**SECURITIESAND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

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**FORM 10-QSB/A**

 

**(Mark One)**
| **ý**                                                | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES EXCHANGE ACT OF 1934** |
|-----------------------------------------------------------|----------------------------------------------------------------------------------------------|
|                                                      |
| **For the period from January 1, 2003 to March 31, 2003** |
|                                                      |
| **o**                                                     | **TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE  ACT**                         |

 

**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) |
|                                                                                |   |                                     |
| **101 Post Road West, 5 Wicks Lane, Westport, CT 06880**                            |
| (Address of principal executive offices)                                            |
|                                                                                |
| **(203) 221-2770**                                                                  |
| (Issuer’s Telephone Number, including area code)                               |
|                                                                                |   |                                     |
| (Former Name, Former Address and Former Fiscal Year, if Changed Since  Last 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 June 17, 2003:  11,205,502shares as of June 13, 2003

 

TransitionalSmall Business Disclosure Format:   oYes         ýNo

 

 

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PART 1

 

ITEM 1:  FINANCIAL STATEMENTS

 

**IWT TESOROCORPORATION AND SUBSIDIARIES**

**CONSOLIDATEDFINANCIAL STATEMENTS**

**(UNAUDITED)**

**THREE MONTHSENDED MARCH 31, 2003**

 

**TABLE OFCONTENTS**

 
| 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                                   |

 

2

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**IWT TESOROCORPORATION AND SUBSIDIARIES**

**CONSOLIDATED BALANCESHEETS**

 
|                                                                                                              |   | **March 31,  2003** |       | **December 31,  2002** |   |
|-------------------------------------------------------------------------------------------------------------------|--------|---------------------|------------|------------------------|--------|
|                                                                                                              |   | **(Unaudited)**     |       |                   |   |
|                                                                                                              |   |                |       |                   |   |
| **Assets**                                                                                                        |   |                |       |                   |   |
| 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 |   |
|                                                                                                              |   |                |       |                   |   |
| **Liabilities and Stockholders’ Equity**                                                                     |   |                |       |                   |   |
| Current  liabilities                                                                                              |   |                |       |                   |   |
| Accounts  payable                                                                                                 |   | $                   | 7,726,994  |                   | $      | 5,403,816 |   |
| Accrued  expenses                                                                                                 |   | 370,545             |       | 126,340                |   |
| Other current  liabilities                                                                                        |   | 39,922              |       | 24,723                 |   |
| Current portion  of lease payable                                                                                 |   | 54,709              |       | 47,222                 |   |
| Current portion  of notes payable—unrelated parties                                                          |   | 49,850              |       | 48,780                 |   |
| Total current  liabilities                                                                                        |   | 8,242,020           |       | 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              |   |
| Redeemable  common stock (450,000 shares issued and outstanding)                                                  |   | 1,073,160           |       | 1,073,160              |   |
| Stockholders’  equity                                                                                        |   |                |       |                   |   |
| Preferred  stock, $0.001 par value, 25,000,000 authorized; none issued                                            |   | —              |       | —                 |   |
| Common stock,  $0.001 par value, 100 million shares authorized, 10,750,502 and 10,587,834  issued and outstanding |   | 10,750              |       | 10,588                 |   |
| Additional paid  in capital                                                                                       |   | 1,169,266           |       | 686,068                |   |
| Accumulated  deficit                                                                                              |   | (21,944             | )          | (184,740               | )      |
|                                                                                                              |   | 1,158,072           |       | 511,916                |   |
|                                                                                                              |   | $                   | 16,678,509 |                   | $      | 12,722,757 |   |

 

See notes to financialstatements.

 

3

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**IWT TESOROCORPORATION 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                                      |   | 2,655,157                         |      | 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                           |   | 275,131                           |      | 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                          |   | 194,665                           |      | 757,059 |   |
| Income  tax—deferred                         |   | (31,869                           | )         | — |   |
| Net income                                        |   | $                                 | 162,796   |   | $ | 757,059 |   |
|                                              |   |                              |      |   |   |
| Earnings per  common share—basic and diluted |   | $                                 | 0.01      |   | $ | 0.08 |   |

 

See notes to financialstatements.

