
and the closure of our final bank  account in March  2004,  we had no revenue or
expense in the three months ended December 31, 2004.

         With the  appointment  of David J Cutler as our new sole  director  and
officer in April 2005 we recommenced  activities and are now focused on reaching
satisfactory negotiated settlements with our outstanding creditors,  winning the
outstanding 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.  Consequently we did incur certain  expenses in the
three months ended December 31, 2005.

         General and Administrative Expenses. In the three months ended December
31, 2005 we  incurred  general and  administrative  expenses of $31,000  largely
relating to director's and consultants'  remuneration ($18,000) and professional
fees and related  overhead costs incurred in bringing our financial  records and
SEC filings up to date  ($13,000).  We  incurred  no general and  administrative
expenses for the three months ended December 31, 2004 as we had no activities in
the period.

         Loss on Assignment  for Benefit of Creditors. In the three months ended
December  31,  2005 we  incurred  a loss of $20,000  on the  assignment  for the
benefit  of the  creditors  of Aspeon  and CCI due to the  payment of $20,000 to
Frank G Blundo,  Jr. P.C.,  trustee of the  assignment for the benefit of Aspeon
and CCI creditors, for the benefit of Aspeon and CCI creditors.

         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.
The number of shares of our common  stock to be issued to Mr.  Cutler in respect
of this investment has yet to be finalized.


                                       27
<PAGE>

         We  incurred  no profit / (loss) on the  assignment  for the benefit of
creditors  in the three  months  ended  December  31, 2004 as we had no funds or
activities in the period.

         Operating  (Loss) In the three months ended December 31, 2005 we had an
operating loss of $(51,000)  compared no operating  profit / (loss) in the three
months ended December 31, 2004 due to the factors outlined above.

           Net Interest and Other Income / (Expense).  We had a net interest and
other  (expense)  of $ (2,000)  in the three  months  ended  December  31,  2005
relating to interest on the loan made to us by our sole  director.  There was no
net interest and other income / (expense) in the three months ended December 31,
2004 as we had no activities in the period

         Provision for Income Taxes.  No provision for income taxes was required
in the three  months ended  December  31, 2005 or the three months  December 31,
2004 as we generated tax losses in the three months ended  December 31, 2005 and
had no taxable income in the three months ended December 31, 2004.

         Net Profit / (Loss)  and  Comprehensive  Profit / (Loss).  We had a net
loss of $(53,000)  for the three months ended  December 31, 2005  compared to no
net profit / (loss) for the three  months  ended  December  31,  2004 due to the
factors outlined above.

         Our  comprehensive  loss was  identical  to our net loss for the  three
months ended December 31, 2005 while we had no comprehensive  profit / (loss) or
net profit / (loss) for the three months ended December 31, 2004.

Results of Operations - Six  Months Ended  December 31, 2005 Compared to the Six
Months Ended December 31, 2004

         Following the  termination  of the last of our operating  businesses at
December 31, 2003, the transfer of the last of our assets to the trustee for the
assignment for the benefit of Aspeon and CCI creditors effective January 1, 2004
and the closure of our final bank  account in March  2004,  we had no revenue or
expense in the six months ended December 31, 2004.

         With the  appointment  of David J Cutler as our new sole  director  and
officer in April 2005 we recommenced  activities and are now focused on reaching
satisfactory negotiated settlements with our outstanding creditors,  winning the
outstanding 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.  Consequently we did incur certain  expenses in the
six months ended December 31, 2005.

         General and Administrative  Expenses.  In the six months ended December
31, 2005 we  incurred  general and  administrative  expenses of $62,000  largely
relating to director's and consultants'  remuneration ($37,000) and professional
fees and related  overhead costs incurred in bringing our financial  records and
SEC filings up to date  ($25,000).  We  incurred  no general and  administrative
expenses for the six months ended  December 31, 2004 as we had no  activities in
the period.

         Loss on  Assignment  for Benefit of  Creditors. In the six months ended
December  31,  2005 we  incurred  a loss of $20,000  on the  assignment  for the
benefit  of the  creditors  of Aspeon  and CCI due to the  payment of $20,000 to
Frank G Blundo,  Jr. P.C.,  trustee of the  assignment for the benefit of Aspeon
and CCI creditors, for the benefit of Aspeon and CCI creditors.


                                       28
<PAGE>

         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 six months ended December 31, 2005, it was agreed
with Frank G Blundo,  Jr.  P.C.,  trustee of the  assignment  for the benefit of
Aspeon and CCI  creditors,  that Mr.  Cutler would invest  $20,000 in us for the
benefit  of Aspeon  and CCI  creditors  in return  for a number of shares of our
common stock to be determined.  Accordingly during the six 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.  The
number of shares of our  common  stock to be issued to Mr.  Cutler in respect of
this investment has yet to be finalized.

         We  incurred  no profit / (loss) on the  assignment  for the benefit of
creditors  in the six  months  ended  December  31,  2004 as we had no  funds or
activities in the period.

