** **

**SECURITIESAND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

----

** **

**FORM 10-QSB**

 

**(Mark One)**

**ý****                                ****QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934**

 

**Forthe period from January 1, 2003 to March 31, 2003**

** **

**o****                                ****TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGEACT**

 

**Commission File No. 0-31267**

 

**IWT TESOROCORPORATION**

(Exact Name of Small Business Issuer in Its Charter)

 

| **Nevada**                                                      |   | **91-2048019**                           |
|-----------------------------------------------------------------|--------|------------------------------------------|
| (State or Other Jurisdiction of  Incorporation or Organization) |   | (I.R.S. Employer  Identification Number) |

** **

**5 Wicks Lane, Wilton, CT  06897**

(Address of principal executive offices)

 

**(203) 858-9951**

(Issuer’s Telephone Number, including area code)

 

(Former Name, Former Address and Former Fiscal Year, if Changed SinceLast Report)

 

Securitiesregistered pursuant to Section 12(b) of the Exchange Act:  **NONE**

Securitiesregistered pursuant to Section 12(g) of the Exchange Act: **Common Stock, $.001 Per Share**

 

Checkwhether the issuer: (1) has filed all reports required to be filed by Section13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements for thepast 90 days:

ýYes                                     oNo

 

Statethe number of shares outstanding of each of the issuer’s class of commonequity, as of May 9. 2003:  11,200,502shares.

 

TransitionalSmall Business Disclosure Format:   oYes               ýNo

 

 

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**IWT TESORO CORPORATION AND SUBSIDIARIES**

**CONSOLIDATED FINANCIAL STATEMENTS**

**(UNAUDITED)**

**THREE MONTHS ENDED MARCH 31, 2003**

 

# **TABLE OF CONTENTS**

 
| **Consolidated  Balance Sheets  (Unaudited)**                           |
|------------------------------------------------------------------------------|
|                                                                         |
| Consolidated Statements of Operations  (Unaudited)                           |
|                                                                         |
| Consolidated Statements of Changes in  Stockholders’ Equity (Unaudited) |
|                                                                         |
| Consolidated  Statements of Cash Flows (Unaudited)                           |
|                                                                         |
| Notes to Consolidated Financial Statements                                   |

 

1

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PART I

 

ITEM 1:      FINANCIAL STATEMENTS

 

**IWT TESORO CORPORATION AND SUBSIDIARIES**

**CONSOLIDATEDBALANCE SHEETS**

 

**Assets**

 
|                                |   | **March 31,  2003** |       | **December 31,  2002** |   |
|-------------------------------------|--------|---------------------|------------|------------------------|--------|
|                                |   | **(Unaudited)**     |       |                   |   |
| Current assets                      |   |                |       |                   |   |
| Cash                                |   | $                   | 664,358    |                   | $      | 574,046 |   |
| Accounts receivable, net            |   | 3,507,858           |       | 2,875,532              |   |
| Inventory                           |   | 8,496,466           |       | 6,047,876              |   |
| Subscription receivable             |   | 130,000             |       | —                 |   |
| Deferred tax asset                  |   | 2,480               |       | 34,348                 |   |
| Prepaid expenses                    |   | 325,587             |       | 286,820                |   |
| Total current assets                |   | 13,126,749          |       | 9,818,622              |   |
|                                |   |                |       |                   |   |
| Property and equipment, net         |   | 3,358,786           |       | 2,712,422              |   |
|                                |   |                |       |                   |   |
| Other assets                        |   |                |       |                   |   |
| Organization cost, net              |   | 7,895               |       | —                 |   |
| Deposits                            |   | 8,709               |       | 9,173                  |   |
| Other receivables                   |   | 63,535              |       | 64,205                 |   |
| Other receivables - related parties |   | —              |       | 5,500                  |   |
| Other assets                        |   | 112,835             |       | 112,835                |   |
|                                |   | 192,974             |       | 191,713                |   |
|                                |   |                |       |                   |   |
|                                |   | $                   | 16,678,509 |                   | $      | 12,722,757 |   |

 

See notes to financial statements.

 

2

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**IWT TESORO CORPORATION AND SUBSIDIARIES**

**CONSOLIDATEDBALANCE SHEETS**

 

**Liabilities and Stockholders’ Equity**

 
|                                                                                                                                                                                           |   | **March, 31  2003** |       | **December 31,  2002** |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------|------------|------------------------|--------|
|                                                                                                                                                                                           |   | **(Unaudited)**     |       |                   |   |
| Current liabilities                                                                                                                                                                            |   |                |       |                   |   |
| Accounts payable                                                                                                                                                                               |   | $                   | 7,726,994  |                   | $      | 5,403,816 |   |
| Accrued expenses                                                                                                                                                                               |   | 370,545             |       | 126,340                |   |
| Other current liabilities                                                                                                                                                                      |   | 39,923              |       | 24,723                 |   |
| Current portion of lease payable                                                                                                                                                               |   | 54,709              |       | 47,222                 |   |
| Current portion of notes payable - other                                                                                                                                                       |   | 49,850              |       | 48,780                 |   |
| Total current liabilities                                                                                                                                                                      |   | 8,242,021           |       | 5,650,881              |   |
|                                                                                                                                                                                           |   |                |       |                   |   |
| Long term lease payable                                                                                                                                                                        |   | 138,323             |       | 108,438                |   |
| Long term notes payable - related parties                                                                                                                                                      |   | 423,662             |       | 448,712                |   |
| Long term notes payable - unrelated parties                                                                                                                                                    |   | 51,911              |       | 64,872                 |   |
| Long term loan payable                                                                                                                                                                         |   | 5,591,361           |       | 4,864,778              |   |
|                                                                                                                                                                                           |   | 6,205,257           |       | 5,486,800              |   |
|                                                                                                                                                                                           |   |                |       |                   |   |
| Stockholders’ equity                                                                                                                                                                      |   |                |       |                   |   |
| Preferred stock, $0.001 par value, 25,000,000  authorized; none issued                                                                                                                         |   |                |       |                   |   |
| Common stock, $0.001 par value, 100 million shares  authorized, 11,200,502 and 11,037,834 issued and outstanding at March 31,  2003 and December 31, 2002, respectively issued and outstanding |   | 11,200              |       | 11,038                 |   |
| Additional paid in capital                                                                                                                                                                     |   | 1,156,647           |       | 673,449                |   |
| Retained earnings                                                                                                                                                                              |   | 1,063,384           |       | 900,589                |   |
|                                                                                                                                                                                           |   | 2,231,231           |       | 1,585,076              |   |
|                                                                                                                                                                                           |   |                |       |                   |   |
|                                                                                                                                                                                           |   | $                   | 16,678,509 |                   | $      | 12,722,757 |   |

 

See notes to financial statements.