 

4

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**IWT TESOROCORPORATION AND SUBSIDIARIES**

**CONSOLIDATEDSTATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY**

**THREE MONTHSENDED MARCH 31, 2003**

 
|                                                         |   |       |   |   |   | **Additional  Paid in  Capital** |   | **Subscription  Receivable** |   | **Retained Earnings  (Deficit)** |    | **TOTAL**  |   |
|--------------------------------------------------------------|--------|------------|--------|--------|--------|----------------------------------|--------|------------------------------|--------|----------------------------------|---------|------------|--------|
| **Common Stock**                                             |
| **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     |   |
| Net income,  nine months ended September 30, 2002            |   |       |   |   |   |                             |   |                         |   | 2,118,767                        |    | 2,118,767  |   |
|                                                         |   |       |   |   |   |                             |   |                         |   |                             |    |       |   |
| Balance  September 30, 2002—before recapitalization     |   | 9,000,000  |   | 9,000  |   | 116,400                          |   | —                       |   | 1,085,329                        |    | 1,210,729  |   |
| Recapitalization  on October 1, 2002                         |   | 1,800,000  |   | 1,800  |   | 972,471                          |   | —                       |   | (1,085,329                       | )       | (111,058   | )      |
|                                                         |   |       |   |   |   |                             |   |                         |   |                             |    |       |   |
| Balance after  recapitalization on October 1, 2002           |   | 10,800,000 |   | 10,800 |   | 1,088,871                        |   | —                       |   | —                           |    | 1,099,671  |   |
| Reclassification  of redeemable stock                        |   | (450,000   | )      | (450   | )      | (60,086                          | )      |                         |   |                             |    | (60,536    | )      |
| 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     |   |
|                                                         |   |       |   |   |   |                             |   |                         |   |                             |    |       |   |
| Sub-total                                                    |   | 10,489,500 |   | $      | 10,490 |                             | $      | 1,406,690                    |   | $                                | —  |       | $      | — |   | $ | 1,417,180 |   |
| 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    |   |
| Exercise of  warrants                                        |   | 5,000      |   | 5      |   | 14,995                           |   | —                       |   | —                           |    | 15,000     |   |
| Accretion of  redeemable stock                               |   |       |   |   |   | (1,012,624                       | )      |                         |   |                             |    | (1,012,624 | )      |
| Net loss, three  months ended December 31, 2002              |   |       |   |   |   |                             |   | —                       |   | (184,740                         | )       | (184,740   | )      |
|                                                         |   |       |   |   |   |                             |   |                         |   |                             |    |       |   |
| Balance,  December 31, 2002                                  |   | 10,587,834 |   | $      | 10,588 |                             | $      | 686,068                      |   | $                                | —  |       | $      | (184,740 | ) | $ | 511,916 |   |
| 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               |   |       |   |   |   |                             |   |                         |   | 162,796                          |    | 162,796    |   |
| Balance, March  31, 2003 (Unaudited)                         |   | 10,750,502 |   | $      | 10,750 |                             | $      | 1,169,266                    |   | $                                | —  |       | $      | (21,944 | ) | $ | 1,158,072 |   |

 

See notes to financialstatements.

 

5

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**IWT TESOROCORPORATION AND SUBSIDIARIES**

**STATEMENTS OF CASHFLOWS**

**(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 financialstatements.

 

6

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**IWT TESOROCORPORATION AND SUBSIDIARIES**

**NOTES TOCONSOLIDATED FINANCIAL STATEMENTS**

**(UNAUDITED)**

**THREE MONTHSENDED MARCH 31, 2003**

 

**NOTE 1                 BASISOF PRESENTATION AND 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). All significant inter-company balances and transactionshave 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 suggested that these condensed financialstatements should be read in conjunction with the Company’s financialstatements and notes thereto included in the Company’s audited financialstatements on Form 10-KSB for the fiscal year ended December 31, 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 yearended December 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 statementsrequires management to make estimates and assumptions that affect the reportedamounts of assets, liabilities, revenues and expenses. Actual results maydiffer from these estimates. Interim results are not necessarily indicative ofresults for a full year. The results of operations for the three-month periodended March 31, 2003 are not necessarily indicative of operating results to beexpected for a full year.

