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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                            ------------------------

                                   FORM 10-K

                 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                    FOR THE FISCAL YEAR ENDED JUNE 30, 2000

                         COMMISSION FILE NO. 000-21477

                            ------------------------

                                  ASPEON, INC.
             (Exact Name of Registrant as Specified in its Charter)

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<S>                                        <C>
                DELAWARE                                  52-1945748
     (State or Other Jurisdiction of                   (I.R.S. Employer
     Incorporation or Organization)                   Identification No.)
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                17891 CARTWRIGHT ROAD, IRVINE, CALIFORNIA 92614
               (Address of Principal Executive Offices)(Zip Code)

                 Registrant's telephone number: (949) 440-8000

      Securities registered pursuant to Section 12(b) of the Exchange Act:
                                      NONE

      Securities registered pursuant to Section 12(g) of the Exchange Act:
                         COMMON STOCK, $0.01 PAR VALUE

                            ------------------------

    Check whether the registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days.  Yes / /  No /X/

    Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-K is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.  / /

    The aggregate market value of the voting and non-voting common stock held by
non-affiliates of the registrant as of November 27, 2000 was $14,154,337. Shares
of common stock held by each officer and director and by each person who owns 5%
of more of the outstanding common stock of the Company have been excluded
because such persons may be deemed to be affiliates.

    The total number of shares outstanding of the registrant's Common Stock was
9,436,225 as of November 27, 2000.

                      DOCUMENTS INCORPORATED BY REFERENCE

                                      None

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                                FORM 10-K INDEX

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<S>      <C>                                                           <C>
                                    PART I

Item 1   Business....................................................         3

Item 2   Properties..................................................        29

Item 3   Legal Proceedings...........................................        30

Item 4   Submission of Matters to a Vote of Security Holders.........        30

                                    PART II

Item 5   Market for the Registrant's Common Stock and Related
           Stockholder Matters.......................................        31

Item 6   Selected Financial Data.....................................        32

Item 7   Management's Discussion and Analysis of Financial Condition
           and Results of Operations.................................        33

Item 7A  Quantitative and Qualitative Disclosures About Market
           Risk......................................................        43

Item 8   Financial Statements and Supplementary Data.................        43

Item 9   Changes in and Disagreements with Accountants on Accounting
           and Financial Disclosure..................................        43

                                   PART III

Item 10  Directors and Executive Officers of the Registrant..........        44

Item 11  Executive Compensation......................................        45

Item 12  Security Ownership of Certain Beneficial Owners and
           Management................................................        48

Item 13  Certain Relationships and Related Transactions..............        49

                                    PART IV

Item 14  Exhibits, Financial Statement Schedules, and Reports on Form
           8-K.......................................................        50
</TABLE>

                                       2
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    THIS ANNUAL REPORT ON FORM 10-K CONTAINS FORWARD-LOOKING STATEMENTS WITHIN
THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND
SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THE COMPANY
INTENDS THAT SUCH STATEMENTS SHALL BE PROTECTED BY THE SAFE HARBORS PROVIDED FOR
IN SUCH SECTIONS. SUCH STATEMENTS ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT
COULD CAUSE ACTUAL RESULTS TO VARY MATERIALLY FROM THOSE PROJECTED IN THE
FORWARD-LOOKING STATEMENTS. THE COMPANY MAY EXPERIENCE SIGNIFICANT FLUCTUATIONS
IN FUTURE OPERATING RESULTS DUE TO A NUMBER OF ECONOMIC, COMPETITIVE,
GOVERNMENTAL AND TECHNOLOGICAL FACTORS, INCLUDING, AMONG OTHER THINGS, CHANGES
IN LAWS, CHANGES TO OR CLARIFICATIONS OF ACCOUNTING RULES OR APPROACHES AND/OR
THEIR APPLICATIONS, THE SIZE AND TIMING OF CUSTOMER ORDERS, NEW OR INCREASED
COMPETITION, DELAYS IN NEW PRODUCT ENHANCEMENTS AND NEW PRODUCT AND/OR SERVICE
INTRODUCTIONS, QUALITY CONTROL DIFFICULTIES, CHANGES IN MARKET DEMAND, MARKET
ACCEPTANCE OF NEW PRODUCTS AND/OR SERVICES, PRODUCT RETURNS AND SEASONALITY IN
PRODUCT AND SERVICES PURCHASES. SEE "BUSINESS--RISK FACTORS" FOR A MORE DETAILED
DISCUSSION OF IMPORTANT FACTORS WHICH COULD CAUSE OPERATING RESULTS TO VARY
SIGNIFICANTLY FROM THOSE IN PRIOR PERIODS, AND THOSE PROJECTED IN THE
FORWARD-LOOKING STATEMENTS. SUCH FORWARD-LOOKING STATEMENTS REPRESENT
MANAGEMENT'S CURRENT EXPECTATIONS AND ARE INHERENTLY UNCERTAIN. INVESTORS ARE
WARNED THAT ACTUAL RESULTS MAY DIFFER FROM MANAGEMENT'S EXPECTATIONS. THE
COMPANY ASSUMES NO OBLIGATION TO UPDATE THE FORWARD-LOOKING INFORMATION TO
REFLECT ACTUAL RESULTS OR CHANGES IN THE FACTORS AFFECTING SUCH FORWARD-LOOKING
INFORMATION.

                                     PART I

ITEM 1.  BUSINESS

    Unless specified otherwise as used herein, the terms "we," "us" or "our"
"Aspeon" or the "Company" refer to Aspeon, Inc. and its wholly owned
subsidiaries.

THE COMPANY

    Aspeon, Inc., formerly known as Javelin Systems, Inc., was incorporated in
the State of Delaware on September 19, 1995 under the name of Sunwood
Research, Inc. The Company's executive offices are located at 17891 Cartwright
Road, Irvine, California 92614. Its telephone number is (949) 440-8000, and its
address on the World Wide Web is HTTP://WWW.ASPEON.COM.

    The Company's principal business activities are:

    - POS PRODUCTS.  Javelin Systems, a division of Aspeon, Inc. ("Javelin") and
      CCI Group, Inc., a subsidiary of Aspeon, Inc. ("CCI") design, manufacture,
      market and sell open system touch screen point of sale ("POS") computers
      primarily to the foodservice and retail industries (the "POS Products").

    - SOLUTION SERVICES.  Through its CCI, Jade Communications Limited ("Jade"),
      RGB/Trinet Limited ("RGB") (collectively "RGB/Jade") and Aspact IT
      Services (Singapore) Pte Ltd. ("Aspact") subsidiaries, the Company
      provides information technology management services for its customers that
      do not intend or are not able to hire their own information technology
      personnel (the "Solution Services"). These services include network design
      and management, installation of computer systems, local area network and
      wide area network support, maintenance and repair, and help desk support.
      Aspact was sold in August 2000.

    - APPLICATION SERVICES PROVIDER.  Through its Aspeon Solutions, Inc.
      ("Aspeon Solutions"), Dynamic Technologies, Inc. ("DTI"), SB
      Holdings, Inc. ("SB"), Restaurant Consulting Services ("RCS") and Monument
      Software Corporation ("Monument") subsidiaries, the Company operates as an
      application service provider ("ASP"). Its ASP services enable software
      applications to be deployed, managed, supported and upgraded from
      centrally located servers, rather than on individual computers (the "ASP
      Services"). The Company's ASP Services primarily are directed toward
      customers in the foodservice industry.

                                       3
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    Since its formation in 1995, the Company has completed a number of
acquisitions in an effort to expand geographically its POS Products business
while aggressively developing the Solution Services and ASP Services operations.

    In December 1997, Aspeon acquired CCI and POSNET Computers (collectively
"CCI"). Both companies focused on providing point of sale solutions to large
restaurant chains including White Castle, AFC, Red Robin and Jamba Juice. These
acquisitions formed the basis of Aspeon's POS Products and Solution Services
operations.

    Aspeon began its globalization initiative in 1998, first opening Javelin
sales and support offices in the United Kingdom (UK) and Australia.

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

    In May 1998, Aspeon 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, Aspeon acquired RGB/Jade, a networking solutions provider
with customers such as Marks and Spencer, WH Smith, Body Shop and Bass pubs.
Although primarily retail focused, RGB/ Jade has relationships with major
non-retail customers including Reuters and British Telecom. Aspeon launched
another UK subsidiary, Teneo, in an effort to expand its service management and
wide area network solutions business.

    By late 1998, Aspeon was positioned globally to provide both point of sale
and communications solutions to the retail and restaurant industries, but
realized it lacked the expertise in enterprise software and infrastructure,
which would be necessary to complete the Company's end-to-end vision. The
Company was not in a position to build a large enterprise consulting practice
due to the difficulty of hiring and retaining the hundreds of consultants needed
to serve its large clients.

    Aspeon began evaluating alternative business models and identified the ASP
business as ideal for its vertical focus since it could develop a
pre-integrated, vertically-focused suite of software applications that could be
delivered through the Internet in a hosted environment. In 1999, Aspeon began
developing its ASP business.

    In April 1999, Aspeon acquired DTI and SB, a Philadelphia-based provider of
hosted messaging, customer relationship management, and custom software
solutions to a variety of customers in the Delaware Valley area including
Aventis and Right Management. This acquisition served as the platform for
Aspeon's ASP offering by providing application development, implementation, and
support capabilities.

    In August 1999, Aspeon acquired RCS, a provider of technology outsourcing
services including Oracle Financials hosting and communications management to
customers such as Champs Entertainment, Inc., Fuddruckers, Chart House, and
Xando-Cosi.

    In January 2000, Aspeon created Aspeon Solutions, Inc. as a wholly-owned
subsidiary to centralize and continue to rapidly develop its ASP Services
business.

    In March 2000, Aspeon acquired Monument, a provider of rapid implementation
services of first-class financial systems with an emphasis on Oracle Financials.

                                       4
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    The Company has attempted to assemble a high caliber management team and
build an ASP infrastructure designed to rapidly scale as companies increasingly
turn to outsourcers, like Aspeon, to satisfy their internal information
technology ("IT") needs.

INDUSTRY OVERVIEW

POS PRODUCTS AND SOLUTION SERVICES

    The Company estimates that there are more than 450,000 restaurants and more
than 1.6 million retail stores in the United States. These restaurants and
retail stores are increasingly part of multi-location chains that have the need
to capture, analyze and disseminate information throughout the entire enterprise
in order to better manage inventory and costs, make pricing decisions, analyze
sales data and provide customized products and services. Moreover, businesses
that encounter local demographic changes or seek to expand globally face
additional challenges, such as multilingual customer and employee bases,
multiple currency transactions and local regulatory requirements. Consequently,
foodservice providers and retailers now require robust, integrated point-of-sale
("POS") systems and services that are able to reliably and efficiently capture,
manage and analyze large numbers of individual transactions generated by
diversified points of sale.

    The critical front and back office roles of integrated POS systems are now
being recognized by distinct market segments within the foodservice and retail
industries. Quick service restaurants ("QSRs") and full service restaurants, the
largest market segments within the foodservice industry, both are investing in
advanced POS systems, with QSRs generally being the first to adopt the latest
POS technology and full service restaurants being more price-sensitive, and
therefore, more likely to adopt POS technology later in the product life cycle.
A typical QSR requires four to seven POS workstations to operate efficiently,
while a full service restaurant generally requires at least seven POS
workstations. The foodservice industry also encompasses hotel restaurants and
restaurants located in other hospitality locations, such as stadiums and arenas,
casinos, theme parks and cruise lines. Retail establishments, such as
convenience stores, gas stations, record stores and clothing stores, are
increasingly utilizing POS systems to expedite in-store transactions and more
effectively monitor inventory on a current basis.

    The POS industry has begun evolving from proprietary customized single
platform systems to open-architecture systems in which a variety of hardware and
software products from different manufacturers can be combined to obtain the mix
of features desired by the customer. With the advent of hardware and software
systems that use industry standard open-architecture, foodservice providers and
retailers are no longer captive to single solution vendors that had initially
created their POS systems. As in other markets for computer products and systems
where open systems are replacing proprietary platforms, new entrants have been
drawn to the growing POS market, increasing competition for POS software and
hardware and enhancing competitive pressure through faster design cycles.

ASP SERVICES

    According to Forrester Research, Inc., the size of the ASP market in 1999
was less than $1.0 billion. Forrester Research, Inc. projects this market to
grow to over $11.0 billion in 2003 and that 22% of all U.S.-based application
revenue will flow through ASPs.

    We believe the growth and acceptance of the ASP model is being driven by the
following factors:

    - SOFTWARE COMPLEXITY.  Software applications are increasingly more complex
      and need to be continually upgraded, integrated and supported. This is
      beyond the expertise of many companies.

    - SHORTAGE OF INFORMATION TECHNOLOGY PROFESSIONALS.  According to
      International Data Corporation, by 2002 there will be a shortage of
      850,000 information technology professionals in the United States

                                       5
<PAGE>
      and an even greater shortage of one million information technology
      personnel in Europe. Companies are finding it increasingly more difficult
      and expensive to maintain their information technology departments.

    - TELECOMMUNICATION COSTS HAVE BEEN DECLINING.  The greater availability of
      telecommunications capacity and declining costs over the last several
      years have made the use of centralized computing more economical to
      businesses.

ASPEON'S THREE BUSINESS SEGMENTS

    Aspeon currently operates in three business segments: (a) the POS Products
segment in which it designs, manufactures, markets and sells open system touch
screen POS computers primarily for the food service and retail industries,
(b) the Solution Services segment in which it provides retail foodservice
technology solutions and services that enable restaurants and retailers to
capture, analyze, disseminate and use information throughout the enterprise,
from the POS cash register terminal to the back office to an organization's
headquarters and (c) the ASP Services segment in which it provides integrated
business application software customized to meet industry-specific requirements.
The financial information for business segments and geographic areas is included
in Note 11 to the Consolidated Financial Statements included herein under Item
14 of this Report.

POS PRODUCTS

    Aspeon, through its Javelin Systems division and its subsidiary, CCI,
designs, manufactures and markets open system touch screen POS computers
primarily for the food service and retail industries. The Company's family of
network-ready computers integrates substantially all of the functionality of a
standard desktop personal computer into durable, small, footprint touch screen
workstations that run on industry standard operating systems. Our POS Products
offer customers a fully functioning PC inside a small footprint touch screen
workstation. The Company's systems are network ready and support industry
standard operating systems, enabling the easy installation and setup of leading
industry standard POS software programs. The Company's system also virtually
eliminates configuration conflicts due to the system's proprietary embedded
firmware. In addition, its single motherboard design reduces costly trouble-
shooting and service calls, and the Company's systems are sealed to protect
against liquid and other foreign matter entering the interior electronic
chamber. The Company believes that its POS Products offer its clients more
features and better reliability than its competitors' products at lower price
points ranging from $2,500 to $3,700. The Company's product line is currently
comprised of the Javelin-Wedge 5, Javelin-Wedge P, Javelin-LC, Javelin-LCP, and
Javelin Viper series.

    JAVELIN-WEDGE 5. The Javelin-Wedge 5 is a small footprint, high performance
color LCD touch screen computer which is approximately 12.75"(W), 10.25"(D) and
6.0"(H). The Javelin-Wedge 5 features a 133mHz processor, system memory from 4
MB of RAM to 64 MB of RAM, 1 MB of video memory, a 10.4 or 12.1 inch TFT active
matrix screen, 4 serial ports, 1 enhanced parallel port, 2 electronic cash
drawer ports, a 10 Base-T Ethernet port and an integrated customer display. As a
result of the product's inherent flexibility and rugged design, it is being
successfully marketed and sold as a POS workstation and as an industrial
operator interface.

    JAVELIN-WEDGE P. The Javelin-Wedge P is a product line extension of the
Javelin-Wedge 5 series and is believed by the Company to be the first fully
integrated, Pentium-based touch screen computer designed specifically for the
POS marketplace. The Wedge P features a 200 MHz Intel Pentium processor with
additional features such as a 512K Pipeline Burst cache and up to 128 MB of RAM.
The Wedge P approximately doubles the speed and performance of the Wedge 5 which
provides end users the ability to dramatically increase speed and performance
when using graphically intensive POS applications that operate in Windows 95 and
Windows NT environments.

                                       6
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    JAVELIN-LC. The Javelin-LC product line offers customers what the Company
believes is the smallest footprint of any POS computer in the industry with a
footprint of less than eight inches square and has been designed to be more
compact and elegant in appearance, making it suitable for both the foodservice
market and the retail market. In addition, the system's reduced size and flat
panel display allow it to be mounted in a variety of ways, including
wall-mounted, fixed to an adjustable base or attached to an articulated arm. The
Javelin-LC features a 133mHz processor, system memory from 4 MB of RAM to 64 MB
of RAM, 1 MB of video memory, a 10.4 or 12.1 inch TFT active matrix screen, 2
serial ports, 1 enhanced parallel port and a 10 Base-T Ethernet port. The
Javelin-LC is designed to meet the industry's unique hardware requirements for
speed, space, flexibility and multimedia features.

    JAVELIN-LCP. The Javelin-LCP is a product line extension of the Javelin-LC.
This is a Pentium based LC product which, like the Javelin-LC, the Company
believes to have the smallest footprint of any POS computer in the industry. The
speed of the Pentium-based CPU offers clients the ability to dramatically
increase speed and performance when using graphically intensive POS
applications. The LCP features a 200 MHz Intel Pentium processor with additional
features such as an integrated sound card and full screen video, 3 serial ports
and up to 128 MB of RAM. The foodservice industry, especially the quick service
restaurants ("QSR") segment, is demanding the latest generation hardware to be
based around the Pentium processor. The Javelin-LCP is designed to meet the
industry's unique hardware requirements for speed, space, flexibility and
multimedia features.

    JAVELIN-LP. The Javelin-LP is a compact, low profile PC for the
high-traffic, POS environment. The LP is planned to be network-ready with an
integrated 100/10BaseT Ethernet controller. With 4 serial ports, two of which
can supply +5Volt power, the LP will accommodate a variety of peripheral
equipment such as cash drawers, card readers, scanners and printers. The
Javelin-LP's rugged, aluminum die-cast, convection cooled case provides the
Javelin LP with a significant advantage over other POS systems. The LP is
designed to be spill-resistant with a solid cover, and, because it has no fans,
is noiseless and has no vents into which airborne debris can enter and collect
inside the system. The LP's low profile design requires minimal counter space,
and I/O connectors be located at the bottom of the unit allow easy routing of
cables through a small opening in a counter or desk top. The Javelin-LP comes
with an integrated touchscreen controller supporting both Elographics and
Microtouch Bus Monitors, eliminating the need for an external controller.

    JAVELIN-HHT 40. The Javelin HHT-40 is being developed for the Company by a
third party. The HHT-40 is designed to be a compact, lightweight, wireless
handheld system that provides service people the ability to enter orders quickly
and efficiently and offers the benefit of sending information remotely to the
kitchen, bar, etc. With its built-in customer display and paging system, the
HHT-40 would expedite customer transactions, reduce operator errors, and most
significantly, increase table turns. The HHT-40 is planned to be based on a main
module where a battery, magnetic card reader or end-piece can be connected to
any side of the main module.

    VIPER.- The Javelin Viper is a low profile touchscreen PC designed for the
high-traffic POS environment. The Viper is network-ready with an integrated
10/100Base T controller and Ethernet interface. Equipped with 6 serial ports,
the Viper can support a variety of peripheral POS equipment such as cash
drawers, card readers, scanners and printers. The Viper's low profile design
requires minimal counter space and its modular LCD display can be positioned at
various angles or even detached from the base to accommodate special area
requirements.

    VIPER RT.- The Javelin Viper RT touchscreen POS system incorporates all of
the features of the Viper, but also includes an integrated, detachable 32-key
keypad. The lightweight aluminum base of the Viper RT features a
Pentium-class 333 MHz microprocessor with four external serial ports and two USB
ports for expanded connectivity to peripheral devices. If counter space is
limited, the modular display can be detached from the base and mounted to the
counter or wall. The base can be stored up to 50 feet away and connected by a
single CAT-5 cable. Wireless configuration is also available as an option.
Javelin

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engineers included an on-board system health monitor that allows users to
proactively monitor system performance and the PC's general configuration.
Through the use of the Internet or any dial-up networking software the Viper RT
allows users to monitor the integrity of the system from a connected PC in
another location. This feature may assist with identifying potential conflicts
before they result in costly system downtime.

    The product line is undergoing a transition with most new customers adopting
the latest generation product, the Javelin Viper and Viper RT. The Company has
initiated an "end of life" strategy for the Wedge 5/P, LC, and LCP in fiscal
2001.

SOLUTION SERVICES

    Aspeon, through its CCI, RGB/Jade and Aspact subsidiaries, provides retail
foodservice technology solutions and services that enable restaurants and
retailers to capture, analyze, disseminate and use information throughout the
enterprise, from the POS cash register terminal to the back office to an
organization's headquarters.

    IT MANAGEMENT SERVICES

    We provide various onsite and offsite management services for our customers
including data center operations, local area network ("LAN")/wide area network
("WAN") support, and information strategic planning. These services are
typically required by customers who do not intend or are unable to build their
own IT department.

    NETWORK DESIGN/PROJECT MANAGEMENT SERVICES

    The Company provides network services ranging from network design to
large-scale network implementation, which would include a review and audit of a
customer's existing POS technology infrastructure, an assessment of the
functional requirements of the customer's POS system, the preparation of network
specifications and technical design documentation and diagrams. The Company's
network implementation services involve the purchase, delivery, testing and
installation of enterprise-wide POS systems. The Company acts as the single
project manager for all parties involved in a multi-unit installation, to
effectively converge and integrate the client's business processes. The Company
believes that the delivery of a combination of design, implementation and
management services through a project manager enables the Company's personnel to
fully understand the customer's computing and operating environments, install
POS systems that meet the customer's specialized requirements and train the
customer's users and internal POS system staff prior to the full migration to a
new POS system. The Company's personnel have extensive experience resolving the
integration, implementation and management issues faced by its customers, and
the personnel involved in any particular project are carefully selected for
their technical expertise to meet the requirements of the specific project. The
Company assesses its customers' POS system requirements and selects the optimal
mix of applications and products of various hardware and software vendors, and
does not exclusively use Aspeon products. The Company's expertise extends
through each area of POS system networking to create a tailor-made
infrastructure for the client, including structured cabling, power, LAN, WAN and
Internet technologies.

    OTHER SERVICES

    - MANAGED NETWORK SERVICE SOLUTIONS.  The Company's network management
      services include combinations of the following services, which are
      selected by the customer to meet its specific needs: network health
      checks, baseline documentation and management maintenance, break/fix
      remote network management, and diagnostics help desk network outsourcing
      services.

    - HELP DESK SERVICE SOLUTIONS.  The Company's emergency software hotline is
      available for questions customers may have with respect to specific
      application software and operating systems. The Help

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      Desk is designed to provide service and support for issues that can be
      resolved without an on-site visit. If at any time during the Help Desk
      call it is determined that hardware service is required, the support
      personnel will expedite the call to the appropriate third party on-site
      service entity or our own depot maintenance department.

    - HARDWARE SERVICE/HARDWARE MAINTENANCE/PREVENTATIVE MAINTENANCE SERVICE
      SOLUTIONS.  A variety of hardware maintenance options are currently
      provided. Calls placed to a central service center are provided with
      assistance to determine the nature of the call. Once the failure is
      determined, the responding third party field technician will answer the
      call in accordance with services needed and contracted coverage. Depot
      service supplies configured equipment directly to the location for
      uninterrupted operations while defective equipment is returned from the
      site to the service center for repair.

    - INSTALLATION SERVICE SOLUTIONS.  Site-specific training is available
      primarily through our third party software partners. Hardware preparation
      such as software load, equipment burn-in, cabling and performance testing
      of "pre-live" systems is an essential component prior to installation.

ASP SERVICES

    Aspeon, through its Aspeon Solutions, DTI, RCS and Monument subsidiaries
provides ASP Services that include deploying, managing and supporting software
applications hosted at our data centers for our customers. Our ASP Services are
designed so that our customers can choose the combination of software
applications that best meet their business requirements, technical needs and
financial resources.

    Our ASP Services customers are mid-sized businesses between $20 million and
$500 million in revenue. The Company typically enters into three-year agreements
with our customers and charges a monthly fee based on the software applications
we host. Our customers pay for our ASP Services on a monthly or quarterly basis.
Amounts invoiced to customers are based on the number of users, types of
applications hosted and number of support services utilized by the customer.

    We believe that growth in the demand for our ASP Services is dependent upon
the following factors:

    - the compatibility between our ASP Services and technology that our
      customers use,

    - our ability to reliably deliver ASP Services to our customers,

    - other ASP providers providing quality services so as not to diminish
      consumer confidence in ASP Services,

    - mitigating the effects of defects in software applications delivered from
      our data centers that are beyond our control,

    - our ability to strengthen awareness of our brand and differentiate the
      services we offer from those of our competitors,

    - our ability to market our services in a cost-effective manner to new
      customers, and

    - satisfying customer concerns over data security and user privacy.

    We believe that our ASP solutions offer the following key benefits:

    - RELIABLE SERVICE.  By offering service level agreements and utilizing the
      latest technology, we are able to provide increased levels of service,
      which our customers cannot easily replicate.

    - REDUCE DEPENDENCY ON INFORMATION TECHNOLOGY STAFF.  The maintenance of a
      complete, professionally managed information technology team necessary to
      effectively manage complex software and information technology
      infrastructures is increasingly expensive and difficult. By outsourcing
      all or part of their information technology needs, our customers are able
      to reduce their information technology staff and can focus on their core
      competencies.

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    - LOWER COSTS.  By spreading information technology costs among many
      customers, we are able to achieve economies of scale not possible for our
      target customers and, as a result, offer our customers significant cost
      savings. Our customers are able to forecast and budget their ongoing
      information technology costs and reduce their upfront information
      technology investment.

    - RAPID DEPLOYMENT.  By having their software applications hosted at central
      locations, our customers are able to rapidly deploy and quickly upgrade
      their software, allowing them to more rapidly realize returns on their
      information technology expenditures.

    - INTEGRATION.  We have identified and pre-configured a best of breed set of
      application components for our target customers. This reduces the
      integration cost to our customers, which traditionally runs 2 to 3 times
      the cost of the underlying software license.

SOFTWARE PARTNERS

    Among the software applications offered for delivery as part of our ASP
Services are the following:

<TABLE>
<CAPTION>
SOFTWARE PARTNER                           SOFTWARE PRODUCT
----------------                           ----------------
<S>                        <C>
Microsoft................  Email, Database, Web Servers, Operating Systems
Oracle...................  Financials, Database
Eatec....................  Restaurant Back Office
Business Objects.........  Decision Support, Portal
Lawson...................  Financials
</TABLE>

BUSINESS STRATEGY

    The Company's objective is to become the premier solutions provider for
multi-site chain operators in the food service and retail industries. Our
business strategy is to attempt to achieve this objective by leveraging our
restaurant POS Products and Solutions Services businesses together with our DTI,
RCS, and Monument acquisitions to grow our ASP business into a larger portion of
our business. The Company also plans to attempt to achieve these objectives
through internal growth and development and, to the extent suitable acquisition
candidates are identified, through the acquisition of complementary businesses.

    Key elements of Aspeon's strategy include the following:

    - GROW THE ASP AND IT MANAGEMENT BUSINESS.  The Company intends to increase
      its sales of products and services to multi-unit chains by providing them
      with an end-to-end ASP solution. The evolution of open systems, the
      complexity and cost of implementing information systems and the demand by
      customers for timely operational data, has created an opportunity for
      Aspeon with our in-depth knowledge of the industry and ability to
      integrate software and hardware packages into a successful end-to-end
      solution for clients. We have added an IT management component to this
      service for clients whom do not have internal resources to plan and
      implement IT solutions.

    - INTRODUCE TIMELY NEW JAVELIN POS PRODUCTS.  The Company intends to
      continue to develop new POS hardware systems incorporating advanced PC
      technology utilizing its engineering team composed of PC industry
      veterans. Because a significant portion of the Company's management is
      experienced in the PC industry, the Company has been able to quickly
      launch new products in the POS system industry and respond quickly to its
      customers' specific needs. This experience has enabled Aspeon to rapidly
      establish itself in the POS market by developing and introducing new
      products with advanced features in an average of six months compared to
      the industry standard of twelve to eighteen months. The Company intends to
      leverage its history of timely new product introductions and successful
      customer engagements and expand its marketing programs to enhance its
      market presence and visibility with the goal of maintaining Aspeon's
      recognized leadership in providing POS solutions.

                                       10
<PAGE>
    - RAPIDLY PENETRATE THE MARKET THROUGH OUR THIRD-PARTY DISTRIBUTION
      CHANNELS.  We market our ASP Services primarily through a direct
      coast-to-coast sales force, but we intend on providing our ASP Services
      through our traditional point of sale third-party distribution channels.
      We believe these distribution channels will allow us to rapidly increase
      our market penetration without incurring significant capital expenditures.
      This should also allow us to shorten the sales cycle for our service
      offerings by targeting the customer closer to the time of the customer's
      decision to purchase ASP solutions. We also believe this strategy will
      create stronger business ties with our distributors who only carry our
      Javelin POS product line.

PRODUCT DEVELOPMENT

    For the fiscal years ended June 30, 1998, 1999 and 2000, the Company spent
approximately $874,000, $1,336,000 and $1,968,000, respectively, on product
development. The Company maintains an engineering and development staff of
approximately ten people, with expertise in electronics, mechanical and software
design, who are responsible for prototyping, tooling and testing the Company's
products. The Company's engineering and manufacturing staff then coordinate with
systems engineers and quality control personnel to progress from the final
design stage to mass production.

SALES AND MARKETING

    The Company's products are primarily distributed through its direct sales
organization, strategic relationships with outside equipment manufacturers
("OEMs") and value added resellers ("VARs") that have a strong reputation in the
foodservice and retail POS markets. By initially distributing its products
through OEMs and VARs, the Company was able to take advantage of the existing
name recognition and market position of its OEMs and VARs and quickly establish
a market for its products, while minimizing expenditures for direct sales,
marketing, technical support and service. The Company's direct sales
organization consists of approximately 15 professionals focused on offering our,
point of sale, ASP and communications solutions to existing and new customers,
as well as to gain access to new market segments and international markets.

    We are initially targeting our ASP Services to medium to large sized
businesses which we believe represent a strong market opportunity. We plan to
expand our marketing to smaller businesses in the future. In fiscal 2000, the
Company spent approximately $1.3 million for our advertising and promotional
strategies. In 2001, we currently plan to spend approximately $1.0 million to
establish our brand name and create market awareness. As part of our efforts to
continue end user and channel education about the ASP concept, we have allocated
$500,000 for domestic print advertising in restaurant publications, targeting
chief executive officers, chief technology officers, chief information officers
and chief financial officers. We are also developing new ASP tools for both our
direct sales force and our channel sales partners to support them throughout the
sales process, as well as allocating over $250,000 to our continued
participation in end user and channel-focused tradeshows. We will continue our
strategy to develop our channel sales through cooperative seminars and events
with our independent resellers.

ASP DELIVERY SYSTEM

    We have developed a secure, reliable and high-performance system for
delivering software applications to multiple users, which we believe provides us
with a significant competitive advantage. Personnel in our Beverly,
Massachusetts, Danvers, Massachusetts and King of Prussia, Pennsylvania
locations monitor our system on a continual basis. We combine internally created
technology innovations with technologies from leading software and hardware
providers, including, among others Hewlett-Packard ("HP") and Compaq computer
servers, Cisco Systems routers and firewall protection software, and EMC storage
devices. To address the diverse requirements of our customers, we offer our ASP
Services on all of the leading operating systems and computing platforms
including HP, Unix and Microsoft Windows NT. Our

                                       11
<PAGE>
delivery system is scalable, allowing servers to be added to support additional
users without disrupting other servers that are concurrently running software
applications.

    We operate state-of-the-art data centers in Danvers, Massachusetts and King
of Prussia, Pennsylvania from which we deliver our ASP Services. Each facility
features separate, back-up network and power connections, cooling systems and
on-site back-up diesel generators to ensure continuous power supply. We employ
several security measures including:

    - electronic surveillance,

    - limited access electronic card key measures,

    - the physical separation of servers from administrative workstations, and

    - firewalls at each entry point to our data center.

