**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

----

 

**FORM 10-Q**

 

**(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, 2004 to March 31, 2004** |
|                                                      |
| **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, Suite 10, 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 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 |
|-----------|--------|-----|

 

Indicate by check mark whether the registrant is an accelerated files(as defined in Rule 12b-2 of the Exchange Act)    oYes    ýNo

 

Statethe number of shares outstanding of each of the issuer’s class of common equity,as of May 13, 2004:  11,683.102 shares

 

TransitionalSmall Business Disclosure Format:    oYes          ýNo

 

 

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PART I

 

ITEM 1:                                                     FINANCIALSTATEMENTS

 

**IWT TESORO CORPORATION AND SUBSIDIARIES**

**CONSOLIDATED FINANCIAL STATEMENTS**

**(UNAUDITED)**

**THREE MONTHS ENDED MARCH 31, 2004**

 

**TABLE OF CONTENTS**

 
| Report of Independent Accountants                                                                                    |   |
|----------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                 |   |
| **C**onsolidated Balance Sheets March 31, 2004  (unaudited) and December 31, 200**3**                                |   |
|                                                                                                                 |   |
| Consolidated Statements of Operations for  the Three Months Ended March 31, 2004 and 2003 (unaudited)                |   |
|                                                                                                                 |   |
| Consolidated Statements of Stockholders’  Equity for the Three Months ended March 31, 2004 and 2003 (unaudited) |   |
|                                                                                                                 |   |
| Consolidated Statements of Cash Flows for the Three Months Ended  March 31, 2004 and 2003 (unaudited)                |   |
|                                                                                                                 |   |
| Notes to Consolidated Financial Statements  (unaudited)                                                              |   |

 

1

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**REPORTOF INDEPENDENT ACCOUNTANTS**

 

 

To the Board of Directors

IWT Tesoro Corporation

Westport, Connecticut

 

We have reviewed theaccompanying consolidated balance sheet of IWT Tesoro Corporation and itswholly-owned subsidiaries as of March 31, 2004, and the related consolidatedstatements of operations, stockholders’ equity, and cash flows for thethree-month periods ended March 31, 2004 and 2003.  These financial statements are the responsibility of theCompany’s management.

 

We conducted our reviews inaccordance with standards established by the American Institute of CertifiedPublic Accountants.  A review of interimfinancial information consists principally of applying analytical procedures tofinancial data and making inquiries of persons responsible for financial andaccounting matters.  It is substantiallyless in scope than an audit conducted in accordance with generally acceptedauditing standards, the objective of which is the expression of an opinionregarding the financial statements taken as a whole.  Accordingly, we do not express such an opinion.

 

Based on our reviews, we arenot aware of any material modifications that should be made to the accompanyingconsolidated financial statements for them to be in conformity with accountingprinciples generally accepted in the United States of America.

 

We have previously audited, inaccordance with auditing standards generally accepted in the United States ofAmerica, the consolidated balance sheet as of December 31, 2003, and therelated consolidated statements of operations, stockholders’ equity, and cashflows for the year then ended (not presented herein); and in our report datedJanuary 23, 2004, we expressed an unqualified opinion on those financialstatements.  In our opinion, theinformation set forth in the accompanying consolidated balance sheet as ofDecember 31, 2003, is fairly stated, in all material respects, in relation tothe consolidated balance sheet from which it has been derived.

 

 

KANTOR, SEWELL &OPPENHEIMER, PA

Certified Public Accountants

 

Hollywood, Florida

April 27, 2004

 

2

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**IWT TESORO CORPORATION AND SUBSIDIARIES**

**CONSOLIDATEDBALANCE SHEETS**

 
|                        |   | **March 31,  2004** |       | **December 31,  2003** | ** ** |
|-----------------------------|--------|---------------------|------------|------------------------|------------|
|                        |   | **(Unaudited)**     |       |                   |       |
| **Assets**                  |   |                |       |                   |       |
|                        |   |                |       |                   |       |
| Current assets              |   |                |       |                   |       |
| Cash                        |   | $                   | 609,682    |                   | $          | 867,361 |   |
| Accounts receivable, net    |   | 5,755,937           |       | 4,907,705              |       |
| Inventory                   |   | 14,279,540          |       | 13,058,839             |       |
| Subscription receivable     |   | —              |       | 550,000                |       |
| Deferred tax asset          |   | 26,671              |       | 146,192                |       |
| Advance to supplier         |   | 550,000             |       | —                 |       |
| Prepaid expenses            |   | 681,426             |       | 754,289                |       |
| Total current assets        |   | 21,903,256          |       | 20,284,386             |       |
|                        |   |                |       |                   |       |
| Property and equipment, net |   | 4,677,048           |       | 4,283,518              |       |
|                        |   |                |       |                   |       |
| Other assets                |   |                |       |                   |       |
| Deposits                    |   | 100,020             |       | 59,609                 |       |
| Other receivables           |   | 84,400              |       | 69,370                 |       |
| Other assets                |   | 256,036             |       | 253,120                |       |
|                        |   | 440,456             |       | 382,099                |       |
|                        |   |                |       |                   |       |
|                        |   | $                   | 27,020,760 |                   | $          | 24,950,003 |   |

 

See accompanying notes to financial statements.

 

3

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**IWT TESORO CORPORATION AND SUBSIDIARIES**

**CONSOLIDATED BALANCE SHEETS**

 

