##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 x
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended December 31, 2007
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission
File Number: 000-51577
 ESPRE SOLUTIONS INC.
  NEVADA
(State or other jurisdiction of 
incorporation or organization)
    
    68-0576847
(I.R.S. Employer
Identification No.)
 5700 W. Plano Parkway, Suite 2600, Plano, Texas
(Address of principal executive offices)
    
    75093
(Zip Code)
 (214) 254-3708
 x o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer x
 o x




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##### 



FORM 10-Q
 CONTENTS
 PAGEPART I  FINANCIAL INFORMATION (Unaudited)Item 1
    
    
    
    Financial StatementsConsolidated Balance Sheets at December 31, 2007 and September 30, 2007
    
    
    3Consolidated Statements of Operations for the Three Months Ended December 31, 2007 and 2006
    
    
    4Consolidated Statements of Cash Flows for the Three Months ended December 31, 2007 and 2006
    
    
    5Consolidated Statement of Shareholders Equity for the Three Months ended December 31, 2007
    
    
    6Selected Notes to Condensed Consolidated Financial Statements
    
    
    7Item 2
    
    
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    11Item 3
    
    
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    13Item 4
    
    
    
    Controls and Procedures
    
    
    13PART II  OTHER INFORMATIONItem 1
    
    
    
    Legal Proceedings
    
    
    14Item 1A
    
    
    
    Risk Factors
    
    
    14Item 2
    
    
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    14Item 3
    
    
    
    Defaults upon Senior Securities
    
    
    14Item 4
    
    
    
    Submission of Matters to a Vote of Security Holders
    
    
    14Item 5
    
    
    
    Other Information
    
    
    14Item 6
    
    
    
    Exhibits
    
    
    14Signature
    
    
    15EX-31.1 Section 302 CertificationEX-31.2 Section 302 CertificationEX-32.1 Section 906 CertificationEX-32.2 Section 906 Certification
   
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##### Table of Contents



PART I
 FINANCIAL INFORMATION
 
 Item 1
 Financial Statements
 
 ESPRE SOLUTIONS INC. AND SUBSIDIARY
 December 31, 2007
    
    
    September 30,2007(Unaudited)ASSETSCurrent assets:Cash
    
    $
    3,297,089
    
    
    $
    3,850,666Accounts receivable, net
    
    
    1,808
    
    
    
    251,050Prepaid expenses and advances
    
    
    113,418
    
    
    
    34,564Total current assets
    
    
    3,412,315
    
    
    
    4,136,280Equipment, net
    
    
    329,154
    
    
    
    296,758Intangible assets, net
    
    
    72,526
    
    
    
    73,191Loans to related parties
    
    
    69,432
    
    
    
    69,432Other assets
    
    
    114,847
    
    
    
    97,292Total assets
    
    $
    3,998,273
    
    
    $
    4,672,953LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Notes payable to related parties
    
    $
    25,000
    
    
    $
    395,000Accounts payable and accrued expenses
    
    
    1,082,451
    
    
    
    1,449,397Total current liabilities
    
    
    1,107,451
    
    
    
    1,844,397Deferred revenue  related party
    
    
    
    
    
    
    1,000,000Minority interest
    
    
    1,413,741
    
    
    
    348,093Stockholders equityCommon shares  $0.001 par value; authorized
500,000,000 shares; and 329,217,550 and
318,522,499 shares issued
and outstanding , respectively
    
    
    329,217
    
    
    
    318,523Additional paid-in capital
    
    
    75,458,285
    
    
    
    72,383,030Stock subscription receivable
    
    
    (10,000
    )
    
    
    (190,000
    )Retained equity (deficit)
    
    
    (74,300,421
    )
    
    
    (71,031,090
    )Total stockholders equity
    
    
    1,477,081
    
    
    
    1,480,463Total liabilities and stockholders equity (deficit)
    
    $
    3,998,273
    
    
    $
    4,672,953
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ESPRE SOLUTIONS INC. AND SUBSIDIARY
 2007
    
