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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q

(Mark One)

x
    
    Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934For the quarterly period ended November 30, 2003ORo
    
    Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934For the transition period  to


Commission File Number 000-29883

Impreso, Inc.

(Exact name of registrant as specified in its charter)


Delaware
    
    75-2849585(State or other jurisdiction of
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)


652 Southwestern Boulevard
Coppell, Texas 75019
(Address of principal executive offices)

(972) 462-0100
(Registrants telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days:

Yes x
    
    No o


Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).

Yes o            No x

Indicate the number of shares outstanding of each of the issuers classes of
Common Stock as of the latest practicable date.

Class of Common Stock
    
    Shares outstanding at January 12, 2004$0.01 Par Value
    
    
    5,278,780






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|                                                 |                                                                                               |                                                                            |  |  |  |  |  | 
|------------------------------------------------ | --------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------- |  |  |  |  |  | 
|                                                 |                                                                                               | INTERIM CONSOLIDATED BALANCE SHEETS  ASSETS                              
|                                                 |                                                                                               | INTERIM CONSOLIDATED BALANCE SHEETS  LIABILITIES AND STOCKHOLDERS EQUITY
|                                                 |                                                                                               | INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS                             
|                                                 |                                                                                               | INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS                             
|                                                 |                                                                                               | NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS              
|                                                 | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                                 | Item 3. Quantitative and Qualitative Disclosures about Market Risk                           
|                                                 | Item 4. Controls and Procedures                                                              
|PART II: OTHER INFORMATION                      
|                                                 | Item 1. Legal Proceedings                                                                    
|                                                 | Item 2. Changes in Securities                                                                
|                                                 | Item 3. Defaults upon Senior Securities                                                      
|                                                 | Item 4. Submission of Matters to a Vote of Security Holders                                  
|                                                 | Item 5. Other Information                                                                    
|                                                 | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                                      
|Exhibits                                        
|EX-31.1 Certification of Chief Executive Officer
|EX-31.2 Certification of Chief Financial Officer
|EX-32.1 Certification of Chief Executive Officer
|EX-32.2 Certification of Chief Financial Officer



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IMPRESO, INC. AND SUBSIDIARIES
FORM 10-Q
November 30, 2003

INDEX

Page NumberPART I. FINANCIAL INFORMATIONItem 1.
    
    Condensed Consolidated Financial Statements:Interim Condensed Consolidated Balance Sheets as of November 30, 2003
(Unaudited) and      August 31, 2003
    
    1Interim Condensed Consolidated Statements of Operations for the
Three Months Ended      November 30, 2003 and 2002 (Unaudited)
    
    3Interim Condensed Consolidated Statements of Cash Flows for the
Three Months Ended      November 30, 2003 and 2002 (Unaudited)
    
    4Notes to Interim Condensed Consolidated Financial Statements
    
    5Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    9Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    13Item 4.
    
    Controls and Procedures
    
    13PART II. OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    15Item 2.
    
    Changes in Securities
    
    15Item 3.
    
    Defaults upon Senior Securities
    
    15Item 4.
    
    Submission of Matters to a vote of Security Holders
    
    15Item 5.
    
    Other Information
    
    15Item 6.
    
    Exhibits and Reports on Form 8-K and 8-K/A
    
    15SIGNATURES
    
    15INDEX TO EXHIBITS
    
    16






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IMPRESO, INC. AND SUBSIDIARIES

INTERIM CONSOLIDATED BALANCE SHEETS

ASSETS
(Unaudited)

November 30,
    
    August 31,2003
    
    2003Current assets:Cash and cash equivalents
    
    $
    218,018
    
    
    $
    95,129Trade accounts receivable, net of allowance for doubtful accounts
of $774,214 at November 30, 2003 and $630,916 as of August 31, 2003
    
    
    12,038,423
    
    
    
    12,144,735Inventories
    
    
    23,452,654
    
    
    
    28,462,091Prepaid expenses and other
    
    
    274,493
    
    
    
    141,729Deferred income tax assets
    
    
    588,724
    
    
    
    574,924Total current assets
    
    
    36,572,312
    
    
    
    41,418,608Property, plant and equipment, at cost
    
    
    28,058,461
    
    
    
    28,030,124Less-Accumulated depreciation
    
    
    (13,552,769
    )
    
    
    (13,196,099
    )Net property, plant and equipment
    
    
    14,505,692
    
    
    
    14,834,025Other assets
    
    
    88,166
    
    
    
    83,667Total assets
    
    $
    51,166,170
    
    
    $
    56,336,300


The accompanying notes are an integral part of the condensed consolidated financial statements

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IMPRESO, INC. AND SUBSIDIARIES

INTERIM CONSOLIDATED BALANCE SHEETS (CONTINUED)

LIABILITIES AND STOCKHOLDERS EQUITY
(Unaudited)