    We offer connectivity to our systems from virtually anywhere in the world,
providing customers with global access to software applications. Customers can
access us:

    - via the Internet,

    - through high speed connections, and

    - over Frame Relay through AT&T Corp. and MCI Worldcom, Inc. or over
      dedicated, private lines.

    We have designed our network to attempt to minimize the effect of
interruptions. We monitor the performance and security of our entire
infrastructure. We have also implemented security measures to identify potential
sources of failure or interruption. Although we have attempted to build complete
back up into our network and hosting facilities, our delivery system is
currently subject to several single points of failure, and a problem with one of
our servers, routers or switches could cause an interruption in the services we
provide to some of our customers.

    The design of our data centers enables systems administrators and support
staff to be promptly alerted to problems and rapidly resolve any technical
issues.

    The Company has had preliminary discussions with a domestic organization to
consolidate our data centers into one outsource provider that will allow us to
minimize capital investment, increase security, increase scalability, and lower
operating costs. The Company has currently delayed plans to consolidate its data
centers pending its assessment of future data center needs.

MANUFACTURING

    The Company's manufacturing operations consist of the procurement of
components and the assembly, testing and quality assurance of finished goods for
shipment to its customers. Third-party manufacturers provide the fabrication of
major sub-assemblies, such as circuit boards and sheet metal chassis, and the
supply of other finished components, such as touch screens. The Company monitors
the quality of its purchased and manufactured components through source and
incoming inspection. The Company evaluates and monitors suppliers based on
quality, reputation, responsiveness and price. The Company uses an outsourced
contract manufacturer in Singapore to assemble our Viper product. Our other
products are assembled in our Irvine, California facility.

PRODUCT WARRANTY

    The Company's computer products have a warranty that covers defective
material and workmanship during the twelve-month warranty period commencing on
the date of delivery of the products. During the warranty period, the Company
will, at its sole option, repair or replace parts found to be defective or
refund the purchase price of products or parts. Certain of the Company's major
distributors also provide warranty service for the Company's products.

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<PAGE>
COMPETITION

POS PRODUCTS AND SOLUTION SERVICES

    The market for the Company's POS Products is highly competitive, subject to
rapid change and sensitive to new product introductions or enhancements and
marketing efforts by industry participants. The Company expects to continue to
experience significant and increasing levels of competition in the future; in
part as open systems architecture in its targeted industries becomes more
common. The principal elements of competition related to the Company's POS
Products include price, product features and performance, compatibility with
open systems, quality and reliability, brand awareness, level of customer
service and quality of display. The POS systems integration industry is also
highly competitive and undergoing continual change. The principal elements of
competition related to the Company's systems integration services include
reputation, scope of services provided, availability of resources and price. In
many of the Company's markets, traditional computer hardware manufacturing,
communications and consulting companies provide the most significant
competition. The Company must also compete with smaller service providers that
have been able to develop strong local or regional customer bases. Most of the
Company's competitors for its products and services, as well as certain
potential competitors, are more established, benefit from greater name
recognition, have significantly greater financial, technological, production and
marketing resources, and have more extensive distribution networks than the
Company.

    The Company believes the use of open systems architecture in its targeted
industries is an important competitive element. Several of the Company's
competitors currently also offer open systems and the Company believes that the
number of competitors offering open systems solutions will grow over the next
several years. The Company anticipates that a significant source of future
competition may be from existing competitors in the POS products and services
market that the Company believes are currently attempting to develop POS systems
and support services utilizing open systems architecture. Due to the greater
sales, marketing, product development and financial resources of the Company's
competitors, the Company anticipates that competition from these competitors
will intensify in the future. In order to effectively compete against these
competitors, the Company will need to continue its growth trend and attain
sufficient revenues to have the resources to timely develop new products and
services in response to evolving technology and customer demands and to sell
products and services through a broad distribution channel in competition with
these other existing and potential competitors. No assurance can be given that
the Company will be able to grow sufficiently to enable it to compete
effectively in this marketplace.

    The Company's competitors include a substantial number of large
well-established companies including International Business Machines (IBM),
Micros, Par Technology Corporation, Radiant Systems, Inc., NCR, and Panasonic,
each of which also offers open systems architecture products and services
related thereto. There can be no assurance that the Company will be able to
maintain its competitive advantage or that these existing substantial
competitors, or new competitors, will not develop competitive products and
services with favorable pricing. Moreover, the Company has little or no
proprietary barriers to entry that could keep its competitors from developing
similar products or services and technology or selling competing products or
services in the Company's markets.

    Increased competition from manufacturers or distributors of products similar
to or competitive with the Company's products, or from service providers that
provide services similar to the Company's services, could result in price
reductions, reduced margins and loss of market share or could render the
Company's technology obsolete, all of which could have a material adverse effect
on the Company's results of operations and financial condition. There can be no
assurance that the Company will be able to successfully compete in this
marketplace or develop sufficient new products and services to remain
competitive, and any failure to do so could have a material adverse effect on
its results of operations and financial condition.

                                       13
<PAGE>
ASP SERVICES

    The ASP market is extremely competitive. The tremendous growth and potential
size of this market has attracted many start-ups, as well as extensions of
existing businesses from different industries. The principal competitive factors
in the ASP market include:

    - quality of service, including performance, scalability, reliability and
      functionality,

    - customer service and support,

    - variety of services offered,

    - price,

    - name recognition, and

    - network security.

    Our current and prospective competitors include other ASPs, systems
integrators, and hardware and software suppliers.

    ASPS.  We expect to compete with other companies whose core business is
providing ASP Services to restaurant chains. These competitors include, among
others, Mirus, Agilera, Radiant Systems, and MICROS Systems, Inc ("Micros").

    SYSTEMS INTEGRATORS.  We compete with commercial systems integrators who
bundle their services with software and hardware providers and perform an
outsourcing role for the customer. Examples of these competitors include ACS,
EDS, Andersen Consulting, PricewaterhouseCoopers and IBM Global Services, among
others. These companies provide professional consulting services in the use and
integration of software applications in single-project customer engagements.
Systems integrators may establish strategic relationships with software
application providers to offer services similar to our ASP offerings. Their
strengths include local customer awareness and relationships with hardware and
software companies. Additionally, regional systems integrators may align
themselves with Internet service providers to offer complex website management
combined with professional implementation services.

    HARDWARE AND SOFTWARE COMPANIES.  We compete with hardware and software
companies in providing software application solutions, communication solutions,
and point of sale solutions. In order to build market share, both hardware and
software providers may establish strategic relationships to enhance their
service offerings. IBM Solutions currently provides applications outsourcing of
its Lotus Notes products and delivers the service via the IBM network
infrastructure. J.D. Edmunds & Company, a developer of enterprise resource
planning software, has announced that it will offer its software in an
outsourced model. SAP Aktiengesellschaft ("SAP") has formed an outsourcing
organization to develop key partnerships with leading consulting firms with the
intent of offering SAP software and PeopleSoft and Oracle have announced an ASP
strategy. We believe that additional hardware and software providers,
potentially including our current software partners, may enter the outsourcing
market in the future.

    OTHER POTENTIAL COMPETITORS.  It is possible that new competitors or
alliances may emerge and gain market share. Such competitors could materially
affect our ability to obtain new contracts. Further, competitive pressure could
require us to reduce the price of our products and services, thus affecting our
business, financial condition and results from operations.

    Many of our competitors have substantially greater financial, technical and
marketing resources, larger customer bases, longer operating histories, greater
name recognition and more established relationships in the industry. As a
result, certain of these competitors may be able to develop and expand their
service offerings more rapidly, adapt to new or emerging technologies and
changes in customer requirements more quickly, take advantage of acquisition and
other opportunities more readily, devote greater resources to the marketing and
sale of their services and adopt more aggressive pricing policies.

                                       14
<PAGE>
EMPLOYEES

    As of November 27, 2000, the Company had approximately 346 full-time
employees, including 40 employed in sales and marketing, 273 employed in
engineering, technical support and production, research and development and 33
employed as administrative and support staff. Unions represent none of the
Company's employees, and the Company considers its employee relations to be
good.

RISK FACTORS

RISKS RELATED TO THE COMPANY

THE COMPANY'S COMMON STOCK MAY BE DELISTED FROM THE NASDAQ STOCK MARKET

    The Company's common stock is listed on the Nasdaq National Market System.
On October 10, 2000, The Nasdaq Stock Market ("Nasdaq") suspended trading of the
Company's Common Stock while it sought additional information from the Company.
On October 11, 2000, Nasdaq sent a letter to the Company stating that that its
Common Stock would be delisted from Nasdaq if the Company did not file its
Annual Report on Form 10-K for the fiscal year ended June 30, 2000 with the
Securities and Exchange Commission ("SEC") by October 18, 2000. The Company's
Form 10-K was not filed with the SEC by the October 18, 2000 deadline. On
November 9, 2000, the Company participated in a hearing before the Nasdaq
Listing Qualifications Panel which was held for the purpose of evaluating
whether the Company's Common Stock may continue to be listed on Nasdaq or if it
will be delisted. As of the date of the filing of this report with the SEC,
Nasdaq has not informed the Company as to its decision. The Company is not able
to give any assurances that trading of its Common Stock will resume on Nasdaq at
any time in the future.

    Nasdaq provides brokers and others with immediate access to the best bid and
ask prices and other information about stock traded on Nasdaq during each
trading day. If the Company were to lose its Nasdaq National Market System
designation, real-time price information for its Common Stock might cease to be
available. As a result, an investor might find it more difficult to dispose of,
or to obtain more accurate quotations as to the price of, the Company's Common
Stock.

    If the Company were to lose its Nasdaq National Market System designation,
it would seek to have its Common Stock listed on the Nasdaq SmallCap Market or
another securities exchange, subject to the Company's ability to satisfy the
eligibility criteria for such exchange. If the Company was not able to meet the
Nasdaq SmallCap Market maintenance criteria, trading, if any, in the Company's
Common Stock might continue to be conducted in non-Nasdaq over-the-counter
markets. The Company's Common Stock would then be subject to the risk that it
could become characterized as a low-priced or "penny stock," which
characterization could have a material adverse effect on the market liquidity of
the Company's Common Stock. See the section heading "Risks Related to Penny
Stock Regulation" below for a discussion of such risks.

    No assurances can be given that the Company's Common Stock will be traded on
Nasdaq or any other exchange or market at any time in the future. If the
Company's Common Stock does not trade on any exchange or market in the future,
then stockholders of the Company may lose their investment in the Company.

RISKS RELATED TO PENNY STOCK REGULATION

    Broker-dealer practices in connection with transactions in "penny stocks"
are regulated by certain penny stock rules adopted by the SEC. Penny stocks
generally are equity securities with a price of less than $5.00 (other than
securities registered on certain national securities exchanges or quoted on the
Nasdaq system, provided that current price and volume information with respect
to transactions in such securities is provided by the exchange or system). The
penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from the rules, to deliver a standardized risk
disclosure

                                       15
<PAGE>
document that provides information about penny stocks and the risks in the penny
stock market. The broker-dealer also must provide the customer with current bid
and offer quotations for the penny stock, the compensation of the broker-dealer
and its salesperson in the transaction, and monthly account statements showing
the market value of each penny stock held in the customer's account. In
addition, the penny stock rules generally require that prior to a transaction in
a penny stock the broker-dealer make a special written determination that the
penny stock is a suitable investment for the purchaser and receive the
purchaser's written agreement to the transaction.

    If the Company's Common Stock becomes subject to the penny stock rules, such
rules may restrict the ability of broker-dealers to sell the Company's Common
Stock and may affect the ability of holders to sell the Company's Common Stock
in the secondary market and the price at which such holders can sell any such
Common Stock.

SHAREHOLDER LAWSUITS FILED AGAINST THE COMPANY

    The Company is aware of at least seven lawsuits in which the Company,
Richard P. Stack, the President and Chief Executive Officer of the Company, and
Horace Hertz, the former Chief Financial Officer of the Company, have been sued
in the United States District Court for the Central District of California for
alleged violations of the Securities Exchange Act of 1934. The plaintiffs seek
class action status. Per press releases, other plaintiffs are purported to have
filed similar lawsuits against the Company and its officers or former officers.
The Company believes that the claims being brought against the Company and its
officers are totally without merit and the Company intends to engage in a
rigorous defense of such claims. No assurances can be made that the Company will
be successful in its defense of such claims. If the Company is not successful in
its defense of such claims, the Company could be forced to make significant
payments to its shareholders, and such payments could have a material adverse
effect on the Company's business, financial conditions and results of
operations.

FUTURE CAPITAL REQUIREMENTS

    The Company has expended and will continue to expend substantial funds on
the development of its ASP services, IT infrastructure, expansion of its sales
and marketing efforts, expansion of its services business, potential
acquisitions and product development. Consequently, the Company may require
additional funds to finance its operations. The precise amount and timing of the
Company's funding needs cannot be determined at this time, and will depend upon
a number of factors, including the market demand for the Company's products and
services, the progress of the Company's product development efforts, and the
Company's management of its cash, accounts payable, inventory and other working
capital items. There can be no assurance that, if required by the Company in the
future, funds will be available on terms satisfactory to the Company, if at all.
If additional funds are raised through the issuance of equity or convertible
debt securities, the percentage ownership of the existing stockholders of the
Company will be reduced, the existing stockholders may experience additional
dilution and such securities may have rights, preferences or privileges senior
to those of the holders of the Company's Common Stock. Additionally, any debt
financing that may be available to the Company may include restrictive covenants
on the Company. An inability to obtain needed funding on satisfactory terms may
require the Company to terminate its operations and sell its assets and
dissolve, reduce planned capital expenditures, to reduce planned levels of
advertising and promotion, to scale back its manufacturing or other operations
or to enter into financing arrangements on terms which it would not otherwise
accept, and could have a material adverse effect on the Company's business,
financial condition and results of operations. No assurances can be made that
the Company will be able to obtain financing for its operations in the future.

TERM LOAN AND LINE OF CREDIT

    In June 1998, the Company and its U.S. subsidiaries obtained a credit
facility of $7,500,000 from an unrelated financial institution. The credit
facility expires in June 2001 and consists of a line of credit of up

                                       16
<PAGE>
to $6,000,000 and a term loan of $1,500,000. The credit facility contains a .50%
per annum unused line of credit fee, which is based on the difference between
the borrowing capacity and outstanding balance. Borrowings under the term loan
are collateralized by substantially all of the assets of the Company, bear
interest at 13.65% per annum and are repayable at $25,000 per month with all
unpaid principal and interest due in June 2001. At June 30, 2000, borrowings
outstanding under the term loan amounted to $900,000.

    Under the terms of the credit facility, the Company was permitted to borrow
up to 80% of eligible accounts receivable (as defined) and 50% of eligible
inventory (as defined) with monthly interest payments based upon the prime rate
of a national financial institution plus 1.75% (9.5% as of June 30, 2000).
Borrowings under the line of credit are collateralized by substantially all the
assets of the Company. At June 30, 2000, borrowings outstanding under the line
amounted to $2,497,000.

    The credit facility contains certain restrictive financial and non-financial
covenants. The Company is required to maintain a stated current ratio, net
worth, senior debt service coverage ratio and total debt service coverage ratio.
At June 30, 2000, the Company was in default of certain non-financial covenants.
In October 2000, the Company obtained a waiver on all defaults through June 30,
2000 pursuant to certain terms and conditions including accelerating term loan
repayments, accruing interest on the term loan at the default rate of 11.5%, and
limiting borrowings to approximately $3,538,000. The Company believes that it
will be able to satisfy the accelerated repayment terms while simultaneously
seeking and obtaining replacement financing. However, no assurances can be made
that the Company will be able to meet its repayment obligations under the term
loan or line of credit or that the Company will not default under the terms of
the term loan or line of credit in the future, or that the Company will be able
to obtain replacement financing on suitable terms. If the Company defaults under
the loans and the lender demands repayment, or the Company is not able to obtain
replacement financing on satisfactory terms, the Company may be required to
terminate its operations and sell its assets and dissolve, reduce planned
capital expenditures, reduce planned levels of advertising and promotion, scale
back its manufacturing or other operations, or enter into financing arrangements
on terms which it would not otherwise accept, and any of these occurrences could
have a material adverse effect on the Company's business, financial condition
and results of operations.

SERIES A CONVERTIBLE EXCHANGEABLE PREFERRED STOCK

    In March 2000, Aspeon completed a private placement of securities with
Marshall Capital Management, Inc., ("Purchaser"), an affiliate of Credit Suisse
First Boston, in which the Company 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 common stock of the Company at an initial
exercise price of $17.00 per share and a warrant to acquire 1,250,000 shares of
Aspeon Solutions, at an exercise price of $5.00 per share pursuant to a
Securities Purchase Agreement dated March 7, 2000 by and among the Company,
Aspeon Solutions and the Purchaser. Proceeds to the Company from the placement
amounted to $9,568,400, net of $431,600 in issuance costs.

    In October 2000, Purchaser notified the Company that it was in default of
various covenants associated with the Preferred Stock and related agreements. As
a result of these defaults, the Purchaser has the right to pursue any or all of
the following remedies:

    - REDEMPTION OF PREFERRED STOCK.  The Purchaser may require that the Company
      redeem all or any portion of the Preferred Stock at a redemption price
      equal to the greater of: (i) 125% of the sum of the aggregate $1,000
      stated value per share of the Preferred Stock outstanding plus accrued
      dividends and interest (the "Aggregate Value") or (ii) the amount which
      results from dividing the Aggregate Value by the conversion price in
      effect for the Preferred Stock on the redemption date and multiplying the
      resulting quotient by the average closing trading price for the Company's
      Common Stock on the five trading days immediately preceding the redemption
      date. If the

                                       17
<PAGE>
      Purchaser were to require that the Company redeem all of the Preferred
      Stock as of November 30, 2000, the Company estimates that the redemption
      price for such shares would be in excess of $12,300,000.

    - 1.5% PENALTY PAYMENT.  During the time that the shares of Common Stock of
      the Company which may be acquired upon the conversion of the Preferred
      Stock (i) may not be sold pursuant to an effective registration statement
      or are not freely saleable pursuant to Rule 144(k) of the Securities Act
      of 1933, or (ii) are not freely tradeable on the Nasdaq National Market or
      the New York Stock Exchange, then the Purchaser may demand the payment of
      the amount which results from multiplying 1.5% per month and the aggregate
      $1,000 stated value per share of the Preferred Stock outstanding. The
      Company estimates that the approximate monthly amount which it may be
      required to pay to the Purchaser pursuant to this 1.5% penalty provision
      is $148,000.

    - REPRICING EVENT AND SHARE LIMITATION INCREASE.  The Purchaser may reduce
      the conversion price for the Preferred Stock to the lesser of (i) the
      lowest conversion price of the Preferred Stock or market price of the
      Common Stock of the Company (in either case, calculated according to the
      terms of the Preferred Stock) during the applicable default period or
      (ii) the conversion price for the Preferred Stock otherwise in effect on
      the conversion date. In connection with any such reduction of the
      conversion price of the Preferred Stock, the applicable limits of the
      number of shares of Common Stock which may be acquired upon the conversion
      of the Preferred Stock (the "Share Limitation"), shall be increased in
      proportion to the reduction in the conversion price of the Preferred
      Stock. The Company estimates that if the conversion price for the
      Preferred Stock were repriced effective as of October 10, 2000 (the last
      trading day of the Company's Common Stock) pursuant to the formula
      described above, the conversion price would be reduced to approximately
      $1.50 per share and the Share Limitation of approximately 1,500,000 shares
      of Common Stock would not change because the repricing event would not
      proportionately decrease the conversion price, as compared to the
      conversion price which would otherwise be calculated absent a repricing
      event.

    The Company currently is negotiating with the Purchaser to attempt to obtain
a waiver of the defaults under the terms of the Preferred Stock and related
agreements. However, no assurances can be made that the Company will be
successful in its efforts to obtain a waiver of the defaults. If the Company is
not able to obtain a waiver of defaults from the Purchaser and the Purchaser
elects to pursue the default remedies described above, the Company could be
forced to seek financing to obtain the funds necessary to pay to the Purchaser
the redemption amount of the Preferred Stock and the accrued 1.5% penalty
amounts. If the Company is not able to obtain financing on satisfactory terms,
the Company may be required to terminate its operations and sell its assets and
dissolve, reduce planned capital expenditures, reduce planned levels of
advertising and promotion, scale back its manufacturing or other operations or
enter into arrangements on terms which it would not otherwise accept, and any of
these occurrences could have a material adverse effect on the Company's
business, financial condition and results of operations.

OPERATING HISTORY AND EVOLVING ASP BUSINESS MODEL

    The Company's revenues and operating results during fiscal 2000 have
deteriorated compared with prior revenue and operating results. Future periods
are subject to all of the risks and uncertainties inherent in the on going
development of existing and new products and the growth of an evolving and
unproven ASP business. In order to operate our business successfully, we must:

    - increase awareness and market penetration of our brands,

    - attract, retain and motivate qualified personnel,

    - maintain our existing, and develop new, relationships with software
      providers and vendors,

    - raise additional capital, and

                                       18
<PAGE>
    - convince customers that we can provide reliable and cost-effective
      services.

    Our management team faces the challenge of successfully implementing
company-wide administrative and operating systems and managing our newly
acquired companies as well as companies we may acquire in the future. We may not
be able to successfully manage our businesses to achieve or maintain
profitability.

    The Company intends to make investments on an ongoing basis, primarily from
cash expected to be generated from operations, and to the extent necessary,
funds available from existing lines of credit, as the Company develops and
introduces new products and services and expands into new markets. There can be
no assurance that the Company will be able to generate cash flows from
operations or that there will be funds available from existing lines of credit.

RATE OF GROWTH

    The Company does not believe that domestic hardware sales will continue to
grow at the rate at which they have grown in the past. Further, the Company
cannot guarantee that it will be able to increase domestic service sales or that
its foreign hardware and service sales in the future will be at or near the
rates of the past.

    The market for ASP Services has only recently begun to develop and is
evolving rapidly. Future demand for these services is highly uncertain. We
believe that many of our existing and potential customers are not fully aware of
the benefits of ASP Services. We must educate potential customers regarding
these benefits and convince them of our ability to provide complete and reliable
services. The market for ASP Services may never become viable or grow further.
If the market for our ASP Services does not grow or grows more slowly than we
currently anticipate, our business, financial condition and operating results
could be materially adversely affected.

SIGNIFICANT FLUCTUATIONS IN OPERATING RESULTS

    The Company has experienced in the past and may in the future experience
significant fluctuations in its operating results and cash flows. Such
fluctuations may be caused by many factors, including, but not limited to: the
size and timing of individual orders or service contracts, some of which may be
of significant size; seasonality of revenues; employee hiring and retention,
particularly with respect to sales and IT personnel; lengthy sales and
implementation cycles; reduction in demand for existing products and services
and shortening of product life cycles; acceptance of the ASP business, the
timing of the introduction of products and services, product enhancements or
services by the Company or its competitors; competition and pricing in the POS
systems and ASP industries; market acceptance of new products and services;
service personnel utilization rates; the ability of the Company to expand its
international and domestic sales, as well as the mix of such sales; foreign
currency exchange rates; changes in the mix of products and services sold;
general health of the restaurant and retail industries, particularly the quick
service restaurant segment; the ability of the Company to generate service
agreements; product quality problems; the ability of the Company to control
costs; the Company's success in establishing and expanding its direct and
indirect distribution channels; the mix of distribution channels through which
the Company's products are sold; and general economic conditions. The Company's
products are typically shipped shortly after orders are received and,
consequently, order backlog at the beginning of any quarter typically represents
only a small portion of that quarter's expected revenues. As a result, product
revenues in any quarter are substantially dependent on orders booked, shipped,
and where obligated by the Company, installed in that quarter. Revenues for any
future quarter are not predictable with any significant degree of accuracy.
Product revenues are also difficult to forecast because the market for the
Company's products is rapidly evolving and the Company's sales and
implementation cycles, from initial evaluation to multiple product purchases and
the provision of support services, vary substantially from customer to customer.
The Company has in the past experienced and expects to continue to experience
quarters or periods with

                                       19
<PAGE>
individual product or service orders which are significantly larger than its
typical product or service orders, adding to the unpredictability of the
Company's revenues. The Company's expense levels, however, are based in
significant part on the Company's expectations of future revenues and therefore
are relatively fixed in the near term. In addition, the Company expects expense
levels to increase in the near term as the Company attempts to expand its
operations. Net income may be disproportionately affected by an unanticipated
decline in revenue for a particular quarter because a relatively small amount of
the Company's expenses varies with its revenue in the near term. Moreover, the
POS systems industry is generally dependent on system rollouts with fixed time
horizons. The Company's operating results, particularly with respect to its
Solutions Services and ASP Services businesses, may vary significantly because
of the Company's failure to obtain major projects, the cancellation or delays in
the progress of major projects for any reason and the Company's failure to
timely replace projects that have been completed or are nearing completion. Any
of these factors could cause the Company's results of operations to fluctuate
significantly from period to period, including on a quarterly basis. The Company
may also experience relatively weaker demand for its products in August,
particularly in international markets, and December as a result of reduced sales
activities during those months.

    As a result of the above factors, revenues and earnings for any quarter are
subject to significant variation and the Company believes that period-to-period
comparisons of its results of operations are not necessarily meaningful and
should not be relied upon as indications of future performance. Fluctuations in
operating results may also result in volatility in the price of the Company's
Common Stock. Accordingly, it is likely that in some future quarter the
Company's total revenues or operating results will be below the expectations of
public market analysts or investors. In such event, or in the event that adverse
conditions prevail or are perceived to prevail generally or with respect to the
Company's business, the price of the Common Stock would likely be materially
adversely affected.

RISKS ASSOCIATED WITH ACQUISITIONS

    Within the past three fiscal years, the Company acquired CCI, Aspact,
RGB/Jade, DTI, RCS and Monument. Acquisitions involve numerous risks, including
difficulties in the assimilation of the operations and personnel of the acquired
business, the integration of management information and accounting systems of
the acquired business, the diversion of management's attention from other
business concerns, risks of entering markets in which the Company has no direct
prior experience, and the potential loss of key employees of the acquired
business. In particular, all of the acquired companies have self-contained
management information and accounting systems. In the later part of fiscal 2000,
the Company initiated a strategic plan to consolidate and centralize management
information and accounting systems, payroll systems and employee benefit
programs that fully integrate each acquired entity's existing structure. The
Company's management will be required to continually devote substantial time and
attention to the integration of the recently acquired, or any future acquired,
businesses and to any material operational or financial problems arising as a
result of the acquisitions. There can be no assurance that operational or
financial problems will not occur as a result of any acquisition. Failure to
effectively integrate acquired businesses could have a material adverse effect
on the Company's business, financial condition and results of operations.

RISK OF INTERNATIONAL SALES AND INTERNATIONAL OPERATIONS

    The Company derived approximately 3%, 35% and 35% of its total revenues from
sales outside North America in the years ended June 30, 1998, 1999 and 2000,
respectively. The Company believes that its growth and profitability will
require additional expansion of its POS products and Solutions service sales in
foreign markets. Sales made outside North America related to the POS Product and
Solution Services

                                       20
<PAGE>
operations. At this time, the Company has no plans to pursue the ASP Services
business outside North America. The Company has sales or support staff located
in Australia and England. The Company's expansion into foreign countries has
required and will continue to require significant management attention and
financial resources, particularly with respect to the expansion of the Company's
sales force, managing the Company's manufacturing operations, which have been
outsourced to a third-party manufacturer in Singapore, and the Company's
operation and management of its acquired service-based subsidiaries in England.
To increase international sales in subsequent periods, the Company must
establish additional foreign operations, hire additional personnel and recruit
additional international resellers. To the extent that the Company is unable to
expand international sales in a timely and cost-effective manner, the Company's
business, financial condition and results of operations would be materially
adversely affected.

    There can be no assurance that the Company will be able to maintain or
increase international market demand for the Company's products or services.
Although the Company's product sales are currently denominated in U.S. dollars,
the Company's international service contracts are currently denominated in local
currency and, accordingly, gains and losses on the conversion to U.S. dollars of
accounts receivable and accounts payable arising from international service
revenues may contribute to fluctuations in the Company's operating results. The
Company does not currently utilize foreign currency hedging instruments. There
can be no assurance that fluctuations in currency rates will not materially
adversely impact the Company's business, financial condition and results of
operations in the future. Additional risks inherent in the Company's
international business activities, including its relationship with its
third-party manufacturer of the Company's products in Singapore, include various
and changing regulatory requirements, costs and risks of relying upon local
subcontractors, increased sales and marketing and research and development
expenses, export restrictions and availability of export licenses, tariffs and
other trade barriers, political and economic instability, difficulties in
staffing and managing foreign operations, longer payment cycles, seasonal
reduction in business activities, potentially adverse tax laws, complex foreign
laws and treaties and the potential for difficulty in accounts receivable
collection. Any of these factors could have a material adverse effect on the
Company's business, financial condition or results of operations. Certain of the
Company's customer purchase agreements are governed by foreign laws, which may
differ significantly from U.S. laws. Therefore, the Company may be limited in
its ability to enforce its rights under such agreements and to collect amounts
owed to the Company should any customer refuse to pay such amounts. In addition,
the Company is subject to the Foreign Corrupt Practices Act (the "FCPA"), which
may place the Company at a competitive disadvantage to foreign companies that
are not subject to the FCPA.

    To date, the Company has not been negatively affected by the turmoil in
Asian markets or the decline of European currencies. However, certain of the
Company's customers, suppliers and third-party manufacturers located in foreign
markets may encounter financial difficulties resulting from foreign currency
fluctuations or other economic, social or political instabilities which could
restrict their ability to fulfill their contractual obligations to the Company.
There can be no assurance that a decline in the value of any relevant foreign
currency relative to the U.S. dollar or an economic, social or political change
in any relevant country will not have a material adverse effect on the Company's
business, financial condition and results of operations.

DEPENDENCE UPON SIGNIFICANT CUSTOMERS

    The Company has derived, and believes that it may continue to derive, a
significant portion of its revenues from a limited number of large customers.
For the fiscal year ended June 30, 1998, AFC Enterprises, Inc. accounted for 11%
of the Company's total net revenue. For the fiscal years ended 1999 and 2000,
ScanSource, Inc., on an aggregate basis, accounted for 11% and 15% of the
Company's total revenues, respectively. Most customer product orders are placed
within the quarter that delivery is expected; therefore, projections of future
orders may be unreliable. In addition, the amount of the

                                       21
<PAGE>
Company's products or services required by any of its customers can be adversely
affected by a number of factors, including technological developments and the
internal budget cycles of its customers. Moreover, the volume of work performed
for specific customers is likely to vary from year to year, and a major customer
in one year may not purchase the Company's products or services in a subsequent
year. The completion, cancellation or significant reduction in the scope of a
large customer product or service order, or the failure by the Company to obtain
future orders from a significant customer, could have a material adverse effect
on the Company's business, financial condition and results of operations. As a
result of the Company's focus in specific vertical markets, economic and other
conditions that affect these industries could lead to a reduction in capital
spending on its customer projects, which would have a material adverse effect on
the Company's business, financial condition and results of operations.

DEPENDENCE ON KEY PERSONNEL

    The Company's success is dependent, in part, upon the continued services of
certain key executive officers, including Richard P. Stack, the Company's
President and Chief Executive Officer. The Company believes that its future
success depends to a significant degree upon the continued contributions of its
existing key management, sales, marketing, research and development and
manufacturing personnel, many of whom would be difficult to replace. An
employment agreement has been entered into with Mr. Stack that has expired in
August 2000. The Company also carries key-man life insurance on Mr. Stack. The
Company also believes its future success will also depend largely upon its
ability to attract and retain highly skilled hardware engineers, managerial, and
sales and marketing personnel. Competition for such personnel is intense, and
the Company competes in the market for personnel against numerous companies,
including larger, more established companies with significantly greater
financial resources than the Company. There can be no assurance that the Company
will be successful in attracting and retaining skilled personnel. The loss of
certain key employees or the Company's inability to attract and retain other
qualified employees could have a material adverse effect on the Company's
business, financial condition and results of operations.

