UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________

FORM 10-K

_______________

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2004

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from       to      .

Commission File Number 001-15469

THERMOVIEW INDUSTRIES, INC.

(Exact name of Registrant as specified in its charter)

DELAWARE

61-1325129

(State or other jurisdiction

(I.R.S. Employer

of incorporation or organization)

Identification Number)

5611 Fern Valley Road

40228

Louisville, Kentucky

(Zip Code)

(Address of principal executive offices)

Registrant's telephone number, including area code:

(502) 968-2020

Securities registered pursuant to Section 12(b) of the Act:

NAME OF EACH EXCHANGE

TITLE OF EACH CLASS

ON WHICH REGISTERED

Common Stock, $.001 par value

American Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None.

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 [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

Indicate by check mark whether the Registrant is an accelerated filer (as defined by Rule 12b.2 of the Act). Yes [ ] No [X]

Based upon the June 30, 2004 American Stock Exchange closing price of $.39 per share, the aggregate market value of the Registrant's outstanding common stock, $.001 par value, held by non-affiliates was approximately $3.1 million.

As of March 30, 2005, 8,638,716 shares of the Registrant's common stock, $.001 par value, were issued and outstanding.

Documents Incorporated by Reference

Portions of the Definitive Proxy Statement to be delivered to security holders for the 2005 annual meeting of stockholders to be held on May 18, 2005, are incorporated by reference into Items 10 through 14 of Part III of this Form 10-K.

PART I

Item 1. Business

Overview

     We design, manufacture, sell and install custom vinyl replacement windows for residential and commercial customers. We also sell and install replacement doors, textured coatings, vinyl and steel siding, patio decks, patio enclosures, cabinet refacings, and bathroom and kitchen remodeling products, as well as residential roofing.

     In April 1998, we acquired Thermo-Tilt Window Company, which was established in 1987. Since that time, we have acquired 12 retail and manufacturing businesses which had been in operation an average of approximately 11 years. During 2000, we closed two manufacturing businesses, the finance business and one retail business. At December 31, 2004, we had 834 full-time and 91 part-time employees. We had facilities in 11 states, primarily in the Midwest and southern California, and conduct business in 24 states. For calendar 2003, we generated consolidated revenues of approximately $70 million, and for calendar 2004, we generated consolidated revenues of approximately $69 million.

     Our initial business plan focused on an aggressive acquisition program to build a vertically integrated company in the vinyl window business. We intended to aggressively develop in the manufacturing, retail, and finance segments. We closed our finance subsidiary, two acquired manufacturing businesses and one acquired retail business in 2000. Although we have scaled back on manufacturing and eliminated our finance subsidiary, we continue to search for strategic alliances and business development opportunities that may be beneficial to us in the manufacturing, retail and finance segments.

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We continue to work closely with all of our window manufacturers in the production of our current windows and in the development of windows using new technologies.

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In October 2001, we formed a joint venture with Royal Group Technologies Limited, headquartered in Ontario, Canada, to manufacture leading edge thermoplastic extrusions. The Compozit extrusions are stronger than vinyl, withstand weather and climate extremes, are impact resistant and can be produced in many colors. The joint venture's revenue approximated $2.9 million in 2003 and $3.2 million in 2004. We own 40% of the joint venture operation.

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We plan to introduce new or enhanced products and expand the market areas of our existing retail subsidiaries.

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Since we continue to assist our customers in obtaining financing for about 38% of our sales, we intend to explore economically beneficial strategic alliances with the companies that provide financing to our customers.

     Our custom vinyl and Compozit replacement windows are manufactured by a combination of internal and external manufacturers. Both are capable of supplying quality windows on a timely basis at competitive prices.

     Because we did not have the available capital upon completion of our initial public offering in December 1999 to pursue our initial acquisition strategy, we shifted our focus first to internal cost cutting and closing of non profitable operations, and then in late 2000, to the growth of the retail segment and the introduction of new or enhanced products and product lines in addition to the development of new advertising and marketing programs that foster cross-selling of product lines to our existing customer bases.

The Replacement Window Industry

     Sales of replacement windows have experienced substantial growth in recent years. Three basic categories of windows comprise the replacement window market: vinyl, wood and aluminum. We believe that vinyl windows require less maintenance and are more durable than either wood or aluminum windows and they provide greater energy efficiency than aluminum windows. Since prices for vinyl windows have become more competitive with wood window prices and the durability and energy efficiency of vinyl windows have improved, the demand for vinyl windows has significantly increased in recent years. Today, vinyl windows are the most popular replacement window. We believe that factors driving demand in the replacement window industry include:

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the aging existing housing stock;

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job and wage growth;

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consumer confidence levels;

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consumer credit conditions;

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interest rates;

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rise in residential property values;

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demographic trends;

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population migration between urban and suburban areas; and

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demand for maintenance free products.

Growth Strategy

     Our goal is to become a leader in the home improvement and replacement window industry by building a nationwide network of sales and installation subsidiaries principally through internal growth.

Integration Strategy

     We believe that we can begin to increase our growth through expansion of the markets of our current and acquired subsidiaries. We believe that our brand recognition and integrated management enhances the capability of our subsidiaries to further expand regional market share. We intend to more thoroughly integrate the advertising and marketing programs of our regional subsidiaries into a national home-remodeling business over the next two years. Beginning in 2002 and continuing through 2003, we changed the focus of our expansion strategy to growth of our current subsidiaries during the near future rather than expanding predominantly through acquisitions. Because of the unavailability of capital for acquisitions, we have suspended our pursuit of acquisitions.

Merchandising

     Replacement Windows. We offer three lines of custom-made replacement vinyl windows. We previously offered four lines but have discontinued using the Thermal Industries window. Each of our lines consists of a broad range of window options including casement, awning, bay, bow, double hung, garden, and slider replacement windows. We offer the Barricade, Thermal Line, and Great Lakes lines of windows tailored to fit the various remodeling and financial needs of our customers. Our customers will generally spend in the range of $3,000 to $18,000 for an installed product depending upon the size of the residence.

     Barricade Window. This line consists of our most expensive window products. We design and Winchester Industries, Inc., in Saltsburg, Pennsylvania, manufactures this line of replacement windows for energy performance, strength, security and low maintenance. The windows offer welded vinyl frames reinforced with aluminum for added strength, and with one inch triple insulated glass with low-emissivity, Low-E coatings to reduce heat radiation through the glass and double steel cam locks for security. Our Primax, Rolox and Thermo-Shield subsidiaries utilize the Barricade window. In January, 2005 Thomas Construction, Inc. began purchasing the Barricade window.

     Thermal Line Window. Thermal Line is our sole manufacturing subsidiary located in Mandan, North Dakota. We design and Thermal Line manufactures this line for high performance at an affordable cost. A component of this line of replacement windows is Compozit, a vinyl substitute, which increases strength without the cost of aluminum reinforcement. The use of Compozit also permits the use of dark colors in extreme heat. The Compozit components used to manufacture these windows are being purchased from our joint venture extrusion operation. This line of replacement windows contains double insulated glass and Low-E coatings. Approximately 34% of Thermal Line's sales are to ThermoView subsidiaries with the balance sold to external customers. Thermal Line has been the sole supplier of vinyl and Compozit windows to Leingang Siding and Windows, Inc. of Mandan, North Dakota, and had not sold windows to other ThermoView subsidia ries until January 2004 when they began selling windows to ThermoView of California.

     Great Lakes Window. Great Lakes, owned by Caxton-Iseman Capital, is one of the world's largest producers of custom-made replacement windows. Great Lakes, located in Toledo, Ohio, manufactures a diverse line of replacement products including bay windows, bow windows, garden windows and extra heavy duty patio doors with special enhanced insulating features available. Great Lakes is noted for its innovative approach to product development. Thomas Construction has been designing, selling and installing Great Lakes' top of the line UNIFRAME product line. In January, 2005, Thomas moved away from the Great Lakes product and began selling Barricade windows.

     Compozit Window System. Thermal Line Window, Inc., our wholly owned manufacturing subsidiary in North Dakota, has been producing windows made from a climate-resistant composite resin material for over fifteen years. During this time, Thermal Line has been supplying our North Dakota and South Dakota locations with this superior window product and as of the first of 2004, Thermal Line has been supplying our California and Arizona locations also. In addition, Thermal Line has a very dedicated base of unaffiliated home improvement dealers in fourteen states who have had success in marketing this window product.

     In January 2002, we selected Winchester Industries, Inc. and Thermal Line Window, Inc. to design and build a new line of windows incorporating the climate-resistant composite resin material. We currently purchase the extrusions used to manufacture Compozit windows from our joint venture extrusion operation in Canada. We expected to begin manufacturing this new line of windows in late spring of 2004 but due to design and fabrication difficulties, short supply and rising prices of the composite resins, which we believe is a short term problem, we have placed on hold the production of the new Compozit window. We are now researching the possibility of expanding the distribution of the Thermal Line Compozit window to the balance of our retail locations with Winchester Industries, Inc. to manufacture the window.

     Our windows offer the following features:

     Energy Efficiency. One characteristic of our windows is their insulating qualities. Double and triple-pane glass provides the R-values and U-values, measures of insulation for end-users. With regard to this double and triple-pane glass, we incorporate state-of-the-art Low-E coatings. Low-E coatings allow the passage of light but selectively block infrared radiation. As a result, less heat escapes on cold days, and less heat enters on warm days. We further increase the insulation value of our windows by sandwiching a layer of argon, krypton and sulfur hexafluoride gas mixture between panes of glass.

     High Quality Frames. Our windows incorporate fusion-welded corners, and our Barricade line includes an internal aluminum support system. This structure enhances the durability of the windows and prevents warping problems.

     Custom Design. We custom design windows in varying dimensions. This process involves the retro-fitting of existing homes with custom-made, energy efficient, vinyl windows.

     Installation Service. Some of our subsidiaries use only their employees for installation of our replacement windows. Others subcontract with crews that work exclusively for us. Generally, we complete installation within the same or the second day of commencing installation.

