Table of Contents

 

 

 

**U.S.SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

 

**FORM 10-Q**

 
| **x**  | ** ** | **QUARTERLY  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF  1934**                                                                                                                                                                                                                                                           |
|--------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |       |                                                                                                                                                                                                                                                                                                                                                        |   |   |
|   |       | **For the  quarterly period ended September 30, 2008**                                                                                                                                                                                                                                                                                                 |
|   |       |                                                                                                                                                                                                                                                                                                                                                        |   |   |
| **o**  | ** ** | **TRANSITION REPORT UNDER  SECTION 13 OR 15(d) OF THE EXCHANGE ACT**                                                                                                                                                                                                                                                                              |
|   |       | ** **                                                                                                                                                                                                                                                                                                                                                  |
|   |       | **For the  transition period from                                  to                     ** |
|   |       | ** **                                                                                                                                                                                                                                                                                                                                                  |
|   |       | **Commission  File number 001-10320**                                                                                                                                                                                                                                                                                                                       |
|        |            |                                                                                                                                                                                                                                                                                                                                                             |  |  |  |

 

**Tempco, Inc.**

(Exact name of smallbusiness issuer as specified in its charter)

 

| **Nevada**                      | ** ** | **13-3465289**      |
|---------------------------------|------------|---------------------|
| (State or other jurisdiction of |       | (I.R.S. Employer    |
| incorporation of organization)  |       | Identification No.) |

 

**7625 East Via Del Reposa,Scottsdale, AZ 85258**

(Address of principalexecutive offices)

 

**(480) 272-8745**

(Issuer’s telephonenumber)

 

**NETTime Solutions, Inc.**

(Former name, formeraddress and former fiscal year, if changed since last report)

 

Check whether the issuer (1) filedall reports required to be filed by Section 13 or 15(d) of theExchange Act during the past 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days.    Yes  x    No  o

 

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or a smaller reporting company. See the definitions of“large accelerated filer,” “accelerated filer,” and “smaller reporting company”in Rule 12b-2 of the Exchange Act. (Check one):

 
| Large  accelerated filer o |   | Accelerated  filer o |   | Non-accelerated filer o    |   | Smaller  reporting company x |
|---------------------------------|--------|----------------------|--------|----------------------------|--------|------------------------------|
|                            |   |                 |   | (Do not check if a         |   |                         |
|                            |   |                 |   | smaller reporting company) |   |                         |

 

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act).    Yes  x    No  o

 

State the number ofshares outstanding of each of the issuer’s classes of common equity, as of thelatest practicable date: At October 15, 2008 the issuer had outstanding11,403,711 shares of Common Stock, par value $.005 per share.

 

 

 

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Tableof Contents

 

**TABLE OF CONTENTS**

 
| ** **                                                                                                                             | ** **                                                      | **PAGE** |
|----------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------|----------|
| ** **                                                                                                                             | ** **                                                      |
| **PART I  - FINANCIAL INFORMATION**                                                                                               | ** **                                                      |
| Item 1.                                                                                                                                | Financial Statements.                                           |     |
| Condensed  Consolidated Balance Sheets as of September 30, 2008 (unaudited) and  June 30, 2007                               | 2                                                               |
| Unaudited  Condensed Consolidated Statements of Operations for the Three Months Ended  September 30, 2008 and 2007                | 3                                                               |
| Unaudited  Condensed Consolidated Statement of Shareholders’ Equity (Deficit) for the  Three Months Ended September 30, 2008 | 4                                                               |
| Unaudited  Condensed Consolidated Statements of Cash Flows for the Three Months Ended  September 30, 2008 and 2007                | 5                                                               |
| Notes to Unaudited Condensed Consolidated Financial  Statements                                                                        | 6                                                               |
| Item 2.                                                                                                                                | Management’s  Discussion and Analysis or Plan of Operation | 9        |
| Item 3.                                                                                                                                | Quantitative  and Qualitative Disclosures about Market Risk     | 11       |
| Item 4T.                                                                                                                               |                                                            | 11       |
|                                                                                                                                   |                                                            |     |
| **PART II  - OTHER INFORMATION**                                                                                                  | ** **                                                      |
| Item 1.                                                                                                                                | Legal Proceedings                                               | 12       |
| Item 1A.                                                                                                                               | Risk Factors                                                    | 12       |
| Item 2.                                                                                                                                | Unregistered  Sales of Equity Securities and Use of Proceeds    | 12       |
| Item 3.                                                                                                                                | Defaults  Upon Senior Securities                                | 12       |
| Item 4.                                                                                                                                | Submission  of Matters to a Vote of Security Holders            | 12       |
| Item 5.                                                                                                                                | Other information                                               | 12       |
| Item 6.                                                                                                                                | Exhibits                                                        | 12       |
| Signatures                                                                                                                             | 13                                                              |

 

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#### **PART I-FINANCIAL INFORMATION**

