UNITED STATES

SECURITIES AND 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 QUARTERLY PERIOD ENDED JUNE 30, 2005
o		TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

 

Commission File No. 0-31267

 

IWT TESORO CORPORATION

(Exact name of registrant as specified 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

(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:

 

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

 

State the number of shares outstanding of each of the issuer’s class of common equity, as of August 12, 2005: 11,701,102 shares

 

 

IWT TESORO CORPORATION AND SUBSIDIARIES

FORM 10-Q

For the Six Months Ended June 30, 2005

INDEX

 

PART I	FINANCIAL INFORMATION
Item I.	Financial Statements
	Consolidated Balance Sheets as of June 30, 2005 (unaudited) and December 31, 2004
	Consolidated Statements of Operations for the Three Months and Six Months Ended June 30, 2005 and 2004 (as restated) (unaudited)
	Consolidated Statement of Stockholders’ Equity for the Six Months Ended June 30, 2005 (unaudited)
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2005 and 2004 (as restated) (unaudited)
	Notes to the Consolidated Interim 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 6.	Exhibits

 

2

 

PART I – FINANCIAL INFORMATION

 

ITEM 1:  FINANCIAL STATEMENTS

 

IWT TESORO CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

		June 30,			December 31,
		2005			2004
		(Unaudited)
ASSETS
Current Assets:
Cash		$	636,921		$	507,677
Accounts receivable, net allowance for doubtful accounts and returns of $288,909 and $270,013		9,055,652			7,883,756
Inventories		26,604,745			21,578,829
Deposit on purchase of inventories		383,057			366,667
Prepaid expenses		300,773			271,104
Total current assets		36,981,148			30,608,033
Property and equipment, net		1,746,338			1,762,065
Other assets		742,361			758,997
		$	39,469,847		$	33,129,095
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable		$	15,530,686		$	15,282,653
Accrued expenses and other liabilities		1,180,377			997,432
Current portion of capital lease obligations		74,442			80,943
Current portion of notes payable, other		16,438			18,218
Total current liabilities		16,801,943			16,379,246
Long-Term Debt:
Note payable, revolving line of credit		21,751,541			16,047,220
Capital lease obligations		135,576			170,425
Subordinated notes payable, stockholders		338,662			338,662
Notes payable, other		59,677			37,487
Total long-term debt		22,285,456			16,593,794
Total liabilities		39,087,399			32,973,040
Commitments and Contingencies		—			—
Stockholders’ Equity:
Preferred stock, $0.001 par value, 25,000,000 authorized; none issued		—			—
Common stock, $0.001 par value, 100 million shares authorized; 11,701,102 and 11,697,102 issued and outstanding		11,701			11,697
Additional paid in capital		4,189,396			4,178,800
Accumulated deficit		(3,818,649		)	(4,034,442		)
		382,448			156,055
		$	39,469,847		$	33,129,095

 

See notes to the consolidated interim financial statements.

 

3

 

IWT TESORO CORPORATION AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

		The three months ended						The six months ended
		June 30,						June 30,
		2005			2004			2005			2004
					(Restated)						(Restated)
Net Sales		$	14,441,721		$	11,585,016		$	28,134,699		$	21,119,648
Cost of Goods Sold		8,602,396			7,144,406			17,165,389			12,954,820
Gross Profit		5,839,325			4,440,610			10,969,310			8,164,828
Operating Expenses:
Warehouse and distribution		1,925,995			1,327,688			3,611,386			2,588,744
Sales and marketing		1,768,142			1,535,385			3,457,820			3,135,300
General and administrative		1,687,400			1,529,035			3,228,236			2,916,973
		5,381,537			4,392,108			10,297,442			8,641,017
Income (Loss) from Operations		457,788			48,502			671,868			(476,189		)
Other Expenses:
Interest expense		(335,170		)	(139,111		)	(604,760		)	(261,377		)
Other		41,694			23,823			148,685			30,276
		(293,476		)	(115,288		)	(456,075		)	(231,101		)
Income (Loss) Before Income Taxes		164,312			(66,786		)	215,793			(707,290		)
Income Tax Benefit (Expense)		—			—			—			—
Net Income (Loss)		$	164,312		$	(66,786	)	$	215,793		$	(707,290	)
Earnings (Loss) Per Share:
Basic		$	0.01		$	(0.01	)	$	0.02		$	(0.06	)
Diluted		$	0.01		$	(0.01	)	$	0.02		$	(0.06	)
Weighted Average Common Shares Outstanding:
Basic		11,698,333			11,687,377			11,697,721			11,661,050
Diluted		12,161,081			11,687,377			12,160,469			11,661,050

 

See notes to the consolidated interim financial statements.

 

4

 

IWT TESORO CORPORATION AND SUBSIDIARIES

 

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(Unaudited)

 

 

							Additional			Accumulated
		Common Stock					Paid in			Earnings
		Shares		Amount			Capital			Deficit			Total
Balance, December 31, 2004		11,697,102		$	11,697		$	4,178,800		$	(4,034,442	)	$	156,055
Issuance of shares to employees		4,000		4			10,596			—			10,600
Net income, six months ended June 30, 2005		—		—			—			215,793			215,793
Balance, June 30, 2005		11,701,102		$	11,701		$	4,189,396		$	(3,818,649	)	$	382,448

 

See notes to the consolidated interim financial statements.