    
    2006Revenue:Software licensing fees
    
    $
    1,000,000
    
    
    $
    2,240,000Custom engineering fees
    
    
    44,842
    
    
    
    233,250Other
    
    
    41,116
    
    
    
    7,626Total revenue
    
    
    1,085,958
    
    
    
    2,480,876Expenses:General, administrative and selling expenses
    
    
    2,037,184
    
    
    
    1,093,428Research and development
    
    
    565,754
    
    
    
    84,600Stock based compensation
    
    
    1,996,741
    
    
    
    1,084,074Stock and options for services
    
    
    105,209
    
    
    
    Amortization and depreciation
    
    
    31,762
    
    
    
    23,347Total operating expenses
    
    
    4,736,650
    
    
    
    2,285,449Loss from operations
    
    
    (3,650,690
    )
    
    
    195,427Interest expense
    
    
    
    
    
    
    (7,848
    )Net loss before minority interest
    
    
    (3,650,665
    )
    
    
    187,579Minority interest
    
    
    381,359
    
    
    
    Net income (loss)
    
    $
    (3,269,331
    )
    
    $
    187,579Basic and diluted net loss per share
    
    $
    (0.01
    )
    
    $
    (0.00
    )Weighted average shares outstanding, basic and
diluted
    
    
    324,093,718
    
    
    
    205,085,889
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ESPRE SOLUTIONS INC. AND SUBSIDIARY
 2007
    
    
    2006Cash flows from operating activities:Net income (loss) for period
    
    $
    (3,269,331
    )
    
    $
    187,579Adjustments to reconcile net loss to cash used in
operating activities:Stock and options issued for services
    
    
    105,209
    
    
    
    Stock based compensation
    
    
    1,996,741
    
    
    
    1,084,074Amortization and depreciation
    
    
    31,762
    
    
    
    23,347Minority interest
    
    
    (381,359
    )
    
    
    Changes in assets and liabilities:Deferred revenue
    
    
    (1,000,000
    )
    
    
    150,000Accounts receivable
    
    
    249,242
    
    
    
    (2,048,220
    )Prepaid expenses
    
    
    (78,854
    )
    
    
    928Other assets
    
    
    (17,555
    )
    
    
    4,400Accounts payable and accrued expenses
    
    
    (366,947
    )
    
    
    443,962Total cash used in operating activities
    
    
    (2,731,092
    )
    
    
    (153,930
    )Net cash used in investing activities:Purchase of equipment
    
    
    (51,922
    )
    
    
    1,411Purchase of intangible assets
    
    
    (11,571
    )
    
    
    (35,991
    )Net cash used in investing activities
    
    
    (63,493
    )
    
    
    (34,580
    )Cash flows provided by financing activities:Payments on notes payable to related parties
    
    
    (100,000
    )
    
    
    (97,985
    )Proceeds from sale of stock
    
    
    714,000
    
    
    
    Minority capital raised
    
    
    1,447,008
    
    
    
    Receipts of stock subscriptions receivable
    
    
    180,000
    
    
    
    Net cash provided (used in) by financing activities
    
    
    2,241,008
    
    
    
    (97,985
    )Net increase in cash
    
    
    (553,577
    )
    
    
    (286,495
    )Cash, beginning of period
    
    
    3,850,666
    
    
    
    291,426Cash, end of period
    
    $
    3,297,089
    
    
    $
    4,931Supplemental
disclosures of cash flow information:Cash paid for interest
    
    $
    
    
    
    $
    7,848Non-cash
transactions:Issuance of common stock to retire debt
    
    $
    270,000
    
    
    $
    
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ESPRE SOLUTIONS INC. AND SUBSIDARY
 Common StockAdditionalNumber of
    
    
    
    
    
    
    Paid-In
    
    
    SubscriptionsShares
    
    
    Par Value
    
    
    Capital
    
    
    Receivable
    
    
    Retained Deficit
    
    
    TotalBalance, October 1, 2007
    
    
    318,522,499
    
    
    $
    318,522
    
    
    $
    72,383,030
    
    
    $
    (190,000
    )
    