 

**NOTE 2                 NATUREOF OPERATIONS AND SUMMARY OF SIGNIFICANT 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.

 

No options were granted during the three months ended March 31, 2003and 2002.

 

Had compensation costs for the Company’s stock option granted duringthe year ended December 31, 2002, been determined on the fair market value atthe grant dates for the options, consistent with Statement of AccountingStandards No. 123, *Accounting for StockBased Compensation* (Statement No. 123),

 

7

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the Company’s results of operations for theyear ended December 31, 2002 would have changed to the pro-forma amountsindicated.

 
|                                                                                                                                |   | **2002** |      |
|-------------------------------------------------------------------------------------------------------------------------------------|--------|----------|-----------|
|                                                                                                                                |   |     |      |
| Net income as  reported                                                                                                             |   | $        | 1,934,027 |   |
| Add: Stock  based employee compensation cost, net of related tax effects, included in the  determination of net income as reported  |   | 234,355  |      |
| Less: Stock  based employee compensation cost, net of related tax effects, determined  under fair value based method for all awards |   | (295,656 | )         |
| Pro-forma net  income                                                                                                               |   | $        | 1,872,726 |   |
|                                                                                                                                |   |     |      |
| Net income per  share basic – diluted                                                                                          |   |     |      |
| As reported                                                                                                                         |   | $        | 0.18      |   |
| Pro-forma                                                                                                                           |   | $        | 0.17      |   |

 

*AccountingPronouncements*

 

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 alternative methods of transition for a voluntarychange to the fair value based method of accounting for stock-based employeecompensation. 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. Thisstatement is effective for financial statements for fiscal years ending afterDecember 15, 2002. In compliance with SFAS No. 148, the Company has elected tocontinue to follow the intrinsic value method in accounting for its stock-basedemployee 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 share include the effects of common stockequivalents to the extent they are dilutive. At March 31, 2003 all common stockequivalents were antidilutive and therefore diluted earnings per share equaledbasic 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 |   |

 

At March 31, 2003, the total number of additional shares that couldpotentially dilute basic EPS in the future, but were not included in the computationof diluted EPS because of their antidilutive effect, was 205,000. AtMarch 31, 2002, there were no common stock equivalents that couldpotentially dilute basic EPS in the future.

 

**NOTE 3                 CONCENTRATIONOF CREDIT RISK**

 

Financial instruments that potentially subject the Company to creditrisk include cash on deposit with two financial institutions amounting to$664,358 at March 31, 2003, which was insured for up to $100,000 per financialinstitution by the U.S. Federal Deposit Insurance Corporation.

 

8

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

 

**NOTE 4                 ACCOUNTSRECEIVABLE**

 

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 ended March 31, 2003 was $3,247.There was no bad debt expense for the three months ended 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 |   |

 

Inventory in transit consists of merchandise purchased overseas whichis not yet received in the warehouse. The Company obtains legal title at theshipping point. Inventory cost includes the purchase price and in-boundfreight.

 

**NOTE 6                 PROPERTYAND EQUIPMENT**

 

Property and 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                                |   |   |   |

 

9

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Depreciation expense for thethree months ended March 31, 2003 and 2002 was $136,108 and $114,578,respectively. (See Note 9)

 

*Sample Boards*

 

The samples in the field withcustomers and salespersons have two characteristics that distinguish them asfixed assets:

 

•              Theyare produced for use in operations and entered into the revenue-generatingstream indirectly as marketing tools. They are held primarily for use and notfor sale.

 

•              Theyhave relatively long lives.

 

The carrying values of thesesamples are adjusted through systematic depreciation to reflect wear and tear.

 

Capitalized samples in the fieldwere as follows:

 
|                            |   | **March 31,  2003** |      | **December 31,  2002** |   |
|---------------------------------|--------|---------------------|-----------|------------------------|--------|
|                            |   |                |      |                   |   |
| Sample boards                   |   | $                   | 2,553,378 |                   | $      | 2,379,533 |   |
| Less:  accumulated depreciation |   | (649,449            | )         | (586,507               | )      |
|                            |   | $                   | 1,903,929 |                   | $      | 1,793,026 |   |

 

Depreciation expense related tothe sample boards for the three months ended March 31, 2003 and 2002 was$62,942 and $45,787, respectively.