COMPETITION

    The market for the Company's products and service solutions is highly
competitive, subject to rapid change and sensitive to new product and service
introductions or enhancements and marketing efforts by industry participants.
The Company expects to continue to experience significant and increasing levels
of competition in the future; in part as open systems architecture in its
targeted industries becomes more common and as the ASP model becomes more
accepted. The principal elements of competition related to the Company's
products include price, product features and performance, compatibility with
open systems, quality and reliability, brand awareness, level of customer
service and quality of display. The POS systems integration industry is also
highly competitive and undergoing continual change. The principal elements of
competition related to the Company's systems integration services include
reputation, scope of services provided, availability of resources and price. In
many of the Company's markets, traditional computer hardware manufacturing,
communications and consulting companies provide the most significant
competition. The principal competitive factors in the ASP market include quality
of service, including performance, scalability, reliability and functionality,
customer service and support, variety of services offered, price, name
recognition, and network security. The Company must also compete with smaller
service providers that have been able to develop strong local or regional
customer bases. Most of the Company's competitors for its products and services,
as well as certain potential competitors, are more established, benefit from
greater name recognition, have significantly greater financial, technological,
production and marketing resources, and have more extensive distribution
networks than the Company.

    The Company believes the use of open systems architecture in its targeted
industries is an important competitive element. Several of the Company's
competitors currently also offer open systems and the Company believes that the
number of competitors offering open systems solutions will grow over the next

                                       22
<PAGE>
several years. The Company anticipates that a significant source of future
competition may be from existing competitors in the POS products and services
market that the Company believes are currently attempting to develop POS systems
and support services utilizing open systems architecture. Due to the greater
sales, marketing, product development and financial resources of the Company's
competitors, the Company anticipates that competition from these competitors
will intensify in the future. In order to effectively compete against these
competitors, the Company will need to continue its growth trend and attain
sufficient revenues to have the resources to timely develop new products and
services in response to evolving technology and customer demands and to sell
products and services through a broad distribution channel in competition with
these other existing and potential competitors. No assurance can be given that
the Company will be able to grow sufficiently to enable it to compete
effectively in this marketplace.

    Increased competition from manufacturers or distributors of products similar
to or competitive with the Company's products, or from service providers that
provide services similar to the Company's services, could result in price
reductions, reduced margins and loss of market share or could render the
Company's technology obsolete, all of which could have a material adverse effect
on the Company's results of operations and financial condition. There can be no
assurance that the Company will be able to successfully compete in this
marketplace or develop sufficient new products and services to remain
competitive, and any failure to do so could have a material adverse effect on
its results of operations and financial condition.

POSSIBLE VOLATILITY OF STOCK PRICE

    The market price of the Company's Common Stock has been, and is likely to
continue to be, volatile. Factors such as announcements of new customer orders
or services by the Company or its competitors, changes in pricing policies by
the Company or its competitors, quarterly fluctuations in the Company's
operating results, announcements relating to strategic relationships or
acquisitions, changes in earnings estimates by analysts, government regulatory
actions, general conditions in the market for POS systems and ASPs, overall
market conditions and other factors may have a significant impact on the market
price of Common Stock. In addition, in recent years the stock market in general,
and the shares of technology companies in particular, have experienced extreme
price fluctuations. This volatility has had a substantial effect on the market
prices of securities issued by many companies for reasons unrelated to the
operating performance of the specific companies. These broad market fluctuations
may adversely affect the market price of the Company's Common Stock.

POSSIBLE ISSUANCE OF PREFERRED STOCK; ANTI-TAKEOVER EFFECT OF DELAWARE LAW AND
  CERTAIN CHARTER PROVISIONS

    The Company is authorized to issue up to 1,000,000 shares of preferred
stock, par value $.01 per share (the "Preferred Stock"). As of the date of
filing of this report with the SEC, the Company has issued 10,000 shares of
Preferred Stock. See "Business--Risk Factors--Risks Related to the
Company--Series A Convertible Exchangeable Preferred Stock." The Preferred Stock
may be issued in one or more series, the terms of which may be determined at the
time of issuance by the Board of Directors, without further action by the
Company's stockholders, and may include voting rights, preferences as to
dividends and liquidation, conversion and redemption rights, and sinking fund
provisions as determined by the Board of Directors. The issuance of Preferred
Stock could affect the rights of the holders of Common Stock and thereby reduce
the value of the Common Stock. In particular, specific rights granted to future
holders of Preferred Stock could be used to restrict the Company's ability to
merge with or sell its assets to a third party, thereby preserving control of
the Company by its present owners. The issuance of Preferred Stock, rights to
purchase Preferred Stock or additional shares of Common Stock may have the
effect of delaying or preventing a change in control of the Company. In
addition, the possible issuance of Preferred Stock or additional shares of
Common Stock could discourage a proxy contest, make more difficult the
acquisition of a substantial block of the Company's Common Stock or limit the
price that investors might be willing to pay for shares of the Company's Common
Stock. Special meetings of the stockholders of the Company

                                       23
<PAGE>
may be called only by the Chairman of the Board of Directors, the Chief
Executive Officer of the Company, by the Board of Directors pursuant to a
resolution adopted by a majority of the total number of authorized directors or
by the holders of 10% of the outstanding voting stock of the Company. The
Company's Amended and Restated Certificate of Incorporation (the "Restated
Certificate") and the Company's Bylaws also provide for staggered terms for the
members of the Board of Directors. These and other provisions contained in the
Restated Certificate and the Company's Bylaws, as well as certain provisions of
Delaware law, could delay or make more difficult certain types of transactions
involving an actual or potential change in control of the Company or its
management (including transactions in which stockholders might otherwise receive
a premium for their shares over then current market prices) and may limit the
ability of stockholders to remove current management of the Company or approve
transactions that stockholders may deem to be in their best interests and,
therefore, could adversely affect the price of the Company's Common Stock.

RISKS RELATED TO THE POS PRODUCTS AND SOLUTION SERVICES

INDUSTRY CHARACTERIZED BY RAPIDLY CHANGING TECHNOLOGY WITH CONTINUOUS
IMPROVEMENTS IN BOTH COMPUTER HARDWARE AND SOFTWARE

    We must continually develop new POS Products and license new computer
software systems to effectively compete in our industry. In addition, our
software delivery applications must be able to support changes in the underlying
software applications that are delivered to our customers. The rapid development
of new technologies increases the risk that current or new competitors could
develop products or services that would reduce the competitiveness of our
products or services. We rely on software providers to produce software
applications that keep pace with our customers' demands.

    We may not successfully develop or adopt new technologies, introduce new
services or enhance our existing services on a timely basis and new
technologies, new services or enhancements we use or develop may never achieve
market acceptance. If we fail to address these developments, we will lose sales
to our competitors and our business, operating results and financial condition
will be materially adversely affected.

DISTRIBUTION RISKS

    The Company presently markets its products primarily through OEMs, VARs and
direct sales to end-users, and intends to continue to utilize these distribution
channels in the future. Moreover, as part of the Company's strategy to increase
international sales, the Company will need to more fully develop similar
distribution channels in international markets. The Company also anticipates
that its services business will increase in the future, resulting in a greater
emphasis on marketing and distributing to OEMs and directly to end users. As the
Company increasingly relies on direct sales to end users, the Company
anticipates competing to a certain extent with its VARs and OEMs. This
competition may harm the Company's relationship with certain of its VARs and
OEMs, potentially resulting in the termination of some relationships with the
Company. Failure by the Company to expand its distribution channels, develop its
international distribution channels or manage any potential channel conflicts
could have a material adverse effect on the Company's growth. Moreover, any
factors, such as general adverse economic conditions, high inventory levels,
financial condition, marketing considerations or governmental regulations and
restrictions, that affect the ability of the Company's resellers to sell the
Company's products will adversely affect the Company's sales and could have a
material adverse impact on the Company's financial condition and results of
operations.

    There can be no assurance that the Company will be able to attract resellers
or OEMs that will be able to market the Company's products effectively and will
be qualified to provide timely and cost-effective customer support and service
or that the Company will be able to manage conflicts among its resellers and/or
OEMs. In addition, the Company's agreements with resellers typically do not
restrict resellers from

                                       24
<PAGE>
distributing competing products, and in most cases may be terminated by either
party without cause. The inability to recruit, manage or retain important
resellers or OEMs, or their inability to penetrate their respective market
segments, could materially adversely affect the Company's financial condition
and results of operations.

    The Company's future success will also depend in part upon the ability of
the Company to attract, integrate, train, motivate and retain sales and
technical support personnel. The Company intends to rely more heavily in the
future on direct sales to end users, and there can be no assurance that the
Company's efforts to expand its direct sales force will be successful or that
the cost of these efforts will not exceed the revenue generated. In addition,
the Company expects to experience a significant time lag between the date sales
personnel are hired and the date sales personnel become fully productive. The
Company's inability to manage its sales force expansion effectively could have a
material adverse effect on the Company's business, financial condition and
results of operations. Competition for sales and support personnel is intense,
and the Company competes in the market for sales personnel against numerous
companies, including larger, more established companies with significantly
greater financial resources than the Company. There also can be no assurance
that the Company will be successful in attracting and retaining sales personnel,
and the loss of certain sales personnel or the Company's inability to attract
and retain other qualified sales personnel could have a material adverse effect
on the Company's business, financial condition and results of operations.

DEPENDENCE UPON THIRD-PARTY MANUFACTURERS AND SUPPLIERS

    Although the Company has capacity to manufacture limited volumes of its
products, the Company currently relies upon, and intends in the future to rely
more heavily upon, third-party manufacturers for the manufacture, assembly and
subassembly of its products. Currently, the Company maintains a significant
portion of its manufacturing operations with a third-party manufacturer in
Singapore. Any termination of, or significant disruption in, the Company's
relationship with the third-party manufacturers of its products may prevent the
Company from filling customer orders in a timely manner, as the Company
generally does not maintain large inventories of its products or components. The
Company has occasionally experienced and may in the future experience delays in
delivery of products and delivery of products of inferior quality from some of
its third-party manufacturers. In addition, the Company's use of third-party
manufacturers reduces control over product quality, manufacturing timing, yields
and costs since the Company must rely on the third-party manufacturers' ability
to identify the Company's requirements for products and components, the
manufacturers' general competence and ability to progress along the learning
curve relating to the manufacture of the Company's products, and the
manufacturers' schedules and capacity. Disruption in manufacturing the Company's
POS Products or failure of a third-party manufacturer to remain competitive in
functionality or price could delay or interrupt the Company's ability to
manufacture or deliver its products to customers on a timely basis and would
have a material adverse effect on the Company's business, financial condition
and results of operations. Moreover, although arrangements with the Company's
manufacturers may contain provisions for warranty obligations on the part of the
third-party manufacturers, the Company remains primarily responsible to its
customers for warranty obligations. The Company has currently identified a
domestic manufacturer to manufacture the Company's products.

    The Company also depends upon third-party suppliers to deliver components
that are free from defects, competitive in functionality and cost and in
compliance with the Company's specifications and delivery schedules. Disruption
in supply, a significant increase in the cost of one or more components or
failure of a third-party supplier to comply with any of the Company's
procurement needs could delay or interrupt the Company's ability to manufacture
or deliver its products to customers on a timely basis and would have a material
adverse effect on the Company's business, financial condition and results of
operations. Moreover, any factors, such as general adverse economic conditions,
financial condition or government regulations and restrictions, that affect the
Company's third-party manufacturers or suppliers

                                       25
<PAGE>
could have a material adverse impact on the Company's business, financial
condition and result of operations.

RISK OF PRODUCT DEFECTS; PRODUCT AND OTHER LIABILITY

    Computer products and systems as complex as those sold by the Company, often
contain undetected errors or performance problems, particularly during new and
enhanced product launches. Despite product testing prior to introduction, the
Company's products have in the past, on occasion, contained errors that were
discovered after commercial introduction. Errors or performance problems may
also be discovered in the future. In addition, the Company's computer products
have a warranty that covers defective material and workmanship during the
twelve-month warranty period commencing on the date of delivery of the products.
Any future defects discovered after shipment of the Company's products could
result in loss of sales, delays in or elimination of market acceptance, damage
to its brand or to the Company's reputation, or product returns and warranty
costs, particularly in the quick service restaurant market where certain product
defects could cause a restaurant's POS systems and cash registers to be
inoperable for periods of time. Any loss of sales, delays in market acceptance
or product returns and warranty costs that result from defects discovered after
shipment would have a material adverse effect on the Company's business, results
of operations and financial condition. The Company attempts to make adequate
allowance in its new product release schedule for testing of product
performance. Because of the complexity of the Company's products, however, the
release of new products by the Company may be postponed should test results
indicate the need for redesign and retesting, or should the Company elect to add
product enhancements in response to customer feedback. In addition, third-party
products, upon which the Company's products are dependent, may contain defects
that could reduce or undermine entirely the performance of the Company's
products.

    In addition, although the Company's sales agreements with its customers
and/or warranty policy for its products typically contain provisions designed to
limit the Company's exposure to potential product liability claims, there can be
no assurance that these limitations of liability would be enforceable or would
otherwise protect the Company from liability for damages to a customer resulting
from a defect in one of the Company's products. Although the Company maintains
product liability insurance covering certain damages arising from implementation
and use of the Company's products, there can be no assurance that this insurance
would cover or be sufficient to cover any claims sought against the Company. Any
product liability or other claims against the Company, if successful and of
sufficient magnitude could have a material adverse effect on the Company's
business, financial condition and results of operations.

DIFFICULTY OF PENETRATION INTO OTHER MARKET SECTORS

    Although the Company has historically sold most of its products and services
to the food service industry, the Company is increasingly focusing on selling
its products and services to retailers and in the industrial market. To date,
the Company has only recognized a limited amount of revenue in these markets.
There can be no assurance that the Company's products and services will gain
acceptance in or meet these sectors' expectations and needs. In addition, the
Company may attempt to penetrate other markets. The inability of the Company,
for any reason, to successfully sell its products and services into these
markets could materially adversely affect the Company's growth.

EVOLVING TECHNOLOGY AND MARKET

    The POS computer industry is characterized by evolving technology and
industry standards. The Company's touch screen computers presently consist of
the Aspeon-Wedge 5, the Aspeon-Wedge P, the Aspeon-LC and the Aspeon-LCP, the
Viper and Viper RT which are sold in various configurations to meet the needs of
the Company's customers. The Company's success will depend, in part, on its
ability to transition from older legacy products to its new Viper products and
broaden its product offerings by developing and introducing new products that
keep pace with technological developments in a cost

                                       26
<PAGE>
effective manner, respond to evolving customer preferences and requirements and
achieve market acceptance. Lack of market acceptance for the Company's existing
or new products, the Company's failure to introduce new products in a timely or
cost-effective manner or the Company's failure to achieve a technological
advantage over its competition while also remaining price competitive, could
materially adversely affect the Company's results of operations and financial
condition. There can be no assurance that the Company will be successful in its
product development efforts. In addition, there can be no assurance that the
Company's products, even if successfully developed, will achieve timely market
acceptance. Moreover, the introduction of products embodying new technology and
the emergence of new industry standards could render the Company's existing
products obsolete and unmarketable.

    The Company's future success will depend on its ability to continue to
develop and manufacture new competitive products and to enhance its existing
products, both of which will require continued investment in engineering and
product development. The success of product enhancements and new products
depends on a variety of factors, including product selection and specification,
timely and efficient completion of product design, cost-effective implementation
of the manufacturing and assembly processes and effective sales and marketing
efforts. There can be no assurance that the Company will be able to successfully
manage all of the diverse aspects of successful new product development in order
to develop and maintain competitive products.

LACK OF PATENT PROTECTION

    The Company holds no patents and believes that its competitive position is
not materially dependent upon patent protection. The Company believes that most
of the technology used in the design and manufacture of most of the Company's
products is generally known and available to others. Consequently, there can be
no assurances that others will not develop, market and sell products
substantially equivalent to the Company's products, or utilize technologies
similar to those used by the Company. The Company is aware of at least one
competitor that has attempted to copy the Company's products in the past, and
there can be no assurance that similar attempts will not be made in the future.
Although the Company believes that its products do not infringe on any third
party's patents, there can be no assurance that the Company will not become
involved in litigation involving patents or proprietary rights. Patent and
proprietary rights litigation entails substantial legal and other costs, and
there can be no assurance that the Company will have the necessary financial
resources to defend or prosecute its rights in connection with any litigation.
Responding to, defending or bringing claims related to the Company's rights to
its intellectual property may require the Company's management to redirect its
resources to address these claims, which could have a material adverse effect on
the Company's business, financial condition and results of operations.

DEPENDENCE UPON INDEPENDENT SOFTWARE PROVIDERS

    The Company produces PC-based open system hardware for the food service and
retail industries; however, the Company does not develop software. Consequently,
the Company is dependent upon third party software providers to develop the POS
application software that operates on the Company's hardware platform. As in
other sectors of the computer industry, advances in software technology can
often drive hardware sales. Accordingly, if software providers do not, or are
unable to, continue to provide state-of-the-art POS application software that
runs on the Company's hardware, the Company's financial condition and results of
operations could be materially adversely affected.

RISKS RELATED TO THE ASP SERVICES

CURRENT DATA CENTERS RESIDE IN TWO LOCATIONS--DANVERS, MASSACHUSETTS AND KING OF
PRUSSIA, PENNSYLVANIA

    Our ASP Services business strategy depends on the consistent performance of
our two data centers located in Danvers, Massachusetts and King of Prussia,
Pennsylvania. We currently offer back-up storage of data to all existing and new
customers. Our current data centers are vulnerable to interruption from fire,
earthquake, flood, power loss, telecommunications failure, break-ins and other
events beyond our control.

                                       27
<PAGE>
If a data center is damaged, a customer storing its data at that data center may
lose its data if it is not backed up. If either of our data centers were
damaged, the loss of data may affect a significant portion of our customers. We
have experienced periodic systems disruptions in the past and anticipate that
such disruptions will occur in the future. In the event that we experience
significant disruptions that affect our data centers, we could lose customers
and fail to attract new customers, and our business, results of operations and
financial condition would be materially adversely affected. The Company has
initiated discussions with a domestic organization to consolidate our data
centers into one outsource provider which the Company believes will allow it to
minimize capital investment, increase security, increase scalability, and lower
operating costs. No assurances can be made that the Company will consolidate its
data centers into one outsource provider or that such consolidation will
minimize the Company's capital investment, increase security, increase
scalability or lower operating costs.

MUST BE ABLE TO LICENSE THE SOFTWARE APPLICATIONS WE PROVIDE TO OUR CUSTOMERS

    We depend on third-party software manufacturers agreeing to allow their
software applications to be hosted and run at our data centers and provided to
our customers. We have entered into non-exclusive agreements with Microsoft,
Oracle, Lawson, Eatec, Business Objects, Xcellenet and others that allow us to
host some of their software applications at our data centers or re-license their
software applications to our customers. Under most of these agreements, the
software manufacturer can terminate its relationship with us for any reason by
giving us as little as 30 days notice. In these instances, the software
manufacturer is not liable to us or our customers for any damages resulting from
termination. If our relationships with these software manufacturers are
terminated or if these or other software manufacturers do not allow our
customers to obtain a license to operate the software application on our data
centers, our business, operating results and financial condition could be
materially adversely affected.

MUST BE ABLE TO OBTAIN CITRIX OR MICROSOFT PRODUCTS AND OTHER KEY HARDWARE
COMPONENTS AND SOFTWARE APPLICATIONS.

    In connection with our ASP Services business, we depend on third-party
suppliers to provide us with key hardware components and software applications
for our infrastructure and with sufficient communications lines to allow our
customers to access their software applications. Some components or applications
are only available from limited sources. Citrix Systems, Inc. and Microsoft
Corporation are our key suppliers of software that we utilize to connect our
customers to software applications. Although there are other competing software
applications on the market, we believe that Citrix software, deployed with
Windows NT Terminal Server software from Microsoft, is currently best suited to
serve this function. If we are unable to obtain these products or services such
as telecommunications services in a timely manner, at an acceptable cost or at
all, we would be unable to deliver our ASP Services and our business, results
from operations and financial condition would be materially and adversely
affected until we could replace such products and services.

SOFTWARE DEFECTS

    Our ASP service offerings depend on complex software that may contain
defects, particularly when first introduced or when new versions are released.
Although we test software applications prior to deployment, we may not discover
software defects that affect our new or current services or enhancements until
after they are deployed. These defects could cause service interruptions or data
loss, which could damage our reputation or increase our service costs, cause us
to lose revenue, delay market acceptance or divert our development resources.
Any software modifications we perform as part of our integration services could
cause problems in application delivery. Also, because we offer a one-source
solution to our customers, they are likely to hold us accountable for any
problems associated with their software, even if the problem results from
software defects the manufacturer causes. Typically, software manufacturers
disclaim liability for any damages suffered as a result of software defects or
provide only limited warranties. As a result, we may have no recourse against
the providers of defective software applications.

                                       28
<PAGE>
BREACHES OF SECURITY COULD DISRUPT THE OPERATIONS OF OUR DATA CENTERS AND
JEOPARDIZE OUR SECURE TRANSMISSION OF CONFIDENTIAL INFORMATION

    The growth of our ASP Services business depends upon our ability to securely
transmit confidential information to and from our data centers or the servers of
our customers. Despite our design and implementation of a variety of delivery
system security measures, unauthorized access, computer viruses and accidental
or intentional disturbances could occur. We may need to devote substantial
capital and resources to protect against the threat of unauthorized penetration
of our delivery system or to remedy any problems that the penetration of our
delivery system security creates. The occurrence of any of these events could
cause us to lose customers and expose us to liability, all of which could have a
material adverse effect on us.

ASP SERVICE CONTRACTS GUARANTEE CERTAIN SERVICE LEVELS

    Our ASP contracts contain service level guarantees, which obligate us to
provide our hosted applications at a guaranteed level of performance. To the
extent we fail to meet those service levels, we may be obligated to provide our
customers credit for free service. If we continue to fail to meet these service
levels, our ASP customers have the right to cancel their contracts with us.
These credits or cancellations will cost us money, damage our reputation with
our customers and prospective customers and could materially adversely affect
our business, results of operations and financial condition.

ITEM 2.  PROPERTIES

    The Company's executive offices, research and product development,
warehousing and distribution facilities for POS Products are currently housed in
a single leased industrial unit comprised of approximately 29,000 square feet
located in Irvine, California. Under the terms of the lease, the Company
presently pays rent of approximately $43,700 per month with predetermined
monthly rent increases at annual intervals. The lease expires in 2003.

    The Company leases an industrial unit comprised of 33,000 square feet
located in Earth City, Missouri, which serves as a warehousing, staging and
deployment facility for the Solutions Services business. This unit also houses
sales and administrative staff. The Company currently pays rent of approximately
$17,800 per month with predetermined monthly rent increases at annual intervals.
The lease expires in 2003.

    The Company leases office space comprised of 21,350 square feet located in
King of Prussia, Pennsylvania, which contains a data center and office space for
employees providing ASP Services. This space also houses sales, administrative
and professional services staff. The Company currently pays rent of
approximately $43,200 per month with predetermined monthly rent increases at
annual intervals. The lease expires in 2007.

    The Company leases office space comprised of approximately 15,000 square
feet located in Beverly, Massachusetts that contains space for the build out of
an additional data center, if required. This space also houses sales,
administrative and professional services staff for the ASP Services business.
The Company currently pays rent of approximately $20,300 per month with
predetermined monthly rent increases at annual intervals. The lease expires in
2005. The Company's Danvers, Massachusetts facility currently houses a data
center and certain network technicians for the ASP Services business. The
company currently pays rent of approximately $5,200 per month for 2,500 square
feet. The lease expires in 2002.

    The Company leases office space comprised of approximately 3,000 square feet
in Padworth, Reading UK for Solutions Services which contains a project and
sales office for Jade and a sales office for Teneo. The Company currently pays
rent of approximately $4,600 per month. The lease expires in 2004.

                                       29
<PAGE>
    The Company leases warehouse space comprised of approximately 10,000 square
feet in Middleton, Manchester UK which contains a distribution and warehousing
function for the Solutions Services business. The Company currently pays rent of
approximately $4,900 per month. The lease expires in 2001.

    The Company leases office and warehouse space in Warrington, Cheshire UK
comprised of approximately 7,200 square feet to support sales, administration,
and warehousing activities for the Solutions Services business. The Company
currently pays rent of approximately $4,500 per month. The lease expires in
2001.

ITEM 3.  LEGAL PROCEEDINGS

    From time to time the Company is a defendant or plaintiff in litigation
arising in the ordinary course of our business. To date, no litigation has had a
material effect on us and, as of the date of this filing, the Company is not a
party to any material litigation except as described below.

DANIEL BOUDWIN V. JOHN SEITZ, ET AL.

    In October 1999, the Company, and two former officers of DTI, were named as
defendants in a breach of contract and intentional tort action brought by Daniel
Boudwin who claims rights to computer software products once offered for sale by
subsidiaries of the Company. This action is pending in Pennsylvania's Delaware
Court of Common Pleas. The plaintiff is seeking payment of one-half of all the
sales proceeds of the commercial software product line of "Special Delivery"
from February 1997 to the present and makes claim to one-half of the asset
purchase price (as apportioned to the "Special Delivery" asset) paid by the
Company to the shareholders of DTI in April 1999. The Company and its
subsidiaries have indemnification rights against one of the selling shareholders
in connection with his representations and warranties made about "Special
Delivery" in various documents. Although the Company and its subsidiaries
support the selling shareholder's position as it relates to the plaintiff in
this action, cross-claims have been filed against the selling shareholder, for
indemnification and contribution, for further protection. Management is unable
to determine whether the outcome of this complaint will have a material impact
on the financial position, results of operations or cash flows.

OTHER PROCEEDINGS

    The Company is aware of at least seven lawsuits in which the Company,
Richard P. Stack, the President and Chief Executive Officer of the Company, and
Horace M. Hertz, the former Chief Financial Officer of the Company, have been
sued in the United States District Court for the Central District of California
(the "Court") for alleged violations of the Securities Exchange Act of 1934. The
names of the plaintiffs and the dates the cases were filed with the Court are as
follows: Jay Spechler filed his action with the Court on October 11, 2000, Mark
Michelson filed his action with the Court on October 13, 2000, Donald Wilkens
filed his action with the Court on October 17, 2000 and Robert D. Brown Jr.
filed his action with the Court on October 30, 2000, Robert M. Stilson filed his
action with the Court on November 2, 2000, Stephanie Chauvel filed her action
with the Court on November 17, 2000 and Peter Miller filed his action with the
Court on November 20, 2000. The plaintiffs seek class action status. The
complaints do not specify the amount of damages sought. Per press releases,
other plaintiffs are purported to have filed similar lawsuits against the
Company and its officers or former officers. The Company believes that the
claims being brought against the Company and its officers are totally without
merit and the Company intends to engage in a rigorous defense of such claims.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

    No matters were submitted for a vote of stockholders of the Company during
the fourth quarter of the fiscal year ended June 30, 2000.

                                       30
<PAGE>
                                    PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

    The Company's Common Stock is listed on the Nasdaq National Market System
under the symbol "ASPEE." On October 10, 2000, The Nasdaq Stock Market
("Nasdaq") suspended trading in the Company's Common Stock while it sought
additional information from the Company. On October 11, 2000, Nasdaq sent a
letter to the Company stating that that Company's Common Stock would be delisted
from Nasdaq if the Company did not file its Form 10-K for the fiscal year ended
June 30, 2000 with the Securities and Exchange Commission ("SEC") by
October 18, 2000. The Form 10-K was not filed with the SEC by the October 18,
2000 deadline. On November 9, 2000 the Company participated in a hearing before
the Nasdaq Listing Qualifications Panel which was held for the purpose of
evaluating whether the Company's Common Stock may continue to be listed on
Nasdaq or if it will be delisted. As of the date of the filing of this report
with the SEC, Nasdaq has not informed the Company as to its decision.

    The following table sets forth, for the periods indicated, the high and low
sales prices of the Company's Common Stock as reported by Nasdaq. Prices reflect
inter-dealer prices without retail mark-up, mark-down or commissions, and may
not necessarily reflect actual transactions.

<TABLE>
<CAPTION>
                                                                 HIGH         LOW
                                                              ----------   ----------
<S>                                                           <C>          <C>
YEAR ENDED JUNE 30, 1999
    First Quarter...........................................  13 1/8       7
    Second Quarter..........................................  13 3/8       6 1/2
    Third Quarter...........................................  17 1/2       9
    Fourth Quarter..........................................  15           9 3/8

YEAR ENDED JUNE 30, 2000
    First Quarter...........................................  15 3/4       9 1/4
    Second Quarter..........................................  13 3/16      7 15/16
    Third Quarter...........................................  30           9 1/16
    Fourth Quarter..........................................  21 1/2       4 1/32
</TABLE>

    There were 92 holders of record as of November 27, 2000; however, the
Company believes the number of beneficial holders of the Company's common stock
to be in excess of 600.

    The Company has never paid cash dividends on its Common Stock. The Company
currently intends to retain its available funds from earnings for future growth
and, therefore, does not anticipate paying any dividends in the foreseeable
future. See Item 7. "Management's Discussion and Analysis of Financial Condition
and Results of Operation--Liquidity and Capital Resources" for a discussion
regarding certain restrictions which relate to the Company's ability to pay cash
dividends.

RECENT SALES OF UNREGISTERED SECURITIES.

    The Company has sold and issued the following securities, which were not
registered under the Securities Act of 1933, as amended (the "Act") since
June 30, 1999.

    1.  In September 1999 and December 1999, respectively, the Company issued
79,270 and 104,698 shares of the Company's Common Stock to Gary Green, Roger
Scarlett, Anthony Sampson and Contech Consultants, Ltd. as further consideration
for the Company's acquisition of all the outstanding capital stock of RGB/Trinet
Limited and of Jade Communications, Ltd., corporations organized under the laws
of England. The issuance of the Common Stock was deemed to be exempt from
registration under the Securities Act of 1933, as amended ("the Act") by virtue
of Section 4(2) of the Act because the issuance did not involve a public
offering.

                                       31
<PAGE>
    2.  In March 2000, the Company issued 104,802 shares of the Company's Common
Stock to Mr. Chester Pazdziorny and Mr. Carl Rubin as consideration for the
Company's acquisition of all of the outstanding capital stock of Monument
Software Corporation, organized under the laws of Massachusetts. The issuance of
the Common Stock was deemed to be exempt from registration under the Act by
virtue of Section 4(2) of the Act because the issuance did not involve a public
offering.

    3.  In March, 2000, the Company sold to Marshall Capital Management, Inc.
("Marshall") 10,000 shares of the Company's Series A Convertible Exchangeable
Preferred Stock (the "Preferred Shares"), a warrant to acquire 583,334 shares of
the Company's Common Stock at an initial exercise price of $17.00 per share (the
"Aspeon Warrant") and a warrant to acquire 1,250,000 shares of common stock of
Aspeon Solutions, Inc., a wholly-owned subsidiary of the Company, at an exercise
price of $5.00 per share, for an aggregate purchase price of $10 million. The
Preferred Shares are convertible into shares of the Company's Common Stock at a
conversion price, which is the lesser of a fixed conversion price or a variable
conversion price. The fixed conversion price for the Preferred Shares initially
was set at $16.00 per share. The variable conversion price for the Preferred
Shares is the average of the three lowest closing bid prices for the Company's
Common Stock occurring during the period of ten consecutive trading days
immediately preceding the conversion date. The conversion price for the
Preferred Shares is subject to certain anti-dilution adjustments and other
adjustments upon the occurrence of events such as defaults under the Certificate
of Designations, Preferences and Rights of the Series A Convertible Exchangeable
Preferred Stock of the Company or the other agreements entered into between the
Company and Marshall in connection with the Company's sale of securities to
Marshall. See "Business--Risk Factors--Risks Related to the Company--Series A
Convertible Exchangeable Preferred Stock" for a more complete discussion of the
Preferred Shares and certain defaults, which have occurred in connection with
the Preferred Shares and related agreements. The sale of the stock and warrants
was deemed to be exempt from registration under the Act by virtue of
Section 4(2) of the Act and Rule 506 of Regulation D promulgated thereunder
because the issuance did not involve a public offering.