November 30,
    
    August 31,2003
    
    2003Current liabilities:Accounts payable
    
    $
    9,311,446
    
    
    $
    11,102,673Accrued liabilities
    
    
    2,700,697
    
    
    
    1,892,686Current maturities of long-term debt
    
    
    1,312,791
    
    
    
    1,343,231Line of credit
    
    
    9,929,004
    
    
    
    14,355,445Current maturities of prepetition debt
    
    
    8,159
    
    
    
    8,084Total current liabilities
    
    
    23,262,097
    
    
    
    28,702,119Deferred income tax liability
    
    
    1,005,840
    
    
    
    1,021,357Long-term debt, net of current maturities
    
    
    9,148,049
    
    
    
    9,342,784Long-term portion of prepetition debt, net of current maturities
    
    
    227,078
    
    
    
    229,150Total liabilities
    
    
    33,643,064
    
    
    
    39,295,410Stockholders equity:Preferred stock, $.01 par value; 5,000,000 shares authorized;
0 shares issued and outstanding
    
    
    
    
    
    
    Common stock, $.01 par value; 15,000,000 shares authorized;
5,292,780 issued and 5,278,780 outstanding
    
    
    52,928
    
    
    
    52,928Treasury stock (14,000 shares, at cost)
    
    
    (38,892
    )
    
    
    (38,892
    )Additional paid-in capital
    
    
    6,353,656
    
    
    
    6,353,656Retained earnings
    
    
    11,155,414
    
    
    
    10,673,198Total stockholders equity
    
    
    17,523,106
    
    
    
    17,040,890Total liabilities and stockholders equity
    
    $
    51,166,170
    
    
    $
    56,336,300


The accompanying notes are an integral part of the condensed consolidated financial statements

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IMPRESO, INC. AND SUBSIDIARIES

INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

Three Months EndedNovember 30,
    
    November 30,2003
    
    2002Net sales
    
    $
    28,178,743
    
    
    $
    31,842,729Cost of sales
    
    
    24,797,982
    
    
    
    28,598,347Gross profit
    
    
    3,380,761
    
    
    
    3,244,382Selling, General and administrative expenses
    
    
    2,281,994
    
    
    
    2,370,089Operating Income
    
    
    1,098,767
    
    
    
    874,293Other expenses (income):Interest expense
    
    
    337,014
    
    
    
    483,639Other income, net
    
    
    (6,869
    )
    
    
    (106,697
    )Total other expense
    
    
    330,145
    
    
    
    376,942Income before income tax expense
    
    
    768,622
    
    
    
    497,351Income tax expense (benefit):Current
    
    
    315,723
    
    
    
    188,574Deferred
    
    
    (29,317
    )
    
    
    4,157Total income tax expense
    
    
    286,406
    
    
    
    192,731Net income
    
    $
    482,216
    
    
    $
    304,620Net income per share (basic and diluted)
    
    $
    .09
    
    
    $
    0.06Weighted average shares outstanding
    
    
    5,278,780
    
    
    
    5,278,780


The accompanying notes are an integral part of the condensed consolidated financial statements.

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IMPRESO, INC. AND SUBSIDIARIES

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

Three Months EndedNovember 30, 20032003
    
    2002Cash Flows From Operating Activities:Net income
    
    $
    482,216
    
    
    $
    304,620Adjustments to reconcile net income to net
cash provided by (used in) operating activities-Depreciation and amortization
    
    
    356,670
    
    
    
    365,913Provision for Losses of Receivables
    
    
    143,298
    
    
    
    Provision for Losses of Inventory
    
    
    
    
    
    
    40,000Deferred income taxes
    
    
    (29,317
    )
    
    
    4,157(Increase) Decrease in trade accounts receivable
    
    
    (36,986
    )
    
    
    2,614,890Decrease (Increase) in inventory
    
    
    5,009,437
    
    
    
    (5,534,748
    )(Increase) Decrease in prepaid expenses and other
    
    
    (137,263
    )
    
    
    47,746Decrease in accounts payable
    
    
    (1,791,227
    )
    
    
    (1,205,053
    )Increase (Decrease) in accrued liabilities
    
    
    808,011
    
    
    
    (1,072,241
    )Net cash provided by (used in) operating activities
    
    
    4,804,839
    
    
    
    (4,434,716
    )Cash Flows From Investing Activities:Additions to property, plant and equipment
    
    
    (28,337
    )
    
    
    (163,389
    )Net cash used in investing activities
    
    
    (28,337
    )
    
    
    (163,389
    )Cash Flows From Financing Activities:Net (repayments) borrowing on line of credit
    
    
    (4,426,441
    )
    
    
    4,771,845Principal payments on prepetition debt
    
    
    (1,997
    )
    
    
    (1,917
    )Principal payments on post-petition debt
    
    
    (225,175
    )
    
    
    (174,746
    )Warrant Issued
    
    
    
    
    
    
    6,447Net cash (used in) provided by financing activities
    
    
    (4,653,613
    )
    
    
    4,601,629Net Increase in cash and cash equivalents
    
    
    122,889
    
    
    
    3,524Cash and cash equivalents, beginning of period
    
    
    95,129
    
    
    
    202,809Cash and cash equivalents, end of period
    
    $
    218,018
    
    
    $
    206,333


The accompanying notes are an integral part of the condensed consolidated financial statements.