     Low Maintenance Product. Our windows require little or no external maintenance due to the vinyl materials used. The tilt-in feature of our windows eases their cleaning.

     Competitive Pricing. We believe that, with increased sales volume, we can reduce purchased product costs through purchasing and distribution channels that will benefit the customer and create a competitive advantage over the small, fragmented competition.

     Replacement Doors. We offer custom-made insulated steel doors with wood-grain embossed finishes in 36 styles and sliding glass doors in six variations.

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The steel doors range in price from $750 to $3,000 per door as installed depending upon the styles, hardware and art-glass options and wood grain finishings chosen.

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The sliding glass doors range in price from $1,500 to $3,000 per door as installed.

     Energy Efficiency, Design, And Installation. Our sliding glass doors and insulated steel doors that contain glass have the same energy efficiency characteristics as our vinyl replacement windows. We custom design and install our sliding glass doors and insulated steel doors in a similar fashion to our vinyl replacement windows.

     Home Textured Coatings. We offer home textured coatings for residential use, the cost of which ranges approximately from $8,000 to $22,000 per residence as installed. Home textured coating is a paint and service that usually takes seven days to complete. The process involves four coats of primer and two finish coats, together with a trenching operation to prevent ground moisture penetration and patching and repairs of the surface to be coated.

     Installation Service. Both employee and exclusive subcontractor painters provide the home textured coatings to our customers.

     Product Guarantee. The manufacturer of the product, Textured Coatings of America, Inc., provides a limited lifetime warranty to the owner of the home against chipping, flaking and peeling of its product.

     Vinyl Siding. We offer vinyl siding in several colors and styles. Our customers will generally spend in the range of $2,800 to $25,000 as installed depending upon the size of the residence. The average time for installation is seven days and generally the vinyl siding is maintenance free.

     Cabinet Refacings. We offer kitchen cabinet refacings in a number of designs that range in cost to our customer from $4,000 to $15,000 per kitchen as installed and generally take one day to complete.

     Kitchen and Bathroom Remodeling. We offer kitchen and bathroom remodeling through four of our subsidiaries. We estimate the cost to our customer for kitchen remodeling to range from $3,000 to $40,000. Generally, remodeling takes one week to complete. We charge our customers for bathroom remodeling from $3,000 to $8,000 per residence as installed.

     Patio Decks and Patio Enclosures. We offer patio decks and patio enclosures with single or double-pane glass as a less expensive alternative to room additions. Most sales involve single-pane glass together with a modular roof. Generally, installation takes three days, and the cost to our customer ranges from $8,000 to $20,000 as installed depending on the size and options chosen.

     Retail Businesses. ThermoView's retail segment consists of the following businesses:

     Thomas Construction, Inc. Thomas Construction, Inc., founded in 1981 and headquartered in Earth City, Missouri, designs, sells and installs replacement windows, siding, patio enclosures, kitchen and bathroom remodeling, roofing and various other home improvement products in Illinois and Missouri. Thomas had 423 full and part-time employees as of December 31, 2004. Stephen C. Townzen, an employee of the business for 18 years, manages its operations.

     ThermoView Industries, Inc., of California. (formerly Five Star Builders now combined with American Home Remodeling, Inc.) ThermoView of California, founded in 1992 and headquartered in San Diego, California, designs, sells and installs replacement windows, siding, kitchen and bathroom remodeling, textured exterior coatings, and various other home improvement products in California and Arizona. ThermoView of California had 136 full and part-time employees as of December 31, 2004. George Jenkins, Executive Vice President of Sales Development, is currently managing the operations in California.

     Primax Window Company. Primax Window Company, founded in 1981 and headquartered in Louisville, Kentucky, sells and installs replacement windows, doors, siding as well as bathroom remodeling in Illinois, Indiana, Kentucky, Missouri, Ohio and Tennessee. Commencing January 1, 2004, we divided Primax into two divisions. Joe Beisler manages the East Division covering Louisville and Lexington, Kentucky, and Cincinnati, Ohio, and Doug Miles manages the West Division covering middle to southern Illinois, portions of St. Louis, Missouri and Henderson, Kentucky. Joe Beisler has been in the business for 19 years, and Doug Miles 21 years. Primax, including the integrated businesses, had 142 full and part-time employees as of December 31, 2004.

     The Thermo-Shield Companies. Thermo-Shield, founded in 1984, was headquartered in Wheeling, Illinois. In 2004, we closed the Wheeling location and opened two new streamlined retail showroom locations in Peoria, Illinois and Paducah, Kentucky. These showrooms were opened in conjunction with our new growth strategy labeled the "Model THV" initiative. The new streamlined model requires only two employees at each location. Accordingly, Thermo-Shield had 4 full-time employees at December 31, 2004. ThermoView's corporate office is currently providing management oversight for this operation.

     The Rolox Companies. The Rolox Companies, founded in 1973 and headquartered in Grandview, Missouri, sell and install vinyl replacement windows, steel doors, siding and bathroom remodeling in Iowa, Kansas, Missouri, Nebraska, Oklahoma, and Tennessee. Rolox had 89 full and part-time employees as of December 31, 2004. Robert L. Cox II has been in the business for 20 years and manages its operations.

     Leingang Siding And Window, Inc. Leingang Siding and Window, Inc., founded in 1991 and headquartered in Mandan, North Dakota, sells and installs quality remodeling products such as premium replacement windows, steel, vinyl and seamless steel siding, asphalt and cedar roofs, soffit and fascia, doors, awnings, seamless gutters, cabinet refacing and bathtub liners in North Dakota and South Dakota. Leingang had 59 full and part-time employees as of December 31, 2004. John Frohlich, an employee of the business for 19 years, manages its operations.

Manufacturing

     Initially, our goal was to vertically integrate our replacement window sales, installation and manufacturing functions. In 2000, we decided to close two of our three acquired manufacturers because of operating losses. We decided to rely more heavily on unrelated third-party manufacturing with a significant reduction in our own manufacturing. Consequently, we offer three lines of custom-made replacement vinyl windows. Our Thermal Line Windows plant in North Dakota manufactures one line, and the other two lines are manufactured by unaffiliated third parties: Winchester Industries, Inc., located in Saltsburg, Pennsylvania, and Great Lakes Window, Inc., located in Toledo, Ohio.

     Low-Tech Manufacturing Process. The process of manufacturing custom replacement windows consists of measuring, cutting and assembling glass and extruded vinyl "lineal" components to create windows that match customer specifications. For those windows that we continue to manufacture in our own facility, we have invested in sophisticated machinery to create an assembly line environment designed to further automate the production process. A summary of the assembly of a vinyl replacement window is as follows:

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we receive orders from customers and enter the desired dimensions of the windows into a computer;

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through the use of a proprietary computer program, we map the dimensions of multiple windows onto a large sheet of glass in the configuration that will maximize the number of windows to be cut from each sheet, thereby minimizing waste;

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once the glass is cut, we wash it and coat the edges with an insulating material that will separate the two or three layers of glass panes and create the desired air-tight seal around the window;

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while cutting the glass, another procedure measures and cuts vinyl "lineals" according to the specifications of the window types and dimensions required by the order;

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the cut and processed lineals then move to a welding area, where we weld the four sides together and complete any final fabricating attachments;

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we then send the completed sash to the glass insertion area, where we insert the window panes into the proper sash units; and

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all of the major components of the window arrive at the final assembly area concurrently to produce the finished product.

     Because we assemble our windows on a made-to-order basis utilizing a just-in-time inventory system, we do not maintain a large finished goods inventory at our manufacturing plant. We typically deliver finished products to our customers. Service personnel complete the installation and servicing of the product at the customer's home. Integration of our sales, shipping, installation, and service operations enables us to provide a complete window or door installation service for customers. The average time between the execution of a customer sales contract and completion of installation is approximately 4 to 6 weeks.

     Suppliers. Thermal Line Windows, our manufacturing subsidiary, purchases its extrusions from our joint venture extrusion operation. Extrusions constitute the largest portion of our raw materials costs, accounting for approximately 30%-40% of our window. We primarily purchase glass from Cardinal Glass. Glass constitutes approximately 10%-15% of our window content.

     Manufacturing Businesses. ThermoView's sole manufacturing subsidiary is Thermal Line Windows, Inc.

     Thermal Line Windows, Inc., formerly Thermal Line Windows, L.L.P., founded in 1984 and headquartered in Mandan, North Dakota, manufactures Compozit replacement and new construction windows and doors for residential and commercial use for sale in Colorado, Idaho, Iowa, Kansas, Minnesota, Montana, Nebraska, North Dakota, South Dakota, Wisconsin and Wyoming. Thermal Line Windows, Inc. had 56 full and part-time employees as of December 31, 2004. Brad Bushaw, an employee of the business for 11 years, manages its operations. Approximately 34% of Thermal Line's sales are to ThermoView subsidiaries with the balance being to external customers.

Sales and Marketing

     Each one of our subsidiaries has its own sales staff.  We pay members of our sales staff on a commission basis and on the profitability of the subsidiary for which they work.

     We have a centralized advertising group for major media efforts such as direct mail and/or new product roll outs, but each subsidiary also maintains its own advertising and promotions staff for activities best handled locally.  A corporate-driven consulting group comprised of a national sales development director, a national marketing director and a national advertising director is headed by George Jenkins.  Its purpose is to oversee and implement company-wide marketing programs and to explore, develop, and test new methods of advertising and marketing.

     Our marketing approach varies from subsidiary to subsidiary and also varies based upon the geographic market area.

     Advertising.  We generally give all subsidiaries discretion to choose the most effective form of advertising for its geographic market.  Each subsidiary can advertise locally or take advantage of our national advertising program, with the objective of achieving the most effective use of each subsidiary's advertising budget. The corporate consulting group monitors Budgets monthly and makes modifications and recommendations in order to ensure effective communications to our customers as well as maximize lead generation and company recognition for each execution.