**Liabilities and Stockholders’ Equity**

 
|                                                                                                                    |   | **March 31,  2004** |       | **December  31,  2003** |   |
|-------------------------------------------------------------------------------------------------------------------------|--------|---------------------|------------|-------------------------|--------|
|                                                                                                                    |   | **(Unaudited)**     |       |                    |   |
| Current liabilities                                                                                                     |   |                |       |                    |   |
| Accounts payable                                                                                                        |   | $                   | 11,453,496 |                    | $      | 9,859,161 |   |
| Accrued expenses and other liabilities                                                                                  |   | 102,362             |       | 137,292                 |   |
| Current portion of leases payable                                                                                       |   | 49,065              |       | 63,151                  |   |
| Current portion of notes payable -  unrelated parties                                                                   |   | 38,512              |       | 42,719                  |   |
| Total current liabilities                                                                                               |   | 11,643,435          |       | 10,102,323              |   |
|                                                                                                                    |   |                |       |                    |   |
| Deferred tax liability - non current                                                                                    |   | 149,072             |       | 148,594                 |   |
| Long term leases payable                                                                                                |   | 153,895             |       | 149,183                 |   |
| Long term notes payable - related parties                                                                               |   | 338,662             |       | 338,662                 |   |
| Long term notes payable - unrelated parties                                                                             |   | 36,107              |       | 42,560                  |   |
| Long term loan payable                                                                                                  |   | 10,170,284          |       | 9,599,340               |   |
|                                                                                                                    |   | 10,848,020          |       | 10,278,339              |   |
|                                                                                                                    |   |                |       |                    |   |
| Stockholders’ equity                                                                                               |   |                |       |                    |   |
| Preferred stock, $0.001 par value, 25,000,000  authorized; none issued                                                  |   | —              |       | —                  |   |
| Common stock, $0.001 par value, 100 million  shares authorized, 11,675,702 and 11,622,702   issued and outstanding |   | 11,676              |       | 11,623                  |   |
| Additional paid in capital                                                                                              |   | 4,519,450           |       | 4,306,153               |   |
| Retained earnings (deficit)                                                                                             |   | (1,821              | )          | 251,565                 |   |
|                                                                                                                    |   | 4,529,305           |       | 4,569,341               |   |
|                                                                                                                    |   |                |       |                    |   |
|                                                                                                                    |   | $                   | 27,020,760 |                    | $      | 24,950,003 |   |

 

See accompanying notes to financial statements.

 

4

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**IWT TESORO CORPORATION AND SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF OPERATIONS**

**(UNAUDITED)**

 
|                                                               |   | **Three  months ended  March 31,** |      |
|--------------------------------------------------------------------|--------|------------------------------------|-----------|
|                                                               |   | **2004**                           |      | **2003** | ** ** |
| Revenue                                                            |   |                               |      |   |   |
|                                                               |   |                               |      |   |   |
| Sales, net of discounts and returns                                |   | $                                  | 9,556,147 |   | $ | 6,734,765 |   |
| Cost of goods sold                                                 |   | 5,810,414                          |      | 4,079,608 |   |
|                                                               |   |                               |      |   |   |
| Gross profit                                                       |   | 3,745,733                          |      | 2,655,157 |   |
|                                                               |   |                               |      |   |   |
| Expenses                                                           |   |                               |      |   |   |
| Payroll expense                                                    |   | 1,608,045                          |      | 1,132,831 |   |
| Delivery expense                                                   |   | 558,622                            |      | 336,045 |   |
| General and administrative                                         |   | 287,623                            |      | 210,016 |   |
| Depreciation                                                       |   | 214,500                            |      | 136,524 |   |
| Lease expense                                                      |   | 362,928                            |      | 134,380 |   |
| Professional fees                                                  |   | 83,105                             |      | 124,843 |   |
| Repairs and maintenance                                            |   | 100,685                            |      | 82,371 |   |
| Insurance                                                          |   | 160,598                            |      | 74,828 |   |
| Sales expenses                                                     |   | 199,562                            |      | 68,606 |   |
| Travel and entertainment                                           |   | 88,607                             |      | 54,460 |   |
| Advertising                                                        |   | 76,420                             |      | 21,875 |   |
| Bad debt                                                           |   | 22,611                             |      | 3,247 |   |
|                                                               |   | 3,763,306                          |      | 2,380,026 |   |
| Income (loss) from operations                                      |   | (17,573                            | )         | 275,131 |   |
|                                                               |   |                               |      |   |   |
| Other income/(expenses)                                            |   |                               |      |   |   |
| Interest expense                                                   |   | (122,266                           | )         | (75,949 | ) |
| Other income (expense), net                                        |   | 6,453                              |      | (4,517 | ) |
|                                                               |   | (115,813                           | )         | (80,466 | ) |
|                                                               |   |                               |      |   |   |
| Net income (loss) before taxes                                     |   | (133,386                           | )         | 194,665 |   |
|                                                               |   |                               |      |   |   |
| Income tax - deferred                                              |   | (120,000                           | )         | (31,869 | ) |
|                                                               |   |                               |      |   |   |
| Net income (loss)                                                  |   | $                                  | (253,386  | ) | $ | 162,796 |   |
|                                                               |   |                               |      |   |   |
| Earnings per share                                                 |   |                               |      |   |   |
| Basic                                                              |   | $                                  | (0.02     | ) | $ | 0.08 |   |
| Diluted                                                            |   | $                                  | (0.02     | ) | $ | 0.08 |   |
|                                                               |   |                               |      |   |   |
| Average number of common and common  equivalent shares outstanding |   |                               |      |   |   |
| Basic                                                              |   | 11,634,724                         |      | 10,631,516 |   |
| Diluted                                                            |   | 11,842,294                         |      | 10,631,516 |   |

 

See accompanying notes to financial statements.

 

5

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**IWT TESORO CORPORATION AND SUBSIDIARIES**

**CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY**

**THREE MONTHS ENDED MARCH 31, 2003**

**(UNAUDITED)**

 
|                                                                       |   | **Common  Stock** |   | **Additional  Paid in** |   | **Subscription** |   | **Retained  Earnings** |   |          |   |
|----------------------------------------------------------------------------|--------|-------------------|--------|-------------------------|--------|------------------|--------|------------------------|--------|---------------|--------|
|                                                                       |   | **Shares**        |   | **Amount**              |   | **Capital**      |   | **Receivable**         |   | **(Deficit)** |   | **TOTAL** | ** ** |
| Balance, January 1, 2003                                                   |   | 10,587,834        |   | $                       | 10,588 |             | $      | 686,068                |   | $             | — |   | $ | (184,740 | ) | $ | 511,916 |   |
|                                                                       |   |              |   |                    |   |             |   |                   |   |          |   |   |   |
| Issuance of shares  - private offering                                |   | 136,668           |   | 136                     |   | 409,864          |   | —                 |   | —        |   | 410,000 |   |
|                                                                       |   |              |   |                    |   |             |   |                   |   |          |   |   |   |
| Exercise of warrants ($3.00)                                               |   | 10,000            |   | 10                      |   | 29,990           |   | —                 |   | —        |   | 30,000 |   |
|                                                                       |   |              |   |                    |   |             |   |                   |   |          |   |   |   |
| Issuance of shares to employees and  directors for services rendered (SIP) |   | 16,000            |   | 16                      |   | 43,344           |   | —                 |   | —        |   | 43,360 |   |
|                                                                       |   |              |   |                    |   |             |   |                   |   |          |   |   |   |
| Net income                                                                 |   |              |   |                    |   |             |   |                   |   | 162,796       |   | 162,796 |   |
|                                                                       |   |              |   |                    |   |             |   |                   |   |          |   |   |   |
| Balance, March 31, 2003 (Unaudited)                                        |   | 10,750,502        |   | $                       | 10,750 |             | $      | 1,169,266              |   | $             | — |   | $ | (21,944 | ) | $ | 1,158,072 |   |

 

See accompanying notes to financial statements.