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IMPRESO, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)



|1. |  | ORGANIZATION AND NATURE OF BUSINESS
|-- |  | -----------------------------------

Impreso, Inc., (formerly Impreso.com, Inc.) a Delaware corporation (referred to
collectively with its subsidiaries as the Company), is the parent holding
company of TST/Impreso, Inc. (TST), a manufacturer and distributor to dealers
and other resellers of paper and film products for commercial and home use in
domestic and international markets, and Hotsheet.com, Inc., the owner and
operator of the Hotsheet.com web portal. TSTs product line consists of
standard continuous computer stock business forms; thermal facsimile paper;
cut sheet products such as copy paper, ink jet paper, digital photo paper and
transparencies; fine business stationary; point of sale and cash register
machine rolls; high speed laser roll paper; wide format engineering rolls;
wide format ink jet media; and processed laser cut sheets. TST has one wholly
owned subsidiary, TST/Impreso of California, Inc., which was formed to support
the activities of the paper converting segment of the Companys business.



|2. |  | INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|-- |  | ---------------------------------------------------

In the opinion of management, the unaudited Interim Condensed Consolidated
Financial Statements of the Company include all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of the
Companys financial position as of November 30, 2003, and its results of
operations for the three months ended November 30, 2003 and November 30, 2002.
Results of the Companys operations for the interim period ended November 30,
2003, may not be indicative of results for the full fiscal year. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to the rules and regulations promulgated by the
Securities and Exchange Commission (the SEC).

The unaudited Interim Condensed Consolidated Financial Statements should be
read in conjunction with the audited Condensed Consolidated Financial
Statements and accompanying notes of the Company and its subsidiaries, included
in the Companys Form 10-K, as amended (the Companys Form 10-K), for the
fiscal year ended August 31, 2003 (Fiscal 2003). Accounting policies used in
the preparation of the unaudited Interim Condensed Consolidated Financial
Statements are consistent in all material respects with the accounting policies
described in the Notes to Condensed Consolidated Financial Statements in the
Companys Form 10-K.



|3. |  | NEW ACCOUNTING PRONOUNCEMENTS
|-- |  | -----------------------------

In December 2002, the FASB issued SFAS No. 148 Accounting for Stock-Based
Compensation  Transition and Disclosure, an amendment to SFAS No. 123.This
statement provides alternative methods of transition for companies that elect
to voluntarily change to the fair value based method of accounting for
stock-based employee compensation. In addition, this statement amends the
disclosure requirements of SFAS No. 123 to require prominent disclosures in
both annual and interim financial statements about the method of accounting

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for stock-based employee compensation and the effect of the method
used on reported results. The Company currently does not intend to change to
the fair value based method of accounting for stock-based compensation, but
will adhere to the disclosure requirements of the Statement. The Company has
adopted the disclosure requirements for Fiscal 2004.



|4. |  | INVENTORIES
|-- |  | -----------

Inventories are stated at the lower of cost (principally on a first-in,
first-out basis) or market and include material, labor and factory overhead.

Inventories consisted of the following:

November 30, 2003
    
    August
31, 2003Finished goods
    
    $
    13,967,458
    
    
    $
    15,409,606Raw materials
    
    
    8,793,490
    
    
    
    12,345,769Supplies
    
    
    977,766
    
    
    
    1,008,103Work-in-process
    
    
    91,003
    
    
    
    86,731Allowance for obsolete inventory
    
    
    (377,063
    )
    
    
    (388,118
    )Total
    
    $
    23,452,654
    
    
    $
    28,462,091




|5. |  | LONG-TERM DEBT AND LINE OF CREDIT:
|-- |  | ----------------------------------

The following is a summary of long-term debt and line of credit:
    
    November 30,
    
    August 31,2003
    
    2003Line of Credit with a commercial financial corporation under
revolving credit line, maturing May 2004, secured by
inventories, trade accounts receivable, equipment, goodwill
associated with TSTs trademark IMPRESO (no value on
financial statements), and a personal guarantee by the trustee
of a trust which is a principal stockholder of the Company,
interest payable monthly from July 8, 2003 to October 6, 2003,
on $12 million, and from October 6, 2003 to January 5, 2004, on
$10 million, at LIBOR plus 2.75% (3.9 % as of November 30,
2003), balance at prime plus .25% (4.25 % as of November 30,
2003)
    