     We utilize a number of methods to create opportunities for direct contact with potential customers, including renting space at local fairs and manning kiosks in shopping malls.  Other advertising and promotion media used to acquire bona-fide sales leads include direct mail, television spots, radio, newspaper ads and inserts, ads in home lifestyle magazines, internet-based advertising, neighborhood canvassing and telemarketing.

     While the form of media may vary, each advertising message carries an attractive offer to homeowners who may be considering a home improvement. The offer can include an opportunity to enter our Home Improvement Sweepstakes, discounts on selected home improvement projects if purchased during a specific time frame, customer financing and seasonal savings.

     Telemarketing.  A majority of our retail subsidiaries solicit customers through an internally-managed telemarketing system.  Through the use of predictive dialing systems (an automated system that calls multiple phone numbers and directs those calls to operators), we have increased efficiency while reducing the costs associated with telemarketing.  Special care is taken to politely provide helpful information about our products and services to homeowners when telemarketing. We utilize specific routines and proven practices to stay in compliance with national and state do-not-call laws. Due to the strict enforcement of do-not-call laws in 2003 and 2004, we anticipate reduced focus on telemarketing.

     In-Home Demonstration.  When a sales representative receives an expression of interest from a potential customer, he or she will then arrange for an in-home demonstration at the customer's residence.  We have developed a standard list of procedures for in-home sales presentations, which features a free, no-obligation design and estimate of the work being considered by the homeowner.  Furthermore, we teach our sales staff that they have limited discretion to negotiate on price.  We pay our sales staff solely on a commission basis to provide for maximum incentives.

Customer Payment

     As of December 31, 2004 for approximately 62% of our sales, customers pay in cash upon completion of installation of our products. For the remaining 38% of sales, customers pay for the products under installment or conditional sales contracts with unaffiliated local and national financial institutions. In these sales, a customer contracts to pay the retail sales price, plus a finance charge, in equal installments over a predetermined period of time. A security interest or chattel mortgage collateralizes the purchased goods. We execute the customer contracts and then assign all of these contracts to unaffiliated local and national financial institutions, in return for the cash sales price of the products involved, upon execution of a certificate of completion by a customer after completion of installation.

Competition

     Vinyl Replacement Windows and Doors. The vinyl replacement window and door industry is highly competitive. The industry is significantly fragmented at both the manufacturing level and at the retail level. Most of our retail competitors are smaller than us and consist of small contractors and construction companies as well as installed product programs at local wholesalers and lumber yards. We also compete with larger home improvement chain store operations such as Home Depot, Lowes and Scotty's. These stores, which usually sell windows with limited warranties and without in-house installation services, have significantly greater financial and operating resources and greater name recognition than we have. Additional competitors include Champion Windows, Pacesetters and the Sears Group.

     Brands in the window industry with the highest name recognition include Andersen Corporation, Pella Corporation and Marvin Windows. These companies primarily compete in the new construction segment of the window market. While these companies also produce replacement windows, they currently sell a relatively small percentage of their products for replacement applications. Furthermore, these companies generally emphasize wood windows rather than vinyl and market their products primarily to higher-end homeowners.

     Home Textured Coatings. The competitors for our textured coating products include small remodelers and painting contractors who use the textured coating product or other painting products. We are not aware of a significantly large company that competes with us directly in the installation of textured coating.

     Vinyl Siding. We compete in the sale and installation of our vinyl siding with PaceSetters, Champion Windows and the Sears Group.

     Cabinet Refacings and Kitchen and Bathroom Remodeling. Our principal competitors include PaceSetters and the Sears Group. In addition, smaller remodelers and contractors in each of the regions in which we engage in the cabinet refacing and kitchen and bathroom remodeling businesses compete with us.

     Patio Decks and Patio Enclosures. Our competition in the installation of patio decks and patio enclosures includes PaceSetters and a number of smaller remodelers and contractors in each of the regions in which we install patio decks and patio enclosures.

Government Regulations

     Our business is subject to various federal, state and local laws, regulations and ordinances relating to, among other things, in-home sales, telemarketing, consumer financing, retail installment sales, advertising, the licensing of home improvement independent contractors, OSHA standards, building and zoning, consumer protection and environmental protection and regulations relating to the disposal of other solid wastes. Some jurisdictions require us to secure a license as a contractor. In addition, some jurisdictions require us to obtain a building permit for each installation. We are also subject to federal, state and local laws and regulations, which, among other things, regulate our advertising, telemarketing, warranties and disclosures to customers. Although we believe that we are currently in compliance in all material respects with these laws and regulations, existing or new laws or regulations applicable to our business i n the future may materially adversely affect our results of operations.

Intellectual Property

     We do not have any material patents related to our products. Two of our subsidiaries have sales and installation processes that they consider trade secrets. These subsidiaries protect these trade secrets by requiring their employees to enter into confidentiality agreements. We have filed for a trademark with the U.S. Patent and Trademark Office under the names "THV", "THV: America's Home Improvement Company", and "NuBath."

Employees

     As of December 31, 2004 we had 925 full and part-time employees. With the exception of the assembly line employees of Thermal Line Windows, none of our employees are subject to a collective bargaining agreement. Thirteen of the assembly employees at Thermal Line are members of the United Steel Workers of America, and are working under a one-year contract that expires April 30, 2005. We have never experienced a work stoppage, and we consider our relations with our employees to be satisfactory.

     Our employees typically receive an hourly wage or salary and are generally eligible for bonuses, except for our sales staff that we pay on a commission basis. Our compensation system is directly related to profitability and accordingly compensation expense increases and decreases as sales and profits fluctuate. We emphasize incentive compensation, including cash bonus arrangements and various other incentive programs which offer our personnel an opportunity for additional earnings and benefits.

FORWARD-LOOKING STATEMENTS

     Some of the statements under "Business," "Legal Proceedings," "Management's Discussion and Analysis of Financial Condition and Results of Operations," and elsewhere in this Form 10-K constitute forward-looking statements. These statements involve risks and uncertainties about ThermoView and its business, including, among other things:

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the successful implementation of our business plan and growth including access to adequate capital;

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our ability to successfully integrate our past acquisitions; and

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anticipated economic and demographic trends affecting the replacement window industry generally and our business in particular.

     Specific factors which could cause our actual results to differ materially from those expressed or implied by forward-looking statements include those risk factors listed below.

     In some cases, you can identify forward-looking statements by words such as "may," "will," "should," "could," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," or "continue" or the negative of such terms or other comparable language.

     Although we believe that the expectations and assumptions reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.

Risk Factors

     You should carefully consider the following risk factors in addition to the other information and financial data contained elsewhere in this Form 10-K.

Risks Related To Our Operations

We have a history of operating losses

     We have incurred a net loss attributable to common stockholders before gain on forgiveness of debt for each year we have had consolidated operations. If we cannot increase our revenues and control our costs, we may not achieve profitability. If we do achieve profitability, we may be unable to sustain or increase profitability on a quarterly or annual basis in the future due to decreased demand for our products, increases in expenses or unprofitable acquisitions. Our continuing losses and failure to become profitable could result in the bankruptcy of ThermoView and the complete loss in the value of our common stock.

Cash and non-cash dividends and interest related to financings will increase our losses or reduce potential net income

     We will suffer losses or reductions in future potential net income as a result of the 8% dividends on our Series D and Series E preferred stock and the 8% to 10% stated interest on our debt. Also, fees and expenses and the amortization and accretion of the discounts on the debt related to detachable stock warrants issued in connection with the debt will contribute to our losses or lower potential future income.

Fluctuations in our quarterly operating results may cause a drop in our stock price

     Our operating results are unpredictable and may fluctuate on a quarterly basis due to the markets for our products or our operating problems. These fluctuations may cause a decrease in the price of our common stock. You should not rely on our results of operations during any quarter as an indication of our results for a full year or any other quarter.

Our debt documents impose restrictions on us and limit our operations

     Our debt requires us to comply with affirmative and negative covenants. We must maintain various financial ratios and our lenders may restrict us from incurring other debt. We cannot pay dividends on our common stock while our debt is outstanding. We are also subject to other restrictions, including restrictions pertaining to additional borrowings, significant corporate transactions and management changes. In the past, and most recently in March, June and December 2003, December 2004 and March 2005, we have had our lenders waive our non-compliance with covenants and, in some instances, adjust the covenants to avoid future non-compliance. We may require lender waivers in the future. However, we cannot assure that lenders will grant any future waiver requests.

     In January 2001, we defaulted under our term loan with PNC Bank. GE Capital Equity Investments, Inc. (GE Equity) and an investor group consisting principally of ThermoView directors and officers waived payment and other defaults upon purchase of the term loan from PNC Bank. Consequently, GE Equity and the investor group under the restructured term loan could, among other items, accelerate all amounts owed to them and increase the interest rate on the borrowings, if we default under our debt documents. In the event of acceleration of our debt, ThermoView would be unable to pay the amounts due which this could result in the bankruptcy of ThermoView as an enterprise. Under our debt, an event of default could result in the loss of our subsidiaries because of the pledge of our ownership in all of our subsidiaries to our lenders.

Our inability to refinance a portion of our debt could increase our expenses

     The majority of our long-term debt is due in June of 2006. Because of the amount of the debt and declining revenues, our independent accountants have issued a going concern opinion. If we are unable to restructure the due date of this debt prior to June 2005, the debt would be considered as a current obligation for financial reporting purposes. We do not have the ability to satisfy the outstanding indebtedness by June 2006. The issuance of this going concern opinion from our independent accountants may cause third party lenders to become unwilling to provide financing.

Our operations and future direction will suffer from the loss of our key executive

     If we were to lose the service of Charles L. Smith without an adequate replacement, we will suffer from a lack of leadership in our future financial planning and operations management. The departure or death of Mr. Smith, in spite of our key person life insurance on his life, will not replace the lost leadership he provides. This management gap would cause potential revenue reduction and operating cost increases.