 

3

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**IWT TESORO CORPORATION AND SUBSIDIARIES**

**CONSOLIDATEDSTATEMENTS OF OPERATIONS**

**(UNAUDITED)**

 
|                                          |   | **Three months ended  March 31,** |      |
|-----------------------------------------------|--------|-----------------------------------|-----------|
|                                          |   | **2003**                          |      | **2002** |   |
| Revenue                                       |   |                              |      |   |   |
|                                          |   |                              |      |   |   |
| Sales, net of discounts and returns           |   | $                                 | 6,734,765 |   | $ | 6,014,020 |   |
| Cost of goods sold                            |   | 4,079,608                         |      | 3,612,316 |   |
|                                          |   |                              |      |   |   |
| Gross profit                                  |   | 2,655,156                         |      | 2,401,704 |   |
|                                          |   |                              |      |   |   |
| Expenses                                      |   |                              |      |   |   |
| Payroll expense                               |   | 1,132,831                         |      | 771,201 |   |
| Delivery expense                              |   | 336,045                           |      | 271,518 |   |
| General and administrative                    |   | 210,016                           |      | 79,045 |   |
| Depreciation and amortization                 |   | 136,524                           |      | 114,578 |   |
| Lease expense                                 |   | 134,380                           |      | 114,716 |   |
| Professional fees                             |   | 124,843                           |      | 20,036 |   |
| Repairs and maintenance                       |   | 82,371                            |      | 34,988 |   |
| Insurance                                     |   | 74,828                            |      | 82,351 |   |
| Sales expenses                                |   | 68,606                            |      | 39,592 |   |
| Travel and entertainment                      |   | 54,460                            |      | 33,625 |   |
| Advertising                                   |   | 21,875                            |      | 15,063 |   |
| Bad debt                                      |   | 3,247                             |      | — |   |
|                                          |   | 2,380,026                         |      | 1,576,713 |   |
| Income from operations                        |   | 275,130                           |      | 824,991 |   |
|                                          |   |                              |      |   |   |
| Other income/(expenses)                       |   |                              |      |   |   |
| Interest expense                              |   | (75,949                           | )         | (74,631 | ) |
| Other income                                  |   | 835                               |      | 709 |   |
| Gain (loss) on disposal of assets             |   | (5,352                            | )         | 5,990 |   |
|                                          |   | (80,466                           | )         | (67,932 | ) |
|                                          |   |                              |      |   |   |
| Net income   before taxes                |   | 194,664                           |      | 757,059 |   |
|                                          |   |                              |      |   |   |
| Income tax - deferred                         |   | (31,869                           | )         | — |   |
|                                          |   |                              |      |   |   |
| Net income                                    |   | $                                 | 162,795   |   | $ | 757,059 |   |
|                                          |   |                              |      |   |   |
| Earnings per common share - basic and diluted |   | $                                 | 0.01      |   | $ | 0.08 |   |

 

See notes to financial statements.

 

4

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**IWT TESORO CORPORATION AND SUBSIDIARIES**

**CONSOLIDATEDSTATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY**

**THREE MONTHS ENDED MARCH 31, 2003**

**(UNAUDITED)**

 
|                                                         |   | **Common Stock** |       | **Additional  Paid in  Capital** |       | **Subscription  Receivable** |       | **Retained  Earnings** |       | **TOTAL**  |       |
|--------------------------------------------------------------|--------|------------------|------------|----------------------------------|------------|------------------------------|------------|------------------------|------------|------------|------------|
| **Shares**                                                   |   | **Amount**       |
|                                                         |   |             | ** ** |                             | ** ** |                         | ** ** |                   | ** ** |       | ** ** |   | ** ** |
| Balance, December 31, 2001                                   |   | 9,000,000        |       | $                                | 9,000      |                         | $          | 116,400                |       | $          | (84,000    | ) | $ | 830,582 |   | $ | 871,982 |   |
|                                                         |   |             |       |                             |       |                         |       |                   |       |       |       |   |   |
| Distributions, September 30, 2002                            |   | —           |       | —                           |       | —                       |       | —                 |       | (1,864,020 | )          | (1,864,020 | ) |
|                                                         |   |             |       |                             |       |                         |       |                   |       |       |       |   |   |
| Payment of subscription receivable                           |   | —           |       | —                           |       | —                       |       | 84,000                 |       | —     |       | 84,000 |   |
|                                                         |   |             |       |                             |       |                         |       |                   |       |       |       |   |   |
| Recapitalization on October 1, 2002                          |   | 1,800,000        |       | 1,800                            |       | (112,858                     | )          | —                 |       | —     |       | (111,058 | ) |
|                                                         |   |             |       |                             |       |                         |       |                   |       |       |       |   |   |
| Issuance of shares in exchange for legal services            |   | 15,000           |       | 15                               |       | 40,635                       |       | —                 |       | —     |       | 40,650 |   |
|                                                         |   |             |       |                             |       |                         |       |                   |       |       |       |   |   |
| Issuance of shares to employees for services  rendered (SIP) |   | 75,900           |       | 76                               |       | 205,613                      |       | —                 |       | —     |       | 205,689 |   |
|                                                         |   |             |       |                             |       |                         |       |                   |       |       |       |   |   |
| Issuance of shares to directors (SIP)                        |   | 40,000           |       | 40                               |       | 108,360                      |       | —                 |       | —     |       | 108,400 |   |
|                                                         |   |             |       |                             |       |                         |       |                   |       |       |       |   |   |
| Issuance of shares to consultants (SIP)                      |   | 8,600            |       | 9                                |       | 23,297                       |       | —                 |       | —     |       | 23,306 |   |
|                                                         |   |             |       |                             |       |                         |       |                   |       |       |       |   |   |
| Issuance of shares in exchange for consulting  services      |   | 10,000           |       | 10                               |       | 27,090                       |       | —                 |       | —     |       | 27,100 |   |
|                                                         |   |             |       |                             |       |                         |       |                   |       |       |       |   |   |
| Issuance of shares - private offering                        |   | 83,334           |       | 83                               |       | 249,917                      |       | —                 |       | —     |       | 250,000 |   |
|                                                         |   |             |       |                             |       |                         |       |                   |       |       |       |   |   |
| Sub-total                                                    |   | 11,032,834       |       | $                                | 11,033     |                         | $          | 658,454                |       | $          | —     |   | $ | (1,033,438 | ) | $ | (363,951 | ) |
|                                                         |   |             |       |                             |       |                         |       |                   |       |       |       |   |   |
| Exercise of warrants                                         |   | 5,000            |       | 5                                |       | 14,995                       |       | —                 |       | —     |       | 15,000 |   |
|                                                         |   |             |       |                             |       |                         |       |                   |       |       |       |   |   |
| Net income, 2002                                             |   |             |       |                             |       |                         |       | —                 |       | 1,934,027  |       | 1,934,027 |   |
|                                                         |   |             |       |                             |       |                         |       |                   |       |       |       |   |   |
| Balance, December 31, 2002                                   |   | 11,037,834       |       | 11,038                           |       | $                            | 673,449    |                   | —     |       | 900,589    |   | 1,585,076 |   |
|                                                         |   |             |       |                             |       |                         |       |                   |       |       |       |   |   |
| Issuance of shares  - private offering                  |   | 93,334           |       | 93                               |       | 279,907                      |       | —                 |       | —     |       | 280,000 |   |
|                                                         |   |             |       |                             |       |                         |       |                   |       |       |       |   |   |
| Exercise of warrants                                         |   | 10,000           |       | 10                               |       | 29,990                       |       | —                 |       | —     |       | 30,000 |   |
|                                                         |   |             |       |                             |       |                         |       |                   |       |       |       |   |   |
| Issuance of shares to employees for services  rendered (SIP) |   | 1,000            |       | 1                                |       | 2,709                        |       | —                 |       | —     |       | 2,710 |   |
|                                                         |   |             |       |                             |       |                         |       |                   |       |       |       |   |   |
| Issuance of shares to directors (SIP)                        |   | 15,000           |       | 15                               |       | 40,635                       |       | —                 |       | —     |       | 40,650 |   |
|                                                         |   |             |       |                             |       |                         |       |                   |       |       |       |   |   |
| Issuance of shares - private offering                        |   | 43,334           |       | 43                               |       | 129,957                      |       | —                 |       | —     |       | 130,000 |   |
|                                                         |   |             |       |                             |       |                         |       |                   |       |       |       |   |   |
| Net income, three months ended March 31, 2003                |   |             |       |                             |       |                         |       |                   |       | 162,795    |       | 162,795 |   |
|                                                         |   |             |       |                             |       |                         |       |                   |       |       |       |   |   |
| Balance, March 31, 2003 (Unaudited)                          |   | 11,200,502       |       | $                                | 11,200     |                         | $          | 1,156,647              |       | $          | —     |   | $ | 1,063,384 |   | $ | 2,231,231 |   |