    $
    9,929,004
    
    
    $
    14,355,445Note payable to a commercial financial corporation, secured by
real property, payable in monthly installments of $15,151
(including interest at 7.75%, or 4.5% above the 11th District
cost of funds rate, whichever is greater; 7.75 % as of November
30, 2003), maturing June 2008
    
    
    1,633,032
    
    
    
    1,638,448Note payable to a commercial financial corporation, secured by
real property and equipment, payable in monthly installments of
$4,457 (including interest at 8.50%), maturing November 2009
    
    
    249,811
    
    
    
    257,641


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Note payable to a commercial financial corporation, secured by
real property and equipment, payable in monthly installments of
$10,843 (including interest at 8.50%), maturing July 2010
Revolving lenders blanket lien subordinated to notes collateral
    
    
    665,056
    
    
    
    682,876Note payable to a commercial financial corporation, secured by
real property, payable in monthly installments of $2,834
(including interest at 5.5%), maturing October 2010
    
    
    193,763
    
    
    
    199,531Notes payable to various commercial financial corporations,
secured by equipment, interest rates ranging from 5.25 % to
11.016 %, maturing at various dates from September 2004 through
July 2008
    
    
    251,194
    
    
    
    308,323Notes payable to a commercial financial corporation, secured by
real property and a personal guarantee by the trustee of a
trust which is a principal stockholder of the Company, payable
in monthly installments of $21,407 (including interest at 8%),
maturing March 2011
    
    
    2,017,905
    
    
    
    2,041,453Acquisition note payable, unsecured, payable in quarterly
installments of $15,000 (including interest at 8%), maturing
April 2006
    
    
    225,000
    
    
    
    225,000Acquisition note payable, secured by equipment, payable in
monthly installments of $16,024, no interest, matured May 2003
    
    
    352,145
    
    
    
    352,145Note payable to a commercial financial corporation, secured by
real property and a personal guarantee by the trustee of a
trust which is a principal stockholder of the Company, payable
in monthly installments of $22,827 (including a fixed scheduled
for interest, 7.25 % at November 30, 2003), maturing April 2007
    
    
    3,123,634
    
    
    
    3,135,614Note payable to a commercial financial corporation, secured by
equipment, payable in monthly installments of $17,857 including
interest at a variable rate equal to 30 day LIBOR plus 350
basis points, 4.52% at November 30, 2003), maturing February
2009
    
    
    1,142,857
    
    
    
    1,196,429Acquisition notes payable, unsecured, payable in monthly
installments of 16,666, maturing February 2007
    
    
    606,443
    
    
    
    648,556Prepetition-Note payable to a commercial financial corporation, secured by
real property and equipment and a personal guarantee by the
trustee of a trust which is a principal stockholder of the
Company, payable in monthly installments of $1,461 (including
interest at 4%), maturing May 2023
    
    
    235,237
    
    
    
    237,234Total
    
    
    20,625,081
    
    
    
    25,278,694Less Current Maturities
    
    
    (11,249,954
    )
    
    
    (15,706,760
    )Long-Term Debt
    
    $
    9,375,127
    
    
    $
    9,571,934


Prepetition amount listed above represents the renegotiated amounts and terms
under the 1993 plan of reorganization.

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In April 2002, TST amended its revolving line of credit to increase the line
from $22 million to $25 million. The amended revolving credit line is limited
to the lesser of $25 million or a percentage of eligible trade accounts
receivable and inventories, as defined. The remaining availability under the
revolving credit line was $6.9 million as of November 30, 2003.

On January 5, 2004, TST elected to implement the euro dollar interest rate of
1.152 % plus 2.75%, to $5,000,000 of the Companys outstanding loan balance.
This rate is locked until April 4, 2004.

The line of credit, as amended, has a restrictive covenant requiring the
maintenance of a minimum tangible net worth, as defined in the agreement. One
of the notes payable contains restrictive covenants on current and debt to
worth ratio, and the payment of cash dividends. As of November 30, 2003, the
Company was in compliance with all covenants.



|6. |  | SUPPLEMENTAL CASH FLOW INFORMATION
|-- |  | ----------------------------------

Three Months EndedNovember 30,Cash paid during the period for:
    
    2003
    
    2002Interest
    
    $
    337,014
    
    
    $
    483,639Income taxes
    
    $
    8,269
    
    
    $
    376,878




|7. |  | STOCK OPTIONS
|-- |  | -------------

The Company accounts for the Incentive Stock Option Plan under the recognition
and measurement principles of APB Opinion No. 25, Accounting for Stock Issued
to Employees, and related Interpretations. No stock-based compensation costs
are reflected in net income, as all options granted under those plans had an
exercise price equal to the market value of the underlying common stock on the
date of grant. The following table illustrates the effect on net income and
earnings per share if the Company had applied the fair value recognition
provisions of FASB Statement No. 123, Accounting for Stock-Based
Compensation, to stock-based employee compensation.