 

6

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**IWT TESORO CORPORATION AND SUBSIDIARIES**

**CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY**

**THREE MONTHS ENDED MARCH 31, 2004**

**(UNAUDITED)**

 
|                                                                   |   | **Common  Stock** |   | **Additional  Paid in** |   | **Subscription** |   | **Retained  Earnings** |   |          |   |
|------------------------------------------------------------------------|--------|-------------------|--------|-------------------------|--------|------------------|--------|------------------------|--------|---------------|--------|
|                                                                   |   | **Shares**        |   | **Amount**              |   | **Capital**      |   | **Receivable**         |   | **(Deficit)** |   | **TOTAL** | ** ** |
| Balance, January 1, 2004                                               |   | 11,622,702        |   | $                       | 11,623 |             | $      | 4,306,153              |   | $             | — |   | $ | 251,565 |   | $ | 4,569,341 |   |
|                                                                   |   |              |   |                    |   |             |   |                   |   |          |   |   |   |
| Exercise of warrants ($3.25)                                           |   | 38,000            |   | 38                      |   | 123,462          |   | —                 |   | —        |   | 123,500 |   |
|                                                                   |   |              |   |                    |   |             |   |                   |   |          |   |   |   |
| Issuance of shares to consultants for  services rendered (SIP) ($5.99) |   | 15,000            |   | 15                      |   | 89,835           |   | —                 |   | —        |   | 89,850 |   |
|                                                                   |   |              |   |                    |   |             |   |                   |   |          |   |   |   |
| Net loss                                                               |   |              |   |                    |   |             |   |                   |   | (253,386      | )      | (253,386 | ) |
|                                                                   |   |              |   |                    |   |             |   |                   |   |          |   |   |   |
| Balance, March 31, 2004(Unaudited)                                     |   | 11,675,702        |   | $                       | 11,676 |             | $      | 4,519,450              |   | $             | — |   | $ | (1,821 | ) | $ | 4,529,305 |   |

 

See accompanying notes to financial statements.

 

7

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**IWT TESORO CORPORATION AND SUBSIDIARIES**

**STATEMENTS OF CASH FLOWS**

**(UNAUDITED)**

 
|                                                                                  |   | **Three  months ended  March 31,** |     |
|---------------------------------------------------------------------------------------|--------|------------------------------------|----------|
|                                                                                  |   | **2004**                           |     | **2003** |   |
| Cash flows from operating activities:                                                 |   |                               |     |   |   |
| Net income (loss)                                                                     |   | $                                  | (253,386 | ) | $ | 162,796 |   |
|                                                                                  |   |                               |     |   |   |
| Adjustments to reconcile net income (loss)  to net cash used in operating activities: |   |                               |     |   |   |
| Depreciation                                                                          |   | 214,500                            |     | 136,524 |   |
| (Gain) loss on asset disposal                                                         |   | —                             |     | 5,352 |   |
| Deferred taxes                                                                        |   | 120,000                            |     | — |   |
| Compensation in exchange for stock                                                    |   | 89,850                             |     | 43,360 |   |
| Bad debt                                                                              |   | 22,611                             |     | 3,247 |   |
| (Increase) decrease in operating assets                                               |   |                               |     |   |   |
| Accounts receivable                                                                   |   | (870,843                           | )        | (632,326 | ) |
| Inventory                                                                             |   | (1,220,701                         | )        | (2,448,590 | ) |
| Prepaid expenses                                                                      |   | (477,138                           | )        | (38,767 | ) |
| Other assets                                                                          |   | (54,729                            | )        | (91,497 | ) |
| Increase (decrease) in operating  liabilities                                         |   |                               |     |   |   |
| Accounts payable and accrued expenses                                                 |   | 1,594,335                          |     | 2,560,072 |   |
| Other liabilities                                                                     |   | (34,930                            | )        | 15,200 |   |
| Total adjustments                                                                     |   | (617,045                           | )        | (447,425 | ) |
| Net cash used in operating activities                                                 |   | (870,431                           | )        | (284,629 | ) |
|                                                                                  |   |                               |     |   |   |
| Cash flows from investing activities:                                                 |   |                               |     |   |   |
| Acquisition of property and equipment                                                 |   |                               |     |   |   |
| Displays and sample boards                                                            |   | (565,633                           | )        | (243,693 | ) |
| Other property and equipment                                                          |   | (39,930                            | )        | (371,267 | ) |
| Net cash used in investing activities                                                 |   | (605,563                           | )        | (614,960 | ) |
|                                                                                  |   |                               |     |   |   |
| Cash flows from financing activities:                                                 |   |                               |     |   |   |
| Proceeds from issuance of stocks                                                      |   | 673,500                            |     | 310,000 |   |
| Proceeds from new borrowings                                                          |   | 9,230,000                          |     | 6,788,000 |   |
| Payments to stockholder loans                                                         |   | —                             |     | (25,050 | ) |
| Payments on new borrowings                                                            |   | (8,659,056                         | )        | (6,060,817 | ) |
| Principal payment on notes payable and  capital leases                                |   | (26,129                            | )        | (22,232 | ) |
| Net cash provided by financing activities                                             |   | 1,218,315                          |     | 989,901 |   |
|                                                                                  |   |                               |     |   |   |
| Net increase (decrease) in cash and cash  equivalents                                 |   | (257,679                           | )        | 90,312 |   |
|                                                                                  |   |                               |     |   |   |
| Cash and cash equivalents, beginning of  period                                       |   | 867,361                            |     | 574,046 |   |
|                                                                                  |   |                               |     |   |   |
| Cash and cash equivalents, end of period                                              |   | $                                  | 609,682  |   | $ | 664,358 |   |
|                                                                                  |   |                               |     |   |   |
| Supplemental disclosures of cash flow  information:                                   |   |                               |     |   |   |
|                                                                                  |   |                               |     |   |   |
| Cash paid during the period for:                                                      |   |                               |     |   |   |
|                                                                                  |   |                               |     |   |   |
| Interest expense                                                                      |   | $                                  | 115,183  |   | $ | 76,645 |   |

 

See accompanying notes to financial statements.