 

**NOTE 7                 NOTESPAYABLE**

 

The Company has outstandingnotes 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 threemonths ended March 31, 2003 and 2002 was $13,531 and $16,209, respectively.

 

Long-term debt maturities forall notes payable 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 |   |

 

10

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**NOTE 8                 LOANPAYABLE**

 

On November 13, 2002, thesubsidiary (IWT) renegotiated its existing line of credit to increase theamount of the maximum credit to $7,500,000. The average interest rate was about5% for the three months ended March 31, 2003. IWT owed $5,591,361 at March 31,2003, and $4,864,778 at December 31, 2002 against these revolving loans.

 

IWT is subject to a number ofrestricted covenants under the debt agreement. IWT is in compliance with allcovenants during the three months ended March 31, 2003.

 

Interest expense related tothese loans for the three months ended March 31, 2003 and 2002 was $59,151 and$72,051, respectively.

 

**NOTE 9                 LEASES**

 

*Capital Leases*

 

The Company’s property undercapital leases is included in property and equipment (See Note 6) and issummarized as follows:

 
|                             |   | **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 |   |

 

*Operating Leases*

 

The Company leases office andwarehouse space under a non-cancelable operating lease, which has an initialterm in excess of one year. In May 2003, the Company took occupancy of a newwarehouse and office facility in Palm City, Florida. The Company also leasesoffice space in Westport, Connecticut for its corporate headquarters.

 

At March 31, 2003, futureminimum annual lease payments under operating and capital leases are asfollows:

 
|                 |   | **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 underoperating leases was $134,380 and $114,716 for the three months ended March 31,2003 and 2002, respectively.

 

Total interest expense undercapital leases was $2,146 and $2,350 for the three months ended March 31, 2003and 2002, respectively.

 

11

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**NOTE 10****                                             INCOME TAXES**

 

At March 31, 2003 the Companyhad useable net operating loss carryforwards of approximately $161,000 forincome tax purposes, available to offset future taxable income of the U.S.entity, expiring through 2022. No valuation allowance has been recorded due tothe certainty of the Company’s ability to generate future taxable income.

 

**NOTE 11****                                             STOCKHOLDERS’ EQUITY**

 

The Articles of Incorporationprovide for the authorization of 25,000,000 shares of convertible preferredstock at $0.001, and 100,000,000 shares of common stock at $0.001 par value.Each share of preferred stock is convertible into 1 share of common stock. AtMarch 31, 2003 11,200,502 shares of common stock were issued and outstanding.Of those shares, 450,000 were reclassified to Redeemable Common Stock toaddress the repurchase agreement by which three shareholders could redeem up to450,000 shares of common stock.

 

*Common Stock*

 

During the three months endedMarch 31, 2003, the Company issued 136,668 shares of common stock and 205,002warrants for $3.00 per unit, or a total of $410,000, to accredited investorspursuant to the private offering. (See Note 14)

 

On March 3, 2003, the Companyissued 1,000 shares of common stock valued at $2.71 per share, based on thecontemporaneous offering price, or a total of $2,710 to employees under theStock Incentive Plan for services rendered resulting in an immediate charge tooperations.

 

On February 18th andFebruary 25th, 2003, the Company issued 15,000 shares of commonstock valued at $2.71 per share, based on the contemporaneous offering price,or a total of $40,650 to directors under the Stock Incentive Plan for servicesrendered resulting in an immediate charge to operations.

 

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

 

**NOTE 12****                                             STOCK OPTIONS AND COMPENSATION PLAN**

 

*Stock CompensationPlan*

 

On December 27, 2001, IWT TesoroCorporation adopted the “Stock Incentive Plan.” The Company’s Stock IncentivePlan provides that eligible employees, consultants, and affiliates may begranted shares of common stock. Under the plan, the options granted arenon-qualified stock options, incentive stock options, and restricted stock. Theaggregate total common stock that may be issued is 4,000,000 shares. For thethree months ended March 31, 2003, 16,000 restricted shares were issued toemployees and directors for services rendered. For the three months endedMarch 31 2002, no restricted shares were issued to employees, directorsand consultants for services rendered under the “Stock Incentive Plan.” Theaggregate total of restricted shares issued under the Stock Incentive Plan is140,500 through March 31, 2003. These shares are currently not registered and are subject toRule 144 without any additional restrictions imposed by the CompensationCommittee at the present time.