 

**Item 1-Financial Statements**

 

#### **TEMPCO, INC. AND SUBSIDIARIES**

(A DEVELOPMENTSTAGE COMPANY)

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 
| ** **                                                                                         | ** ** | **September 30,** | ** ** | **June 30,** | ** ** |
|----------------------------------------------------------------------------------------------------|------------|-------------------|------------|--------------|------------|
| ** **                                                                                         | ** ** | **2008**          | ** ** | **2008**     | ** ** |
| ** **                                                                                         | ** ** | ** **        | ** ** | ** **   | ** ** |
| **ASSETS**                                                                                         | ** ** | ** **        | ** ** | ** **   | ** ** |
| Current  assets:                                                                                   |       |              |       |         |       |
| Cash and cash equivalents                                                                          |       | $                 | 171,298    |         | $          | 212,278 |   |
| Prepaid expenses                                                                                   |       | 6,373             |       | 9,559        |       |
| Total current assets                                                                               |       | 177,671           |       | 221,837      |       |
|                                                                                               |       |              |       |         |       |
| Note receivable                                                                                    |       | 200,000           |       | 200,000      |       |
| Accrued interest receivable                                                                        |       | 11,750            |       | 7,250        |       |
| Total assets                                                                                       |       | $                 | 389,421    |         | $          | 429,087 |   |
| ** **                                                                                         | ** ** | ** **        | ** ** | ** **   | ** ** |
| **LIABILITIES AND STOCKHOLDERS’  EQUITY (DEFICIT)**                                           | ** ** | ** **        | ** ** | ** **   | ** ** |
| Current Liabilities:                                                                               |       |              |       |         |       |
| Accounts payable                                                                                   |       | $                 | 1,000      |         | $          | 9,224 |   |
| Note payable                                                                                       |       | 2,759             |       | 5,435        |       |
| Total current liabilities                                                                          |       | 3,759             |       | 14,659       |       |
|                                                                                               |       |              |       |         |       |
| Commitments:                                                                                       |       | —            |       | —       |       |
|                                                                                               |       |              |       |         |       |
| Stockholders’ equity (deficit):                                                               |       |              |       |         |       |
| Common stock, $.005 par value 50,000,000 authorized; 17,882,404 issued  and 11,403,711 outstanding |       | 89,413            |       | 89,413       |       |
| Paid in Capital                                                                                    |       | 12,413,099        |       | 12,392,814   |       |
| Accumulated deficit prior to reentering the development stage                                      |       | (11,160,829       | )          | (11,160,829  | )          |
| Deficit accumulated in the development stage                                                       |       | (113,670          | )          | (64,619      | )          |
| Treasury stock, at cost (6,478,693 shares)                                                         |       | (842,351          | )          | (842,351     | )          |
| Total stockholders’ equity (deficit)                                                          |       | 385,662           |       | 414,428      |       |
| Total liabilities and stockholders’ equity (deficit).                                         |       | $                 | 389,421    |         | $          | 429,087 |   |

 

The AccompanyingNotes are an Integral Part of the Financial Statements

 

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TEMPCO, INC. ANDSUBSIDIARIES

(A DEVELOPMENT STAGECOMPANY)

CONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 
| ** **                                                   | ** ** | ** **             | ** ** | ** **        | ** ** | **From the**       | ** ** |
|--------------------------------------------------------------|------------|------------------------|------------|-------------------|------------|--------------------|------------|
| ** **                                                   | ** ** | ** **             | ** ** | ** **        | ** ** | **Date of**        | ** ** |
| ** **                                                   | ** ** | ** **             | ** ** | ** **        | ** ** | **Reentering the** | ** ** |
| ** **                                                   | ** ** | ** **             | ** ** | ** **        | ** ** | **Development**    | ** ** |
| ** **                                                   | ** ** | **Three Months Ended** | ** ** | **Stage to**      | ** ** |
| ** **                                                   | ** ** | **Setember 30,**       | ** ** | **September 30,** | ** ** |
| ** **                                                   | ** ** | **2008**               | ** ** | **2007**          | ** ** | **2008**           | ** ** |
| Costs and Expenses                                           |       |                   |       |              |       |               |       |
| General and administrative                                   |       | $                      | 54,126     |              | $          | —             |       | $ | 131,744 |   |
| Operating loss                                               |       | (54,126                | )          | —            |       | (131,744           | )          |
| Net loss from continuing operations                          |       | (54,126                | )          | —            |       | (131,744           | )          |
|                                                         |       |                   |       |              |       |               |       |
| Other Income (Expense)                                       |       |                   |       |              |       |               |       |
| Interest expense                                             |       | (151                   | )          | —            |       | (356               | )          |
| Interest income                                              |       | 5,226                  |       | 299               |       | 18,430             |       |
|                                                         |       | 5,075                  |       | 299               |       | 18,074             |       |
|                                                         |       |                   |       |              |       |               |       |
| Discontinued operations:                                     |       |                   |       |              |       |               |       |
| Income (loss) from discontinued operations                   |       | —                 |       | (309,173          | )          | —             |       |
|                                                         |       |                   |       |              |       |               |       |
| Net Loss                                                     |       | $                      | (49,051    | )                 | $          | (308,874           | )          | $ | (113,670 | ) |
|                                                         |       |                   |       |              |       |               |       |
| Basic and diluted net income (loss) per common share:        |       |                   |       |              |       |               |       |
| Loss from continuing operations                              |       | $                      | (0.00      | )                 | —     |               | $          | (0.01 | ) |
| Loss from discontinued operations                            |       | —                 |       | (0.02             | )          | —             |       |
| Basic and diluted loss per share                             |       | $                      | —     |              | $          | (0.02              | )          | $ | (0.01 | ) |
|                                                         |       |                   |       |              |       |               |       |
| Basic and diluted weighted average common shares outstanding |       | 11,403,711             |       | 15,030,481        |       | 11,403,711         |       |

