Current Business Strategy

Because of the sale of all of our operating assets in February 2008, the Company has no ongoing operations.   The Board has determined to maintain the Company as a public “shell” corporation, which will seek suitable business combination opportunities.  The Board believes that a business combination with an operating company has the potential to create greater value for the Company’s stockholders than a liquidation or similar distribution.

Effect of Status as a “Shell” Company

Because we are a shell company as defined under the Rules of the Securities and Exchange Commission, we are disqualified from using a short form of registration statement (S-8) for the issuance of employee stock options. Furthermore, holders of restricted securities issued while we were or are a shell company may not re-sell them pursuant to SEC Rule 144 for a period of one year after we cease to be a shell and have filed the necessary report with the SEC to that effect.

Employees

The Company presently has no employees apart from our Officers and Directors. We expect no significant changes in the number of our employees other than such changes, if any, incident to a business combination.

4

Item 2. Description of Property.

We do not own any real property.  The Company’s corporate headquarters are located in the offices of one of our Board Members, located in Scottsdale, Arizona.  The Company is not obligated under the terms of that lease, which has monthly rental payments of $1,000, on a month to month basis.

 Item 3. Legal Proceedings.

We are from time to time involved in legal proceedings arising from the normal course of business.  As of the date of this report, we were not currently involved in any legal proceedings.

Item 4. Submission Of Matters To A Vote Of Security Holders and Small Business Issuer Purchases of Equity Securities.

No matter was submitted to vote of our security holders during the fourth fiscal quarter covered by this report.

5

PART II

Item 5. Market For Common Equity And Related Stockholder Matters

Market for Common Stock

Our common stock is quoted on the Over-The-Counter Bulletin Board maintained by the NASD under the symbol “NTMS.OB.”  The high and low bid prices of our common stock as reported for the periods presented, by fiscal quarter (i.e. 1st Quarter = July 1 through September 30), were as follows.  The quotations reflect inter-dealer prices, without retail markup, mark-down or commission and may not represent actual transactions.

Holders

As of September 22, 2008, there were approximately 129 holders of record of our common stock.  This does not include beneficial owners holding stock in street name.

6

our common stock exceeds certain designated thresholds.  Under the terms of the note, if the average price of the stock for the five trading days preceding a scheduled payment is 10% greater than the fixed conversion price, the scheduled payment is paid by the conversion of common stock. If the scheduled payment is not made with common stock, the payment is made with cash.  In June 2005, we amended the conversion price of the note. The conversion price on the first $300,000 of the note was reduced to $0.50 per share and the conversion price on the remainder of the note was reduced to $0.65 per share.  The warrant entitles the holder thereof to purchase, at any time through March 22, 2011, 200,000 shares of our common stock at a price of $1.29 per share; 40,000 shares of our common stock at a price of $1.35 per share; and 40,000 shares of our common stock at a price of $1.40 per share.  We issued the note and the warrant in a transaction exempt from registration under Section 4(2) of the Securities Act.

The private placement of the note and the warrant with Laurus in March 2004 was facilitated by The Oberon Group, LLC (Oberon) in consideration for which Oberon was paid an advisory fee of $150,000, and granted a warrant to purchase, at any time through March 22, 2007, 136,364 shares of our common stock at a per share price of $1.10.  We issued the warrant in a transaction exempt from registration under Section 4(2) of the Securities Act.

In April 2004, the Company entered into a subordinated note agreement with a shareholder and existing debt holder.  Under the terms of the agreement, an existing term note was refinanced as a five year term note with monthly principal and interest payments at 15%.  In consideration for agreeing to subordinate repayment of the note to the Laurus note, we issued 25,000 shares of restricted common stock to the holder of the subordinated note.  We issued these shares in a transaction exempt from registration under Section 4(2) of the Securities Act.