 

In accordance with SFAS No. 123,for options issued to employees, the Company has elected to account for thesestock options under APB No. 25 and related interpretations in accounting forits plan. Accordingly, no compensation costs have been recognized for optionsissued under the plan as of December 31, 2002. Had compensation costs for theCompany’s stock option been determined on the fair market value at the grantdates for the options, consistent with Statement of Accounting Standards No.123, *Accounting for Stock Based Compensation*(Statement No. 123), the Company’s results of

 

12

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operations for the year ended December 31,2002 would have changed to the pro-forma amounts indicated. No options wereissued during the three months ended March 31, 2003.

 

**NOTE 13****                                             ACQUISITION**

 

On October 1, 2002, the Companyacquired International Wholesale Tile, Inc. In connection with the legal formof this transaction, International Wholesale Tile, Inc. became a wholly ownedsubsidiary of IWT Tesoro Corporation. A total of 9,000,000 shares of commonstock were issued for the acquisition. For accounting purposes, the acquisitionhas been treated as a capital transaction and as a recapitalization ofInternational Wholesale Tile, Inc.

 

As part of the transaction, theCompany and each of the three shareholders of International Wholesale Tile,Inc. entered into a repurchase agreement, to commence on January 1, 2003for three years, by which the three shareholders may sell a certain amount ofthe Company’s common stock back to the Company for a price based on an amountequal to 88% of the average trading price of the Company’s common stock so longas the stock is trading. The amount of stock is generally up to 25,000 sharesfor the first year, up to 50,000 shares for the second year, and up to 75,000shares for the third year. The repurchase agreement is contingent upon tradingof the Company’s stock on the NYSE, the ASE, the NASDAQ, the Over the CounterBulletin Board, or the “Pink Sheets”. The maximum number of redeemable sharesunder the repurchase agreement is 450,000.

 

At March 31, 2003, themaximum possible cash obligation related to redeemable common stock under therepurchase agreement was $1,073,160, based on the repurchase price of 88% ofthe fair value of the common stock at March 31, 2003 for a maximum of450,000 shares.

 

**NOTE 14****                                             PRIVATE OFFERING**

 

The Company adopted asubscription agreement on October 1, 2002 to commence a private offering of itscommon stock to accredited investors only for up to 1.0 million units at $3.00per unit; each consisting of one (1) share of common stock and warrants topurchase 1 1/2 shares initially at $3.00 per share. Theprice of 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 thesubscription agreement on October 1, 2002 through March 31, 2003, the Companysold 220,000 units for a total of $660,000. In addition, 15,000 warrants wereexercised for a total of $45,000.

 

**NOTE 15****                                             SEGMENT INFORMATION**

 

The Company manages itsoperations as one segment and all revenue is derived from customers in theUnited States.

 

**NOTE 16****                                             NEW SUBSIDIARIES**

 

On January 8, 2003, the Companyincorporated a subsidiary, IWT Tesoro International, Ltd. (ITIL). Thissubsidiary was set up as a foreign subsidiary, to be based in Bermuda to handlefuture operations of foreign subsidiaries. Organizational costs related to theincorporation totaling $8,311 were capitalized and are being amortized over 5years. Amortization expense for the three months ended March 31, 2003 was $416.

 

On January 24, 2003, the Companyset up IWT Tesoro Transport, Inc. (ITTI). Initially, this corporation will be atransport broker, but future plans include overland transport of tile fromFlorida to destinations within the United States and return shipments of otherfreight back to Florida.

 

13

----

 

**NOTE 17****                                             SUBSEQUENT EVENT**

 

On April 11, 2003, the Companyfiled a registration statement with the Securities and Exchange Commission toregister 250,000 units to be sold to the public at $5.50 per unit. Each unitconsists of one share of common stock and one warrant to purchase one share at$7.00 per share for three years.

