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Thermoview Industries Inc – ‘10-K405’ for 12/31/01

On: Tuesday, 3/26/02 · For: 12/31/01 · Accession #: 912057-2-11544 · File #: 1-15469

  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 3/26/02  Thermoview Industries Inc         10-K405    12/31/01    5:227K                                   Merrill Corp/FA

Annual Report — [x] Reg. S-K Item 405 — Form 10-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-K405     Form 10-K                                             74    355K 
 2: EX-10.108   Material Contract                                      6     24K 
 3: EX-16.1     Letter re: Change in Certifying Accountant             2     12K 
 4: EX-99.1     Miscellaneous Exhibit                                  3     16K 
 5: EX-99.2     Miscellaneous Exhibit                                  1      6K

10-K405 — Form 10-K
Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (Word, et al.) Business Certain Relationships and Related Transactions Changes in and Disagreements With Accountants on Accounting and Financial Disclosure Directors and Executive Officers of the Registrant Executive Compensation Exhibits, Financial Statement Schedules, and Reports on Form 8-K Financial Statements and Supplementary Data Legal Proceedings Management's Discussion and Analysis of Financial Condition and Results of Operations Market for Registrant's Common Equity and Related Stockholder Matters Properties Quantitative and Qualitative Disclosures About Market Risk Risk Factors Security Ownership of Certain Beneficial Owners and Management Selected Financial Data Series B preferred stock Submissions of Matters to Vote of Security Holders
1	1st Page - Filing Submission
2	Item 1. Business
12	Risk Factors
15	Item 2. Properties
16	Item 3. Legal Proceedings
17	Item 4. Submissions of Matters to Vote of Security Holders
18	Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
19	Item 6. Selected Financial Data
21	Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
32	Item 7a. Quantitative and Qualitative Disclosures About Market Risk
33	Item 8. Financial Statements and Supplementary Data
38	Series B preferred stock
69	Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
"	Item 10. Directors and Executive Officers of the Registrant
"	Item 11. Executive Compensation
"	Item 12. Security Ownership of Certain Beneficial Owners and Management
70	Item 13. Certain Relationships and Related Transactions
"	Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

10-K405 1st Page of 74 TOC ↑Top Previous Next ↓Bottom Just 1st
================================================================================

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, 2001

/ / 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 / /

10-K405 2nd Page of 74 TOC 1st Previous Next ↓Bottom Just 2nd
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]

BASED UPON THE MARCH 18, 2002 AMERICAN STOCK EXCHANGE CLOSING PRICE OF
$1.20 PER SHARE, THE AGGREGATE MARKET VALUE OF THE REGISTRANT'S OUTSTANDING
COMMON STOCK, $.001 PAR VALUE, HELD BY NON-AFFILIATES WAS APPROXIMATELY
$7.7 MILLION.

AS OF MARCH 18, 2002, 8,258,111 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 2002 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON APRIL 25,
2002, ARE INCORPORATED BY REFERENCE INTO 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 retail commercial customers. We also sell and install
replacement doors, textured coatings, vinyl 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 and one retail
business. At December 31, 2001, we had 900 full-time employees and had
facilities in 13 states, primarily in the Midwest and southern California. For
calendar 2000, we generated consolidated revenues of approximately $98 million,
and for calendar 2001, we generated consolidated revenues of approximately $90
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.

- 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 extrusions are stronger
than vinyl, withstand weather and climate extremes, are impact
resistant and can be produced in many colors. We own 40% of the joint
venture operation.

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

- We plan to work towards opening new retail offices in the South,
Southwest and Midwest.

- Since we continue to assist our customers in obtaining financing for
about 50% of our sales, we intend to explore economically beneficial
strategic alliances with the companies that provide financing to our
customers.

Our custom vinyl 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 growth focus to 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
significantly increased from 1993 through 1998. Today, vinyl windows are the
most popular replacement window. We believe that factors driving demand in the
replacement window industry include:

- the aging existing housing stock;

- job and wage growth;

- consumer confidence levels;

- consumer credit conditions;

- interest rates;

- demographic trends;

- 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 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. In 2000 and continuing into 2001, 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 four lines of custom-made replacement vinyl
windows. Each of our lines consists of a broad range of window options including
awning, bay, bow, double hung, garden and slider replacement windows. We offer
the Barricade, Thermal Line, Thermal Industries and Great Lakes lines of windows
tailored to fit the various remodeling and financial needs of our customers.

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 in both their main frame and sash 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
and Rolox subsidiaries utilize the Barricade window. In January 2002, we
selected Winchester to design and build a new line of windows incorporating
climate-resistant composite resin materials. We will purchase the components
used to manufacture these windows from our joint venture extrusion operation.

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 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 14% of Thermal Line's sales are to Leingang, another
ThermoView subsidiary, with the balance sold to external customers. Thermal Line
does not sell windows to other ThermoView subsidiaries.

THERMAL INDUSTRIES WINDOW. Thermo-Shield Co., Inc., utilizes Thermal
Industries as their primary window supplier. Thermal Industries is

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headquartered in Pittsburgh, Pennsylvania, and is not one of our affiliates. The
most requested product by Thermo-Shield customers is their "exclusive solution"
double hung window. The double hung line of vinyl windows is available in a
variety of styles and options for every budget. Features such as insulating
sashes and frames provide extra warmth in critical points where windows need it
most. High performance glass packages, designed specifically for each customer's
climate, can provide increased R-value, reduce sound transmission and enhance
security. In addition, these windows are "energy star" compliant, which means
year-round energy savings. All of these benefits strive to make the homes we
serve more comfortable.

GREAT LAKES WINDOW. Great Lakes, a subsidiary of Nortek, which is a large
building material conglomerate, 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 and ThermoView of California design,
sell and install Great Lakes' top of the line UNIFRAME product line.

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 through the
Thermal Line manufacturing subsidiary for Leingang and through unrelated
third-party manufacturers for the balance of the retail subsidiaries. This
process involves the retro-fitting of existing homes with custom-made, energy
efficient, vinyl-clad 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 competitor advantage over the small,
fragmented competition.

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

- 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.

- 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 $15,000 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 $10,000 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 which range in cost to our customer from $3,000 to $10,000 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 $20,000. 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 $18,000 as installed depending on the size and options chosen.

RETAIL BUSINESSES. ThermoView's retail segment consists of the following
businesses:

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THOMAS CONSTRUCTION, INC. Thomas Construction, Inc., founded in 1981 and
headquartered in Earth City, Missouri, designs, sells and installs replacement
and new construction windows, siding, patio enclosures, kitchen and bathroom
remodeling, roofing and various other home improvement products in Illinois and
Missouri. Thomas had 240 employees as of December 31, 2001. Rodney H. Thomas, a
former principal of Thomas and related companies for 30 years, and Stephen C.
Townzen, an employee of the business for 15 years, manage 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 and new construction windows, siding, patio enclosures,
kitchen and bathroom remodeling, roofing and various other home improvement
products in California. ThermoView of California had 162 employees as of
December 31, 2001. Robert E. Graham, an employee of the business for 8 years,
manages its operations.

PRIMAX WINDOW COMPANY. Primax Window Company, founded in 1981 and
headquartered in Louisville, Kentucky, sells and installs vinyl replacement
windows and doors as well as bathroom remodeling in Indiana, Kentucky and Ohio.
George Jenkins, a former principal of Primax, manages its operations. We merged
the operations of Thermo-Tilt Window Company in Owensboro, Kentucky, into the
Primax business in 2000. ThermoView of Missouri, Inc. (formerly NuView) with
continuing operations in Decatur Illinois, and St. Louis, Missouri (Bath Fitter
product line only) was integrated into Primax commencing February, 2001. Primax,
including the integrated businesses, had 200 employees as of December 31, 2001.

THE THERMO-SHIELD COMPANIES. The Thermo-Shield Companies, comprised of
three remaining corporations, founded in 1984 and headquartered in Wheeling,
Illinois, sell, furnish and install replacement windows and siding and also
conduct cabinet refacings in Illinois, Wisconsin and Indiana. Operations in
Michigan and Arizona were closed in 2000 and early 2001. The Thermo-Shield
Companies had 52 employees as of December 31, 2001. Jerry Gentile, an employee
of the business for 7 years, manages its operations.

THE ROLOX COMPANIES. The Rolox Companies, founded in 1973 and headquartered
in Kansas City, Kansas, sell and install vinyl replacement windows, steel doors
and storm siding in Arkansas, Iowa, Kansas, Missouri, Nebraska and Oklahoma.
Rolox had 110 employees as of December 31, 2001. Robert L. Cox II, a former
principal of Rolox for 17 years, 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
exterior remodeling products such as premium replacement windows, steel, vinyl
and seamless steel siding, asphalt and cedar roofs, soffit and fascia, doors,
awning, seamless gutters and cabinet refacing in North Dakota and South Dakota.
Leingang had 74 employees as of December 31, 2001. Alvin W. Leingang, a former
principal of Leingang and related companies for 24 years, and John Frohlich, an
employee of the business for 18 years, manage its operations.

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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 four lines of
custom-made replacement vinyl windows. Our Thermal Line Windows plant in North
Dakota manufactures one line, and the other three lines are manufactured by
unaffiliated third parties: Winchester Industries, Inc., located in Saltsburg,
Pennsylvania, Great Lakes Window, Inc., located in Toledo, Ohio, and Thermal
Industries Window located in Pittsburgh, Pennsylvania.

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:

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

- 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;

- 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;

- 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;

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

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

- 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

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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. Previously, Thermal
Line purchased its extrusions from the company that our recently formed joint
venture acquired. 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.

With the increased emphasis on unrelated third-party manufacturing, our
reliance upon other suppliers may lessen depending upon the suppliers of the
unrelated third-party manufacturers. Additionally, unrelated third-party vendors
have manufactured our products other than replacement windows since our
inception. We have relied on one or two third party vendors for the manufacture
of each of our products to provide us with manufacturing consistency and volume
discounts.

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 1996 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 employees as of December 31, 2001. Alvin W. Leingang, a
former principal of Thermal Line Windows and related companies for 24 years, and
Dennis Buchholz, an employee of the business for 11 years, manage its
operations. Approximately 14% of Thermal Line's sales are to Leingang 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, but each subsidiary also maintains its own advertising and
promotions staff for activities best handled locally. An advertising committee
comprised of subsidiary managers is headed by Rod Thomas. 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 target area.

ADVERTISING. We generally give the individual subsidiary discretion as to
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.

We utilize a number of methods to create opportunities for direct contact
with potential customers, including renting space at local fairs and

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maintaining kiosks at shopping malls. Other advertising and promotion media used
to acquire bona-fide sales leads include direct mail, television spots,
newspaper inserts, home magazine ads, internet-based advertising, neighborhood
canvassing and telemarketing.

While the form of media may vary, each media message carries an attractive
offer to homeowners who may be considering a home improvement. This offer may
include an opportunity to enter our Home Improvement Sweepstakes, savings 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 a
predictive dialing system, an automated system that calls multiple phone numbers
at once and only directs to the operators those calls that are answered, we have
increased the 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.

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 ten-step
procedure for in-home sales presentations, which features a free, no-obligation
design and estimate of the work to be performed. Furthermore, in the training of
our sales staff, we instruct them 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, 2001 for approximately 50% of our sales, customers pay
in cash upon completion of installation of our products. For the remaining 50%
of sales, customers pay for the products under installment or conditional sales
contracts. 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 currently 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 to an extent consist of local lumber and home
improvement dealers. 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

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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, 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 in
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 name "ThermoView."

EMPLOYEES

As of December 31, 2001 we had in excess of 900 full-time employees. With
the exception of employees of Thermal Line Windows, none of our employees are
subject to a collective bargaining agreement. The employees at

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Thermal Line are members of the United Steel Workers of America. The three-year
contract with the employees of Thermal Line Windows expired on February 1, 2001.
A new three-year contract has been agreed upon and approved with a term ending
February 1, 2004. 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 who 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:

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

- our ability to successfully integrate our past acquisitions; and

- 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 THE MARKET FOR OUR COMMON STOCK

WE MAY 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

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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. Currently, we
have options and warrants to purchase in the aggregate 6,865,221 hares of our
common stock. Many 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 OUR OPERATIONS

WE HAVE A HISTORY OF OPERATING LOSSES

We have incurred a net loss attributable to common stockholders before
extraordinary items 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 12% dividends on our Series D and Series E preferred stock and the
10% to 12% 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, 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

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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 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 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 956,900 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.

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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 limited 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 continue to believe that these claims are without
merit and intend to vigorously defend the suits, an adverse outcome in any of
these actions could have a material adverse effect on our financial position,
results of operations and 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 results of
operations and financial condition.

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.