In June 2005, we entered into a security agreement with Laurus that provided that we may borrow from time to time revolving loans up to $1,500,000 subject to a borrowing base calculation based on our eligible accounts receivable.  Borrowings under the revolving facility, evidenced by notes, accrue interest at the prime rate payable monthly. Pursuant to the terms of the Agreement, Laurus shall have the right at any time until the maturity date, or during an event of default, to convert all or any portion of the outstanding notes into fully paid restricted shares of our common stock at a fixed conversion price of $0.65.  The principal amount of all outstanding loans together with any accrued and unpaid interest is due as of June 23, 2008.  We also issued Laurus a common stock purchase warrant entitling the holder to purchase 210,000 shares of common stock, at any time through June 23, 2012, as follows:  150,000 shares at a price of $0.72 per share; 30,000 shares at a price of $0.75 per share; and 30,000 shares at a price of $0.78 per share.  We issued the notes and the warrant in a transaction exempt from registration under Section 4(2) of the Securities Act.

In January 2006, we entered into a security and purchase agreement with Laurus to refinance our obligations to Laurus under our prior arrangements, and to obtain an additional $1 million in new financing.  Under the terms of the agreement, we issued a $2 million convertible term note and a $1.5 million non-convertible revolving note.  The term note was fully drawn, with $1,058,310 of the proceeds of the term note used to repay in full the March 22, 2004 Laurus note. Under the revolving facility, we may borrow from time to time revolving loans up to $1,500,000 subject to a borrowing base calculation based on our eligible accounts receivable and eligible inventory.  Borrowings under the notes accrue interest at the prime rate plus 2%, with a 7.25% minimum interest rate, payable monthly.  Pursuant to the terms of the agreement, Laurus has the right to convert all or any portion of the outstanding term note into fully paid restricted shares of the Company’s common stock at a fixed conversion price of $0.65 if the average market price of such stock for the five (5) days preceding the payment is 10% above the initial fixed conversion price of $0.65 per share.  The revolving note matured on January 3, 2008 and the term note matures on January 3, 2009.  We also issued to Laurus a common stock purchase warrant entitling the holder to purchase 140,000 shares of common stock, at any time through January 3, 2013, at a price of $0.65 per share.  We issued the notes and the warrant in a transaction exempt from registration under Section 4(2) of the Securities Act.

In December 2006, the Company entered into a subordinated note agreement with a related party.  The note is a 90-day note with the principal and interest due in 90 days and monthly interest payments at an annual percentage rate of 10%.  In consideration for agreeing to subordinate repayment of the note, the Company issued 30,000 shares of restricted common stock to the holder of the subordinated note.

In January 2007, the Company issued 100,000 shares of restricted common stock to Laurus in consideration for Laurus’s consent to extending the maturity date of the Company’s existing revolving note with Laurus, the asset sale to Synel, and the corporate name change.

8

In February 2007, the Company issued 100,000 shares of its common stock to Thomas Bednarik for consulting services following the January 2007 asset sale.

In February 2007, the Company amended the terms of all its note agreements with a related party to defer the monthly principal payments through December 2007.  The amortization period of the note was increased by 12 months to compensate for the deferred principal payments.  The Company issued 100,000 shares of its common stock in consideration for consent to interest only payments through December 2007.

In March 2008, we commenced a private placement which closed in April, 2008 pursuant to which we received net proceeds of $225,000 upon issuance of 2,500,000 shares of our common stock. The shares were sold to “accredited investors”, as such term is defined in the rules promulgated under the Securities Act, for a purchase price of $.10 per share, with a minimum purchase of 50,000 shares. In relation to the private placement, we paid Source Capital $25,000, and issued a warrant entitling the holder to purchase 250,000 shares of common stock, at any time through April 14, 2013, at a price of $0.12 per share.

No underwriters were involved in the foregoing sales of securities.  The securities described in the foregoing paragraphs were issued in reliance upon the exemption from the registration requirements of the Securities Act under Section 4(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder relating to sales by an issuer not involving any public offering.  The purchasers of our securities represented to us in connection with their purchase that they were accredited investors and were acquiring the shares for investment and not distribution, that they could bear the risks of the investment and could hold the securities for an indefinite period of time.  The purchasers received written disclosures that the securities had not been registered under the Securities Act and that any resale must be made pursuant to an effective registration statement or an available exemption from such registration requirement.  We did not engage in any general solicitation or advertising in connection with the sales.  Unless otherwise indicated, the proceeds from the private offering were used for general working capital needs.

9

Item 6.  Management’s Discussion and Analysis and Plan Of Operation.