 

14

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ITEM 2:       MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLANOF OPERATION

 

**MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLANOF OPERATION**

 

The following discussion shouldbe read along with our financial statements, which are included in anothersection of this prospectus. This discussion contains forward-looking statementsabout our expectations for our business and financial needs. These expectationsare subject to a variety of uncertainties and risks that may cause actualresults to vary significantly from our expectations. The cautionary statementsmade in this prospectus should be read as applying to all forward-lookingstatements in any part of this prospectus.

 

We were incorporated onMay 5, 2000 as a Nevada corporation. Our principal office is located at191 Post Road West, Suite 10, Westport, CT 06880. Any reference in this“Management’s Discussion and Analysis or Plan of Operations” discussion to “thecompany,” “our,” “we” or “us” refers to Tesoro.

 

Effective October 1, 2002,we acquired International Wholesale Tile, Inc. (IWT) through a shareexchange and IWT became our wholly owned subsidiary. We issued a total of9 million shares of our common stock in exchange for all of the IWTshares. As part of the transaction, Tesoro and each of the three IWTstockholders entered into a repurchase agreement by which the threestockholders may each sell a total of 150,000 shares of Tesoro’s common stockover a three-year period back to us for a price based on an amount equal to 88%of its then weighted average trading price.

 

Through IWT, we provide hardfloor and wall covering materials primarily ceramic, porcelain and granitetiles to the new construction and remodeling industries for the commercial andresidential marketplaces. We distribute our products through a network ofindependently owned dealers and distributors, buying groups and home centerretailers. We currently purchase our products predominately from foreignmanufacturers.

 

Our primary source of revenue isthe sale of hard flooring and wall covering materials and our primary costsrelate to the acquisition, warehousing and delivery of those products. Whilesales are made throughout the United States, the majority of our sales are inthe southeastern quadrant of the country. The primary sources of workingcapital are a $7.5 million (US) revolving line of credit from a divisionof a large US commercial bank, stockholders’ equity and our suppliers who haveextended us terms. Specifically, the terms we have negotiated with our internationalsuppliers are more advantageous than those we extend to our customers. Thisallows us, in some instances, to collect our receivables prior to paying oursuppliers. During 2003, we expect to begin trading our stock on the OTC-BB andto raise equity through the public market. Any new equity raised will be usedto strengthen our balance sheet and to provide capital for continued growth.

 

In the first quarter of 2003, wehave created two new wholly owned subsidiary companies. The first is IWT TesoroInternational Ltd, a Bermuda based exempt company. A Bermuda exemptcompany is a company domiciled in Bermuda that is not actively involved intrade or business on the island and is therefore exempt from certain licensingrequirements. International will serve as the holding company for anyinternational based ventures we need to support expanding our sales effort. Theother subsidiary is IWT Tesoro Transport, Inc., a Florida corporation, anda licensed freight broker that will handle our in and out bound freightoperations.

 

*Results ofOperations for the Quarter ending March 31, 2003.*

 

The following discussion andanalysis should be read in conjunction with the financial statements and notesthereto that appear elsewhere in this document. The table below sets forthcertain operating data as a percentage of total revenue for the periodsindicated.

 
|                |   | **Quarter Ending March 31,** |   |
|---------------------|--------|------------------------------|--------|
|                |   | **2001**                     |   | **2002** |   | **2003** |   |
|                |   |                         |   |   |   |   |   |
| Revenues            |   | 4,513,755                    |   | 6,014,020 |   | 6,734,765 |   |
| Cost of Goods  Sold |   | 2,995,589                    |   | 3,612,316 |   | 4,079,608 |   |
| Gross Margin        |   | 33.6                         |   | 39.9 |   | 39.4 |   |
| Operating  Expenses |   | 1,242,024                    |   | 1,576,713 |   | 2,385,765 |   |

 

*March 31, 2003Compared to March 31, 2002*

 

Sales for the quarter endedMarch 31, 2003 were $6,734,765 a 12% increase over sales for the quarterended March 31, 2002. This growth follows a 33% growth from 2001 to 2002.We are a relatively small player in a growing market. We are entering newmarkets and adding new products; therefore, we expect to be able to grow fasterthan the market as a whole for the next several years. Our 

 

15

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share of this market is approximately 1%. The tile market in the UnitedStates is approximately $2.1 billion and is growing at a five to sevenpercent rate.