    $
    (71,031,090
    )
    
    $
    1,480,462Private
Placements
    
    
    8,608,334
    
    
    
    8,608
    
    
    
    705,392
    
    
    
    180,000
    
    
    
    
    
    
    
    894,000Stock
Based Compensation
    
    
    
    
    
    
    
    
    
    
    1,996,741
    
    
    
    
    
    
    
    
    
    
    
    1,996,741Issuance of
common stock to guarantee note payable
    
    
    1,500,000
    
    
    
    1,500
    
    
    
    268,500
    
    
    
    
    
    
    
    
    
    
    
    270,000Stock for
services
    
    
    586,717
    
    
    
    587
    
    
    
    104,622
    
    
    
    
    
    
    
    
    
    
    
    105,209Net Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,269,331
    )
    
    
    (3,269,331
    )Balance, December 31, 2007
    
    
    329,217,550
    
    
    $
    329,217
    
    
    $
    75,458,285
    
    
    $
    (10,000
    )
    
    $
    (74,300,421
    )
    
    $
    1,477,081
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ESPRE SOLUTIONS, INC. AND SUBSIDIARY  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1. BASIS OF PRESENTATION AND CONTROLLED SUBSIDIARY
    2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Principles of consolidation
  Reclassifications
  Recent pronouncements
     Business Combinations
 Noncontrolling Interests in Consolidated
Financial Statements, an amendment of ARB 51
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3. GOING CONCERN AND MANAGEMENTS PLAN
   
    
    Market its principal product, ESPRE Live, to customers wishing to build applications
using video and provide custom engineering services to those customers as requested.
    
    Engage in partnerships with firms in key vertical markets. These partners will be market
experts and have well defined application strategies that require ESPRE Live to develop
them.
    
    Launch Blideo as an application service provider
    
    Establish independent sales agreements with representatives to sell its products and
services. The Company will actively pursue the engagement of additional independent sales
representatives who can distribute the Companys existing video products and services both
domestically and internationally.
    
    Obtain additional debt and equity financing.
  4. INVESTMENT IN AND LOANS TO RELATED PARTIES
 Blideo Inc.
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5. NOTES PAYABLE TO RELATED PARTIES
  December 31,
    
    
    September 30,2007
    
    
    2007Contingent
repurchase agreement to Video Software Partners,
secured by certain software
products, payable on February 1,
2008, interest imputed at 10%
    
    $
    
    
    
    $
    370,000Note payable
to a related individual, at 10%, due November
25, 2004, extended year to year,
unsecured
    
    
    25,000
    
    
    
    25,000$
    25,000
    
    
    $
    395,000
 6. STOCKHOLDERS EQUITY
 Common stock
 Payments for Services
  Capital Raises
  7. STOCK OPTIONS
  Outstanding Stock Options
    
    
    Exercisable Stock OptionsWeighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    
    ExerciseShares
    
    
    Price
    
    
    Shares
    
    
    PriceOutstanding at October 1, 2007
    
    
    66,814,634
    
    
    $
    0.10
    
    
    
    18,986,301
    
    
    $
    0.12Granted during period
    
    
    7,200,000
    
    
    $
    0.09
    
    
    
    3,014,423
    
    
    $
    0.08Outstanding at December 31, 2007
    
    
    74,014,634
    
    
    $
    0.10
    
    
    
    22,000,724
    
    
    $
    0.10
 8. WARRANTS
  Outstanding Warrants
    
    
    Exercisable WarrantsWeighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    
    ExerciseShares
    
    
    Price
    
    
    Shares
    
    
    PriceOutstanding at October 1, 2007
    
    
    44,019,716
    
    
    $
    0.10
    
    
    
    44,019,716
    
    
    $
    0.10Granted during period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Outstanding at December 31, 2007
    