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LEASE EXPIRATION
THERMOVIEW OR PROPERTY DESCRIPTION DATE (EXCLUSIVE OF
SUBSIDIARY AS LESSEE PROPERTY ADDRESS AND USE RENEWAL OPTIONS)
-------------------- ---------------- ------- ----------------

RETAIL SUBSIDIARIES:
Leingang Siding and Window, Inc. ..... 2601 Twin City Drive 6,000 sq. ft. December 2006
Mandan, ND 58554 Office / Warehouse
Primax Window Co. .................... 5611 Fern Valley Road 15,000 sq. ft. Month-to-month
Louisville, KY 40228 Headquarters
Rolox, Inc. .......................... 4002 Main Street 16,000 sq. ft. April 2002
Grandview, MO 64030 Headquarters /
Warehouse
1440 S. Ridge Road 10,000 sq. ft. April 2002
Wichita, KS 67209 Office / Warehouse
Thermo-Tilt Window Company............ 2800 Warehouse Road 24,000 sq. ft. December 2002
Owensboro, KY 42301 Warehouse plus 9,000
sq. ft. Office
ThermoView of California.............. 8445 Camino Sante Fe 9,000 sq. ft. January 2005
San Diego, CA 92121 Headquarters /
Office
6627 Valjean Avenue 12,600 sq. ft. January 2005
Van Nuys, CA 91406 Office / Warehouse
Thomas Construction, Inc. ............ 13397 Lake Front Dr. 60,000 sq. ft. December 2013
Earth City, MO 63045 Office / Warehouse
Thermo-Shield Company, LLC. .......... 661 Glenn Avenue 17,000 sq. ft. October 2007
Wheeling, IL 60090 Office / Warehouse
MANUFACTURING SUBSIDIARIES:
Thermal Line Windows, Inc. ........... 3601 30th Ave., NW 49,500 sq. ft. December 2006
Mandan, ND 58554 Headquarters / Office /
Manufacturing
Precision Window Mfg., Inc. .......... 1200 Andes Boulevard 66,600 sq. ft. June 2002
Creve Coeur, MO 63132 Office / Warehouse

The leases of our properties provide for monthly rentals ranging from
approximately $500 to $37,500. We are presently negotiating a sublease for the
space no longer occupied by Precision Window Mfg., Inc. See footnote 5 to our
consolidated financial statements for the year ended December 31, 2001, which
appears on page 47 of this Form 10-K, for more information regarding our leases.

ITEM 3. LEGAL PROCEEDINGS

On March 3, 2000, Pro Futures Bridge Capital Fund, L.P. and Bridge Capital
Partners, Inc. Defined Benefit Pension Plan filed an action titled PRO FUTURES
BRIDGE CAPITAL FUND, L.P. V. THERMOVIEW INDUSTRIES, INC., ET AL., Civil Action
No. 00CV0559 (Colo. Dist. Ct., March 3, 2000) against ThermoView, its directors,
certain officers, a former employee and a stockholder alleging breach of
contract, common law fraud, fraudulent misstatements and omissions in connection
with the sale of securities, negligent misrepresentations and breach of
fiduciary duty. These claims are in connection with the mandatory conversion of
ThermoView's 10% Series A convertible preferred stock, held by the two funds,
into common stock upon completion of the initial public offering in December
1999, and purchases by the two funds of ThermoView common stock from ThermoView
stockholders. The funds are seeking rescission of their purchases of the Series
A preferred

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stock in the amount of $3,250,000, plus interest and unspecified damages in
connection with their purchases of the common stock. ThermoView filed a notice
to dismiss certain claims and an answer denying liability in the remainder of
the claims. ThermoView also exercised an election for the removal of the action
to the United States District Court of Colorado in Civil Action No. 00-B-722. In
December 2001, the Court dismissed all claims against ThermoView by the grant of
summary judgment. In January 2002, ProFutures filed a notice to appeal the
Court's grant of summary judgment in the United States Court of Appeals for the
Tenth Circuit. The Court of Appeals has yet to rule on this appeal. Although
ThermoView continues to believe that the claims are without merit and intends to
vigorously defend the suit, we cannot predict the outcome of the matter,
however, it could have a material adverse effect on our results of operations
and cash flow. No amounts have been provided in the accompanying consolidated
financial statements for this matter.

On August 1, 2001, Scott Ferguson filed a civil action styled SCOTT
FERGUSON V. THERMOVIEW INDUSTRIES, INC., ET. AL., Civil Action No. 01-CI-005295
(Jefferson Circuit Court, August 1, 2001) seeking damages resulting from an
investment in Series A preferred stock. This suit alleges claims similar to the
claims advanced by ProFutures Bridge Capital Fund, L.P. and Bridge Capital
Partners, Inc. Defined Benefit Pension Plan, in their action detailed above. By
agreement of the parties, the claims will be held in abeyance until final
resolution of the ProFutures matter. Our management believes that we have
adequate defense to this litigation, and in the event of an adverse outcome to
us, we do not believe that the loss would have a material adverse effect on us.

On November 19, 2001, Nelson E. Clemmens, former director and president
of the Company, filed an action titled NELSON E. CLEMMENS V. THERMOVIEW
INDUSTRIES, INC., Civil Action No. 01-CI-07901 (Jefferson Circuit Court,
November 19, 2001) against ThermoView alleging subrogation and indemnity
rights associated with Mr. Clemmens' loss of guaranty collateral to PNC Bank,
N.A. These claims are in connection with the April 2000 amendment to
ThermoView's 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,
ThermoView 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 regard to guaranty of $1,000,000. The Clemmens suit
seeks to determine the respective rights and duties of the parties concerning
the loss of collateral. Our management believes that no payment should be
made for loss of guarantor collateral and we have filed an answer and
counter-claim in defense of our legal position. An unfavorable determination
of our position regarding this matter could have a material adverse effect on
our cash flow.

ITEM 4. SUBMISSIONS OF MATTERS TO VOTE OF SECURITY HOLDERS

None.

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PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

(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 traded
our common stock on the OTC Bulletin Board under the symbol "TVIID" after a
1-for-3 reverse stock split of our common stock that occurred on October 5,
1999, and prior thereto under the symbol "TVII." The OTC Bulletin Board is a
regulated quotation service that displays real-time quotes, last-sale prices and
volume information in over-the-counter equity securities. 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 and as adjusted to
reflect the 1-for-3 reverse stock split which occurred on October 5, 1999. The
American Stock Exchange and OTC Bulletin Board market quotations reflect
inter-dealer prices, without retail mark up, mark down or commission and may not
necessarily represent actual transactions.

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PRICE RANGE
-----------
HIGH LOW
---- ---

CALENDAR YEAR 2000
First Quarter........................................................................... $ 5.00 $ 2.68
Second Quarter.......................................................................... 3.50 1.31
Third Quarter........................................................................... 1.38 .63
Fourth Quarter.......................................................................... .63 .19
CALENDAR YEAR 2001
First Quarter........................................................................... .90 .31
Second Quarter.......................................................................... 1.41 .46
Third Quarter........................................................................... 1.30 .86
Fourth Quarter.......................................................................... 1.05 .60

On March 18, 2002, the last reported sale price of the common stock on the
American Stock Exchange was $1.20 per share.

As of March 1, 2002 there were 241 holders of record of our stock
consisting of 234 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;

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- financial condition; and

- future prospects.

ITEM 6. SELECTED FINANCIAL DATA

The following tables present selected historical statement of operations
and balance sheet financial data for ThermoView. On April 15, 1998, ThermoView
acquired all of the outstanding stock of Thermo-Tilt Window Company. Prior to
that date, ThermoView was a development stage corporation and had no business
operations since its incorporation. For accounting and financial statement
presentation purposes, Thermo-Tilt is deemed to be the acquirer. The statement
of operations data for the period January 1, 1998 through April 15, 1998 and the
financial data as of and for the year ended December 31, 1997 reflect only the
operations of Thermo-Tilt. During the period April 1998 through July 1999, we
acquired 12 retail and manufacturing businesses. These acquisitions have been
accounted for as purchase transactions and, accordingly, the results of
operations of the acquired businesses are included in the historical financial
data since their respective acquisition dates.

The selected financial data for ThermoView as of December 31, 1997, 1998,
1999, 2000 and 2001 and for each of the five years in the period ended December
31, 2001, have been derived from the audited financial statements of ThermoView.

The following unaudited pro forma statement of operations data with respect
to the years ended December 31, 1998 and 1999, give effect to each of our
acquisitions, as if all transactions had occurred on January 1, 1998. We have
presented this pro forma data for informational purposes only, in order to
provide you with some indication of what our business might have looked like if
we had owned all of the acquired companies since January 1, 1998. These
companies may have performed differently if they had actually been combined with
our operations. You should not rely on the unaudited pro forma information as
necessarily being indicative of the historical results that we would have had or
the results that we will experience in the future.

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.

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YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
HISTORICAL PRO FORMA
------------------------------------------------------------------------
1997 1998 1999 2000 2001 1998 1999
---- ---- ---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

STATEMENT OF OPERATIONS DATA:
Revenues............................. $ 5,629 $ 37,376 $108,198 $ 98,472 $ 90,327 $ 102,115 $ 110,700
Cost of revenues earned.............. 2,889 16,748 48,727 47,145 42,697 48,092 49,460
-------- -------- -------- --------- -------- --------- ---------

Gross profit......................... 2,740 20,628 59,471 51,327 47,630 54,023 61,240
Selling, general and administrative
expenses........................... 3,293 20,233 53,478 52,662 42,809 49,427 55,030
Stock-based compensation expense..... 1 5,509 71 - - 5,509 71
Unusual charges...................... - - - 11,150 - - -
Depreciation expense................. 69 297 966 1,204 1,175 667 994
Amortization expense................. - 972 3,393 3,356 2,805 2,718 3,444
-------- -------- -------- --------- -------- --------- ---------

Income (loss) from operations........ (623) (6,383) 1,563 (17,045) 841 (4,298) 1,701
Interest expense..................... (90) (439) (2,962) (4,711) (3,035) (2,394) (3,047)
Other income (expense)............... (19) 69 112 153 66 465 112
-------- -------- -------- --------- -------- --------- ---------

Loss before income taxes............. (732) (6,753) (1,287) (21,603) (2,128) (6,227) (1,234)
Income tax expense (benefit)......... (266) (1,148) 370 1,672 - (594) 395
-------- -------- -------- --------- -------- --------- ---------

Loss before extraordinary item....... (466) (5,605) (1,657) (23,275) (2,128) (5,633) (1,629)
Extraordinary item-gain on
forgiveness of debt................ - - - - 7,150 - -
-------- -------- -------- --------- -------- --------- ---------
Net income (loss).................... (466) (5,605) (1,657) (23,275) 5,022 (5,633) (1,629)

Less amount attributable to sole
proprietor......................... (398) - - - - - -
Less preferred stock dividends:
Cash .............................. - (585) (2,005) (101) - (785) (2,005)
Non-cash........................... - (9,540) (2,492) (1,813) (346) (9,540) (2,492)
Plus:
Benefit of converting Series C to
warrant.......................... - - - 5,809 - - -
Benefit of Series D redemption..... - - - 1,092 397 - -
-------- --------- -------- --------- -------- --------- ---------

Net income (loss) attributable to
common stockholders............... $ (864) $ (15,730)$ (6,154) $ (18,288) $ 5,073 $ (15,958) $ (6,126)
======== ========= ========= ========= ========= ========= =========

Basic and diluted loss per common share
(see note below):
Loss attributable to common
stockholders before extraordinary
item $ (3.96)$ (1.19) $ (2.28) $ (.25)$ (3.28) $ (1.18)
Extraordinary item.................. - - - .86 - -
--------- --------- --------- --------- --------- ---------
Income (loss) attributable to
common stockholders............... $ (3.96)$ (1.19) $ (2.28) $ .61 $ (3.28) $ (1.18)
========= ========= ========= ========= ========= =========

Weighted average shares outstanding.. 3,975,235 5,164,497 8,038,291 8,328,523 4,858,134 5,192,705
========= ========= ========= ========= ========= =========

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AS OF DECEMBER 31,
-------------------------------------------------------
1997 1998 1999 2000 2001
---- ---- ---- ---- ----
(IN THOUSANDS)

BALANCE SHEET DATA:
Total assets............................................ $ 1,503 $ 54,094 $ 93,971 $ 71,711 $ 71,200
Long-term debt including current maturities............. 527 9,206 21,759 23,316 17,917
Total liabilities....................................... 1,326 15,796 37,647 32,767 25,949
Mandatorily redeemable preferred stock.................. - - 4,649 6,194 6,943
Stockholders' equity.................................... 177 38,298 51,675 32,750 38,308

----------
Note: We have described the method used to calculate loss per common share in
footnote 1 to our consolidated financial statements for the year ended
December 31, 2001, which appears on page 42 of this Form 10-K.

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 refacings and kitchen and bathroom remodeling products, as
well as residential roofing. We financed a portion of our customers' purchases
through Key Home Credit, our consumer finance subsidiary. However, we closed our
finance subsidiary in July 2000 since expanding the subsidiary would have
required considerable capital.

On April 15, 1998, we acquired all of the outstanding stock of Thermo-Tilt
Window Company in exchange for 3,120,000 shares of our common stock, which
represented 90% of ThermoView's then outstanding common stock. Thermo-Tilt is
deemed to be the acquirer for accounting purposes.

BUSINESS SEGMENTS

Our subsidiaries have separate management teams and infrastructures and
operate in three reportable operating segments: retail, manufacturing and
financial services.

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

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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 replacement windows to one of our retail companies
and to unaffiliated customers. Sales from the manufacturing segment to our
retail segment have been a larger percentage of our manufacturing revenues in
prior years, however, now all but one of our retail subsidiaries obtain windows
manufactured from unaffiliated vendors. 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.

FINANCIAL SERVICES. Our financial services segment financed credit sales of
our retail segment. We closed Key Home Credit, ThermoView's Owensboro, Kentucky,
finance subsidiary, in July 2000 since expanding the subsidiary would have
required considerable capital. We decided that we could more effectively employ
capital to expand our retail business.

You should refer to footnote 14 to our financial statements for the year
ended December 31, 2001, which appears on page 64 of this Form 10-K for
additional financial information about each of our business segments.

MANAGEMENT'S DISCUSSION OF CRITICAL ACCOUNTING POLICIES

The accounting policies discussed below are considered by management to be
critical in understanding the Company's financial statements because their
application places the most demands on management's 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

The Company evaluates its goodwill and other long-term assets for
impairment and assesses their recoverability based upon anticipated future cash
flows. If facts and circumstances lead the Company's management to believe that
the cost of one of its assets may be impaired, the Company 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.