 

8

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**IWT TESOROCORPORATION AND SUBSIDIARIES**

**NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS**

**(UNAUDITED)**

**THREE MONTHS ENDEDMARCH 31, 2004**

 

**NOTE1****    PRINCIPLESOF CONSOLIDATION**

 

The accompanying consolidatedfinancial statements include the accounts of the Company and its wholly ownedsubsidiaries, International Wholesale Tile, Inc. (IWT), IWT TesoroInternational, Inc. (International) and IWT Tesoro Transport, Inc. (Transport)(collectively the “Company”).  Allsignificant inter-company balances and transactions have been eliminated.

 

**NOTE2****    BASISOF PRESENTATION**

 

The interim financialinformation included herein is unaudited; however, such information reflectsall adjustments which are, in the opinion of management, necessary for a fairpresentation of the Company’s financial position, results of operations,changes in stockholders’ equity and cash flows for the interim periods.  All such adjustments are of a normal,recurring nature.  The results ofoperations for the first three months of the year are not necessarilyindicative of the results of operations which might be expected for the entireyear.

 

The accompanying consolidatedfinancial statements of the Company have been prepared in accordance with theinstructions to Form 10-Q and, therefore, omit or condense certain footnotesand other information normally included in financial statements prepared inaccordance with generally accepted accounting principles.  It is suggested that these condensedfinancial statements should be read in conjunction with the Company’s financialstatements and notes thereto included in the Company’s audited financialstatements on Form 10-K for the fiscal year ended December 31, 2003.

 

**NOTE3****                                                    SUMMARYOF SIGNIFICANT ACCOUNTING POLICIES**

 

Stock Options

The Company accounts for stockoptions under the provisions of Accounting Principles Board Opinion (APB) No.25 *Accounting For Stock Issued to Employees*and related interpretations.  Accountingfor the issuance of stock options under the provisions of APB No. 25 typicallydoes not result in compensation expense for the Company since the exerciseprice of options is normally established at the market price of the Company’scommon stock on the date granted. Statement of Financial Accounting Standards (SFAS) No. 123 *Accounting for Stock-Based Compensation*provides that the related expense may be recorded in the basic financialstatements or the pro forma effect on earnings may be disclosed in thefinancial statements.

 

A total of 50,000 options weregranted to directors of the Company during the three months ended March 31,2004.  No options were granted duringthe three months ended March 31, 2003.

 

9

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Theeffect on net income (loss) and earnings per share if the Company had appliedthe fair value recognition provision of the SFAS No. 123, consisted of thefollowing:

 
|                                                                                                                          |   | **Three  Months Ended  March 31, 2004** |     |
|-------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------|----------|
|                                                                                                                          |   |                                    |     |
| Net loss as reported                                                                                                          |   | $                                       | (253,386 | ) |
| Plus total stock-based  compensation cost, net of related tax effects, included in the determination  of net loss as reported |   | —                                  |     |
|                                                                                                                          |   |                                    |     |
| Less stock-based compensation  cost, net of related tax effects, determined under fair value based method  for all awards     |   | (54,563                                 | )        |
|                                                                                                                          |   |                                    |     |
| Pro-forma net loss                                                                                                            |   | $                                       | (307,949 | ) |
|                                                                                                                          |   |                                    |     |
| Basic earnings per share                                                                                                      |   |                                    |     |
| As reported                                                                                                                   |   | $                                       | (0.02    | ) |
| Pro-forma                                                                                                                     |   | $                                       | (0.03    |   |
|                                                                                                                          |   |                                    |     |
| Diluted earnings per share                                                                                                    |   |                                    |     |
| As reported                                                                                                                   |   | $                                       | (0.02    | ) |
| Pro-forma                                                                                                                     |   | $                                       | (0.03    | ) |

 

For the pro forma net losscalculation in the preceding table, the fair value of each option on the dateof grant was estimated using the Black-Scholes option-pricing model and thefollowing assumptions for awards in 2004: dividend yields of .0 percent; expectedvolatility of 21.51 percent; risk-free interest rates of 2.20 percent; andexpected lives of five years.  Usingthese assumptions, the weighted average grant-date fair value per share ofoptions granted in 2004 was $1.21.

 

Recent Accounting Pronouncements

In December 2002, the FinancialAccounting Standards Board (FASB) issued SFAS No. 148, *Accounting for Stock-Based Compensation – Transitionand Disclosure,* which provides alternative methods of transition fora voluntary change to the fair value based method of accounting for stock-basedemployee compensation as prescribed in SFAS No. 123. Additionally, SFAS No. 148requires more prominent and more frequent disclosures in financial statementsabout the effects of stock-based compensation. The provisions of this Statementare effective for fiscal years ending after December 15, 2002.  Management does not expect the adoption ofthis Statement to have a material impact on the Company’s financial conditionor results of operations.

 

Earnings perShare

Basic earnings per share arecomputed based on the weighted average number of common shares outstandingduring each year.  Diluted earnings pershare are computed based on the weighted average number of common shares outstandingplus all potential dilutive common shares outstanding (stock options) duringeach year.

 

10

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**NOTE 4****                                                    INVENTORIES**

 

Inventories consisted of thefollowing:

 

|                 |   | **March 31,  2004** |       | **December  31,  2003** | ** ** |
|----------------------|--------|---------------------|------------|-------------------------|------------|
|                 |   |                |       |                    |       |
| Tiles                |   | $                   | 12,088,010 |                    | $          | 11,102,115 |   |
| Inventory in transit |   | 2,191,530           |       | 1,956,724               |       |
|                 |   |                |       |                    |       |
|                 |   | $                   | 14,279,540 |                    | $          | 13,058,839 |   |

 

Inventory in transit consistsof merchandise purchased overseas, which is not yet received in thewarehouse.  The Company obtains legaltitle at the shipping point.  Inventorycost includes the purchase price and in-bound freight.

 

**NOTE 5****                                                    DEPOSITON EXCLUSIVE AGREEMENT**

 

DuringFebruary 2004, the Company entered into an agreement with an Italian supplierto develop an exclusive line of tile. The agreement required a deposit of $550,000, and the initial shipmentis anticipated in July 2004.