    4.  In March 2000, the Company issued 87,288 shares of the Company's Common
Stock to Gary Green, Roger Scarlett, Anthony Sampson and Contech
Consultants, Ltd. as further consideration for the Company's acquisition of all
the outstanding capital stock of RGB/Trinet Limited and of Jade
Communications, Ltd., corporations organized under the laws of England. The
issuance of the Common Stock was deemed to be exempt from registration under the
Act by virtue of Section 4(2) of the Act because the issuance did not involve a
public offering.

    The recipients of the above-described securities represented their intention
to acquire the securities for investment only and not with a view to
distribution thereof. Appropriate legends were affixed to the stock certificates
issued in such transactions.

ITEM 6.  SELECTED FINANCIAL DATA

    The following table presents selected consolidated data from continuing
operations and balance sheet data of the Company. The balance sheet data as of
June 30, 1996, 1997, 1998, 1999 and 2000 and the statements of operations data
for each of the five fiscal years in the period ended June 30, 2000 presented
below are derived from the Company's audited consolidated financial statements.

                                       32
<PAGE>
    The selected consolidated financial data should be read in conjunction with
the consolidated financial statements and related notes thereto of the Company
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this Annual Report on Form 10-K.

<TABLE>
<CAPTION>
                                                     AS OF AND FOR THE FISCAL YEARS ENDED JUNE 30,
                                                  ----------------------------------------------------
                                                    1996       1997       1998       1999       2000
                                                  --------   --------   --------   --------   --------
                                                         (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                               <C>        <C>        <C>        <C>        <C>
STATEMENT OF OPERATIONS DATA:
Products........................................   $1,464     $7,015    $27,132    $58,672    $ 54,902
Services........................................       --         --      2,514     14,086      26,143
                                                   ------     ------    -------    -------    --------
  Total revenues................................    1,464      7,015     29,646     72,758      81,045
                                                   ------     ------    -------    -------    --------
Income (loss) from continuing operations........      (16)      (132)     1,661      6,283      (9,783)
Net income (loss)...............................      (54)      (827)     1,014      3,667      (9,301)
Accretion of redeemable convertible preferred
  stock discount and dividends..................       --         --         --         --      (6,091)
Net income (loss) available to common
  stockholders..................................   $  (54)    $ (827)   $ 1,014    $ 3,667    $(15,392)
Net income (loss) per common share:
  Basic.........................................   $(0.03)    $(0.30)   $  0.28    $  0.59    $  (1.67)
  Diluted.......................................   $(0.03)    $(0.30)   $  0.27    $  0.57    $  (1.67)

BALANCE SHEET DATA:
  Total assets..................................   $  951     $5,203    $22,531    $76,083    $ 91,784
  Long-term debt including current portion......       70         --      2,843      4,131       4,532
  Mandatorily redeemable preferred stock........       --         --         --         --       6,042
  Mandatorily redeemable warrants...............       --         --         --         --       3,427
  Mandatorily redeemable minority interest
    warrants....................................       --         --         --         --         867
  Stockholders' equity..........................   $  195     $3,354    $11,400    $59,610    $ 54,150
</TABLE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

    The following discussion should be read in conjunction with the Company's
consolidated financial statements and the related notes thereto and the other
financial information included elsewhere in this Annual Report. This discussion
contains forward-looking statements that include risk and uncertainties. The
Company's actual results could differ materially from those anticipated in these
forward-looking statements as a result of any number of factors, including those
set forth under "Risk Factors" in Item 1 and elsewhere in this Annual Report.

BUSINESS

    Aspeon, Inc. ("Aspeon"), formerly known as Javelin Systems, Inc., was
incorporated in the State of Delaware on September 19, 1995 under the name of
Sunwood Research, Inc. Aspeon Solutions, Inc., a wholly-owned subsidiary, is an
application service provider ("ASP") providing services which enable software
applications to be deployed, managed, supported and upgraded from centrally
located servers, rather than individual computers. Javelin Systems, a division
of Aspeon, is a provider of integrated touchscreen computers and system
integration services to the foodservice and retail industries. Aspeon's
background as a developer of point of sale systems, communications solutions,
and enterprise applications, has allowed the Company to rapidly gain contracts
in the ASP market.

    In December 1997, Aspeon acquired CCI and Posnet Computers; both companies
focused on providing point of sale solutions to large restaurant chains
including White Castle, AFC, Red Robin and Jamba Juice. These acquisitions
formed the basis of Aspeon's POS Products and Solution Services businesses.

    Aspeon began its globalization initiative in 1998, first opening Javelin
sales and support offices in the United Kingdom (UK) and Australia. In
November 1998, Aspeon acquired RGB/Jade, a networking solutions provider with
customers such as Marks and Spencer, WH Smith, Body Shop and Bass pubs.

                                       33
<PAGE>
Although primarily retail focused, Jade has relationships with major non-retail
customers including Reuters and British Telecom. Aspeon launched another UK
subsidiary, Teneo, in an effort to expand its service management and wide area
network solutions business.

    By late 1998, Aspeon was positioned globally to provide both point of sale
and communications solutions to the retail and restaurant industries, but
realized it lacked the expertise in enterprise software and infrastructure,
which would be necessary to complete the Company's end-to-end vision. The
Company was not in a position to build a large enterprise consulting practice
due to the difficulty of hiring and retaining the hundreds of consultants needed
to serve its large clients.

    Aspeon began evaluating alternative business models and identified the ASP
Services business as ideal for its vertical focus since it could develop a
pre-integrated, vertically-focused suite of software applications that could be
delivered through the Internet in a hosted environment. In 1999, Aspeon began
developing its ASP Services business.

    In April 1999, Aspeon acquired DTI and SB, a Philadelphia-based provider of
hosted messaging, customer relationship management, and custom software
solutions to a variety of customers in the Delaware Valley area including
Aventis and Right Management. This acquisition served as the platform for
Aspeon's ASP Services offering by providing application development,
implementation, and support capabilities.

    In August 1999, Aspeon acquired RCS, a provider of technology outsourcing
services including Oracle Financials hosting and communications management to
customers such as Champs Entertainment, Inc., Fuddruckers, Chart House, and
Xando-Cosi.

    In January 2000, Aspeon created Aspeon Solutions, Inc. as a wholly-owned
subsidiary to centralize and continue to develop its ASP Services.

    In March 2000, Aspeon acquired Monument, a provider of rapid implementation
services of financial systems with an emphasis on Oracle Financials.

    The Company has attempted to assemble a high caliber management team and
build an ASP infrastructure designed to rapidly scale as companies increasingly
turn to outsourcers, like Aspeon, to satisfy their internal information
technology ("IT") needs.

    All of the acquisitions were accounted for by the purchase method, and
accordingly, the results of operations of these subsidiaries have been included
with those of the Company commencing on the dates of acquisition. Goodwill
resulting from these acquisitions is amortized on a straight-line basis over
periods of 3 to 25 years.

    The Company's principal business activities are:

    (1) POS Products--designs, manufactures and markets open system touchscreen
       POS network-ready hardware systems. These systems can be sold on a
       stand-alone basis or integrated as part of an end-to-end solution.

    (2) Solutions Services--provides retail foodservice technology solutions and
       services that enable restaurants and retailers to capture, analyze,
       disseminate and use information throughout the enterprise, from the POS
       cash register terminal to the back office to an organization's
       headquarters.

    (3) ASP Services--provides pre-integrated mission-critical business
       application services customized to meet industry specific needs of the
       foodservice and retail industry.

REVENUES

POS PRODUCTS

    POS Products revenues consist primarily of sales of POS hardware, software
and peripheral equipment including printers and personal computers. The
replacement cycle for hardware in the POS

                                       34
<PAGE>
foodservice industry is generally long, and consequently, revenues for hardware
products to a specific end-user tend to be non-recurring. The Company may
experience significant variations in POS Products revenue in any quarterly or
annual period.

SOLUTIONS SERVICES

    Solutions Services revenues consist primarily of staging and design,
installation, maintenance and repair and consulting services. Maintenance and
repair contract Solution Services tend to be recurring while services such as
staging, design and installation tend not to be recurring. Installation services
are not always a required service to be provided for in connection with the sale
of the Company's POS Products. Maintenance services are typically provided for
under the terms of a single or multi-year maintenance agreement.

ASP SERVICES

    ASP Services revenues consist primarily of information technology
outsourcing, hosting, remote services, help desk and consulting services.
Revenues are classified into two categories: recurring or multi-year
contractually based revenue, and revenue generated via non-recurring agreements.
Services such as consulting tend not to be recurring.

    ASP Services also include certain purchases of equipment procured by the
Company on behalf of a customer. Typically, these purchases are passed through
to the customer with a nominal markup on the cost to the Company.

    Management anticipates that Solution Services and ASP Services revenues in
the future will increase and become a more significant percentage of total
revenues. As sales of hardware products and services to specific end-users
become more significant relative to total revenues, the Company may experience
significant variations in any quarterly or annual reporting period. These
variations may result from, among other things, delays in installations or the
Company's inability to timely address any problems with installations that have
been completed or are near completion. Any of these factors could cause the
Company's results of operations to fluctuate significantly from period to
period, including on a quarterly basis.

COST OF REVENUES

POS PRODUCTS

    POS Products cost of revenues consist primarily of POS hardware, software
and peripheral equipment costs. POS hardware costs include the acquisition costs
of non-Javelin product line hardware that is resold by the Company and the costs
of components and payroll and related costs for assembly, manufacturing,
purchasing, quality control and repairs of Javelin products. Sales of
non-Javelin hardware generally carry a lower gross margin than do other product
sales. The cost of the components incorporated in the Javelin product line
represents in excess of 80% of the total cost of such products, which is
consistent with prior fiscal years. The cost of five components represents in
excess of 75% of the total component costs included in the Javelin product line.
The Company anticipates that the cost of manufacturing its products will be
favorably impacted by its strategy to move its existing overseas manufacturing
to a domestic outside contract manufacturer during the later half of fiscal
2001.

SOLUTIONS SERVICES

    Solutions Services cost of revenues consist primarily of payroll and related
costs for technical and support staff providing staging, installation,
maintenance and other services. Cost of revenues per contract increases as new
installations under the contract are completed. Consequently, until the Company
has a larger volume of matured service contracts, gross margins on such service
revenues will be lower than the Company believes can be realized by its service
operations. Additionally, because the Company's service

                                       35
<PAGE>
business should generate higher revenues and higher margins in periods in which
the Company handles significant system deployments, and because contracts for
such deployments are non-recurring in nature, the Company anticipates that
revenues and gross margins from its service business will fluctuate from period
to period.

ASP SERVICES

    ASP Services cost of revenues consist primarily of payroll and related costs
for the technical and support staff providing information technology
outsourcing, hosting, remote services, help desk and consulting services. Cost
of revenues also includes certain utility charges (i.e. telephone) associated
with providing remote services and help desk. In anticipation of gaining new
customers, the Company has invested and will continue to invest in the service
business by incurring costs necessary to meet the needs of a higher level of
service revenues. ASP Services cost of revenues also includes costs associated
with purchases of equipment procured by the Company on behalf of a customer.
Typically, these purchases are passed through to the customer with a nominal
markup on the cost to the Company.

RESULTS OF OPERATIONS

    The following table sets forth certain statements of operations data as a
percentage of total revenues (unless otherwise indicated) for the fiscal years
ended June 30, 1998, 1999 and 2000.

<TABLE>
<CAPTION>
                                                           1998          1999          2000
                                                         --------      --------      --------
<S>                                                      <C>           <C>           <C>
REVENUES:
  POS Products.....................................        91.5 %        80.6 %        65.9 %
  Solutions Services...............................         8.5          17.3          17.5
  ASP Services(1)..................................          --           2.1          16.6
                                                          -----         -----         -----
    Total revenues.................................       100.0         100.0         100.0

COST OF REVENUES:
  POS Products(2)..................................        73.1          70.6          74.5
  Solutions Services(2)............................        75.8          78.8          90.4
  ASP Services(1)..................................          --          47.5          64.6
                                                          -----         -----         -----
    Total cost of revenues.........................        73.3          71.5          75.6

GROSS PROFIT.......................................        26.7          28.5          24.4

OPERATING EXPENSES:
  Research and development.........................         2.9           1.8           2.4
  Selling and marketing............................         4.0           5.4          10.4
  General and administrative.......................        14.2          12.7          23.7
                                                          -----         -----         -----
    Total operating expenses.......................        21.1          19.9          36.5

INCOME (LOSS) FROM OPERATIONS......................         5.6           8.6         (12.1)

Interest expense...................................        (0.4)         (1.2)         (1.0)
Interest income....................................          --           0.3           0.5
Other income (expense).............................         0.2            --          (0.1)
Income tax expense (benefit).......................        (2.0)         (2.8)          1.2
                                                          -----         -----         -----
NET INCOME (LOSS)..................................         3.4 %         4.9 %       (11.5)%
                                                          =====         =====         =====
</TABLE>

------------------------

(1) ASP Services for fiscal 2000 includes approximately $2.0 million and
    $1.6 million, respectively, of non-POS equipment related transactions, which
    are categorized within the ASP Services segment.

(2) Expressed as a percentage of related revenues, not of total revenues.

                                       36
<PAGE>
FISCAL YEAR ENDED JUNE 30, 2000 COMPARED TO FISCAL YEAR ENDED JUNE 30, 1999

    REVENUES--POS PRODUCTS.  Revenues from product sales decreased
$5.3 million, or 9.9%, to $53.4 million in fiscal 2000 compared to
$58.7 million in fiscal 1999. As a percentage of total revenues, POS Product
sales accounted for approximately 66% and 81% in fiscal 2000 and 1999,
respectively. POS Products revenues in fiscal 2000 were adversely impacted by an
industry-wide slowdown for POS hardware units as a result of soft demand
following the Year 2000 buildup.

    REVENUES--SOLUTIONS SERVICES.  Revenues from solutions services increased
$1.6 million, or 12.8%, to $14.1 million in fiscal 2000 compared to
$12.5 million in fiscal 1999. As a percentage of total revenues, Solutions
Services accounted for approximately 17% in fiscal 2000 and 1999. Solutions
Services revenues were impacted primarily by one significant new customer
contract, for which deployment and installation services were provided, offset,
in part, by one significant fiscal 1999 customer contract which ended during the
first quarter of fiscal 2000.

    REVENUES--ASP SERVICES.  Revenues for ASP Services, excluding approximately
$2.0 million of equipment sales, increased $10.0 to $11.5 million in fiscal 2000
compared to $1.5 million in fiscal 1999. Equipment sales represent non-POS
Products procured by the Company on behalf of ASP Services customers. As a
percentage of total revenues, ASP Services excluding equipment sales, accounted
for 14.0% and 2.1% in fiscal 2000 and 1999, respectively. ASP Services revenues
reflect the full year impact of the Company's fiscal 1999 acquisition of DTI
coupled with its fiscal 2000 acquisitions of RCS and Monument.

    GROSS PROFIT.  Gross profit decreased approximately $961,000, or 0.5%, to
$19.8 million in fiscal 2000 compared to $20.7 million in fiscal 1999. The gross
profit decrease is comprised of the following:

<TABLE>
<CAPTION>
                                                      YEAR ENDED             INCREASE/
                                                       JUNE 30,             (DECREASE)
                                                  -------------------   -------------------
                                                    2000       1999        $          %
                                                  --------   --------   --------   --------
                                                            (DOLLARS IN MILLIONS)
<S>                                               <C>        <C>        <C>        <C>
POS Products....................................   $13.6      $17.2      $(3.6)     (20.9)%
Solutions Services..............................   $ 1.4      $ 2.7      $(1.3)     (48.1)%
ASP Services....................................   $ 4.8      $ 0.8      $ 4.0      500.0 %
</TABLE>

    The decrease in gross profit from POS Products revenues is primarily
attributable to lower product sales as described above offset, in part, by a
larger proportion of POS Products sold at a higher gross profit directly to end
users. The decrease in gross profit from Solutions Services is primarily
attributable to lower margins associated with one significant customer contract
obtained during fiscal 2000 offset, in part, by higher margin consulting
contracts. ASP Services gross margins, excluding gross profit of $288,000
associated with equipment sales, reflect the impact of higher margin consulting
engagements offset, in part, by fixed payroll and related costs associated with
technical support and service employees. The increase in ASP Services gross
profit in fiscal 2000 reflects the full year impact of the Company's fiscal 1999
acquisition of DTI coupled with its fiscal 2000 acquisition of RCS and Monument.

    RESEARCH AND DEVELOPMENT.  Research and development expenses increased
approximately $632,000, or 47%, to $2.0 million in fiscal 2000 compared to
$1.3 million in fiscal 1999. As a percentage of total revenues, research and
development activities amounted to 2.4% and 1.8% in fiscal 2000 and 1999,
respectively. The increase is primarily attributable to hardware development
costs and activities associated with certain management reporting service
applications.

    SELLING AND MARKETING.  Selling and marketing expenses increased
approximately $4.5 million, or 118%, to $8.4 million in 2000 compared to
$3.9 million in fiscal 1999. As a percentage of total revenues, selling and
marketing costs amounted to 10.3% and 5.3% in fiscal 2000 and 1999,
respectively. The increase is primarily attributable to ASP sales infrastructure
costs, including payroll, benefits and travel coupled by increased website
development, tradeshow, and advertising costs incurred to promote Javelin's

                                       37
<PAGE>
Viper products and the new ASP Services business. Selling and marketing costs
aggregated approximately $2.2 million for the POS Products segment,
$5.0 million for the Solutions Services segment and $1.2 million for the ASP
Services segment.

    GENERAL AND ADMINISTRATIVE.  General and administrative expenses increased
approximately $9.9 million, or 107%, to $19.2 million in fiscal 2000 compared to
$9.3 million in fiscal 1999. As a percentage of total revenues, general and
administrative expenses amounted to 23.7% and 12.7% in fiscal 2000 and 1999,
respectively. The increase is primarily attributable to infrastructure costs,
including payroll and related taxes, travel, rent and utilities associated with
the ASP Services business, the full year impact of goodwill amortization
associated with fiscal 1999 acquisitions, goodwill amortization of the Company's
fiscal 2000 acquisitions and severance costs associated with the termination of
senior management in the ASP Services division. General and administrative
expenses aggregated approximately $6.3 million for POS Products segment,
$3.8 million for the Solutions Services segment and $8.9 million for the ASP
Services segment.

    INTEREST EXPENSE.  Interest expense decreased approximately $63,000, or
7.2%, to $807,800 in fiscal 2000, compared to $870,300 in fiscal 1999. The
decrease primarily reflects the repayment of indebtedness during fiscal 2000
offset, in part, by interest associated with new capital leases executed within
the ASP Services segment.

    INTEREST INCOME.  Interest income increased $198,000, or 88%, to $422,800 in
fiscal 2000 compared to $224,800 in fiscal 1999. The increase primarily reflects
the impact of interest earned on the remaining invested proceeds from the
Company's fiscal 1999 public offering coupled with the investment of proceeds
received in connection with the Company's issuance of Preferred Stock in
March 2000.

    INCOME TAXES.  The Company had an income tax benefit of approximately
$950,000 in fiscal 2000 compared to a provision for federal, state and foreign
income taxes of $2.0 million in fiscal 1999. The income tax benefit results from
the carry-back of certain losses incurred by the Company during fiscal 2000
along with a full valuation allowance provided against its net deferred tax
assets at June 30, 2000.

FISCAL YEAR ENDED JUNE 30, 1999 COMPARED TO FISCAL YEAR ENDED JUNE 30, 1998

    REVENUES--POS PRODUCTS.  Revenues from POS Product sales increased
approximately $31.5 million, or 116%, to $58.7 million in fiscal 1999 compared
to $27.1 million in fiscal 1998. As a percentage of total revenues, POS Product
sales accounted for approximately 81% and 92% in fiscal 1999 and 1998,
respectively. The increase reflects higher revenues relating to POS Products
sales of $9.2 million, revenues from POS Product sales at CCI and RGB/Jade of
$6.9 million and $6.7 million, respectively, and revenues from the newly
established foreign subsidiaries of $8.7 million. The increase in fiscal 1999
revenues reflects the full year impact of the Company's fiscal 1998 acquisitions
of CCI and RGB/Jade coupled with higher POS Product revenues in the Javelin
division, primarily due to an increase in the number of units sold.

    REVENUES--SOLUTIONS SERVICES.  Revenues from Solutions Services increased
approximately $11.6 million, or 460%, to $14.1 million in fiscal 1999 compared
to $2.5 million in fiscal 1998. As a percentage of total revenues, Solution
Services accounted for approximately 19% and 8% in fiscal 1999 and 1998,
respectively. The increase reflects the full year impact of the Company's fiscal
1998 acquisition of CCI and fiscal 1999 acquisition of RGB/Jade.

    REVENUES--ASP SERVICES.  Revenues for ASP Services aggregated $1.5 million
in fiscal 1999. As a percentage of total revenues, ASP Services accounted for
2.1% in fiscal 1999. ASP Services represents the operations of DTI which were
acquired by the Company in April 1999.

                                       38
<PAGE>
    GROSS PROFIT.  Gross profit increased $12.8 million, or 162%, to
$20.7 million in fiscal 1999 compared to $7.9 million in fiscal 1998. The gross
profit increase is comprised of the following (dollars in millions):

<TABLE>
<CAPTION>
                                                        YEAR ENDED             INCREASE/
                                                         JUNE 30,             (DECREASE)
                                                    -------------------   -------------------
                                                      1999       1998        $          %
                                                    --------   --------   --------   --------
                                                              (DOLLARS IN MILLIONS)
<S>                                                 <C>        <C>        <C>        <C>
POS Products......................................   $17.2       $7.3       $9.9      135.6%
Solutions Services................................   $ 2.7       $0.6       $2.1      350.0%
ASP Services......................................   $ 0.8         --       $0.8         --
</TABLE>

    The increase in gross profit from POS Products sales is due to an increase
in gross profit from the sale of POS Products of approximately $3.8 million, an
increase from CCI of $1.2 million, an increase from RGB/Jade of $2.4 million and
gross profit generated from newly established foreign subsidiaries of
$2.5 million. The increase relating to POS Products is attributable to the
increase in the number of units sold and a decrease in prices from the Company's
suppliers due to a higher volume of purchases by the Company and the realization
of manufacturing efficiencies.

    The increase in gross profit from Solutions Services revenues is due to
gross profit on services provided by RGB/Jade of approximately $1.7 million and
gross profit on services provided by newly established foreign subsidiaries of
$687,000 offset, in part, by a decrease in gross profit from services provided
by CCI of $438,000. The decrease in gross profit from CCI is due to a lower
number of installations in 1999 as compared to 1998.

    Gross profit from ASP Services reflects costs associated with the acquired
operations of DTI in April 1999.

    RESEARCH AND DEVELOPMENT.  Research and development expenses increased
approximately $462,000, or 53%, to $1.3 million in fiscal 1999 compared to
$874,000 in fiscal 1998. As a percentage of total revenues, research and
development costs amounted to 1.8% and 2.9% in fiscal 1999 and 1998,
respectively. The increase is primarily attributable to higher payroll costs
associated with hiring additional engineers for research and development
activities.

    SELLING AND MARKETING.  Selling and marketing expenses increased
approximately $2.7 million, or 227% to $3.9 million in 1999 compared to
$1.2 million in fiscal 1998. The increase reflects higher selling and marketing
expenses for the POS Products segment of $608,000 coupled with the full year
impact of selling and marketing expenses associated with RGB/Jade of
$1.7 million and with newly established foreign subsidiaries of $521,000. Such
expenses consisted primarily of payroll, tradeshow fees, and travel costs.

    GENERAL AND ADMINISTRATIVE.  General and administrative expenses increased
approximately $5.1 million, or 121%, to $9.3 million in fiscal 1999 compared to
$4.2 million in fiscal 1998. As a percentage of total revenues, general and
administrative costs amounted to 12.7% and 14.2% in fiscal 1999 and 1998,
respectively. The increase is due to higher general and administrative expenses
for the POS Products segment of $1.2 million coupled with the full year impact
of general and administrative expenses associated with CCI of $1.4 million,
RGB/Jade of $732,000 and with newly established foreign subsidiaries of
$1.9 million. The increase within the POS Products segment consisted primarily
of increased payroll costs due primarily to an increase in the number of
employees and increased facility costs due to expansion.

    INTEREST EXPENSE.  Interest expense increased by approximately $755,000 to
$870,300 in fiscal 1999 compared to $115,000 in fiscal 1998. The increase is due
to borrowings under the credit facility prior to the completion of the Company's
public offerings in November 1998 and February 1999 coupled with the
amortization of deferred financing costs associated with the Company's line of
credit. Such borrowings were necessary to sustain the growth of business.

                                       39
<PAGE>
    INTEREST INCOME.  Interest income increased $212,600 to $224,800 in fiscal
1999 compared to $12,200 in fiscal 1998, reflecting the impact of interest
earned on invested proceeds from the Company's fiscal 1999 public offerings.

    INCOME TAXES.  Provision for federal, state and foreign income taxes
increased approximately $1.4 million, or 244%, to $2.0 million in fiscal 1999
compared to $585,000 in fiscal 1998. The increase is attributable to the overall
increase in income before income taxes of $4.1 million as well as increases in
income from the Company's foreign subsidiaries, offset, in part, by these
subsidiaries which operate in jurisdictions with lower income tax rates than
those in the United States.

LIQUIDITY AND CAPITAL RESOURCES

    In June 1998, the Company and its U.S. subsidiaries obtained a credit
facility of $7,500,000 from an unrelated financial institution. The credit
facility expires in June 2001 and consisted of a line of credit of up to
$6,000,000 and a term loan of $1,500,000. The credit facility contains a .50%
per annum unused line of credit fee, which is based on the difference between
the borrowing capacity and outstanding balance. Borrowings under the term loan
are collateralized by substantially all of the assets of the Company, bear
interest at 13.65% per annum and are repayable at $25,000 per month with all
unpaid principal and interest due in June 2001. At June 30, 2000, borrowings
outstanding under the term loan amounted to $900,000. The Company is not
permitted to pay cash dividends to common stockholders under the terms of the
credit facility without approval of the unrelated financial institution.

    Under the terms of the credit facility, the Company is permitted to borrow
up to 80% of eligible accounts receivable (as defined) and 50% of eligible
inventory (as defined) with monthly interest payments based upon the prime rate
of a national financial institution plus 1.75% (9.5% as of June 30, 2000).
Borrowings under the line of credit are collateralized by substantially all the
assets of the Company. At June 30, 2000, borrowings outstanding under the line
amounted to $2,497,000.

    The credit facility contains certain restrictive financial and non-financial
covenants. The Company is required to maintain a stated current ratio, net
worth, senior debt service coverage ratio and total debt service coverage ratio.
At June 30, 2000, the Company was in default of certain non-financial covenants.
In October 2000, the Company obtained a waiver on all defaults through June 30,
2000 pursuant to certain terms and conditions including accelerating term loan
repayments, accruing interest on the term loan at the default rate of 11.5%, and
limiting borrowings to approximately $3,538,000.

    Jade has a line of credit facility of $1,800,000 from an unrelated financial
institution. Borrowings under the line of credit are collateralized by all of
the assets of Jade and bear interest at 2% over the U.K. Base rate (8.0% at
June 30, 2000). The credit facility was renewed in October 2000 and expires in
August 2001. At June 30, 2000, borrowings under the line amounted to $692,000
with approximately $1,108,000 available for future borrowings.

    In March 2000, the Company completed a private placement in which the
Company 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
common stock of the Company at an initial exercise price of $17.00 per share and
a warrant to acquire 1,250,000 shares of common stock of Aspeon Solutions, Inc.
("Aspeon Solutions"), a wholly-owned subsidiary of the Company, at an exercise
price of $5.00 per share. Proceeds to the Company amounted to $9,568,400, net of
$431,600 in issuance costs.

    In October 2000, a notice of default was received from the Preferred
Stockholders due to the Company's failure to timely file its Form 10-K and the
suspension of trading of the Company's common stock by Nasdaq. In accordance
with the provisions of the Preferred Stock agreement, the Company is required to
pay 1.5% of the stated value of the Preferred Stock ($9,850,000) for each thirty
calendar day period during which the default remains ($147,800 per month). As a
result of the defaults not being cured within ten days of the default notice,
both a Repricing and Redemption Event, as defined, have been

                                       40
<PAGE>
triggered. See "Business--Risk Factors--Risks Related to the Company--Series A
Convertible Exchangeable Preferred Stock" for a more complete discussion
regarding the defaults under the terms of the Preferred Stock and related
agreements and the default remedies available to the Preferred Stockholders. In
the event that the Preferred Stockholders exercise their right to require that
the Company redeem the Preferred Stock, no assurances can be made that the
Company will be able to obtain the funds necessary to meet such redemption
obligation.

    In October 2000, The Nasdaq Stock Market ("Nasdaq") suspended trading in the
Company's Common Stock while it sought additional information from the Company.
On October 11, 2000, Nasdaq sent a letter to the Company stating that that
Company's Common Stock would be delisted from Nasdaq if the Company did not file
its Form 10-K for the fiscal year ended June 30, 2000 with the Securities and
Exchange Commission ("SEC") by October 18, 2000. The Form 10-K was not filed
with the SEC by the October 18, 2000 deadline. Nasdaq has not yet determined
whether the Company's Common Stock may continue to be listed on Nasdaq or if it
will be delisted.

    As of June 30, 2000, the Company had cash and cash equivalents of $8,853,200
and working capital of $23,906,000. As of September 30, 2000, the Company had
cash and cash equivalents of approximately $2,700,000.

    Cash used in operating activities for the year ended June 30, 2000 amounted
to approximately $2,070,400 and was primarily attributable to the use of cash to
fund the Company's net loss and inventory. This was partially offset by an
increase in accounts payable and accrued expenses. Cash used in investing
activities for the year ended June 30, 2000 amounted to approximately $5,530,000
and consisted primarily of cash used to acquire the outstanding common stock of
RCS and Monument, payment of various earn-out provisions associated with
acquired busineses and the purchase of equipment. Cash provided by financing
activities for the year ended June 30, 2000 amounted to approximately
$11,130,000 and consisted primarily of the gross proceeds from the issuance of
$10,000,000 of Preferred Stock in March 2000. Proceeds from the Preferred Stock
have been used primarily to acquire Monument, settle future contingent payments
associated with RCS, hire management and staff personnel, expand corporate
facilities and fund ASP Services operations.

    The Company has sustained significant losses during fiscal 2000 and has
experienced negative cash flows from operations since its inception. The
Company's ability to meet its obligations in the ordinary course of business is
dependent upon its ability to re-initiate trading of its Common Stock, return to
profitability, obtain a waiver of preferred stock defaults, replace the existing
domestic line of credit and raise additional financing through public or private
equity financings and evaluate potential strategic opportunities.

    Management must re-initiate trading of the Company's Common Stock and retain
its listing on the Nasdaq. Management believes it can satisfy all SEC filing
requirements, including but not limited to certain quarterly filing requirements
on Form 10-Q communicated to the Nasdaq Panel on November 9, 2000. However, no
assurances can be made that the Company will not be delisted by the Nasdaq
prior, or subsequent, to filing all information with the SEC.

    Management has instituted certain business initiatives to streamline
operations and generate future on-going cost savings. In June 2000, the Company
recorded a $3,900,000 charge for severance costs associated with the termination
of senior management personnel in the ASP Services segment. Management
anticipates annual cash savings from this initiative of approximately
$1,800,000. The Company also anticipates monthly cost savings of approximately
$100,000 associated with management's decision to exit the retail ASP operations
and focus solely on the foodservice ASP operations. The Company has delayed
plans to consolidate and outsource data center functions for ASP Services
resulting in the elimination of measurable up-front costs which would otherwise
have been incurred. The Company has also delayed and reduced the budgeted
dollars associated with its corporate wide marketing and advertising campaign.

                                       41
<PAGE>
However, no assurances can be made that these initiatives will return the
Company to profitability in the immediate future.