 

The Accompanying Notesare an Integral Part of the Financial Statements

 

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TEMPCO, INC. AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

CONDENSED CONSOLIDATED STATEMENTS OF CHANGESIN STOCKHOLDERS’ EQUITY (DEFICIT)

FOR THE YEAR ENDED JUNE 30, 2008 AND THE THREE MONTH PERIOD ENDEDSEPTEMBER 30, 2008

(UNAUDITED)

 
| ** **                                                                           | ** ** | ** **            | ** ** | ** **              | ** ** | ** **  | ** ** | ** **      | ** ** | ** **              | ** ** | ** **                       | ** ** | **Deficit **                    | ** ** | ** **  | ** ** |
|--------------------------------------------------------------------------------------|------------|-----------------------|------------|-------------------------|------------|-------------|------------|-----------------|------------|-------------------------|------------|----------------------------------|------------|--------------------------------------|------------|-------------|------------|
| ** **                                                                           | ** ** | ** **            | ** ** | ** **              | ** ** | ** **  | ** ** | ** **      | ** ** | ** **              | ** ** | **Accumulated**                  | ** ** | **Accumulated **                | ** ** | ** **  | ** ** |
| ** **                                                                           | ** ** | ** **            | ** ** | ** **              | ** ** | ** **  | ** ** | ** **      | ** ** | ** **              | ** ** | **Deficit**                      | ** ** | **Since Reentering **      | ** ** | ** **  | ** ** |
| ** **                                                                           | ** ** | ** **            | ** ** | ** **              | ** ** | ** **  | ** ** | ** **      | ** ** | ** **              | ** ** | **Prior to rentering** | ** ** | **the Development**                  | ** ** | ** **  | ** ** |
| ** **                                                                           | ** ** | **Common Stock** | ** ** | **Treasury Stock** | ** ** | **Paid in** | ** ** | **Development** | ** ** | **Stage on ** | ** ** | ** **                       | ** ** |
| ** **                                                                           | ** ** | **Shares**            | ** ** | **Amount**              | ** ** | **Shares**  | ** ** | **Amount**      | ** ** | **Capital**             | ** ** | **Stage**                        | ** ** | **February 5, 2008 ** | ** ** | **Total**   | ** ** |
| Balance at June 30, 2007                                                             |       | 15,030,481            |       | 75,153                  |       | —      |       | —          |       | 9,889,188               |       | (11,799,579                      | )          | —                               |       | (1,835,238  | )          |
| Stock based compensation                                                             |       | —                |       | —                  |       | —      |       | —          |       | 62,347                  |       | —                           |       | —                               |       | 62,347      |       |
| Reclassification of restricted shares to  equity                                     |       | 351,923               |       | 1,760                   |       | —      |       | —          |       | 205,875                 |       | —                           |       | —                               |       | 207,635     |       |
| Shares surrendered in relation to Asset  Sale                                        |       | —                |       | —                  |       | (6,478,693  | )          | (842,351        | )          | —                  |       | —                           |       | —                               |       | (842,351    | )          |
| Contributed capital adjustment related to  Asset Sale                                |       | —                |       | —                  |       | —      |       | —          |       | 2,022,904               |       | —                           |       | —                               |       | 2,022,904   |       |
| Sale of common stock in April 2008 Private Placement  at $.10 per share, net of fees |       | 2,500,000             |       | 12,500                  |       | —      |       | —          |       | 212,500                 |       | —                           |       | —                               |       | 225,000     |       |
| Net income (loss)                                                                    |       | —                |       | —                  |       | —      |       | —          |       | —                  |       | 638,750                          |       | (64,619                              | )          | 574,131     |       |
| Balance at June 30, 2008                                                             |       | 17,882,404            |       | 89,413                  |       | (6,478,693  | )          | (842,351        | )          | 12,392,814              |       | (11,160,829                      | )          | (64,619                              | )          | 414,428     |       |
| Stock based compensation                                                             |       | —                |       | —                  |       | —      |       | —          |       | 20,285                  |       | —                           |       | —                               |       | 20,285      |       |
| Net loss                                                                             |       | —                |       | —                  |       | —      |       | —          |       | —                  |       |                             |       | (49,051                              | )          | (49,051     | )          |
| Balance at September 30, 2008                                                        |       | 17,882,404            |       | $                       | 89,413     |        | (6,478,693 | )               | $          | (842,351                | )          | $                                | 12,413,099 |                                 | $          | (11,160,829 | )          | $ | (113,670 | ) | $ | 385,662 |   |
|                                                                                      |            |                       |            |                         |            |             |            |                 |            |                         |            |                                  |            |                                      |            |             |            |  |  |  |  |  |  |