The following discussion and analysis provides information that management believes is relevant to an assessment and understanding of our results of operations and financial condition for the periods presented.  The following selected financial information is derived from our historical consolidated financial statements and should be read in conjunction with such consolidated financial statements and notes thereto set forth elsewhere herein and the “Forward-Looking Statements” explanation included herein.

Plan of Operation

The Company’s current business objective is to locate suitable business combination opportunities. The Company does not currently engage in any business activities that provide cash flow. As of June 30, 2008, we have approximately $212,000 in cash and cash equivalents. We believe this will be sufficient to fund the costs of investigating and analyzing a suitable business combination or to fund general and administrative expenses for the next 12 months. If our efforts are unsuccessful within that period, we will have to seek additional funds.

During the next 12 months we anticipate incurring costs related to:

We believe we will be able to meet these costs through use of exisiting cash and cash equivalents or additional amounts, as necessary, to be loaned by or invested in us by our stockholders, management or other investors. However, no assurance can be given that we will be able to raise additional capital, when needed or at all, or that such capital, if available, will be on acceptable terms. In the absence of obtaining additional financing, the Company may be unable to fund its operations.  Accordingly, the Company’s financial condition could require that the Company seek the protection of applicable reorganization laws in order to avoid or delay actions by third parties, which could materially adversely affect, interrupt or cause the cessation of the Company’s operations. As a result, the Company’s independent registered public accounting firms have issued going concern opinions on the consolidated financial statements of the Company for the fiscal years ended June 30, 2008 and 2007.

Prior to consummating a business combination transaction, we do not anticipate:

Revenue

Due to the asset sale in February 2008, we have classified all of our operations as discontinued operations, and accordingly, there are no revenues reflected in our financial statements for the years ended June 30, 2008 or 2007.

General and Administrative Expenses

For the year ended June 30, 2008 we have recorded general and administrative expenses of $77,618. There is no similar expense reflected for the year ended June 30, 2007 as all of our prior general and administrative expenses were classified as a part of discontinued operations. Our general and administrative expenses in the current year consist primarily of officer’s salaries, legal and accounting fees, and other costs associated with maintaining the company as a publicly traded entity.

10

Net Income

For the years ended June 30, 2008 and 2007, we have reflected net income of $574,131 and $140,436. In both years we had recognized gains from the sale of assets, which are included as part of our discontinued operations. We do not anticipate similar gains or revenue or expenses from these discontinued operations in future periods.

Off-balance sheet arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Item 7. Financial Statements.

The financial statements and schedules are included herewith commencing on page F-1.

11

TEMPCO, INC. AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

FINANCIAL STATEMENTS FOR THE

YEARS ENDED JUNE 30, 2008 AND 2007

MOORE & ASSOCIATES, CHARTERED

ACCOUNTANTS AND ADVISORS

PCAOB REGISTERED

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

Tempco, Inc. and Subsidiaries

(A Development Stage Company)

We have audited the accompanying consolidated balance sheet of Tempco, Inc. and Subsidiaries as of June 30, 2008, and the related consolidated statements of operations, stockholders’ equity and cash flows for the year then ended and cumulative since reentering development stage on February 5, 2008 through June 30, 2008. These consolidated financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements based on our audits. The financial statements of Tempco, Inc. and Subsidiaries as of June 30, 2007 were audited by other auditors whose report dated October 12, 2007, expressed an unqualified opinion on those statements.

We conduct our audits in accordance with standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audits 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.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Tempco, Inc. and Subsidiaries as of June 30, 2008, and the related consolidated statements of operations, stockholders’ equity and cash flows for the year then ended and cumulative since reentering development stage on February 5, 2008 through June 30, 2008, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 9 to the financial statements, the Company currently has no operations and no source of revenue, which raises substantial doubt about its ability to continue as a going concern.  Management’s plans concerning these matters are also described in Note 9.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Moore & Associates, Chartered

Moore & Associates Chartered

Las Vegas, Nevada

September 18, 2008

2675 S. Jones Blvd. Suite 109, Las Vegas, NV 89146 (702) 253-7499 Fax (702) 253-7501

F-1

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders of

NETtime Solutions, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheet of NETtime Solutions Inc. and Subsidiaries as of June 30, 2007 and the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of NETtime Solutions Inc. and Subsidiaries at June 30, 2007, and the results of its consolidated operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 9 to the consolidated financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that 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 9.  The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Semple, Marchal & Cooper, LLP