 

5

 

IWT TESORO CORPORATION AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

		Six Months Ended
		June 30,			June 30,
		2005			2004
					(Restated)
Cash flows from operating activities:
Net income (loss)		$	215,793		$	(707,290	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization		188,619			128,859
Loss (Gain) on disposal of property and equipment		16,900			(21,533		)
Common stock issued for services and compensation		10,600			140,300
Provision for doubtful accounts and reserve for returns		18,896			97,966
Changes in operating assets and liabilities:
(Increase) Decrease in:
Accounts receivable		(1,190,792		)	(2,460,414		)
Inventories		(4,952,291		)	(2,369,087		)
Deposit on purchase of inventories		—			(550,000		)
Prepaid expenses and other assets		(96,293		)	40,491
Increase in:
Accounts payable		248,033			2,233,146
Accrued expenses		182,945			273,080
Net cash used in operating activities		(5,357,590		)	(3,194,482		)
Cash flows from investing activities:
Acquisitions of property and equipment		(107,562		)	(473,214		)
Proceeds from sale of equipment		—			25,000
Net cash used in investing activities		(107,562		)	(448,214		)
Cash flows from financing activities:
Proceeds from revolving line of credit		32,783,331			21,330,000
Payments on revolving line of credit		(27,079,010		)	(18,518,046		)
Collection on notes receivable arising from sale of stock		—			550,000
Proceeds from issuance of stock		—			147,875
Payments of long-term debt		(74,271		)	(73,350		)
Loan financing costs		(35,654		)	—
Net cash provided by financing activities		5,594,396			3,436,479
Net Increase (decrease) in Cash		129,244			(206,217		)
Cash, Beginning		507,677			867,361
Cash, Ending		$	636,921		$	661,144
Cash Paid During the Period for:
Interest expense		$	604,760		$	246,876
Income tax		$	8,000		$	—
Non-Cash Operating Activities:
Inventory acquired through deposit with vendor		$	73,625		$	—
Non-Cash Investing and Financing Activities:
Acquisition of property and equipment financed through long-term debt		$	53,331		$	6,095

 

See notes to the consolidated interim financial statements.

 

6

 

IWT TESORO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

SIX MONTHS ENDED JUNE 30, 2005

 

NOTE 1.                SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Principles of Consolidation

 

The consolidated financial statements include IWT Tesoro Corporation and its wholly owned subsidiaries International Wholesale Tile, Inc., IWT Tesoro International, Ltd, IWT Tesoro Transport, Inc., The Tile Club, Inc. and The Tile Club, Inc.’s wholly owned subsidiary Import Flooring Group, Inc. All significant inter-company balances and transactions have been eliminated in consolidation.

 

Basis of Presentation

 

The interim financial information included herein is unaudited; however, such information reflects all adjustments, which are, in the opinion of management, necessary for a fair presentation 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 of operations for the first six months of the year are not necessarily indicative of the results of operations which might be expected for the entire year.

 

The accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and with the instructions to Form 10-Q and Rule 10-10 of Regulation S-X of the Securities and Exchange Commission. Accordingly certain information and footnote disclosure required by accounting principles generally accepted in the United States of America for complete financial statements have been omitted. These condensed financial statements should be read in conjunction with the Company’s financial statements and notes thereto included in the Company’s audited financial statements on Form 10-K, for the fiscal year ended December 31, 2004.

 

The Consolidated Balance Sheet at December 31, 2004 has been derived from the audited financial statements of IWT Tesoro Corporation at that date, but does not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements.

 

Stock-Based Compensation

 

The Company has elected to follow Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (APB No. 25), and related interpretations, in accounting for its employee and board of director stock options rather than the alternative fair value accounting allowed by SFAS No. 123, “Accounting for Stock-Based Compensation”.  As amended by SFAS 148 “Accounting for Stock-Based Compensation Transition and Disclosure” APB No. 25 provides that the compensation expense relative to the Company’s employee stock options is measured based on the intrinsic value of the stock option.

 

SFAS No. 123 requires companies that continue to follow APB No. 25 to provide pro forma disclosure of the impact of applying the fair value method of SFAS No. 123.  The Company follows SFAS No. 123 in accounting for stock options issued to non-employees.

 

Pro forma information regarding net income and earnings per share is required by SFAS No. 123, “Accounting forStock-Based Compensation,” and has been determined as if the Company had accounted for its stock options under the fair value method of that Statement. The fair value for these options was estimated at the grant date using the Black-Scholes option-pricing model using the following weighted average assumptions for 2005 and 2004, respectively: risk-free interest rates of 3.58%, and 2.20%, dividend yields of 0% and 0%, volatility factors of the expected market price of the Company’s common stock of 60.79% and 21.51% and expected lives of ten years. Using these assumptions, the weighted average grant-date fair value per share of options granted in 2005 was $1.57 and in 2004 it was $1.21.

 

7

 

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company’s employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options.  For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options’ vesting period.