    
    44,019,716
    
    
    $
    0.10
    
    
    
    44,019,716
    
    
    $
    0.10
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9. CONCENTRATION OF CREDIT RISK AND DEPENDENCY
    10. DEFERRED INCOME TAXES
  2007
    
    
    2006Net operating losses
    
    $
    19,624,000
    
    
    $
    19,239,000In- process research and development
    
    
    1,329,000
    
    
    
    1,528,000Stock based compensation
    
    
    587,000
    
    
    
    1,386,000Transition adjustment
    
    
    217,000
    
    
    
    217,00021,757,000
    
    
    
    22,370,000Less valuation
    
    
    (21,757,000
    )
    
    
    (22,370,000
    )Net deferred tax assets
    
    $
    
    
    
    $
    
 11. SUBSEQUENT EVENTS
  10




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Overview
 Results of Operations for the Three Months Ended December 31, 2007
  
    
    In April 2007 we entered into a license agreement an exclusive right to use our
technology license for the entertainment market for an initial amount of $1,000,000 and a
further $450,000 contingent on our delivering certain design proofs of concept. The
license agreement granted the license holder a put option which could have required us to
repurchase the license for $2,000,000 at any time after January 31, 2008, and before April
31, 2010. The revenue from this license was deferred and is included on our balance sheet
as deferred revenue at September 30, 2007. In December 2007, we concluded an agreement with
the licensee to waive the put option in return for a waiver of the balance due under the
license of $450,000, and accordingly we recorded the full license fee of $1,000,000 in the
quarter ended December 31, 2007.
    
    $44,000 for the design of our customers applications, including a major US carrier. We
expect continued engineering revenues if and when these customers successfully deploy their
product and/or service offerings.
   Liquidity and Capital Resources
   
    
    Market our principal product, ESPRE Live, to customers wishing to build applications
using video and provide custom engineering services to those customers as requested. In
August 2007 we expanded our sales and marketing staff to achieve this objective.
    
    Engage in partnerships with firms in key vertical markets. These partners will be market
experts and have well-defined application strategies that require ESPRE Live to build them.
Potential customers have been identified and we are in active negotiations with them. No
assurance can be given however that we will be successful in entering into satisfactory
commercial arrangements with these or other customers.
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
    
    Establish independent sales agreements with representatives to sell our products and
services. We will actively pursue the engagement of additional independent sales
representatives that can distribute the Companys existing video products and services both
domestically and internationally. Potential partners have been identified and we are in
active negotiations with them. No assurance can be given however that we will be successful
in entering into satisfactory commercial arrangements with these or other partners.
    
    Obtain additional debt and equity financing.
    Critical Accounting Policies and Recent Accounting Pronouncements
  Forward-Looking Statements
  12




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ITEM 3. Quantitative and Qualitative Disclosure About Market Risk
  
 ITEM 4. Controls and Procedures
   Limitations on the Effectiveness of Controls
  13




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PART II  OTHER INFORMATION
 
 Item 1
    
    Legal ProceedingsNone
 
 Item 1A
    
    Risk FactorsNone
  
 Item 2
    
    Unregistered Sales of Equity Securities and Use of Proceeds
  
 
 
 
 Item 3
    
    Defaults upon Senior SecuritiesNoneItem 4
    
    Submission of Matters to a Vote of Security HoldersNoneItem 5
    
    Other InformationNoneItem 6
    
    ExhibitsExhibit 31.1  Section 302 Certificate of Chief
Executive Officer
Exhibit 31.2  Section 302 Certificate of Chief Financial Officer
Exhibit 32.1  Section 906 Certificate of Chief Executive Officer
Exhibit 32.2  Section 906 Certificate of Chief Financial Officer
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SIGNATURE
  ESPRE SOLUTIONS, INC.

Registrant/s/ Peter Leighton

Peter Leighton
    
    President
    
    February 19, 2008/s/ Forres McGraw

Forres McGraw
    
    Chief Financial Officer
    
    February 19, 2008
 15