REVENUE AND COST RECOGNITION

The Company recognizes revenues from fixed-price contracts on the
completed-contract method since the contracts are of a short duration. A
contract is considered complete when the home improvement product has been
installed.

Contract costs include all direct material and labor costs and those
indirect costs related to contract performance such as indirect labor and
supplies. General and administrative costs are charged to expense as incurred.
Provisions for estimated losses on uncompleted contracts are made in the period
in which such losses are determined.

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OTHER LOSS CONTINGENCIES

Other loss contingencies are recorded as liabilities when it is probable
that a liability has been incurred 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. Contingent liabilities
are often resolved 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 of this Form 10-K, Organization and Significant
Accounting Policies, which discusses accounting policies that must be
selected by management when there are acceptable alternatives.

HISTORICAL RESULTS OF OPERATIONS

The following financial information includes Thermo-Tilt plus the results
of operations of the companies acquired by us after April 15, 1998 from their
respective dates of acquisition.

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YEAR ENDED DECEMBER 31,
-----------------------
1999 2000 2001
---- ---- ----
(IN THOUSANDS)

Revenues......................................................... $ 108,198 $ 98,472 $ 90,327
Cost of revenues earned.......................................... 48,727 47,145 42,697
------------- ------------- -------------

Gross profit..................................................... 59,471 51,327 47,630
Selling, general and administrative expenses..................... 53,478 52,662 42,809
Stock-based compensation expense................................. 71 - -
Unusual charges.................................................. - 11,150 -
Depreciation expense............................................. 966 1,204 1,175
Amortization expense............................................. 3,393 3,356 2,805
------------- ------------- -------------

Income (loss) from operations.................................... 1,563 (17,045) 841
Interest expense................................................. (2,962) (4,711) (3,035)
Interest income.................................................. 112 153 66
------------- ------------- -------------

Loss before income taxes......................................... (1,287) (21,603) (2,128)
Income tax expense............................................... 370 1,672 -
------------- ------------- -------------

Loss before extraordinary item................................... (1,657) (23,275) (2,128)
Extraordinary item - gain on forgiveness of debt................. - - 7,150
------------- ------------- -------------
Net income (loss)................................................ (1,657) (23,275) 5,022

Less preferred stock dividends:
Cash.......................................................... (2,005) (101) -
Non-cash...................................................... (2,492) (1,813) (346)
Plus:
Benefit of converting Series C to warrant..................... - 5,809 -
Benefit of Series D redemption................................ - 1,092 397
------------- ------------- -------------

Net income (loss) attributable to common stockholders............ $ (6,154) $ (18,288) $ 5,073
============= ============= =============

1999 COMPARED TO 2000

REVENUES. Revenues decreased from $108.2 million in 1999 to $98.5 million
in 2000. Revenues decreased $9.7 million or 9.0% due primarily to fluctuations
in revenues for certain subsidiaries. Rolox and ThermoView of Missouri
collectively reported $2.4 million less revenues in 2000 than in 1999. This
reduced revenue was due to the negative effects of their window supplier's
quality control and delivery problems. Their window supplier was our
manufacturer (Precision) located in St. Louis, Missouri. Precision's inability
to produce and deliver windows resulted from its plant relocation in the first
quarter of 2000. Revenues from Thermo-Shield decreased $3.3 million due to
changing its lead generation strategy and the closing of two of its branch
operations that were unprofitable. Additionally, American Home Developers'
revenue decreased $2.9 million in 2000 as compared to 1999 as we closed the
operation.

GROSS PROFIT. Gross profit decreased from $59.5 million in 1999 to $51.3
million in 2000. This decline principally results from less revenue at
Thermo-Shield and American Home Developers as explained above, and the poor
operating performance at Precision, Rolox and ThermoView of Missouri. As a
percentage of revenues, gross profit decreased from 55.0% in 1999 to 52.1% in

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2000. This decrease results primarily because some costs at our subsidiaries are
fixed and these fixed costs are more significant relative to the lower volumes
in 2000 compared to 1999.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses decreased from $53.5 million in 1999 to $52.7 million in
2000. Selling, general and administrative expenses as a percentage of revenue
increased from 49.4% in 1999 to 53.5% in

UNUSUAL CHARGES. Unusual charges for 2000 amounting to $11.2 million
represent primarily goodwill write offs for two of our subsidiaries which we
closed, Precision and American Home Developers, plus other asset write offs and
expense accruals required by these closures.

DEPRECIATION EXPENSE. Depreciation expense increased from $966,000 in 1999
to $1.2 million in 2000 as a result of capital expenditures in 1999 and 2000.

AMORTIZATION EXPENSE. Amortization expense remained constant at $3.4
million in 1999 and 2000. Amortization expense increased in 2000 at several
subsidiaries as the former owners secured an increase to our purchase price of
their entities by achieving post-acquisition earnings targets. This increase was
offset by reduced amortization related to operations closed in 2000.

INTEREST EXPENSE. Interest expense increased from $3.0 million in 1999 to
$4.7 million in 2000 primarily as a result of interest, including accreted
discount, on the $10.0 million senior subordinated promissory note with GE
Equity, which began accruing in mid-1999, as well as interest on additional
amounts borrowed in early 1999 under the PNC Bank credit facility. Also, PNC
Bank charged us somewhat higher interest rates on the PNC credit facility in
2000.

INCOME TAX PROVISION. The provision for income taxes in 1999 differs from
the amount computed by applying the statutory U.S. Federal income tax rate to
loss before income taxes primarily as a result of state taxes and non-deductible
goodwill amortization. At December 31, 1999, we reported $1.7 million of
deferred income tax assets. Due to operating losses incurred during 2000, we
reported a significant taxable loss for the year ending December 31, 2000.
Management concluded that it is more likely than not that our deferred tax
assets will not be realized. As a result, the income tax provision for 2000
includes the effects of recognizing a valuation allowance against the deferred
tax assets that existed at December 31, 1999, and no additional deferred income
taxes have been recorded in 2000.

CASH DIVIDENDS. Cash dividends on our Series A and Series B preferred stock
amounted to $1.7 million in 1999. There were no cash dividends for 2000 on our
Series A and Series B preferred stock, since the preferred stock was converted
into shares of our common stock effective December 31, 1999.

Cash dividends on our Series C preferred stock amounted to $308,000 in 1999
and $101,000 in 2000. PNC Bank did not permit us to pay any cash dividends on
our Series C preferred stock after the first quarter of 2000.

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The first quarter of 1999 did not have any cash dividends on the Series C
preferred stock since it was issued in April 1999.

NON-CASH DIVIDENDS. Non-cash dividends of $1.7 million for 2000 represent
accretion of the discount on the mandatorily redeemable Series C preferred stock
related to the value of the detachable stock purchase warrants issued to the
Series C preferred stockholders and stock dividends paid to these stockholders.
Non-cash dividends of $2.5 million for 1999 relate to a beneficial conversion
feature of the mandatorily redeemable Series C convertible preferred stock
issued in April 1999, as well as accretion of the discount of the stock and
stock dividends.

BENEFIT OF CONVERTING SERIES C TO WARRANT. During 2000, the holders of our
Series C preferred stock agreed to convert all of their $6 million of preferred
stock, including related warrants, into a warrant to purchase 1,100,000 shares
of our common stock at an exercise price of $.28 per share. The excess of the
carrying amount of $6 million and the current fair value of the previously held
warrants to purchase 600,000 shares of our common stock at $12 per share over
the fair value of the warrant to purchase 1,100,000 shares of our common stock
at $.28 per share has been reflected as a $5,809,000 benefit of converting the
Series C preferred stock to a warrant.

BENEFIT OF SERIES D REDEMPTION. We redeemed 226,346 shares of Series D
preferred stock with a carrying amount of $1,131,300 for $40,000 from the prior
owners of an acquired business, as part of a severance settlement. We have
reflected the excess of the carrying amount over the consideration given of
$1,091,730 as a benefit of Series D redemption.

2000 COMPARED TO 2001

REVENUES. Revenues decreased from $98.5 million in 2000 to $90.3 million in
2001. This revenue decrease of $8.2 million is due primarily to fluctuations in
revenues of our retail subsidiaries. Revenues from Thermo-Shield decreased $5.7
million due to (a) changing its lead generation strategy, which should improve
its long-term performance but has an adverse effect on short-term operating
performance and cash flows; and (b) the closing of one of its branch operations
that was unprofitable. Thermo-Shield, because of the foregoing, is currently
underperforming. We have an investment in this subsidiary approximating $5.6
million at December 31, 2001. Because of cost cutting and other changes, we
expect to recover our investment in Thermo-Shield from its future cash flows.
Thomas Construction, our St. Louis subsidiary, experienced a weather-related
revenue decline of $1.3 million in 2001 compared 2000, and American Home
Developers had revenues of $1.4 million in 2000 before it was closed.

GROSS PROFIT. Gross profit decreased from $51.3 million in 2000 to $47.6
million in 2001 because of a reduction in volume as discussed above. As a
percentage of revenues, gross profit was 52.1% in 2000 compared to 52.7% in
2001.

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SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses decreased from $52.7 million in 2000 to $42.8 million in
2001. Selling, general and administrative expenses as a percentage of revenues
decreased from 53.5% in 2000, to 47.4% in 2001. The decrease in selling, general
and administrative expenses in 2001 represents a concerted effort by management
to reduce corporate and field expenses. We have taken steps to reduce
administrative expenses principally by terminating corporate employees and
relocating our corporate headquarters to one of our subsidiary locations. We are
also taking steps to reduce administrative expenses at all of our subsidiaries
by eliminating personnel, merging operations where appropriate, and
standardizing procedures.

UNUSUAL CHARGES. Unusual charges for 2000 amounting to $11.2 million
represent primarily goodwill write offs for two of our subsidiaries which were
closed, Precision and American Home Developers, plus other asset write offs and
expense accruals required by these closures.

DEPRECIATION EXPENSE. Depreciation expense remained constant in 2000 and
2001 at $1.2 million.

AMORTIZATION EXPENSE. Amortization expense decreased from $3.4 million in
2000 to $2.8 million in 2001. This decrease results from the elimination of
amortization of goodwill upon the closure of American Home Developers and
Precision Window Mfg., Inc., in July 2000 and August 2000, respectively.

INTEREST EXPENSE. Interest expense decreased from $4.7 million in 2000 to
$3.0 million in 2001. This decrease results from the reduction of interest
related to the elimination of nearly $7.0 million of debt during the first
quarter of 2001 in connection with a debt restructuring, a 2% reduction in the
stated interest rate on $10 million of our debt, and extended maturity dates on
some of our debt which reduced the monthly amounts of accretion of debt discount
following the first quarter of 2001.

INCOME TAX EXPENSE. Because of operating losses incurred during 2000,
management concluded that it was more likely than not that ThermoView's deferred
tax assets would not be realized and, accordingly, the deferred tax assets at
December 31, 2000 were fully offset by a valuation allowance. As a result,
income tax expense for 2000 includes the effects of recognizing a valuation
allowance against the deferred tax assets that existed at December 31, 1999. We
have continued in 2001 not to recognize the benefit of our net deferred tax
assets.

EXTRAORDINARY ITEM. The extraordinary item in 2001 represents a gain on
forgiveness of debt in connection with the restructuring of debt in March 2001.
The $7.2 million extraordinary gain is net of expenses and net of $82,000 of
value assigned to common stock purchase warrants issued in connection with the
settlement reached with our former senior lender, PNC Bank.

CASH DIVIDENDS. The cash dividends of $101,000 in 2000 represented
dividends on our mandatorily redeemable Series C convertible preferred stock.
The Series C preferred stock was converted to warrants in December 2000, and we
paid no cash dividends on any preferred stock in 2001.

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warrants issued to the Series C preferred stockholders and stock dividends paid
to these stockholders. The Series C preferred stock was converted to warrants in
December 2000, and there were, therefore, no similar non-cash dividends on this
preferred stock in 2001.

Non-cash dividends for 2000 also include 12% cumulative undeclared
dividends on the 300,000 shares of Series D preferred stock that were unpaid
at the time of conversion to Series E preferred stock on September 30, 2000
plus undeclared dividends for the fourth quarter on the Series E preferred
stock. The total of undeclared dividends for the Series E preferred stock for
2000 was $129,000. The Series D preferred stock accrued 12% dividends during
the entire fourth quarter of 2001 and the Series E preferred stock accrued
12% dividends throughout 2001. The total of undeclared dividends for Series D
and Series E preferred stock for 2001 was $347,000.

BENEFIT OF SERIES D STOCK REDEMPTION. In 2000, we redeemed 226,346 shares
of Series D preferred stock with a carrying amount of $1,131,300 for $40,000
from the prior owners of an acquired business, as part of a severance
settlement. We have reflected the excess of the carrying amount over the
consideration given of $1,091,730 as a benefit of Series D redemption. In 2001,
we redeemed 99,470 shares of Series D preferred stock with a carrying amount of
$497,350 for $100,000 from the prior owners of an acquired business. We have
reflected the excess of the carrying amount over the consideration given of
$397,350 as a benefit of Series D redemption in 2001.

NEW ACCOUNTING PRONOUNCEMENTS

In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS
No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other
Intangible Assets." SFAS No. 142 is effective for ThermoView as of January 1,
2002. Under the new rules, goodwill and indefinite lived intangible assets will
no longer be amortized but will be reviewed annually for impairment. Intangible
assets that are not deemed to have an indefinite life will continue to be
amortized over their useful lives.