Certified Public Accountants

Phoenix, Arizona

October 12, 2007

F-2

TEMPCO, INC. AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED BALANCE SHEETS

The Accompanying Notes are an Integral Part
of the Consolidated Financial Statements

F-3

TEMPCO, INC. AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF OPERATIONS

The Accompanying Notes are an Integral Part
of the Consolidated Financial Statements

F-4

TEMPCO, INC. AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS STOCKHOLDERS’ EQUITY (DEFICIT)

The Accompanying Notes are an Integral Part
of the Consolidated Financial Statements

F-5

TEMPCO, INC. AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF CASH FLOWS

The Accompanying Notes are an Integral Part
of the Consolidated Financial Statements

F-6

The Accompanying Notes are an Integral Part
of the Consolidated Financial Statements

F-7

TEMPCO, INC. AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – Organization, Basis of Presentation and Description of Business

Tempco, Inc. was incorporated in Nevada in June 1988 as Richard Barrie Fragrances, Inc. Over the years, the Company changed its name several times, most recently from Vitrix, Inc. in October 1999, to Time America, Inc. in December 1993, then to NETtime Solutions, Inc. in January 2007. The name was changed again on February 4, 2008 to Tempco, Inc. The consolidated financial statements include the accounts of Tempco, Inc. and its wholly-owned subsidiaries (collectively, the “Company”), NETtime Solutions, Inc. an Arizona corporation, and Net Edge Devices, LLC, an Arizona Limited Liability Company. All intercompany accounts and transactions have been eliminated in consolidation.

As Time America, Inc. and NETtime Solutions, Inc. the Company operated as a time and attendance software company. In February, 2008 the time attendance software business was sold (“the 2008 Asset Sale”)(see Note 3), and the Company is currently researching other business opportunities. These audited financial statements are presented to reflect the discontinuation of the Company’s time and attendance software business, and concurrently reset the development stage inception date of the Company to February 5, 2008. Due to the 2008 Asset Sale, the Company has reentered the development stage and following this sale, the Company has limited operations and therefore, in accordance with Statement of Financial Accounting Standards No. 7, “Accounting and Reporting by Development Stage Enterprises,” the Company is considered a development stage company.   The Company intends to locate and combine with an existing company that is profitable or which, in management’s view, has growth potential, irrespective of the industry in which it is engaged.   A combination may be structured as a merger, consolidation, exchange of the Company’s common stock for stock or assets or any other form.

Pending negotiation and consummation of a combination the Company anticipates that it will have, aside from carrying on its search for a combination partner, no business activities, and, thus, will have no source of revenue.  The Company believes that the cash on hand at June 30, 2008 is sufficient to fund its operations until the earlier of a combination or a period of one year. If necessary to continue as a going concern, pending consummation of a transaction, the Company intends to either seek additional equity or debt financing.  No assurances can be given that such equity or debt financing will be available, nor can there be any assurance that a combination transaction will be consummated.  Should the Company be required to incur any significant liabilities prior to a combination transaction, including those associated with the current minimal level of general and administrative expenses, it may not be able to satisfy those liabilities in the event it was unable to obtain additional equity or debt financing.

Note 2 – Summary of Significant Accounting Policies

Principles of Consolidation:

The consolidated financial statements include the accounts of Tempco, Inc. and its wholly-owned subsidiaries (collectively, the “Company”), NETtime Solutions, Inc. an Arizona corporation, and Net Edge Devices, LLC, an Arizona Limited Liability Company. All intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts or revenues and expenses during the period. Actual results could differ from those estimates. Significant estimates include deferred income taxes and fair value of stock-based compensation. It is at least reasonably possible a material change in these estimates may occur in the near term.

F-8

TEMPCO, INC. AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Reclassifications

Certain balances as of June 30, 2007 have been reclassified in the accompanying consolidated financial statements to conform to the current year presentation of discontinued operations. These reclassifications had no effect on previously reported net income or stockholders’ equity (deficit).