 

The Accompanying Notes are an Integral Part of the Financial Statements

 

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TEMPCO, INC. ANDSUBSIDIARIES

(A DEVELOPMENT STAGECOMPANY)

CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 
| ** **                                             | ** ** | **Three Months Ended** | ** ** |
|--------------------------------------------------------|------------|------------------------|------------|
| ** **                                             | ** ** | **September 30,**      | ** ** |
| ** **                                             | ** ** | **2008**               | ** ** | **2007** | ** ** |
|                                                   |       |                   |       |   |   |
| **Cash flows from operating activities**               |       |                   |       |   |   |
| Net income                                             |       | $                      | (49,051    | ) | $ | (308,874 | ) |
| Adjustments to reconcile net income to net cash        |       |                   |       |   |   |
| Provided (used) by operating activities:               |       | —                 |       | — |   |
| Depreciation                                           |       | —                 |       | 30,010 |   |
| Amortization of discounts and deferred financing costs |       |                   |       | 80,748 |   |
| Stock based compensation                               |       | 20,285                 |       | 36,963 |   |
| Loss on disposal of fixed assets                       |       | —                 |       | 10,404 |   |
| Accrued interest receivable                            |       | (4,500                 | )          | — |   |
| Changes in Assets and Liabilities:                     |       |                   |       |   |   |
| Accounts receivable                                    |       | —                 |       | (19,897 | ) |
| Prepaid expenses                                       |       | 3,186                  |       | — |   |
| Inventory                                              |       | —                 |       | 9,867 |   |
| Deferred loan costs and other current assets           |       | —                 |       | (5,933 | ) |
| Accounts payable                                       |       | (8,224                 | )          | (54,614 | ) |
| Accrued liabilities                                    |       | —                 |       | 70,763 |   |
| Deferred revenue                                       |       | —                 |       | (93,033 | ) |
| Net Cash Used by Operating Activities                  |       | (38,304                | )          | (243,596 | ) |
|                                                   |       |                   |       |   |   |
| **Cash flows from investing activities**               |       |                   |       |   |   |
| Purchase of property and equipment                     |       | —                 |       | (3,472 | ) |
| Proceeds from sale of assets                           |       | —                 |       | 216,351 |   |
| Net cash provided by investing activities              |       | —                 |       | 212,879 |   |
|                                                   |       |                   |       |   |   |
| **Cash flows from financing activities:**              |       |                   |       |   |   |
| Reypayment of debt                                     |       | (2,676                 | )          | — |   |
| Net Cash Used by Financing Activities                  |       | (2,676                 | )          | — |   |
|                                                   |       |                   |       |   |   |
| Net change in cash and cash equivalents                |       | (40,980                | )          | (30,717 | ) |
|                                                   |       |                   |       |   |   |
| Cash and cash equivalents at beginning of year         |       | 212,278                |       | 278,701 |   |
| Cash and cash equivalents at end of period             |       | $                      | 171,298    |   | $ | 247,984 |   |
|                                                   |       |                   |       |   |   |
| Supplemental Disclosures:                              |       |                   |       |   |   |
| Cash paid for income taxes                             |       | $                      | —     |   | $ | — |   |
| Cash paid for interest                                 |       | $                      | 151        |   | $ | 43,233 |   |

 

The AccompanyingNotes are an Integral Part of the Financial Statements

 

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TEMPCO, INC. ANDSUBSIDIARIES

(A DEVELOPMENT STAGECOMPANY)

NOTES TOCONSOLIDATED FINANCIAL STATEMENTS

 

## **SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

## ** **

Note A - Basis ofPresentation and Interim Consolidated Financial Statements

 

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 fromVitrix, Inc. in October 1999, to Time America, Inc. in December 1993,then to NETtime Solutions, Inc. in January 2007. The name was changedagain on February 4, 2008 to Tempco, Inc. The consolidated financialstatements include the accounts of Tempco, Inc. and its wholly-ownedsubsidiaries (collectively, the “Company”), NETtime Solutions, Inc. anArizona corporation, and Net Edge Devices, LLC, an Arizona Limited LiabilityCompany. All intercompany accounts and transactions have been eliminated inconsolidation.

