UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________

FORM 10-Q

_______________

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

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2005

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)

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

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

THERMOVIEW INDUSTRIES, INC.

TABLE OF CONTENTS

Part I Financial Information

          Item 1. Financial Statements ...........................................2

                    Condensed Consolidated Balance Sheets ..............................2

                    Condensed Consolidated Statements of Operations ....................3

                    Condensed Consolidated Statements of Cash Flows ....................4

                    Notes to Condensed Consolidated Financial Statements ...............5

          Item 2. Management's Discussion and Analysis of Financial Condition

                    and Results of Operations .........................................12

          Item 3. Quantitative and Qualitative Disclosures About Market Risk ....20

          Item 4. Controls and Procedures .......................................20

Part II Other Information

          Item 1. Legal Proceedings .............................................21

          Item 2. Unregistered Sales of Equity Securities and Use of Proceeds ...22

          Item 3. Defaults upon Senior Securities ...............................22

          Item 4. Submission of Matters to a Vote of Security Holders ...........22

          Item 5. Other Information .............................................22

          Item 6. Exhibits ......................................................22

Item 1. Financial Statements

ThermoView Industries, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

December 31,

March 31,

2004

2005

Assets

Current assets:

  Cash and equivalents........................................

$    316,351 

$     43,778 

  Receivables:

    Trade, net of allowance for doubtful accounts of $350,225
      in 2004 and $332,745 in 2005............................

3,570,036 

3,067,477 

    Other.....................................................

228,680 

626,315 

  Costs in excess of billings on uncompleted contracts........

390,989 

654,523 

  Inventories.................................................

2,435,625 

2,577,831 

  Prepaid expenses and other current assets...................

    875,651 

  1,465,930 

Total current assets..........................................

7,817,332 

8,435,854 

Property and equipment, net of depreciation...................

2,755,361 

2,750,679 

Other assets:

  Goodwill....................................................

18,358,742 

18,358,742 

  Other assets................................................

  1,218,949 

  1,215,160 

 19,577,691 

 19,573,902 

Total assets..................................................

$ 30,150,384 

$ 30,760,435 

Liabilities and stockholders' capital deficiency

Current liabilities:

  Accounts payable............................................

$  4,298,356 

$5,320,458 

  Accrued expenses............................................

1,819,330 

2,551,919 

  Billings in excess of costs on uncompleted contracts........

619,699 

813,255 

  Income taxes payable........................................

66,672 

52,472 

  Current portion of long-term debt...........................

    437,429 

    529,654 

Total current liabilities.....................................

7,241,486 

9,267,758 

Long-term debt................................................

17,799,523 

17,518,772 

Preferred shares subject to mandatory redemption..............

8,219,409 

8,381,547 

Other long-term liabilities...................................

    519,194 

    555,164 

Total liabilities.............................................

33,779,612 

35,723,241 

Stockholders' 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; 8,638,716 shares issued and outstanding at
    December 31, 2004 and 8,638,716 shares issued and
    outstanding at March 31, 2005.............................

8,638 

8,638 

  Paid-in capital.............................................

64,537,449 

64,537,449 

  Accumulated deficit.........................................

(68,175,315)

(69,508,891)

Total stockholders' capital deficiency........................

 (3,629,228)

 (4,962,806)

Total liabilities and stockholders' capital deficiency........

$ 30,150,384 

$ 30,760,435 

See accompanying notes.

2

ThermoView Industries, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

For the three months ended
March 31,

2004

2005

Revenues

$  14,839,140 

$  14,256,726 

Cost of revenues earned

   7,867,099  

   7,896,547  

Gross profit

6,972,041 

6,360,179 

Selling, general and administrative expenses

7,480,599 

6,970,167 

Depreciation expense

212,598 

203,351 

Amortization expense

      12,983  

         168  

Loss from operations

(734,139)

(813,507)

Equity in earnings (loss) of joint venture

(3,335)

1,821 

Interest expense

(768,651)

(527,777)

Interest income

       5,563  

       5,887  

Loss before income taxes

(1,500,562)

(1,333,576)

Income tax expense (benefit)

       3,377 

           - 

Net loss

$  (1,503,939)

$  (1,333,576)

Basic and diluted loss per common share

$       (0.16)

$       (0.14)

See accompanying notes.