 

**NOTE 6****                                                    PROPERTYAND EQUIPMENT**

 

Property and equipmentconsisted of the following:

 

|                          |   | **March 31,  2004** |      | **December  31,  2003** |   |
|-------------------------------|--------|---------------------|-----------|-------------------------|--------|
|                          |   |                |      |                    |   |
| Furniture and fixtures        |   | $                   | 315,566   |                    | $      | 313,965 |   |
| Machinery and equipment       |   | 479,483             |      | 477,996                 |   |
| Vehicles                      |   | 222,216             |      | 211,215                 |   |
| Display boards                |   | 1,415,923           |      | 1,098,199               |   |
| Sample boards                 |   | 3,376,759           |      | 3,128,750               |   |
| Computer equipment            |   | 349,149             |      | 323,010                 |   |
| Leasehold improvements        |   | 409,125             |      | 409,125                 |   |
|                          |   |                |      |                    |   |
|                          |   | 6,568,221           |      | 5,962,260               |   |
| Less accumulated depreciation |   | (1,891,173          | )         | (1,678,742              | )      |
|                          |   |                |      |                    |   |
|                          |   | $                   | 4,677,048 |                    | $      | 4,283,518 |   |

 

Depreciation expense for thethree months ended March 31, 2004 was $214,500 and $136,524, respectively.

 

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**NOTE 7****                                                    LOANSPAYABLE**

 

TheCompany has a loan and security agreement with a financial institution for arevolving line of credit with a maximum limit of $17,000,000.  The agreement specifies that proceeds fromthis revolving credit loan be used for general working capital needs.  All present and future assets of the Companycollateralize this loan. The rate of interest in effect for this agreement iscalculated with reference to the Base Rate and/or LIBOR (London InterbankOffered Rate).  The balance due at March31, 2004 and December 31, 2003 was $10,170,284 and $9,599,340, respectively.

 

BaseRate advances bear a fluctuating interest rate per annum equal to prime plus0.50%.  LIBOR advances bear a fixed rateper annum equal to 3.00% plus the LIBOR for the applicable interestperiod.  At March 31, 2004, the BaseRate and the LIBOR rate were 4.50% and 4.13%, respectively.

 

Theloan and security agreement contains certain covenants, which include financialcovenants that require the Company to maintain a certain leverage ratio, arequired minimum fixed charge coverage ratio, and a certain inventory turnoverratio.  At March 31, 2004, the Companyis not in compliance with a certain required covenant, as amended and restatedin the agreement with the financial institution.  The financial institution has agreed to waive compliance withthis covenant for this quarter.

 

For the three months endedMarch 31, 2004 and 2003, interest expense related to the credit lines amounted to $101,829 and$59,151, respectively.

 

**NOTE 8****                                                    STOCKHOLDERS’EQUITY**

 

Common Stock

During the three months endedMarch 31, 2004, the Company issued 38,000 shares of common stock pursuant towarrants exercised at $3.25 per share, for a total of $123,500.

 

On February 17, 2004 the Companyissued 15,000 shares of common stock valued at $5.99 per share, based on thetrading price, for a total of $89,850, to a consultant for services renderedresulting in an immediate charge to operations.

 

InMarch 2004, the Company received $550,000 as full payment on a subscriptionreceivable outstanding at December 2003.

 

**NOTE 9****                                                    SEGMENTINFORMATION**

 

TheCompany manages its operations as one segment and all revenue is derived fromcustomers in the United States.

 

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ITEM 2: MANAGEMENT’S DISCUSSIONAND ANALYSIS OR PLAN OF OPERATION

 

The following discussion shouldbe read along with our financial statements, which are included in anothersection of this filing.

 

*ForwardLooking Statements*

 

Some of the statements madeconstitute “forward-looking statements”. For example, statements included inthis prospectus regarding our financial position, business strategy and otherplans and objectives for future operations, and assumptions and predictionsabout future demand for our services and products, supply, costs, marketing andpricing factors are all forward-looking statements. When we use words like“intend,” “anticipate,” “believe,” “estimate,” “plan” or “expect,” we aremaking forward- looking statements. These forward-looking statements are subject to risks and uncertaintiesand other factors that may cause our actual results, performance orachievements to be materially different from the results, performance orachievements expressed or implied by the forward-looking statements. You shouldnot unduly rely on these statements. Forward-looking statements involveassumptions and describe our plans, strategies, and expectations. This reportcontains forward-looking statements that address, among other things,

 

•our business and financing plans;

•regulatory environments in which we operateor plan to operate; and

•trends affecting our financial condition orresults of operations, the impact of competition, the start-up of certainoperations, roll out of products and services and acquisition opportunities.

 

Factors, risks, and uncertainties that couldcause actual results to differ materially from those in the forward-lookingstatements (Cautionary Statements) include, among others,

 

•our ability to raise capital;

•our ability to continue distributing ourproducts;

•our ability to provide our products atcompetitive rates;

•our ability to execute our business strategyin a competitive environment;

•our degree of financial leverage;

•regulatory considerations and risks relatedto international economics,

•risks related to market acceptance and demandfor our products and services;

•our dependence on third party suppliers;

•the impact of competitive services; and

•other risks referenced from time to time inour SEC filings.

 

We believe that theassumptions and expectations reflected in this prospectus are reasonable, basedon information available to us in this report. However, we cannot assure anyone that these assumptions and expectationswill prove to have been correct or that we will take any action that we maypresently be planning. We assume no obligation to update forward-lookingstatements or reflect unanticipated future events.

 

**General**

 

We were incorporated on May 5,2000 as a Nevada corporation.  Ourprincipal office is located at 191 Post Road West, Suite 10, Westport, CT06880.  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, weacquired International Wholesale Tile, Inc. (IWT) through a share exchange andIWT became our wholly owned subsidiary. We issued nine million shares of our common stock in exchange for all ofthe IWT shares.  The company has threeadditional wholly owned subsidiaries, two of which were created in 2004.  The first is IWT Tesoro International,Ltd.  The

 

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second is IWT Transport,Inc.  “International” was created to ownand manage assets relating to any of the Company’s overseas activities.  “Transport” was created to handle thedomestic freight operations of the Company. Subsequent to the fiscal quarter ended March 31, 2004, we organized TheTile Club, Inc. (TCI).  TCI will licensethe distribution rights to designer and artistic based decorative wall tiles.

 

**Company Overview**

 

The Company is a value addeddistributor of imported ceramic, porcelain and stone flooring and decorativewall tile.  Our warehousing anddistribution center contains over 220,000 square feet of storage space and overseven million square feet of product ready for immediate shipment to ourcustomers.  The company’s primarystrategy is to be a reliable supplier not a competitor to its customers.