 

The accompanying unaudited condensed consolidated financialstatements of Tempco, Inc. and subsidiaries have been prepared inaccordance with generally accepted accounting principles (“GAAP”), pursuant tothe rules and regulations of the Securities and Exchange Commission, andare unaudited.  Accordingly, they do notinclude all the information and footnotes required by GAAP for completefinancial statements.  In the opinion ofmanagement, all adjustments (which include only normal recurring adjustments)necessary for a fair presentation of the results for the interim periodspresented have been made.  The resultsfor the three month period ended September 30, 2008, may not be indicativeof the results for the entire year. These financial statements should be read in conjunction with theCompany’s Annual Report on Form 10-KSB for the fiscal year ended June 30,2008.

 

The preparation of financial statements in conformity withGAAP requires management to make estimates and assumptions that affect thereported amounts of assets and liabilities and disclosure of contingent assetsand liabilities at the date of the financial statements and the reportedamounts of revenues and expenses during the reporting period.  Actual results could differ materially fromthese estimates.

 

Note B – Asset Sale:

 

The Company has had ahistory of losses from operations and due to the Company’s financial conditionand inability to continue ongoing operations with current cash flow, along withdebt obligations, the Company’s Board of Directors and management determinedthat the sale ofsubstantially all of our operating assets and liabilities (the “Asset Sale”)would be in the best interest of the Company’s stockholders.

 

On August 31, 2007, theBoard of Directors approved the Asset Sale pursuant to the terms of theMemorandum of Understanding, dated September 24, 2007 (the “Memorandum ofUnderstanding”). Under the terms of the Memorandum of Understanding, certaininsiders of the Company, including all of the members of the Company’s Board ofDirectors, the President and Chief Executive Officer, together with certainother shareholders of the Company, collectively referred to as the“Contributors,” formed NETtime Solutions, LLC (the “Buyer”) for the purpose ofconsummating the Asset Sale and acquiring substantially all of the net assetsof the Company. The Contributors contributed certain issued and outstandingshares of the Company that they collectively held to NETtime Solutions, LLCpursuant to the terms of the limited liability company operating agreementgoverning NETtime Solutions, LLC. Accordingly, on February 4, 2008, wecompleted the sale of substantially all of our net assets and the net assets ofour two operating subsidiaries, NETtime Solutions, Inc., an Arizona corporationand NetEdge Devices, LLC, an Arizona limited liability company, to the Buyerfor consideration valued at approximately $1,042,000.

 

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TEMPCO, INC. ANDSUBSIDIARIES

(A DEVELOPMENT STAGECOMPANY)

NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS

 

Note C- Discontinued Operations

 

Included inDiscontinued Operations for the three months ended September 30, 2007 isrevenues of $680,242. Net loss reflected in discontinued operations for thethree months ended September 30, 2007 is $198,796.

 

Note D - Income (Loss) Per Share:

 

Basic income (loss) per share of common stock was computedby dividing the net income (loss) by the weighted average number of shares ofcommon stock outstanding during the period.

 

Diluted income (loss) per share is computed based on theweighted average number of shares of common stock and dilutive securitiesoutstanding during the period.  Dilutivesecurities are options and warrants that are freely exercisable into commonstock at less than the prevailing market price. Dilutive securities are not includedin the weighted average number of shares when inclusion would increase theearnings per share or decrease the loss per share.  For the three months ended September 30,2008 and 2007, no securities were included in weighted average sharesoutstanding as the effect would be anti-dilutive.

 

Note E - Stock Based Compensation:

 

Effective July 1,2005, the Company adopted the fair value recognition provisions of Statement ofFinancial Accounting Standards Board No. 123(R), “Share–Based Payment,”using the modified prospective-transition method.  Under this transition method, compensationexpense recognized for the three months ended September 30, 2008 and 2007 includes:  (a) compensationexpense for all share-based payments granted prior to, but not yet vested as ofJune 30, 2005 based on the grant date fair value estimated in accordancewith the original provisions of SFAS 123 and (b) compensation expense forall share-based payments granted subsequent to June 30, 2005, based on thegrant date fair value estimated in accordance with the provisions of SFAS 123(R).  The fair value of option grants is estimatedas of the date of grant utilizing the Black-Scholes option-pricing model andamortized to expense over the options’ vesting period net of estimatedforfeitures.