Estimated Fair Value of Financial Instruments

The carrying value of notes receivable, prepaid expenses, accounts payable and other financial instruments reflected in the financial statements approximate fair value due to the short-term maturity of the instruments. It is management’s opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments.

Cash and Cash Equivalents:

Cash and cash equivalents are considered to be all highly liquid investments purchased with an initial maturity of three months or less.

Concentration of Credit Risk

The Company has no significant off-balance-sheet concentrations of credit risk such as foreign exchange contracts, options contracts or other foreign hedging arrangements.  The Company maintains the majority of its cash balances with one financial institution.  At times, such balances may be in excess of any insured limits.

Advertising Costs

Advertising costs are charged to operations when incurred. Advertising costs for the years ended June 30, 2008 and 2007 were approximately $1,000 and $11,000, respectively. The advertising costs are included as part of discontinued operations.

Deferred Income Taxes

The Company follows the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 109, “Accounting for Income Taxes”. Deferred income taxes are provided on an asset and liability method, whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, there is uncertainty of the utilization of these assets in future periods. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

Income (Loss) Per Share:

Diluted income (loss) per share is computed based on the weighted average number of shares of common stock and dilutive securities outstanding during the period.  Potentially dilutive securities are options and warrants that are exercisable into common stock.  Dilutive securities are not included in the weighted average number of shares when inclusion would increase the income per share or decrease the loss per share.  At June 30, 2008 and 2007, there were options and warrants outstanding to purchase 3,692,944 and 3,201,223, respectively, shares of the Company’s common stock. At June 30, 2008 and 2007, there were no potentially dilutive securities included in the calculation as their effect was anti-dilutive.

F-9

TEMPCO, INC. AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Stock-Based Compensation:

Prior to July 1, 2005, the Company accounted for stock-based compensation arrangements in accordance with the provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” (“APB 25”). Accordingly, compensation expense, if any, was measured as the excess of the underlying stock price over the exercise price on the date of grant. The Company complied with the disclosure provisions of Statement of Financial Accounting Standards Board No. 123  “Accounting for Stock Based Compensation” (“SFAS 123”) as amended by Statement of Financial Accounting Standards Board No. 148 “Accounting for Stock-Based Compensation-Transition and Disclosure,” which required pro-forma disclosure of compensation expense associated with stock options under the fair value method.

Effective July 1, 2005, the Company adopted the fair value recognition provisions of Statement of Financial Accounting Standards Board No. 123(R), “Share–Based Payment,” (“SFAS 123(R)”) using the modified prospective-transition method. Under this transition method, compensation expense recognized for the years ended June 30, 2008 and 2007 includes:  (a) compensation expense for all share-based payments granted prior to, but not yet vested as of June 30, 2005 based on the grant date fair value estimated under the original provisions of SFAS 123 and (b) compensation expense for all share-based payments granted subsequent to June 30, 2005, based on the grant date fair value estimated in accordance with the provisions of SFAS 123(R). Results for prior periods have not been restated. The fair value of option grants is estimated as of the date of grant utilizing the Black-Scholes option-pricing model and amortized to expense over the options’ requisite service period.

Recent Accounting Pronouncements

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”, which clarifies the principle that fair value should be based on the assumptions that market participants would use when pricing an asset or liability. It also defines fair value and established a hierarchy that prioritizes the information used to develop assumptions. In February 2008, the FASB issued Financial Staff Positions (“FSP”) SFAS 157-2, Effective Date of FASB Statement No. 157 (“FSP 157-2”), which delays the effective date of SFAS No. 157, for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). FSP 157-2 partially defers the effective date of SFAS 157 to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years for items within the scope of this FSP. FSP 157-2 is effective for us beginning July 1, 2009. We are currently evaluating the potential impact of the adoption of those provisions of SFAS 157, for which effectiveness was delayed by FSP 157-2, on our consolidated financial position and results of operations, or cash flows.