 

See notes to financial statements.

 

5

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**IWT TESORO CORPORATION AND SUBSIDIARIES**

**STATEMENTSOF CASH FLOWS**

**(UNAUDITED)**

 
|                                                                               |   | **Three months ended  March 31,** |       |
|------------------------------------------------------------------------------------|--------|-----------------------------------|------------|
|                                                                               |   | **2003**                          |       | **2002** |   |
|                                                                               |   |                              | ** ** |   | ** ** |
| Cash flows from operating activities:                                              |   |                              |       |   |   |
| Net Income                                                                         |   | $                                 | 162,795    |   | $ | 757,059 |   |
|                                                                               |   |                              |       |   |   |
| Adjustments to reconcile net income to net cash  provided by operating activities: |   |                              |       |   |   |
| Depreciation and amortization                                                      |   | 136,524                           |       | 114,578 |   |
| (Gain) loss on asset disposal                                                      |   | 5,352                             |       | (5,990 | ) |
| Compensation in exchange for stock and options                                     |   | 43,360                            |       | — |   |
| Bad debt                                                                           |   | 3,247                             |       | — |   |
| (Increase) decrease in accounts receivable                                         |   | (632,326                          | )          | (785,763 | ) |
| (Increase) decrease in inventory                                                   |   | (2,448,590                        | )          | 1,290,938 |   |
| (Increase) decrease in prepaid expenses                                            |   | (38,767                           | )          | (61,751 | ) |
| (Increase) decrease in other assets                                                |   | (91,497                           | )          | (29,063 | ) |
| Increase (decrease) in accounts payable and  accrued expenses                      |   | 2,560,072                         |       | (945,933 | ) |
| Increase (decrease) in other liabilities                                           |   | 15,200                            |       | 5,625 |   |
| Total adjustments                                                                  |   | (447,425                          | )          | (417,359 | ) |
| Net cash provided by (used in) operating  activities                               |   | (284,629                          | )          | 339,700 |   |
|                                                                               |   |                              |       |   |   |
| Cash flows from investing activities:                                              |   |                              |       |   |   |
| Proceeds from sale of property                                                     |   | —                            |       | 11,000 |   |
| Cash payments for the purchase of property                                         |   | (614,960                          | )          | (101,943 | ) |
| Net cash used in investing activities                                              |   | (614,960                          | )          | (90,943 | ) |
|                                                                               |   |                              |       |   |   |
| Cash flows from financing activities:                                              |   |                              |       |   |   |
| Proceeds from issuance of stocks                                                   |   | 310,000                           |       | — |   |
| Proceeds from loans                                                                |   | 6,788,000                         |       | 5,350,000 |   |
| Proceeds from loans from related party                                             |   | —                            |       | 10,650 |   |
| Distributions to stockholders                                                      |   | —                            |       | (531,458 | ) |
| Payments to stockholder loans                                                      |   | (25,050                           | )          | — |   |
| Principal payments on notes payable                                                |   | (6,072,715                        | )          | (5,107,797 | ) |
| Principal payment on capital leases                                                |   | (10,334                           | )          | (10,287 | ) |
| Net cash provided by (used in) financing  activities                               |   | 989,901                           |       | (288,892 | ) |
|                                                                               |   |                              |       |   |   |
| Net increase (decrease) in cash and cash  equivalents                              |   | 90,312                            |       | (40,135 | ) |
|                                                                               |   |                              |       |   |   |
| Cash and cash equivalents, beginning of period                                     |   | 574,046                           |       | 402,500 |   |
|                                                                               |   |                              |       |   |   |
| Cash and cash equivalents, end of period                                           |   | $                                 | 664,358    |   | $ | 362,365 |   |
|                                                                               |   |                              |       |   |   |
| Supplemental disclosures of cash flow information:                                 |   |                              |       |   |   |
|                                                                               |   |                              |       |   |   |
| Cash paid during the period for:                                                   |   |                              |       |   |   |
|                                                                               |   |                              |       |   |   |
| Interest expense                                                                   |   | $                                 | 76,645     |   | $ | 74,631 |   |

 

See notes to financial statements.

 

6

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** **

**IWTTESORO CORPORATION AND SUBSIDIARIES**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**(UNAUDITED)**

**THREE MONTHS ENDED MARCH 31, 2003**

 

**NOTE1                 BASIS OF PRESENTATIONAND PRINCIPLES OF CONSOLIDATION**

 

The accompanying consolidated financial statements include the accountsof the Company and its wholly owned subsidiaries, International Wholesale Tile,Inc. (IWT), IWT Tesoro International, Inc. (International) and IWT TesoroTransport, Inc. (Transport).  Allsignificant inter-company balances and transactions have been eliminated.

 

The accompanying consolidated financial statements of the Company havebeen prepared in accordance with the instructions to Form 10-QSB and,therefore, omit or condense certain footnotes and other information normallyincluded in financial statements prepared in accordance with generally acceptedaccounting principles.  It is suggestedthat these condensed financial statements should be read in conjunction withthe Company’s financial statements and notes thereto included in the Company’saudited financial statements on Form 10-KSB for the fiscal year ended December31, 2002.

 

The accounting policies followed for interim financial reporting arethe same as those disclosed in Note 1 of the Notes to Financial Statementsincluded in the Company’s audited financial statements for the fiscal year endedDecember 31, 2002, which are included in Form 10-KSB.

 

In the opinion of management, the unaudited financial statementsinclude all necessary adjustments (consisting of normal, recurring accruals)for a fair presentation of the financial position, results of operations andcash flow for the interim periods presented. Preparing financial statements requires management to make estimates andassumptions that affect the reported amounts of assets, liabilities, revenuesand expenses.  Actual results may differfrom these estimates.  Interim resultsare not necessarily indicative of results for a full year.  The results of operations for thethree-month period ended March 31, 2003 are not necessarily indicative ofoperating results to be expected for a full year.