3

ThermoView Industries, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

For the three months ended
March 31,

2004

2005

Operating activities

Net loss

$(1,503,939)

$(1,333,576)

Adjustments to reconcile net loss to net cash provided by (used in) operations:

  Depreciation and amortization

225,581 

203,519 

  Accretion of debt discount

188,160 

- 

  Accrued interest on preferred shares subject to
    redemption

148,818 

162,138 

  Interest added to principal

410,079 

- 

  Equity in income of joint venture

3,335 

(1,821)

  Changes in operating assets and liabilities

    470,245 

  1,078,923 

Net cash provided by (used in) operating
  activities

(57,721)

109,183 

Investing activities

Payments for purchase of property and equipment

(77,841)

(71,707)

Other

      7,946  

      5,439 

Net cash used in investing activities

(69,895)

(66,268)

Financing activities

Increase in long-term debt

353,002 

17,066 

Payments of long-term debt

(169,836)

(332,554)

Amount escrowed for special purposes

(60,000)

- 

Exercise of options

      6,250  

          -  

Net cash provided by (used in) financing
  activities

    129,416  

   (315,488)

Net increase (decrease) in cash and equivalents

      1,800  

   (272,573)

Cash and equivalents at beginning of period

    211,449  

    316,351  

Cash and equivalents at end of period

    213,249 

     43,778 

See accompanying notes.

4

THERMOVIEW INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2005

(UNAUDITED)

1.   Basis of Presentation

     The accompanying unaudited condensed consolidated financial statements of ThermoView Industries, Inc. ("ThermoView" or "the Company"), have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions in Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals), considered necessary for a fair presentation have been included. ThermoView's business is subject to seasonal variations. The demand for replacement windows and related home improvement products is generally lower during the winter months due to inclement weather. Demand for replacement windows is generally higher in the second and third q uarters. Operating results for the three-month period ended March 31, 2005, are not necessarily indicative of the results that may be expected for the year ended December 31, 2005.

     For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2004.

2.   Operating Losses, Cash Flow and Management's Plan

     During the first quarter of 2005, the Company incurred a net loss to common shareholders of $1,333,576, compared to a net loss in the first quarter of 2004 of $1,503,939.  The first quarter 2005 net loss would have been more by $416,000 had it not been for the change in compensation method for certain employees as described in the fourth paragraph of this section.

     The Company's net cash provided by operating activities for the first three months of 2005 was $109,183 as compared to net cash (used in) operating activities of $(57,721) during the first three months of 2004. The Company would have used more cash had it not been for a slow-down in payment of routine vendor payables. Accounts payable increased by $1,022,102 from December 31, 2004, to March 31, 2005. This increase in accounts payable of $1,022,102 is $610,644 more than the $411,458 increase in accounts payable that occurred in the first quarter of 2004.

     Revenue decreased by $582,414 from first quarter 2004 to first quarter 2005. The decrease in revenue was due to interruptions in the installation process, which is how the Company recognizes revenue. These interruptions were caused by a shortage of qualified installation staff caused in part by low unemployment rates in the construction industry which is due primarily to a robust new construction market.