 

Management believes that thecritical success factors to the Company’s business are its ability to:

 

•                  Maintainrelationships with and serve a growing base of independent dealers,distributors and wholesalers by providing adequate stocks of in demand productat reasonable and competitive prices

•                  Stay ahead ofthe trends in color, texture and format the drive demand for our fashion basedproducts

•                  Make the correctinvestments in product inventories, relationships with suppliers and logisticssupport services to ensure our continuing capability to meet our customer’sexpectations

 

Our primary source of revenueis the sale of hard flooring and wall covering materials and our primary costsrelate to the acquisition, sales and delivery of those products.  While sales are made throughout the UnitedStates, to date the majority of our sales are in the southeastern quadrant ofthe country.  The primary sources ofworking capital are a $ 17 million (US) revolving line of credit from adivision of a large US commercial bank, our suppliers who extend us terms andour stockholders equity.

 

On December 17, 2003 we begantrading our stock on the OTCBB under the symbol IWTT.  During 2004, we expect to raise additional equity through thepublic market.  Any new equity raisedwill be used to strengthen our balance sheet and to provide capital forcontinued growth.

 

During the quarter ended March31, 2004, the Company began to expand its distribution channels beyond itstraditional small and mid sized floor covering dealers in the southeasternUnited States. These new channels included larger regional distributors outsidethe southeastern United States, home center stores and floor-covering dealersthat focus on the builders of new construction units.

 

**Quarter Ended March 31,**

 
|               |   | **2003**  |      | **2004**  |   |
|--------------------|--------|-----------|-----------|-----------|--------|
| Revenues           |   | $         | 6,734,765 |      | $      | 9,556,147 |   |
| Cost of Goods Sold |   | 4,079,608 |      | 5,810,414 |   |
| Gross Margin       |   | 2,655,157 |      | 3,745,733 |   |
| Operating Expenses |   | 2,380,026 |      | 3,763,306 |   |
|                    |        |           |           |           |        |  |  |

 

March 31, 2003compared to March 31, 2004

 

Sales for the quarter endedMarch 31, 2004 were $ 9,556,147 a 42% increase over sales for the quarter endedMarch 31, 2003.  This growth follows a12% growth from March 31, 2002 to March 31, 2003.  The primary cause of the significant growth in sales is thestartup of our sales channel for larger regional distributors.

 

We believe that as a relativelysmall player in a growing market, we can sustain growth rates in excess of 20%for the next several years.  The tilemarket in the United States is approximately $2.3 billion at the wholesalelevel and is growing at a seven to ten percent rate.  Our share of this market is approximately 1.5%.

 

We purchase product fromsuppliers around the world.  This allowsus to maintain a consistent mix of price and consequently our cost of goodssold have remained stable at 60% for the periods ended March 31 2002, 2003 and2004.

 

Our earnings before taxes forthe quarter ended March 31 fell from $ 275,130 in 2003 to a loss of ($133,386)in 2004.  The primary cause for thereduction in pre-tax earnings is the planned expansion of our sales and marketingefforts, including staff, in advance of opening new markets and channels ofdistribution.  Our sales growth in thequarter ended March 31, 2004 over the same period in 2003, is a result of theseinvestments beginning to have impact.

 

We currently operate from awarehouse facility of nearly 147,000 square feet.  We also use local satellite warehouse facilities accounting foran additional 80,000 square feet to accommodate overflow stock.  During the quarter ended March 31, 2004, we

 

14

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contracted to build a newwarehouse next to the main facility and to expand the office space in the mainfacility from five to ten thousand square feet.  This new facility, scheduled for completion in the forth quarterof 2004, will allow us to consolidate our overflow stock and to continue ourgrowth plan.  We currently maintainbetween six and seven million square feet of product in our facilities with anadditional one to two million square feet in-transit (on the ocean) or onlocation at foreign factories.

 

Inventory was $ 14,279,540 atMarch 31, 2004 compared to $ 8,496,466 at March 31, 2003.  The company turned its inventory 1.62 timesduring the quarter ended March 31, 2004 compared to 1.92 times during thequarter ended March 31, 2003.  Thecompany targets 1.5 to 2.0 turns as a measure of its ability to meet the needsof its customers.

 

Our investment in Property andEquipment, which is primarily made up of the sample and display boards weprovide to our customers as support for their sales efforts increased by $1,561,000 from the quarter ended March 31, 2003 to the quarter ended March 31,2004.

 

**Liquidity and Capital Resources**

 

During the first quarter ended March 31, 2004, Tesoro issued 38,000shares of common stock in connection with warrants exercised at $3.25 per sharefor a total of $123,500.  The purchaserswere accredited investors, were provided with or had access to, informationabout the Company, including financial information.  The transaction was exempt pursuant to Section 4(2) of theSecurities Act.

 

On February 17, 2004, Tesoro issued 15,000 shares of common stockvalued at $5.99 per share, based on the trading price of the shares on the dateissued, for a total of  $89,850 to aconsultant.

 

In March 2004, we received550,000 as full payment on a subscription receivable outstanding at December31, 2003.

 

The balance due at March 31,2004 was approximately $10.2 million. The loan and security agreement contains certain covenants, whichinclude financial covenants that require us to maintain a certain leverageratio, a required minimum fixed charge coverage ration, and a certain inventoryturnover ratio.  At March 31, 2004, weare not in compliance with a certain required covenant, as amended and restatedin the agreement with the financial institution.  The financial institution has agreed to waive compliance for thisquarter.

 

**Critical Accounting Policies**

** **

Please refer to the Notes tothe Financial Statements regarding Tesoro’s Form 10-KSB for the fiscal yearended December 31, 2004 and filed with the Securities and Exchange Commissionon March 30, 2004.

 

**Segment Information**

** **

We manage our operations in onesegment and all revenue is derived from customers in the United States.

 

**ITEM3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS**

 

**Quantitativeand Qualitative Disclosures About Market Risk**

 

The Company is exposed to market risk fromchanges in interest rates and foreign currency exchange rates since it fundsits operations through short-term investments and has business transactions inEuros. A summary of the Company’s market risk exposures is presented below.

 

*InterestRate Risk*

 

Tesoro has fixed income investmentsconsisting of cash equivalents and short-term investments, which may be affectedby changes in market interest rates. The Company does not use derivativefinancial instruments in its investment portfolio. The Company places its cashequivalents and short-term investments with high-quality financialinstitutions, limits the amount of credit exposure to any one institution andhas established investment guidelines relative to diversification andmaturities designed to maintain safety and liquidity. Investments are reportedat amortized cost, which approximates fair value.