 

A total of 50,000 options were granted to directors of the Company during the six months ended June 30, 2005. During the six months ended June 30, 2004 a total of 45,000 options were granted to directors of the Company and 5,000 options were granted to employees. The effect on net income (loss) and earnings (loss) per share if the Company had applied the fair value recognition provision of the SFAS No. 123, is presented below:

 

 

Earnings per Share

 

Basic and diluted loss per share for the three month period ended June 30, 2004 are equal as the effect of the common stock options and warrants were antidilutive.

 

8

 

Income Taxes

 

The Company recognizes income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

 

Reclassifications

 

Certain amounts in the 2004 financial statements have been reclassified for comparative purposes to conform to the 2005 presentation. These reclassifications had no effect on net income (loss).

 

NOTE 2.                RESTATEMENT OF FINANCIAL STATEMENTS

 

The Company has restated the consolidated balance sheet as of June 30, 2004 and the consolidated statements of operations, stockholders’ equity and cash flows for the six months then ended as described below:

 

Accounts Receivable

 

Management determined that the Company had been incorrectly calculating the allowances for product returns.  Management revised this calculation and determined that accounts receivable was overstated by approximately $108,000 at June 30, 2004 and net sales were overstated by approximately $31,200 for the three months ended June 30, 2004 and $52,800 for the six months ended June 30, 2004.

 

Accrued Expenses

 

Management determined that the Company had been incorrectly calculating the accruals for sales commissions.  Management revised this calculation and determined that accrued expenses were understated by approximately $600,400 as of June 30, 2004.

 

Sample and Display Boards

 

Management reassessed its methodology for accounting for sample and display boards and determined that this promotional merchandise should have been expensed when distributed rather than capitalized and depreciated.  The adjustments resulting from the restatement increased the net loss for the three months ended June 30, 2004 by approximately $254,000 and for the six months ended June 30, 2004 by approximately $666,000. This change also reduced property and equipment as of June 30, 2004 by approximately $3,646,500.

 

Deferred Taxes

 

In connection with the restatements for accounts receivable, accrued expenses and sample and display boards described above, the related tax effect was recorded resulting in gross deferred tax assets and the Company recorded a valuation allowance, as needed, to reduce net deferred tax assets to an amount considered by management more likely than not to be realized.

 

9

 

Additional Paid In Capital

 

As part of the recapitalization transaction of IWT effective October 1, 2002, the Company and each of the three stockholders of International Wholesale Tile, Inc. entered into a repurchase agreement to commence on January 1, 2003. The maximum number of redeemable shares under the repurchase agreement was 450,000. On June 26, 2003, the Company voted to cancel the repurchase agreement. The transaction was accounted for by reducing additional paid in capital to the extent a balance existed with the remaining portion of the transaction applied to accumulated deficit as of December 31, 2002.

 

The effects of these changes are summarized as follows:

 

 

		For the Quarter Ended June 30, 2004									For the Year Ended June 30, 2004
		As									As
		Previously						As			Previously						As
		Reported			Adjustments			Restated			Reported			Adjustments			Restated
Consolidated Statement of Operations:
Net Sales		$	11,616,257		$	(31,241	)	11,585,016			$	21,172,404		$	(52,756	)	$	21,119,648
Gross profit		4,471,851			(31,241		)	4,440,610			8,217,584			(52,756		)	8,164,828
Operating expenses		4,010,729			381,379			4,392,108			7,774,037			866,980			8,641,017
Income (loss) before								—									—
income taxes		345,834			(412,620		)	(66,786		)	212,446			(919,736		)	(707,290		)
Income tax benefit		84,400			(84,400		)	—			(35,600		)	35,600			—
Net Income (loss)		$	430,234		$	(497,020	)	$	(66,786	)	$	176,846		$	(884,136	)	$	(707,290	)
Earnings (loss) per share:
Basic & diluted		$	0.04		(0.05		)	$	(0.01	)	$	0.02		(0.08		)	$	(0.06	)

 

10

 

NOTE 3                 INVENTORIES

 

Inventories consisted of the following:

 

		June 30,			December 31,
		2005			2004
		(unaudited)
Tiles		$	23,700,299		$	17,034,540
Inventory in transit		2,904,446			4,544,289
Total Inventories		$	26,604,745		$	21,578,829

 

Inventory in transit consists of merchandise purchased overseas, which is not yet received in the warehouse. The Company obtains legal title at the shipping point.

 

NOTE 4                 PROPERTY AND EQUIPMENT

 

Property and equipment consisted of the following:

 

		June 30,			December 31,
		2005			2004
		(unaudited)
Furniture and fixtures		$	416,560		$	412,316
Machinery and equipment		700,806			634,531
Vehicles		265,974			233,501
Computer equipment		344,640			447,866
Leasehold improvements		662,494			730,534
		2,390,474			2,458,748
Less accumulated depreciation		644,138			696,683
		$	1,746,338		$	1,762,065

 

Depreciation expense for the three months ended June 30, 2005 and 2004 was approximately $79,200 and $70,300, respectively.  Depreciation expense for the six months ended June 30, 2005 and 2004 was approximately $157,300 and $128,900, respectively.