In February 2007, the FASB issued SFAS 159, “The Fair Value Option for Financial Assets and Financial Liabilities”, which permits entities to choose to measure many financial instruments and certain other items at fair value. The unrealized gains and losses on items for which the fair value option has been elected should be reported in earnings. The decision to elect the fair value option is determined on an instrument-by-instrument basis, should be applied to an entire instrument and is irrevocable. Assets and liabilities measured at fair values pursuant to the fair value option should be reported separately in the balance sheet from those instruments measured using other measurement attributes. SFAS No. 159 is effective as of the beginning of July 1, 2008. The adoption of SFAS No. 159 is not expected to have a material effect on its financial position, results of operations or cash flows.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of Accounting Research Bulletin No. 51” (SFAS 160). SFAS 160 establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, changes in a parent’s ownership of a noncontrolling interest, calculation and disclosure of the consolidated net income attributable to the parent and the noncontrolling interest, changes in a parent’s ownership interest while the parent retains its controlling financial interest and fair value measurement of any retained noncontrolling equity investment. SFAS 160 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Early adoption is prohibited. The Company has not yet determined the effect of the adoption of SFAS No. 160 will have on its financial position, results of operations or cash flows.

F-10

TEMPCO, INC. AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

In December 2007, the FASB issued SFAS 141R, “Business Combinations” (“SFAS 141R”), which replaces FASB SFAS 141, “Business Combinations”. This Statement retains the fundamental requirements in SFAS 141 that the acquisition method of accounting be used for all business combinations and for an acquirer to be identified for each business combination. SFAS 141R defines the acquirer as the entity that obtains control of one or more businesses in the business combination and establishes the acquisition date as the date that the acquirer achieves control. SFAS 141R will require an entity to record separately from the business combination the direct costs, where previously these costs were included in the total allocated cost of the acquisition. SFAS 141R will require an entity to recognize the assets acquired, liabilities assumed, and any non-controlling interest in the acquired at the acquisition date, at their fair values as of that date. This compares to the cost allocation method previously required by SFAS No. 141. SFAS 141R will require an entity to recognize as an asset or liability at fair value for certain contingencies, either contractual or non-contractual, if certain criteria are met. Finally, SFAS 141R will require an entity to recognize contingent consideration at the date of acquisition, based on the fair value at that date. This Statement will be effective for business combinations completed on or after the first annual reporting period beginning on or after December 15, 2008. Early adoption of this standard is not permitted and the standards are to be applied prospectively only. Upon adoption of this standard, there would be no impact to the Company’s results of operations and financial condition for acquisitions previously completed. The adoption of SFAS No. 141R is not expected to have a material effect on its financial position, results of operations or cash flows.

In March 2008, the FASB issued SFAS No. 161 “Disclosures about Derivative Instruments and Hedging Activities—An Amendment of FASB Statement No. 133.” (“SFAS 161”). SFAS 161 establishes the disclosure requirements for derivative instruments and for hedging activities with the intent to provide financial statement users with an enhanced understanding of the entity’s use of derivative instruments, the accounting of derivative instruments and related hedged items under Statement 133 and its related interpretations, and the effects of these instruments on the entity’s financial position, financial performance, and cash flows. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2008. We do not expect its adoption will have a material impact on our financial position, results of operations or cash flows.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles.”  The current GAAP hierarchy, asset forth in the American Institute of Certified Public Accountants (AICPA) Statement on Auditing Standard No.  69, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles, has been criticized because (1) it is directed to the auditor rather than the entity, (2) it is complex, and (3) it ranks FASB Statements of Financial Accounting Concepts.  The FASB believes that the GAAP hierarchy should be directed to entities because it is the entity (not its auditor) that is responsible for selecting accounting principles for financial statements that are presented in conformity with GAAP.  Accordingly, the FASB concluded that the GAAP hierarchy should reside in the accounting literature established by the FASB and is issuing this Statement to achieve that result. This Statement is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles.  The adoption of SFAS No. 162 is not expected to have a material impact on the Company’s financial position, results of operations, or cash flows.

Note 3 – Discontinued Operations

As of the beginning of fiscal 2008, the Company had experienced a history of losses from operations. Due to the Company’s financial condition and inability to continue ongoing operations with current cash flows, along with debt obligations, towards the beginning of fiscal 2008, the Company’s Board of Directors and management determined that it would be in the best interest of the Company’s stockholders to sell all of the operating assets and liabilities.

F-11