     The Company's income and (loss), by month, in the first quarter of 2004 and 2005, are as follows:

2004

2005

January

$  (729,086)

$  (595,282)

February

(586,954)

(773,244)

March

(187,899)

34,950 

     The Company recorded as advances approximately $416,000 of incentive commissions in March of 2005, that were expensed in prior periods, as a one time benefit recognized in the first quarter of 2005. The effect of this change was to increase other receivables and to decrease selling, general and administrative expenses by $416,000 in the first quarter of 2005. During 2004, the Company implemented changes in the method of compensating certain employees which would allow the Company to record these payments as advances for payments made to marketing, advertising and sales management personnel. The Company migrated from a base salary plus incentive commissions program to a mostly incentive commission only compensation program to alleviate some of the seasonality of the payments with more incentives being paid during the higher sales months than during the slower months. From 2004 to the end of the first quarter of 2005, the Company fully implemented this change in the compensation method. If the changes in the compensation methods had been fully implemented as of December 31, 2004, the effect would have been a benefit of approximately $250,000 on the 2004 financial statements.

     In accordance with its debt agreements, in October of 2004, the Company resumed interest payments and beginning in November 2004, resumed payments of principal. During the fourth quarter of 2004 and into the first quarter of 2005, it was determined that the Company would not be able to meet its cash obligations of its long-term debt payments or comply with the terms of its debt agreements at December 31, 2004 and into 2005 and 2006. Accordingly, the Company entered into negotiations with its principal creditor, GE Capital, to restructure the debt repayment schedules and covenant requirements. In March of 2005, GE agreed to modify its agreements. 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 its subordinated debt until the second and third quarter of 2005.

     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 the Company will generate sufficient cash to meet long-term debt service obligations. The forecast, for the twelve months ending December 31, 2005, projects revenues of $73 million and earnings before interest, income tax, depreciation and amortization of $3.2 million. The forecast for the first quarter of 2005 revenue was $15.4 million and EBITDA of a negative $83,000. The Company believes it will be able to recover the lost revenues and EBITDA by improving operating performance and cash flow over the next twelve months with plans to continue a national marketing effort shifting emphasis from direct marketing to a less expensive media driven advertising model thereby realizing significant cost savings and other cost efficiencies and savings. In October, 2004, the Company consolidated a call center in Orange County California with another call center in San Diego California realizing a significant annual cost savings. In addition to the forecasted improved revenues over the next twelve months, the Company forecasts 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. In the first quarter of 2005 as compared to the first quarter of 2004, the Company's selling, general and administrative expenses dec reased from $7.5 million to $7.0 million realizing approximately a $500,000 savings due to the above mentioned initiatives.

     With respect to the classification of debt as non-current, GE Capital revised the loan covenants in March of 2005 to enable the Company to comply with less restrictive covenants. The amended covenants for 2005 and 2006 enable the Company to comply with such covenants in future quarters, assuming achievement of the forecast. Under the revised covenants, there are no 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 in the following table indicate that it is reasonably possible to meet covenant requirements in future periods:

Period/Calendar Quarter

Minimum EBITDA

Six months ending on June 30, 2005

$934,000

Nine months ending on September 30, 2005

$1,890,000

Twelve months ending on December 31, 2005

$2,754,000

Twelve months ending on March 31, 2006

$3,007,000

Twelve months ending as of the end of each calendar quarter thereafter

$3,049,000

Accordingly, the debt is classified as non-current.

     The Company expects positive cash from operations beginning in the second quarter. In the event the Company does not return to positive cash from operations, the Company will not be able to meet its revised debt covenants, thereby making its long-term debt currently due, and the Company will need to re-evaluate its goodwill for potential further impairment and related write-offs.

     While management believes operating results have stabilized and will improve in 2005, the Company cannot support its current debt level. 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.

     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 it be reasonably expected another lender will 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. Due to these and other factors, there is substantial doubt about the Company's ability to continue as a going concern.  

     Assets acquired through non-cash capital leases and other financing activities were $126,962 for the three month period ending March 31, 2005 and $80,681 for the three month period ending March 31, 2004.

     Income tax expense was $0.00, in the three month period ending March 31, 2005, and $3,377 for the three month period ending March 31, 2004 which represents cash paid for state income tax liabilities.