 

NOTE 5                 NOTES PAYABLE, REVOLVING LINE OF CREDIT

 

On December 31, 2004, the Company amended and restated the existing revolving line of credit agreement providing up to $25,000,000 with interest rates of either (1) LIBOR plus 3.00% or (2) the base rate plus 0.50% (interest rates ranging from 6.125% to 7.875% at June 30, 2005) payable monthly.  The line of credit is limited by a borrowing base which is comprised of a percentage of eligible accounts receivable and eligible inventories, as defined, and is collateralized by substantially all the assets of the Company. The balance due at June 30, 2005 and December 31, 2004 was $21,751,541 and $16,047,220, respectively. The line matures September 10, 2006 and contains certain covenants requiring the Company to maintain a certain leverage ratio, a required minimum fixed charge coverage ratio, and certain inventory turnover ratio. At June 30, 2005 the Company was not in compliance with the leverage and fixed charge coverage ratio requirement. The Company was granted a waiver of these covenants by our commercial lender.

 

For the three months ended June 30, 2005 and 2004, interest expense related to the credit line amounted to $320,676 and $119,787 respectively.  For the six months ended June 30, 2005 and 2004, interest expense related to the credit line amounted to $576,301 and $220,643 respectively.

 

11

 

NOTE 6                 STOCKHOLDERS’ EQUITY

 

Common Stock

 

During the six months ended June 20, 2005, the Company issued 4,000 shares of common stock to several employees under the Stock Incentive Plan for services rendered, based on the trading price at the date of issuance, for a total of $10,600, resulting in an immediate charge to operations.

 

NOTE 7                 SEGMENT INFORMATION

 

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

 

NOTE 8                 INCOME TAXES

 

Income tax expense for the three month period ended June 30, 2005 was $-0-as the provision for income taxes, computed by applying the Federal statutory rate to income before income taxes, was reduced by the decrease in the deferred tax valuation allowance during the period, resulting from the utilization of a portion of the Company’s net operating loss carryforward.

 

Income tax expense for the three month period ended June 30, 2004 was $-0- as the benefit for income taxes, computed by applying the Federal statutory rate to loss before income taxes, was reduced by the increase in the deferred tax valuation allowance during the period, to adjust deferred taxes to the amount considered by management more likely than not to be realized

 

NOTE 9                 NEW SUBSIDIARIES

 

On June 6^th, 2005, the Company organized the Import Flooring Group, Inc. (IFG).  IFG will provide agency services by directly importing tile from the foreign factories to wholesale tile distributors within the United States. There was no activity as of period ended June 30^th, 2005.

 

12

 

ITEM 2:  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion should be read along with our financial statements, which are included in another section of this filing.

 

Some statements made in this Quarterly Report are “forward-looking statements” and are not historical facts.  For example, statements regarding our financial position, business strategy and other plans and objectives for future operations, and assumptions and predictions about future demand for our services and products, supply, costs, marketing and pricing factors are all forward-looking statements. When we use words like “intend,” “would”, “anticipate,” “believe,” “estimate,” “plan” or “expect” or the negative of these terms and similar expressions we are making forward- looking statements.  You should be aware that these forward-looking statements are subject to risks and uncertainties.  Additionally, our forward-looking statements speak only as of the date of this report.  Other than as required by law, we undertake no obligation to update or revise these statements, whether as a result of new information, future events or otherwise.  New factors emerge from time to time that may cause our business not to develop as we expect, and it is not possible for us to predict all of them.  Factors that may cause our actual results, performance or achievements to be materially different from the results, performance or achievements expressed or implied by the forward-looking statements include, among other things:

 

•                  Our ability to successfully implement our business plan, including expanding our markets, increasing our product lines, and maintaining high quality customer service;

•                  Continuing and cultivating our relationships with current and new vendors;

•                  Funding our growth in a manner that is beneficial to our stockholders;

•                  Trends affecting our financial condition or results of operations, the impact of competition, the start-up of certain operations, roll out of products and services and acquisition opportunities;

•                  Restraints on pricing flexibility due to competitive conditions in the flooring industry, while taking into consideration factors beyond our control such as increases in freight and tariff charges, currency risks, and political conditions;

•                  Depending on third party suppliers outside the United States;

•                  The impact of adverse weather conditions, both in our targeted markets, as well as with respect to our foreign suppliers; and

•                  Other risks referenced from time to time in our SEC filings.

 

A part of preparing its Form 10-K, filed on April 15, 2005, management concluded it should restate its previously issued financial statements from the fiscal year ended December 31, 2002 through September 30, 2004.  The restatements are the result of management reassessing its methodology for accounting for certain transactions.  The Consolidated Financial Statements for the year ended December 31, 2004 have been prepared according to the new methodology and may be relied upon.  Tesoro is working diligently to complete the restated financial statements, but as of the date of filing this Form 10-Q for the quarter ended June 30, 2005 the restated Financial Statements have not be filed.  Accordingly, Tesoro’s Consolidated Financial Statements previously filed for the years ended 2003 and 2002 and for the interim periods within those years should no longer be relied upon.

 

General

 

IWT Tesoro Corporation (the Company) was organized in Nevada on May 3rd, 2000, originally under the name “Ponca Acquisition Corporation”.  Effective October 1, 2002, Tesoro acquired all of International Wholesale Tile, Inc.’s (IWT) common stock from IWT’s three shareholders. IWT was organized in Florida and has been in continuous operations since 1994. In exchange for the IWT stock, the IWT shareholders each received 3.0 million Tesoro shares, representing 87% of Tesoro’s then outstanding common stock.