 

**NOTE 2                 NATUREOF OPERATIONS AND SUMMARY OFSIGNIFICANT ACCOUNTING POLICIES**

 

Stock Options

The Company elected to account for stock options issued to employees inaccordance with Accounting Principles Board Opinion No. 25**(APB Opinion No. 25) *Accounting For Stock Issued to Employees*and related interpretations, which established financial accounting andreporting for compensation cost of stock issued to employees throughnon-variable plans, variable plans, and non-compensatory plans, and accountsfor stock options and warrants issued to non-employees in accordance with SFAS123, *Accounting for Stock-Based Compensation*,which established a fair value method of accounting for stock compensationplans with employees and others.

 

7

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Accounting Pronouncements

In December 2002, the FASB issued SFAS No. 148, *Accounting for Stock-Based Compensation – Transitionand Disclosure,* which amended SFAS No. 123, *Accounting for Stock-Based Compensation.*  The new standard provides alternativemethods of transition for a voluntary change to the fair value based method ofaccounting for stock-based employee compensation.  Additionally, the statement amends the disclosure requirements ofSFAS No. 123 to require prominent disclosures in the annual and interimfinancial statements about the method of accounting for stock-based employeecompensation and the effect of the method used in reported results.  This statement is effective for financialstatements for fiscal years ending after December 15, 2002.  In compliance with SFAS No. 148, the Companyhas elected to continue to follow the intrinsic value method in accounting forits stock-based employee compensation arrangement as defined by APB No. 25.

 

Earnings per Share

Basic earnings per share for each year is computed by dividing incomefor the year by the weighted average number of common shares outstanding duringthe year.  Diluted earnings per shareinclude the effects of common stock equivalents to the extent they aredilutive. At March 31, 2003 all common stock equivalents were antidilutive andtherefore diluted earnings per share equaled basic earnings per share.

 

Basic and diluted weighted average number of shares outstanding atMarch 31st is as follows:

 
|                                                             |   | **2003**   |   | **2002**  |   |
|------------------------------------------------------------------|--------|------------|--------|-----------|--------|
|                                                             |   |       |   |      |   |
| Basic and diluted weighted average number  of shares outstanding |   | 11,081,516 |   | 9,000,000 |   |

 

**NOTE 3                 CONCENTRATIONOF CREDIT RISK**

 

Financial instruments thatpotentially subject the Company to credit risk include cash on deposit with twofinancial institutions amounting to $664,358 at March 31, 2003, which wasinsured for up to $100,000 per financial institution by the U.S. FederalDeposit Insurance Corporation.

 

The Company obtains detailed credit evaluations of customers andestablishes credit limits as required and routinely assesses the financialstrength of its customers.  The Companycompetes primarily in the sale of ceramic tile and marble markets and sells itsproducts to a multitude of customers. There is no disproportionate concentration of credit risk.

 

8

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**NOTE 4                 ACCOUNTS RECEIVABLE**

 

Accounts receivable consisted of the following:

 
|                                 |   | **March 31,  2003** |      | **December  31,  2002** |   |
|--------------------------------------|--------|---------------------|-----------|-------------------------|--------|
|                                 |   |                |      |                    |   |
| Accounts receivable                  |   | $                   | 3,547,858 |                    | $      | 2,958,777 |   |
| Less allowance for doubtful accounts |   | (40,000             | )         | (83,245                 | )      |
|                                 |   |                |      |                    |   |
|                                 |   | $                   | 3,507,858 |                    | $      | 2,875,532 |   |

 

Bad debt expense for the three months endedMarch 31, 2003 was $3,247. There was no bad debt expense for the three monthsended March 31, 2002.

 

**NOTE 5                 INVENTORY**

 

Inventory consisted of the following:

 
|                 |   | **March 31,  2003** |      | **December  31,  2002** |   |
|----------------------|--------|---------------------|-----------|-------------------------|--------|
|                 |   |                |      |                    |   |
| Tiles                |   | $                   | 7,022,025 |                    | $      | 4,692,974 |   |
| Inventory in transit |   | 1,474,441           |      | 1,354,902               |   |
|                 |   |                |      |                    |   |
|                 |   | $                   | 8,496,466 |                    | $      | 6,047,876 |   |

 

9

----

 

**NOTE 6                 PROPERTYAND EQUIPMENT**

 

Propertyand equipment consisted of the following:

 
|                          |   | **March 31,  2003** |      | **December  31,  2002** |   | **Depreciation  Period  in Years** |   |
|-------------------------------|--------|---------------------|-----------|-------------------------|--------|------------------------------------|--------|
|                          |   |                |      |                    |   |                               |   |
| Furniture and fixtures        |   | $                   | 199,589   |                    | $      | 89,227                             |   | 5-10 |   |
| Machinery and equipment       |   | 381,347             |      | 326,165                 |   | 7-10                               |   |
| Vehicles                      |   | 214,571             |      | 207,071                 |   | 5                                  |   |
| Display boards                |   | 677,827             |      | 607,978                 |   | 5                                  |   |
| Sample boards                 |   | 2,553,378           |      | 2,379,533               |   | 10                                 |   |
| Computer equipment            |   | 274,176             |      | 131,407                 |   | 3-5                                |   |
| Leasehold improvements        |   | 314,740             |      | 108,220                 |   | 7                                  |   |
|                          |   |                |      |                    |   |                               |   |
|                          |   | 4,615,628           |      | 3,849,601               |   |                               |   |
| Less accumulated depreciation |   | (1,256,842          | )         | (1,137,179              | )      |                               |   |
|                          |   |                |      |                    |   |                               |   |
|                          |   | $                   | 3,358,786 |                    | $      | 2,712,422                          |   |   |   |

 

Depreciation expense for the three monthsended March 31, 2003 and 2002 was $136,108 and $114,578, respectively. (SeeNote 9)

 

**NOTE7                 NOTES PAYABLE**

 

The Company has outstanding notes payable as follows:

 
|                                   |   | **March 31,  2003** |    | **December  31,  2002** |   |
|----------------------------------------|--------|---------------------|---------|-------------------------|--------|
|                                   |   |                |    |                    |   |
| Notes Payable – Related Parties   |   | $                   | 423,662 |                    | $      | 448,712 |   |
| Notes Payable – Unrelated Parties |   | 101,761             |    | 113,652                 |   |
|                                   |   |                |    |                    |   |
|                                   |   | 525,423             |    | 562,364                 |   |
| Less current portion                   |   | (49,850             | )       | (48,780                 | )      |
|                                   |   |                |    |                    |   |
|                                   |   | $                   | 475,573 |                    | $      | 513,584 |   |

 

Interest expense for the three months ended March 31, 2003 and 2002 was$13,531 and $16,209, respectively.

 

10

----

 

Long-term debt maturities for all notespayable for the next five years and thereafter are as follows:

 
| 2003                  |   | $       | 36,889  |   |
|-----------------------|--------|---------|---------|--------|
| 2004                  |   | 46,456  |    |
| 2005                  |   | 18,416  |    |
| 2006                  |   | 0       |    |
| 2007                  |   | 0       |    |
| 2008 & thereafter |   | 423,662 |    |
|                  |   |    |    |
|                  |   | $       | 525,423 |   |

 

 

**NOTE 8                 LOAN PAYABLE**

 

On November 13, 2002, the subsidiary (IWT)renegotiated its existing line of credit to increase the amount of the maximumcredit to $7,500,000.  The averageinterest rate was about 5% for the three months ended March 31, 2003.  IWT owed $5,591,361 at March31, 2003, and $4,864,778 at December 31, 2002 against these revolving loans.