Anti-takeover provisions affecting us could prevent or delay a change of control, discourage takeover bids and cause the market price of our common stock to fall

     Provisions of our restated certificate of incorporation and bylaws and provisions of applicable Delaware law may discourage, delay or prevent a merger or other change of control that a stockholder may consider favorable. Our Board of Directors has the authority to issue up to 5,000,000 shares of our preferred stock and to determine the price and the terms, including preferences and voting rights, of those shares without stockholder approval. To date, we have issued and outstanding 756,900 shares of Series D preferred stock and 336,600 shares of Series E preferred stock. Additionally, we have a classified Board of Directors whereby directors serve staggered three-year terms. Our Certificate of Incorporation requires a supermajority vote of the common stockholders to remove or modify this staggered board. Furthermore, we require advance notice for stockholder proposals and director nominations. These items could:

--  

have the effect of delaying, deferring or preventing a change of control of ThermoView;

--  

discourage bids for our common stock at a premium over the market price; or

--  

cause the market price of our common stock to fall.

     We are subject to Delaware laws that could delay, deter or prevent a change of control of ThermoView. One of these laws prohibits us from engaging in a business combination with any interested stockholder for a period of three years from the date the person became an interested stockholder, unless conditions are met.

Risks Related To the Market for Our Common Stock

We likely will not pay cash dividends on the common stock in the foreseeable future

     Our debt documents preclude us from paying dividends on our common stock. Additionally, the terms of our Series D and Series E preferred stock prevent us from paying dividends on our common stock as long as the Series D and Series E preferred stock is outstanding. We anticipate using future earnings for our operations. Accordingly, it is unlikely that we will pay dividends on the common stock in the foreseeable future.

Future dilution may occur from exercise of options and warrants

     Future dilution may occur from option and warrant exercises. As of December 31, 2004, we have issued options and warrants to purchase in the aggregate 4,575,750 shares of our common stock. Some of these options and warrants contain an exercise price below the current market price for the common stock. Additionally, many of these options and warrants contain registration rights.

Risks Related To the Replacement Window Industry

With the greater name recognition and resources of some of our competitors, we may lose potential revenue

     A number of our competitors have longer operating histories, greater name recognition, larger customer bases and greater financial, technical and marketing resources than we do. These resources may allow them to respond more quickly than we can to new or emerging technologies and changes in customer requirements. It may also allow them to devote greater resources than we can to the development, promotion and sale of their products. Our competitors may also engage in more extensive research and development, undertake more far-reaching marketing campaigns and adopt more aggressive pricing policies. Increased competition in addition to our present lack of capital could cause a decrease in our potential revenue and potential income, and the deterioration in our financial position and the value of our common stock.

     The market for our products is highly competitive and it is very fragmented at the manufacturing and retail levels. We expect competition to continue to increase because our markets pose no substantial barriers to entry. To the extent one of our competitors undertakes a consolidation program, our competition would increase further.

We may suffer lost potential revenue from our inability to satisfy current and future governmental regulations

     Government regulations related to in-home sales, telemarketing and consumer financing may prevent us from engaging in business in some jurisdictions. Consequently, we will lose potential customers and revenue from these areas.

Risks Related To Litigation

     Pending litigation against ThermoView is fully described under Part III of this Form 10-K. Although we intend to vigorously defend the Clemmens suit, an adverse outcome in the appeal of this action could have a material adverse effect on our cash flow.

     We are subject to other legal proceedings and claims which have arisen in the ordinary course of our business and have not been finally adjudicated. Although there can be no assurance as to the ultimate disposition of these matters, it is the opinion of our management, based upon the information available at this time, that the expected outcome of these matters, individually or in the aggregate, will not have a material adverse effect on our financial position, results of operations or cash flows.

Item 2. Properties

     The following lists our property locations having in excess of 6,000 square feet. We lease all of our facilities. In many cases, we lease the property, at market rates, from the former owners of the subsidiaries which operate on the property.

ThermoView or
Subsidiary as Lessee

Property Address

Property Description
and Use

Lease Expiration
Date (Exclusive of
Renewal Options)

Retail Subsidiaries:

Leingang Siding and Window, Inc.*

2601 Twin City Drive
Mandan, ND 58554
2605 Twin City Drive
Mandan, ND 58554

6,000 sq. ft.
Office/Showroom
13,000 sq. ft.
Office/Warehouse

December 2006

December 2006

Primax Window Co.*

5611 Fern Valley Rd.
Louisville, KY 40228

15,000 sq. ft.
Headquarters

December 2006

2975 North Woodford
Decatur, IL 62526
1501 Woodson Road
St. Louis, MO 63114

9,000 sq. ft. Office
6,600 sq. ft.
Office

Month-to-month

December 2009

Rolox, Inc.*

4002 Main Street
Grandview, MO 64030

16,000 sq. ft.
Headqtrs/Warehouse

December 2006

1440 S. Ridge Road
Wichita, KS 67209

10,000 sq. ft.
Office/Warehouse

December 2006

ThermoView of California

8445 Camino Santa Fe
San Diego, CA 92121

9,000 sq. ft.
Headquarter/Office

January 2006

6627 Valjean Avenue
Van Nuys, CA 91406
3025 S. 48^th St.
Tempe, AZ

12,600 sq. ft.
Office/Warehouse
6,500 sq. ft.
Office

July 2005

December 2007

Thomas Construction, Inc.

13397 Lake Front Dr.
Earth City, MO 63045

60,000 sq. ft.
Office/Warehouse

December 2006

Manufacturing Subsidiaries:

Thermal Line Windows, Inc.*

3601 30^th Ave., NW
Mandan, ND 58554

2605 Twin City Drive
Mandan, ND 58554

49,500 sq. ft.
Headquarter/Office
Manufacturing
15,500 sq. ft.
Manufacturing

December 2006


December 2006

*      Related party lease.

     The leases of our properties provide for monthly rentals ranging from approximately $500 to $25,000.

     See Note 5 of Notes to Consolidated Financial Statements for more information regarding our leases.

Item 3. Legal Proceedings

     On November 19, 2001, Nelson E. Clemmens, former director and president of ThermoView, filed an action titled Nelson E. Clemmens v. ThermoView Industries, Inc., Civil Action No. 01-CI-07901 (Jefferson Circuit Court, November 19, 2001) against us alleging subrogation and indemnity rights associated with Mr. Clemmens' loss of guaranty collateral to PNC Bank. These claims are in connection with the April 2000 amendment to our previous bank debt with PNC Bank, in which Stephen A. Hoffmann, Richard E. Bowlds, Nelson E. Clemmens and Douglas I. Maxwell, III guaranteed $3,000,000 of our PNC Bank debt. In January 2001, PNC seized the collateral pledged as security by the guarantors for the loan guaranty. In March 2001, we reached settlements with Messrs. Bowlds and Hoffmann for any claims that they may hold against us regarding their loss of assets in connection with the guaranty. We did not reach a settlement with Mess rs. Clemmens and Maxwell with regard to guarantees of $1,000,000. Clemmens sought a judicial determination that our March 2001 assignment of the underlying debt relieved him of a contractual obligation to refrain from asserting a claim of repayment until the debt was ultimately satisfied. The Jefferson Circuit Court initially issued an order of summary judgment stating that Clemmens could not assert a claim for repayment until the debt was ultimately satisfied. Clemmens filed a motion with the court to reconsider the September 30, 2002, ruling, and on February 26, 2003, the Jefferson Circuit Court reversed the previous judgment granted to us and awarded judgment to Clemmens against us. We then sought a reconsideration of the February 26, 2003 ruling. On May 9, 2003, the Jefferson Circuit Court upheld the previous ruling in favor of Clemmens, and entered a final, appealable judgment which allowed Clemmens to seek collection against us for the loss of collateral in the amount of $500,000 plus interest at the rate of 10% annually beginning January 1, 2001 ($200,000 through December 31, 2004). On May 19, 2003, we appealed the judgment issued to Clemmens to the Kentucky Court of Appeals. On June 6, 2003 with the guarantee of GE Capital Equity, we posted a supercedeas bond in the amount of $690,000 with the Jefferson Circuit Court to prevent Clemmens from enforcing the judgment awarded to him during the pendency of the appeal of this matter. In order to secure the supercedeas bond, we entered into an agreement with GE Capital Equity to deposit funds monthly into a sinking fund to serve as security for the amount of the supercedeas bond. Pursuant to this agreement, we made payments of $50,000 monthly for the months of July through December, 2003 and 2004 and $30,000 monthly during the months January through June, 2004. We discontinued making payments in October, 2004 due to our interim appellate success, detailed below. At December 31, 2004, we included $630,000 on the accompanying balance sheet as other a ssets, restricted cash. We believe that the outcome of this litigation will be in our favor and should be concluded in less than twelve months. Further, in the event that we prevail upon the appeal and no amounts are drawn upon the bond, we will apply the balance of the sinking fund to the Series A and B notes on a pro-rata basis. We have presented the sinking fund as other assets, restricted cash. In consideration for the supercedeas bond agreement, we agreed to pay to GE Capital Equity a fee of 2.5% of the face amount of the bond and granted GE Capital Equity a first priority lien on its assets to secure any amounts drawn on the bond. On October 8, 2004, the Kentucky Court of Appeals issued a four-page 3-0 decision in our favor, reversing the trial court. The Kentucky Court of Appeals agreed with us that the contract is properly interpreted as providing that Clemmens is not to be paid until the PNC obligation is paid, regardless of its current holder. On October 28, 2004, Clemmens requested that th e entire Kentucky Court of Appeals reconsider this three-judge decision, which the Kentucky Court of Appeals denied. On January 8, 2005, Clemmens sought discretionary review from the Supreme Court of Kentucky. The parties have fully briefed the request for discretionary review, and we expect a decision within the next two to four months. If the Supreme Court of Kentucky rejects Clemmens' request for discretionary review, the matter will be remanded to the trial court for further proceedings consistent with the appellate decision that Clemmens is not now entitled to the repayment of principal of his guarantee. Alternatively, if the Supreme Court of Kentucky decides to accept discretionary review, the parties will file briefs and present oral arguments on the issues. In that instance, we would expect a ruling from the Supreme Court of Kentucky within eighteen to twenty-four months of its accepting discretionary review. Maxwell has not asserted a claim for the loss of his collateral as of the date of filin g of this report. Maxwell could assert claims for the same amount as Clemmens. We have evaluated the potential loss associated with Clemmens' litigation and Maxwell's unasserted claim and believe that we have recorded adequate liabilities on our balance sheet as of December 31, 2004. While we believe that the ultimate resolution of this Clemmens matter on appeal will be favorable to us, an adverse final determination of our position regarding this matter could have a material adverse effect on cash flow and our financial position. A primary reason for this material adverse effect would be that if Mr. Clemmens prevails in his action against us, Mr. Maxwell would likely pursue the identical action against us and the other $500,000, plus interest, guaranteed by Maxwell could become payable by us without any sinking fund as set aside for the Clemmens guarantee.