    Management believes that through an inventory reduction program and
aggressive receivable collection efforts it may generate between $5.0 million to
$7.5 million of cash. Management has developed and implemented a POS sales
rebate program effective in the first quarter of fiscal 2001. However, there can
be no assurance that the Company's rebate program will generate significant
sales volumes and inventory reductions of POS products. The Company has recorded
an income tax receivable in excess of $2.0 million as of June 30, 2000
reflecting, in part, the carryback of losses incurred during the fiscal year.
However, there can be no assurance that the Company will collect this money in
the immediate future.

    Management intends to replace its existing domestic line of credit with a
new facility to fund its working capital needs. However, no assurances can be
made that such financing can be successfully completed on terms acceptable to
the Company. In addition, the management of the Company's UK subsidiaries has
renewed its existing line of credit which will expire in August 2001.

    Management continues to evaluate raising additional financing through public
or private equity financings. If additional funds are raised through the
issuance of equity securities, our stockholders may experience significant
dilution. Furthermore, there can be no assurance that additional financing will
be available when needed or that if available, such financing will include terms
favorable to our stockholders or the Company. If such financing is not available
when required or is not available on acceptable terms, we may be unable to
develop or enhance our products and services, take advantage of business
opportunities or respond to competitive pressures, any of which could have a
material adverse effect on our business, financial condition and results of
operations.

    Management continues to evaluate exit strategy opportunities relating to the
sale of the Company or certain subsidiaries. However, there can be no assurance
that any opportunity to sell the Company, or any of its divisions, would be
approved by the stockholders of the Company. Furthermore, there can be no
assurance that such transaction can be successfully completed on terms
acceptable to the Company.

NEWLY ISSUED ACCOUNTING PRONOUNCEMENTS

    In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities" was issued, which establishes new standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. The Company will be required to adopt
SFAS No 133 in fiscal 2001. Management has not completed its assessment as to
whether the adoption of the new statement will have a material impact on the
consolidated results of operations or financial position of the Company.

    In December 1999, Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue
Recognition in Financial Statements" was issued by the Securities and Exchange
Commission staff (the "staff"), which summarizes the staff's views on selected
revenue recognition issues based upon existing generally accepted accounting
principles. The statements in the staff accounting bulletins are not rules or
interpretations of the Commission, nor are they published as bearing the
Commission's official approval. They represent interpretations and practices
followed by the Division of Corporation Finance and the Office of the Chief
Accountant in administering the disclosure requirements of the Federal
securities laws. The staff has deferred the implementation date of SAB 101 until
no later than the fourth quarter of fiscal years beginning after December 15,
1999. Management has not completed its assessment as to whether the adoption of
SAB 101 will have a material impact on the consolidated results of operations or
financial position of the Company.

    In November 2000, the Emerging Task Force ("EITF") issued EITF No. 00-27,
"Application of Issue No. 98-5, 'Accounting for Convertible Conversion Features
or Contingently Adjustable Conversion Ratios', to Certain Convertible
Instruments". Management believes there will be no impact to the consolidated
results of operations or financial position of the Company as a result of this
EITF issue.

                                       42
<PAGE>
ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

    The Company is exposed to a variety of risks, including foreign currency
fluctuations and changes in interest rates affecting the cost of its debt.

FOREIGN CURRENCY

    The Company has subsidiary operations in Australia, Singapore and the United
Kingdom and accordingly, the Company is exposed to translation and transaction
gains and losses that could result from changes in foreign currency exchange
rates. The Company uses the local currency of the Australian dollar in
Australia, the Singapore dollar in Singapore and the British Pound in the United
Kingdom, as its functional currency in those countries. Translation adjustments
resulting from translating foreign currency financial statement into U.S.
dollars were $65,400 and $895,700 in the fiscal years ended June 30, 1999 and
2000, respectively. To date, the Company has not experienced material
transaction gains or losses due to the limited number of transactions
denominated in other than the functional currency of the respective subsidiary
operation. Under current market conditions, the Company believes that its
foreign currency market risk is not material. The Company actively monitors its
foreign exchange exposure and, should circumstances change, intends to implement
strategies to reduce its risk at such time that it determines that the benefits
of such strategies outweigh the associated costs. There can be no assurance that
management's efforts to reduce foreign exchange exposure will be successful.

INTEREST RATES

    The Company's domestic line of credit bears interest based upon the prime
rate of a national financial institution plus 1.75% (9.5% as of June 30, 2000).
At June 30, 2000, borrowings under the line of credit amounted to $2,497,000.
The Company's term loan bears interest at 13.65% per annum. Outstanding
borrowings under the term loan amounted to $900,000 at June 30, 2000.

    As of June 30, 2000, Jade has a line of credit facility of $1,800,000 from
an unrelated financial institution. Borrowings under the line of credit are
collateralized by all of the assets of Jade and bear interest at 2% over the
U.K. Base rate (8.0% at June 30, 2000). Outstanding borrowings under the line
amounted to $692,000 with approximately $1,108,000 available for future
borrowings at June 30, 2000.

    If interest rates were to increase by 10%, the impact on the Company's
consolidated financial statements would be additional interest expense of
approximately $420,000 for a one year period, assuming that the debt amount
outstanding remained equal to the balance outstanding at June 30, 2000.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

    The information required by this item is included in Pages F-1 through F-33
attached hereto and incorporated herein by reference.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

    None

                                       43
<PAGE>
                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

EXECUTIVE OFFICERS AND DIRECTORS

    The executive officers and directors of the Company and their ages are as
follows:

<TABLE>
<CAPTION>
NAME                                     AGE      POSITION
----                                   --------   --------
<S>                                    <C>        <C>
Richard P. Stack.....................     35      President, Chief Executive Officer and Director

Edmund Brooks........................     55      Chief Executive Officer of Javelin Systems and Director

Timothy M. Feeney....................     35      Chief Financial Officer and Chief Administrative Officer

Peter G. Spitzer.....................     44      Chief Technology Officer

Andrew F. Puzder(1)(2)...............     50      Director

Jay L. Kear(1)(2)....................     63      Director

Thomas Nolan(2)......................     58      Director
</TABLE>

------------------------

(1) Member of the Compensation Committee.

(2) Member of the Audit Committee.

    RICHARD P. STACK, age 35, has been President, Chief Executive Officer and a
director of the Company since the Company's inception in September 1995. Prior
to that time, from 1991 through September 1995, Mr. Stack was Managing Director
of Hi-Technology Supply, a manufacturer and distributor of personal computers
and components located in South Africa, which he founded and grew to
approximately $6 million in annual sales and 15 employees prior to its sale to a
South Africa-based personal computer and component manufacturing company. From
1988 through 1991, Mr. Stack was employed by Pan American Airlines in technical
management positions. Mr. Stack holds a B.A. degree from the University of
California at Berkeley.

    EDMUND BROOKS, age 55, was elected as a director of the Company in
May 2000. Currently, Mr. Brooks is Chief Executive Officer of Javelin Systems, a
division of the Company, after having served as Executive Vice President of
Sales for Aspeon Solutions, Inc. ("Aspeon Solutions") a wholly-owned subsidiary
of the Company. Mr. Brooks joined Aspeon Solutions in July 1999, prior to that
time Mr. Brooks served from 1994 through 1999 as the Corporate Chief Information
Officer and as Chief Operating Officer of the AFC Management Services Corp, a
shared services organization supporting the AFC Brands (Popeyes Fried Chicken,
Churchs Fried Chicken, Cinnabon and Seattle's Best Coffee). Prior to joining
AFC, Mr. Brooks was with IBM from 1969 through 1994 as Managing Principal in
IBM's Consulting Group, a group conducting engagements with numerous large
retail food service chains in the United States and abroad. Mr. Brooks received
his undergraduate degree in Electrical Engineering from Penn State and his MBA
in International Marketing from Pepperdine University.

    TIMOTHY M. FEENEY, age 35, has been Chief Financial Officer and Chief
Administrative Officer of the Company since June 2000, and has served as Vice
President of Finance and Administration for the Company's ASP Services business
since March 2000. Prior to joining the Company, Mr. Feeney was President of The
Platinum Group providing strategic planning services for growth-oriented,
fast-paced foodservice, technology and consulting organizations. Mr. Feeney
served in senior-level financial management positions from January 1996 through
December 1998 with several foodservice and restaurant companies including
Jeepers! and DAKA International, Inc. Prior to January 1996, Mr. Feeney served
as an audit manager in the Boston office of Deloitte & Touche LLP where he
specialized in manufacturing, high-technology and telecommunications industries.
Mr. Feeney holds a B.A. in Accountancy from the Bentley College and is a
Certified Public Accountant in the Commonwealth of Massachusetts.

                                       44
<PAGE>
    PETER G. SPITZER, age 44, joined the Company in March 2000 as Chief
Technology Officer. He has 26 years of experience in information technology
having served in the vendor, service provider, consulting and user environments
in a variety of leadership roles. Most recently, from 1999 through 2000,
Dr. Spitzer was Vice President of Strategic Systems for Dendrite International,
where he built Dendrite's analytics and data management division. From 1990
through 1999, Dr. Spitzer was a consultant in advanced technology and business
practices. From 1988 through 1990, Dr. Spitzer served as Chief Information
Officer for Texas Children's Hospital. Peter holds an MBA from the UCLA
Executive MBA Program, MD with honors from Harvard Medical School, a Masters of
Science in Electrical Engineering and Computer Science from MIT, and a BS in
Bioelectrical Engineering (with a minor in Economics) from MIT.

    ANDREW F. PUZDER, age 50, was elected as a director of the Company in
November 1996. Mr. Puzder is currently President and Chief Executive Officer of
CKE Inc., a New York Stock Exchange listed company, President and Chief
Executive Officer of CKE Hardee's Food Systems, Inc., and a director of Pierre
Foods Inc. and Santa Barbara Restaurants Group. He is also a partner on leave at
the law firm of Stradling, Yocca, Carlson & Rauth. Mr. Puzder received his J. D.
from the Washington University School of Law.

    JAY L. KEAR, age 63, was elected as a director of the Company in
August 1996. Since 1988, Mr. Kear has represented Stack Enterprises in working
with and investing in high technology companies. From 1988 through 1993,
Mr. Kear also engaged in similar work for the Noorda Family Trust. Prior to
1988, Mr. Kear held various sales, marketing, engineering, and general
management positions with private and public companies in the high technology
sector. Mr. Kear received a B.S. degree from the University of Southern
California.

    THOMAS NOLAN, Age 58, was elected as a director of the Company in
September 2000. Mr. Nolan is currently President and Chief Executive Officer and
member of the board of directors of Xcert Inc. Since 1985, Mr. Nolan served as a
business consultant for numerous Silicon Valley high-technology companies,
including Visible Interactive, DB Star, InterLinear Technology, Beckman Display,
Pixelcraft, The Windward Group, Seismic Entertainment, Phaser Systems and Xerox
Technology Ventures. From 1974 to 1984 Mr. Nolan was Chief Financial Officer of
Randtron Systems. Prior to 1974, Mr. Nolan was with Arthur Young & Company, a
predecessor to Ernst & Young. Mr. Nolan served as an officer in the US Navy and
is a graduate of Texas Christian University with a B.B.A. degree in business
administration. He is a certified public accountant.

    There is currently one vacancy in the class of directors to be elected at
the 2000 Annual Meeting of Stockholders.

SECTION 16 (a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

    To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended June 30, 2000, all officers,
directors and greater than ten percent beneficial owners complied with all
Section 16(a) filing requirements applicable to them, except that Edmund Brooks
failed to file Form 3 with the SEC within ten days of being appointed as a
Director of the Company in May 2000, and Dr. Peter Spitzer failed to file a
Form 3 with the SEC within ten days of being appointed as the Company's Chief
Technology Officer in June 2000. Mr. Brooks and Dr. Spitzer each filed a Form 3
with the SEC in November 2000.

ITEM 11.  EXECUTIVE COMPENSATION

COMPENSATION OF DIRECTORS

    The members of the Board receive cash compensation of $2,500 plus
reimbursement of their expenses incurred in connection with attendance at Board
meetings in accordance with Company policy.

                                       45
<PAGE>
    Further, each non-employee director of the Company is to be granted options
to purchase shares of the Company's Common Stock pursuant to the terms of the
Company's stock option plan then in effect for services rendered as a director
of the Company. As of November 27, 2000 no non-employee director had exercised
any options.

COMPENSATION OF EXECUTIVE OFFICERS

    The following table shows for the fiscal year ended June 30, 2000,
compensation awarded or paid to, or earned by, the Company's Chief Executive
Officer and the two other most highly compensated executive officers that earned
more than $100,000 in the fiscal year ended June 30, 2000 (collectively, the
"Named Executive Officers"):

<TABLE>
<CAPTION>
                                              ANNUAL COMPENSATION         LONG-TERM
                                              -------------------       COMPENSATION
                                               SALARY     BONUS       AWARDS SECURITIES        ALL OTHER
NAME AND PRINCIPAL POSITION          YEAR       ($)        ($)      UNDERLYING OPTIONS(2)   COMPENSATION(3)
---------------------------        --------   --------   --------   ---------------------   ---------------
<S>                                <C>        <C>        <C>        <C>                     <C>
Richard P. Stack ................    2000     $222,987   $ 25,000           25,000                   --
  President, Chief Executive         1999     $187,887         --           75,000                   --
  Officer and Director               1998     $105,508         --           50,000                   --

Horace M. Hertz(1) ..............    2000     $170,833   $ 12,500          125,000              $15,385
  Chief Financial Officer            1999     $143,333   $ 20,000          110,000                   --
                                     1998     $ 65,215         --           55,000                   --

Robert D. Nichols(1) ............    2000     $169,231         --           75,000                   --
  Chief Operating Officer            1999     $ 37,500   $152,909           75,000                   --
                                     1998     $ 73,250   $ 87,500            5,000                   --
</TABLE>

------------------------

(1) Messrs. Hertz and Nichols employment as Chief Financial Officer and Chief
    Operating Officer, respectively, were terminated in June 2000.

(2) Messrs. Stack, Hertz and Nichols were also granted 800,000, 500,000 and
    500,000 options, respectively, to acquire shares of common stock of Aspeon
    Solutions, Inc. at a strike price of $1.50 per share. The options vest in
    equal monthly installments over thirty-six months.

(3) Represents severance payments made to Mr. Hertz in June 2000.

OPTION GRANTS IN LAST FISCAL YEAR

    The following table sets forth each grant of stock options made during the
fiscal year ended June 30, 2000 to each of the Named Executive Officers:

<TABLE>
<CAPTION>
                                                  INDIVIDUAL GRANTS                       POTENTIAL REALIZABLE
                                ------------------------------------------------------      VALUE AT ASSUMED
                                NUMBER OF      % OF TOTAL                                 ANNUAL RATES OF STOCK
                                SECURITIES      OPTIONS                                  PRICE APPRECIATION FOR
                                UNDERLYING     GRANTED TO     EXERCISE OR                      OPTION TERM
                                 OPTIONS      EMPLOYEES IN    BASE PRICE    EXPIRATION   -----------------------
NAME                             GRANTED     FISCAL YEAR(3)     ($/SH)         DATE          5%          10%
----                            ----------   --------------   -----------   ----------   ----------   ----------
<S>                             <C>          <C>              <C>           <C>          <C>          <C>
Richard P. Stack..............    25,000(2)         2.2%         $9.63       01/04/10     $     --     $ 75,362

Horace M. Hertz...............   100,000(1)         8.8%          4.88       06/29/10      306,586      776,949
                                  25,000(2)         2.2%          9.63       01/04/10           --       75,362

Robert D. Nichols.............    50,000(1)         4.4%          4.88       06/29/10      153,293      388,475
                                  25,000(2)         2.2%          9.63       01/04/10           --       75,362
</TABLE>

------------------------

(1) Options issued to Messrs. Hertz and Nichols in connection with their
    employment termination in June 2000. The options vest in equal monthly
    installments over twenty-four months.

                                       46
<PAGE>
(2) Options vested 100% upon grant and issuance to Messrs. Stack, Hertz and
    Nichols.

(3) Based on options to purchase 1,137,750 shares granted to employees in the
    fiscal year ended June 30, 2000, including the Named Executive Officers.

AGGREGATED FISCAL YEAR-END OPTION VALUES

    There were no option exercises by the Named Executive Officers during the
fiscal year ended June 30, 2000. The following table sets forth information with
respect to the number and value of securities underlying unexercised options
held by the Named Executive Officers as of June 30, 2000:

<TABLE>
<CAPTION>
                                                          NUMBER OF
                                                    SECURITIES UNDERLYING         VALUE OF UNEXERCISED
                                                     UNEXERCISED OPTIONS          IN-THE-MONEY OPTIONS
                                                    AT FISCAL YEAR-END(1)         AT FISCAL YEAR-END(2)
                                                 ---------------------------   ---------------------------
NAME                                             EXERCISABLE   UNEXERCISABLE   EXERCISABLE   UNEXERCISABLE
----                                             -----------   -------------   -----------   -------------
<S>                                              <C>           <C>             <C>           <C>
Richard P. Stack...............................    60,000          90,000         $ --           $ --

Horace M. Hertz................................    91,667         100,000           --             --

Robert D. Nichols..............................    45,750          50,000           --             --
</TABLE>

------------------------

(1) Includes both "in-the-money" and "out-of-the-money" options. "In-the-money"
    options are options with exercise prices below the market price of the
    Company's Common Stock. Excludes options granted pursuant to the Aspeon
    Solutions, Inc. 2000 Equity Incentive Plan.

(2) Based on the fair market value of the Common Stock as of June 30, 2000
    ($4.875), there are no in-the-money options for Named Executive Officers at
    June 30, 20000.

EMPLOYMENT AGREEMENTS

    The Company and Richard P. Stack entered into an Employment Agreement dated
August 19, 1996 (the "Stack Employment Agreement"). The Stack Employment
Agreement expired on August 19, 1999 and was not renewed. The Stack Employment
Agreement provided for payment to Mr. Stack of an annual salary of $95,000 from
January 1, 1997 through December 31, 1997 and $105,000 from and after
January 1, 1998. As of April 1, 1998, Mr. Stack's annual salary was increased to
$150,000. As of February 1, 2000, Mr. Stack's salary increased to $250,000. In
addition to his salary, Mr. Stack was reimbursed for all reasonable and
necessary travel and other business expenses incurred in connection with the
performance of his duties. The Company was also obligated to pay the premium for
a life insurance policy insuring Mr. Stack's life providing for death benefits
of up to $750,000 to the named beneficiary of the policy. During the term of the
Stack Employment Agreement, if Mr. Stack's employment with the Company had been
terminated for cause (as defined in the Stack Employment Agreement), Mr. Stack
would have been entitled to receive his base salary through the date of
termination. During the term of the Stack Employment Agreement, if Mr. Stack's
employment with the Company was terminated without cause, he would have been
entitled to receive payment of his base salary for the greater of (i) the
remaining term of the Stack Employment Agreement, or (ii) one (1) year from the
date of termination.

    CCI Group, Inc., a wholly-owned subsidiary of the Company ("CCI"), and
Robert Nichols entered into an Employment Agreement dated January 1, 1998 (the
"Nichols Employment Agreement"). The Nichols Employment Agreement expires on
December 31, 2002 and provides for payment to Mr. Nichols of an annual base
salary of $100,000. Mr. Nichols is also entitled to a quarterly bonus of $6,250
and a year-end bonus of approximately $31,750, subject to adjustment based on
CCI's profitability for the applicable fiscal year. In addition to his base
salary and bonuses, Mr. Nichols is also reimbursed for all reasonable and
necessary travel and other business expenses incurred in connection with the
performance of his duties. If Mr. Nichols' employment with CCI is terminated for
cause (as defined in the Nichols Employment Agreement) or in the event of a
voluntary termination of employment by Mr. Nichols

                                       47
<PAGE>
following a change in control (as defined in the Nichols Employment Agreement),
Mr. Nichols will be entitled to his base salary through the date of termination.
If Mr. Nichols is terminated without cause (as defined in the Nichols Employment
Agreement), then Mr. Nichols will be entitled to a lump sum equal to
Mr. Nichol's annual base salary. On June 30, 2000 Mr. Nichols' employment with
the Company was terminated.

    The Stack and Nichols Employment Agreements provided that: (i) upon a change
of control of the Company, such officers will be entitled to receive, upon
termination by the officer within 90 days after the change in control, any
remaining salary payable during the term or six months' salary whichever is
shorter, and all stock options held by such officers.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

    Richard P. Stack, Jay L. Kear and Andrew F. Puzder served as the members of
the Company's Compensation Committee during the fiscal year ended June 30, 2000.
Mr. Stack is an officer and director of the Company and Messrs. Kear and Puzder
are directors of the Company.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

    The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of November 27, 2000 by
(i) each person who is known by the Company to own beneficially more than 5% of
the Company's outstanding Common Stock, (ii) each Named Executive Officer,
(iii) each of the Company's directors, and (iv) all current directors and
executive officers as a group. Except as indicated in the footnotes to this
table, the persons named in the table have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them,
subject to community property laws where applicable.

<TABLE>
<CAPTION>
                                                              AMOUNT AND NATURE OF
                                                              BENEFICIAL OWNERSHIP
                                                             -----------------------
NAME AND ADDRESS OF BENEFICIAL OWNER(1)(2)                    NUMBER        PERCENT
------------------------------------------                   ---------      --------
<S>                                                          <C>            <C>
Richard P. Stack(3)....................................        798,041         8.3%

Robert D. Nichols(4)...................................        325,249         3.4%

Horace Hertz(5)........................................        116,666         1.2%

Jay L Kear(6)..........................................         70,054           *

Andrew F. Puzder(7)....................................         59,054           *

Edmund Brooks(8).......................................         53,844           *

Thomas Nolan(9)........................................          5,555           *

All Executive Officers and Directors as a group
  (7 persons)(10)......................................      1,428,463        14.4%
</TABLE>

------------------------

  *  Less than one percent

 (1) Mr. Stack has an address c/o the Company's principal executive offices at
     17891 Cartwright Road, Irvine, CA 92614.

 (2) Beneficial ownership is determined in accordance with the rules of the
     Securities and Exchange Commission (the "SEC") and generally includes
     voting or investment power with respect to securities. Except as indicated
     by footnote, and subject to community property laws where applicable, the
     persons named in the table above have sole voting and investment power with
     respect to all shares of Common Stock shown as beneficially owned by
     them.

                                       48
<PAGE>
     Percentage of beneficial ownership is based on 9,436,225 shares of Common
     Stock outstanding as of November 27, 2000.

 (3) Includes 9,700 shares owned by Mr. Stack's children, 22,200 shares owned by
     Mr. Stack's father and 5,500 shares owned by Mr. Stack's mother. Also
     includes 150,000 shares subject to options exercisable within 60 days of
     November 27, 2000.

 (4) Includes 58,249 shares subject to options exercisable within 60 days of
     November 27, 2000.

 (5) Includes 116,666 shares subjection to options exercisable within 60 days of
     November 27, 2000.

 (6) Includes 5,000 shares held by the Jay Louis Kear family Trust of which
     Mr. Kear is the trustee and 7,000 shares owned by an individual retirement
     account of which Mr. Kear is the trustee. Also includes 58,054 shares
     subject to options exercisable within 60 days of November 27, 2000.

 (7) Includes 58,054 shares subject to options exercisable within 60 days of
     November 27, 2000.

 (8) Includes 53,333 shares subject to options exercisable within 60 days of
     November 27, 2000

 (9) Includes 5,555 shares subject to options exercisable within 60 days of
     November 27, 2000.

 (10) Includes 468,245 shares subject to options exercisable within 60 days of
      November 27, 2000.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

CERTAIN TRANSACTIONS

    On August 10, 1999, the Company loaned $116,000 to Edmund Brooks, a director
of the Company and the Chief Executive Officer of the Company's Javelin Systems
division. The loan bears interest at an annual rate of 6% per annum. The loan
was made to Mr. Brooks for personal reasons. The loan is secured by a pledge of
39,000 shares of common stock of AFC Enterprises, Inc. owned by Mr. Brooks. The
largest amount outstanding under this loan since August 10, 1999 is
approximately $124,600, which also represents the outstanding balance as of
November 27, 2000.

    On September 25, 1999, the Company loaned $80,000 to Andrew F. Puzder, a
director of the Company. The loan bears interest at an annual rate of 6% per
annum. The loan was made to Mr. Puzder for personal reasons. The loan is secured
by a pledge of Mr. Puzder's option to purchase 30,000 shares of Common Stock of
the Company. The largest amount outstanding under this loan since September 25,
1999 is approximately $85,300. The loan principal and interest of approximately
$85,300 was paid in full in November 2000.

    In April 2000, the Company loaned $300,000 to Richard P. Stack, the Chief
Executive Officer and director of the Company. The loan bears interest at an
annual rate of 6.6% per annum. The loan was made to Mr. Stack for personal
reasons. The loan principal and interest of approximately $307,500, which amount
represents the largest balance outstanding under the loan, was repaid in full in
September 2000.

    In August 2000, the company loaned $400,000 to Richard P. Stack, the Chief
Executive Officer and director of the Company. The loan bears interest at an
annual rate of 6.6% per annum. The loan was made to Mr. Stack for personal
reasons. The loan principal and interest of approximately $402,000, which amount
represents the largest balance outstanding under the loan, was repaid in full in
September 2000.

                                       49
<PAGE>
ITEM 14.  EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K

(a) The following documents are filed as part of this report:

    (1) Financial Statements:

<TABLE>
<S>                                                           <C>
Report of Independent Accountants...........................    F-1

Consolidated Balance Sheets at June 30, 1999 and 2000.......    F-2

Consolidated Statements of Operations for each of the three
  years in the period ended June 30, 2000...................    F-3

Consolidated Statements of Cash Flows for each of the three
  years in the period ended June 30, 2000...................    F-4

Consolidated Statements of Stockholders' Equity for each of
  the three years in the period ended June 30, 2000.........    F-5

Notes to Consolidated Financial Statements..................    F-6
</TABLE>

    (2) Financial Statement Schedules:

       For each of the three years in the period ended June 30, 2000

       Schedule II--Valuation and Qualifying Accounts

       All other schedules are omitted because they are not applicable or the
       required information is shown in the financial statements or notes
       thereto.

    (3) No Reports on Form 8-K were filed during the fourth quarter of the
       fiscal year ended June 30, 2000.

(b) Exhibits.

<TABLE>
<CAPTION>
       EXHIBIT
       NUMBER                           DESCRIPTION OF DOCUMENT
---------------------                   -----------------------
<C>                         <C>         <S>
          3.1(8)                   --   Registrant's Amended and Restated Certificate of
                                        Incorporation.

          3.2                      --   Registrant's Certificate of Amendment to Amended and
                                        Restated Certificate of Incorporation.

          3.3(10)                  --   Registrant's Certificate of Designations, Preferences and
                                        Rights of the Series A Convertible Exchangeable Preferred
                                        Stock.

          3.4(1)                   --   Registrant's Amended and Restated Bylaws.

          4.1(1)                   --   Form of Common Stock Certificate of Registrant.

         10.1(1)                   --   Form of Indemnity Agreement entered into between the Company
                                        and its directors and executive officers.*

         10.2(1)                   --   1996 Stock Incentive Award Plan (the "1996 Plan").*

         10.3(1)                   --   Form of Director Non-Qualified Stock Option Agreement under
                                        the 1996 Plan.*

         10.4(1)                   --   Form of Employee Non-Qualified Stock Option Agreement under
                                        the 1996 Plan.*

         10.5(6)                   --   1997 Equity Incentive Plan, as amended.*

         10.6(6)                   --   Form of Incentive Stock Option Agreement under the 1997
                                        Plan.*

         10.7(6)                   --   Form of Nonstatutory Stock Option Agreement under the 1997
                                        Plan.*
</TABLE>

                                       50
<PAGE>

<TABLE>
<CAPTION>
       EXHIBIT
       NUMBER                           DESCRIPTION OF DOCUMENT
---------------------                   -----------------------
<C>                         <C>         <S>
         10.8(1)                   --   Employment Agreement dated August 19, 1996 by and between
                                        the Company and Richard P. Stack.*

         10.9(6)                   --   Employment Agreement dated January 1, 1998 by and between
                                        CCI Group, Inc. and Robert Nichols.*

        10.10(6)                   --   Standard Industrial/Commercial Multi-Tenant Lease-Modified
                                        Net dated January 27, 1998 by and between the Company and
                                        BRS-Campo Investment Company LP.

        10.11(1)                   --   Standard Industrial/Commercial Single-Tenant Lease-Gross
                                        dated October 19, 1995 by and between the Company and Robert
                                        P. Peebles Trust, dated April 11, 1979.

        10.12(2)                   --   Standard Sublease dated September 9, 1997 by and between the
                                        Company, D. Howard Lewis and William R. Miller.

        10.13(6)                   --   The Business Center Office/Warehouse Lease dated April 4,
                                        1997 by and between CCI Group, Inc and Nooney Krombech
                                        Company.

        10.14(2)                   --   Distributor Agreement dated March 14, 1997 by and between
                                        the Company and ScanSource, Inc.

        10.15(6)                   --   Loan and Security Agreement dated June 8, 1998 by and among
                                        the Company, CCI Group, Inc., Posnet Computers, Inc. and
                                        Finova Capital Corporation and related Secured Promissory
                                        Note, Pledge Agreement and Secured Continuing Corporate
                                        Guaranty.

        10.16(6)                   --   Form of Warrant issued by the Company in favor of Finova
                                        Capital Corporation.

        10.17(8)                   --   Second and Third Amendments to Loan and Security Agreement
                                        dated December 15, 1998 and January 10, 1999, respectively,
                                        by and among the Company, CCI Group, Inc., Posnet
                                        Computers, Inc. and FINOVA Capital Corporation and related
                                        Security Promissory Note, Pledge Agreement and Secured
                                        Continuing Corporate Guaranty.

        10.18(7)                   --   Stock Purchase Agreement, dated April 23, 1999 by and among
                                        Javelin Systems, Inc., Dynamic Technologies, Inc., SB
                                        Holdings, Inc., John Biglin, Denise Biglin and John Seitz.

        10.19(9)                   --   1999 Non-Officer Stock Option Plan.*

        10.20(9)                   --   Form of non-qualified stock option agreement under the 1999
                                        Non-Officer Stock Option Plan.*

        10.21(9)                   --   Form of 1999 Plan Stock Option Grant Notice.*

        10.22(10)                  --   Securities Purchase Agreement, dated as of March 7, 2000, by
                                        and among the Company, Aspeon Solutions, Inc. and Marshall
                                        Capital Management, Inc.

        10.23(10)                  --   Warrant to Purchase Common Stock of the Company, dated as of
                                        March 8, 2000 issued by the Company in favor of Marshall
                                        Capital Management, Inc.

        10.24(10)                  --   Warrant to Purchase Common Stock of Aspeon Solutions, Inc.
                                        dated as of March 8, 2000, issued by Aspeon
                                        Solutions, Inc. in favor of Marshall Capital
                                        Management, Inc.

        10.25(10)                  --   Registration Rights Agreement, dated as of March 7, 2000 by
                                        and among the Company, Aspeon Solutions, Inc. and Marshall
                                        Capital Management, Inc.
</TABLE>

                                       51
<PAGE>

<TABLE>
<CAPTION>
       EXHIBIT
       NUMBER                           DESCRIPTION OF DOCUMENT
---------------------                   -----------------------
<C>                         <C>         <S>
        10.26                      --   Sixth Amendment and Waiver to Loan and Security Agreement
                                        Between Aspeon, Inc., CCI Group, Inc. and Finova Capital
                                        Corporation.

         21.1                      --   Subsidiaries

         24.1                      --   Power of Attorney (included on page 54 of this 10-K)

         27.1                      --   Financial Data Schedule.
</TABLE>

------------------------

 (1) Filed as an exhibit to the Company's Registration Statement on Form SB-2,
     as amended (No. 333-11217), and incorporated herein by reference.

 (2) Filed as an exhibit to the Company's Annual Report on Form 10-KSB for the
     fiscal year ended June 30, 1997 and incorporated herein by reference.