Three Months EndedNovember 30,2003
    
    2002Net EarningsAs reported
    
    $
    482,216
    
    
    $
    304,620Pro forma
    
    
    481,016
    
    
    
    290,620Stock-based employee
compensation expense, net of taxAs reported
    
    
    
    
    
    
    Pro forma
    
    
    1,200
    
    
    
    14,000Net earnings per common and
Common equivalent share:Basic  as reported
    
    
    0.09
    
    
    
    0.06Diluted  as reported
    
    
    0.09
    
    
    
    0.06Basic  Pro forma
    
    
    0.09
    
    
    
    0.06Diluted  Pro forma
    
    $
    0.09
    
    
    $
    0.06


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|8. |  | Legal Matters
|-- |  | -------------

On October 9, 2003, in the United States District Court Central District of
California Southern Division, Avery Dennison Office Products Company and Avery
Dennison Corporation (Avery) filed a patent infringement lawsuit against TST
claiming TSTs business cut card products infringed on patents and pending
patents owned by Avery. The parties have executed a standstill agreement while
TST investigates the claim and the parties negotiate settlement. If the
products do infringe on Averys patents, TST, under the Uniform Commercial
Code, will file a lawsuit against its suppliers for selling products that
infringed on a patent. The Company also filed a claim with its insurance
carrier requesting coverage. The insurance company has reserved their decision
pending their own investigation.

On November 5, 2003, the Company discovered the Companys payroll administrator
was fraudulently diverting Company funds into her personal bank account. The
payroll administrator admitted guilt to the FBI and the Companys banks
internal investigator. The investigation by the FBI, the bank and the Company to
date has revealed an approximate loss of $580,000 over a period starting in
September 2000 until October 2003. The investigation is not complete. The
Company has notified its insurance Company of the loss under its employee theft
coverage and management believes that a majority of the losses will be
reimbursed by insurance. Management has recently hired a full time internal
audit specialist to lead its efforts to evaluate and improve its internal
accounting controls and this individual will be heading up the companys efforts
to establish more effective internal controls over the payroll processing
function. The Company is cooperating with the FBI in its investigation and
prosecution of the Companys former employee.







Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

CRITICAL ACCOUNTING POLICIES

The accounting policies described below are those the Company considers
critical in preparing its condensed consolidated financial statements . These
policies require the application of significant judgement by management in
selecting the appropriate assumptions for calculating financial estimates. By
their nature, these judgements are subject to an inherent degree of
uncertainty. These judgements are based on historical experience, the Companys
observation of trends in the industry, information provided by customers and
information available from other outside sources, as appropriate and available
at the time the estimates are made. However, as described below, these
estimates could change materially if different information or assumptions were
used. The Company believes that of its significant accounting policies, the
following may involve a higher degree of judgment or estimation than other
accounting policies.

Accounts Receivable (doubtful accounts) Reserves

The Company provides for losses on accounts receivable based upon their current
status, historical experience and managements evaluation of existing economic
conditions. Significant changes in customer profitability or general economic
conditions may have a significant effect on the Companys allowance for
doubtful accounts.

Revenue Recognition

TSTs sales are recorded when products are shipped to customers. TST is
reasonably assured a majority of the sales are collectible upon shipment due to
its credit policies and collection methods. For those accounts TST is not
reasonably assured of collection the Company reserves against doubtful accounts
based upon historical experience and managements evaluation of existing
economic conditions. Hotsheet.com, Inc. generates its

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revenue by click through
fee advertising revenues and commissions earned. Click through fees are
generated when traffic is sent from the Hotsheet.com website, via a link, to a
vendors website. Commissions are generated when the linked traffic makes
purchases. The revenue is recognized upon receipt.

Inventories

Inventories are valued at the lower of cost or market, cost being determined on
the first-in, first-out method. Reserves for slow moving, obsolete products, or
bad (damaged) products are based on historical experience, acquisition
activities, and secured lender policies. The Company evaluates, and if
necessary, adjusts reserves quarterly.

Historically, the Company has not reserved for slow moving, obsolete or bad
inventories. Substantially all of the slow moving products can be repackaged
into different formats or labels. Demand for products that are associated with
obsolete technology slowly decline as sales of new hardware requiring new or
different consumables increase. The reduced demand for products which are
becoming obsolete is easily monitored and scheduled production of these items
is adjusted accordingly. If damage is caused to a product it is most often
minor in value and expensed as damage occurs.

The Company records reductions in revenue when products are returned. Returns
and allowances are monitored based on a historical percentage of sales. All
returns must be approved by the Company prior to the product being returned,
and in some instances a restocking fee is charged to the customer. The Company
also monitors reasons for return, such as quality, shipping errors or ordering
errors.