 

As we grow, we have been able topurchase product at lower prices and have consequently lowered our cost ofgoods to 60% in 2002 from 64% in 2001 and 68% in 2000. While there arecertainly finite limits to improving our gross margin percentage, it isimperative that we maintain these ratios as we grow.

 

Our earnings before interest,taxes, depreciation and amortization (EBITDA) grew from $2 million in 2001to $2.65 million in 2002, a 31% growth rate. EBITDA is a concept used byfinancial managers to compare businesses that operate in different industrieswith different capital needs, tax circumstances and debt structure. It is not aGAAP concept and should not be used as the only measure of a company’sfinancial performance. Investors should refer to the financial statementsincluded in this document before making any investment decisions.

 

We have included areconciliation from our net income to EBITDA:

 
|                     |   | **2002** |      | **2001** |   |
|--------------------------|--------|----------|-----------|----------|--------|
|                     |   |     |      |     |   |
| Net income               |   | $        | 1,934,027 |     | $      | 1,287,118 |   |
| Interest  expense        |   | 328,920  |      | 424,527  |   |
| Income taxes  (deferred) |   | (34,384  | )         | 0        |   |
| Depreciation             |   | 422,435  |      | 317,852  |   |
| Amortization             |   | 0        |      | 0        |   |
| EBIDTA                   |   | $        | 2,650,998 |     | $      | 2,029,497 |   |

 

•                                          The major causes of the increased EBITDA were(a) an increase of 29% in sales and (b) an increase of 4% on thegross margin.

 

•                                          EBIDTA is not a GAAP concept and should not beused as the only measure of a company’s financial performance. Investors shouldrefer to our financial statements before making any investment decisions.

 

•                                          Our earnings before interest, taxes, depreciationand amortization (EBITDA) grew from $2 million in 2001 to$2.65 million in 2002, a 31% growth rate. EBITDA is a concept used byfinancial managers to compare businesses that operate in different industrieswith different capital needs, tax circumstances and debt structure.

 

In early April 2003, wemoved into a new warehouse facility of nearly 147,000 square feet, an increaseof nearly 50% over the previous facility. 5,000 square feet of the new facilityis for office space. This new facility will allow us to increase our inventoryand better serve our customers who rely upon us to meet the short lead timesand limited inventory capacity that exist in their markets. We hope to improvethe efficiency of our warehouse operations by simplifying the receiving andshipping functions. We currently maintain between four and five million squarefeet of product in our facility and expect that this will increase to betweensix and seven million square feet. Our inventory turns, in 2002, wereapproximately 3.8 times. We expect to lower those turns to about 3.2 during2003 and to 3.0 in 2004, however we cannot assure anyone that we will besuccessful in attaining these expectations. Availability of product is a keysuccess factor for us and is a good use of our capital.

 

Making it easy for our customersto sell product is a key success factor for us. We have an extensive samplingand display program that augments the training and marketing support we provideour customers. Our inventory of samples in the field with our customersrepresents a significant investment that is capitalized as property andequipment. The net value on March 31, 2003 and December 31, 2002 was$1,903,929 and $1,793,026, respectively on our balance sheet.

 

Operating expenses for thequarters ended March 31, 2003 and March 31, 2002 were $2,385,765 and$1,576,713, respectively. This increase of 51.3% was a result of investmentsbeing made in people, infrastructure and corporate organization for futuregrowth. With the acquisition of IWT in October 2002, we began to incur certainprofessional and operating expenses that are not reflected in the comparableperiod for 2002. In addition, we began to issue common stock to non-executiveemployees, outside directors and suppliers under the incentive stock plan.Generally Accepted Accounting Principles require that these shares be expensedin the period they are issued at the fair market value of these shares. Weexpect these expenses to continue.

 

The first quarter of fiscal year2003 also saw the increase in our sales staff at IWT in anticipation of itsexpansion of the buying group and home center store channels. We expect theseincreased expenses to generate proportionate sales growth in the future.

 

16

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*Liquidity andCapital Resources*

 

We had cash balances of $664,358and $574,046 at the end of March 31, 2003 and December 31, 2002, respectively.We have generated positive cash flow from operations for the last three years.