3.   Income (Loss) per Common Share

     Income (loss) per common share is calculated in accordance with Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share." The Company calculates basic earnings per common share using the weighted average number of shares outstanding for the period. The weighted average number of shares outstanding for the three month periods ended March 31, 2004 and 2005, includes shares related to a stock purchase warrant that can be exercised for nominal cash consideration. Outstanding shares for purposes of determining diluted earnings per common share includes the weighted average number of shares outstanding for basic earnings per share, plus the diluted effect of any common share equivalents such as options or warrants in the calculation. As the Company recorded losses attributable to operations for the three-month periods ended March 31, 2004 and 2005, common share equivalents outstanding would be anti - -dilutive. Accordingly, basic and diluted earnings per share amounts are the same.

     Weighted average shares outstanding were as follows:

                  Period                 

Weighted Average
Shares Outstanding

For the three months ended March 31, 2004

    9,198,960

For the three months ended March 31, 2005

    9,200,059

4.   Stock Option Information

     Pursuant to SFAS No. 123, "Accounting for Stock-Based Compensation," the Company has elected to account for its employee stock options under APB No. 25, "Accounting for Stock Issued to Employees." Accordingly, no compensation cost has been recognized for employee options. Had compensation cost for employee options been determined based on the fair value at the grant date consistent with SFAS No. 123, the Company's net loss and loss per share would have been as follows:

Net loss:

2004

2005

  As reported

$(1,503,939)

$(1,333,576)

  Pro forma

$(1,524,744)

$(1,338,321)

Basic and diluted loss per common share:

  Basic and diluted, as reported

$      (.16)

$      (.14)

  Basic and diluted, Pro forma

$      (.17)

$      (.15)

7.   Contingencies and Commitments

     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 Messrs. Clemmens and Maxwell with re gard 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 beginni ng 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 assets, restricted cash. We beli eve 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 the entire Kentucky Court of Appea ls 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. On April 13, 2005, the Supreme Court of Kentucky denied Clemmens' motion for discretionary review. The matter has now returned to Jefferson Circuit Court for further proceedings consistent with the appellate rulings. The Jefferson Circuit Court has initially ruled that interest is due and owing, but we have filed a motion to alter or amend the ruling as to the amount and payment of the interest. Whatever the ruling on interest, it is likely the losing party will appeal. The Jefferson Circuit Court is also determining whether to retain the supersedeas bond for the current interest payment issue. Maxwell has not asserted a claim for the loss of his collateral as of the date of filing of this report. Maxwell could assert claims for the same amount as Clemmens. Management has evaluated the potential loss associated with Clemmens ' litigation and Maxwell's unasserted claim and believes that the recorded liabilities on our balance sheet as of March 31, 2005 are adequate. While management believes that the ultimate resolution of this Clemmens matter on appeal will be favorable to the Company, 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 the Company, Mr. Maxwell would likely pursue the identical action and the other $500,000, plus interest, guaranteed by Maxwell could become payable without any sinking fund as set aside for the Clemmens guarantee.

     The Company is 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 management's 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 the Company's results of operations and financial condition.

8.   Subsequent Events

     On April 28, 2005, management received notice from the staff of The American Stock Exchange ("AMEX") indicating that the Company was not in compliance with Section 1003(a)(i) of the AMEX Company Guide, in that its stockholders' equity is less than $2 million and the Company has sustained losses from continuing operations and/or net losses in two of its three most recent fiscal years; and with Section 1003(a)(ii) of the AMEX Company Guide, in that its stockholders' equity is less than $4 million and the Company has sustained losses from continuing operations and/or net losses in three of its four most recent fiscal years. In order to maintain listing of its Common Stock on AMEX, management must submit a plan by May 31, 2005, advising AMEX of the actions management has taken, or will take, that would bring the Company into compliance with the applicable listing standards. If AMEX accepts the plan, the Company may be able to continue our listing during the plan period of up to 18 months, during which time the Company will be subject to periodic review to determine whether the Company is making progress consistent with the plan. If AMEX does not accept management's plan, or even if accepted, if the Company is not in compliance with the continued listing standards at the end of the 18-month period or does not make progress consistent with the plan during s uch period, AMEX may initiate delisting proceedings with respect to its Common Stock. Management intends to submit a compliance plan to AMEX by May 31, 2005.