 

IWT is subject to a number of restrictedcovenants under the debt agreement.  IWTis in compliance with all covenants during the three months ended March 31,2003.

 

Interest expense related to these loans for the three months endedMarch 31, 2003 and 2002 was $59,151 and $72,051, respectively.

 

 

**NOTE 9                 LEASES**

 

Capital Leases

The Company’s property under capital leasesis included in property and equipment (See Note 6) and is summarized asfollows:

 

|                                  |   | **March 31,  2003** |    | **December  31,  2002** |   |
|---------------------------------------|--------|---------------------|---------|-------------------------|--------|
|                                  |   |                |    |                    |   |
| Equipment                             |   | $                   | 316,855 |                    | $      | 266,672 |   |
| Less:   Accumulated depreciation |   | (66,332             | )       | (58,724                 | )      |
|                                  |   |                |    |                    |   |
| Net assets under capital leases       |   | $                   | 250,523 |                    | $      | 207,948 |   |

 

11

----

 

Operating Leases

The Company leases office and warehouse spaceunder a non-cancelable operating lease, which has an initial term in excess ofone year.  In May 2003, the Company tookoccupancy of a new warehouse and office facility in Palm City, Florida.   The Company also leases office space inWestport, Connecticut for its corporate headquarters.

 

At March 31, 2003, future minimum annuallease payments under operating and capital leases are as follows:

 

|                |   | **Operating  Lease** |      | **Capital  Leases** |   |
|---------------------|--------|----------------------|-----------|---------------------|--------|
|                |   |                 |      |                |   |
| 2003                |   | $                    | 454,427   |                | $      | 41,807 |   |
| 2004                |   | 634,550              |      | 51,611              |   |
| 2005                |   | 649,250              |      | 46,746              |   |
| 2006                |   | 663,950              |      | 34,977              |   |
| 2007                |   | 678,650              |      | 15,976              |   |
| 2008 and thereafter |   | 3,866,100            |      | 1,915               |   |
|                |   |                 |      |                |   |
|                |   | $                    | 6,946,927 |                | $      | 193,032 |   |

 

Total lease expense under operating leaseswas $134,380 and $114,716 for the three months ended March 31, 2003 and 2002,respectively.

 

Total interest expense under capital leases was $2,146 and $2,350 forthe three months ended March 31, 2003 and 2002, respectively.

 

**NOTE 10               INCOMETAXES**

 

At March 31, 2003 the Company had useable net operating losscarryforwards of approximately $161,000 for income tax purposes, available tooffset future taxable income of the U.S. entity, expiring through 2022.  No valuation allowance has been recorded dueto the certainty of the Company’s ability to generate future taxable income.

 

12

----

 

**NOTE11               STOCKHOLDERS’ EQUITY**

 

The Articles of Incorporation provide for the authorization of25,000,000 shares of convertible preferred stock at $0.001, and 100,000,000shares of common stock at $0.001 par value. Each share of preferred stock is convertible into 1 share of commonstock.

 

Common Stock

During the three months ended March 31, 2003, the Company issued136,668 shares of common stock and 205,002 warrants for $3.00 per unit, or atotal of $410,000, to accredited investors pursuant to the private offering.(See Note 14)

 

On March 3, 2003, the Company issued 1,000 shares of common stockvalued at $2.71 per share, based on the contemporaneous offering price, or atotal of $2,710 to employees under the Stock Incentive Plan for servicesrendered resulting in an immediate charge to operations.

 

On February 18th and February 25th, 2003, theCompany issued 15,000 shares of common stock valued at $2.71 per share, basedon the contemporaneous offering price, or a total of $40,650 to directors underthe Stock Incentive Plan for services rendered resulting in an immediate chargeto operations.

 

On February 26, 2003, 10,000 warrants were exercised for 10,000 sharesof common stock at $3.00 per share, or a total of $30,000.

 

**NOTE 12               STOCKOPTIONS AND COMPENSATION PLAN**

 

Stock Compensation Plan

On December 27, 2001, IWT Tesoro Corporation adopted the “StockIncentive Plan.”  The Company’s StockIncentive Plan provides that eligible employees, consultants, and affiliatesmay be granted shares of common stock. Under the plan, the options granted are non-qualified stock options,incentive stock options, and restricted stock. The aggregate total common stock that may be issued is 4,000,000shares.  For the three months endedMarch 31, 2003, 16,000 restricted shares were issued to employees and directorsfor services rendered.  The total numberof restricted shares issued under the Stock Incentive Plan is 140,500 throughMarch 31, 2003.

 

In accordance with SFAS No. 123, for options issued to employees, theCompany has elected to account for these stock options under APB No. 25 andrelated interpretations in accounting for its plan.  Accordingly, no compensation costs have been recognized foroptions issued under the plan as of December 31, 2002.  Had compensation costs for the Company’sstock option been determined on the fair market value at the grant dates for theoptions, consistent with Statement of Accounting Standards No. 123, *Accounting for Stock Based Compensation*(Statement No. 123), the Company’s results of operations for the year endedDecember 31, 2002 would have changed to the pro-forma amounts indicated.  No options were issued during the threemonths ended March 31, 2003.

 

13

----

 

The following illustrates the effect on net income and earnings pershare if the Company had applied the fair value recognition provisions of SFASNo. 123.

 
|                          |   |        |   | **March 31,  2003** |    | **December  31,  2002** |   |
|-------------------------------|--------|-------------|--------|---------------------|---------|-------------------------|--------|
|                          |   |        |   |                |    |                    |   |
| Net income  -                 |   | As reported |   | $                   | 162,795 |                    | $      | 1,934,027 |   |
|                          |   | Pro-forma   |   | $                   | 162,795 |                    | $      | 1,833,731 |   |
|                          |   |        |   |                |    |                    |   |
| Net income  per share basic - |   | As reported |   | $                   | 0.01    |                    | $      | .18 |   |
|                          |   | Pro-forma   |   | $                   | 0.01    |                    | $      | .17 |   |

 

**NOTE 13               ACQUISITION**

 

On October 1, 2002, the Company acquired International Wholesale Tile,Inc. In connection with the legal form of this transaction, InternationalWholesale Tile, Inc. became a wholly owned subsidiary of IWT TesoroCorporation.  A total of 9,000,000 sharesof common stock were issued for the acquisition.  For accounting purposes, the acquisition has been treated as acapital transaction and as a recapitalization of International Wholesale Tile,Inc.

 

As part of the transaction, the Company and each of the threeshareholders of International Wholesale Tile, Inc. entered into a repurchaseagreement by which the three shareholders may sell a certain amount of theCompany’s common stock back to the Company for a price based on an amount equalto 88% of the average trading price of the Company’s common stock so long asthe stock is trading.  The amount ofstock is generally up to 25,000 shares for the first year, up to 50,000 sharesfor the second year, and up to 75,000 shares for the third year.

 

**NOTE 14               PRIVATE OFFERING**

 

The Company adopted a subscription agreementon October 1, 2002 to commence a private offering of its common stock toaccredited investors only for up to 1.0 million units at $3.00 per unit; eachconsisting of one (1) share of common stock and warrants to purchase 11⁄2 sharesinitially at $3.00 per share.  The priceof the warrants will increase by $.25 per share at the beginning of eachcalendar quarter following the first public sale of the common stock of IWTTesoro Corporation pursuant to the Company’s form 211 to be filed with theNational Association of Securities Dealers (NASD).