 

In October 2002, wecommenced a private offering of our common stock to accredited investors for upto one million units at $3.00 per unit. Each unit consists of one share ofcommon stock and warrants to purchase 1 1/2 sharesinitially at $3.00 per share for five years from the date the warrant wasissued. The price of the warrants will increase by $.25 per share at thebeginning of each calendar quarter following the first public sale of Tesoro’scommon stock and continuing until the warrant expires.

 

Through its closing as ofMarch 31, 2003, we raised $530,000 from units sales. We also raised anadditional $45,000 from 15,000 warrants that were exercised. All of theinvestors were provided with, or otherwise had access to, information about theCompany and its subsidiaries, including financial information. The proceeds fromthe offering and the warrant exercises were used for general corporatepurposes, including paying fees to outside professionals and working capital.

 

On November 21, 2000, oursubsidiary, IWT, entered into a new loan and security agreement with a financialinstitution totaling $5 million as a revolving loan, for a period of threeyears, with an option to renew for one additional year. This was amended andrestated effective November 13, 2002 and the amount of the maximum creditwas increased from $5 million to $7.5 million. The interest rate onthis loan is the Wachovia announced prime rate plus .75% per year.Additionally, at the lender’s option, we also pay prime plus 2.75% with respectto any non-contingent obligations

 

•                                          on all outstanding obligations followingtermination or non-renewal of the credit facility;

 

•                                          form and after the date of an event of defaultoccurs and for so long as such event is continuing, as determined by lender;

 

•                                          during any time the amounts available to us aremade or arise without our lender’s knowledge or consent.

 

On June 17, 2003, the Securities and Exchange Commission declared IWTTesoro Corporation’s registration statement on Form SB-2 effective.  In connection with the RegistrationStatement, two offerings are occurring. The first is the offer and sale of 250,000 units at $5.50 per unit.  Each unit consists of one share of Tesorocommon stock and a warrant to purchase one share at $7.00 per share throughJune 17, 2006.  The second is an offerby certain Tesoro’s stockholders to sell an aggregate of 1,243,502 registeredshares.

 

The unitoffering is being sold on an exclusive basis through July 7, 2003 to Tesoro’scurrent stockholders.  Thereafter, theunits will be offered and sold by Tesoro’s officers and directors, or bycertain registered broker-dealers who have entered into a Selected DealerAgreement with Tesoro and who have been approved by the National Association ofSecurities Dealers (NASD).

 

17

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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                  |
|---------------|--------|--------|-----------------------------------------|
|          |   |   |                                    |
|          |   |   |                                    |
| June 27, 2003 |   |   | /s/ Henry J. Boucher, Jr.               |   |
|          |   |   | Henry J. Boucher, Jr., President        |
|          |   |   |                                    |
| June 27, 2003 |   |   | /s/Forrest Jordan                       |   |
|          |   |   | Forrest Jordan, Chief Financial Officer |

 

1

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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/A of IWT Tesoro Corporation for the  quarter ended March 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                                                                                                                                                                                                                                                           |

 

2

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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:  June 27, 2003 | By:                                    | /s/ Henry J.  Boucher, Jr. |   |
|----------------------|----------------------------------------|----------------------------|--------|
|                 | Henry  J. Boucher, Jr.,                |
|                 | President  and Chief Executive Officer |

 

3

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**CERTIFICATION**

 
| I,  Forrest Jordan, Chief Financial Officer of IWT Tesoro Corporation, certify  that:                                                                                                                                                                                                                                                                                                                                      |
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| 1.                I have reviewed  this annual report on Form 10-QSB/A of IWT Tesoro Corporation for the  quarter ended March 31, 2003;                                                                                                                                                                                                    |
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| 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; |
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| 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;                     |
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| 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:                                                                                          |
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| 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;                                                                                                                        |
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| 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                                                                                                                                                                                                        |
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| 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;                                                                                                                                                                                                                                                  |
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| 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):                                                              |
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| 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                                                                                                            |
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| 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. |
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| Date:  June 27, 2003 | By:                      | /s/ Forrest  Jordan |   |
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|                 | Forrest  Jordan,         |
|                 | Chief  Financial Officer |

 

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