 (3) Filed as an exhibit to the Company's Current Report on Form 8-K dated
     December 30, 1997 and incorporated herein by reference.

 (4) Filed as an exhibit to the Company's Current Report on Form 8-K/A dated
     March 4, 1998 and incorporated herein by reference.

 (5) Filed as an exhibit to the Company's Current Report on Form 8-K dated
     January 5, 1998 and incorporated herein by reference.

 (6) Filed as an exhibit to the Company's Annual Report on Form 10-KSB for the
     fiscal year ended June 30, 1998 and incorporated herein by reference.

 (7) Filed as an exhibit to the Company's Current Report on Form 8-K filed
     May 3, 1999, and incorporated herein by reference.

 (8) Filed as an exhibit to the Company's Quarterly report on Form 10-QSB for
     the quarter ended December 31, 1998 and incorporated herein by reference.

 (9) Filed as an exhibit to the Company's Annual Report on Form 10-KSB for the
     fiscal year ended June 30, 1999 and incorporated herein by reference.

 (10) Filed as an exhibit to the Company's Current Report on Form 8-K dated
      March 9, 2000 and incorporated herein by reference.

  *  Management contract or compensatory plan or arrangement of the Company.

                                       52
<PAGE>
                                   SIGNATURES

    Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

<TABLE>
<S>                                                    <C>  <C>
                                                       ASPEON, INC.

Date: November 28, 2000                                By:             /s/ RICHARD P. STACK
                                                            -----------------------------------------
                                                                         Richard P. Stack
                                                              PRESIDENT AND CHIEF EXECUTIVE OFFICER

Date: November 28, 2000                                By:            /s/ TIMOTHY M. FEENEY
                                                            -----------------------------------------
                                                                        Timothy M. Feeney
                                                                   CHIEF FINANCIAL OFFICER AND
                                                                   CHIEF ADMINISTRATIVE OFFICER
</TABLE>

                                       53
<PAGE>
                               POWER OF ATTORNEY

    KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Richard P. Stack and Timothy M. Feeney, his
attorney-in-fact, with the power of substitution, for him, in any and all
capacities, to sign any amendments to this report, and to file the same, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and conforming all that the
attorney-in-fact, or his substitute, may do or cause to be done by virtue
hereof.

    Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
                      SIGNATURE                                   TITLE                   DATE
                      ---------                                   -----                   ----
<C>                                                    <S>                          <C>
                                                       President, Chief Executive
                /s/ RICHARD P. STACK                     Officer, Director
     -------------------------------------------         (PRINCIPAL EXECUTIVE       November 28, 2000
                  Richard P. Stack                       OFFICER)

                                                       Chief Financial Officer And
                /s/ TIMOTHY M. FEENEY                    Chief Administrative
     -------------------------------------------         Officer (PRINCIPAL         November 28, 2000
                  Timothy M. Feeney                      FINANCIAL AND ACCOUNTING
                                                         OFFICER)

                /s/ PETER G. SPITZER
     -------------------------------------------       Chief Technology Officer     November 28, 2000
                  Peter G. Spitzer

                  /s/ EDMUND BROOKS
     -------------------------------------------       Director                     November 28, 2000
                    Edmund Brooks

                   /s/ JAY L. KEAR
     -------------------------------------------       Director                     November 28, 2000
                     Jay L. Kear

                /s/ ANDREW F. PUZDER
     -------------------------------------------       Director                     November 28, 2000
                  Andrew F. Puzder

                  /s/ THOMAS NOLAN
     -------------------------------------------       Director                     November 28, 2000
                    Thomas Nolan
</TABLE>

                                       54
<PAGE>
                                 EXHIBIT INDEX

<TABLE>
<C>                         <C>         <S>
          3.1(8)                   --   Registrant's Amended and Restated Certificate of
                                        Incorporation.

          3.2                      --   Registrant's Certificate of Amendment to Amended and
                                        Restated Certificate of Incorporation.

          3.3(10)                  --   Registrant's Certificate of Designations, Preferences and
                                        Rights of the Series A Convertible Exchangeable Preferred
                                        Stock.

          3.4(1)                   --   Registrant's Amended and Restated Bylaws.

          4.1(1)                   --   Form of Common Stock Certificate of Registrant.

         10.1(1)                   --   Form of Indemnity Agreement entered into between the Company
                                        and its directors and executive officers.*

         10.2(1)                   --   1996 Stock Incentive Award Plan (the "1996 Plan").*

         10.3(1)                   --   Form of Director Non-Qualified Stock Option Agreement under
                                        the 1996 Plan.*

         10.4(1)                   --   Form of Employee Non-Qualified Stock Option Agreement under
                                        the 1996 Plan.*

         10.5(6)                   --   1997 Equity Incentive Plan, as amended.*

         10.6(6)                   --   Form of Incentive Stock Option Agreement under the 1997
                                        Plan.*

         10.7(6)                   --   Form of Nonstatutory Stock Option Agreement under the 1997
                                        Plan.*

         10.8(1)                   --   Employment Agreement dated August 19, 1996 by and between
                                        the Company and Richard P. Stack.*

         10.9(6)                   --   Employment Agreement dated January 1, 1998 by and between
                                        CCI Group, Inc. and Robert Nichols.*

        10.10(6)                   --   Standard Industrial/Commercial Multi-Tenant Lease-Modified
                                        Net dated January 27, 1998 by and between the Company and
                                        BRS-Campo Investment Company LP.

        10.11(1)                   --   Standard Industrial/Commercial Single-Tenant Lease-Gross
                                        dated October 19, 1995 by and between the Company and Robert
                                        P. Peebles Trust, dated April 11, 1979.

        10.12(2)                   --   Standard Sublease dated September 9, 1997 by and between the
                                        Company, D. Howard Lewis and William R. Miller.

        10.13(6)                   --   The Business Center Office/Warehouse Lease dated April 4,
                                        1997 by and between CCI Group, Inc and Nooney Krombech
                                        Company.

        10.14(2)                   --   Distributor Agreement dated March 14, 1997 by and between
                                        the Company and ScanSource, Inc.

        10.15(6)                   --   Loan and Security Agreement dated June 8, 1998 by and among
                                        the Company, CCI Group, Inc., Posnet Computers, Inc. and
                                        Finova Capital Corporation and related Secured Promissory
                                        Note, Pledge Agreement and Secured Continuing Corporate
                                        Guaranty.

        10.16(6)                   --   Form of Warrant issued by the Company in favor of Finova
                                        Capital Corporation.

        10.17(8)                   --   Second and Third Amendments to Loan and Security Agreement
                                        dated December 15, 1998 and January 10, 1999, respectively,
                                        by and among the Company, CCI Group, Inc., Posnet
                                        Computers, Inc. and FINOVA Capital Corporation and related
                                        Security Promissory Note, Pledge Agreement and Secured
                                        Continuing Corporate Guaranty.
</TABLE>

                                       55
<PAGE>
<TABLE>
<C>                         <C>         <S>
        10.18(7)                   --   Stock Purchase Agreement, dated April 23, 1999 by and among
                                        Javelin Systems, Inc., Dynamic Technologies, Inc., SB
                                        Holdings, Inc., John Biglin, Denise Biglin and John Seitz.

        10.19(9)                   --   1999 Non-Officer Stock Option Plan.*

        10.20(9)                   --   Form of non-qualified stock option agreement under the 1999
                                        Non-Officer Stock Option Plan.*

        10.21(9)                   --   Form of 1999 Plan Stock Option Grant Notice.*

        10.22(10)                  --   Securities Purchase Agreement, dated as of March 7, 2000, by
                                        and among the Company, Aspeon Solutions, Inc. and Marshall
                                        Capital Management, Inc.

        10.23(10)                  --   Warrant to Purchase Common Stock of the Company, dated as of
                                        March 8, 2000 issued by Aspeon Solutions, Inc. in favor of
                                        Marshall Capital Management, Inc.

        10.24(10)                  --   Warrant to Purchase Common Stock of Aspeon Solutions, Inc.
                                        dated as of March 8, 2000, issued by the Company in favor
                                        of Marshall Capital Management, Inc.

        10.25(10)                  --   Registration Rights Agreement, dated as of March 7, 2000 by
                                        and among the Company, Aspeon Solutions, Inc. and Marshall
                                        Capital Management, Inc.

        10.26                      --   Sixth Amendment and Waiver to Loan and Security Agreement
                                        Between Aspeon, Inc., CCI Group, Inc. and Finova Capital
                                        Corporation.

         21.1                      --   Subsidiaries

         24.1                      --   Power of Attorney (included on page 54 of this 10-K)

         27.1                      --   Financial Data Schedule.
</TABLE>

------------------------

 (1) Filed as an exhibit to the Company's Registration Statement on Form SB-2,
     as amended (No. 333-11217), and incorporated herein by reference.

 (2) Filed as an exhibit to the Company's Annual Report on Form 10-KSB for the
     fiscal year ended June 30, 1997 and incorporated herein by reference.

 (3) Filed as an exhibit to the Company's Current Report on Form 8-K dated
     December 30, 1997 and incorporated herein by reference.

 (4) Filed as an exhibit to the Company's Current Report on Form 8-K/A dated
     March 4, 1998 and incorporated herein by reference.

 (5) Filed as an exhibit to the Company's Current Report on Form 8-K dated
     January 5, 1998 and incorporated herein by reference.

 (6) Filed as an exhibit to the Company's Annual Report on Form 10-KSB for the
     fiscal year ended June 30, 1998 and incorporated herein by reference.

 (7) Filed as an exhibit to the Company's Current Report on Form 8-K filed
     May 3, 1999, and incorporated herein by reference.

 (8) Filed as an exhibit to the Company's Quarterly report on Form 10-QSB for
     the quarter ended December 31, 1998 and incorporated herein by reference.

 (9) Filed as an exhibit to the Company's Annual Report on Form 10-KSB for the
     fiscal year ended June 30, 1999 and incorporated herein by reference.

 (10) Filed as an exhibit to the Company's Current Report on Form 8-K dated
      March 9, 2000 and incorporated herein by reference.

  *  Management contract or compensatory plan or arrangement of the Company.

                                       56
<PAGE>
                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and
  Stockholders of Aspeon, Inc.

    In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) on page 50 present fairly, in all material
respects, the financial position of Aspeon, Inc. and its subsidiaries at
June 30, 1999 and 2000, and the results of their operations and their cash flows
for each of the three years in the period ended June 30, 2000 in conformity with
accounting principles generally accepted in the United States of America. In
addition, in our opinion, the financial statement schedule listed in the index
appearing under Item 14(a)(2) on page 50 presents fairly, in all material
respects, the information set forth therein when read in conjunction with the
related consolidated financial statements. These financial statements and
financial statement schedule are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits. We conducted our audits of
these statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

    The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in
Note 2 to the consolidated financial statements, the Company sustained
significant losses during the year ended June 30, 2000, has experienced negative
cash flows from operations since its inception, and is in default of its
preferred stock provisions, which raises substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 2. The consolidated financial statements do not include
any adjustments that might result from the outcome of this uncertainty.

/s/ PRICEWATERHOUSECOOPERS LLP

PricewaterhouseCoopers LLP

Orange County, California
November 3, 2000

                                      F-1
<PAGE>
                                  ASPEON, INC.

                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                              JUNE 30, 1999   JUNE 30, 2000
                                                              -------------   -------------
<S>                                                           <C>             <C>
                                          ASSETS
Current assets:
  Cash and cash equivalents.................................   $ 5,641,500     $ 8,853,200
  Investments...............................................     7,472,000       1,025,200
  Accounts receivable--net of allowance for doubtful
    accounts of $454,400 and $433,600.......................    16,275,500      12,856,000
  Inventories...............................................    14,565,700      20,666,300
  Income tax receivable.....................................            --       2,713,700
  Prepaid expenses and other current assets.................     1,354,400       1,955,600
                                                               -----------     -----------
    Total current assets....................................    45,309,100      48,070,000

Property and equipment, net.................................     2,861,400       5,525,900
Goodwill....................................................    25,755,200      36,627,700
Other intangible assets.....................................     1,266,000         782,200
Other assets, net...........................................       891,200         777,700
                                                               -----------     -----------
  Total assets..............................................   $76,082,900     $91,783,500
                                                               ===========     ===========

         LIABILITIES, MANDATORILY REDEEMABLE SECURITIES, AND STOCKHOLDERS' EQUITY

Current liabilities:
  Line of credit............................................   $ 2,056,600     $ 3,189,000
  Accounts payable..........................................     7,681,800      10,598,600
  Accrued expenses..........................................     2,446,200       7,249,200
  Current maturities of long-term debt......................       300,000       1,037,600
  Customer deposits.........................................       278,000       1,226,900
  Deferred revenues.........................................       397,500       1,545,900
  Income taxes payable......................................     1,517,400              --
                                                               -----------     -----------
    Total current liabilities...............................    14,677,500      24,847,200
                                                               -----------     -----------

Long-term debt, net of current portion......................       900,000         305,200
Purchase price payable for acquisitions.....................       874,000       1,868,200
Other.......................................................        21,000         277,400
                                                               -----------     -----------
    Total liabilities.......................................    16,472,500      27,298,000
                                                               -----------     -----------

Mandatorily redeemable Series A preferred stock, $0.01 par
  value, 10,000 issued and outstanding at June 30, 2000
  (liquidation value of $10,150,000)........................            --       6,042,100
Mandatorily redeemable warrants.............................            --       3,426,600
Mandatorily redeemable minority interest warrants...........            --         867,300

Commitments and contingencies (Notes 2, 9 and 12)

Stockholders' equity:
  Preferred stock, $0.01 par value, 990,000 shares
    authorized (1,000,000 authorized net of 10,000
    designated as mandatorily redeemable stock); no shares
    issued and outstanding..................................            --              --
  Common stock, $0.01 par value: 20,000,000 shares
    authorized; 8,887,203 and 9,383,161 issued and
    outstanding.............................................        88,900          93,800
  Additional paid in capital................................    55,800,700      65,049,500
  Deferred stock-based compensation.........................        (6,700)             --
  Retained earnings (accumulated deficit)...................     3,799,700     (10,025,900)
  Accumulated other comprehensive loss......................       (72,200)       (967,900)
                                                               -----------     -----------
    Total stockholders' equity..............................    59,610,400      54,149,500
                                                               -----------     -----------
    Total liabilities, mandatorily redeemable securities,
     and stockholders' equity...............................   $76,082,900     $91,783,500
                                                               ===========     ===========
</TABLE>

  THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
                                  STATEMENTS.

                                      F-2
<PAGE>
                                  ASPEON, INC.

                     CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                     FOR THE YEAR ENDED
                                                        ---------------------------------------------
                                                        JUNE 30, 1998   JUNE 30, 1999   JUNE 30, 2000
                                                        -------------   -------------   -------------
<S>                                                     <C>             <C>             <C>
Revenues:
  Products............................................   $27,132,400     $58,672,400    $ 54,902,300
  Services............................................     2,513,700      14,086,400      26,142,900
                                                         -----------     -----------    ------------
Total revenues........................................    29,646,100      72,758,800      81,045,200
                                                         -----------     -----------    ------------

Cost of revenues:
  Products............................................    19,831,300      41,408,400      40,973,800
  Services............................................     1,904,700      10,618,400      20,300,100
                                                         -----------     -----------    ------------
Total cost of revenues................................    21,736,000      52,026,800      61,273,900
                                                         -----------     -----------    ------------
Gross profit..........................................     7,910,100      20,732,000      19,771,300
                                                         -----------     -----------    ------------

Operating expenses:
  Research and development............................       874,000       1,336,100       1,968,000
  Selling and marketing...............................     1,179,900       3,861,400       8,396,900
  General and administrative..........................     4,195,500       9,251,500      19,189,800
                                                         -----------     -----------    ------------
Total operating expenses..............................     6,249,400      14,449,000      29,554,700
                                                         -----------     -----------    ------------

Income (loss) from operations.........................     1,660,700       6,283,000      (9,783,400)

Interest expense......................................      (115,000)       (870,300)       (807,800)
Interest income.......................................        12,200         224,800         422,800
Other income (expense), net...........................        41,100          39,800         (82,300)
                                                         -----------     -----------    ------------

Income (loss) before income taxes.....................     1,599,000       5,677,300     (10,250,700)
Income taxes (expense) benefit........................      (584,900)     (2,010,500)        949,500
                                                         -----------     -----------    ------------
Net income (loss).....................................     1,014,000       3,666,800      (9,301,200)

Accretion of mandatorily redeemable preferred stock
  discount and dividends..............................            --              --      (6,090,500)
                                                         -----------     -----------    ------------
Net income (loss) available to common stockholders....   $ 1,014,100     $ 3,666,800    $(15,391,700)
                                                         ===========     ===========    ============

Net income (loss) per common share:
  Basic...............................................   $      0.28     $      0.59    $      (1.67)
  Diluted.............................................   $      0.27     $      0.57    $      (1.67)

Shares used in computing net income (loss) per common
  share:
  Basic...............................................     3,622,604       6,259,965       9,243,079
  Diluted.............................................     3,750,611       6,474,181       9,243,079
</TABLE>

  THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
                                  STATEMENTS.

                                      F-3
<PAGE>
                                  ASPEON, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                           FOR THE YEAR ENDED
                                                              ---------------------------------------------
                                                              JUNE 30, 1998   JUNE 30, 1999   JUNE 30, 2000
                                                              -------------   -------------   -------------
<S>                                                           <C>             <C>             <C>
OPERATING ACTIVITIES
Net income (loss)...........................................   $ 1,014,100    $  3,666,800     $(9,301,200)
Adjustments to reconcile net income (loss) to net cash used
  in operating activities:
  Depreciation and amortization.............................       351,800       1,228,300       4,962,800
  Write-off of purchased software...........................            --              --         136,400
  Amortization of deferred financing costs..................         3,100         281,400         304,700
  Amortization of deferred stock-based compensation.........        51,600          32,500         121,100
  Loss on disposal of assets................................        55,100              --              --
  Deferred income taxes.....................................      (204,900)       (326,000)        530,900
  Deferred rent expense.....................................         6,300          14,700          67,900
  Income tax benefit from exercise of stock options.........        59,200         223,600              --
Non-cash allowances:
  Inventories...............................................       312,800         274,700         629,400
  Accounts receivable.......................................       243,800         263,000         355,200
  Warranty..................................................       130,000         (35,000)         18,300
Changes in operating assets and liabilities, net of
  acquisitions:
  Accounts receivable.......................................    (3,403,500)     (5,585,900)      3,298,100
  Inventories...............................................    (2,985,800)     (8,024,200)     (6,755,900)
  Income taxes receivable...................................            --              --      (2,713,700)
  Prepaid expenses and other current assets.................      (313,900)       (170,900)       (118,200)
  Other assets..............................................       (75,200)       (131,200)         (6,400)
  Accounts payable..........................................     2,838,100         725,800       2,705,900
  Accrued expenses..........................................        35,100         949,200       3,997,000
  Customer deposits.........................................      (408,500)     (1,194,500)        948,900
  Deferred revenues.........................................       129,200         (99,600)        247,600
  Income taxes payable......................................       239,000         707,300      (1,517,400)
                                                               -----------    ------------     -----------
  Net cash used in operating activities.....................    (1,922,600)     (7,200,000)     (2,070,400)
                                                               -----------    ------------     -----------
INVESTING ACTIVITIES
  Purchase of equipment.....................................      (724,600)     (2,051,000)     (3,528,500)
  Cash received from (paid for) purchased businesses........       392,400     (11,083,300)     (7,953,600)
  Investments in securities.................................            --      (7,472,000)      6,446,800
  Notes receivable due from related parties.................            --              --        (496,000)
                                                               -----------    ------------     -----------
  Net cash used in investing activities.....................      (332,200)    (20,606,300)     (5,531,300)
                                                               -----------    ------------     -----------
FINANCING ACTIVITIES
  Net borrowings (repayments) under line of credit..........       774,200      (1,000,900)      1,137,400
  Proceeds from issuance of long-term debt..................     1,500,000          43,500              --
  Payments of notes payable to related parties..............      (515,500)       (320,000)        (33,900)
  Payment of notes payable..................................            --        (399,200)       (309,500)
  Principal payments on capital leases......................            --              --        (108,900)
  Deferred financing costs..................................      (278,900)         10,000              --
  Net proceeds from public offerings........................            --      35,007,300              --
  Net proceeds from issuance of Preferred Stock.............            --              --       9,568,400
  Exercise of stock options and warrants....................        95,600         338,700         916,600
  Preferred Stock dividend paid.............................            --              --         (40,000)
                                                               -----------    ------------     -----------
  Net cash provided by financing activities.................     1,575,400      33,679,400      11,130,100
                                                               -----------    ------------     -----------
Effects of exchange rate changes on cash....................        (6,800)       (231,600)       (316,700)
                                                               -----------    ------------     -----------
Increase (decrease) in cash and cash equivalents............      (686,200)      5,641,500       3,211,700
Cash and cash equivalents at beginning of period............       686,200              --       5,641,500
                                                               -----------    ------------     -----------
Cash and cash equivalents at end of period..................   $        --    $  5,641,500     $ 8,853,200
                                                               ===========    ============     ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Income tax paid.............................................   $   298,000    $  1,388,700     $ 1,425,900
                                                               ===========    ============     ===========
Interest paid...............................................   $   113,200    $    494,100     $   436,000
                                                               ===========    ============     ===========
</TABLE>

SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING AND INVESTING ACTIVITIES--NOTE 2

  THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
                                  STATEMENTS.

                                      F-4
<PAGE>
                                  ASPEON, INC.

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                                       RETAINED      ACCUMULATED
                                    COMMON STOCK       ADDITIONAL      DEFERRED        EARNINGS         OTHER
                                --------------------     PAID IN      STOCK-BASED    (ACCUMULATED   COMPREHENSIVE
                                 SHARES      AMOUNT      CAPITAL     COMPENSATION      DEFICIT)          LOSS           TOTAL
                                ---------   --------   -----------   -------------   ------------   --------------   ------------
<S>                             <C>         <C>        <C>           <C>             <C>            <C>              <C>
BALANCE, JUNE 30, 1997........  3,119,250   $31,200    $ 4,295,300    $   (90,800)   $  (881,200)     $      --      $  3,354,500
Value assigned to warrants
  issued in connection with
  credit facility.............         --        --        621,900             --             --             --           621,900
Shares issued in connection
  with acquisition of Posnet
  and CCI.....................    929,050     9,300      6,199,500             --             --             --         6,208,800
Amortization of deferred
  stock-based compensation....         --        --             --         51,600             --             --            51,600
Exercise of stock options and
  warrants....................     63,662       600         95,000             --             --             --            95,600
Income tax benefit from
  exercise of stock options...         --        --         59,200             --             --             --            59,200
Comprehensive income..........         --        --             --             --      1,014,100         (6,800)        1,007,300
                                ---------   -------    -----------    -----------    ------------     ---------      ------------
BALANCE, JUNE 30, 1998........  4,111,962    41,100     11,270,900        (39,200)       132,900         (6,800)       11,398,900
Issuances of common stock in
  connection with the
  limitation of Posnet earnout
  shares......................     56,250       600        362,600             --             --             --           363,200
Shares issued in connection
  with public offerings,
  net.........................  3,770,000    37,700     34,969,600             --             --             --        35,007,300
Shares issued in connection
  with the acquisition of RGB
  and Jade....................    416,975     4,200      3,774,600             --             --             --         3,778,800
Shares issued in connection
  with acquisition of DTI and
  SB..........................    452,226     4,500      4,861,500             --             --             --         4,866,000
Amortization of deferred
  stock-based compensation....         --        --             --         32,500             --             --            32,500
Exercise of stock options and
  exchange of warrants for
  common stock................     79,790       800        337,900             --             --             --           338,700
Income tax benefit from
  exercise of stock options...         --        --        223,600             --             --             --           223,600
Comprehensive income..........         --        --             --             --      3,666,800        (65,400)        3,601,400
                                ---------   -------    -----------    -----------    ------------     ---------      ------------
BALANCE, JUNE 30, 1999........  8,887,203    88,900     55,800,700         (6,700)     3,799,700        (72,200)       59,610,400
Shares issued in connection
  with the acquisition of
  Monument....................    104,802     1,000      2,059,700             --             --             --         2,060,700
Shares issued in connection
  with the earnout provisions
  of the RGB and Jade
  acquisition.................    271,256     2,700      2,565,300             --             --             --         2,568,000
Mandatorily redeemable
  preferred stock beneficial
  conversion feature..........         --        --      3,708,400             --     (3,708,400)            --                --
Accretion of mandatorily
  redeemable preferred stock
  discount and dividends......         --        --             --             --       (816,000)            --          (816,000)
Amortization of deferred
  stock-based compensation....         --        --             --          6,700             --             --             6,700
Exercise of stock options.....    119,900     1,200        915,400             --             --             --           916,600
Comprehensive loss............         --        --             --             --     (9,301,200)      (895,700)      (10,196,900)
                                ---------   -------    -----------    -----------    ------------     ---------      ------------
BALANCE, JUNE 30, 2000........  9,383,161   $93,800    $65,049,500    $        --    $(10,025,900)    $(967,900)     $ 54,149,500
                                =========   =======    ===========    ===========    ============     =========      ============
</TABLE>

  THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
                                  STATEMENTS.

                                      F-5
<PAGE>
                                  ASPEON, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  GENERAL

    Aspeon, Inc. ("Aspeon"), formerly known as Javelin Systems, Inc., was
incorporated in the State of Delaware on September 19, 1995 under the name of
Sunwood Research, Inc. Aspeon Solutions, Inc. ("Aspeon Solutions"), a
wholly-owned subsidiary, is an application service provider ("ASP") providing
services which enable software applications to be deployed, managed, supported
and upgraded from centrally located servers, rather than individual computers.
Javelin Systems, a division of Aspeon, is a provider of integrated touchscreen
computers and system integration services to the foodservice and retail
industries.

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

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

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

    In November 1998, Aspeon acquired all of the outstanding common stock of RGB
and Jade. RGB and Jade are headquartered in England and provide complementary
Wide Area Networking products and services primarily to large retail,
hospitality, and telecommunications companies.

    In April 1999, the Company acquired all of the outstanding capital stock of
Dynamic Technologies, Inc. ("DTI") and all of the outstanding capital stock of
SB Holdings, Inc. ("SB"). DTI and SB provide custom Internet/intranet software
and services.

    In August 1999, the Company acquired all of the outstanding capital stock of
Restaurant Consulting Services, Inc. ("RCS"). RCS implements, operates and
supports packaged software applications for the restaurant industry.

    In March 2000, Aspeon acquired all of the outstanding capital stock of
Monument Software Corporation ("Monument"). Monument specializes in the rapid
implementation of enterprise-class financial systems with an emphasis on Oracle
Financials.

    Hereinafter, Aspeon and its subsidiaries are referred to as the Company.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

LIQUIDITY AND CAPITAL RESOURCES

    The Company has sustained significant losses during the year ended June 30,
2000 and has experienced negative cash flows from operations since its
inception. At June 30, 2000, the Company's balance of cash, cash equivalents and
short-term investments was $9,878,400. At June 30, 2000, the Company was in
default of certain non-financial covenants related to its credit facility
(Note 5). In October 2000, the Company obtained a waiver on all defaults as of
June 30, 2000 pursuant to certain terms and conditions

                                      F-6
<PAGE>
                                  ASPEON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
including accelerating term loan repayments, accruing interest on the term loan
at the default rate of 11.5% and limiting outstanding borrowings to
approximately $3,538,000. The credit facility expires in June 2001. In
October 2000, the Company received a notice of default from the Preferred
Stockholders (Notes 6 and 12), which triggered certain payment requirements as
well as a Repricing and Redemption Event, as defined in the Preferred Stock
Agreement.

    The Company's continued existence is dependent upon, among other factors,
the Company's ability to return to profitability, the continued forbearance of
the Company's lenders, its ability to obtain a Preferred Stock default waiver
(Note 12), its ability to commence trading of its common stock (Note 12), the
outcome of litigation filed against the Company, which alleges violations of the
federal securities laws (Note 9), and the Company's ability to raise additional
capital. Management has reduced its workforce and plans to further reduce
expenditures. Management believes that such reductions, and funds expected to be
generated from operations, will be sufficient to meet its expected short-term
needs for working capital. However, there can be no assurance that sufficient
cash flows will be generated by the Company to avoid the further depletion of
its working capital or that the outcomes of the litigation or the Preferred
Stock default will not have a material adverse impact on the Company's
operations. Accordingly, management intends to obtain additional debt or equity
financing. There can be no assurance that additional debt or equity financing
will be available, if and when needed, or that, if available, such financing
could be completed on commercially favorable terms.

    These consolidated financial statements have been prepared assuming the
Company will continue as a going concern. The consolidated financial statements
do not include any adjustments relating to the recoverability of the carrying
amount of recorded assets or the amount of liabilities that might result from
the outcome of these uncertainties.

PRINCIPLES OF CONSOLIDATION

    The accompanying consolidated financial statements include the accounts of
Aspeon and its wholly-owned subsidiaries. All significant intercompany
transactions and balances have been eliminated.

USE OF ESTIMATES

    The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
respective periods. Actual results could materially differ from these estimates.

FAIR VALUE OF FINANCIAL INSTRUMENTS

    The Company's financial instruments consist of cash and cash equivalents,
investments, accounts receivable, accounts payable, accrued expenses and debt.
The carrying amounts of the Company's financial instruments at June 30, 1999 and
2000 approximate their respective fair values.

                                      F-7
<PAGE>
                                  ASPEON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CONCENTRATION OF BUSINESS AND CREDIT RISK

    The Company operates within an industry that is subject to rapid
technological advancement, intense competition and uncertain market acceptance.
The introduction of new technologies, competitors' alternative products and
ultimate market acceptance of the products sold by the Company could have a
substantial impact on future operations. The Company maintains a significant
portion of its manufacturing operations with a third-party manufacturer in
Singapore. Any termination of, or significant disruption in, the Company's
relationship with the third-party manufacturer of its product may prevent the
Company from fulfilling customer orders in a timely manner.

    Financial instruments, which potentially subject the Company to a
concentration of credit risk, consist primarily of accounts receivable and
investments. In the normal course of business, the Company provides credit terms
to its customers and collateral is generally not required. Accordingly, the
Company performs ongoing credit evaluations of its customers and maintains
allowances for potential losses which, when realized, have been within the range
of management's expectations. By policy, the Company invests primarily in
high-grade marketable securities.

    For the year ended June 30, 1998, one customer in the Solutions Services
segment (Note 11) accounted for approximately 11% of consolidated revenues. For
the year ended June 30, 1999, one customer in the POS Products segment
(Note 11) accounted for approximately 11% of consolidated revenues. For the
years ended June 30, 1998 and 1999, outstanding accounts receivable from these
customers amounted to $31,400 and $1,590,000, respectively. For the year ended
June 30, 2000, one customer in the POS Products segment accounted for
approximately 15% of consolidated revenues. The outstanding accounts receivable
balance from this customer amounted to $741,000 at June 30, 2000.

CASH AND CASH EQUIVALENTS

    The Company considers all highly liquid investments purchased with original
maturities of three months or less to be cash equivalents.

INVESTMENTS

    Management determines the appropriate classification of its investments at
the time of purchase and reevaluates such determination at each balance sheet
date. The Company classifies its investments as available-for-sale in accordance
with the provisions of Statement of Financial Accounting Standards ("SFAS")
No. 115, "Accounting for Certain Investments in Debt and Equity Securities."
These securities are carried at fair market value, with unrealized gains or
losses reported in stockholders' equity as a component of other comprehensive
income (loss). Cost is determined using the specific identification method for
the purpose of computing gains and losses. During the years ended June 30, 1999
and 2000, the Company invested in debt securities with original maturities
ranging from three to nine months.

                                      F-8
<PAGE>
                                  ASPEON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
    Investments consisted of the following as of June 30, 1999, and 2000:

<TABLE>
<CAPTION>
                                                          1999         2000
                                                       ----------   ----------
<S>                                                    <C>          <C>
Obligations of U.S. government agencies..............  $3,981,900   $  519,500
U.S. Treasury securities.............................     988,400           --
Corporate debt securities............................   2,501,700      505,700
                                                       ----------   ----------
  Total investments..................................  $7,472,000   $1,025,200
                                                       ==========   ==========
</TABLE>

    Unrealized gains and losses for the years ended June 30, 1999 and 2000 were
not material.