     We are subject to other legal proceedings and claims, which have arisen in the ordinary course of our business and have not been finally adjudicated. Although there can be no assurance as to the ultimate disposition of these matters, it is our opinion, based upon the information available at this time, that the expected outcome of these matters, individually or in the aggregate, will not have a material adverse effect on our results of operations and financial condition.

Item 4. Submissions of Matters to Vote of Security Holders

     None.

PART II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

     (a) Our common stock has traded on the American Stock Exchange since December 2, 1999, under the symbol "THV." Prior to December 2, 1999, we had not previously registered our common stock under either the Securities Act of 1933 or the Securities Exchange Act of 1934, nor had we listed our common stock on any exchange or had it quoted on The NASDAQ Stock Market. The following table sets forth, for the quarterly periods indicated, the high and low closing sale prices per share for the common stock. The American Stock Exchange market quotations reflect inter-dealer prices, without retail mark up, mark down or commission and may not necessarily represent actual transactions.

Price Range

High

Low

Calendar Year 2003

First Quarter................................................

.90

.45

Second Quarter...............................................

.64

.43

Third Quarter................................................

.78

.47

Fourth Quarter...............................................

.83

.41

Calendar Year 2004

First Quarter................................................

.89

.46

Second Quarter...............................................

.58

.35

Third Quarter................................................

.53

.31

Fourth Quarter...............................................

.56

.33

     On March 18, 2005, the last reported sale price of the common stock on the American Stock Exchange was $.40 per share.

     As of March 18, 2005, there were 262 holders of record of our stock consisting of 253 common stockholders. This number does not include stockholders whose shares are held by brokers and other institutions.

     ThermoView has not declared or paid any cash dividends on its common stock and does not expect to pay any cash dividends on our common stock in the foreseeable future. Our agreements with our lenders prohibit us from paying dividends on our common stock. Any future change in our dividend policy will be made at the discretion of our Board of Directors and will depend on a number of factors, including:

--  

our future earnings;

--  

capital requirements;

--  

contractual restrictions;

--  

financial condition; and

--  

future prospects.

     There were no issuer purchases of securities in the last three months of the 2004.

Item 6. Selected Financial Data

     The following tables present selected statement of operations and balance sheet financial data for ThermoView.

     The selected financial data for ThermoView as of December 31, 2000, 2001, 2002, 2003 and 2004 and for each of the five years in the period ended December 31, 2004, have been derived from the audited financial statements of ThermoView.

     The following data should be read in conjunction with:

--  

the information set forth under "Management's Discussion and Analysis of Financial Condition and Results of Operations;" and

--  

our consolidated financial statements and the related notes thereto included elsewhere in this Form 10-K.

(1) 

Due to adoption of SFAS No. 145, a forgiveness of debt in 2001, formerly reported as an extraordinary item, was subsequently reclassified as an unusual credit.

(2) 

Due to adoption of SFAS No. 142, beginning in 2002 goodwill is no longer amortized (see Note 1 of Notes to Consolidated Financial Statements).

(3) 

We have described the method used to calculate income (loss) per common share in Note 1 of Notes to Consolidated Financial Statements.

(4) 

Due to adoption of SFAS No. 150, dividends or other distributions on mandatorily redeemable preferred stock subsequent to June 30, 2003, are reported as interest expense on mandatorily redeemable preferred stock. Prior periods are not restated when SFAS 150 is applied (see Note 8 to Consolidated Financial Statements).

           As of December 31,        

2000

2001

2002

2003

2004

(in thousands)

Balance sheet data:

   Total assets

$71,711

$71,200

$40,493

$38,494

$30,150

   Long-term debt including current
     maturities

23,316

17,917

17,337

17,055

18,237

   Preferred shares subject to
     mandatory redemption

-

-

-

7,594

8,219

   Total liabilities

32,767

25,949

24,582

31,849

33,780

   Mandatorily redeemable preferred
     stock

6,194

6,943

7,824

-

-

   Stockholders' equity (capital
     deficiency)

32,750

38,308

8,087

6,645

(3,629)

__________

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

     The following discussion and analysis should be read in conjunction with the information set forth under "selected financial data" and our financial statements and the accompanying notes thereto included elsewhere in this Form 10-K. This Form 10-K contains forward-looking statements which involve risks and uncertainties. Our actual results may differ significantly from the results, expectations and plans discussed in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed under "risk factors."

Overview

     We design, manufacture, sell and install custom vinyl replacement windows for residential and retail commercial customers. We also sell and install replacement doors, home textured coatings, vinyl siding, patio decks, patio enclosures, cabinet re-facings and kitchen and bathroom remodeling products as well as residential roofing.

     We have reported a revenue decline in each of the last five years. Our sector in the remodeling industry has been challenged by a number of material events in the past five years, including the lingering effects of the terrorist attacks of September 11, 2001, a stock market drop, investor confidence shaken by corporate scandals, the war in Iraq and new federal and state "do not call" legislation. These material events are part of the reason for our eroding revenues, but we are also challenged by competition, limited access to new capital, and the burden of interest expense related to our present debt levels.

     While we believe operating results have stabilized and will improve in 2005, we cannot support our current debt level (see liquidity and capital resources below). We have not been able to make meaningful cash payments toward interest or principal in recent years, and would need significant improvement in cash flow from operations to pay interest on a current basis and make any principal payments.

     We have reported a revenue decline in each of the last five years. Despite failing to increase revenue, 2004 has seen the following successes:

--  

continued cost cutting which resulted in savings of approximately $2.7 million in selling, general and administrative expense in 2004 over 2003.

--  

the successful opening of two Model THV retail stores which are based on our optimal, best practices operating model that includes consolidation and standardization of key elements of our business such as advertising, marketing, accounting, and our branding.

--  

continued development of a new technologically superior window product using state-of-the-art GE plastics.

     Because of the large, growing home improvement market, we believe ThermoView has considerable opportunities in the future. However, it is going to be vital for us to:

--  

continue to improve on our best practices Model THV retail store concept along with the opening of up to six more Model THV retail stores in 2005.

--  

complete the master job tracking system that will facilitate further centralization of costly accounting processes thereby cutting costs and standardizing practices.

--  

continue to develop the loan finder software system to provide an effective means of locating ready financing sources for our customers as well as facilitate centralization of the financing functions thereby realizing further efficiencies and getting more jobs financed while at the same time cutting costs and standardizing practices.

--  

complete introduction of the technologically superior Compozit window product at all of our window manufacturers by the end of 2005.

--  

expanding our manufacturing facility to provide windows to some of our other retail locations in addition to providing windows to our North Dakota, California and Arizona retail operations.

     The extent of response to our advertising, the closure rate experienced on our sales calls, and the expression of interest by financial institutions in providing consumer remodeling loans are all key indicators of trends in our business. We are presently observing positive changes in each of these key indicators.

     Our debt matures in June, 2006. Because of our operating results, we will not be able to pay off the debt when due nor can we reasonably expect another lender to refinance the total debt. Accordingly, we are dependent on our current lender agreeing to extend the maturity of the debt, or attracting equity investors to provide the funding needed to meet our obligations.

     In January 2005, we retained the operational consulting services of Morris Anderson to assist us in evaluating the steps that we need to take to improve our performance levels. With respect to a significant portion of our debt, in early 2005 we revised covenants and revised required interest and principal payments. This, however, only addresses the short-term future. We need long-term solutions. Morris Anderson's review will likely conclude in April 2005. We need to have the full benefit of their recommendations. We believe that their report may include at least the following longer term recommendations:

--  

to recapitalize ThermoView with new capital to achieve a more workable, less expensive structure.

--  

to continue to be more competitive by opening more Model THV retail stores which are based on our optimal, best practices operating model, including standardization of key elements of our business such as advertising, marketing, accounting, and our branding.

--  

to undertake other strategies that will improve profitability for the remainder of 2005 and thereafter.

Liquidity and Capital Resources

     As of December 31, 2004, we had cash and equivalents of $316,000, working capital of $576,000, $17.8 million of long-term debt, net of current maturities, and $8.2 million of preferred stock subject to mandatory redemption.

     During the fourth quarter of 2003, we determined that we would not be able to meet our cash obligations, or comply with the terms of our debt agreements, at December 31, 2003 and into 2004. Accordingly, we entered into negotiations with our principal creditor, GE Capital Corporation, to restructure the cash flow and covenant requirements. In the first quarter of 2004, GE Capital agreed to modify its agreements with us, effective December 31, 2003. The new agreements allowed us to defer all payments of interest and principal until the fourth quarter of 2004, at which time payments essentially equal to those in the prior agreement resumed. The new agreements also set new covenant requirements for 2004.

     During the fourth quarter of 2004 and into the first quarter of 2005, we determined that we would again not be able to meet the cash obligations of our long-term debt payments or comply with the terms of our debt agreements at December 31, 2004 and into 2005 and 2006. Accordingly, we entered into negotiations with our principal creditor, GE Capital, to restructure the debt repayment schedules and covenant requirements. In March of 2005, GE agreed to modify its agreements effective March 9th and March 29th, 2005. The new agreements removed the requirement to make principal payments from February 2005 through January 2006 in the amount of $1,750,000 and deferred the first quarter 2005 payment of interest of $81,199 on their subordinated debt until the second and third quarter of 2005.