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

     This report on Form 10-Q contains statements which constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements can be identified by the use of forward-looking terminology such as "believes," "expects," "may," "estimates," "will," "should," "plans" or "anticipates" or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties, and that actual results may vary materially from those in the forward-looking statements as a result of any number of factors, most of which are beyond the control of management. These factors include operating losses, continued and increased expenses, non-cash dividends and interest related to our financings, adverse judgments to ThermoView, and restrictions imposed by our senior and subordinated debt.

     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.

     The following should be read in conjunction with the response to Part I, Item 1, of this Report and our audited consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2004. Any capitalized terms used, but not defined in this Item, have the same meaning given to them in the Form 10-K.

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 exterior coatings, vinyl siding, patio decks, patio enclosures, cabinet refacings and kitchen and bathroom remodeling products, as well as residential roofing.

Business Segments

     Our subsidiaries have separate management teams and infrastructures 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 completed contract is considered revenue when the home improvement installation is considered substantially complete, notwithstanding minor unresolved service items. 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 replacement windows to one 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.

Historical Results of Operations

Three Months ended
March 31,

2004

2005

(In thousands)

Revenues.............................................

$   14,839 

$  14,257 

Cost of revenues earned..............................

    7,867 

    7,897 

Gross profit.........................................

6,972 

6,360 

Selling, general and administrative expenses.........

7,481 

6,970 

Depreciation expense.................................

213 

203 

Amortization expense.................................

       13 

        0 

Loss from operations.................................

(734)

(814)

Equity in earnings (loss) of joint venture...........

(3)

2 

Interest expense.....................................

(769)

(528)

Interest income......................................

        6 

        6 

Loss before income taxes.............................

(1,501)

(1,334)

Income tax benefit...................................

        3 

        0 

Net loss.............................................

(1,504)

(1,334)

Less non-cash Series D and E preferred stock dividends

        - 

        - 

Net loss attributable
  to common stockholders.............................

$  (1,504)

$  (1,334)

Three months ended March 31, 2004 Compared to Three Months Ended March 31, 2005

     Revenues. Revenues decreased from $14.8 million for the first quarter of 2004 to $14.3 million for the first quarter of 2005. The $.58 million decrease in revenue from first quarter 2004 to first quarter 2005 was primarily due to interruptions in the installation process, which is how the Company recognizes revenue. These interruptions were the result of inclement weather in various markets and a shortage of qualified installation staff caused in part by low unemployment rates in the construction industry which is due primarily to a robust new construction market.

     Gross Profit. Gross profit, which represents revenues less cost of revenues earned, decreased from $7.0 million in the first quarter of 2004 to $6.4 million in the first quarter of 2005. As a percentage of revenues, gross profit decreased from 47.0% in the first quarter of 2004 to 44.6% in the first quarter of 2005. This decrease in gross profit percentage results partly because some costs of goods sold at our subsidiaries are fixed and these fixed costs are more significant relative to the lower volumes in the first quarter of 2005 compared to the first quarter of 2004 and partly because the cost of our installed products is increasing.

     Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased from $7.5 million in the first quarter of 2004 to $7.0 million in the first quarter of 2005. Selling, general and administrative expenses as a percentage of revenue decreased from 50.4% in the first quarter of 2004 to 48.9% in the first quarter of 2005. In March of 2005, we recorded as advances approximately $416,000 of incentive commissions that were expensed in prior periods as a one time benefit recognized in the first quarter of 2005. The effect of this change was to increase other receivables and to decrease selling, general and administrative expenses by $416,000 in the first quarter of 2005. During 2004, we implemented changes in the method of compensating certain employees which would allow us to record these payments as advances for payments made to marketing, advertising and sales management personnel. We migrated from a base salary plus incentive commissions program to a mostly incentive commission only compensation program to alleviate some of the seasonality of the payments with more incentives being paid during the higher sales months than during the slower months. From 2004 to the end of the first quarter of 2005, we fully implemented this change in the compensation method. If we had fully implemented the changes in the compensation methods as of December 31, 2004, the effect would have been a benefit of approximately $250,000 on the 2004 financial statements.