The adoption of SFAS No. 142 requires that an initial impairment
assessment be performed on all goodwill and indefinite lived intangible
assets. To complete this assessment, we will compare the fair value to the
current carrying value of goodwill. Fair values will be derived using cash
flow analysis. Any impairment charge resulting from this initial assessment
will be recorded as a cumulative effect of an accounting change. We estimate
the cumulative effect of adopting this standard will result in a non-cash
charge in the first quarter of 2002 of at least $30 million on a pretax
basis. We expect that the adoption of this new standard will also benefit
earnings beginning in 2002 by approximately $2.7 million in reduced
amortization of goodwill. Prior to the adoption of this standard, the Company
evaluated its goodwill for impairment based upon anticipated future
undiscounted cash flows.

In August 2001, FASB issued SFAS No. 144, "ACCOUNTING FOR THE IMPAIRMENT OR
DISPOSAL OF LONG-LIVED ASSETS," which addresses financial accounting and
reporting for the impairment of long-lived assets and for long-lived assets to
be disposed of. SFAS No. 144 is effective for fiscal years beginning after
December 15, 2001, with early adoption permitted. Management is currently
evaluating the provisions of SFAS No. 144, but does not expect the adoption of
SFAS No. 144 to have a significant impact on the Company's financial position or
results of operations. However, future impairment reviews may result in charges
against earnings to write down the value of long-lived assets.

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DISCLOSURES ABOUT CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

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LESS THAN 4 - 5 AFTER
CONTRACTUAL OBLIGATIONS TOTAL 1 YEAR 1 - 3 YEARS YEARS 5 YEARS
----------------------- ----------------- --------------- ----------------- ------------- ------------

Long Term Debt $ 17,775,183 $ 201,284 $ 17,548,825 $ 25,074 $ -
Capital Lease
Obligations 142,195 84,127 58,068 - -
Operating Leases 6,108,143 1,911,449 3,084,750 964,198 147,746
Mandatorily Redeemable
Preferred Stock 6,942,893 - 6,942,893 - -
----------------- --------------- ----------------- ------------- ------------
Total Contractual Cash
Obligations $ 30,968,414 $ 2,196,860 $ 27,634,536 $ 989,272 $ 147,746
================= =============== ================= ============= ============

JOINT VENTURE

In October 2001, the Company 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. Upon acquisition, the joint
venture was 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. The Company's interest in this joint
venture will be accounted for using the equity method. The joint venture will
produce and sell extrusions consisting of composites of acrylonitrile butadiene
styrene (ABS) and other materials. 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.

LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 2001, we had cash and cash equivalents of $2.4 million,
working capital of $2.0 million, $17.6 million of long-term debt, net of current
maturities, and $6.9 million of mandatorily redeemable preferred stock. Our
operating activities for 2001 provided $3.1 million of cash. As of December 31,
2000, we had cash and cash equivalents of $392,000, a working capital deficiency
of $1.4 million, $22.9 million of long-term debt, net of current maturities,
$822,000 of non current amounts due to sellers of acquired businesses and other
long-term liabilities, and $6.2 million of mandatorily redeemable preferred
stock. Our operating activities for 2000 used $810,000 of cash.

Investing activities included investments in property and equipment of
$510,000 in 2001 and cash of $174,000 was provided by the sale of finance
receivables and by other investing activities in 2001. Additional purchase price
related to acquisitions accounted for the use of $1.0 million of cash in 2000.
Investing in property and equipment amounted to $878,000 in 2000. Cash was
provided by finance receivables of $477,000 and by other of $73,000.

Financing activities used $814,000 of cash in 2001. The financing
activities primarily relate to the debt restructuring that occurred in March
2001 and redemption of $100,000 of Series D preferred stock. We used cash

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for financing activities in 2000 to make long-term debt payments of $687,000 and
to pay preferred stock dividends of $101,000.

Under our financing arrangements (including those arrangements in place
after debt restructuring discussed below), substantially all of our assets are
pledged as collateral. We are required to maintain certain financial ratios and
to comply with various other covenants and restrictions under the terms of the
financing agreements, including restrictions as to additional financings, the
payment of dividends and the incurrence of additional indebtedness. In
connection with waiving defaults at June 30, 2000, PNC required us to repay $5
million of our $15 million credit facility with them by December 27, 2000. We
were unable to make the required December 27, 2000 payment, violated various
other covenants, and were declared in default by PNC Bank in early January 2001.
The declaration of default by PNC Bank also served as a condition of default
under the senior subordinated promissory note to GE Equity. GE Equity and a
group of our officers and directors purchased the PNC note in March 2001, and
all defaults relating to the GE Equity note and the purchased PNC Bank note were
waived.

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.

The steps that management has taken to increase cash flows and achieve
better operating results during 2001 and in future periods are as follows:

- The merger, expansion and plant relocation of two of our acquired
manufacturers (Precision Window Mfg., Inc. and TD Windows, Inc.)
during late 1999 and early 2000 was unsuccessful, resulting in closure
of these businesses in 2000, which eliminated the losses and cash
needs of these under performing operations. In addition, our retail
operations that relied on window supplies from these manufacturers had
improved results when they shifted to unrelated window suppliers and
again received high-quality windows on a timely basis.

- American Home Developers, one of our southern California retail
acquisitions, incurred losses and had negative cash flow in the first
half of 2000. Since this subsidiary sold to a different customer base
and the development of its product mix was moving contrary to the
diversified home improvement product mix of our other southern
California locations, management concluded in June 2000 that closing
this unprofitable operation and abandoning its underlying business was
a better alternative than trying to merge the subsidiary with our
other businesses.

- We closed Key Home Credit, our finance subsidiary, in July 2000 since
expanding the subsidiary would have required considerable capital. We
decided that we could more effectively employ capital to expand our
retail business.

- We have taken steps to reduce administrative expenditures principally
by terminating corporate employees and relocating our corporate
headquarters to one of our subsidiary locations.

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- We are also taking steps to reduce administrative expenditures at all
of our subsidiaries by eliminating personnel, merging operations where
appropriate, and standardizing procedures.

- We restructured our debt to eliminate the need for any significant
debt payments until 2004. In connection with the restructuring, some
2001 interest was forgiven and some was added to principal so that we
had to pay cash interest of about $500,000 in 2001 compared to cash
interest of about $2.9 million in 2000.

- We restructured our mandatorily redeemable preferred stock to
eliminate the payment of all cash dividends until 2003 and to defer
any redemption until 2004.

See Notes 7, 8 and 12 of our consolidated financial statements included
elsewhere in this Form 10-K for more information regarding the above noted
closings of operations, our debt and mandatorily redeemable preferred stock, and
the restructuring of our debt and mandatorily redeemable preferred stock which
occurred in March 2001.

Considering the impact of all of the above steps taken by management, 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;

- working capital requirements; and

- planned property and equipment capital expenditures.

We also believe in the longer term that cash will be sufficient to meet our
needs. However, we do not expect to continue our acquisition program soon. We
have decided, for now, to focus on improving the profitability of our existing
operations and expanding the market areas of our retail subsidiaries.

On or before our debt matures in 2004, we anticipate either extending the
term of our current financing or refinancing it. Management intends to begin
reducing debt by internally generated cash in 2002, but will keep adequate
levels of cash on hand for working capital purposes.

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 $500,000 to $900,000 annually.

PENDING LITIGATION

ThermoView does not anticipate any significant adverse effect on our
results of operations or cash flows through December 2002 because of the pending
litigation described in Item 3, Legal Proceedings. Although ThermoView believes
the claims in this litigation are without merit and intends to vigorously defend
the suits, an adverse outcome, thereafter, in these actions, other than the
Ferguson litigation, could have a material adverse effect on our results of
operations and cash flow.

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INFLATION

Due to relatively low levels of inflation experienced during the years
ended December 31, 1999, 2000, and 2001, 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 March 2001, 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 10% to 11%) would not have resulted in a significant change in the
fair value of our fixed-rate debt.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO FINANCIAL STATEMENTS

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THERMOVIEW INDUSTRIES, INC.

Reports of Independent Auditors.............................................33

Consolidated Balance Sheets as of
December 31, 2000 and 2001..............................................35

Consolidated Statements of Operations
for the years ended December 31, 1999, 2000 and 2001....................36

Consolidated Statements of Stockholders' Equity
for the years ended December 31, 1999, 2000 and 2001....................37

Consolidated Statements of Cash Flows
for the years ended December 31, 1999, 2000 and 2001....................39

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

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REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
ThermoView Industries, Inc.

We have audited the consolidated balance sheet of ThermoView Industries,
Inc. as of December 31, 2000, and the related consolidated statements of
operations, stockholders' equity, and cash flows for each of the two years in
the period ended December 31, 2000. Our audits also included the information for
each of the two years in the period ended December 31, 2000 included in the
financial statement schedule listed in the Index at Item 14(a). These financial
statements and information included in the schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and information included in the schedule based
on our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of ThermoView
Industries, Inc. at December 31, 2000, and the consolidated results of its
operations and its cash flows for each of the two years in the period ended
December 31, 2000, in conformity with accounting principles generally accepted
in the United States. Also, in our opinion, the information for each of the two
years in the period ended December 31, 2000 included in the related 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.

/s/ Ernst & Young LLP

Louisville, Kentucky
March 23, 2001

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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Shareholders of
ThermoView Industries, Inc.:

We have audited the accompanying consolidated balance sheet of ThermoView
Industries, Inc. (a Delaware Corporation) and subsidiaries as of December 31,
2001 and the related consolidated statements of operations, stockholders'
equity, and cash flows for the year then ended. These financial statements and
the schedule referred to below are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and the schedule based on our audit.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of ThermoView Industries, Inc.,
and subsidiaries as of December 31, 2001, and the results of their operations
and their cash flows for the year then ended, in conformity with accounting
principles generally accepted in the United States.

Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The Schedule II - Valuation and
Qualifying Accounts for the period ended December 31, 2001 is presented for
purposes of complying with the Securities and Exchange Commission's rules and is
not part of the basic financial statements. This Schedule has been subjected to
the auditing procedures applied in our audit of the basic financial statements
and, in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.

/s/ ARTHUR ANDERSEN LLP
-----------------------

Louisville, Kentucky
February 22, 2002

10-K405 36th Page of 74 TOC 1st Previous Next ↓Bottom Just 36th
THERMOVIEW INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS

[Enlarge/Download Table]

DECEMBER 31
-----------
2000 2001
---- ----

ASSETS
Current assets:
Cash and equivalents............................................................... $ 392,326 $ 2,387,583
Receivables:
Trade, net of allowance for doubtful accounts of $881,000 in 2000 and $413,000 in
2001............................................................................ 3,463,338 3,618,474
Other............................................................................. 602,630 275,400
Costs in excess of billings on uncompleted contracts............................... 1,066,583 973,628
Inventories........................................................................ 1,731,806 1,749,917
Prepaid expenses and other current assets.......................................... 391,411 907,881
-------------- --------------
Total current assets.................................................................. 7,648,094 9,912,883
Property and equipment, net........................................................... 2,923,778 2,665,382
Other assets:
Goodwill, net of accumulated amortization of $5,661,364 in 2000 and $8,311,407 in
2001............................................................................ 60,562,416 58,358,742
Other assets....................................................................... 576,519 263,138
-------------- --------------
61,138,935 58,621,880
-------------- --------------
Total assets.......................................................................... $ 71,710,807 $ 71,200,145
============== ==============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................................... $ 4,401,992 $ 3,928,781
Accrued expenses................................................................... 3,266,230 2,617,533
Billings in excess of costs on uncompleted contracts............................... 961,998 1,064,153
Income taxes payable............................................................... - 52,450
Current portion of long-term debt.................................................. 368,678 285,411
-------------- --------------
Total current liabilities............................................................. 8,998,898 7,948,328
Long-term debt........................................................................ 22,946,889 17,631,967
Due to sellers of acquired businesses................................................. 450,000 -
Other long-term liabilities........................................................... 371,538 368,918
Commitments and contingencies .......................................................
Mandatorily redeemable preferred stock:
Series C, $.001 par value, 25,000 shares authorized; none issued.................. - -
Series D, $.001 par value (aggregate redemption amount and liquidation preference
of $4,929,216); 1,500,000 shares authorized; 912,970 shares issued and
outstanding in 2000; 956,900 shares issued and outstanding in 2001............... 4,564,850 4,929,216
Series E, $.001 par value (aggregate redemption amount and liquidation preference
of $2,013,677); 500,000 shares authorized; 300,000 shares issued and outstanding
in 2000; 336,600 shares issued and outstanding in 2001........................... 1,628,713 2,013,677
Stockholders' equity:
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; 7,726,461 shares
issued and outstanding in 2000; 7,861,702 shares issued and outstanding in 2001... 7,726 7,861
Paid-in capital.................................................................... 64,143,792 64,679,509
Accumulated deficit................................................................ (31,401,599) (26,379,331)
-------------- --------------
Total stockholders' equity............................................................ 32,749,919 38,308,039
-------------- --------------
Total liabilities and stockholders' equity............................................ $ 71,710,807 $ 71,200,145
============== ==============

See accompanying notes.