 

In addition to IWT, Tesoro’s primary operating subsidiary, Tesoro has three additional wholly owned subsidiaries.  These include IWT Tesoro Transport, IWT Tesoro International, Ltd and The Tile Club, Inc. The Tile Club, Inc has a wholly owned subsidiary named Import Flooring Group, Inc.

 

•                  IWT Tesoro Transport, a USDOT licensed common carrier, organized to act as our freight carrier outside of Florida and to back haul non-household goods into Florida to help generate outside revenue, which has been insignificant through June 30, 2005;

 

•                  IWT Tesoro International, Ltd., a Bermuda corporation to act as a holding company for activities and assets such as agency agreements and investments in foreign operations; and

 

•                  The Tile Club, Inc., formed in 2004, was organized to acquire licensing, manufacturing and distribution rights for high-end

 

13

 

designer and artistic based decorative tiles and to also act as an agent for foreign manufacturers from whom IWT has acquired exclusive distribution rights.

 

•                  Import Flooring Group, Inc., formed in June 2005, was organized to support the Company’s growth strategy with an agent- oriented business model in the floor covering market.

 

Our principal executive office is located at 191 Post Road West, Suite 10, Westport, CT 06880.  Our telephone number is
(203) 221-2770.  Our web site can be found at http://www.iwttesoro.com.  Information contained on our web site is not part of this report.

 

Results of Operations for the three months ended June 30, 2005, 2004 and 2003

 

The following discussion and analysis should be read in conjunction with the financial statements and notes thereto that appear elsewhere in this document. The table below sets forth certain operating data for the periods indicated. Percentages are relative to total revenue for the periods indicated.

 

		Quarter ending June 30,
		June 30,			June 30,			June 30,
		2005			2004			2003
					(Restated)			(Restated)
Revenues		$	14,441,721		$	11,585,016		$	8,477,575
Cost of Goods Sold		8,602,396			7,144,406			5,011,999
Gross Margin		5,839,325			4,440,610			3,465,576
Gross Margin Percentage		40.43		%	38.33		%	40.88		%
Operating Expenses		$	5,381,537		$	4,392,108		$	3,067,820

 

Quarter ended June 30, 2005 Compared to Quarter June 30, 2004

 

Net sales for the three months ended June 30, 2005 increased $2,856,705 or approximately 24.7% over the reported net sales for the three months ended June 30, 2004. This growth follows a 36.7% increase in net sales for the three months ended June 30, 2004 over the three months ended June 30, 2003. The Company’s continued growth rate exceeds industry growth rates. We believe we will continue to exceed industry growth rates as a result of continued expansion into national markets.

 

Gross profit for the three months ended June 30, 2005 was $5,839,325 (40.4% of net sales) compared to $4,440,610 (38.3% of net sales) for the three months ended June 30, 2004. The second quarter 2005 gross profit increased was a direct result of a new pricing structure implemented in March 2005.  This new pricing structure will enable us to maintain an approximate gross margin of 38%.

 

Our operating expenses for the three months ended June 30, 2005 were $5,381,537 (37.3% of net sales) compared to $4,392,108 (37.9% of net sales) for the three months ended June 30, 2004. The decrease in the current percentage of operating expenses was a result of the Company’s continued realization of economies of scale.

 

Income from operations for the three months ended June 30, 2005 were $457,788 (3.2% of sales) compared to $48,502 (.4% of sales) for the three months ended June 30, 2004. The 2.8% increase is attributed to continued growth in sales distribution channels and process efficiencies gained in delivering these services.

 

Results of Operations for the Six Months ended June 30, 2005, 2004 and 2003

 

The following discussion and analysis should be read in conjunction with the financial statements and notes thereto that appear elsewhere in this document. The table below sets forth certain operating data for the periods indicated. Percentages are relative to total revenue for the periods indicated.

 

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		Six Months Ending June 30,
		June 30,			June 30,			June 30,
		2005			2004			2003
Revenues		$	28,134,699		$	21,119,648		$	15,191,385
Cost of Goods Sold		17,165,389			12,954,820			9,091,607
Gross Margin		10,969,310			8,164,828			6,099,778
Gross Margin Percentage		38.99		%	38.66		%	40.15		%
Operating Expenses		$	10,297,442		$	8,641,017		$	5,686,637

 

 Six Months ended June 30, 2005 Compared to Six Months ended June 20, 2004 and 2003

 

Sales for the six months ended June 30, 2005 were $28,134,699, a 33.2% increase over sales for the six months ended June 30, 2004. This growth follows a 39.0% increase for the same period ended in 2004 compared with 2003. The Company’s growth rate continues to exceed industry growth rates. We believe we will continue to exceed industry growth rates as a result of our continued expansion into national markets.

 

The gross margin for the six months ended June 30, 2005 was $10,969,310 (39.0% of net sales) compared to $8,164,828 (38.7% of net sales) for the six months ended June 30, 2004. The slightly higher gross margin for the six months ended June 30, 2005 is a result of the March 2005 new pricing structure. This new price structure was implemented as a direct result of increasing material and import costs.