 

In July 2007, the Company issued 152,767 options to the members ofthe board. Those options have an exercise price of $.16 and were fully vestedon the date of grant. In February, 2008, the Company issued 1,500,000 optionsto the new members of the board. These options vest over a period of 13 months,and have an exercise price of $.09. The options were valued using the followingassumptions:

 
| Risk Free Rate:   |   | 2.1%-4%   |
|-------------------|--------|-----------|
| Volatility:       |   | 138%-160% |
| Expected life     |   | 3 Years   |
| Expected dividend |   | 0%        |

 

Note F - New Accounting Pronouncements:

 

In December 2007,the Financial Accounting Standards Board issued Statement of FinancialAccounting Standards No. 160, “Non-controlling Interests in ConsolidatedFinancial Statements—an amendment of Accounting Research Bulletin No. 51”(“SFAS 160”). SFAS 160 establishes new accounting and reporting standards forthe noncontrolling interest in a subsidiary and for the deconsolidation of asubsidiary. SFAS No. 160 is effective for fiscal years beginning on orafter December 15, 2008. The Company does not believe that SFAS 160 willhave a material impact on its consolidated financial statements.

 

In December 2007, the Financial AccountingStandards Board issued Statement of Financial Accounting Standards No. 141(revised 2007), “Business Combinations” (“SFAS 141(R)”). SFAS 141(R) willchange the accounting for business combinations. Under SFAS No. 141(R), anacquiring entity will be required to recognize all the assets acquired andliabilities assumed in a transaction at the acquisition-date fair value withlimited exceptions. SFAS No. 141(R) will change the accountingtreatment and disclosure for certain specific items in a business combination.SFAS No. 141(R) applies prospectively to business combinations forwhich the acquisition date is on or after the beginning of the first annualreporting period beginning on or after December 15, 2008. SFAS 141(R) willimpact the Company in the event of any future acquisition.

 

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TEMPCO, INC. ANDSUBSIDIARIES

(A DEVELOPMENT STAGECOMPANY)

NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS

 

In February 2007, the Financial AccountingStandards Board issued Statement of Financial Accounting Standards No. 159,“The Fair Value Option for Financial Assets and Financial Liabilities—Includingan amendment of Statement of Financial Accounting Standards Statement No. 115”(“SFAS 159”), which permits entities to choose to measure many financialinstruments and certain other items at fair value at specified election dates.A business entity is required to report unrealized gains and losses on itemsfor which the fair value option has been elected in earnings at each subsequentreporting date. This statement is expected to expand the use of fair valuemeasurement. SFAS 159 is effective for financial statements issued for fiscalyears beginning after November 15, 2007, and interim periods within thosefiscal years. The adoption of  SFAS 159has not had a material impact on the Company’s financial position or results ofoperations.

 

In September 2006,the Financial Accounting Standard Board issued a Statement of FinancialAccounting Standards No. 157, “Fair Value Measurements” (“SFAS 157”).The Statement defines fair value, establishes a framework for measuring fairvalue in accordance with GAAP, and expands disclosures about fair valuemeasurements.  This Statement iseffective for financial statements issued for fiscal years beginning after November 15,2007, and interim periods within those fiscal years. The adoption of SFAS 157is not expected to have a material affect on our financial position or resultsof operations.

 

In March 2008, the FASB issued SFAS No. 161,“Disclosures about Derivative Instruments and Hedging Activities, an amendmentof FASB Statement No. 13*3*” (“SFAS 161”),which establishes, among other things, the disclosure requirements forderivative instruments and hedging activities. SFAS 161 requiresqualitative disclosures about objectives and strategies for using derivatives,quantitative disclosures about fair value amounts of and gains and losses onderivative instruments, and disclosures about credit-risk-related contingentfeatures in derivative agreements. SFAS 161 is effective for fiscal periodsand interim periods beginning after November 15, 2008.  The adoption of SFAS 161 is not expected toimpact on our financial statement disclosures.

 

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**Item 2. Management’s Discussion and Analysisand Plan of Operation.**

 

**Overview**

 

This quarterly report on Form 10-Q covers the quarterly periodended September 30, 2008.  On February 4,2008, our shareholders approved the proposed sale of substantially all of ournet assets, and the net assets of our two operating subsidiaries, to a newlyformed private company called NETtime Solutions, LLC (the “Buyer”) forconsideration valued at $1,042,351. As a result of the sale, the Companynow has no operating business and is, in effect, a “shell” company with nosignificant liabilities and minimal cash. Our new management team and board of directors currently is  looking for a private company that it canmerge with or acquire and that has an operating business that will helpincrease shareholder value.  No suchcompany has yet been identified and there is no assurance of any success inthis regard.  Your review of thisquarterly report should be read with the above facts in mind.

 

**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 businesscombination with an operating company has the potential to create greater valuefor the Company’s stockholders than a liquidation or similar distribution.

 

### **Critical Accounting Policies**

 

Our significant accounting policies are described inthe audited consolidated financial statements and notes thereto included in ourAnnual Report on Form 10-KSB for the year ended June 30, 2008.  We believe our most critical accountingpolicies is the valuation of stock-based compensation and classification.