 

From adoption of the subscription agreementon October 1, 2002 through March 31, 2003, the Company sold 220,000 units for atotal of $660,000.  In addition, 15,000warrants were exercised for a total of $45,000.

 

14

----

 

**NOTE 15               SEGMENT INFORMATION**

 

The Company manages its operations as onesegment and all revenue is derived from customers in the United States.

 

**NOTE 16               NEW SUBSIDIARIES**

 

On January 8, 2003, the Company incorporateda subsidiary, IWT Tesoro International, Ltd. (ITIL).  This subsidiary was set up as a foreign subsidiary, to be basedin Bermuda to handle future operations of foreign subsidiaries.  Organizational costs related to theincorporation totaling $8,311 were capitalized and are being amortized over 5years.  Amortization expense for thethree months ended March 31, 2003 was $416.

 

On January 24, 2003, the Company set up IWTTesoro Transport, Inc. (ITTI). Initially, this corporation will be a transport broker, but future plansinclude overland transport of tile from Florida to destinations within theUnited States and return shipments of other freight back to Florida.

 

**NOTE 17               SUBSEQUENT EVENT**

 

On April 11, 2003, the Company filed aregistration statement with the Securities and Exchange Commission to register250,000 units to be sold to the public at $5.50 per unit.  Each unit consists of one share of commonstock and one warrant to purchase one share at $7.00 per share for three years.

 

15

----

 

ITEM 2:      MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

 

Thefollowing discussion should be read along with our financial statements, whichare included in another section of this prospectus.  This discussion contains forward-looking statements about ourexpectations for our business and financial needs.  These expectations are subject to a variety of uncertainties andrisks that may cause actual results to vary significantly from ourexpectations.  The cautionary statementsmade in this Prospectus should be read as applying to all forward-lookingstatements in any part of this prospectus.

 

We were incorporated on May 5, 2000 as aNevada corporation.  Our principaloffice is located at 191 Post Road West, Suite 10, Westport, CT  06880. Any reference in this “Management’s Discussion and Analysis or Plan ofOperations”  discussion to “thecompany,” “our,” “we” or “us” refers to Tesoro.

 

Effective October 1, 2002, we acquiredInternational Wholesale Tile, Inc. (IWT) through a share exchange and IWTbecame our wholly owned subsidiary.  Weissued a total of 9 million shares of our common stock in exchange all of theIWT shares.  As part of the transaction,Tesoro and each of the three IWT stockholders entered into a repurchaseagreement by which the three stockholders may each sell a total of 150,000shares of Tesoro’s common stock over a three-year period back to us for a pricebased on an amount equal to 88% of its then weighted average trading price.

 

Through IWT, we provide hard floor and wall covering materialsprimarily ceramic, porcelain and granite tile to the new construction andremodeling industries for the commercial and residential marketplaces. Wedistribute our products through a network of independently owned dealers anddistributors, buying groups and home center retailers.  We currently purchase our productsexclusively from foreign manufacturers.

 

Our primary source of revenue is the sale of hard flooring materialsand our primary costs relate to the acquisition, carrying inventory anddelivery of those products.  While salesare made throughout the United States, the majority of our sales are in thesoutheastern quadrant of the country. The primary sources of working capital are a $ 7.5 million (US)revolving line of credit from a division of a large US commercial bank, oursuppliers who have extended us terms sufficient to convert our receivables tocash and stockholders equity.  During2003, we expect to begin trading our stock on the OTCBB and to raise equitythrough the public market.  Any newequity raised will be used to strengthen our balance sheet and to providecapital for continued growth.

 

In 2003, we have created two new wholly owned subsidiarycompanies.  The first is IWT TesoroInternational Ltd, a Bermuda based exempt company .  International will serve as the holding company for anyinternational based ventures we need to support expanding our saleseffort.  The other subsidiary is IWT TesoroTransport, Inc., a Florida corporation, and a licensed freight broker that willhandle our in and out bound freight operations.

 

16

----

 

# **Results of Operationsfor the quarter ending March 31, 2003.**

 

The following discussion and analysis should be read in conjunctionwith the financial statements and notes thereto that appear elsewhere in thisdocument.  The table below sets forthcertain operating data as a percentage of total revenue for the periods indicated.

 

**Quarter EndingMarch 31, 2003**

 
|               |   | **2001** |       | **2002** |       | **2003** |       |
|--------------------|--------|----------|------------|----------|------------|----------|------------|
| Revenues           |   |     | ** ** |     | ** ** |     | ** ** |
| Cost of Goods Sold |   |     | ** ** |     | ** ** |     | ** ** |
| Gross Margin       |   |     | ** ** |     | ** ** |     | ** ** |
| Operating Expenses |   |     | ** ** |     | ** ** |     | ** ** |

 

##### March 31, 2003 compared toMarch 31, 2003  **UPDATE**

 

Sales for the year ended December 31, 2002 were $ 25,387,707 a 29%increase over sales for the year ended December 31, 2001.  This growth follows a 40% growth from 1999to 2000 and a 31% growth from 2000 to 2001. As a relatively small player in a growing market, we expect our salesgrowth to continue for the next several years, albeit at a slightly reducedrate of between 20% and 25%.  The tilemarket in the United States is approximately $2.1 billion and is growing at afive to seven percent rate.  Our shareof this market is approximately 1%.

 

As we grow, we have been able to purchase product at lower prices andhave consequently lowered our cost of goods to 60% in 2002 from 64% in 2001 and68% in 2000.  While there are certainlyfinite limits to improving our gross margin percentage, it is imperative thatwe maintain these ratios as we grow.

 

Our earnings before interest, taxes,depreciation and amortization (EBITDA) grew from $2 million in 2001 to $2.65million in 2002, a 31% growth rate.

 

In early April 2003, we moved into a newwarehouse facility of nearly 147,000 square feet, an increase of nearly 50%over the previous facility.  5,000square feet of the new facility is for office space.  This new facility will allow us to increase our inventory andbetter serve our customers who rely upon us to meet the short lead times andlimited inventory capacity that exist in their markets.  We hope to improve the efficiency of ourwarehouse operations by simplifying the receiving and shipping functions.  We currently maintain between four and fivemillion square feet of product in our facility and expect that this willincrease to between six and seven million square feet.  Our inventory turns, in 2002, wereapproximately 3.8 times.  We expect tolower those turns to about 3.2 during 2003 and to 3.0 in 2004, however wecannot assure anyone that we will be successful in attaining theseexpectations.  Availability of productis a key success factor for us and is a good use of our capital.

 

Making it easy for our customers to sellproduct is a key success factor for us. We have an extensive sampling and display program that augments thetraining and marketing support we provide our customers.  Our inventory of samples in the field withour customers represents a significant investment that is capitalized on ourbalance sheet.

 

17

----

 

##### Liquidity and CapitalResources  **UPDATE**

 

We had cash balances of $                and $                at the end of March 31, 2003 and 2002, respectively.  We have generated positive cash flow from operations for the lastthree years.