     Beginning in October of 2004, we resumed interest payments and beginning in November 2004, resumed payments of principal. Based on the loan agreements amended in March, 2005, interest payments during 2005, on the long-term debt, will be approximately $1.25 million and principal payments will be $100,000. Cash flow forecasts for the next twelve months indicate that we will generate sufficient cash to meet our long-term debt service obligations. We forecast, for the twelve months ending December 31, 2005, revenues of $73 million and earnings before interest, income tax, depreciation and amortization of $3.2 million. To improve cash flow over the next twelve months we plan to continue a national marketing effort shifting emphasis from direct marketing to a less expensive media driven advertising model thereby realizing significant cost savings. In October, 2004, we consolidated a call center in Orange County California with an other call center in San Diego California realizing a significant annual cost savings. In addition to the forecasted improved revenues over the next twelve months, we forecast significant cost savings in 2005 over 2004 because of (i) the expiration of building leases on the discontinued manufacturing operation in St. Louis, Missouri and the re-location of the Wheeling, Illinois retail operation to Peoria, Illinois, which will result in annual savings of approximately $600,000 (ii) consolidation of California call center which will result in annual savings of approximately $300,000, and (iii) continued centralization of administrative and accounting functions which will result in annual savings of approximately $300,000.

     With respect to the classification of debt as non-current, our lender revised the loan covenants in March of 2005 to enable us to comply with less restrictive covenants. The amended covenants for 2005 and 2006 enabled us to comply in future quarters, assuming achievement of the forecast. Under the revised covenants, we do not have any compliance requirements for the first quarter of 2005. For the remaining quarters of 2005 and 2006, covenants were less restrictive than in prior agreements. The forecasts for 2005 and 2006 indicate that it is reasonably possible we will meet covenant requirements in future periods. Accordingly, we continued to classify the debt as non-current.

     During 2004, accounts receivable balances, as a percentage of revenue, compared to the same period in 2003, increased from 4.4 percent to 5.2 percent. We are aware of the increase in our accounts receivable balances and we have studied the issue and we believe the causes are related to the following; (i) turnover in personnel at key positions in the accounting department at the corporate and subsidiary level causing a reduction in experienced and trained personnel in the accounts receivable collection area and therefore collections are not getting the needed resources to keep receivables as current as possible (ii) in each quarter in 2004, as compared to the prior year, we completed a larger volume of jobs at or near the end of the quarter resulting in higher receivable balances for that period (iii) customer financing sources are trending towards more secured financing contracts which takes more time than traditional unsecured financing and therefore the receivable may be outstanding for a longer period of time resulting in higher receivable balances; the trend towards secured financing is caused in part by a deterioration of credit scores since the 2003 economic slowdown and the lower interest rates on second mortgage loans. We believe the above mentioned factors (i) and (ii) are temporary in nature and do not materially impact the quality and value of our accounts receivable balances at December 31, 2004.

     Our inventory balances increased in 2004 compared to 2003, at our North Dakota manufacturing subsidiary, by approximately $200,000 through the first quarter, $350,000 through the second quarter and $475,000 through the third and fourth quarter. Most of this increase is attributable to our North Dakota manufacturing subsidiary. This increase in inventory at the North Dakota manufacturing subsidiary is caused by a higher volume of windows being manufactured in North Dakota coupled with a change in our supplier of lineal extrusions, both vinyl and Compozit. We produced approximately 13% more windows in 2004 over 2003, which is approximately $800,000 more in sales. In January 2004, our California and Arizona locations switched window suppliers from a third party supplier to Thermal Line, our North Dakota manufacturing subsidiary, resulting in the increased production and sales. In addition to more window sales we are now buying our extrusions from our joint venture partner in Canada, RoyCom Limited, who requires our manufacturing subsidiary to buy in larger quantities with longer lead times between order date and shipping date. These two issues force our manufacturing facility to carry higher levels of inventory.

     We used $612,000 of cash for investing activities for 2003 related primarily to the acquisition of property and equipment. We used $376,000 of cash for investing activities for 2004 primarily for the acquisition of property and equipment.

     We used $779,000 in cash for financing activities in 2003 primarily for repayment of debt and establishing a sinking fund. We used $1.0 million of cash for financing activities in 2004 primarily for repayment of debt and for establishing a sinking fund.

     Our cash flow could be negatively impacted by an adverse final determination in the Nelson E. Clemmens' litigation due to the fact a second guarantor, Doug Maxwell would most likely file a similar claim. The adverse judgment could result in our requirement to pay $500,000 plus 10% interest accrued from March 2001 to Nelson Clemmens plus an additional and identical amount to Mr. Maxwell. We have recorded $1,000,000 as long-term debt on our balance sheet, which represents the total principal amount of the debt owed to both guarantors plus we have accrued interest amounting to $375,000 through December 31, 2004. We have appealed the latest decision and received a favorable decision from the appeals court. Although, we have won the case on appeal, the decision is still subject to review and not final.

     On June 30, 2003, we restructured our long-term debt and preferred stock. GE Equity holds Series A debt, Series C debt and other subordinated debt. Under the restructuring agreements, GE Equity reduced the interest rate on both series of debt from 10% to 8% and from 12% to 8% on the subordinated debt. Additionally, GE Equity converted $1 million of the subordinated debt to 680,000 common stock warrants at 28 cents per share. These warrants are exercisable through March 22, 2013 and were determined to have a fair value of $204,000. GE Equity extended ThermoView's debt maturities two years to June 30, 2006, and to July 31, 2006 for the subordinated debt.

     The holder of $1.2 million of notes in connection with obligations related to guarantors of a bank revolving line of credit also agreed to extend the due date of the notes from June 2004 to September 30, 2006.

     ThermoView's preferred stock holders also converted $1 million worth of Series D preferred stock to 680,000 common stock warrants at 28 cents per share. These warrants are exercisable through June 30, 2013 and were determined to have a fair value of $204,000. Also, the Series D and E preferred stock holders agreed to reduce the dividend rate on the remainder of the preferred holdings from 12% to 8%, to defer cash dividends until the Series A and B debt is retired, and to extend the date for mandatory redemption to August 31, 2006.

     If we default in the future under our debt arrangements, the lenders can, among other items, accelerate all amounts owed and increase interest rates on our debt. An event of default could result in the loss of our subsidiaries because of the pledge of our ownership in all of our subsidiaries to the lenders. As of December 31, 2004, we were in violation of the EBITDA requirements of our debt arrangements but after negotiations with our senior lender, GE Equity, we were able to obtain a waiver of our EBITDA covenant therefore avoiding, among other items, the acceleration of the due dates of our debt with GE Equity.

     While revenues continue to be lower than the previous year and economic and regulatory issues continue to challenge us, we believe that our cash flow from operations will allow us to meet our anticipated needs during at least the next 12 months for:

--  

debt service requirements under terms as revised as of March 9^th and 29th, 2005;

--  

working capital requirements;

--  

planned property and equipment capital expenditures;

--  

expanding our retail segment;

--  

offering new technologically improved products to our customers; and

--  

integrating more thoroughly the advertising and marketing programs of our regional subsidiaries into a national home-remodeling business.

     We do not expect annual capital expenditures for the next three years to significantly vary from amounts reported for the last three years, which have been in the range of $800,000 to $1,000,000 annually.

Business Segments

     Our subsidiaries have separate management teams and operational structures and operate in two reportable operating segments: retail and manufacturing.

     Retail. Our retail segment consists of our subsidiaries that design, sell and install custom vinyl replacement windows, doors and related home improvement products to commercial and retail customers. Our retail segment derives its revenues from the sale and installation of thermal replacement windows, storm windows and doors, patio decks, patio enclosures, vinyl siding and other home improvement products. Our retail segment recognizes revenues on the completed contract method. A contract is considered complete when the home improvement product has been installed. Gross profit in the retail segment represents revenues after deducting product and installation labor costs.

     Manufacturing. Our manufacturing segment consists of our subsidiary that manufactures and sells vinyl and Compozit replacement windows to two of our retail companies and to unaffiliated customers. Our manufacturing segment recognizes revenues when products are shipped. Gross profit in the manufacturing segment represents revenues after deducting product costs (primarily glass, vinyl and hardware), window fabrication labor and other manufacturing expenses.

     See Note 13 to Consolidated Financial Statements for additional financial information about each of our business segments.

Management's Discussion of Critical Accounting Policies

     We consider the accounting policies discussed below to be critical in understanding our financial statements because their application places the most demands on our judgment, with financial reporting results relying on estimation about the effect of matters that are inherently uncertain.

Accounting for the Impairment of Long-Lived Assets and Goodwill

     We evaluate our goodwill and other long-term assets for impairment and assess their recoverability based upon anticipated future cash flows. If facts and circumstances lead us to believe that the cost of one of our assets may be impaired, we will (a) evaluate the extent to which that cost is recoverable by comparing the future undiscounted cash flows estimated to be associated with the asset to the asset's carrying amount and (b) write-down that carrying amount to market value or discounted cash flow value to the extent necessary.

     For the determination of impairment of goodwill, we estimate the fair value of the reporting units using single period capitalization of operating cash flow and discounted cash flow analyses. Key assumptions in single period capitalization of operating cash flow approach for the two operating units include assumptions with respect to (a) ongoing net operating income after tax, (b) ongoing capital expenditures relative to depreciation and amortization, (c) operating cash flow multiples, and (d) methodology concerning the allocation of interest-bearing debt balances to the two operating units. Key assumptions in the discounted cash flow analysis approach for the two operating units include assumptions with respect to (a) projected revenue growth and operating income growth over the next several years, (b) multiples of earnings before interest, taxes, depreciation and amortization, and (c) discount rates for discounting fu ture projected benefits. The most likely variation from assumptions used would be to not meet our expected performance targets, which would likely result in further write-downs for impairment.