 

*Foreign CurrencyRisk*

 

We currently purchase our products fromforeign manufacturers in U.S. dollars. Our fund transfers are relatively large.  The Office of the Comptroller of the Currency (USOCC) monitorsthese activities.  Should the EUROcontinue to strengthen against the US dollar, we could see an increase in ourcost of product that could, in time, to pass on to our

 

15

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customers and therefore have a detrimentalimpact on our profitability.  Ourcompetitors rely as heavily on imported product as we do.  Therefore, we do not see any change in thecompetitive landscape for ceramic tile as a result of the strength of theEURO.  Tesoro does not currently hedgeagainst the risk of exchange rate fluctuations.

 

**ITEM4 – CONTROLS AND PROCEDURES**

 

*Disclosure Controls and Procedures*

 

(a)                                  Withinthe 90 days prior to the date of this report, we carried out an evaluation,under the supervision and with the participation of management, including ourprincipal executive officer and principal financial officer, of theeffectiveness of the design and operation of our disclosure controls andprocedures pursuant to Exchange Act Rule 13a-14.  Based upon this evaluation, our principal executive officer andprincipal financial officer concluded that our disclosure controls andprocedures are effective in timely alerting them to material informationrelating to us (including our consolidated subsidiaries) that is required to beincluded in our periodic SEC reports.

 

(b)                                 Therehave been no significant changes in our internal controls or in other factorsthat could significantly affect these controls subsequent to the date of theevaluation described in the preceding paragraph.

 

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**PART II**

 

**ITEM 1:****                                                    LEGALPROCEDURINGS**

 

Weare not a party to any material pending legal proceedings and, to the best ofour knowledge; no such action by or against us is contemplated, threatened orexpected.

 

**ITEM 2:****                                                    CHANGESIN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES.**

 

During the first quarter ended March 31, 2004, Tesoro issued 38,000shares of common stock in connection with warrants exercised at $3.25 per sharefor a total of $123,500.  The purchaserswere accredited investors, were provided with or had access to, informationabout the Company, including financial information.  The transaction was exempt pursuant to Section 4(2) of theSecurities Act.

 

On February 17, 2004, Tesoro issued 15,000 shares of common stockvalued at $5.99 per share, based on the trading price of the shares on the dateissued, for a total of  $89,850 to aconsultant.

 

**ITEM 3:****                                                    DEFAULTUPON SENIOR SECURITIES.**

 

Not applicable

 

**ITEM 4:****                                                    SUBMISSIONOF MATTERS TO A VOTE OF SECURITY HOLDERS**

 

Not applicable

 

**ITEM 5:****                                                    OTHERINFORMATION**

 

Not applicable

 

**ITEM 6:****                                                    EXHIBITSAND REPORTS ON FORM 8-K**

 

(a)                                  Exhibits

 

a.                                       Exhibits

 
| **EXHIBIT  NUMBER** |   | **DESCRIPTION**                                                                                                                                                                                                               |
|---------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 1.1                 |   | Form  of Selected Dealers Agreement (filed as an Exhibit to the Company’s  Registration Statement, filed with the Securities and Exchange Commission on  June 4, 2003)                                              |
| 1.2                 |   | Selected  Exclusive Dealers Agreement dated November 22, 2003 (filed as an Exhibit  to the Company’s Report on Form 8-K, filed with the Securities and Exchange  Commission on September 24, 2003)             |
| 3.1                 |   | Articles  of Incorporation (filed as an Exhibit to the Company’s Form 10-SB, filed with  the Securities and Exchange Commission on August 7, 2000)                                                                  |
| 3.1.1               |   | Articles  of Amendment to Articles of Incorporation dated September 23, 2002  (filed as an Exhibit to the Company’s Report on Form 8-K, filed with the  Securities and Exchange Commission on October 1, 2002) |
| 3.2.1               |   | Bylaws  (filed as an Exhibit to the Company’s Form 10-SB, filed with the Securities  and Exchange Commission on August 7, 2000)                                                                                     |
| 3.2.2               |   | Amended  and Restated Bylaws (filed as an Exhibit to the Company’s Report on Form 8-K,  filed with the Securities and Exchange Commission on February 4, 2003)                                                      |
| 3.3.1               |   | Specimen  Stock Certificate (filed as an Exhibit to the Company’s Form 10-SB, filed  with the Securities and Exchange Commission on August 7, 2000)                                                                 |
| 3.3.2               |   | Audit  Committee Charter (filed as an Exhibit to the Company’s Report on Form 8-K,  filed with the Securities and Exchange Commission on February 4, 2003)                                                          |
| 3.3.3               |   | Compensation  Committee Charter (filed as an Exhibit to the Company’s Report on Form 8-K,  filed with the                                                                                                                |

 

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|   |   | Securities  and Exchange Commission on February 4, 2003)                                                                                                                                                                                                                 |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.3.4  |   | Nominating  And Governing Committee Charter (filed as an Exhibit to the Company’s Report  on Form 8-K, filed with the Securities and Exchange Commission on  February 4, 2003)                                                                                      |
| 3.4.1  |   | Code  of Ethics for Senior Financial Officers (filed as an Exhibit to the Company’s  Registration Statement, filed with the Securities and Exchange Commission on  April 11, 2003)                                                                                  |
| 4.1.1  |   | Form  of Warrant Agreement (filed as an Exhibit to the Company’s Registration  Statement, filed with the Securities and Exchange Commission on  April 11, 2003)                                                                                                     |
| 4.1.2  |   | Form  of Stock Certificate (filed as an Exhibit to the Company’s Registration  Statement, filed with the Securities and Exchange Commission on  April 11, 2003)                                                                                                     |
| 4.1.3  |   | Form  of Lock-Up Agreement (filed as an Exhibit to the Company’s Registration  Statement, filed with the Securities and Exchange Commission on  April 11, 2003)                                                                                                     |
| 10.1   |   | Agreement  With Peter Goss (filed as an Exhibit to the Company’s Form 10-SB, filed with  the Securities and Exchange Commission on August 7, 2000)                                                                                                                  |
| 10.2   |   | Stockholders  Agreement (filed as an Exhibit to the Company’s Form 10-SB, filed with the  Securities and Exchange Commission on August 7, 2000)                                                                                                                     |
| 10.3   |   | 2001  Ponca Acquisition Corporation Stock Incentive Plan. (filed as an Exhibit to  the Company’s Report on Form 8-K, filed with the Securities and Exchange  Commission on September 11, 2002)                                                                      |
| 10.4   |   | Employment  Agreement Between Ponca Acquisition Corporation And Henry Jr. Boucher, Jr.  Dated As Of December 29, 2002 (filed as an Exhibit to the Company’s  Report on Form 8-K, filed with the Securities and Exchange Commission on  September 11, 2002)     |
| 10.5   |   | Memorandum  Of Understanding Between Ponca Acquisition Corporation And The Stockholders  Of International Wholesale Tile, Inc. (filed as an Exhibit to the Company’s  Report on Form 8-K, filed with the Securities and Exchange Commission on  September 11, 2002) |
| 10.6   |   | Stock  Purchase Agreement Among The Stockholders Of International Wholesale Tile,  Inc., and                                                                                                                                                                                  |