 

In October 2002, we commenced a private offering of our common stock toaccredited investors for up to one million units at $3.00 per unit.  Each unit consists of one share of commonstock and warrants to purchase 1-1/2 shares initially at $3.00 per share forfive years from the date the warrant was issued.  The price of the warrants will increase by $.25 per share at thebeginning of each calendar quarter following the first public sale of Tesoro’s commonstock and continuing through the expiration he expiration date.  During the three months ended

 

During the three months ended March 31, 2003, the Company issued136,668 shares of common stock and 205,002 warrants for $3.00 per unit, or atotal of $410,000, to      accredited investors pursuant toa private offering.  Each of theseinvestors was provided with, and had access to information concerning theCompany, including financial information.

 

On February 26, 2003, 10,000 warrants were exercised for 10,000 sharesof common stock at $3.00 per share, or a total of $30,000.

 

The proceeds from the offering and the warrant exercises were used forgeneral corporate purposes, including paying fees to outside professionals andworking capital.

 

We intend to raise additional capital through the public market during2003 for expansion.  We can make noassurances, however, that we will be able to raise capital at share pricesacceptable to us.  However, currentlythese funds are not critical to our on-going operations.

 

Subsequent Events

 

On April 11, 2003, theCompany filed a registration statement with the Securities and ExchangeCommission to register 250,000 units to be sold to the public at $5.50 perunit.  Each unit consists of one shareof common stock and one warrant to purchase one share at $7.00 per for threeyears.

 

ITEM 3: CONTROLS AND PROCEDURES

 

(a)                Within the 90 days prior to the date of this report, we carried out an evaluation, under the supervision and with the participation of management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are effective in timely alerting them to material information relating to us (including our consolidated subsidiaries) that is required to be included in our periodic SEC reports. There have been no significant changes in our internal controls or in other factors that could significantly affect those controls subsequent to the date we carried out this evaluation.

 

(b)               There have been no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation described in the preceding paragraph.

 

18

----

 

PART II — OTHER INFORMATION

 

ITEM 1.      LEGAL PROCEEDINGS

 

There are no legal proceedings against the Company and the Company is unaware of such proceedings contemplated against it.

 

ITEM 2.      CHANGES IN SECURITIES

 

Not applicable.

 

ITEM 3.       DEFAULTS UPON SENIOR SECURITIES

 

Not applicable.

 

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

 

Not applicable.

 

ITEM 5.      OTHER INFORMATION

 

Not applicable.

 

ITEM 6.      EXHIBITS AND REPORTS ON FORM 8-K

 

(a)                Exhibits

 
| **Exhibit  Number** |   | **Description**                                                                                                                    |
|---------------------|--------|------------------------------------------------------------------------------------------------------------------------------------|
|                |   |                                                                                                                               |
| 1.1                 |   | Selected Dealers Agreement (9)                                                                                                     |
| 3.1                 |   | Articles of Incorporation (1)                                                                                                      |
| 3.1.1               |   | Articles of Amendment to Articles of  Incorporation dated September 23, 2002(3)                                                    |
| 3.2.1               |   | Bylaws (1)                                                                                                                         |
| 3.2.2               |   | Amended and Restated Bylaws (8)                                                                                                    |
| 3.3.1               |   | Specimen Stock Certificate (1)                                                                                                     |
| 3.3.2               |   | Audit Committee Charter (8)                                                                                                        |
| 3.3.3               |   | Compensation Committee Charter (8)                                                                                                 |
| 3.3.4               |   | Nominating And Governing Committee Charter  (8)                                                                                    |
| 3.4.1               |   | Code of Ethics for Senior Financial  Officers (9)                                                                                  |
| 4.1.1               |   | Form of Warrant Agreement (9)                                                                                                      |
| 4.1.2               |   | Form of Stock Certificate (9)                                                                                                      |
| 4.1.3               |   | Form of Lock-Up Agreement (9)                                                                                                      |
| 10.1                |   | Agreement With Peter Goss (1)                                                                                                      |
| 10.2                |   | Stockholders Agreement (1)                                                                                                         |
| 10.3                |   | 2001 Ponca Acquisition Corporation Stock  Incentive Plan. (2)                                                                      |
| 10.4                |   | Employment Agreement Between Ponca  Acquisition Corporation And Henry Jr. Boucher, Jr. Dated As Of December 29,  2002. (2)         |
| 10.5                |   | Memorandum Of Understanding Between Ponca  Acquisition Corporation And The Stockholders Of International Wholesale Tile,  Inc. (2) |

 

19

----

 
| 10.6 |   | Stock Purchase Agreement Among The  Stockholders Of International Wholesale Tile, Inc., And IWT Tesoro  Corporation, Effective October 1, 2002. (5) |
|------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.7 |   | Termination  Of Stockholders Agreement (6)                                                                                                          |
| 10.8 |   | Repurchase  Agreement (7)                                                                                                                           |
| 10.9 |   | Form  of Indemnity Agreement (9)                                                                                                                    |
| 22.  |   | Subsidiaries of Registrant (9)                                                                                                                      |
| 99.1 |   | MRS’ Letter To The Securities and Exchange  Commission. (4)                                                                                    |
| 99.2 |   | Letter from Peter Goss regarding fiscal  year end (5)                                                                                               |

 

----

| (1)    |   | Filed as an Exhibit to the Company’s Form  10-SB, filed with the Securities and Exchange Commission on August 7, 2000.                          |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                 |
| (2)    |   | Filed as an Exhibit to the Company’s Report  on Form 8-K, filed with the Securities and Exchange Commission on September  11, 2002.             |
|   |   |                                                                                                                                                 |
| (3)    |   | Filed as an Exhibit to the Company’s Report  on Form 8-K, filed with the Securities and Exchange Commission on October 1,  2002.                |
|   |   |                                                                                                                                                 |
| (4)    |   | Filed as an Exhibit to the Company’s Report  on Form 8-K/A, filed with the Securities and Exchange Commission on October  8, 2002.              |
|   |   |                                                                                                                                                 |
| (5)    |   | Filed  as an Exhibit to the Company’s Report on Form 8-K, filed with the Securities  and Exchange Commission on October 15, 2002.               |
|   |   |                                                                                                                                                 |
| (6)    |   | Filed  as an Exhibit to the Company’s Report on Form 8-K/A, filed with the  Securities and Exchange Commission on February 4, 2003.             |
|   |   |                                                                                                                                                 |
| (7)    |   | Filed  as an Exhibit to the Company’s Report on Form 8-K/A, filed with the Securities  and Exchange Commission on February 4, 2003.             |
|   |   |                                                                                                                                                 |
| (8)    |   | Filed  as an Exhibit to the Company’s Report on Form 8-K, filed with the Securities  and Exchange Commission on February 4, 2003.               |
|   |   |                                                                                                                                                 |
| (9)    |   | Filed as an Exhibit to the Company’s Registration Statement on Form  SB-2, filed with the Securities and Exchange Commission on April 11, 2003. |

 

20

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 
|         |   |   | IWT TESORO CORPORATION                  |
|--------------|--------|--------|-----------------------------------------|
|         |   |   |                                    |
|         |   |   |                                    |
| May 14, 2003 |   |   | /s/ Henry J. Boucher, Jr.               |   |
|         |   |   | Henry J. Boucher, Jr., President        |
|         |   |   |                                    |
| May 14, 2003 |   |   | /s/Forrest Jordan                       |   |
|         |   |   | Forrest Jordan, Chief Financial Officer |

 