Commissions and Rebates

The Company reserves commissions and rebates paid to certain customers based on
specific contractual agreements. These reserves are calculated based upon
sales by customer, and adjusted quarterly to reflect increases and decreases in
each customers sales and payments of commissions and rebates.

Results of Operations for the Interim Periods Ended November 30, 2003 and
November 30, 2002.

Net SalesNet sales decreased from $31.8 million in the three months ended
November 30, 2002, to $28.2 million in the three months ended November 30, 2003
(First Quarter 2004), a decrease of $3.6 million or 11.5%. Net sales
decreased in First Quarter 2004, as compared to the corresponding period of the
prior year, as a result of decreased sales of branded products and the slowed
economy. The sales decreased due to new manufacturers in the marketplace of
identical branded products.

Gross Profit Gross profit increased from $3.2 million in the three months
ended November 30, 2002, to $3.4 million in the First Quarter 2004, an increase
of 4.2%. Gross profit margin for the three month period ended November 30,
2003, increased to 12.0 % as compared to 10.2% for the three month period ended
November 30, 2002.The increase in gross profit margin for First Quarter 2004,
is a result of lower raw material costs.

Selling, General, and Administrative ExpensesSG&A expenses decreased from $2.4
million in the three months ended November 30, 2002 to $2.3 million in First
Quarter 2004. This decrease was primarily the result of the elimination of
overtime, reduction in workforce and employee benefits. SG&A expenses as a
percentage of net sales increased from 7.4% in the three months ended November
30, 2002, to 8.1% in the First Quarter 2004. The increase in SG&A as a
percentage of sales for First Quarter 2004, is due to the decrease in net
sales.

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Interest ExpenseInterest expense decreased from $484,000 in the three months
ended November 30, 2002, to $335,000 in First Quarter 2004. The decrease of
30.7% is due to the reduction of inventories which
reduced our borrowings under our line of credit.

Income Taxes Income tax expense increased from $193,000 for the three months
ended November 30, 2002, to $286,000 in First Quarter 2004. The increase in
income tax expense for First Quarter, as compared to the corresponding period
of the prior year is a result of the increase in taxable income.

Liquidity and Capital Resources

Working capital increased to $13.3 million as of November 30, 2003, from $12.7
million at August 31, 2003. This represented an increase of 4.8%.

Effective October 28, 2002, TST entered into an amended and restated loan
agreement with a commercial financial corporation, which matures in May 2004.
The agreement provides for a $25 million line of credit and an inventory
sub-limit of $21 million. The loan is secured by, among other things,
inventory, trade receivables, equipment and a personal guarantee of Marshall
Sorokwasz, our Chairman of the Board and President, and Trustee of a trust
which is a principal shareholder of our Company. A new provision in the
amended and restated loan agreement allows the Company to elect the application
of a Eurodollar interest rate plus 2.75% for 30, 60 or 90 day periods to
specified amounts of the loan.

Available borrowings under this line of credit, which accrued interest from
July 8, 2003 to October 6, 2003, on $12 million and from October 6, 2003 to
January 5, 2004, on $10 million, at LIBOR plus 2.75% (3.9 % as of November 30,
2003), balance at prime plus .25% (4.25 % as of November 30, 2003) are based
upon specified percentages of eligible accounts receivable and inventories. As
of November 30, 2003, we have adequate capital available to us to operate our
business.

On January 5, 2004, TST elected to implement the euro dollar interest rate of
1.152 % plus 2.75%, to $5,000,000 of the Companys outstanding loan balance.
This rate is locked until April 4, 2004.

On April 22, 2003, we executed a one-year, $1.4 million construction loan with
the current mortgagee of the Itasca, Illinois building to expand the building
an additional 34, 500 square feet.

We believe that the funds available under the loans encumbering our California,
Texas, Pennsylvania, Illinois and West Virginia plants, the construction loan
for the expansion at the Itasca facility, the revolving credit facility, cash
and cash equivalents, trade credit and internally generated funds will be
sufficient to satisfy our requirements for working capital and capital
expenditures for at least the next twelve months. Such belief is based on
certain assumptions, including the continuation of current operations and no
extraordinary adverse events, and there can be no assurance that such
assumptions are correct. In addition, expansion of our operations due to an
increased demand for products TST manufactures or significant growth of
Hotsheet.com, Inc. may require us to obtain additional capital to add new
operations or manufacturing facilities. If that should occur, we anticipate
that the funds required would be generated through securities offerings or
additional debt. There can be no assurance that any additional financing will
be available if needed, or, if available, will be on acceptable terms.

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As of November 30, 2003, we did not own derivative or other financial
instruments for trading or speculative purposes. The implementation of
Statement of Financial Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities does not have a material impact on our
financial position or results of operations.