     Depreciation Expense. Depreciation expense decreased from $213,000 in the first quarter of 2004 to $203,000 in the first quarter of 2005, reflecting a fairly constant amount of property and equipment.

     Interest Expense. Interest expense decreased from $769,000 in 2004 to $528,000 in 2005. The decrease results from lower interest rates and lower levels of debts after principal payments.

     Income Tax Expense (Benefit). Due to operating losses, management concluded that it is more likely than not that our deferred tax assets will not be realized. Accordingly, we established a valuation allowance against all deferred tax assets, and no deferred income taxes have been recorded in 2004 or 2005. Income tax expense (benefit), in the first quarter of 2004 and 2005 relates to some minor state tax refunds and minor state tax expense.

     Non-Cash Dividends. There were no non-cash dividends due to the adoption of SFAS 150 wherein dividends or other distributions on mandatorily redeemable preferred stock are reported as interest expense in the statement of operations.

Liquidity, Capital Resources and Management's Plan

     As of March 31, 2005, we had cash and equivalents of $43,778, $17.5 million of long-term debt, net of current maturities, and $8.4 million of mandatorily redeemable preferred stock.

     Our operating activities for the three months ended March 31, 2004, used $57,721 of cash. Our operating activities for the three months ended March 31, 2005, provided $109,183 of cash.

     The use of cash for investing activities of $69,895 in the first quarter of 2004 and $66,268 in the first quarter of 2005, related primarily to the acquisition of property and equipment and reflects a fairly consistent level of purchases of property and equipment.

     We used $315,488 in cash for financing activities in the three months ended March 31, 2005, primarily for repayment of debt. In the three months ended March 31, 2004, $129,416 of cash was provided by financing activities and reflects new borrowings for property and equipment.

     During the first quarter of 2005, we incurred a net loss to common shareholders of $1,333,576, compared to a net loss in the first quarter of 2004 of $1,503,939. Our net cash provided by operating activities for the quarter was $109,183. We would have used more cash had it not been for a slow-down in payment of routine vendor payables.

     Accounts payable increased by $1.022 million from December 31, 2004, to March 31, 2005. This increase in accounts payable relates primarily to the slow-down in payments to vendors to conserve cash.

     Revenue decreased by $582,414 from first quarter 2004 to first quarter 2005, primarily due to interruptions in the installation process, which is how we recognize revenue. These interruptions were caused by a shortage of qualified installation staff caused in part by low unemployment rates in the construction industry, which is due primarily to a robust new construction market. In future months, we intend to increase installed contract revenue by emphasizing the need to hire more installation crews. We intend to advertise for more help wanted in local market newspapers and online help wanted services, offer referral incentives to existing installation and administrative staff and expand the use of subcontract crews if needed so as to meet our revenue goals.

     Our income and (loss), by month, in the first quarter of 2004 and 2005, are as follows:

2004

2005

January

$  (729,086)

$ (595,282)

February

(586,954)

(773,244)

March

(187,899)

34,950 

     We recorded as advances approximately $416,000 of incentive commissions in March of 2005 that were expensed in prior periods, as a one time benefit recognized in the first quarter of 2005. The effect of this change was to increase other receivables and to decrease selling, general and administrative expenses by $416,000 in the first quarter of 2005. During 2004, we implemented changes in the method of compensating certain employees, which would allow us to record these payments as advances for payments made to marketing, advertising and sales management personnel. We migrated from a base salary plus incentive commissions program to a mostly incentive commission only compensation program to alleviate some of the seasonality of the payments with more incentives being paid during the higher sales months than during the slower months. From 2004 to the end of the first quarter of 2005, we fully implemented this change in the compensation method. If we had completed the implementation of the changes in the compensation methods as of December 31, 2004, the effect would have been a benefit of approximately $250,000 on the financial statements.