     We recorded a charge of $30 million for goodwill impairment upon adoption of the accounting standard on January 1, 2002. We also recorded a charge of $10 million for goodwill impairment as a result of our annual goodwill valuation at September 30, 2004.

Revenue and Cost Recognition

      We recognize revenues from fixed-price contracts on the completed-contract method since the contracts are of a short duration. We consider a contract complete when the home improvement installation is substantially completed, notwithstanding minor unresolved service items. Customers finance a portion of our sales. The customers sign financing contracts with us, which we then assign to unaffiliated third parties without recourse. The third parties pre-approve the customer financing. We do not retain these contracts for future securitization. Since we assign the contracts without recourse, our revenue recognition policy for these sales is the same as our revenue recognition policy for cash sales.

     Contract costs include all direct material and labor costs and those indirect costs related to contract performance such as indirect labor and supplies. We charge general and administrative costs to expense as incurred. We make provisions for estimated losses on uncompleted contracts in the period in which we determine such losses.

Other Loss Contingencies

     We record other loss contingencies as liabilities when it is probable that we have incurred a liability and the amount of the loss is reasonably estimable. Disclosure is required when there is a reasonable possibility that the ultimate loss will exceed the recorded provisions. We resolve contingent liabilities over long term periods. Estimating probable losses requires analysis of multiple forecasts that often depend on judgments about potential actions by third parties.

Other Significant Accounting Policies

     Other significant accounting policies, not involving the same level of measurement uncertainties as those discussed above, are nevertheless important to an understanding of the financial statements. Policies related to consolidation policy, trade receivables, inventories and warranties require judgments on complex matters that are often subject to multiple sources of authoritative guidance. Also see footnote 1 to our consolidated financial statements included elsewhere in this Form 10-K, Organization and Significant Accounting Policies, which discusses accounting policies that we must select when there are acceptable alternatives.

Historical Results of Operations

     The following financial information includes the results of operations of the companies acquired by us after April 15, 1998. Since all acquisitions were made prior to January 1, 2001, a full year of operations is included for every company acquired.

2002 Compared To 2003

     Revenues. Revenues decreased from $86.4 million for 2002 to $70.1 million for 2003. Revenues in 2003 were negatively impacted by severe winter weather in our Midwest markets in the first quarter, rain in our Southern California market, the sluggish economy, the events in Iraq, and new telemarketing laws. All of our retail operations and our manufacturing operation reported less revenues in 2003 compared to 2002.

     Gross Profit. Gross profit, which represents revenues less cost of revenues earned, decreased from $43.0 million in 2002 to $33.7 million in 2003. The reduction in the amount of gross profit is consistent with the reduced revenue discussed above. As a percentage of revenues, gross profit decreased from 49.8% in 2002 to 48.2% in 2003. This decrease results primarily because of more competitive pricing in certain markets and because certain installation costs at our subsidiaries are fixed and these fixed costs are more significant relative to the lower volumes in 2003 compared to 2002.

     Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased from $39.0 million in 2002 to $33.1 million in 2003. Selling, general and administrative expenses as a percentage of revenue increased from 45.1% in 2002 to 47.2% in 2003. The increase in selling, general and administrative expenses as a percentage of revenues in 2003 results primarily from the fixed nature of certain expenses relative to the lower volumes. Despite an increase in selling, general and administrative expenses as a percentage of revenue, we have reduced these expenses by $5 million through purchasing programs and focused cost cutting.

     Unusual Credit. The unusual credit of $796,000 in 2003 represents a gain from converting $1 million of debt to 680,000 common stock warrants issued at 28 cents per share.

     Depreciation Expense. Depreciation expense decreased from $986,000 in 2002 to $785,000 in 2003, reflecting a fairly constant amount of property and equipment.

     Interest Expense. Interest expense, exclusive of interest on mandatorily redeemable preferred, was relatively constant for 2002 and 2003.

     Starting July 1, 2003, dividends on mandatorily redeemable preferred stock are reported as interest expense. For 2003, interest expense on mandatorily redeemable preferred was $297,000.

     Income Tax Benefit. Due to operating losses, we concluded that it is more likely than not that we will not realize our deferred tax assets. Accordingly, we established a valuation allowance against all deferred tax assets, and we have not recorded any deferred income taxes in 2002 or 2003. Income tax expense in 2003 relates to state taxes.

     Non-Cash Dividends. Non-cash dividends in 2002 and the first six months of 2003 represent accrued dividends on the Series D and E preferred stock. For the last six months of 2003, we reported non-cash dividends as interest expense on mandatorily redeemable preferred.

     Benefit of Series D Preferred Stock Redemption. The benefit of $796,000 in 2003 is used in determining net income attributable to common stockholders, and represents a gain on redemption of $1 million of Series D stock in exchange for 680,000 common stock warrants issued at 28 cents per share.

2003 Compared To 2004

     Revenues. Revenues decreased from $70.1 million in 2003 to $68.9 million in 2004. Our retail operations reported less revenues in part due to the re-location of our Illinois retail operation and the re-engineering of our California retail operation.

     Gross Profit. Gross profit, which represents revenues less cost of revenues earned, decreased from $33.7 million in 2003 to $33.3 million in 2004. The reduction in the amount of gross profit is consistent with the reduced revenue discussed above. As a percentage of revenues, gross profit increased from 48.2% in 2003 to 48.4% in 2004. We have initiated price increases in most of our territories and we are studying the market to determine if additional price increases are warranted.

     Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased from $33.1 million in 2003 to $30.3 million in 2004. Selling, general and administrative expenses as a percentage of revenue decreased from 47.2% in 2003 to 44.1% in 2004. The decrease in selling, general and administrative expenses continued in each quarter of 2004 and is the direct result of our continued efforts to control costs, standardize and centralize accounting, use of best practices efficiencies in addition to significant year end 2004 salary reductions.

     Impairment of Goodwill. The annual goodwill valuation at September 30, 2004 indicated that goodwill was impaired. Mercer Capital performed the goodwill analysis under our direction. Mercer Capital adheres to the ethical standards set by the American Society of Appraisers and the Association for Investment Management and Research. Their reports conform to the Uniform Standards of Professional Appraisal Practice and to the Business Valuation Standards of the American Society of Appraisers. We also evaluated the resumes of the specific professionals performing the work.

     Mercer Capital performs the impairment analysis annually in accordance with SFAS 142. After its initial evaluation on January 1, 2002, we chose September 30 as our annual valuation date. The annual calculation allocated debt and interest expense between the manufacturing and retail segments based on the relative amounts of inter-company debt reflected on the respective segment's balance sheet. We discussed assumptions used by Mercer Capital and became satisfied that Mercer Capital used proper assumptions.

     During the third quarter of 2004, Mercer Capital performed its annual impairment review for goodwill and other intangible assets on our behalf and based on their report, we recorded a non-cash charge of $10.0 million, which is classified as a component of operating income in the accompanying consolidated statement of operations. The $10.0 million includes charges to reduce the carrying value of goodwill at the retail segment. The $10.0 million charge at the retail segment reflects the segment's lower than expected performance. The impairment charges are non-cash in nature and do not affect our liquidity.

     Unusual Credit. The unusual credit of $796,000 in 2003 represents a gain from converting $1 million of debt to 680,000 common stock warrants issued at 28 cents per share.

     Depreciation Expense. Depreciation expense increased from $785,000 in 2003 to $851,000 in 2004, reflecting fairly constant levels of property and equipment.

     Interest Expense. Interest expense, exclusive of interest on mandatorily redeemable preferred, decreased from $2.5 million in 2003 to $1.7 million in 2004. This decrease in interest expense results from a combination of a reduction in interest rates, the conversion of $1,000,000 of debt to warrants in connection with restructuring of debt at June 30, 2003 and the completion of the accretion of debt discount in April 2004.

     Starting July 1, 2003, we began to report dividends on mandatorily redeemable preferred stock as interest expense. For 2003 interest expense on mandatorily redeemable preferred was $297,000 compared to $626,000 in 2004.

     Income Tax Expense. Due to operating losses, we concluded that it is more likely than not that we will not realize our deferred tax assets. Accordingly, we established a valuation allowance against all deferred tax assets, and we have not recorded any deferred income taxes in 2003 or 2004. Income tax expense, in 2004, relates to state taxes.

     Non-Cash Dividends. Non-cash dividends in 2003 represented accrued dividends on the Series D and E preferred stock. Starting July 1, 2003, we reported non-cash dividends as interest expense on mandatorily redeemable preferred and continue to do so.

     Benefit of Series D Preferred Stock Redemption. The benefit of $796,000 in 2003 represents a gain on redemption of $1 million of Series D stock in exchange for 680,000 common stock warrants issued at 28 cents per share.

Joint Venture

     In October 2001, ThermoView and Royal Group Technologies Limited formed a joint venture, which purchased certain assets consisting primarily of manufacturing equipment of Complast, Inc. for $1,100,000. Complast was a supplier of extruded components for the manufacture of window systems, originally located in Minneapolis, Minnesota. The joint venture is located in Winnipeg, Manitoba, Canada, in one of Royal Group's manufacturing plants.

     Under the terms of the agreement, ThermoView owns 40 percent of the joint venture and Royal Group owns 60 percent. Additionally, ThermoView agreed to purchase extrusions from the joint venture or an affiliate of the Royal Group for seven years, subject to meeting demand, being price competitive and meeting industry quality standards. Our interest in this joint venture is accounted for using the equity method. The joint venture produces and sells extrusions consisting of composites of acrylonitrile butadiene styrene (ABS) and other materials. Purchases by ThermoView represented 30% and 43% of the joint venture's total revenue in 2003 and 2004. The joint venture's revenue approximated $2.9 million in 2003 and $3.2 million in 2004.