Inventory Management; Raw Materials of TST

We believe that it is necessary for TST to maintain a sufficient inventory of
finished goods and raw materials to adequately service its customers. In recent
years inventory levels had been increased to facilitate the introduction of new
brands and expanded product lines. At the beginning of Fiscal 2002, we
implemented a program to reduce inventory. From September 1, 2001 to August
31, 2002, TST inventory levels were reduced by over $4.3 million. This is in
addition to the depletion of $3 million of inventory acquired in the purchase
of the assets of United in March 2002. We reduced inventory levels in the
fiscal year ending August 31, 2003 (Fiscal 2003) by $5.6 million. In the
first quarter of Fiscal 2004 Inventory was reduced another $5 million.
Management intends to continue reducing inventory through the year ending
August 31, 2004 (Fiscal 2004); however, downward pressures on raw material
prices could compress the market for our existing inventory and have a material
adverse effect on the results of operations of TST or restrain our attempts at
further reducing inventory.

For the six month period ended February 28, 2003, the price of raw materials
had remained relatively stable. During the third and fourth quarter of Fiscal
2003, the price of raw materials rapidly dropped. Prices continued to decrease
through the first quarter of Fiscal 2004, but we believe they will stabilize in
the second quarter.

TST bears the risk of increases in the prices charged by its suppliers and
decreases in the prices of raw materials held in its inventory. If prices for
products held in its finished goods inventory decline, if prices for raw
materials required by it increase, or if new technology is developed that
renders obsolete products distributed and held in inventory by TST, the
Companys business could be materially adversely affected.

TST purchases raw paper, coated thermal facsimile paper, coated technical
paper, carbon and carbonless paper (consisting of a wide variety of weights,
widths, colors, sizes and qualities), transparency film, packaging and other
supplies in the open market from a number of different companies around the
world. We believe that TST has adequate sources of raw material supplies to
meet the requirements of its business. We believe that TST has a good
relationship with all of its current suppliers.

Market Conditions

The primary product produced by the Company is continuous feed business forms.
Management believes that the market for business forms, which declined in 2003,
will continue to decline in 2004. Management believes that the slowed economy
had a significant impact on First Quarter 2004 results of operation, but
believes the economy is improving and it will not significantly affect the
other three quarters of Fiscal 2004 results of operations.

If selling prices for products manufactured by us cannot increase in relation
to raw material cost increases, or if prices for products manufactured by us
decline as a result of market pressures, our results of operations could be
materially adversely affected.

Although TST has specialized in select markets and has emphasized service and
long-term relationships to meet customer needs more effectively, there are no
long-term contractual relationships between it and any of its customers.
There can be no assurance that purchases by these customers will remain at
significant levels. TST may in the future be dependent on these or other
significant customers. The loss of any other significant customer could
materially adversely affect our financial position, results of operations and
cash flows.

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Seasonality

TST may be subject to certain seasonal fluctuations in that orders for products
may decline over the summer months. If the market for finished goods
decreases, then the adverse impact of the seasonal fluctuations on the Company
will be greater.

Hotsheet.com revenues are partially generated by retail sales which are
typically stronger during the Christmas holiday season.

Forward-Looking Statements

Managements Discussion and Analysis of Financial Condition and Results of
Operations and other sections of this Form 10-Q contain forward-looking
statements about our prospects for the future, including but not limited to
our ability to generate sufficient working capital, our ability to continue to
maintain sales to justify capital expenses, and our ability to generate
additional sales to meet business expansion. Such statements are subject to
certain risks and uncertainties which could cause actual results to differ
materially from those projected, including availability of raw materials,
availability of thermal facsimile, computer, laser and color ink jet paper, to
the cyclical nature of the industry in which we operate, the potential of
technological changes which would adversely affect the need for our products,
price fluctuations which could adversely impact the large inventory we require,
loss of any significant customer, and termination of contracts essential to
our business. Parties are cautioned not to rely on any such forward-looking
statements or judgments in making investment decisions.







Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are not exposed to market risks such as foreign currency exchange rates,
but are exposed to risks such as variable interest rates. Market risk is the
potential loss arising from adverse changes in market prices and rates. Our
subsidiaries do not have supply contracts with any of their foreign
vendors. All foreign vendors are paid in United States currency. In
addition, TSTs international sales of finished goods is insignificant.
Accordingly, there are not sufficient factors to create a material foreign
exchange rate risk; therefore, we do not use exchange commitments to minimize
the negative impact of foreign currency fluctuations.

We had both fixed-rate and variable-rate debts as of November 30, 2003. The
fair market value of long-term variable interest rate debt is subject to
interest rate risk. Generally the fair market value of variable interest rate
debt will decrease as interest rates fall and increase as interest rates rise.