 

Our operating expenses for the six months ended June 30, 2005 have increased by $1,656,425 over the same period in 2004, an increase of 19.2%. This compares with a 52.0% increase for the period ended June 30, 2004 from 2003.  The decrease in the current percentage of operating expenses was a result of the Company’s continued realization of economies of scale.

 

Income (loss) from operations for the six months ended June 30, 2005 was $671,868 (2.4% of sales) compared to ($476,189), (-2.3% of sales) for the six months ended June 30, 2004.  The 4.7% increase is attributed to continued growth in sales distribution channels and process efficiencies gained in delivering these services.

 

Changes in Financial Position for the six months ended June 30, 2005 from the year ended December 31, 2004

 

Accounts receivable and inventory have increased by $1,171,896 and $5,025,916 respectively during the six month period ended June 30, 2005 from the year ended December 31, 2004.  The increases in these account balances relate primarily to our growth in sales and the expansion of our distribution channels. Our accounts receivable balance at June 30, 2005 represented approximately 1.93 months of sales. The inventory turns for the same period was 1.55 times.

 

We had a net decrease in our investment in property and equipment of $15,727 net of depreciation for the six months ended June 30, 2005 from the year ended December 31, 2004.  The net decrease was primarily due to the disposal of capitalized leasehold improvement costs.

 

Our liabilities for accounts payable increased $248,033 and long term debt increased $5,704,321 for the six months ended June 30, 2005 from the year ended December 31, 2004.  The net increase in our liabilities relates directly to the financing of our sales growth and expansion into national markets.

 

Liquidity and Capital Resources

 

We had cash balances of approximately $636,900 at June 30, 2005 and $507,700 at December 31, 2004.  We have financed our growth with new equity capital and increased borrowings from our commercial lender.

 

Our line of credit is $25 million; an amount the Company expects to be sufficient to support its growth in accounts receivable and inventory through 2005. Our rapid growth is expected to continue requiring the Company to seek outside capital to supplement earnings and strengthen our balance sheet. We believe that the working capital required to finance the necessary growth in inventory will be provided by our existing line of credit. We expect to raise additional capital, either debt or equity through both the public and private markets during 2005.  However, we cannot assure anyone that we will be able to obtain outside capital, or if we do, that it will be on terms beneficial to us.

 

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The balance due at June 30, 2005 to our commercial lender for the use of the revolving line of credit was approximately $21.8 million. The loan and security agreement contains certain covenants, which include financial covenants that require us to maintain a certain leverage ratio, limit our unfunded capital expenditures, a required minimum fixed charge coverage ratio, and a certain inventory turnover ratio. At June 30, 2005 the Company was not in compliance with the leverage and fixed charge coverage ratio requirement. The Company was granted a waiver of these covenants by our commercial lender. We believe that our relationship with our commercial lender is good and that they will continue to support the Company.

 

Critical Accounting Policies

 

In preparing the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, the Company must make decisions which impact the reported amounts of assets, liabilities, revenues and expenses, and related disclosures. Such decisions include the selection of appropriate accounting principles to be applied and the assumptions on which to base accounting estimates. In reaching such decisions, the Company applies judgment based on its understanding and analysis of the relevant circumstances and historical experience. Actual amounts could differ from those estimated at the time the consolidated financial statements are prepared.

 

The Company’s significant accounting policies are described in Note 1 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K, for the year ended December 31, 2004. Some of those significant accounting policies require the Company to make subjective or complex judgments or estimates. Critical accounting policies are defined as those that are both most important to the portrayal of a company’s financial condition and results and require management’s most difficult, subjective, or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods.

 

The Company believes the following accounting policies require it to use judgments and estimates in preparing its consolidated financial statements and could represent critical accounting policies.

 

•                  Accounts receivable and revenue recognition. Revenues are recognized when goods are shipped and legal title passes to the customer. The Company provides an allowance for expected doubtful accounts based upon historical bad debt and claims experience and periodic evaluation of specific customer accounts and the aging of accounts receivable. If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

 

•                  Inventories are stated at the average landed cost, which matches current costs with current revenues. Inventories on hand are compared against anticipated future usage, which is a function of historical usage and anticipated future selling price, in order to evaluate obsolescence, excessive quantities, and expected sales below cost. Actual results could differ from assumptions used to value obsolete, excessive inventory or inventory expected to be sold below cost.

 

•                  Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in the tax rates is recognized in earnings (loss) in the period that includes the enactment date. Additionally, taxing jurisdictions could retroactively disagree with the Company’s tax treatment of certain items, and some historical transactions have income tax effects going forward. Accounting rules require these future effects to be evaluated using current laws, rules and regulations, each of which can change at any time and in an unpredictable manner.

 

Segment Information

 

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

 

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ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

 

Quantitative and Qualitative Disclosures About Market Risk

 

Information about the Company’s exposure to market risk was disclosed in its Annual Report on Form 10-K for the year ended December 31, 2004, which was filed with the Securities and Exchange Commission on April 15, 2005.  No material quantitative or qualitative changes in market risk exposure has occurred since the date of that filings

 

ITEM 4 – CONTROLS AND PROCEDURES

 

As of the end of the period covered by this Quarterly Report on Form 10-Q, Tesoro’s management, with participation of the Company’s principal executive officer and principal financial officer, have performed an evaluation of the Company’s disclosure controls and procedures, (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”) to ensure that information required to be disclosed by Tesoro in the reports that Tesoro files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified by the SEC’s rules and forms.