     In accordance with our debt agreements, in October of 2004, we resumed interest payments and beginning in November 2004, resumed payments of principal. During the fourth quarter of 2004 and into the first quarter of 2005, we determined that we would be unable 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. 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.

     Based on the loan agreements amended in March, 2005, interest payments during 2005, on the long-term debt during 2005 will be approximately $1.25 million and principal payments will be $100,000. Cash flow forecasts for the next twelve months indicate we will generate sufficient cash to meet long-term debt service obligations. The forecast, for the twelve months ending December 31, 2005, projects revenues of $73 million and earnings before interest, income tax, depreciation and amortization of $3.2 million. The forecast for the first quarter of 2005 revenue was $15.4 million and EBITDA of a negative $83,000. We believe we will be able to recover the lost revenues and EBITDA by improving operating performance and cash flow over the next twelve months with plans to continue a national marketing effort shifting emphasis from direct marketing to a less expensive media driven advertising model thereby realizing significant cost sa vings and other cost efficiencies. In October, 2004, we consolidated a call center in Orange County California with another 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. In the first quarter of 2005 as compared to the first quarter of 2004, our selling, general and administrative expenses decreased from $7.5 million to $7.0 million realizin g approximately a $500,000 savings due to the above mentioned initiatives.  The first quarter 2005 net loss would have been more by $416,000 had it not been for the change in compensation method for certain employees as described above.

     With respect to the classification of debt as non-current, GE Capital revised the loan covenants in March of 2005 to enable us to comply with less restrictive covenants. The amended covenants for 2005 and 2006 enable us to comply in future quarters, assuming achievement of the forecast. Under the revised covenants, there are no compliance requirements for the first quarter of 2005. For the remaining quarters of 2005 and 2006, covenants are less restrictive than in prior agreements. The forecasts for 2005 and 2006, stated above in Note 2, indicate that it is reasonably possible to meet covenant requirements in future periods. Accordingly, the debt is classified as non-current.

     We expect positive cash from operations beginning in the second quarter. In the event we do not return to positive cash from operations we will not be able to meet our revised debt covenants, thereby making our long-term debt currently due, and we will need to re-evaluate our goodwill for potential further impairment and related write-offs.

     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 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 $400,000 through March 31, 2005. We have appealed the latest decision and received a favorable decision from the appeals court. The case has now returned to the trial court for further proceedings on the accrual and payment of interest. The Jefferson Circuit Court has initially ruled that interest is due and owing, but we have filed a motion to alter or amen d the ruling as to the amount and payment of the interest. Whatever the ruling on interest, it is likely the losing party will appeal.

     During 2005, accounts receivable balances as a percentage of revenue, compared to the same period in 2004, decreased from 25 percent to 22 percent. During 2004, we studied the increase in our accounts receivable balances and observed the following; (i) turnover in personnel at key positions in the accounting department at the corporate and subsidiary level resulted in a reduction in experienced and trained personnel in the accounts receivable collection area and therefore collections did not get 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 which resulted in higher receivable balances for that period, (iii) customer financing sources trended towards more secured financing contracts which take more time than traditional unsecured financing and therefore may be outstanding for a lo nger period of time resulting in higher receivable balances, and (iv) 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 believed that the above mentioned factors were temporary in nature and would not materially impact the quality and value of our accounts receivable balances at December 31, 2004. We have successfully reduced the levels of accounts receivable in the first quarter of 2005 with our accounts receivable balance, net of the allowance for doubtful accounts, of $3.067 million, which is $.687 million less than at the same date last year.