10-K405 37th Page of 74 TOC 1st Previous Next ↓Bottom Just 37th
THERMOVIEW INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

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YEAR ENDED DECEMBER 31
----------------------
1999 2000 2001
---- ---- ----

Revenues....................................................... $ 108,198,535 $ 98,471,929 $ 90,327,342
Cost of revenues earned........................................ 48,727,358 47,145,198 42,696,715
--------------- ---------------- ---------------

Gross profit................................................... 59,471,177 51,326,731 47,630,627
Selling, general and administrative expenses................... 53,477,839 52,661,631 42,809,034
Stock-based compensation expense............................... 71,400 - -
Unusual charges................................................ - 11,150,000 -
Depreciation expense........................................... 965,916 1,204,126 1,175,641
Amortization expense........................................... 3,393,330 3,356,328 2,805,145
--------------- --------------- ---------------

Income (loss) from operations.................................. 1,562,692 (17,045,354) 840,807
Interest expense............................................... (2,962,260) (4,711,049) (3,035,060)
Interest income................................................ 112,866 153,099 66,412
--------------- --------------- ---------------

Loss before income taxes....................................... (1,286,702) (21,603,304) (2,127,841)
Income tax expense............................................. 370,000 1,672,000 -
--------------- --------------- ---------------

Loss before extraordinary item................................. (1,656,702) (23,275,304) (2,127,841)
Extraordinary item--gain on forgiveness of debt................. - - 7,150,109
--------------- --------------- ---------------

Net income (loss).............................................. (1,656,702) (23,275,304) 5,022,268

Less preferred stock dividends:
Cash........................................................ (2,005,549) (100,800) -
Non-cash.................................................... (2,491,640) (1,812,547) (346,680)
Plus:
Benefit of converting Series C to warrant................... - 5,809,000 -
Benefit of Series D redemption.............................. - 1,091,730 397,350
--------------- --------------- ---------------
(4,497,189) 4,987,383 50,670
--------------- --------------- ---------------

Net income (loss) attributable to common stockholders.......... $ (6,153,891) $ (18,287,921) $ 5,072,938
=============== =============== ===============

Basic and diluted income (loss) per common share:
Loss attributable to common stockholders before
extraordinary item....................................... $ (1.19) $ (2.28) $ (.25)
Extraordinary item.......................................... - - .86
--------------- --------------- ---------------
Net income (loss) attributable to common stockholders....... $ (1.19) $ (2.28) $ .61
=============== =============== ===============

Weighted average shares outstanding............................ 5,164,497 8,038,291 8,328,523
=============== =============== ===============

See accompanying notes.

10-K405 38th Page of 74 TOC 1st Previous Next ↓Bottom Just 38th
THERMOVIEW INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999, 2000 AND 2001

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PREFERRED STOCK
SERIES A - E COMMON STOCK
------------ ------------
PAID-IN ACCUMULATED
SHARES PAR VALUE SHARES PAR VALUE CAPITAL DEFICIT TOTAL
------ --------- ------ --------- ------- ------- -----

Balances at December 31, 1998....... 2,980,000 $ 2,980 4,490,288 $ 4,490 $44,759,981 $ (6,469,593) $ 38,297,858

Common stock issued for cash........ - - 1,258,334 1,258 3,248,591 - 3,249,849

Common stock issued for
acquisitions....................... - - 494,511 495 6,244,047 - 6,244,542

Common stock issued as
preferred stock dividend........... - - 19,792 20 84,460 - 84,480

Series B Preferred stock
issued for acquisition............. 400,000 400 - - 1,999,600 - 2,000,000

Series C preferred stock
dividends paid in common stock..... - - - - (84,480) - (84,480)

Conversion of Series A and B
preferred stock into common stock... (3,380,000) (3,380) 1,126,667 1,127 2,253 - -
Value of warrants to purchase
common stock issued to the
underwriters in connection
with the public offering............ - - - - 257,000 - 257,000
Value of warrant to purchase
common stock related to the
12% senior subordinated note........ - - - - 4,460,548 - 4,460,548
Value of warrants to purchase
common stock related to the
Series C preferred stock........... - - - - 1,963,670 - 1,963,670
Portion of proceeds from
issuance of Series C
preferred stock attributable
to beneficial conversion feature
at date of issue.................... - - - - 1,200,000 - 1,200,000
Additional dividend on Series C
preferred stock:

Attributable to beneficial
conversion feature at date
of issue........................... - - - - (1,200,000) - (1,200,000)

Amortization of discount related
to common stock purchase warrants.. - - - - (1,207,160) - (1,207,160)

Preferred stock dividend payments.... - - - - (2,005,549) - (2,005,549)

Stock-based compensation expense..... - - - - 71,400 - 71,400

Net loss............................. - - - - - (1,656,702) (1,656,702)
---------- ---------- ---------- --------- ----------- ------------- ------------

Balances at December 31, 1999........ - $ - 7,389,592 $ 7,390 $59,794,361 $ (8,126,295) $51,675,456

10-K405 39th Page of 74 TOC 1st Previous Next ↓Bottom Just 39th
[Enlarge/Download Table]

PREFERRED STOCK
SERIES A - E COMMON STOCK
------------ ------------
PAID-IN ACCUMULATED
SHARES PAR VALUE SHARES PAR VALUE CAPITAL DEFICIT TOTAL
------ --------- ------ --------- ------- ------- -----

Common stock issued for acquisition.. - $ - 18,000 $ 18 $ 43,866 $ - $ 43,884

Common stock issued for license
agreement........................... - - 12,500 12 49,988 - 50,000

Common stock issued for services..... - - 45,000 45 36,540 - 36,585

Common stock issued to settle Series
C preferred stock dividend.......... - - 337,632 337 332,047 - 332,384

Common stock retired related to
purchase price reduction for
acquisition ........................ - - (76,263) (76) (1,298,393) - (1,298,469)

Series C preferred stock dividends
settled in common stock............. - - - - (332,384) - (332,384)

Accrued dividends on Series E
preferred stock..................... - - - - (128,713) - (128,713)

Preferred stock dividend payments.... - - - - (100,800) - (100,800)
Amortization of discount related to
common stock purchase warrants
issued in connection with Series
C preferred stock................... - - - - (1,351,450) - (1,351,450)
Series D preferred stock issued
in lieu of cash for acquisition
earn-out provisions................ 1,439,316 1,439 - - 7,195,141 - 7,196,580
Conversion of Series D preferred
stock to mandatorily redeemable
Series D and E preferred stock...... (1,439,316) (1,439) - - (7,195,141) - (7,196,580)
Benefit of converting Series C
preferred stock to common stock
purchase warrant..................... - - - - 5,809,000 - 5,809,000
Difference in value of common stock
purchase warrants exchanged in
Series C conversion ................ - - - - 191,000 - 191,000

Benefit of Series D preferred stock
redemption.......................... - - - - 1,091,730 - 1,091,730

Value of warrants to purchase common
stock issued for services............ - - - - 7,000 7,000

Net loss............................. - - - - - (23,275,304) (23,275,304)
---------- --------- --------- --------- ----------- ------------ ------------

Balances at December 31, 2000......... - - 7,726,461 7,726 64,143,792 (31,401,599) 32,749,919

Accrued dividends on Series D and E
preferred stock..................... - - - - (346,680) - (346,680)

Common stock issued for acquisition.. - - 18,000 18 10,782 - 10,800

Benefit of Series D preferred stock
redemption.......................... - - - - 397,350 - 397,350

Value of warrants issued in
connection with debt restructuring.. - - - - 474,382 - 474,382
Cashless exercise of 150,000
shares of common stock as partial
exercise of 1,100,000 shares under
stock purchase warrant.............. - - 117,241 117 (117) - -

Net income........................... - - - - - 5,022,268 5,022,268
---------- --------- ---------- --------- ----------- ------------ ------------

Balances at December 31, 2001......... - $ - 7,861,702 $ 7,861 $64,679,509 $(26,379,331) $38,308,039
========== ========= ========= ========= =========== ============ ============

See accompanying notes.

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THERMOVIEW INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

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YEAR ENDED DECEMBER 31
---------------------------------------------
1999 2000 2001
---- ---- ----

OPERATING ACTIVITIES
Net income (loss)......................................................... $ (1,656,702) $ (23,275,304) $ 5,022,268
Adjustments to reconcile net income (loss) to net cash provided by (used
in) operations:
Depreciation and amortization........................................... 4,359,246 4,560,454 3,980,786
Deferred income taxes................................................... 60,000 1,728,000 -
Stock-based compensation................................................ 71,400 - -
Extraordinary item - gain on forgiveness of debt........................ - - (7,150,109)
Unusual charges......................................................... - 11,150,000 -
Accretion of discount related to senior subordinated debt............... 799,998 1,599,996 993,027
Provision for doubtful accounts......................................... 260,000 800,000 56,000
Writedown of finance receivables to net realizable value................ 359,000 380,000 -
Interest forgiven....................................................... - - 360,000
Interest added to principal............................................. - - 1,184,153
Other................................................................... 54,396 371,482 -
Changes in operating assets and liabilities:
Trade receivables................................................... (730,571) 824,061 (227,778)
Other receivables................................................... 563,385 (209,594) 327,230
Costs in excess of billings on uncompleted contracts................ (19,071) 207,490 92,955
Inventories......................................................... (372,686) 178,837 (18,111)
Prepaid expenses and other current assets........................... 48,301 45,152 (516,470)
Accounts payable.................................................... 106,007 957,590 (473,211)
Accrued expenses.................................................... (840,707) (42,694) (640,312)
Billings in excess of costs on uncompleted contracts................ 42,814 31,266 102,155
Income taxes payable................................................ (159,150) (116,784) 52,450
-------------- ------------- --------------
Net cash provided by (used in) operating activities....................... 2,945,660 (810,048) 3,145,033

INVESTING ACTIVITIES
Acquisitions of businesses, net of cash acquired.......................... (22,310,424) (1,012,621) -
Payments for purchase of property and equipment........................... (873,313) (878,405) (510,057)
Finance receivables originated............................................ (5,529,770) (729,412) -
Finance receivables collected............................................. 355,327 275,031 -
Finance receivables sold.................................................. 4,346,279 931,347 92,355
Other..................................................................... 313,960 72,809 82,021
-------------- ------------- --------------
Net cash used in investing activities..................................... (23,697,941) (1,341,251) (335,681)

FINANCING ACTIVITIES
Increase in long-term debt................................................ 20,838,774 - 7,291,618
Payments of long-term debt................................................ (8,569,923) (687,296) (8,175,474)
Proceeds from issuance of mandatorily redeemable preferred stock.......... 3,441,390 - -
Redemption of Series D preferred stock.................................... - - (100,000)
Proceeds from issuance of detachable stock purchase warrants, net of
fees, related to:
Senior subordinated debt............................................... 4,460,548 - 392,382
Mandatorily redeemable preferred stock................................. 1,963,670 - -
Financing costs.......................................................... (854,554) - (222,621)
Preferred stock dividend payments......................................... (2,005,549) (100,800) -
Proceeds from issuance of common stock, net of expenses................... 3,506,849 - -
-------------- ------------- --------------
Net cash provided by (used in) financing activities....................... 22,781,205 (788,096) (814,095)
-------------- ------------- --------------
Net increase (decrease) in cash and equivalents........................... 2,028,924 (2,939,395) 1,995,257
Cash and equivalents at beginning of year................................. 1,302,797 3,331,721 392,326
-------------- ------------- --------------
Cash and equivalents at end of year....................................... $ 3,331,721 $ 392,326 $ 2,387,583
============== ============== ==============

See accompanying notes.

10-K405 41st Page of 74 TOC 1st Previous Next ↓Bottom Just 41st
THERMOVIEW INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

ThermoView Industries, Inc. ("the Company") is a Delaware corporation, and
was traded on the OTC Bulletin Board pursuant to Rule 15c2-11(a)(5) under the
Securities Exchange Act of 1934, as amended, from April 16, 1998 until December
2, 1999, when it began trading on the American Stock Exchange.

The Company designs, manufactures, sells and installs custom vinyl
replacement windows for residential and retail commercial customers. The Company
also sells and installs replacement doors, textured coatings, vinyl siding,
patio decks, patio enclosures, cabinet refacings, and bathroom and kitchen
remodeling products, as well as residential roofing.

The Company had facilities in 13 states, primarily in the Midwest and
southern California. As of December 31, 2001, 19 of the Company's 900 total
employees were covered by collective bargaining agreements. These agreements in
place as of February 1, 2001 are set to expire February 1, 2004.

Following is a summary of the Company's significant accounting policies.

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated.

CASH AND EQUIVALENTS

The Company considers all short-term, highly liquid investments with
original maturities of three months or less to be cash equivalents.

TRADE RECEIVABLES

Trade receivables consist of amounts due from customers. These are
uncollateralized, short-term receivables. The Company periodically reviews its
trade receivables and provides allowances as deemed necessary.

INVENTORIES

Inventories are recorded at the lower of cost (first-in, first-out basis)
or market. Inventories consist principally of components for the manufacturing
of windows such as glass, vinyl and other composites, as well as parts and
supplies for retail operations.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Expenditures for major renewals
and improvements which increase the useful lives of assets are capitalized.
Maintenance, repairs and minor renewals are expensed as incurred. Assets are
depreciated on a straight-line or accelerated method over their estimated useful
lives which generally range from 3 to 7 years.

10-K405 42nd Page of 74 TOC 1st Previous Next ↓Bottom Just 42nd
THERMOVIEW INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

GOODWILL

Goodwill represents the excess of the aggregate purchase price paid by the
Company in acquisitions accounted for as purchases over the fair value of the
net identifiable tangible and intangible assets acquired. Goodwill is amortized
on a straight-line basis over 25 years. See the discussion, New Accounting
Pronouncements, at the end of this footnote.

ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS

The Company evaluates its goodwill and other long-term assets for
impairment and assesses their recoverability based upon anticipated future cash
flows. If facts and circumstances lead the Company's management to believe that
the cost of one of its assets may be impaired, the Company will (a) evaluate the
extent to which that cost is recoverable by comparing the future undiscounted
cash flows estimated to be associated with that 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. See the discussion, New Accounting
Pronouncements, at the end of this footnote.

WARRANTIES

The Company provides its customers with various warranty programs on its
products and services. The Company provides an accrual for future warranty costs
based upon the relationship of prior years' revenues to actual warranty costs.
It is the Company's practice to classify the entire warranty accrual as a
current liability.

REVENUE AND COST RECOGNITION

Costs in excess of amounts billed are classified under current assets as
costs in excess of billings on uncompleted contracts. Billings in excess of
costs are classified under current liabilities as billings in excess of costs on
uncompleted contracts.

The Company recognizes revenues generated from unaffiliated customers in
the manufacturing segment as product is shipped and title passes.

SHIPPING AND HANDLING FEES AND COSTS

Consistent with Emerging Issues Task Force Issue No. 00-10, "ACCOUNTING FOR
SHIPPING AND HANDLING FEES AND COSTS" (EITF 00-10), the Company classifies
shipping and handling amounts billed to customers as revenues.

10-K405 43rd Page of 74 TOC 1st Previous Next ↓Bottom Just 43rd
THERMOVIEW INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Shipping and handling costs are included as a component of cost of revenues
earned. Shipping and handling amounts billed to customers were $195,859 in 1999,
$209,728 in 2000 and $230,709 in 2001.

ADVERTISING COSTS

The Company expenses advertising costs as incurred. Advertising expense was
$4,271,594 in 1999, $3,439,758 in 2000, and $3,764,840 in 2001. Such expenses
are included within selling, general and administrative expenses in the
accompanying statement of operations.

INCOME TAXES

Income taxes are provided for under the liability method, which takes into
account differences between financial statement treatment and tax treatment of
certain transactions.

LOSS PER COMMON 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 years ended December 31, 1999, 2000, and 2001,
includes shares related to a stock purchase warrant that can be exercised for
nominal cash consideration of $.03 per share (see Note 7). Diluted earnings per
common share include both the weighted average number of shares and any common
share equivalents such as options or warrants in the calculation. As the Company
recorded losses in 1999 and 2000, and a loss attributable to common stockholders
before extraordinary item in 2001, common share equivalents outstanding would be
anti-dilutive, and as such, have not been included in weighted average shares
outstanding.

A reconciliation of income (loss) before extraordinary item attributable to
common stockholders, extraordinary item, and net income (loss) attributable to
common stockholders used in computing the per share amounts are as follows:

[Enlarge/Download Table]

1999 2000 2001
---- ---- ----

Loss before extraordinary item $ (1,656,702) $ (23,275,304) $ (2,127,841)
Preferred stock dividends, net of
benefit of conversions and redemption (4,497,189) 4,987,383 50,670
Loss attributable to common stockholders
before extra-ordinary item (6,153,891) (18,287,921) (2,077,171)
Extraordinary item - - 7,150,109
Net income (loss) attributable to common
stockholders $ (6,153,891) $ (18,287,921) $ 5,072,938

STOCK OPTIONS

These financial statements include the disclosure requirements of
Statements of Financial Accounting Standards (SFAS) No. 123, "ACCOUNTING FOR
STOCK-BASED COMPENSATION." With respect to accounting for stock options, as
permitted under SFAS No. 123, the Company has retained the intrinsic value

10-K405 44th Page of 74 TOC 1st Previous Next ↓Bottom Just 44th
THERMOVIEW INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

method prescribed by Accounting Principles Board Opinion No. 25 (APB 25),
"ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES," and related interpretations.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements. Estimates also affect the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those estimates.

RECLASSIFICATIONS OF 1999 AND 2000 FINANCIAL STATEMENTS

Certain reclassifications have been made to the December 31, 1999 and 2000
financial statements to conform with December 31, 2001 classifications. These
reclassifications have no material effect on previously reported operating
results and stockholders' equity.

NEW ACCOUNTING PRONOUNCEMENTS

In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS
No. 141, "BUSINESS COMBINATIONS," and SFAS No. 142, "GOODWILL AND OTHER
INTANGIBLE ASSETS." SFAS No. 142 is effective for the Company as of January 1,
2002. Under the new rules, goodwill and indefinite lived intangible assets will
no longer be amortized but will be reviewed annually for impairment. Intangible
assets that are not deemed to have an indefinite life will continue to be
amortized over their useful lives.

The adoption of SFAS No. 142 requires that an initial impairment assessment
be performed on all goodwill and indefinite lived intangible assets. To complete
this assessment, the Company will compare the fair value to the current carrying
value of goodwill. Fair values will be derived using cash flow analysis. Any
impairment charge resulting from this initial assessment will be recorded as a
cumulative effect of an accounting change. The Company estimates the cumulative
effect of adopting this standard will result in a non-cash charge in the first
quarter of 2002 of at least $30,000,000 on a pretax basis. The adoption of this
new standard will also benefit earnings beginning in 2002 by approximately
$2,700,000 in reduced amortization of goodwill.

See the discussion, Accounting for Impairment of Long-Lived Assets,
above.

10-K405 45th Page of 74 TOC 1st Previous Next ↓Bottom Just 45th
THERMOVIEW INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001

2. BUSINESS COMBINATIONS

During 1998 and 1999, the Company acquired twelve companies. Information
about these transactions is summarized as follows which includes additional
consideration and purchase price adjustments through December 31, 2001:

[Enlarge/Download Table]

COST OF ACQUIRED COMPANY
----------------------------------------------------------------------------------
CASH SHARES
ACQUIRED COMPANY/ AND DUE -------------------------
DATE OF ACQUISITION TO SELLERS COMMON PREFERRED VALUE TOTAL COST
------------------- ---------- ------ --------- ----- ----------

American Home Developers Co.,
Inc. (a)
04/25/98 $ 1,201,861 259,058 - $ 6,379,044 $ 7,580,905
Primax Window Co. (b)
04/30/98 1,584,080 216,725 180,000 5,011,938 6,596,018
The Rolox Companies (c)
04/30/98 3,819,812 374,058 - 8,705,826 12,525,638
TD Windows, Inc. (d)
05/15/98 311,031 - - - 311,031
American Home Remodeling (e)
07/10/98 3,192,824 122,415 - 3,044,165 6,236,989
Five Star Builders, Inc. (f)
07/12/98 1,551,245 116,667 223,000 3,773,600 5,324,845
NuView Industries, Inc. (g)
07/21/98 1,215,484 725 - 15,653 1,231,137
Leingang Siding and Window,
Inc. (h)
08/14/98 2,923,389 29,255 - 451,949 3,375,338
Thermal Line Windows, LLP (i)
08/14/98 4,693,120 203,682 97,000 1,742,069 6,435,189
Thomas Construction, Inc. (j)
01/04/99 12,051,874 233,808 1,097,000 9,285,000 21,336,874
Precision Window Mfg., Inc. (k)
01/05/99 3,074,862 37,351 - 540,000 3,614,862
The Thermo-Shield Companies (l)
03/01/99 4,596,898 108,743 - 1,851,483 6,448,381
---------------- --------- --------- ------------ ----------------
$ 40,216,480 1,702,487 1,597,000 $ 40,800,727 $ 81,017,207
================ ========= ========= ============ ================

(a) American Home Developers Co., Inc., was closed in July 2000 as discussed in
Note 12.

(b) Sellers of this business earned additional consideration in 1999 of
$450,000 cash and 18,000 common shares valued at $270,000. Additional
consideration in 2000 was earned of $450,000 and 18,000 common shares
valued at $43,884. The $450,000 was recorded as a long-term liability due
to sellers at December 31, 2000, since it was satisfied in 2001 by issuing
53,400 shares of Series D preferred stock and 36,600 shares of Series E

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THERMOVIEW INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001

2. BUSINESS COMBINATIONS (CONTINUED)

preferred stock. Additional consideration in 2001 was earned of $450,000
and 18,000 common shares valued at $10,800. The $450,000 was satisfied in
2001 by issuing 90,000 shares of Series D preferred stock.

(d) TD Windows, Inc., ceased operations as a separate subsidiary in December
1999. The business of TD Windows, Inc. was continued at Precision Window
Mfg., Inc., until Precision was closed in August 2000 as discussed in Note
12.

(e) American Home Remodeling was merged with Five Star Builders, Inc.,
effective December 31, 1998.

(f) Five Star Builders, Inc., changed its name to ThermoView of California,
Inc. in 1998. In 1999, additional purchase price was recorded as a
long-term liability due to sellers for $1,115,000 related to this
acquisition. This obligation was converted into 223,000 shares of Series D
preferred stock in 2000.

(g) NuView Industries, Inc., changed its name to ThermoView of Missouri, Inc.
in 1998. Additional purchase price of $25,000 was recorded in 2000 relative
to this acquisition.

(h) During 1998, 29,255 shares of common stock valued at $451,949 were recorded
as additional consideration. Also, $502,167 was recorded as a liability as
of December 31, 1998. This was paid in 1999.

(i) During 1998, 50,003 shares of common stock valued at $772,481 were recorded
as additional consideration. Also, $498,314 was recorded as a liability as
of December 31, 1998. This was paid in 1999. During 1999, 153,679
additional common shares valued at $484,590 were recorded as additional
consideration. Also in 1999, additional purchase price was recorded as a
long-term liability due to sellers for $485,000 related to this
acquisition. This obligation was converted into 97,000 shares of Series D
preferred stock in 2000. The amounts for Thermal Line Windows, LLP include
the acquisition of North Country Thermal Line, Inc., in November 1998 for
$277,926 cash and 20,973 shares of common stock valued at $324,000.

(j) Stock issued in connection with the acquisition of Thomas Construction,
Inc., included 400,000 shares of Series B preferred stock valued at
$2,000,000. These shares were converted into 133,334 shares of common stock
following the closing of the public offering discussed in Note 10. At
December 31, 1999, $1,000,000 was recorded as a current liability due to
the seller of this business as additional consideration. This was paid in
2000. Also in 1999, additional purchase price was recorded as a long-term
liability due to sellers for $5,485,000 related to this acquisition. This
obligation was converted into 797,000 shares of Series D preferred stock
and 300,000 shares of Series E preferred stock in 2000.

(k) Precision Window Mfg., Inc., was closed in August 2000 as discussed in Note
12.

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THERMOVIEW INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001

2. BUSINESS COMBINATIONS (CONTINUED)

(l) During 2000, the seller of this business returned 76,263 shares of common
stock to ThermoView as an adjustment to the purchase price. The 76,263
shares were originally valued at $1,298,469, and this amount has now been
reversed from goodwill and stockholders' equity.

The above acquisitions have been accounted for as purchase transactions
and, accordingly, the results of operations of the acquired businesses have been
included in the consolidated financial statements since the respective
acquisition dates. These companies are engaged primarily in the businesses of
manufacturing replacement windows or selling and installing them in the
residential retail market. The accompanying consolidated balance sheets as of
December 31, 2000 and 2001 include allocations of the respective purchase prices
to the assets acquired and liabilities assumed based on estimates of fair value
with the excess of cost over the fair value of net assets acquired recorded as
goodwill.

The terms of certain of the Company's acquisition agreements provided for
additional consideration to be paid if the acquired entities' results of
operations exceeded certain targeted levels, generally for a period of three
years subsequent to the acquisition dates. Targeted levels were generally set at
the annual earnings of the acquired entities before interest and taxes, allowing
for the add back of certain salaries and other costs that will not be incurred
on a post-acquisition basis. Such additional consideration was paid in cash and
with shares of the Company's common stock or preferred stock, and was recorded
when earned as additional purchase price. Goodwill was increased for any
additional purchase price.

The following unaudited pro forma consolidated results of operations are
presented as if the acquisitions of the twelve purchased companies had occurred
on January 1:

[Download Table]

(UNAUDITED)
Year ended
December 31, 1999
--------------------------

Net revenues $ 110,700,351
Net loss (1,628,742)
Net loss applicable to common stockholders (6,125,931)
Basic and diluted loss per common share (1.18)

The pro forma consolidated results of operations include adjustments to
give effect to amortization of goodwill, interest expense, preferred stock
dividends, and certain other adjustments. The unaudited pro forma information is
not necessarily indicative of the results of operations that would have occurred
had the acquisitions occurred on January 1 or of the future results of the
combined operations.

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THERMOVIEW INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001

3. PROPERTY AND EQUIPMENT

Property and equipment at December 31 consists of the following:

[Download Table]

2000 2001
------------------------ ------------------------

Building improvements $ 578,170 $ 824,175
Manufacturing equipment 524,843 887,867
Furniture, fixtures and equipment 1,299,605 1,132,688
Computer equipment and software 1,707,162 1,683,870
Autos and trucks 1,105,383 1,233,728
------------------------ ------------------------
5,215,163 5,762,328
Less accumulated depreciation (2,291,385) (3,096,946)
------------------------ ------------------------
$ 2,923,778 $ 2,665,382
======================== ========================

During the fiscal year 2000, $344,073 of additions to property and
equipment were financed. In 2001, the amount of additions financed was $344,478.