 

Based on that evaluation, Tesoro’s principal executive officer and principal financial officer have concluded that its disclosure controls and procedures were not effective in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified by the SEC’s rules and forms. At this time, management has determined that the Company’s current system of disclosure controls and procedures may not be sufficient i) to ensure that data errors, control problems, or acts of fraud are detected and ii) to confirm that appropriate corrective action, including process improvements, is undertaken in a timely manner.

 

Attached as Exhibits 31.1 and 31.2 to this Quarterly Report are certifications of the CEO and the CFO, which are required in accordance with Rule 13a-14 of the Securities Exchange Act of 1934 (the Exchange Act). This Controls and Procedures section includes the information concerning the controls evaluation referred to in the certifications and it should be read in conjunction with the certifications.

 

Definition of Disclosure Controls

 

Disclosure controls are controls and procedures designed to ensure that information required to be disclosed in Tesoro’s reports filed under the Exchange Act is recorded, processed, summarized and reported timely. Disclosure Controls are also designed to ensure that such information is accumulated and communicated to our management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

 

Limitations on the Effectiveness of Controls

 

Our management, including the CEO and CFO, does not expect that its disclosure controls will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within Tesoro have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

 

Deficiencies in the Company’s Controls and Procedures

 

In connection with preparing its Annual Report on Form 10-K for the fiscal year ended December 31, 2004,  Tesoro’s management identified deficiencies in its methodologies that it considered being material weaknesses in the effectiveness of Tesoro’s internal disclosure controls pursuant to standards established by the American Institute of Certified Public Accountants. A “material weakness” is a reportable condition in which the design or operation of one or more of the specific internal control components has a defect or defects that could have a material adverse effect on the Company’s ability to record, process, summarize and report financial data in the financial statements in a timely manner. The material weaknesses identified by Tesoro include the following:

 

•                                                                  Promotional merchandise should have been expensed when distributed rather than capitalized and depreciated;

 

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•                                                                  Tesoro had incorrectly estimated the accruals for sales related expenses; and

 

•                                                                  Incorrectly estimated its allowances for product returns and the allowances.

 

As a result, Tesoro’s management concluded that certain accounting errors occurred in its previously issued financial statements for the fiscal year ended December 31, 2002, each of the three fiscal quarters ended June 30, 2003, June 30, 2003 and September 30, 2003, the fiscal year ended December 31, 2003 and each of the three fiscal quarters ended June 30, 2004, June 30, 2004 and September 30, 2004.

 

Based upon the results of management’s investigation of the accounting errors, the Company’s principal executive officer and principal financial officer concluded that the accounting errors resulted from material weaknesses in the Company’s disclosure controls and procedures, particularly in the areas of documented policies and procedures along with competent personnel. Detailed validation work was performed by the Company’s internal personnel in order to substantiate the financial information contained in the Company’s consolidated financial statements and related disclosures that are contained in financial statements noted above.

 

Management’s Response and Plan for Improvement

 

Management discussed the proposed restatement of the specified financial statements and information with Tesoro’s Audit Committee, financial consultants and both current and former independent auditors who concur with management’s assessments. On March 19, 2005, the Audit Committee reported on its discussions with its management and the current auditors to Tesoro’s Board of Directors with respect to the restatements who supported their conclusions.  On March 21, 2005, Tesoro filed a report on Form 8-K concerning these errors and advised that its Consolidated Financial Statements for the years ended 2003 and 2002 and for the interim periods should no longer be relied upon and that the restatement would not have any effect on the Company’s gross revenue for any periods or on its cash flow.

 

As a result management has responded to these deficiencies by developing a plan to implement the following controls and procedural enhancements, designed to improve the Company’s disclosure controls:

 

•                                                                  Capitalization and amortization of asset balances - i) regular detailed analyses of fixed assets and accumulated depreciation accounts should be performed by preparing detailed account reconciliations, and ii) on a timely basis, account reconciliations and other significant transactions should be reviewed by an appropriate member of management;

 

•                                                                  Recording and processing transactions - transactions must be supported by i) appropriate transaction documentation and ii) appropriate documentation of review by management;

 

•                                                                  Reconciliation of accounts - detailed reconciliations of subsidiary accounts to the general ledger must be performed on a regular basis, and quarterly accounting review procedures must be enhanced by requiring an appropriate member of management to perform an independent review of material general ledger accounts and reserves;

 

•                                                                  Management review of journal entries, account balances and financial statements - all material journal entries must be reviewed and approved by an appropriate member of management;

 

•                                                                  Internal audit function - an internal audit function should conduct audit procedures and test internal controls in order to ensure that the Company’s policies and procedures for transactional recording, transactional review, segregation of duties, and review of significant transactions at the appropriate level of management are both effective and being followed; and

 

•                                                                  Competent personnel - staffing should be enhanced to provide sufficient resources to accomplish the foregoing objectives.