     Our inventory balances increased in the first quarter of 2005 compared to 2004 by $419,000. 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 12% more windows in the first quarter of 2005 over the first quarter of 2004, which is approximately $124,000 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 subsi diary 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.

     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 not in compliance with 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 and 31, 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.

     While we believe operating results have stabilized and will improve in 2005, we cannot support our current debt level. 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.

     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 it be reasonably expected another lender will 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. Due to these and other factors, there is substantial doubt about our ability to continue as a going concern.  

     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.

Pending Litigation

     ThermoView does not anticipate any significant adverse effect on our results of operations through March 2005 because of the Clemmens litigation described in Part II, Item 1, Legal Proceedings. Although we believe that we will prevail upon appeal of the claim, an adverse outcome in this action could have a material adverse effect on our cash flow.

Item 3.   Quantitative and Qualitative Disclosures about Market Risk

     In June 2003, we restructured our debt and all of our debt continues to be 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 10% to 11%) would not have resulted in a significant change in the fair value of our fixed-rate debt.

Item 4.   Controls and Procedures

     As of March 31, 2005, an evaluation was carried out under the supervision and with the participation of ThermoView's management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based on their evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that ThermoView's disclosure controls and procedures are, to the best of their knowledge, effective to ensure that information required to be disclosed by ThermoView in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. Subsequent to March 31, 2005, our Chief Executive Officer and Chief Financial Officer have concluded that there were no significant changes in ThermoView's internal control over financial reporting or in other factors that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Part II - OTHER INFORMATION

Item 1.   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 Messrs. Cle mmens 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 rat e 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 assets, 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 the entir e 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. On April 13, 2005, the Supreme Court of Kentucky denied Clemmens' motion for discretionary review. The matter has now returned to Jefferson Circuit Court for further proceedings consistent with the appellate rulings. The Jefferson Circuit Court has initially ruled that interest is due and owing, but we have filed a motion to alter or amend the ruling as to the amount and payment of the interest. Whatever the ruling on interest, it is likely the losing party will appeal. The Jefferson Circuit Court is also determining whether to retain the supersedeas bond for the current interest payment issue. Maxwell has not asserted a claim for the loss of his collateral as of the date of filing of this report. Maxwell could assert claims for the same amount as Clemmens. Management has evaluated the potential loss associated with Clemmens' litigation and Maxwell's unasserted claim and believes that the recorded liabilities on our balance sheet as of March 31, 2005 are adequate. While management believes 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 and the other $500,000, plus interest, guaranteed by Maxwell could become payable without any sinking fund as set aside for the Clemmens guarantee.

Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds

          None.

Item 3.   Defaults upon Senior Securities

          None.

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

          None.

Item 5.   Other Information

          None.

Item 6.   Exhibits

          See Index to Exhibits.

SIGNATURES

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

ThermoView Industries, Inc.

Date: May 23, 2005

By: /s/ Charles L. Smith             

     Charles L. Smith,

     Chief Executive Officer

     (principal executive officer)

Date: May 23, 2005

By: /s/ David A. Anderson            

     David A. Anderson,

     Chief Financial Officer

     (principal financial and accounting
     officer)

SCHEDULE A
TO INDEX TO EXHIBITS

     Exhibit Number 10.2 Amended and Restated Series B Promissory Note dated as of March 31, 2005, was executed by the registrant and issued to the individuals in the amounts specified:

Name

Amount

Bruce Merrick

$ 24,105.94

Emerging Business Solutions

35,864.24

George T. Underhill

25,104.94

J. Sherman Henderson

25,104.94

Mitchell W. Wexler

71,728.47

Raymond C. Dauenhauer

25,104.94

Robert L. Cox II

107,583.67

Ronald L. Carmicle

25,104.94

Stephen Townzen

35,864.24

Stephen A. Hoffmann

93,246.99

Charles L. Smith

337,123.66

Robert L. Cox

179,321.10

Daniel F. Dooley

17,932.10

Dart Investors, LLC

609,692.04