         Operating  (Loss) In the six months  ended  December 31, 2005 we had an
operating  loss of $(82,000)  compared no  operating  profit / (loss) in the six
months ended December 31, 2004 due to the factors outlined above.

           Net Interest and Other Income / (Expense).  We had a net interest and
other  (expense) of $ (5,000) in the six months ended December 31, 2005 relating
to  interest  on the loan  made to us by our  sole  director.  There  was no net
interest and other income / (expense) in the six months ended  December 31, 2004
as we had no activities in the period

         Provision for Income Taxes.  No provision for income taxes was required
in the six months ended December 31, 2005 or the six months December 31, 2004 as
we  generated  tax losses in the six months  ended  December 31, 2005 and had no
taxable income in the six months ended December 31, 2004.

         Net Profit / (Loss)  and  Comprehensive  Profit / (Loss).  We had a net
loss of $(86,000) for the six months ended  December 31, 2005 compared to no net
profit / (loss) for the six months  ended  December  31, 2004 due to the factors
outlined above.

         Our comprehensive loss was identical to our net loss for the six months
ended  December  31, 2005 while we had no  comprehensive  profit / (loss) or net
profit / (loss) for the six months ended December 31, 2004.

Cash Flow Information

         During the six months ended December 31, 2004 we had no cash balance or
bank account and consequently no movements in cash flow.

         We reopened a bank  account  during the last quarter of the fiscal year
ended June 30, 2005 and  consequently  had a bank account and  movements in cash
flow during the six months ended December 31, 2005.

         Net cash (used in) operations in the six months ended December 31, 2005
was  $(70,000)  compared  to no  movement  in net cash  provided  by / (used in)
operations  in the six months ended  December 31, 2004.  In the six months ended
December 31, 2005 our net loss,  without any  requirement  for an adjustment for
non-cash  items,  resulted  in a  negative  cash  flow of  $(86,000).  This  was
partially  offset by a  positive  cash flow of  $16,000  generated  from the net
movement in our operating assets and liabilities.

         No cash was  provided by / (used in)  investing  activities  in the six
months ended  December 31, 2005 or 2004 as we had no  investments to sell and no
available cash to purchase investments.


                                       29
<PAGE>

         Net cash was provided by financing  activities  in the six months ended
December  31, 2005 was $50,000  compared to no net cash  provided by / (used in)
investing  activities  in the six months ended  December  31,  2004.  In the six
months ended  December 31, 2005 we received  $50,000 by way of loan from David J
Cutler, our sole director and officer.

PLANNED OPERATIONS

         Our plan of operation is to reach satisfactory  negotiated  settlements
with our outstanding creditors,  win the outstanding law suit brought against us
by certain of our  shareholders,  bring our financial records and SEC filings up
to date, obtain debt and, or, equity finance to fund negotiated settlements with
our creditors and to meet our ongoing operating expenses,  seek a 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 can be no assurance
that  this  series  of  events  will be  successfully  completed,  that any such
business will be identified or that any  stockholder  will realize any return on
their shares after such series of transactions 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


                                       30
<PAGE>

opportunities,  we  will  consider  such  matters  as (i)  available  technical,
financial and managerial  resources;  (ii) working  capital and other  financial
requirements; (iii) history of operations, if any, and prospects for the future;
(iv) nature of present and expected  competition;  (v) quality,  experience  and
depth of management services;  (vi) potential for further research,  development
or exploration;  (vii) specific risk factors not now foreseeable but that may be
anticipated to impact the proposed  activities of the company;  (viii) potential
for growth or expansion;  (ix) potential for profit;  (x) public recognition and
acceptance of products, services or trades; (xi) name identification;  and (xii)
other factors that we consider  relevant.  As part of our  investigation  of the
business  opportunity,  we expect to meet  personally  with  management  and key
personnel.  To the extent  possible,  we intend to utilize  written  reports and
personal investigation to evaluate the above factors.

         We will  not  acquire  or merge  with any  company  for  which  audited
financial statements cannot be obtained within a reasonable period of time after
closing of the proposed transaction.

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


                                       31
<PAGE>

and expectations of growth.  Any merger or acquisition can be expected to have a
significant   dilutive   effect  on  the   percentage  of  shares  held  by  our
stockholders.

         We  will   participate  in  a  business   opportunity  only  after  the
negotiation and execution of appropriate written business  agreements.  Although
the terms of such agreements  cannot be predicted,  generally we anticipate that
such agreements will (i) require specific  representations and warranties by all
of the parties;  (ii) specify certain events of default;  (iii) detail the terms
of closing and the  conditions  which must be  satisfied  by each of the parties
prior to and after such  closing;  (iv)  outline  the  manner of bearing  costs,
including costs associated with the Company's attorneys and accountants; (v) set
forth remedies on defaults; and (vi) include miscellaneous other terms.