4. UNCOMPLETED CONTRACTS

Costs and billings on uncompleted contracts at December 31 are as follows:

[Download Table]

2000 2001
-------------------- -----------------

Costs incurred on uncompleted contracts $ 1,811,655 $ 1,585,106
Billings to date 1,707,070 1,675,631
-------------------- -----------------
$ 104,585 $ (90,525)
==================== =================

These amounts are included in the accompanying consolidated balance sheets
under the following captions:

[Enlarge/Download Table]

2000 2001
----------------- -------------------

Costs in excess of billings on uncompleted contracts $ 1,066,583 $ 973,628
Billings in excess of costs on uncompleted contracts (961,998) (1,064,153)
----------------- -------------------
$ 104,585 $ (90,525)
================= ===================

5. LEASES

The Company and its subsidiaries are lessees under various operating lease
agreements for office space, manufacturing facilities, warehouses, equipment and
other properties. The Company in general is responsible for all taxes, insurance
and utility expenses associated with these leases. Lease renewal options are
present in many of the lease arrangements, and range in renewal periods from one
to five years. Future minimum rental commitments at December 31, 2001, are as
follows:

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THERMOVIEW INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001

5. LEASES (CONTINUED)

[Download Table]

RELATED PARTY OTHER
YEAR LEASES LEASES TOTAL
------ -------------------- ------------------- -------------------

2002 $ 814,052 $ 1,097,397 $ 1,911,449
2003 664,452 1,099,907 1,764,359
2004 604,452 715,939 1,320,391
2005 304,452 186,067 490,519
2006 304,452 169,227 473,679
Thereafter - 147,746 147,746
-------------------- ------------------- -------------------
Total $ 2,691,860 $ 3,416,283 $ 6,108,143
==================== =================== ===================

Rent expense was $2,122,111, $2,093,953, and $1,717,523 for the years ended
December 31, 1999, 2000, and 2001, respectively. Of these amounts, related party
rent expense was $1,164,116 in 1999, $1,067,133 in 2000, and $907,620 in 2001.

6. ACCRUED EXPENSES

Accrued expenses as of December 31 consist of the following:

[Download Table]

2000 2001
------------------- -------------------

Payroll and related $ 1,405,469 $ 1,381,956
Warranties 469,768 495,000
Professional fees 231,298 196,000
Other 1,159,695 544,577
------------------- -------------------
$ 3,266,230 $ 2,617,533
=================== ===================

7. LONG-TERM DEBT

Long-term debt at December 31 consists of the following:

[Enlarge/Download Table]

2000 2001
------------------ -------------------

Bank revolving line of credit $ 14,719,991 $ -
Senior subordinated promissory note 7,900,000 4,428,307
Series A, B and C senior debt - 10,506,498
Obligations related to guarantors of bank revolving line of credit - 2,378,500
Note payable to bank, with an interest rate of 9%, maturing in April 2004,
with monthly payments of principal and interest totaling $4,424 157,291 120,572
Note payable to bank, with an interest rate of 7.23%, maturing in March 2002,
with monthly payments of principal and interest totaling $11,494 153,869 22,781
Other 384,416 460,720
------------------ -------------------
23,315,567 17,917,378
Less current portion 368,678 285,411
------------------ -------------------
Long-term portion $ 22,946,889 $ 17,631,967
================== ===================

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THERMOVIEW INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001

7. LONG-TERM DEBT (CONTINUED)

The following is a schedule by years of future maturities of long-term debt
as of December 31, 2001:

[Download Table]

2002 $ 285,411
2003 207,174
2004 17,399,719
2005 25,074
------------------
Total $ 17,917,378
==================

On August 31, 1998, the Company entered into a loan agreement with PNC for
a $15,000,000 revolving credit facility. The interest rate was a LIBOR-based
variable rate which was 8.69% at December 31, 1999 and 10.73% at December 31,
2000. Interest on the line of credit was payable monthly and principal was
payable in full at maturity. On April 14, 2000, the maturity date of the credit
facility was extended from January 1, 2001 to May 1, 2001. Four stockholders of
the Company (two of whom were also officers and directors of the Company at the
time) also agreed to guarantee a total of $3,000,000 of the credit facility for
fees equal to an annual rate of 5% of the $3,000,000 from April 2000 through
June 2000 and 10% thereafter. These fees totaled $205,992 in 2000.

On July 8, 1999, the Company entered into a senior subordinated promissory
note agreement with GE Capital Equity Investments, Inc. (GE Equity) for
$10,000,000. Terms of the agreement require 12% interest, payable quarterly. The
agreement provides for redemption in whole or in part at the Company's option at
a 103% premium the first year, 102% the second year and 101% the third year. The
Company must redeem $10,000,000 (or such lesser amount as then may be
outstanding) without premium on the maturity date in July 2002. Upon a change in
control of the Company, GE Equity has the option to require the Company to
redeem all or a portion of the note with a premium due as set forth above. As
discussed below, certain terms of this debt have been modified, including the
fourth quarter 2000 and all of 2001 interest due being added to principal, and
the maturity dates of the principal extended to March and April, 2004.

In connection with the loan agreement, GE Equity was issued a warrant with
the right to purchase 555,343 shares of common stock at any time at $.03 per
share (the number of shares being subject to adjustment in certain
circumstances) until July 2007. In May 2000, one of the stipulated circumstances
occurred causing adjustment, so GE Equity now has warrants to purchase 561,343
shares of common stock at $.03 per share. The portion of the proceeds from this
loan allocable to the detachable stock purchase warrant amounting to $4,800,000
has been accounted for as paid-in capital (less a prorata share of issue costs
of $339,452) with the resulting discount, as well as a prorata share of issue
costs of $360,303 to be accounted for as additional interest over the term of
the loan. GE Equity has certain demand and piggy-back registration rights with
respect to common stock underlying the warrant.

On October 14, 1999, the Company secured a $2,500,000 line of credit from
PNC Bank, N.A., with interest at prime plus 1%. In accordance with its terms,
the $2,125,000 that had been drawn on the line was repaid from proceeds of the
Company's public common stock offering discussed in Note 10. The line was
guaranteed by four of the Company's stockholders for fees of $100,000. Three of
the four stockholders were at that time also directors of the Company.

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THERMOVIEW INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001

7. LONG-TERM DEBT (CONTINUED)

On March 22, 2001, ThermoView substantially restructured its debt. Under
the Company's financing arrangements, substantially all of the Company's assets
are pledged as collateral. The Company is required to maintain certain financial
ratios and to comply with various other covenants and restrictions under the
terms of the financing agreements, including restriction as to the payment of
dividends and the incurrence of additional indebtedness. In connection with
waiving defaults at June 30, 2000, PNC required the Company to repay $5 million
of the credit facility by December 27, 2000. The Company was unable to make the
required December 27, 2000 payment, violated various other covenants, and was
declared in default by PNC in early January 2001. The declaration of default by
PNC also served as a condition of default under the senior subordinated
promissory note to GE Equity. The PNC note was purchased by GE Equity and a
group of officers and directors of the Company in March 2001, and all defaults
relating to the GE Equity note and the purchased PNC note were waived. The PNC
debt outstanding as of December 31, 2000 is classified as long-term since the
debt was either forgiven or replaced with other long-term debt in March 2001.

The Company owed PNC $14,719,991 as of December 31, 2000. In January 2001,
PNC exercised their right to seize $3,000,000 of collateral provided to them by
four guarantors of the PNC debt. This reduced the PNC debt balance to
$11,719,991. The remaining balance of $11,719,991 was settled for cash of
$5,250,000 and the issuance of a warrant to PNC to purchase 200,000 shares of
the Company's common stock at $.28 per share. The warrant is exercisable through
March 2011. The forgiveness of debt principal by PNC of approximately $6.5
million and the accrued interest on the debt from January 1, 2001 through March
22, 2001, net of related expenses which includes the fair value of the common
stock purchase warrant issued to PNC, has been reported by ThermoView as an
extraordinary credit of $6,584,109, in the first quarter of 2001.

The settlement with PNC was consummated by restatement of the original PNC
note dated August 31, 1998 and by issuing (i) a Series A sub-note payable to GE
Equity in the amount of $3,000,000; (ii) Series B sub-notes payable to each of
the Series B lenders (officers, directors, employees and consultants) in the
total amount of $2,250,000; and (iii) a new Series C sub-note payable to GE
Equity in the amount of $6,250,000 face amount ($4,750,000 net of debt discount)
representing a portion of GE Equity's original subordinated note of $10,000,000.
Also, GE Equity agreed to add interest on this $6,250,000 senior debt to
principal through December 31, 2001. The GE Equity subordinated debt originally
had a face amount of $10,000,000, and at December 31, 2000 had a balance of
$7,600,000 net of debt discount ($7,900,000 with deferred interest). Since
$6,250,000 of this debt became senior debt, the remaining face amount was
$3,750,000 ($2,850,000 net of debt discount). The maturity date of the
subordinated debt was changed from July 2002 to April 30, 2004. Also, GE Equity
agreed to add interest on the subordinated debt to principal for the fourth
quarter of 2000 and all of 2001.

Collectively, the Series A, B and C sub-notes represent senior debt of the
Company. The senior debt bears interest at a rate of 10% per annum, and will
mature March 31, 2004. ThermoView also issued to the Series A and B senior
lenders warrants to purchase 957,030 shares of its common stock at

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THERMOVIEW INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001

7. LONG-TERM DEBT (CONTINUED)

$.28 per share. These warrants are exercisable through March 2011. The fair
value of the warrants amounting to $392,382 has been accounted for as debt
discount and is being amortized over the term of the debt. These warrants, as
well as the warrant issued to PNC, have certain demand and piggy-back
registration rights with respect to common stock underlying the warrants.

Two of the four guarantors received promissory notes for $1,200,000 at 6%
interest in full settlement of any potential obligation related to $2,000,000 of
funds forfeited to PNC when they exercised their rights under their credit
agreement. The $1,200,000 notes mature June 30, 2004. Total interest on the
notes through maturity approximates $234,000. Since the principal amounts of the
notes and the interest totaling approximately $1,434,000 is less than the
$2,000,000 obligation, an extraordinary gain amounting to approximately $566,000
was reported by the Company in the first quarter of 2001.

The other two guarantors who guaranteed $500,000 of the PNC debt each have
not settled possible claims related to forfeiture of their respective
collateral. The Board of Directors and management of the Company now have the
opinion, because of subsequent developments, that none of the $1,000,000
remaining obligation should be paid. Nevertheless, the Company has recorded a
$1,000,000 liability for possible future claims which is classified as long-term
since it is not expected to be repaid before the senior restated notes mature.

Cash paid for interest was $2,224,339, $2,928,759, and $503,707 for 1999,
2000, and 2001, respectively.

Interest expense on related party debt was $170,824 for 1999 and $94,850
for 2000, and $172,438 for 2001.

The fair value of the Company's long-term debt at December 31, 2001
approximates $14,500,000 and is based upon the present value of the underlying
cash flows discounted at the current estimated borrowing rates which might be
available to the Company.

8. MANDATORILY REDEEMABLE PREFERRED STOCK

On April 19, 1999, the Board of Directors authorized the Company to issue
up to 25,000 shares of Series C preferred stock. On April 23, 1999, Brown
Simpson Growth Fund, L.P., a New York limited partnership, and Brown Simpson
Growth Fund, Ltd., a Grand Cayman, Cayman Islands limited partnership, pursuant
to a securities purchase agreement, purchased 6,000 shares of Series C preferred
stock at $1,000 per share for a total investment of $6,000,000.

The Series C preferred stock had various redemption rights and conversion
rights and required dividend payments (9.6% per annum) payable in the form of
70% cash and 30% Company common stock. In conjunction with the issuance of the
Series C preferred stock, the Company issued warrants to purchase up to a total
of 400,000 shares of common stock at $21.00 per share (the number of shares and
exercise price being subject to adjustment in certain circumstances) at any time
until April 22, 2004.

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THERMOVIEW INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001

8. MANDATORILY REDEEMABLE PREFERRED STOCK (CONTINUED)

The portion of the proceeds from this mandatorily redeemable preferred
stock issue equal to the estimated fair value of the detachable stock purchase
warrants amounting to $1,980,000 has been allocated to paid-in capital (less a
prorata share of issue costs of $196,330) with the resulting discount, as well
as a prorata share of issue costs of $398,610, being accounted for as additional
dividends to the preferred stockholders from the date of issue to the earliest
redemption date (October 23, 2000). In addition, since the Series C preferred
stock had a beneficial conversion feature at the date of issue, $1,200,000 is
included in non-cash preferred dividends in the accompanying consolidated
statement of operations for the year ended December 31, 1999.

In August 1999, the Company amended the exercise price of the
aforementioned warrants to $18.00 per share in exchange for a commitment of the
holders to refrain from selling any securities of the Company until January 31,
2000. The estimated increase in fair value of the warrants amounting to $180,000
as the result of the change in the exercise price was accounted for as
additional dividends to the preferred stockholders from August 1999 through
January 2000.

As mentioned above, the Series C preferred stock agreement contained terms
that required increases in the number of common shares exercisable under the
stock purchase warrants and adjustments to the exercise price of such warrants.
In May 2000, one of the stipulated circumstances occurred and, accordingly, the
holders of the mandatorily redeemable preferred stock as of May 2000 had
warrants to purchase 600,000 shares (increased from 400,000 shares) of common
stock at $12.00 per share (reduced from $18.00 per share).

In August 2000, the holders of the mandatorily redeemable preferred stock
agreed to be paid dividends with 100% Company common stock.

In December 2000, the holders of the $6,000,000 of mandatorily redeemable
Series C preferred stock agreed to convert all of its $6 million of preferred
stock, including related warrants, into a warrant to purchase 1,100,000 shares
of common stock of the Company at an exercise price of $.28 per share. The
warrant is exercisable at any time until April 22, 2004. The holder of the
warrant has certain demand and piggy-back registration rights with respect to
common stock underlying the warrant. The excess of the carrying amount of the
Series C preferred stock ($6 million) and the current fair value of the warrants
to purchase 600,000 shares of common stock of the Company at $12 per share over
the fair value of the warrant to purchase 1,100,000 shares of common stock of
the Company at $.28 per share has been reflected as a $5,809,000 benefit of
converting the Series C preferred stock to a warrant in arriving at loss
applicable to common stockholders in the accompanying consolidated statement of
operations for 2000.