 

Determining theappropriate fair value model and calculating the fair value of share-basedpayment awards requires the input of highly subjective assumptions, includingthe expected life of the share-based payment awards and stock price volatility.The assumptions used in calculating the fair value of share-based paymentawards represent management’s best estimates, but these estimates involveinherent uncertainties and the application of management judgment. As a result,if factors change and we use different assumptions, our stock-basedcompensation expense could be materially different in the future. In addition,we are required to estimate the expected forfeiture rate and only recognizeexpense for those shares expected to vest. If our actual forfeiture rate ismaterially different from our estimate, the stock-based compensation expensecould be significantly different from what we have recorded in the current andprior periods.

 

**Effect of Status as a “Shell” Company**

 

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

 

**Plan of Operation**

 

The Company’s current business objective is to locate suitable businesscombination opportunities. The Company does not currently engage in anybusiness activities that provide cash flow. As of September 30, 2008, we haveapproximately $171,000 in cash and cash equivalents. We believe this will besufficient to fund the costs of investigating and analyzing a suitable businesscombination or to fund general and administrative expenses for the next 12months. If our efforts are unsuccessful within that period, we will have toseek additional funds.

 

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

 
|   | (i)    | Filing of Exchange Act reports;                    |
|--------|--------|----------------------------------------------------|
|   |   |                                               |
|   | (ii)   | Officer and director’s salaries and rent; and |
|   |   |                                               |
|   | (iii)  | Consummating an acquisition.                       |

 

We believe we willbe able to meet these costs through use of existing cash and cash equivalentsor additional amounts, as necessary, to be loaned by or invested in us by ourstockholders, management or other investors. However, no assurance can be giventhat we will be able to raise additional capital, when needed or at all, orthat such capital, if available, will be on acceptable terms. In the absence ofobtaining additional financing, the Company may be unable to fund itsoperations.  Accordingly, the Company’sfinancial condition could require that the Company seek the protection ofapplicable reorganization laws in order to avoid or delay actions by thirdparties, which could materially adversely affect, interrupt or cause thecessation of the Company’s operations. As a result, the Company’s independentregistered public accounting firm has issued a going concern opinion on theconsolidated financial statements of the Company for the fiscal year ended June30, 2008.

 

Prior to consummating a business combination transaction, we do notanticipate:

 
|   | (i)    | Any expenditures for research and development;                                                     |
|--------|--------|----------------------------------------------------------------------------------------------------|
|   |   |                                                                                               |
|   | (ii)   | Any expenditures or cash receipts for the  purchase or sale of any property plant or equipment; or |
|   |   |                                                                                               |
|   | (iii)  | Any significant change in the number of employees.                                                 |

 

**Revenue**

 

Due to the assetsale in February 2008, we have classified all of our operations asdiscontinued operations, and accordingly, there are no revenues reflected inour financial statements for the three months ended September 30, 2008 or2007.

 

**Generaland Administrative Expenses**

 

For the threemonths ended September 30, 2008 we have recorded general and administrativeexpenses of $54,126. There is no similar expense reflected for the three monthsended September 30, 2007 as all of our prior general and administrativeexpenses were classified as a part of discontinued operations. Our general andadministrative expenses in the current year consist primarily of officer’ssalaries, legal and accounting fees, and other costs associated withmaintaining the company as a publicly traded entity.

 

**NetIncome (Loss)**

 

For the threemonths ended September 30, 2008 and 2007, we have reflected net loss of$49,051 and $308,874. The decrease in the net loss is due to thediscontinuation of our operations in February 2008.

 

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**Off-balancesheet arrangements**

 

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

 

**Item 3. Quantitative and QualitativeDisclosures About Market Risk**

 

Market riskgenerally represents the risk that losses may occur in the values of financialinstruments as a result of movements in interest rates, foreign currencyexchange rates and commodity prices. We do not have foreign currency exchangerate or commodity price market risk.

 

Interest RateRisk—From time to time we temporarily invest our excess cash ininterest-bearing securities issued by high-quality issuers. We monitor riskexposure to monies invested in securities in our financial institutions. Due tothe short time the investments are outstanding and their general liquidity,these instruments are classified as cash equivalents in our condensedconsolidated balance sheets and do not represent a material interest rate risk.

 

**Item 4T. Controls and Procedures.**

 

*Disclosure Controls and Procedures*.   Our principal executive and financialofficer, based on his evaluation of our disclosure controls and procedures (asdefined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the endof the period covered by this Quarterly Report on Form 10-Q, has concludedthat (i) our disclosure controls and procedures are effective for ensuringthat information required to be disclosed by us in the reports that we file orsubmit under the Securities Exchange Act of 1934 is recorded, processed,summarized and reported within the time periods specified in the Securities andExchange Commission’s rules and forms and (ii) our disclosurecontrols and procedures include, without limitation, controls and proceduresdesigned to ensure that information required to be disclosed by us under the SecuritiesExchange Act of 1934 is accumulated and communicated to our management,including our principal executive and financial officer, or persons performingsimilar functions, as appropriate to allow timely decisions regarding requireddisclosure.