         As stated  above,  we will not  acquire or merge with any entity  which
cannot provide  independent  audited  financial  statements  within a reasonable
period of time after closing of the proposed transaction.  We are subject to all
of the  reporting  requirements  included  in the 1934  Act.  Included  in these
requirements as part of a Current Report on Form 8-K,  required to be filed with
the SEC  upon  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 January,  2004 the  Financial  Accounting  Standards  Board (`the
FASB') issued Statement of Financial Accounting Standards No. 132 (revised 2003)
"Employers'  Disclosures about Pensions and Other Postretirement  Benefits",  an
amendment  of FASB  Statements  No.  87,  88,  and 106.  The  Statement  revises
employers'  disclosures  about  pension plans and other  postretirement  benefit
plans.  The  statement  retains the  disclosure  requirements  contained in FASB
Statement No. 132, which it replaces, and requires additional annual disclosures
about the assets,  obligations,  cash flows,  and net  periodic  benefit cost of
defined benefit pension plans and other defined  benefit  postretirement  plans.
Statement No. 132R  requires us to provide  disclosures  in interim  periods for
pensions and other postretirement  benefits. The initial application of SFAS No.
132R will have no impact on our financial statements.

          In  November 2004, the  FASB issued SFAS  No. 151, "Inventory Costs an
amendment of ARB No.43,  Chapter 4." This Statement clarifies the accounting for
abnormal amounts of idle facility  expense,  freight,  handling costs and wasted
materials.  This  Statement is effective for  inventory  costs  incurred  during
fiscal years beginning after June 15, 2005. The initial  application of SFAS No.
151 will have no impact on our financial statements.

            In December 2004, the FASB issued SFAS No. 152, "Accounting for Real
Estate  Time-Sharing  Transactions - an amendment of FASB  Statements No. 66 and
67." This Statement  references the financial  accounting and reporting guidance
for real estate time-sharing transactions that is provided in AICPA Statement of
Position 04-2,  "Accounting  for Real Estate  Time-Sharing  Transactions."  This


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Statement  also states that the guidance  for  incidental  operations  and costs
incurred to sell real estate projects does not apply to real estate time-sharing
transactions.  This  Statement is effective for financial  statements for fiscal
years  beginning  after June 15, 2005.  The initial  application of SFAS No. 152
will have no impact on our financial statements.

            In  December  2004,  the FASB issued  SFAS No.  153,  "Exchanges  of
Nonmonetary  Assets - a replacement of APB Opinion No. 20 and FASB Statement No.
3." This Statement eliminates the exception for nonmonetary exchanges of similar
productive  assets and  replaces it with a general  exception  for  exchanges of
nonmonetary assets that do not have commercial substance. A nonmonetary exchange
has commercial  substance if the future cash flows of the entity are expected to
change  significantly  as a result of the exchange.  This Statement is effective
for nonmonetary asset exchanges occurring in fiscal periods beginning after June
15, 2005. We do not expect application of SFAS No. 153 to have a material affect
on our financial statements.

            In May 2005, the FASB issued SFAS No. 154,  "Accounting  Changes and
Error - an  amendment  of APB  Opinion No.  29." This  Statement  applies to all
voluntary changes in accounting  principle.  It also applies to changes required
by an accounting pronouncement in the usual instance that the pronouncement does
not  include  specific  transition  provisions.  When a  pronouncement  includes
specific transition provisions,  those provisions should be followed. Opinion 20
previously  required  that most  voluntary  changes in  accounting  principle be
recognized by including in net income of the period of the change the cumulative
effect of changing to the new  accounting  principle.  This  Statement  requires
retrospective  application to prior periods' financial  statements of changes in
accounting  principle,  unless  it is  impracticable  to  determine  either  the
period-specific  effects of the cumulative effect of the change.  This Statement
is effective for  accounting  changes and  corrections  of errors made in fiscal
years  beginning  after December 15, 2005. We do not expect  application of SFAS
No. 154 to have a material affect on our financial statements.

Effects of Inflation

         Although we cannot accurately anticipate the effect of inflation on our
operations, we do not believe that inflation has had, or is likely in the future
to have, a material effect on our 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

         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.


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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 appeal was heard by the United  States  District
Court of Appeal for the 9th Circuit on February  8, 2006.  We have been  advised
that it may be several months before the Court's decision is announced.

Item 2.  Changes in Securities.

All details  of changes  in our securities are  set out in Note 8. Shareholders'
Equity above.

Item 3.  Defaults upon Senior Securities

All details of our defaults in respect of our debt are set out  in Note. 7 Notes
Payable.

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.

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  June 30, 2005 or  subsequent  to that
date

Item 5.  Other Information.

None

Item 6.  Exhibits and Reports on Form 8-K.

a.       Exhibits.

None

b.       Reports on Form 8-K.

On September 15, 2005 we filed a report on Form 8-K appointing  Larry  O'Donnell
CPA PC as our independent accountant.


On  December  9,  2005 we  filed  a  report  on Form  8-K/A  in  respect  of the
appointment of Larry O'Donnell CPA PC as our independent accountant.


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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: February 15, 2005             /s/     David J. Cutler

                                            David J. Cutler,
                                            Chief Executive Officer
                                            Chief Financial Officer.












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