The estimated fair value of our total long-term fixed rate and floating rate
debt approximates carrying value. Based upon our market risk sensitive debt
outstanding at November 30, 2003, there was no material exposure to our
financial position or results of operations.







Item 4. Controls and Procedures

Evaluation of controls and procedures

Subsequent to November 5, 2003, and within the 90 days prior to the date of
this report, the Company carried out an evaluation, under the supervision and
with the participation of the Companys management, including the Companys
Chief Executive Officer and Chief Financial Officer, of the effectiveness of
the design and operation of the Companys disclosure controls and procedures
pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that the Companys
amendments to its disclosure controls and procedures are effective in timely
alerting them to material information relating to the Company (including its
consolidated subsidiaries) required to be included in the Companys periodic
SEC filings.

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Changes in internal controls.

The Company has implemented the following new controls and procedures:

The accounting software system is being modified to facilitate improved control
over all credit memo requests through ultimate approval or denial and in
conjunction with procedural modifications, to assure the timely review and
resolution of all credit memo requests. Therefore, assuring that inventory
returns can not be entered into the perpetual inventory without a corresponding
credit memo.

Unauthorized discount credits taken by customers are reviewed and controlled
through collection of the amounts due and improvement in the communication with customers as to discount
terms.

Receivables aging internal procedures have been strengthened to improve the
accuracy of cash receipts posting and for follow-up reviews to assure proper
application is made. Additionally, the accounting software system and related
procedures are being modified to allow for properly approved recording of
adjusting entries.

Procedures related to reporting of shipments from outside warehouses is under
review in an effort to identify and implement changes which would improve the
timeliness of recording sales for month end cut-off and for invoicing to the
customers.

A log has been initiated to account for write-offs of uncollectible trade
account receivables. Procedures requiring management review of write-offs and
credit memos is being implemented to aid in preventing unauthorized
write-offs.

Procedures are being reviewed to determine the propriety of maintaining
separate divisional balances of account receivable in the financial records.

Procedures have been modified to prevent customer checks from being accessible
to individuals who record cash receipts and credit memos to customer accounts.

The Company has implemented a new procedure so an individual who does not have
the ability to record cash disbursements into the general ledger is responsible
for setting up new vendors within the computer system. Also a member of the
management team shall periodically review a listing of new vendors
investigating any unusual or suspicious entries.

A check register will be included with checks forwarded to the check signer to
allow the check signer to verify the completeness of the check population and
reduce the likelihood of unauthorized checks.

The beginning and ending check numbers of voided and issued checks will be
listed on a log. This log is reviewed by a member of the management team along
with the check signing procedure. Voided checks are cancelled (voided) by
writing and with the signature block removed by the data processing department
at each check run.

A procedural review is currently under investigation to improve the timeliness
and accuracy of major general ledger account balance reconciliations and
analysis.

The Company has implemented the following new controls and procedures in
response to the payroll fraud:

A member of the financial department, on a surprise basis, will physically
distribute paychecks/pay stubs to the employees.

Payroll journal entries will be derived from the actual payroll registers, not
from a payroll summary or other similar document prepared by the payroll clerk.

A person independent of the payroll function approves transfers to payroll
disbursement accounts, comparing amount transferred to actual payroll
registers.

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Periodically, a detail of ACH transfers (direct deposit transfers) will be
reviewed for employee bank accounts that have more than the appropriate number
of direct deposits being deposited into the account.

Periodically, management will test a pay period to ensure that the sum of ACH
transfers plus actual checks written agrees to the net payroll number per the
payroll register.

Employees in the payroll position will be required to take earned vacation, and
someone else will perform the payroll function in that persons absence.







PART II: OTHER INFORMATION







Item 1. Legal Proceedings

See notes to condensed consolidated financial statements







Item 2. Changes in Securities

None







Item 3. Defaults upon Senior Securities

None







Item 4. Submission of Matters to a Vote of Security Holders

None







Item 5. Other Information

None







Item 6. Exhibits and Reports on Form 8-K



| | (a) |  | Exhibits to Part 1.
| | --- |  | -------------------

Exhibit No.
    
    Description of Exhibits31.1
    
    Certification of Chief Executive Officer
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Chief Financial Officer
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of Chief Executive Officer pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Chief Financial Officer pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.




| | (b) |  | Reports on Form 8-K and 8-K /A
| | --- |  | ------------------------------

None

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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.

Dated: January 14, 2004Impreso, Inc.(Registrant)/s/ Marshall D. SorokwaszMarshall D. SorokwaszChairman of the Board, Chief
Executive Officer, President,
and Director/s/ Susan M. AtkinsSusan M. AtkinsChief Financial Officer
and Vice President


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Exhibits

Exhibit No.
    
    Description of Exhibits31.1
    
    Certification of Chief Executive Officer
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Chief Financial Officer
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of Chief Executive Officer pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Chief Financial Officer pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.