 

Status of Management’s Plan for Improvement

 

As of June 30, 2005, Tesoro has made the following progress in the implementation of its plan for improvement:

 

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•                                                                  Recording and processing transactions - controls have been implemented which require transactions to be supported by i) appropriate transaction documentation and ii) documentation that the transaction has been reviewed and approved by an appropriate member of management;

 

•                                                                  Reconciliation of accounts - policies and controls have been implemented which require regular reconciliations of subsidiary accounts to the general ledger, with timely review by an appropriate member of management. Procedures regarding the quarterly accounting review have been enhanced by requiring independent reviews of account reconciliations, material general ledger accounts, and reserves;

 

•                                                                  Management review of journal entries, account balances and financial statements - controls and procedures are being implemented which require that all material journal entries are reviewed and approved by an appropriate member of management;

 

•                                                                  Internal audit function - the Company has engaged a registered public accounting firm, which is not affiliated with the Company’s independent registered public accounting firm, to perform the internal audit function (the “Internal Auditor”). The Internal Auditor has conducted, and will continue to conduct, internal audit procedures and tests of internal controls to ensure that the Company’s controls and procedures for transactional recording, transactional review, segregation of duties, and review of significant transactions at the appropriate level of management are both effective and being followed; and

 

•                                                                  Competent personnel - the Company has made, and will continue to make, appropriate staffing enhancements in order to provide sufficient resources to accomplish the Company’s objectives of recording, processing, summarizing and reporting, on a timely basis, Tesoro’s financial information.

 

Management believes that the disclosure controls and procedures, which have been, and are continuing to be, implemented, are addressing the identified deficiencies in Tesoro’s system of disclosure controls. Management will, on an ongoing basis, further monitor and assess the implementation of its plan to improve the effectiveness of its disclosure controls and procedures, and will take action as appropriate.

 

Exclusive of implementing the changes in Tesoro’s procedures and control resulting from management’s improvements described above, there have been no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation described in the preceding section

 

We are in the process of implementing the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 which requires our management to assess the effectiveness of our internal control over financial reporting and include an assertion in our 2005 annual report as to the effectiveness of our internal controls over financial reporting. Subsequently, our independent registered public accounting firm, McGladrey & Pullen LLP, will be required to attest to whether our assessment of the effectiveness of our internal controls over financial reporting is fairly stated in all material respects and separately report on whether it believes we maintained, in all material respects, effective internal control over financial reporting as of December 31, 2006. We are in the process of performing the system and process documentation, evaluation and testing required for management to make this assessment and for the registered public accounting firm to provide its attestation report. We have not completed this process or its assessment, and this process will require significant amounts of management time and resources. In the course of evaluation and testing, management may identify deficiencies that would need to be addressed and remediate.

 

PART II

 

ITEM 1: LEGAL PROCEEDINGS

 

We are not a party to any material pending legal proceedings and, to the best of our knowledge; no such action by or against us is contemplated, threatened or expected.

 

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ITEM 6: EXHIBITS AND REPORTS ON FORM 10-Q

 

(a)          Exhibits

 

Exhibit Number		Description
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)
3.2.2		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)
3.3.2		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  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)
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 Ponca Acquisition Corporation effective October 1, 2002 (filed as an Exhibit on Form 8-K, filed with the Securities and Exhibit Commission on October 15, 2002).
10.9		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)
10.10		Employment Agreement between International Wholesale Tile, Inc. and Forrest 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 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 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 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 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 Jordan’s Subordination Agreement with the exception of the employee’s name and address)
10.16		Amended and Restated Loan and Security Agreement between by and between Fleet Capital Corporation, IWT Tesoro Corporation and International Wholesale Tile, Inc. effective December 31, 2004 (filed as an exhibit to the Company Report on Form 10-K filed with the Securities and Exchange Commission on April 14, 2005).
13		Annual report to security holders (filed as an exhibit to the Company Report on Form 10-K filed with the Securities and Exchange Commission on April 14, 2005).
16		Letter from Kantor Sewell & Oppenheimer, P.A., concurring with statements concerning their resignation (filed as an exhibit to the Company Report on Form 8-K filed with the Securities and Exchange Commission on September 14, 2004).

 

20

 

21		Subsidiaries of Registrant (filed as an exhibit to the Company Report on Form 10-K filed with the Securities and Exchange Commission on April 14, 2005).
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 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 Jordan, Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act.*

 

*		Included in this filing.  Exhibits are available without charge, upon request of IWT Tesoro.
(6)		Reports on Form 8-K.

 

(b)   Reports on Form 8-K

 

Form 8-K, filed on May 9, 2005, regarding the Company’s results of Operations for the first quarter of 2005 ended March 31, 2005 and the approval of proposals at the 2005 Annual Stockholders Meeting.

 

Form 8-K, filed on June 27, 2005, regarding The Tile Club and The Weir Farm Trust entering into a license agreement and the formation of Import Flooring Group, a subsidiary of The Tile Club.

 

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SIGNATURES

 

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

 

 

			IWT TESORO CORPORATION
August 12, 2005			/s/ Henry J. Boucher, Jr.
			Henry J. Boucher, Jr., President
August 12, 2005			/s/ Forrest P. Jordan
			Forrest P. Jordan, Chief Financial Officer

 

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