Pending Litigation

     ThermoView does not anticipate any significant adverse effect on its financial position, results of operations or cash flows because of the pending litigation described in Item 3, Legal Proceedings, except for the Clemmens litigation. Although ThermoView intends to vigorously defend the Clemmens suit, an adverse outcome could have a material adverse effect on our cash flow.

Inflation

     Due to relatively low levels of inflation experienced during the years ended December 31, 2002, 2003, and 2004, inflation did not cause a significant increase in our costs.

Seasonality

     Historically, our results of operations have fluctuated on a seasonal basis. We have experienced lower levels of sales and profitability during the period from mid-November to mid-March, impacting the first and fourth quarters of each year. Inclement weather conditions in the winter and spring months in our markets located in the north central United States, which limit our ability to install exterior home improvement products, reduces demand for windows, doors, vinyl siding and related products. Our intention is to expand our southern California markets and to enter other markets in the southern United States to reduce the impact of seasonality, if we have the available capital.

Item 7a. Quantitative and Qualitative Disclosures about Market Risk

     In June 2003, we restructured our debt and, as a result, all of our debt is fixed rate debt. Interest rate changes would result in gains or losses in the market value of our fixed-rate debt due to the differences between the current market interest rates and the rates governing these instruments. With respect to our fixed-rate debt currently outstanding, a 10% change in interest rates (for example, from 8% to 8.8%) would not have resulted in a significant change in the fair value of our fixed-rate debt.

Item 8. Financial Statements and Supplementary Data

Index To Financial Statements and Schedules

THERMOVIEW INDUSTRIES, INC.

Report of Independent Registered Public Accounting Firm............. 34

Consolidated Balance Sheets as of

   December 31, 2003 and 2004....................................... 36

Consolidated Statements of Operations

   for the years ended December 31, 2002, 2003 and 2004............. 37

Consolidated Statements of Stockholders' Equity (Capital Deficiency)

   for the years ended December 31, 2002, 2003 and 2004............. 38

Consolidated Statements of Cash Flows

   for the years ended December 31, 2002, 2003 and 2004............. 39

Notes to Consolidated Financial Statements.......................... 40

Schedule II - Valuation and Qualifying Accounts for the periods
   ended December 31, 2004 and 2003................................. 70

Report of Independent Registered Public Accounting Firm

ThermoView Industries, Inc.

Louisville, Kentucky

We have audited the accompanying consolidated balance sheets of ThermoView Industries, Inc. as of December 31, 2004 and 2003, and the related consolidated statements of operations, stockholders' equity (capital deficiency), and cash flows for each of the three years in the period ended December 31, 2004. In connection with our audits of the consolidated financial statements, we also have audited the consolidated financial statement schedule listed in the accompanying index. These consolidated financial statements and consolidated financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and consolidated financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of ThermoView Industries, Inc. as of December 31, 2004 and 2003, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2004, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

As disclosed in Notes 1 and 8, during 2003, the Company adopted new accounting guidance for accounting for certain financial instruments with characteristics of both liabilities and equities. As disclosed in Notes 1 and 3, during 2002 the Company adopted new accounting guidance for debt extinguishment and goodwill and intangible assets.

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern.  As discussed in Note 1, several factors raise substantial doubt about the Company's ability to continue as a going concern.  Revenues have declined and the Company has reported net losses in each of the last three years, and this has resulted in the need for the primary lender to continually modify performance requirements in the debt agreements to avoid default.  If the Company's future performance is not sufficient to meet the requirements of its debt agreements, the primary lender may not be willing to make additional modifications or waivers, and may demand payment.   Management's plans regarding these matters are also described in Note 1.  The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Crowe Chizek and Company LLC

Louisville, Kentucky

March 30, 2005

THERMOVIEW INDUSTRIES, INC.

CONSOLIDATED BALANCE SHEETS

December 31

2003

2004

Assets

Current assets:

  Cash and equivalents

$   211,449 

$   316,351 

  Receivables:

    Trade, net of allowance for doubtful accounts of
      $345,000 in 2003 and $350,000 in 2004

3,096,229 

3,570,036 

    Other

140,444 

228,680 

  Costs in excess of billings on uncompleted contracts

560,617 

390,989 

  inventories

1,960,611 

2,435,625 

  Prepaid expenses and other current assets

    645,027 

    875,651 

Total current assets

6,614,377 

7,817,332 

Property and equipment, net

2,676,003 

2,755,361 

Other assets:

  Goodwill

28,358,742 

18,358,742 

  Other assets

    844,787 

  1,218,949 

 29,203,529 

 19,577,691 

Total assets

$38,493,909 

$30,150,384 

Liabilities and stockholders' equity (capital deficiency)

Current liabilities:

  Accounts payable

$ 4,048,388 

$ 4,298,356 

  Accrued expenses

2,072,902 

1,819,330 

  Billings in excess of costs on uncompleted contracts

541,697 

619,699 

  Income taxes payable

65,602 

66,672 

  Current portion of long-term debt

    544,795 

    437,429 

Total current liabilities

7,273,384 

7,241,486 

Long-term debt

16,510,303 

17,799,523 

Preferred shares subject to mandatory redemption

7,593,520 

8,219,409 

Other long-term liabilities

    471,489 

    519,194 

Total liabilities

31,848,696 

33,779,612 

Commitments and contingencies

- 

- 

Stockholders' equity (capital deficiency):

  Preferred stock, 2,975,000 shares authorized:

    Series A, $.001 par value; none issued

- 

- 

    Series B, $.001 par value; none issued

- 

- 

  Common stock, $.001 par value; 25,000,000 shares
    authorized; 8,628,716 shares issued and outstanding
    in 2003 and 8,638,716 shares issued and
    outstanding in 2004

8,628 

8,638 

  Paid-in capital

64,531,209 

64,537,449 

  Accumulated deficit

(57,894,624)

(68,175,315)

Total stockholders' equity (capital deficiency)

  6,645,213 

 (3,629,228)

Total liabilities and stockholders' equity (capital deficiency)

$38,493,909 

$30,150,384 

See accompanying notes.

THERMOVIEW INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

Year ended December 31

2002

2003

2004

Revenues

$ 86,359,078 

$70,079,811 

$ 68,861,113 

Cost of revenues earned

  43,328,652 

 36,331,468 

 35,539,719 

Gross profit

43,030,426 

33,748,343 

33,321,394 

Selling, general and administrative expenses

38,953,057 

33,092,857 

30,346,719 

Unusual credits-gain on exchange of debt
  for warrants

- 

(796,000)

- 

Impairment of goodwill

- 

- 

10,000,000 

Depreciation expense

986,476 

785,034 

851,222 

Amortization expense

      73,630 

     36,094 

      34,589 

Income (loss) from operations

3,017,263 

630,358 

(7,911,136)

Equity in earnings (loss)
  of joint venture

141,355 

44,900 

(37,751)

Interest expense

(2,604,841)

(2,529,141)

(1,706,120)

Interest expense on mandatorily
  redeemable preferred stock

- 

(297,219)

(625,889)

Interest income

      59,174 

     25,432 

      19,967 

Income (loss) before income taxes

612,951 

(2,125,670)

(10,260,929)

Income tax expense (benefit)

     (45,000)

     47,573 

      19,762 

Income (loss) before cumulative effect
  of an accounting change

657,951 

(2,173,243)

(10,280,691)

Cumulative effect of an accounting change-
  charge for impairment of goodwill

 (30,000,000)

          - 

           - 

Net income (loss)

(29,342,049)

(2,173,243)

(10,280,691)

Less non-cash preferred stock dividends

(880,914)

(472,494)

- 

Plus benefit of Series D redemption

           - 

    796,000 

           - 

    (880,914)

    323,506 

           - 

Net income (loss) attributable to
  common stockholders

$(30,222,963)

$(1,849,737)

$(10,280,691)

Basic and diluted income (loss) per
  common share:

  Income (loss) attributable to common
    stockholders before cumulative effect
    of an accounting change

$       (.02)

$      (.20)

$      (1.12)

  Cumulative effect of an
    accounting change

       (3.31)

          - 

            -

  Net income (loss) attributable to
    common stockholders

$      (3.33)

$      (.20)

$      (1.12)

Weighted average shares outstanding-basic
  and diluted

   9,069,092 

  9,190,059 

   9,199,785 

See accompanying notes.

THERMOVIEW INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (CAPITAL DEFICIENCY)

FOR THE YEARS ENDED DECEMBER 31, 2002, 2003, AND 2004

Common Stock

Paid-in
Capital

Accumulated
Deficit

Total

Shares

Par Value

Balances at December 31, 2001

7,861,702

7,861

64,679,509 

(26,379,331)

38,308,039 

Accrued dividends on Series D and E preferred stock

-

-

(880,914)

- 

(880,914)

Cashless exercise of 950,000 shares of common stock representing the
  remaining exercise of 1,100,000 shares under stock purchase warrant

764,014

764

(764)

- 

- 

Exercise of stock options

3,000

3

1,872 

- 

1,875 

Net loss

          -

         -

          - 

 (29,342,050)

(29,342,050)

Balances at December 31, 2002

8,628,716

8,628

63,799,703 

(55,721,381)

8,086,950 

Accrued dividends on Series D and E preferred stock

-

-

(472,494)

- 

(472,494)

Benefit of converting Series D preferred stock to common stock purchase
  warrants

-

-

796,000 

- 

796,000 

Value of warrants issued in connection with Series D redemption

-

-

204,000 

- 

204,000 

Value of warrants issued in connection with debt restructuring

-

-

204,000 

- 

204,000 

Net loss

          -

         -

          - 

  (2,173,243)

 (2,173,243)

Balances at December 31, 2003

8,628,716

8,628

64,531,209 

(57,894,624)

6,645,213 

Exercise of stock options

10,000

10

6,240 

- 

6,250 

Net loss

          -

         -

          - 

 (10,280,691)

(10,280,691)

Balances at December 31, 2004

  8,638,716

$    8,638

$64,537,449 

$(68,175,315)

$(3,629,228)

See accompanying notes.