21

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**CERTIFICATION**

 
| I, Henry J. Boucher, Jr., President, Chief  Executive Officer of IWT Tesoro Corporation, certify that:                                                                                                                                                                                                                                                  |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                    |
| 1.     I have reviewed this annual report on  Form 10-QSB of IWT Tesoro Corporation for the quarter ended January 31,  2003;                                                                                                                                                                                                   |
|                                                                                                                                                                                                                                                                                                                                                    |
| 2.     Based on my knowledge, this annual report  does not contain any untrue statement of a material fact or omit to state a  material fact necessary to make the statements made, in light of the  circumstances under which such statements were made, not misleading with  respect to the period covered by this annual report; |
|                                                                                                                                                                                                                                                                                                                                                    |
| 3.     Based on my knowledge, the financial  statements, and other financial information included in this annual report,  fairly present in all material respects the financial condition, results of  operations and cash flows of the registrant as of, and for, the periods  presented in this annual report;                    |
|                                                                                                                                                                                                                                                                                                                                                    |
| 4.     The registrant’s other certifying officer  and I am responsible for establishing and maintaining disclosure controls and  procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the  registrant and we have:                                                                                         |
|                                                                                                                                                                                                                                                                                                                                                    |
| a) designed such disclosure controls and  procedures to ensure that material information relating to the registrant,  including its consolidated subsidiaries, is made known to us by others within  those entities, particularly during the period in which this annual report is  being prepared;                                                     |
|                                                                                                                                                                                                                                                                                                                                                    |
| b) evaluated the effectiveness of the registrant’s  disclosure controls and procedures as of a date within 90 days prior to  the filing date of this annual report (the “Evaluation Date”); and                                                                                                                                     |
|                                                                                                                                                                                                                                                                                                                                                    |
| c) presented in this annual report our conclusions  about the effectiveness of the disclosure controls and procedures based on  our evaluation as of the Evaluation Date;                                                                                                                                                                               |
|                                                                                                                                                                                                                                                                                                                                                    |
| 5.     The registrant’s other certifying officer  and I have disclosed, based on our most recent evaluation, to the  registrant’s auditors and the audit committee of registrant’s board of  directors (or persons performing the equivalent function):                                                              |
|                                                                                                                                                                                                                                                                                                                                                    |
| a) all significant deficiencies in the design or  operation of internal controls which could adversely affect the registrant’s  ability to record, process, summarize and report financial data and have  identified for the registrant’s auditors any material weaknesses in internal  controls; and                                         |
|                                                                                                                                                                                                                                                                                                                                                    |
| b) any fraud, whether or not material, that  involves management or other employees who have a significant role in the  registrant’s internal controls; and                                                                                                                                                                                        |

 

22

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| 6.     I have indicated in this annual report  whether or not there were significant changes in internal controls or in  other factors that could significantly affect internal controls subsequent to  the date of our most recent evaluation, including any corrective actions with  regard to significant deficiencies and material weaknesses. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

 
| Date:  May 14, 2003 | By:                                    | /s/ Henry J.  Boucher, Jr. |   |
|---------------------|----------------------------------------|----------------------------|--------|
|                | Henry  J. Boucher, Jr.,                |
|                | President  and Chief Executive Officer |

 

23

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**CERTIFICATION**

 
| I, Forrest Jordan, Chief Financial Officer of  IWT Tesoro Corporation, certify that:                                                                                                                                                                                                                                                                    |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                    |
| 1.     I have reviewed this annual report on  Form 10-QSB Q of IWT Tesoro Corporation for the quarter ended January  31, 2003;                                                                                                                                                                                                 |
|                                                                                                                                                                                                                                                                                                                                                    |
| 2.     Based on my knowledge, this annual report  does not contain any untrue statement of a material fact or omit to state a  material fact necessary to make the statements made, in light of the  circumstances under which such statements were made, not misleading with  respect to the period covered by this annual report; |
|                                                                                                                                                                                                                                                                                                                                                    |
| 3.     Based on my knowledge, the financial  statements, and other financial information included in this annual report,  fairly present in all material respects the financial condition, results of  operations and cash flows of the registrant as of, and for, the periods  presented in this annual report;                    |
|                                                                                                                                                                                                                                                                                                                                                    |
| 4.     The registrant’s other certifying officer  and I am responsible for establishing and maintaining disclosure controls and  procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the  registrant and we have:                                                                                         |
|                                                                                                                                                                                                                                                                                                                                                    |
| a) designed such disclosure controls and  procedures to ensure that material information relating to the registrant,  including its consolidated subsidiaries, is made known to us by others within  those entities, particularly during the period in which this annual report is  being prepared;                                                     |
|                                                                                                                                                                                                                                                                                                                                                    |
| b) evaluated the effectiveness of the registrant’s  disclosure controls and procedures as of a date within 90 days prior to  the filing date of this annual report (the “Evaluation Date”); and                                                                                                                                     |
|                                                                                                                                                                                                                                                                                                                                                    |
| c) presented in this annual report our conclusions  about the effectiveness of the disclosure controls and procedures based on  our evaluation as of the Evaluation Date;                                                                                                                                                                               |
|                                                                                                                                                                                                                                                                                                                                                    |
| 5.     The registrant’s other certifying officer  and I have disclosed, based on our most recent evaluation, to the  registrant’s auditors and the audit committee of registrant’s board of  directors (or persons performing the equivalent function):                                                              |
|                                                                                                                                                                                                                                                                                                                                                    |
| a) all significant deficiencies in the design or  operation of internal controls which could adversely affect the registrant’s  ability to record, process, summarize and report financial data and have  identified for the registrant’s auditors any material weaknesses in internal  controls; and                                         |
|                                                                                                                                                                                                                                                                                                                                                    |
| b) any fraud, whether or not material, that  involves management or other employees who have a significant role in the  registrant’s internal controls; and                                                                                                                                                                                        |

 

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| 6.     I have indicated in this annual report  whether or not there were significant changes in internal controls or in  other factors that could significantly affect internal controls subsequent to  the date of our most recent evaluation, including any corrective actions with  regard to significant deficiencies and material weaknesses. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

 
| Date:  May 14, 2003 | By:                      | /s/ Forrest  Jordan |   |
|---------------------|--------------------------|---------------------|--------|
|                | Forrest  Jordan,         |
|                | Chief  Financial Officer |

 

25

 

CERTIFICATION PURSUANT TO 18 U.S.C. sec. 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of IWT Tesoro Corporation (the “Company”) on Form 10-QSB for the period ending March 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Henry J. Boucher, Jr., President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. sec. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

(1)                The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2)                The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

 
| Dated:  May 14, 2003 | /s/Henry J. Boucher, Jr.              |   |
|---------------------------|---------------------------------------|--------|
|                      | Henry J. Boucher, Jr.,                |
|                      | President and Chief Executive Officer |

 

26

 

CERTIFICATION PURSUANT TO 18 U.S.C. sec. 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of IWT Tesoro Corporation (the “Company”) on Form 10-QSB for the period ending March 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Forrest Jordan, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. sec. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

(1)                The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2)                The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

 
| Dated:  May 14, 2003 | /s/Forrest Jordan       |   |
|---------------------------|-------------------------|--------|
|                      | Forrest Jordan          |
|                      | Chief Financial Officer |

 

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