 

Management’s Report onInternal Control over Financial Reporting

 

Management is responsiblefor establishing and maintaining adequate internal control over financialreporting, as such term is defined in Exchange Act Rule 13a-15(f). Ourmanagement conducted an evaluation of the effectiveness of our internal controlover financial reporting based on the framework in Internal Control –Integrated Framework issued by the Committee of Sponsoring Organizations of theTreadway Commission. Based on this evaluation under the framework in InternalControl – Integrated Framework, our management concluded that our internalcontrol over financial reporting was effective as of September 30, 2008.

 

This report does notinclude an attestation report of the Company’s registered public accountingfirm regarding internal control over financial reporting. Management’s reportwas not subject to attestation by the Company’s registered public accountingfirm pursuant to temporary rules of the Securities and Exchange Commissionthat permit the Company to provide only management’s report in this report.

 

*Changes in Internal Control Over Financial Reporting.*There were no changes in our internal controlover financial reporting during our last fiscal quarter that have materiallyaffected, or are reasonably likely to materially affect, our internal controlover financial reporting.

 

# **FORWARD-LOOKING INFORMATION**

# ** **

The statements contained in this Quarterly Report on Form 10-Qthat are not historical fact are forward-looking statements (as such term isdefined in the Private Securities Litigation Reform Act of 1995), within themeaning of Section 27A of the Securities Act of 1933, as amended, and Section 21Eof 

 

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the Securities ExchangeAct of 1934, as amended.  Theforward-looking statements contained herein are based on current expectationsthat involve a number of risks and uncertainties.  These statements can be identified by the useof forward-looking terminology such as “believes,” “expects,” “may,” “will,” “should,”or “anticipates,” or the negative thereof or other variations thereon orcomparable terminology, or by discussions of strategy that involve risks anduncertainties.  The Company wishes tocaution the reader that these forward-looking statements that are nothistorical facts are only predictions. No assurances can be given that the future results indicated, whetherexpressed or implied, will be achieved. While sometimes presented with numerical specificity, these projectionsand other forward-looking statements are based upon a variety of assumptionsrelating to the business of the Company, which, although considered reasonableby the Company, may not be realized. Because of the number and range of assumptions underlying the Company’sprojections and forward-looking statements, many of which are subject tosignificant uncertainties and contingencies that are beyond the reasonablecontrol of the Company, some of the assumptions inevitably will notmaterialize, and unanticipated events and circumstances may occur subsequent tothe date of this report.  Theseforward-looking statements are based on current expectations and the Companyassumes no obligation to update this information.  Therefore, the actual experience of theCompany and the results achieved during the period covered by any particularprojections or forward-looking statements may differ substantially from thoseprojected.  Consequently, the inclusionof projections and other forward-looking statements should not be regarded as arepresentation by the Company or any other person that these estimates andprojections will be realized, and actual results may vary materially.  There can be no assurance that any of theseexpectations will be realized or that any of the forward-looking statementscontained herein will prove to be accurate.

 

##### **PART II– OTHER INFORMATION**

##### ** **

**Item 1. Legal Proceedings.**

 

As of the date ofthis report, the Company is not currently involved in any legal proceedings.

 

**Item 1A. Risk Factors**

 

We are a smaller reporting company as defined byRule 12b-2 of the Securities Exchange Act of 1934 and are not required toprovide the information under this item.

 

**Item2. Unregistered Sales of Equity Securities and Use of Proceeds.**

 

None

 

**Item3. Defaults Upon Senior Securities**

 

There have been nodefaults with respect to any indebtedness of the Company.

 

**Item4. Submission of Matters to a Vote of Security Holders**

 

None

 

**Item5. Other information**

 

On October 14,2008, the symbol under which our common stock is traded was changed fromNTMS.OB to TEMO.OB.

 

**Item 6. Exhibits**

 
| (a)    | The following  exhibits are filed herewith pursuant to Item 601 of Regulation S-K. |
|--------|------------------------------------------------------------------------------------|
|   |                                                                               |   |
|   | 31                                                                                 | Section 302  Certification of Chief Executive and Financial Officer |
|   |                                                                               |   |
|   | 32                                                                                 | Section 906  Certification |

 

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SIGNATURES

 

In accordance with therequirements of the Securities Exchange Act of 1934, the registrant caused thisreport to be signed on its behalf by the undersigned, thereunto dulyauthorized.

 
|                         | TEMPCO, INC.                      |
|------------------------------|-----------------------------------|
|                         |                              |
|                         |                              |
| Dated: October 20, 2008 |                              |
|                         | By                                |  /s/ Stanley L. Schloz |
|                         | Stanley L. Schloz                 |
|                         | President and Chief Executive and |
|                         | Financial Officer                 |

 

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