INVENTORIES

    Inventories at June 30, 1999 and 2000 consist primarily of point of sale
computer hardware and components and are stated at the lower of cost (first-in,
first-out) or market as follows:

<TABLE>
<CAPTION>
                                                        1999          2000
                                                     -----------   -----------
<S>                                                  <C>           <C>
Raw materials......................................  $ 7,195,600   $ 7,506,400
Work-in-process....................................      227,000       110,400
Finished goods.....................................    7,143,100    13,049,500
                                                     -----------   -----------
                                                     $14,565,700   $20,666,300
                                                     ===========   ===========
</TABLE>

PROPERTY AND EQUIPMENT

    Property and equipment are stated at cost and depreciated using the
straight-line method over the following estimated useful lives:

<TABLE>
<S>                                                           <C>
Computer equipment and software.............................  3 years
Furniture and fixtures......................................  5 years
Vehicles....................................................  5 years
Leasehold improvements......................................  2-8 years
</TABLE>

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

    Depreciation expense was approximately $217,700, $629,800 and $1,964,700 for
the years ended June 30, 1998, 1999 and 2000, respectively.

                                      F-9
<PAGE>
                                  ASPEON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
    Property and equipment at June 30, 1999 and 2000 consists of:

<TABLE>
<CAPTION>
                                                        1999          2000
                                                     -----------   -----------
<S>                                                  <C>           <C>
Computer equipment and software....................  $ 2,911,500   $ 6,597,400
Furniture and fixtures.............................      732,500       835,300
Vehicles                                                  66,600       222,800
Leasehold improvements.............................      254,000     1,238,800
                                                     -----------   -----------
                                                       3,964,600     8,894,300
Accumulated depreciation and amortization..........   (1,103,200)   (3,368,400)
                                                     -----------   -----------
                                                     $ 2,861,400   $ 5,525,900
                                                     ===========   ===========
</TABLE>

LONG-LIVED ASSETS

    Long-lived assets and identifiable intangible assets acquired in purchase
acquisitions are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. An
impairment loss would be recognized when estimated undiscounted future cash
flows expected to result from the use of the asset and its eventual disposition
is less than its carrying value. If an asset is determined to be impaired, the
impairment is measured by the amount that the carrying amount of the asset
exceeds its fair value. During the year ended June 30, 2000, the Company
wrote-off the remaining $136,400 balance of purchased software (Note 3).

INTANGIBLE ASSETS

GOODWILL

    Excess of cost over net assets of purchased businesses (goodwill) represents
the excess of purchase price over the fair value of the net assets of acquired
businesses. For the acquisitions of Posnet, CCI, Aspact, RGB, Jade, RCS and
Monument, the excess was allocated entirely to goodwill. Management determined
that for these acquired companies, there were no other identifiable intangible
assets that would require an allocation of the purchase price. Goodwill is
stated at cost and is amortized on a straight-line basis over periods ranging
from three to 25 years.

OTHER INTANGIBLE ASSETS

    Other intangible assets include the estimated value associated with a
non-compete agreement, workforce and software acquired in the acquisition of DTI
(Note 3). These items are being amortized on a straight-line basis over periods
ranging from two to ten years.

    Amortization of goodwill and other intangible assets amounted to
approximately $125,000, $598,500 and $2,998,100 for the years ended June 30,
1998, 1999 and 2000, respectively. Accumulated amortization was approximately
$751,700 and $3,586,300 as of June 30, 1999 and 2000, respectively.

DEFERRED FINANCING COSTS

    Deferred financing costs are included in other assets and represent costs
incurred by the Company relating to its line of credit facility (Note 5). These
costs are being amortize on a straight-line basis over the term of the line of
credit.

                                      F-10
<PAGE>
                                  ASPEON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ACCRUED SEVERANCE COSTS

    Included in accrued expenses as of June 30, 2000 is $3,900,000 of severance
costs for nine senior management personnel terminated in June 2000. Such costs
include payroll and related expenses, health benefits and $2,500,000 associated
with the settlement of future contingent payments with the selling shareholder
of RCS (Note 3). The termination agreements provided for the extension of the
exercise period to twenty-four months for previously granted stock options. The
fair market value of the underlying common stock on the date the stock options
were modified was less than the exercise price; accordingly, there was no impact
to the consolidated statements of operations. In addition, the Company entered
into consulting agreements with five of the terminated employees, in which a
total of 200,000 Aspeon, Inc. stock options were granted with vesting periods of
twenty-four months (Note 7). The impact of these stock options to the
consolidated financial statements was not material.

FOREIGN CURRENCY TRANSLATION

    The consolidated financial statements of the Company's non-U.S. operations
are translated into U.S. dollars for financial reporting purposes. The assets
and liabilities of non-U.S. operations whose functional currencies are other
than the U.S. dollar are translated at rates of exchange at fiscal year-end, and
revenues and expenses are translated at average exchange rates for the fiscal
year. The cumulative translation effects are reflected in accumulated other
comprehensive income (loss). Gains and losses on transactions denominated in
other than the functional currency of an operation are reflected in other income
(expense). During the year ended June 30, 2000, the Company recorded transaction
losses totaling approximately $80,000, which have been recorded in the statement
of operations.

REVENUE RECOGNITION

    The Company sells its hardware and third-party software products both as
part of a solutions package and on a stand-alone basis. Sales of the Company's
products which are part of a solutions package typically include hardware,
third-party software and installation. Revenues associated with these
arrangements are recognized upon the completion of the installation of the
product. Sales of products, which are part of a solution, are included in
products revenue while installation and consulting services are included in
services revenue. Revenues from sales of products sold on a stand-alone basis
are recognized upon shipment to the customer. Estimated product returns and
sales allowances are provided for when revenue is recognized.

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

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

                                      F-11
<PAGE>
                                  ASPEON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CUSTOMER DEPOSITS AND DEFERRED REVENUES

    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

    The Company's products are under warranty for defects in material and
workmanship for one year. Certain components included in the Company's products
are covered by manufacturers' warranties. The Company establishes an accrual for
estimated warranty costs when the related revenue is recognized.

ADVERTISING COSTS

    Advertising costs are expensed as incurred. Advertising expense was
$703,000, $1,017,000 and $1,288,000 for the years ended June 30, 1998, 1999 and
2000, respectively.

RESEARCH AND DEVELOPMENT

    Research and development costs are expensed as incurred. Research and
development expenses are principally comprised of payroll and related costs, and
the cost of prototypes.

INCOME TAXES

    Income taxes are provided utilizing the liability method in accordance with
SFAS No. 109 "Accounting for Income Taxes". The liability method requires the
recognition of deferred tax assets and liabilities for the expected future tax
consequences of temporary differences between the carrying amounts and tax bases
of assets and liabilities. Additionally, under the liability method changes in
tax rates and laws will be reflected in income in the period such changes are
enacted. A valuation allowance is recorded when it is more likely than not that
deferred tax assets will not be realized.

STOCK-BASED COMPENSATION

    The Company accounts for its stock-based compensation plans under Accounting
Principles Board Opinion No. 25 "Accounting for Stock Issued to Employees" ("APB
25") and complies with the disclosure provisions of SFAS No. 123 "Accounting for
Stock-Based Compensation." Under APB 25, compensation expense is based on the
difference, if any, on the date of grant between the fair value of the Company's
common stock and the exercise price of the stock option.

BASIC AND DILUTED NET INCOME (LOSS) PER COMMON SHARE

    Basic net income (loss) per common share is computed by dividing the net
income (loss) available to common stockholders for the period by the weighted
average number of common shares outstanding. Diluted earnings per share is based
on the weighted average number of shares of common stock outstanding adjusted
for the effects of potential issuances of common shares, if dilutive. Potential
common shares include incremental shares of common stock issuable on the excise
of stock options, warrants and convertible preferred stock.

                                      F-12
<PAGE>
                                  ASPEON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
    A reconciliation of basic and diluted net income (loss) per common share for
the years ended June 30, 1998, and 1999 is as follows:

<TABLE>
<CAPTION>
                                                         1998                      1999
                                                -----------------------   -----------------------
                                                  BASIC       DILUTED       BASIC       DILUTED
                                                ----------   ----------   ----------   ----------
<S>                                             <C>          <C>          <C>          <C>
Net income available to common stockholders...  $1,014,100   $1,014,100   $3,666,800   $3,666,800
Weighted average common shares outstanding
  available to common stockholders............   3,622,604    3,622,604    6,259,965    6,259,965
Potential common shares for the exercise of
  stock options...............................          --      128,007           --      214,216
                                                ----------   ----------   ----------   ----------
Diluted weighted average common shares
  outstanding.................................   3,622,604    3,750,611    6,259,965    6,474,181
                                                ==========   ==========   ==========   ==========
Net income per common share...................  $     0.28   $     0.27   $     0.59   $     0.57
                                                ==========   ==========   ==========   ==========
</TABLE>

    For the year ended June 30, 2000 there was no difference between basic and
diluted net loss per common share, as the Company incurred a net loss for the
year.

    There were 146,000 and 391,000 Aspeon, Inc. stock options in the years ended
June 30, 1999 and 2000, respectively, that were not included in the computation
of diluted net income per common share because the exercise price was greater
than the average market price of the common stock, resulting in an anti-dilutive
effect. Due to the net loss incurred by the Company for the year ended June 30,
2000, an additional 265,300 Aspeon, Inc. stock options were not included in the
computation of diluted net loss per share, as their impact would be
anti-dilutive. The number of anti-dilutive options in 1998 was not material.

    There were 1,968,334 warrants and 10,000 shares of Preferred Stock for the
year ended June 30, 2000 that were not included in the computation of net loss
per common share due to their anti-dilutive effect.

SEGMENT INFORMATION

    The Company uses the management approach for segment disclosure, which
designates the internal organization that is used by management for making
operating decisions and assessing performance as the source of the Company's
reportable segments.

COMPREHENSIVE INCOME (LOSS)

    Comprehensive income (loss) is defined as the change in equity (net assets)
of a business enterprise during a period from transactions and other events and
circumstances from nonowner sources. Comprehensive income (loss) consists of net
income (loss), the change in the cumulative foreign currency translation
adjustment and the change in unrealized gains or losses on available-for-sale
securities. Accumulated other comprehensive loss consists of the cumulative
translation adjustment and net unrealized gains or losses on available-for-sale
securities.

RECLASSIFICATIONS

    Certain amounts in fiscal 1998 and 1999 have been reclassified to conform to
the fiscal 2000 presentation.

                                      F-13
<PAGE>
                                  ASPEON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING AND INVESTING ACTIVITIES

    Acquisitions of businesses in exchange for shares of the Company's common
stock--Note 3.

    Issuance of the Company's common stock for the cancellation of contingent
consideration--Note 3.

    Warrants issued in connection with credit facility and Preferred Stock--Note
7.

    Accrued but unpaid dividends on mandatorily redeemable Series A preferred
stock--Note 6.

    Capital leases obligations of $551,800 executed in fiscal 2000.

NEWLY ISSUED ACCOUNTING PRONOUNCEMENTS

    In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities" was issued, which establishes new standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. The Company will be required to adopt
SFAS No 133 in fiscal 2001. Management has not completed its assessment as to
whether the adoption of the new statement will have a material impact on the
consolidated results of operations or financial position of the Company.

    In December 1999, Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue
Recognition in Financial Statements" was issued by the Securities and Exchange
Commission staff (the "staff"), which summarizes the staff's views on selected
revenue recognition issues based upon existing generally accepted accounting
principles. The statements in the staff accounting bulletins are not rules or
interpretations of the Commission, nor are they published as bearing the
Commission's official approval. They represent interpretations and practices
followed by the Division of Corporation Finance and the Office of the Chief
Accountant in administering the disclosure requirements of the Federal
securities laws. The staff has deferred the implementation date of SAB 101 until
no later than the fourth quarter of fiscal years beginning after December 15,
1999. Management has not completed its assessment as to whether the adoption of
SAB 101 will have a material impact on the consolidated results of operations or
financial position of the Company.

    In November 2000, the Emerging Task Force ("EITF") issued EITF No. 00-27,
"Application of Issue No. 98-5, 'Accounting for Convertible Conversion Features
or Contingently Adjustable Conversion Ratios', to Certain Convertible
Instruments". Management believes there will be no impact to the consolidated
results of operations or financial position of the Company as a result of this
EITF issue.

3.  ACQUISITIONS

    In December 1997, the Company acquired all of the outstanding capital stock
of Posnet. The original purchase price for Posnet consisted of 225,000 shares of
the Company's common stock. The Company was required to issue an additional
75,000 shares of its common stock in fiscal 1998 and shares of its common stock
with a market value of $500,000 in each of fiscal 1999 and fiscal 2000 based
upon the cumulative net profits of Posnet during the three years ending
December 31, 2000. The acquisition has been accounted for by the purchase
method, and accordingly, the results of operations of Posnet have been included
with those of the Company commencing on the date of acquisition. The purchase
price of $1,594,200 (including acquisition costs of approximately $75,500) was
determined by discounting the value of the common stock issued by 25% from the
quoted price, principally due to restrictions and liquidity factors, and
resulted in excess of purchase price over the fair value of net assets acquired
of approximately $2,036,000. Such excess (which was increased for the contingent
payments described below) is being amortized on a straight-line

                                      F-14
<PAGE>
                                  ASPEON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3.  ACQUISITIONS (CONTINUED)
basis over 25 years. During the year ended June 30, 1998, the Company issued
18,750 shares of its common stock as additional consideration. In August 1998,
the Company agreed to issue 56,250 shares of its common stock to the former
shareholders of Posnet in consideration for the elimination of any future
contingent payments. The $363,200 value of these additional shares has been
recorded as additional goodwill.

    In December 1997, the Company acquired all of the outstanding capital stock
of CCI. The purchase price for CCI consisted of 670,000 shares of the Company's
common stock. The acquisition has been accounted for by the purchase method, and
accordingly, the results of operations of CCI have been included with those of
the Company commencing on the date of acquisition. The purchase price of
$4,476,800 (including costs of acquisition of approximately $111,300) was
determined by discounting the value of the common stock issued by 25% from the
quoted price, principally due to restrictions and liquidity factors, and
resulted in excess of purchase price over the fair value of net assets acquired
of approximately $4,097,500. Such excess is being amortized on a straight-line
basis over 25 years.

    In April 1999, the Company acquired all of the outstanding capital stock of
DTI and SB. The aggregate purchase price for DTI and SB consisted of $10,000,000
in cash and 452,226 shares of the common stock of the Company with an additional
(i) $2,000,000 in cash and (ii) $1,000,000 in value (as defined in the
Agreement) of common stock of the Company issuable upon the satisfaction of
certain milestones for each of the quarters in the twelve months ended
April 30, 2000. The $2,000,000 additional cash payment was paid in fiscal 2000.
Included in the purchase price payable for acquisitions is $1,000,000 (100,386
shares of common stock) issuable to the selling shareholders. The acquisition
has been accounted for by the purchase method, and accordingly, the results of
operations of DTI and SB have been included with those of the Company commencing
on the date of acquisition. The original price of approximately $14,398,700
(including costs of acquisition of approximately $148,700) was determined by
discounting the value of the common stock issued by 15% from the quoted price,
principally due to restrictions and liquidity factors. The original purchase
price was allocated as follows:

<TABLE>
<S>                                                           <C>
Tangible net assets acquired................................  $   908,300
Non-compete.................................................      166,000
Workforce...................................................      800,000
Software....................................................      300,000
Goodwill....................................................   12,224,400
                                                              -----------
  Total.....................................................  $14,398,700
                                                              ===========
</TABLE>

    The non-compete agreement is amortized on a straight-line basis over two
years while goodwill and workforce are amortized on a straight-line basis over
10 years. During the year ended June 30, 2000, the Company wrote-off the
remaining $136,400 balance of the purchased software based on management's
assessment that expected cash flow from the related products would be
insignificant.

                                      F-15
<PAGE>
                                  ASPEON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3.  ACQUISITIONS (CONTINUED)
    Unaudited proforma consolidated results from operations as if the
acquisitions of Posnet and CCI and the acquisition of DTI and SB had occurred as
of July 1, 1997 are as follows:

<TABLE>
<CAPTION>
                                                        1998          1999
                                                     -----------   -----------
<S>                                                  <C>           <C>
Revenues...........................................  $41,721,300   $78,550,900
Cost of revenues...................................   27,888,300    52,510,800
                                                     -----------   -----------
  Gross profit.....................................   13,833,000    26,040,100
Operating expenses.................................   12,250,200    18,727,700
                                                     -----------   -----------
Income from operations.............................    1,582,800     7,312,400
Other expense......................................      (66,300)     (609,500)
                                                     -----------   -----------
Income before taxes................................    1,516,500     6,702,900
Provision for income taxes.........................   (1,103,200)   (2,488,700)
                                                     -----------   -----------
Net income available to common stockholders........  $   413,300   $ 4,214,200
                                                     ===========   ===========
Net income per common share:
  Basic............................................  $      0.10   $      0.63
                                                     ===========   ===========
  Diluted..........................................  $      0.10   $      0.62
                                                     ===========   ===========
</TABLE>

    The unaudited proforma amounts are not necessarily indicative of what the
actual results might have been if the acquisitions had occurred as of the dates
indicated.

    In May 1998, Aspeon Asia acquired all of the outstanding common stock of
Aspact for $170,000 in cash and 15,300 shares of the Company's common stock. The
acquisition of Aspact has been accounted for as a purchase, and accordingly, the
results of operations of Aspact have been included with those of the Company
commencing on the date of acquisition. The purchase price of $567,400 resulted
in excess of purchase price over the fair value of net assets acquired of
approximately $320,000. Such excess is being amortized on a straight-line basis
over 25 years. The results of operations of Aspact prior to the date of
acquisition were not material. In August 2000, the Company sold Aspact
(Note 12).

    In November 1998, the Company acquired all of the outstanding capital stock
of RGB and 52.5% of the outstanding common stock of Jade. The remaining 47.5% of
the outstanding common stock of Jade was owned by RGB. The aggregate purchase
price for the RGB and Jade capital stock consisted of $1,922,900 in cash
(including acquisition costs of $181,800) and 257,058 shares of the Company's
common stock. The Company was also required to issue additional shares of its
common stock with a market value of $4,112,500 in each of 1999 and 2000 based
upon the cumulative net profits of RGB and Jade during the twenty-four month
period ended September 30, 2000. The acquisitions have been accounted for by the
purchase method, and accordingly, the results of operations of RGB and Jade have
been included with those of the Company commencing on the date of acquisition.
The purchase price of $3,561,600 resulted in excess of purchase price over the
fair value of net assets acquired of approximately $2,987,700. Such excess
(which increases for any contingent payments) is being amortized on a
straight-line basis over 25 years. During the year ended June 30, 1999, the
Company issued 159,917 shares of its common stock at a value of $1,748,200
($874,000 of which is included as purchase price payable for acquisitions).
During the year ended June 30, 2000, the Company paid an additional $1,224,700
and issued 271,256 shares of its common stock at a value of $2,568,000. In
February 2000, the Company agreed to settle all remaining future

                                      F-16
<PAGE>
                                  ASPEON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3.  ACQUISITIONS (CONTINUED)
contingent payments for cash and stock with a value of $1,908,500 and $867,500
(276,944 shares of common stock), respectively. The Company has recorded such
amounts as additional goodwill. Included in accrued expenses and purchase price
payable for acquisitions is $683,000 in cash that is payable and the $867,500
value of shares that are issuable to the selling shareholders, respectively. The
results of operations of RGB and Jade prior to the date of acquisition were not
material.

    In August 1999, the Company acquired all of the outstanding capital stock of
RCS. The aggregate purchase price for RCS consisted of $3,054,400 in cash
(including acquisition costs of $21,300). The acquisition has been accounted for
by the purchase method, and accordingly, the results of operations of RCS have
been included with those of the Company commencing on the date of acquisition.
The purchase price resulted in excess of purchase price over the fair value of
net assets acquired of approximately $2,706,200. Such excess is being amortized
on a straight-line basis over 10 years. In June 2000, the Company agreed to pay
to the former owner of RCS, and then current employee of the Company, $2,500,000
to settle all future contingent payments. This settlement was recorded as
compensation expense and was paid in July 2000. The results of operations of RCS
prior to the date of acquisition were not material.

    In March 2000, the Company acquired all of the outstanding capital stock of
Monument. The aggregate purchase price for Monument consisted of $1,579,000 in
cash (including acquisition costs of $79,000) and 104,802 shares of common stock
with a value of $2,060,700. The acquisition has been accounted for by the
purchase method, and accordingly, the results of operations of Monument have
been included with those of the Company commencing on the date of acquisition.
The purchase price resulted in excess of purchase price over the fair value of
net assets acquired of approximately $3,639,700. Such excess is being amortized
on a straight-line basis over three years. The results of operations of Monument
prior to the date of acquisition were not material.

    Cash paid in connection with the Company's purchase acquisitions, including
the cash settlement for any future contingent payments, is as follows:

<TABLE>
<CAPTION>
                                           1998          1999          2000
                                        -----------   -----------   -----------
<S>                                     <C>           <C>           <C>
Fair value of assets acquired,
  including goodwill..................  $10,422,000   $22,893,100   $14,675,400
Liabilities assumed...................   (4,561,200)   (4,912,100)   (2,093,100)
Common stock issued...................   (6,253,200)   (6,897,700)   (4,628,700)
                                        -----------   -----------   -----------
  Cash (received) paid................  $  (392,400)  $11,083,300   $ 7,953,600
                                        ===========   ===========   ===========
</TABLE>

4.  INCOME TAXES

    Net income (loss) before income taxes consist of the following for the years
ended June 30, 1998, 1999 and 2000:

<TABLE>
<CAPTION>
                                             1998         1999          2000
                                          ----------   ----------   ------------
<S>                                       <C>          <C>          <C>
U.S.....................................  $1,570,200   $3,230,100   $(10,352,200)
Foreign.................................      28,800    2,447,200        101,500
                                          ----------   ----------   ------------
Total...................................  $1,599,000   $5,677,300   $(10,250,700)
                                          ==========   ==========   ============
</TABLE>

                                      F-17
<PAGE>
                                  ASPEON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4.  INCOME TAXES (CONTINUED)
    The components of income tax expense (benefit) for the years ended June 30,
1998, 1999 and 2000 are as follows:

<TABLE>
<CAPTION>
                                             1998         1999         2000
                                           ---------   ----------   -----------
<S>                                        <C>         <C>          <C>
CURRENT:
  Federal................................  $ 686,300   $1,157,500   $(1,739,000)
  State..................................     70,700      351,800            --
  Foreign................................     32,900      827,200       258,600
DEFERRED:
  Federal................................   (157,500)    (297,400)      467,900
  State..................................    (47,500)     (28,600)       63,000
                                           ---------   ----------   -----------
TOTAL....................................  $ 584,900   $2,010,500   $  (949,500)
                                           =========   ==========   ===========
</TABLE>

    The Company's effective tax rate differs from the U.S. federal statutory tax
rate (benefit), as follows:

<TABLE>
<CAPTION>
                                                              1998          1999          2000
                                                            --------      --------      --------
<S>                                                         <C>           <C>           <C>
Income tax provision at federal statutory tax rates...        34.0%         34.0%        (34.0)%
State taxes, net of federal effect....................         2.5           3.8          (5.0)
Foreign earnings taxed at different rates.............          --          (0.2)         (0.6)
Goodwill amortization.................................         2.7           3.0           8.4
Net operating loss benefit............................        (8.7)           --            --
Non-deductible items..................................         4.1           0.3           0.3
Adjustments to estimated income tax accruals..........         2.0          (5.5)         (1.5)
Valuation allowance...................................          --            --          23.2
Other.................................................          --            --          (0.1)
                                                              ----          ----         -----
  Total...............................................        36.6%         35.4%         (9.3)%
                                                              ====          ====         =====
</TABLE>

    Components of deferred tax assets are as follows:

<TABLE>
<CAPTION>
                                                          1999        2000
                                                        --------   -----------
<S>                                                     <C>        <C>
Accrued expenses......................................  $515,200   $   725,900
Net operating losses..................................        --     1,197,800
Tax credits...........................................        --       112,000
Stock-based compensation..............................        --       318,400
Other.................................................    15,700        20,700
                                                        --------   -----------
                                                        $530,900     2,374,800
  Valuation allowance.................................        --    (2,374,800)
                                                        --------   -----------
  Net deferred tax assets.............................  $530,900   $        --
                                                        ========   ===========
</TABLE>

    As of June 30, 2000, the Company has net operating loss carryforwards of
$1,900,000 and $6,300,000 for federal and state purposes, respectively, that
begin expiring in 2019 and 2004, respectively. Future changes in ownership, as
defined by section 382 of the Internal Revenue Code, could limit the amount of
net operating loss carryforwards used in any one year.

                                      F-18
<PAGE>
                                  ASPEON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4.  INCOME TAXES (CONTINUED)

    Management believes it is more likely than not that the Company will not
realize its deferred tax assets based upon expected operating results.
Accordingly, a full valuation allowance has been provided against net deferred
tax assets as of June 30, 2000.

    Undistributed earnings of foreign subsidiaries aggregated $2,600,000 and
$2,701,500 as of June 30, 1999 and 2000, respectively, which under existing tax
law, will not be subject to U.S. tax until distributed as dividends. Since the
earnings have been or are intended to be indefinitely reinvested in foreign
operations, no provision has been made for any U.S. taxes that may be applicable
thereto. Furthermore, any taxes paid to foreign governments on these earnings
may be used in whole or in part as credits against U.S. tax on dividends
distributed from such earnings. It is not practicable to estimate the amount of
unrecognized deferred U.S. taxes on these undistributed earnings.

5.  LINE OF CREDIT AND LONG-TERM DEBT

    In June 1998, the Company and its U.S. subsidiaries obtained a credit
facility of $7,500,000 from an unrelated financial institution. The credit
facility expires in June 2001 and consisted of a line of credit of up to
$6,000,000 and a term loan of $1,500,000. The credit facility contains a .50%
per annum unused line of credit fee, which is based on the difference between
the borrowing capacity and outstanding balance. Borrowings under the term loan
are collateralized by substantially all of the assets of the Company, bear
interest at 13.65% per annum and are repayable at $25,000 per month with all
unpaid principal and interest due in June 2001. At June 30, 2000, borrowings
outstanding under the term loan amounted to $900,000. The Company is not
permitted to pay cash dividends to common stockholders under the terms of the
credit facility without approval of the unrelated financial institution.

    Under the terms of the credit facility, the Company is permitted to borrow
up to 80% of eligible accounts receivable (as defined) and 50% of eligible
inventory (as defined) with monthly interest payments based upon the prime rate
of a national financial institution plus 1.75% (9.5% as of June 30, 2000).
Borrowings under the line of credit are collateralized by substantially all the
assets of the Company. At June 30, 2000, borrowings outstanding under the line
amounted to $2,497,000.

    The credit facility contains certain restrictive monthly financial and
non-financial covenants (e.g., limitation on capital expenditures and
indebtedness). The Company is required to maintain a stated current ratio, net
worth, senior debt service coverage ratio and total debt service coverage ratio.
At June 30, 2000, the Company was in default of certain non-financial covenants.
In October 2000, the Company obtained a waiver on all defaults through June 30,
2000 pursuant to certain terms and conditions including accelerating term loan
repayments, accruing interest on the term loan at the default rate of 11.5%, and
limiting borrowings to approximately $3,538,000.

    Jade has a line of credit facility of $1,800,000 from an unrelated financial
institution. Borrowings under the line of credit are collateralized by all of
the assets of Jade and bear interest at 2% over the U.K. Base rate (8.0% at
June 30, 2000). The credit facility was renewed in October 2000 and expires in
August 2001. At June 30, 2000, borrowings under the line amounted to $692,000
with approximately $1,108,000 available for future borrowings.

6.  MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK

    In March 2000 the Company completed a private placement in which the Company
sold an aggregate of 10,000 shares of Series A Convertible Exchangeable
Preferred Stock (the "Preferred Stock"), a warrant

                                      F-19
<PAGE>
                                  ASPEON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6.  MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK (CONTINUED)
to acquire 583,334 shares of common stock of the Company at an initial exercise
price of $17.00 per share and a warrant to acquire 1,250,000 shares of common
stock of Aspeon Solutions at an exercise price of $5.00 per share. Proceeds to
the Company amounted to $9,568,400, net of $431,600 in issuance costs.

    The Preferred Stockholders have the following rights: i) the right of first
offer for the subsequent sale of equity securities by the Company, as defined,
through March 2001, ii) the right to exchange Preferred Stock for equity
securities subsequently issued by the Company, through September 2001, iii) the
option to exchange the Preferred Stock for shares of the preferred stock of
Aspeon Solutions following an initial public offering and based on the trading
volume of the Company's common stock, as defined, and iv) registration rights
for the shares of common stock issuable upon the conversion of the Preferred
Stock.

    The Preferred Stock also contains the following preferences: i) cumulative
dividends at an annual rate of 6%, payable quarterly in cash or common stock at
the option of the Company commencing in April 2000, ii) liquidation preference
equal to the original issuance price plus unpaid dividends, iii) conversion into
common stock at any time after March 2000 at a conversion price equal to the
lower of (a) $16.00 or (b) the average of the three lowest closing bid prices of
the Company's common stock during the 10 day period prior to the conversion,
iv) redemption of the Preferred Stock by the Company in March 2002 at the
original issuance price ($1,000 per share) plus unpaid dividends, or at the
option of the Company if certain conditions remain satisfied, as defined, in
shares of common stock, and v) mandatory redemption if certain events occur, as
defined, at a redemption price equal to 125% of the original issuance price plus
unpaid dividends and unpaid default interest.

    The warrant to purchase 583,334 shares of the Company's common stock expires
five years from the issuance date (March 2005). The original exercise price of
$17 per share is subject to adjustment if one year from the issuance date the
Company's common stock is lower (as defined) than the exercise price then in
effect. In this event, the exercise price will be equal to the Company's common
stock price but will not be less than $8.00 per share. In the event of a Major
Transaction, as defined, the warrant holders can cause the Company to redeem the
warrants for consideration equal to the greater of the value of the common stock
received assuming a cashless exercise or the value of the warrants as determined
using the Black-Scholes option pricing model. The warrants were valued using the
Black-Scholes option pricing model with the following assumptions: 82%
volatility, $17.00 exercise price, five-year term, and 0% dividend yield.

    The warrant to purchase 1,250,000 shares of Aspeon Solutions common stock is
exercisable at any time beginning on the date that is the earlier of: (i) the
date on which Aspeon Solutions commences an initial public offering or (ii) the
one-year anniversary of the issue date (March 2001); and ending five years from
the earlier of (i) or (ii). The Aspeon Solutions warrant also contains the same
Major Transaction provision included in the warrant exercisable into the
Company's common stock. The warrants were valued using the Black-Scholes option
pricing model with the following assumptions: 84% volatility, $5.00 exercise
price, four-year term, and 0% dividend yield.

                                      F-20
<PAGE>
                                  ASPEON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6.  MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK (CONTINUED)
    The net proceeds from the issuance of the Preferred Stock was allocated
based on the relative fair values of each equity instrument using an independent
valuation as follows:

<TABLE>
<S>                                                           <C>
Preferred Stock.............................................  $5,274,500
Warrants, Aspeon, Inc.......................................   3,426,600
Warrants, Aspeon Solutions..................................     867,300
                                                              ----------
Total net proceeds..........................................  $9,568,400
                                                              ==========
</TABLE>

    The Preferred Stock conversion price was less than the market value of the
Company's common stock on the date of issuance; accordingly, the Company
recorded a beneficial conversion feature equal to the difference between the
conversion price and the fair value of the common stock, multiplied by the
number of shares into which the Preferred Stock is convertible (intrinsic
value). The resultant value was limited to the amount allocated to the Preferred
Stock of $5,274,500 and was charged to retained earnings, to the extent
available, and paid in capital on the issuance date, and increased the net loss
available to common stockholders.