 

18

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|   |   | IWT  Tesoro Corporation, Effective October 1, 2002 (filed as an Exhibit on  Form 8-K, filed with the Securities and Exhibit Commission on October 15,  2002).                                                                                                                                                                                                                                                        |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.7   |   | Termination  Of Stockholders Agreement (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)                                                                                                                                                                                                                                     |
| 10.8   |   | Repurchase  Agreement (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)                                                                                                                                                                                                                                                       |
| 10.9   |   | Form  of Indemnity Agreement (filed as an Exhibit to the Company’s Registration  Statement, filed with the Securities and Exchange Commission on  April 11, 2003)                                                                                                                                                                                                                                               |
| 10.00  |   | Employment  Agreement between International Wholesale Tile, Inc. and Forrest P. Jordan  (exhibits omitted) (filed as an Exhibit to the Company’s Registration  Statement, filed with the Securities and Exchange Commission on May 21, 2003)                                                                                                                                                                         |
| 10.11  |   | Employment  Agreement between International Wholesale Tile, Inc. and Paul F. Boucher  (this document is omitted as it is substantially similar to Forrest P.  Jordan’s Employment Agreement with the exception of the employee’s name and address)                                                                                                                                                              |
| 10.12  |   | Employment  Agreement between International Wholesale Tile, Inc. and Grey Perna (this  document is omitted as it is substantially similar to Forrest P. Jordan’s  Employment Agreement with the exception of the employee’s name and address)                                                                                                                                                                   |
| 10.13  |   | Subordination  Agreement between Congress Financial Corporation (Florida). and Forrest P.  Jordan (filed as an Exhibit to the Company’s Registration Statement, filed  with the Securities and Exchange Commission on May 21, 2003)                                                                                                                                                                                  |
| 10.14  |   | Subordination  Agreement between Congress Financial Corporation (Florida). and Paul F.  Boucher (this document is omitted as it is substantially similar to Forrest  P. Jordan’s Subordination Agreement with the exception of the employee’s name  and address)                                                                                                                                                |
| 10.15  |   | Subordination  Agreement between Congress Financial Corporation (Florida). and Grey Perna  (this document is omitted as it is substantially similar to Forrest P.  Jordan’s Subordination Agreement with the exception of the employee’s name  and address)                                                                                                                                                     |
| 10.16  |   | Termination  of Repurchase Agreement dated June 26, 2003 between IWT Tesoro  Corporation and Forrest P. Jordan (filed as an Exhibit to the Company’s Form  8-K, filed with the Securities and Exchange Commission on June 26,  2003).                                                                                                                                                                      |
| 10.17  |   | Termination  of Repurchase Agreement dated June 26, 2003 between IWT Tesoro  Corporation and Paul F. Boucher (this document is omitted as it is  substantially similar to Forrest P. Jordan’s Termination of Repurchase  Agreement with the exception of the name and address) (filed as an Exhibit to  the Company’s Form 8-K, filed with the Securities and Exchange Commission on  June 26, 2003). |
| 10.18  |   | Termination  of Repurchase Agreement dated June 26, 2003 between IWT Tesoro  Corporation and Grey Perna (this document is omitted as it is substantially  similar to Forrest P. Jordan’s Termination of Repurchase Agreement with the  exception of the name and address) (filed as an Exhibit to the Company’s Form  8-K, filed with the Securities and Exchange Commission on June 26,  2003).      |
| 16.2   |   | Letter  regarding change in Certifying Accountants (filed as an Exhibit to the  Company’s Report on Form 8-K/A filed with the Securities and Exchange  Commission on March 2, 2004).                                                                                                                                                                                                                            |
| 21.    |   | Subsidiaries  of Registrant (filed as an Exhibit to the Company’s Registration Statement,  filed with the Securities and Exchange Commission on April 11, 2003)                                                                                                                                                                                                                                                 |
| 31.1   |   | Certification  of Henry J. Boucher, Jr., Chief Executive Officer pursuant to Section 302 of  the Sarbanes-Oxley Act.*                                                                                                                                                                                                                                                                                                     |
| 31.2   |   | Certification  of Forrest P. Jordan, Chief Financial Officer pursuant to Section 302 of the  Sarbanes-Oxley Act.*                                                                                                                                                                                                                                                                                                         |
| 32.1   |   | Certification  of Henry J. Boucher, Jr., Chief Executive Officer pursuant to Section 906 of  the Sarbanes-Oxley Act.*                                                                                                                                                                                                                                                                                                     |
| 32.2   |   | Certification  of Forrest P. Jordan, Chief Financial Officer pursuant to Section 906 of the  Sarbanes-Oxley Act.*                                                                                                                                                                                                                                                                                                         |
| 99.1   |   | MRS’  Letter To The Securities And Exchange Commission. (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)                                                                                                                                                                                                                |
| 99.2   |   | Letter  from Peter Goss regarding fiscal year end (filed as an Exhibit to the  Company’s Report on Form 8-K, filed with the Securities and Exchange  Commission on October 15, 2002)                                                                                                                                                                                                                            |

 

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*                                         Filedherewith.

 

(b)                                 Reportson Form 8-K

 

Form 8-K/A,filed on March 2, 2004, regarding change of accountants and filing ofaccountant letter..

 

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SIGNATURES

 

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

 

 
|         | IWT TESORO  CORPORATION                     |
|--------------|---------------------------------------------|
|         |                                        |
|         |                                        |
| May 14, 2004 | /s/ Henry J.  Boucher, Jr.                  |   |
|         | Henry J.  Boucher, Jr., President           |
|         |                                        |
| May 14, 2004 | /s/Forrest  P. Jordan                       |   |
|         | Forrest P.  Jordan, Chief Financial Officer |

 

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