    The Preferred Stock discount that resulted from the allocation of the net
proceeds to the other equity instruments issued is being accreted over the
minimum period from the date of issuance to the date on which the Preferred
Stock can first be redeemed (March 2002), and has increased the net loss
available to common stockholders.

    The warrants exercisable into the Company's common stock and Aspeon
Solutions' common stock (mandatorily redeemable minority interest warrants) are
not included in stockholders' equity due to the holders' ability to cause the
Company to repurchase the warrants. The Company reserved 2,750,000 shares of
common stock that would be issued in the event of conversion or exercise of the
Preferred Stock and warrants, respectively.

    During the year ended June 30, 2000, the Company paid $40,000 in dividends
to the Preferred Stockholders. As of June 30, 2000, the Company has accrued
dividends of $150,000 that have been recorded as an increase to the Preferred
Stock carrying value.

    The components of the accretion of mandatorily redeemable preferred stock
discount and dividends included in the statement of operations for the year
ended June 30, 2000 follows:

<TABLE>
<S>                                                           <C>
Beneficial conversion feature...............................  $5,274,500
Discount accretion..........................................     626,000
Dividend accretion..........................................     190,000
                                                              ----------
                                                              $6,090,500
                                                              ==========
</TABLE>

    In October 2000, a notice of default was received from the Preferred
Stockholders (Note 12).

7.  STOCKHOLDERS' EQUITY

COMMON STOCK

    In December 1998, the Company increased the number of authorized shares of
common stock from 10,000,000 to 20,000,000.

                                      F-21
<PAGE>
                                  ASPEON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7.  STOCKHOLDERS' EQUITY (CONTINUED)
    In November 1998, the Company completed a public offering of 1,395,000
shares of its common stock at $6.75 per share, for net proceeds of approximately
$8,100,000. In February 1999, the Company completed a public offering of
2,375,000 shares of its common stock at $12.25 per share, for net proceeds of
approximately $26,900,000.

STOCK OPTION PLANS

ASPEON, INC.

    In August 1996, the Company adopted a stock incentive award plan (the "1996
Plan") under which the Board of Directors (the "Board"), or a committee
appointed for such purpose, may grant options, restricted stock or other
stock-based compensation to the directors, officers, eligible employees or
consultants of the Company to acquire up to an aggregate of 300,000 shares of
Aspeon, Inc. common stock. Options issued under the Plan generally vest 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 expire ten years from
the date of grant. There are no remaining options available for grant under the
1996 Plan at June 30, 2000. The Company has 123,850 shares of Aspeon, Inc.
common stock reserved for issuance in connection with the exercise of options
under the 1996 Plan at June 30, 2000.

    In December 1997, the stockholders approved the Company's 1997 Equity
Incentive Plan (the "1997 Plan") under which the Board, or a committee appointed
for such purpose, may grant options, restricted stock or other stock-based
compensation to the directors, officers, eligible employees or consultants of
the Company to acquire up to an aggregate of 2,100,000 shares of Aspeon, Inc.
common stock. Options issued under the 1997 Plan generally vest 20% per year
over a 5-year period. All options expire ten years from the date of grant. There
are approximately 1,243,000 options available for grant under the 1997 Plan at
June 30, 2000. The Company has 1,055,900 shares of Aspeon, Inc. common stock
reserved for issuance in connection with the exercise of options under the 1997
Plan at June 30, 2000.

    In April 1999, the Board approved the Company's 1999 Non-Officer Stock
Option Plan (the "1999 Plan") under which the Board, or a committee appointed
for such purpose, may grant nonstatutory options to eligible employees or
consultants of the Company who are not officers or members of the Board, to
acquire up to an aggregate of 3,000,000 shares of Aspeon, Inc. common stock.
Options granted under the 1999 Plan generally vest 25% per year over a 4-year
period, in equal monthly installments over thirty-six months or 100% upon grant
issuance. All options expire ten years from the date of grant. There are
approximately 1,655,000 options available for grant under the 1999 Plan at
June 30, 2000. The Company has 1,000,000 shares of Aspeon, Inc. common stock
reserved for issuance in connection with the exercise of options under the 1999
Plan at June 30, 2000.

                                      F-22
<PAGE>
                                  ASPEON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7.  STOCKHOLDERS' EQUITY (CONTINUED)
    The following option activity occurred during the years ended June 30, 1998,
1999 and 2000:

<TABLE>
<CAPTION>
                                               1998                         1999                         2000
                                     -------------------------   --------------------------   --------------------------
                                                   WEIGHTED                     WEIGHTED                     WEIGHTED
                                                   AVERAGE                      AVERAGE                      AVERAGE
                                     OPTIONS    EXERCISE PRICE    OPTIONS    EXERCISE PRICE    OPTIONS    EXERCISE PRICE
                                     --------   --------------   ---------   --------------   ---------   --------------
<S>                                  <C>        <C>              <C>         <C>              <C>         <C>
FOR OPTIONS GRANTED AT LESS THAN
  FAIR MARKET VALUE ON THE DATE OF
  GRANT:
Options outstanding beginning of
  period...........................  167,500         $3.73         140,200        $3.77          99,200        $3.78
  Exercised........................  (27,300)        $3.50         (36,950)       $3.57         (31,850)       $3.81
  Canceled.........................       --            --          (4,050)       $3.50              --           --
                                     -------         -----       ---------        -----       ---------        -----
Options outstanding................  140,200         $3.77          99,200        $3.78          67,350        $3.77
                                     =======         =====       =========        =====       =========        =====
Options exercisable................  112,536         $3.80          68,000        $3.90          67,350        $3.77
                                     =======         =====       =========        =====       =========        =====
</TABLE>

<TABLE>
<CAPTION>
                                               1998                         1999                         2000
                                     -------------------------   --------------------------   --------------------------
                                                   WEIGHTED                     WEIGHTED                     WEIGHTED
                                                   AVERAGE                      AVERAGE                      AVERAGE
                                     OPTIONS    EXERCISE PRICE    OPTIONS    EXERCISE PRICE    OPTIONS    EXERCISE PRICE
                                     --------   --------------   ---------   --------------   ---------   --------------
<S>                                  <C>        <C>              <C>         <C>              <C>         <C>
FOR OPTIONS GRANTED AT FAIR MARKET
  VALUE ON THE DATE OF GRANT:
Options outstanding................   78,000         $4.90         693,500        $8.96       1,519,800        $9.50
  Granted..........................  623,000         $9.42         903,750        $9.77       1,137,750        $7.37
  Exercised........................       --                       (32,050)       $6.54         (88,050)       $8.99
  Canceled.........................   (7,500)        $9.50         (45,400)       $7.84        (299,883)       $9.56
                                     -------         -----       ---------        -----       ---------        -----
Options outstanding................  693,500         $8.96       1,519,800        $9.50       2,269,617        $8.44
                                     =======         =====       =========        =====       =========        =====
Options exercisable................   58,943         $5.47         153,183        $7.73         588,908        $8.06
                                     =======         =====       =========        =====       =========        =====
</TABLE>

    The weighted average fair value of options granted at fair market value
during fiscal 1998, 1999 and 2000 was $5.63, $6.82, and $3.30, respectively.

                                      F-23
<PAGE>
                                  ASPEON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7.  STOCKHOLDERS' EQUITY (CONTINUED)
    The range of exercise prices for options outstanding and options exercisable
at June 30, 2000 were as follows:

<TABLE>
<CAPTION>
                                                OPTIONS OUTSTANDING              OPTIONS EXERCISABLE
                                           ------------------------------   ------------------------------
                                                         WEIGHTED AVERAGE
                                                            REMAINING                     WEIGHTED AVERAGE
RANGE OF EXERCISE PRICE                    OUTSTANDING   CONTRACTUAL LIFE   EXERCISABLE    EXERCISE PRICE
-----------------------                    -----------   ----------------   -----------   ----------------
<S>                                        <C>           <C>                <C>           <C>
 $1.30 -- $2.60..........................      20,000          6.2             20,000          $ 2.50
 $2.60 -- $3.90..........................      59,650          2.4             59,650            3.50
 $3.90 -- $5.20..........................     378,000          6.1            108,000            4.73
 $5.20 -- $6.50..........................     387,000          5.2              6,066            5.72
 $6.50 -- $7.80..........................     100,000          8.4             20,050            7.50
 $7.80 -- $9.10..........................     413,417          6.4            169,267            8.76
 $9.10 -- $10.40.........................     565,850          4.1            191,300            9.97
$10.40 -- $11.70.........................     279,650          8.3             33,000           10.74
$11.70 -- $13.00.........................     133,400          5.3             48,925           12.77
                                            ---------          ---            -------          ------
                                            2,336,967          5.8            656,258          $ 8.11
                                            =========          ===            =======          ======
</TABLE>

    The Company recognized $51,600, $32,500 and $6,700 in compensation expense
during the years ended June 30, 1998, 1999, and 2000, respectively, for the
difference between the exercise price of certain options granted under the 1996
Plan and the fair market value of the underlying common stock. As of June 30,
2000, the Company recognized all deferred stock-based compensation expense
associated with these 1996 Plan grants.

ASPEON SOLUTIONS, INC. (A WHOLLY-OWNED SUBSIDIARY)

    In February 2000, the Board approved the Company's Aspeon Solutions 2000
Equity Incentive Plan (the "2000 Plan"), under which the Board, or a committee
appointed for such purpose, may grant options, restricted stock or other
stock-based compensation to the directors, officers, eligible employees or
consultants of the Company to acquire up to an aggregate of 7,500,000 shares of
Aspeon Solutions common stock. Options vest in equal monthly installments over
thirty-six months. All options expire ten years from the date of grant. There
are approximately 4,907,000 options available for grant under the 2000 Plan at
June 30, 2000.

    The following option activity occurred in the year ended June 30, 2000:

<TABLE>
<CAPTION>
                                                                 WEIGHTED AVERAGE
                                                     OPTIONS      EXERCISE PRICE
                                                    ----------   ----------------
<S>                                                 <C>          <C>
Options outstanding...............................          --
  Granted.........................................   3,919,500        $1.52
  Canceled........................................  (1,326,111)        1.50
                                                    ----------        -----
Options outstanding...............................   2,593,389        $1.52
                                                    ==========        =====
</TABLE>

    The weighted average grant date fair value of options granted above and
below fair market value during fiscal 2000 was $0.34 and $1.81, respectively.
The weighted average exercise price of options granted above and below fair
market value during fiscal 2000 was $1.52 and $1.50, respectively.

                                      F-24
<PAGE>
                                  ASPEON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7.  STOCKHOLDERS' EQUITY (CONTINUED)
    The range of exercise prices for options outstanding and options exercisable
at June 30, 2000 were as follows:

<TABLE>
<CAPTION>
                                OPTIONS OUTSTANDING              OPTIONS EXERCISABLE
                           ------------------------------   ------------------------------
                                         WEIGHTED AVERAGE
                                            REMAINING                     WEIGHTED AVERAGE
RANGE OF EXERCISE PRICE    OUTSTANDING   CONTRACTUAL LIFE   EXERCISABLE    EXERCISE PRICE
-----------------------    -----------   ----------------   -----------   ----------------
<S>                        <C>           <C>                <C>           <C>
$1.00 -- $1.50...........   2,575,389          7.0            455,437          $ 1.50
$4.50 -- $5.00...........      18,000          9.7              1,484            5.00
                            ---------          ---            -------          ------
                            2,593,389          7.1            456,921          $ 1.51
                            =========          ===            =======          ======
</TABLE>

    The Company recorded $1,029,900 of deferred compensation during the year
ended June 30, 2000 for the difference between the exercise price of certain
Aspeon Solutions options granted under the 2000 Plan and the fair value of the
underlying common stock, which is being amortized ratably over the vesting
periods of the options. Compensation expense of $114,400 was recognized during
the year ended June 30, 2000. Compensation expense of $343,300, $343,300, and
$228,900 will be recognized during the years ending June 30, 2001, 2002 and
2003, respectively.

FAIR VALUE DISCLOSURE

    Pro forma net income (loss) and net income (loss) per common share is
required by SFAS No. 123. The fair value for options granted under all of the
Company's stock option plans was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions:

<TABLE>
<CAPTION>
                                                       1998          1999        2000(1)
                                                     --------      --------      --------
<S>                                                  <C>           <C>           <C>
Risk free interest rate........................          6.0%          6.0%          6.0%
Dividend Yield.................................         None          None          None
Volatility.....................................           57%           60%           82%
Expected Life..................................      3 years       5 years       5 years
</TABLE>

------------------------

(1) The Company used an 84% volatility and 4-year expected life for purposes of
    calculating pro forma per share information required by SFAS No. 123
    relating to the 2000 Plan.

                                      F-25
<PAGE>
                                  ASPEON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7.  STOCKHOLDERS' EQUITY (CONTINUED)
    For purpose of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options vesting periods. The Company's
pro forma information for the years ended June 30, 1998, 1999 and 2000 is as
follows:

<TABLE>
<CAPTION>
                                             1998         1999          2000
                                          ----------   ----------   ------------
<S>                                       <C>          <C>          <C>
Net income (loss) available to common
  stockholders:
  As reported...........................  $1,014,000   $3,666,800   $(15,391,700)
  As adjusted...........................     743,300    3,054,000    (16,270,900)
Net income (loss) per common share as
  reported:
  Basic.................................  $     0.28   $     0.59   $      (1.67)
  Diluted...............................  $     0.27   $     0.57   $      (1.67)
Net income (loss) per common share as
  adjusted:
  Basic.................................  $     0.21   $     0.49   $      (1.76)
  Diluted...............................  $     0.20   $     0.47   $      (1.76)
</TABLE>

WARRANTS

    In connection with its initial public offering, the Company issued the
representatives of the underwriters a warrant to purchase 85,000 shares of the
Company's common stock at $6.25 per share. During the year ended June 30, 1998,
warrants to purchase 65,570 shares of the Company's common stock were exchanged
into 36,362 shares of common stock through a cashless exercise. During the year
ended June 30, 1999, warrants to purchase 19,430 shares of the Company's common
stock were exchanged into 10,790 shares of common stock through a cashless
exercise. As of June 30, 1999 there were no warrants outstanding.

    In connection with the credit facility described in Note 5, the Company
issued warrants to purchase 100,000 shares of its common stock at $9.00 per
share to the financial institution and warrants to purchase 35,000 shares of its
common stock at prices ranging from $9.36 to $12.65 to its independent financial
advisors. The fair value of these warrants was estimated at $621,900 at the date
of grant using a Black-Scholes pricing model with the assumptions described
above. The fair value of the warrants has been reflected as deferred financing
costs and additional paid in capital in the accompanying balance sheets. As of
June 30, 1999 and 2000, deferred financing costs of $617,600 and $312,900 were
included in other assets.

    In March 2000, the Company issued warrants in connection with its issuance
of Preferred Stock (Note 6).

8.  EMPLOYEE BENEFITS PLANS

    The Company sponsors several 401(k) retirement plans (the "Plans") that are
considered defined contribution discretionary plans under which eligible
participants may contribute up to a maximum of 15% of their pre-tax earnings
subject to certain statutory limitations. The Company made no discretionary
contributions to the Plans during fiscal 1998, 1999 and 2000.

                                      F-26
<PAGE>
                                  ASPEON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9.  COMMITMENTS AND CONTINGENCIES

LEASES

    The Company leases its facilities and certain equipment under non-cancelable
operating leases subject to scheduled rent increases. The leases expire at
various dates through December 2007.

    The Company leases certain computer and office equipment under capital
leases with three- to five-year terms and interest rates ranging from 9.5% to
15%. The cost of assets acquired under capital leases during the year ended
June 30, 2000 was $551,800 with accumulated amortization of $75,700 as of
June 30, 2000. There were no capital leases entered into during the year ended
June 30, 1999.

    Minimum lease commitments at June 30, 2000 are as follows:

<TABLE>
<CAPTION>
YEAR ENDING JUNE 30                                      CAPITAL    OPERATING
-------------------                                     ---------   ----------
<S>                                                     <C>         <C>
2001..................................................  $ 151,400   $1,842,300
2002..................................................    111,800    1,734,300
2003..................................................    105,500    1,519,300
2004..................................................     71,900      929,100
2005..................................................     53,900      769,500
Thereafter............................................         --    1,461,100
                                                        ---------   ----------
Total minimum lease payments..........................    494,500   $8,255,600
                                                                    ==========
Less amount representing interest.....................    (51,700)
                                                        ---------
Present value of minimum obligations..................    442,800
Current portion.......................................   (137,600)
                                                        ---------
Long-term portion.....................................  $ 305,200
                                                        =========
</TABLE>

    Rent expense under operating lease agreements aggregated approximately
$230,100, $907,600 and $1,373,100 for the years ended June 30, 1998, 1999, and
2000 respectively, and is included in general and administrative expenses in the
accompanying consolidated statements of operations.

EMPLOYMENT AGREEMENTS

    The Company has employment agreements with key employees of the Company,
which expire at various dates through June 2003. Certain agreements provide for
incentive bonuses which are payable if specified management goals are attained.

    Future annual minimum payments under the employment agreements as of
June 30, 2000 are as follows:

<TABLE>
<CAPTION>
                                                              EMPLOYMENT
YEAR ENDING JUNE 30                                           AGREEMENT
-------------------                                           ----------
<S>                                                           <C>
2001........................................................  $2,118,000
2002........................................................   1,830,000
2003........................................................   1,491,000
                                                              ----------
Total.......................................................  $5,439,000
                                                              ==========
</TABLE>

                                      F-27
<PAGE>
                                  ASPEON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9.  COMMITMENTS AND CONTINGENCIES (CONTINUED)
LITIGATION

    In October 1999, the Company and two former officers of DTI and SB were
named as defendants in a breach of contract and intentional tort action brought
by an individual who claims rights to computer software products once offered
for sale by subsidiaries of the Company. The plaintiff is seeking payment of one
half of all the sales proceeds of the commercial software product line of
"Special Delivery" sold since February 1997 and makes claim to one half of the
asset purchase price (as apportioned to the "Special Delivery" asset) paid by
the Company to the shareholders of DTI in April 1999. The Company and its
subsidiaries have indemnification rights against one of the selling shareholders
in connection with his representations and warranties made about "Special
Delivery" in various documents. Although the Company and its subsidiaries
support the selling shareholder's position as it relates to the plaintiff in
this action, cross-claims have been filed against the selling shareholder, for
indemnification and contribution, for further protection. Management is unable
to determine whether the outcome of this complaint will have a material impact
on the Company's consolidated financial position, results of operations or cash
flows.

    In October and November 2000, the Company, the Company's Chief Executive
Officer, and its former Chief Financial Officer were sued in the United States
District Court for the Central District of California for alleged violations of
the Securities Exchange Act of 1934. The plaintiffs seek class action status.
The complaints do not specify the amount of damages sought. Per press releases,
other plaintiffs are purported to have filed similar lawsuits against the
Company and its officers or former officers. Management is unable to determine
whether the outcome of these complaints or associated legal costs will have a
material impact on the Company's consolidated financial position, results of
operations, or cash flows.

    From time to time the Company is a defendant or plaintiff in other
litigation arising in the ordinary course of business. To date, no such other
litigation has had a material effect on the Company's consolidated financial
position or results of operations.

10.  RELATED PARTY TRANSACTIONS

    In November 1998, the Company executed a note payable with the selling
shareholder of RGB and current employee of the Company in the principal amount
of $330,600. The note bears interest at 10% per annum and is payable upon
demand. The unpaid principal and interest on the note were paid in full by the
Company during fiscal 2000.

    In August and September 1999, the Company executed two notes receivable with
directors of the Company in the amounts of $116,000 and $80,000. These notes
bear interest at 6.0% per annum. The $116,000 note receivable principal balance
and accrued interest is due in August 2002 and is secured by a pledge of 39,000
shares of common stock in an entity other than the Company. The $80,000 note
receivable is payable upon the sooner of: (a) the director's exercise of options
to purchase 30,000 shares of the Company's common stock used as collateral for
the loan or (b) September 2002. The principal and interest of the $80,000 note
was paid in full in November 2000.

    In April and August 2000, the Company executed a $300,000 unsecured and
$400,000 secured note receivable (collectively the "Notes") with its CEO. The
$400,000 note was collateralized by certain assets

                                      F-28
<PAGE>
                                  ASPEON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10.  RELATED PARTY TRANSACTIONS (CONTINUED)

of the CEO and bore interest at the rate of 6.6% annum. The principal and
interest of the Notes were paid in full in September 2000. During each of the
years ended June 30, 1999 and 2000, Aspeon Europe incurred an annual rent
expense of approximately $50,000, which was payable to an entity owned by
directors of Aspeon Europe. As of June 30, 2000, the directors are no longer
employees of the Company.

11.  SEGMENT INFORMATION

    The Company's reportable segments are strategic business units that offer
different products and services. They are managed separately because each
business requires different technology and marketing strategies. The segments
and a description of their businesses follows:

    The Research and Development segment provides all research and development
activities for the other business segments.

    The POS Products segment designs, manufactures and markets open system
touchscreen point-of-sale (POS) network-ready hardware systems. These systems
are sold on a stand-alone basis or integrated as part of an end-to-end solution.

    The Solutions Services segment provides retail foodservice technology
solutions and services that enable restaurants and retailers to capture,
analyze, disseminate and use information throughout the enterprise, from the
point-of-sale (POS) cash register terminal to the back office to an
organization's headquarters.

    The ASP Services segment provides pre-integrated, mission-critical business
application services customized to meet industry specific needs of the
foodservice and retail industry.

    The accounting policies of the segments are the same as those described in
the "Summary of Significant Accounting Policies." Segment data includes
intersegment revenues. The Company does not allocate corporate-headquarters
costs or research and development costs to the operating segments. Resources for
research and development are allocated based on budgets. The Company evaluates
the performance of its segments and allocates resources to them based on net
income (loss). Prior year information has been restated to conform to current
year reportable segments.

                                      F-29
<PAGE>
                                  ASPEON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11.  SEGMENT INFORMATION (CONTINUED)
    Information about the Company's reportable segments for the years ended
June 30 follows:

<TABLE>
<CAPTION>
                                RESEARCH AND       POS        SOLUTION         ASP
                                DEVELOPMENT     PRODUCTS      SERVICES      SERVICES        TOTAL
                                ------------   -----------   -----------   -----------   -----------
<S>                             <C>            <C>           <C>           <C>           <C>
1998
Revenues......................  $        --    $19,590,000   $10,968,700   $        --   $30,558,700
Net income (loss).............     (567,700)     1,774,400       583,200            --     1,789,900
Total assets..................  $        --    $17,118,700   $ 5,412,600   $        --   $22,531,300

1999
Revenues......................  $        --    $39,687,400   $34,538,700   $ 1,645,600   $75,871,700
Net income (loss).............     (927,600)     4,394,200     1,254,300       447,500     5,168,400
Total assets..................  $        --    $56,519,900   $17,374,300   $ 2,188,700   $76,082,900

2000
Revenues......................  $        --    $50,414,700   $33,091,000   $13,469,700   $96,975,400
Net income (loss).............   (1,298,900)      (681,500)     (406,500)   (5,713,000)   (8,099,900)
Total assets..................  $        --    $69,000,200   $16,122,000   $ 6,661,300   $91,783,500
</TABLE>

    A reconciliation of total segment sales to total consolidated revenues and
total segment net income (loss) to total consolidated net income (loss) for the
years ended June 30, 1998, 1999 and 2000 is as follows:

<TABLE>
<CAPTION>
                                                           1998          1999           2000
                                                        -----------   -----------   ------------
<S>                                                     <C>           <C>           <C>
REVENUES:
  Total segment revenues..............................  $30,558,700   $75,871,700   $ 96,975,400
  Elimination of inter-segment revenues...............     (912,600)   (3,112,900)   (15,930,200)
                                                        -----------   -----------   ------------
  Consolidated revenues...............................  $29,646,100   $72,758,800   $ 81,045,200
                                                        ===========   ===========   ============
NET INCOME (LOSS):
  Total segment net income (loss).....................  $ 1,789,900   $ 5,168,400   $ (8,099,900)
  Elimination of inter-segment gross profit net of
    income taxes......................................     (201,300)     (366,200)      (323,900)
  Elimination of non-segment expenses, net of taxes...     (574,500)   (1,135,400)      (877,400)
                                                        -----------   -----------   ------------
  Consolidated net income (loss)......................  $ 1,014,100   $ 3,666,800   $ (9,301,200)
                                                        ===========   ===========   ============
</TABLE>

                                      F-30
<PAGE>
                                  ASPEON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11.  SEGMENT INFORMATION (CONTINUED)
    Specified items included in segment profit (loss) for the years ended
June 30:

<TABLE>
<CAPTION>
                                RESEARCH AND       POS        SOLUTION         ASP
                                DEVELOPMENT     PRODUCTS      SERVICES      SERVICES        TOTAL
                                ------------   -----------   -----------   -----------   -----------
<S>                             <C>            <C>           <C>           <C>           <C>
1998
Interest expense..............    $      --    $   100,600   $    14,400   $        --   $   115,000
Interest income...............           --        (11,400)         (800)           --       (12,200)
Depreciation and amortization
  expense.....................           --        117,500       234,300            --       351,800
Income tax expense
  (benefit)...................     (306,300)     1,005,300       304,600            --   $ 1,003,600
Expenditures for additions to
  long-lived assets...........    $      --    $ 1,199,600   $ 6,996,700            --   $ 8,196,300

1999
Interest Expense..............    $      --    $   744,900   $   125,400   $        --   $   870,300
Interest income...............           --       (224,000)         (800)           --      (224,800)
Depreciation and amortization
  expense.....................                     406,900       808,200        13,200     1,228,300
Income tax expense............     (408,500)     2,001,700       954,200       174,500     2,721,900
Expenditures for additions to
  long-lived assets...........    $      --    $ 1,469,700   $17,059,400            --   $18,529,100

2000
Interest expense..............    $      --    $   759,500   $    42,100   $     6,200   $   807,800
Interest income...............           --       (389,800)      (33,000)           --      (422,800)
Depreciation and amortization
  expense.....................           --        867,300     1,201,200     2,894,300     4,962,800
Income tax expense
  (benefit)...................     (669,100)    (2,598,800)      230,300     2,088,100      (949,500)
Expenditures for additions to
  long-lived assets...........    $      --    $ 1,199,600   $ 4,681,100   $14,170,900   $20,051,600
</TABLE>

    Revenues and long-lived asset information by geographic area as of and for
the years ended June 30:

<TABLE>
<CAPTION>
                                    UNITED
                                    STATES        EUROPE         ASIA      AUSTRALIA       TOTAL
                                  -----------   -----------   ----------   ----------   -----------
<S>                               <C>           <C>           <C>          <C>          <C>
1998
Revenues........................  $28,749,700   $   724,100   $   88,300   $   84,000   $29,646,100
Long-lived assets...............  $ 8,331,200   $     5,900   $   19,800   $   26,000   $ 8,382,900

1999
Revenues........................  $47,969,500   $21,824,800   $1,536,200   $1,428,300   $72,758,800
Long-lived assets...............  $23,803,700   $ 6,254,900   $  397,800   $   43,800   $30,500,200

2000
Revenues........................  $52,924,800   $23,375,200   $2,116,000   $2,629,200   $81,045,200
Long-lived assets...............  $39,318,600   $ 2,377,800   $1,454,700   $   42,400   $43,193,500
</TABLE>

                                      F-31
<PAGE>
                                  ASPEON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

12.  SUBSEQUENT EVENTS

SALE OF ASPACT

    In August 2000, the Company executed a sale agreement with the then current
director of Aspact (the "Purchaser"). The initial purchase price is $350,000
that is payable to the Company in monthly installments of $14,600 commencing in
July 2001. In the event the Purchaser consummates an initial public offering or
disposes of all or substantially all of Aspact's common stock, the Purchaser
will be 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 the Company.

CONVERSION OF PREFERRED STOCK

    In August 2000, $150,000 (150 shares of Preferred Stock stated value) plus
accrued and unpaid dividends, were converted into 53,054 shares of the Company's
common stock.

NOTICE OF DEFAULT

    In October 2000, a notice of default was received from the Preferred
Stockholders due to the Company's failure to timely file its Form 10-K and the
suspension of trading of the Company's common stock by Nasdaq. In accordance
with the provisions of the Preferred Stock agreement, the Company is required to
pay 1.5% of the stated value of the Preferred Stock ($9,850,000) for each thirty
calendar day period during which the default remains (the "Default Amount"). As
a result of the defaults not being cured within ten days of the default notice,
both a Repricing and Redemption Event, as defined, have been triggered.

    In October 2000, Purchaser notified the Company that it was in default of
various covenants associated with the Preferred Stock and related agreements. As
a result of these defaults, the Purchaser has the right to pursue any or all of
the following remedies:

    - REDEMPTION OF PREFERRED STOCK.  The Purchaser may require that the Company
      redeem all or any portion of the Preferred Stock at a redemption price
      equal to the greater of: (i) 125% of the sum of the aggregate $1,000
      stated value per share of the Preferred Stock outstanding plus accrued
      dividends and interest (the "Aggregate Value") or (ii) the amount which
      results from dividing the Aggregate Value by the conversion price in
      effect for the Preferred Stock on the redemption date and multiplying the
      resulting quotient by the average closing trading price for the Company's
      Common Stock on the five trading days immediately preceding the redemption
      date.

    - REPRICING EVENT AND SHARE LIMITATION INCREASE.  The Purchaser may reduce
      the conversion price for the Preferred Stock to the lesser of (i) the
      lowest conversion price of the Preferred Stock or market price of the
      Common Stock of the Company (in either case, calculated according to the
      terms of the Preferred Stock) during the applicable default period or
      (ii) the conversion price for the Preferred Stock otherwise in effect on
      the conversion date. In connection with any such reduction of the
      conversion price of the Preferred Stock, the applicable limits of the
      number of shares of Common Stock which may be acquired upon the conversion
      of the Preferred Stock (the "Share Limitation"), shall be increased in
      proportion to the reduction in the conversion price of the Preferred
      Stock.

                                      F-32
<PAGE>
                                  ASPEON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

12.  SUBSEQUENT EVENTS (CONTINUED)
    As a result of the defaults, the Company will be required to accrete the
Preferred Stock to its redemption value of $9,850,000, plus accrued but unpaid
dividends and the Default Amount in the second quarter of fiscal 2001.

SUSPENSION OF TRADING

    In October 2000, the Nasdaq Stock Market ("Nasdaq") suspended trading in the
Company's common stock while it sought additional information from the Company.
On October 11, 2000, Nasdaq sent a letter to the Company stating that that
Company's Common Stock would be delisted from Nasdaq if the Company did not file
its Form 10-K for the fiscal year ended June 30, 2000 with the Securities and
Exchange Commission ("SEC") by October 18, 2000. The Form 10-K was not filed
with the SEC by the October 18, 2000 deadline. Nasdaq has not yet determined
whether the Company's common stock may continue to be listed on Nasdaq or if it
will be delisted.

                                      F-33
<PAGE>
                                  ASPEON, INC.

                                  SCHEDULE II

                 VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

<TABLE>
<CAPTION>
                                                     BALANCE AT                                 BALANCE AT
                                                    BEGINNING OF                                  END OF
DESCRIPTION                           FISCAL YEAR      PERIOD      ADDITIONS   DEDUCTIONS         PERIOD
-----------                           -----------   ------------   ---------   ----------       ----------
<S>                                   <C>           <C>            <C>         <C>              <C>
Allowance for doubtful accounts.....     2000         $454,400     $355,200    $(376,000)(1)    $  433,600
                                         1999          248,800      263,000      (57,400)(1)       454,400
                                         1998            5,000      243,800           --           248,800

Inventory allowances................     2000          434,500      629,400           --         1,063,900
                                         1999          159,800      274,700           --           434,500
                                         1998               --      312,800     (153,000)(2)       159,800

Warranty reserve....................     2000          100,000       32,000      (13,700)          118,300
                                         1999          135,000      104,400     (139,400)(2)       100,000
                                         1998            5,000      130,000                        135,000
</TABLE>

------------------------

(1) Deductions primarily represent the write-off of certain accounts
    receivables.

(2) Deductions primarily represent the adjustment of the reserve balance.