In April 2000, the Company completed negotiations to satisfy its
obligations under certain earn-out provisions with previous owners of the
Company's subsidiaries. As a result of the negotiations, the Board of Directors
authorized 1,500,000 shares of 12% Series D cumulative preferred stock ($.001
par value and $5.00 stated value), and the Company then issued 1,417,000 shares
to the previous owners in lieu of cash to satisfy $7,085,000 of obligations to
them. An additional 22,316 shares of Series D preferred

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THERMOVIEW INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001

8. MANDATORILY REDEEMABLE PREFERRED STOCK (CONTINUED)

stock have been issued to compensate the previous owners for interest earned
amounting to $111,580 prior to settlement of the obligations. The Series D
preferred stock is senior to the common stock of the Company and is on parity
with the Series E preferred stock discussed below. The Series D preferred stock
requires cumulative dividends at the rate of $.60 per share annually, or an
annual rate of 12%. The shares of Series D preferred stock are redeemable by the
Company at its option, in whole or in part, for cash or common stock that equals
the liquidation value of the shares redeemed. The shares of Series D preferred
stock are not convertible into common stock, have no voting rights and contain
no registration rights. A venture capital firm loaned one of the previous owners
$1,500,000 at 12% interest, and collateralized the loan with the previous
owner's 1,113,500 shares of 12% Series D cumulative preferred stock. A
stockholder, who also is a director of the Company, and a stockholder and former
director of the Company have an ownership interest in the venture capital firm.

In September 2000, holders of approximately $5.7 million, or about 79% of
the Series D preferred stock, agreed to the restructure of terms. As a result of
the agreement, dividends payable to the holders of the stock will not begin to
accrue until October 2001. Also, the Series D preferred stock was revised to add
a mandatory redemption provision which requires 20% annual redemption of this
preferred stock, in addition to other series of preferred stock on a parity
basis, over a period of five years, beginning October 1, 2001 (revised to July
1, 2004). Penalties in the form of a 2% increase per annum in the dividend rate,
limited to a maximum adjusted dividend rate of 16% per annum, will apply to
those portions of preferred stock that are not timely redeemed, which also
applies to the Series E preferred stock discussed below. The Company
subsequently redeemed, in December 2000, 226,346 shares of the Series D
preferred stock with a carrying amount of $1,131,300 for $40,000 from the prior
owners of an acquired business, as part of a severance settlement. The excess of
the carrying amount over the consideration given of $1,091,730 has been
reflected as a redemption benefit in arriving at loss applicable to common
stockholders in the accompanying consolidated statement of operations for 2000.
In 2001, the Company redeemed 99,470 shares of Series D preferred stock with a
carrying value of $497,350 for $100,000 from the prior owners of an acquired
business. ThermoView has reflected the excess of the carrying amount over the
consideration given of $397,350 as a benefit of Series D redemption in 2001.

The remaining approximate 21% or $1.5 million of the Series D preferred
stock was converted into 300,000 shares of 12% Series E cumulative preferred
stock ($.001 par value and $5.00 stated value). The Series E preferred stock is
senior to the common stock of the Company and is on parity with the Series D
preferred stock. The Series E preferred stock will pay cumulative dividends at
the rate of $.60 per share annually, or an annual rate of 12% subject to the
availability of such funds. The undeclared cumulative dividends at December 31,
2001 amount to $144,716 and $330,677 for the Series D and E, respectively. The
shares of Series E preferred stock are not convertible into common stock, have
no voting rights and contain no registration rights. The Series E has a
mandatory redemption provision which requires 20% annual redemption of this
preferred stock, in addition to other series of preferred stock on a parity
basis, over a period of five years, beginning October 1, 2001 (revised to July
1, 2004).

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THERMOVIEW INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001

8. MANDATORILY REDEEMABLE PREFERRED STOCK (continued)

In July 2000, a stockholder/director of the Company loaned a previous owner
$183,000 at 9% interest as a partial temporary advance toward the $450,000
amount reflected as due to sellers of acquired businesses in the accompanying
consolidated balance sheet as of December 31, 2000. Also, the $450,000 amount
due to sellers was converted to Series D and Series E preferred stock in 2001.
This amount has been classified as a long-term amount due to sellers of acquired
businesses in the accompanying consolidated balance sheet, since it has been
refinanced with preferred stock in March 2001.

9. INCOME TAXES

Significant components of income tax expense for the years ended December
31, 1999, 2000, and 2001 are as follows:

[Download Table]

1999 2000 2001
----------------- --------------------- -----------------

Current:
Federal $ - $ - $ -
State 310,000 (56,000) -
----------------- --------------------- -----------------
310,000 (56,000) -
Deferred:
Federal 58,000 1,728,000 -
State 2,000 - -
----------------- --------------------- -----------------
60,000 1,728,000 -
----------------- --------------------- -----------------
Income tax expense $ 370,000 $ 1,672,000 $ -
================= ===================== =================

A reconciliation of income tax expense with the expected amount computed by
applying the federal statutory income tax rate to loss before income taxes for
the years ended December 31, 1999, 2000, and 2001 is as follows:

[Enlarge/Download Table]

1999 2000 2001
----------------- ----------------- -----------------

Income tax benefit computed at federal statutory tax rate (34.0)% (34.0)% (34.0)%
State taxes, net of federal benefit 15.9 (.2) -
Nondeductible goodwill amortization 43.2 2.3 19.6
Unusual charges - nondeductible goodwill writeoff - 15.8 -
Utilization of net operating loss carryforward for Section
108(a) adjustment related to the extra-ordinary gain on
forgiveness of debt - - 114.2
Valuation allowance against deferred tax assets - 23.7 (103.7)
Other 3.7 .2 3.9
----------------- ----------------- -----------------
Total 28.8% 7.8% 0.0%
================= ================= =================

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THERMOVIEW INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001

9. INCOME TAXES (continued)

Significant components of deferred income taxes as of December 31 are as
follows:

[Enlarge/Download Table]

2000 2001
--------------------- ---------------------

Net operating loss carryforwards $ 4,069,000 $ 2,672,000
Allowance for doubtful accounts 656,000 304,000
Compensation expense related to stock options 1,246,000 1,246,000
Warranties 188,000 198,000
Goodwill (1,090,000) (1,516,000)
Other 33,000 (9,000)
--------------------- ---------------------
Deferred tax assets 5,102,000 2,895,000
Less valuation allowance (5,102,000) (2,895,000)
--------------------- ---------------------
Net deferred tax assets $ - $ -
===================== =====================

As of December 31, 2001, the Company has net operating loss carryforwards
of approximately $7.9 million for federal income tax purposes. These net
operating losses expire in 2018 through 2020. The $7.9 million carryforward is
after reduction of $7.2 million representing a Section 108(a) adjustment related
to the extraordinary gain on forgiveness of debt. In 2000, management concluded
that it is more likely than not that the Company's deferred tax assets will not
be realized. Accordingly, deferred tax assets have been fully offset by a
valuation allowance at December 31, 2000 and 2001.

Cash paid for income taxes was $342,362 in 1999, $83,708 in 2000, and
$63,027 in 2001.

10. STOCKHOLDERS' EQUITY

In June 2000, the Company's stockholders approved reducing the amount of
authorized shares of common stock from 100 million to 25 million shares and
preferred stock from 50 million to 5 million shares. In addition, the Company's
stockholders authorized the Company to issue up to 3.75 million shares of common
stock in one or more private placements.

SERIES A AND B PREFERRED STOCK

On June 12, 1998, the Company commenced a Series A preferred stock offering
for the sale of a maximum of 4,000,000 shares of its 10% Cumulative Convertible
Series A preferred stock (the "Series A preferred stock") at $5.00 per share. On
October 15, 1998, the date the preferred stock offering terminated, 2,980,000
shares of Series A preferred stock had been sold and the Company collected
$14,513,583 in proceeds, after issuance costs.

In October 1998, the Company's Board of Directors authorized the Company to
issue up to 4,000,000 shares of 10% Cumulative Series B preferred stock (the
"Series B preferred stock") to be used as consideration in certain acquisitions.
The Series B preferred stock had terms substantially identical to the Series A
preferred stock described above. As mentioned in Note 3, 400,000 shares of
Series B preferred stock were issued as partial consideration for a January 1999
acquisition.

At December 31, 1999, following the closing of the public offering of
common stock discussed below, all of the shares of Series A and Series B
preferred stock were converted into 1,126,667 shares of common stock pursuant
to the terms of the preferred stock. Dividends on the shares of Series A and
Series B preferred stock at an annual rate of 50 cents per share were
cumulative from the date of original issuance and were payable quarterly in
arrears.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001

10. STOCKHOLDERS' EQUITY (CONTINUED)

COMMON STOCK

During 1999, the Company issued 322,832 shares of common stock having a
fair value of $5,489,952 in connection with the acquisition of three companies.
Also, 171,679 shares of common stock having a fair value of $754,590 were issued
as additional consideration for prior acquisitions.

On September 9, 1999, the Board of Directors declared a one-for-three
reverse common stock split which became effective on October 6, 1999. The
reverse stock split was voted on and approved by stockholders on September 23,
1999.

On December 2, 1999, the Company closed a public offering and sold
1,255,000 shares of common stock at $5.50 per share. The proceeds of this
offering amounted to $3,249,849 net of expenses. Expenses of the offering
included $257,000 assigned to the value of warrants issued to the underwriters
to purchase 125,500 shares of common stock at an exercise price of $7.98 per
share. The warrants become exercisable one year after the effective date of the
offering and expire five years after the effective date.

In March 2000, 12,500 shares of common stock having a fair value of $50,000
were issued to satisfy the Company's obligation for royalty payments under a
license agreement with Research Frontiers Incorporated.

In August 2000, 45,000 shares of common stock having a fair value of
$36,585 were issued as consideration for various investment banking services to
be provided.

In October 2001, 18,000 shares of common stock having a fair value of
$10,800 were issued as additional consideration for a prior acquisition.

In October 2001, 117,241 shares of common stock were issued upon the
partial cash-less exercise of an existing warrant. The shares issued had a fair
value of $117,241.

EMPLOYEE STOCK OPTIONS

Prior to April 15, 1998, the Company had no formal employee stock option
plan. As such, all options granted to employees prior to April 15, 1998, were
non-qualified stock options. The exercise price and terms of any non-qualified
options granted are determined at the date of grant.

During 1998, the Company issued non-qualified, non-plan options to purchase
315,597 shares of common stock to key employees. The options were granted at
$3.45 per share which, except for an option to purchase 41,667 shares granted to
a key employee, equaled or exceeded the estimated fair value of the common stock
at the date of grant. All of these options were fully vested at December 31,
1998 and expire five years from the date of grant. The Company recognized
expense of $1,098,750 in 1998 in connection with the option for 41,667 shares.

On April 15, 1998, the Company adopted the 1998 Employee Stock Option Plan
(the "1998 Plan"). Under the 1998 Plan, qualified or non-qualified

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THERMOVIEW INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001

10. STOCKHOLDERS' EQUITY (CONTINUED)

stock options for up to 500,000 shares may be granted to key employees. The
exercise price and terms of any options granted are determined at the date of
grant.

During 1998, the Company issued options to purchase 376,667 shares of
common stock under the 1998 Plan. The options were granted at exercise prices
ranging from $3.45 to $6.90 per share which, except for options to purchase
110,000 shares, equaled or exceeded the estimated fair value of the common stock
at the date of grant. The Company recognized expense of $2,076,000 in 1998 in
connection with the options for 110,000 shares. All of these options were fully
vested at December 31, 1998, and expire five to ten years from the date of
grant.

In December 1998, the Company's Board of Directors adopted the 1999 Stock
Option Plan (the "1999 Plan") under which qualified or non-qualified options for
up to 833,334 shares may be granted to key employees and directors. On January
1, 1999, options for 240,041 shares of common stock were granted to 227
employees of the Company under the 1999 Plan at an exercise price of $15.93 per
share. These options vest over a three-year period and expire on July 1, 2003.

In January 1999, options for 116,667 shares of common stock were granted
under the 1998 Plan to certain employees of a business acquired by the Company
in January 1999. These options have the same terms as the options granted under
the 1999 Plan noted above. The then remaining shares available for grant under
the 1998 Plan (6,667 shares) were then considered shares reserved under the 1999
Plan.

In March 1999, the Company granted options for 33,334 shares of common
stock under the provisions of the 1999 Plan to an employee of a business
acquired in March 1999. The exercise price of the options is $25.86 per share.
The options vest equally in March 2004 and March 2005 and expire on March 23,
2009.

In April 1999, the Company granted options for 16,000 shares of common
stock under the provisions of the 1999 Plan to certain employees of a business
acquired in January 1999. The exercise price of the options is $19.38 per share.
The options vest over a three-year period and expire on April 16, 2009.

The Company granted qualified options for 7,500 shares of common stock with
an exercise price of $11.64 to three non-employee directors in May 1999 under
the 1999 Plan. The options vest over a three-year period and expire on May 10,
2009.

In July 1999, options for 161,667 shares of common stock were granted under
the Company's 1999 Stock Option Plan. The exercise price of the options is
$11.43 per share. Vesting of 124,167 shares occurred on July 29, 1999, and the
remaining 37,500 shares vested on July 29, 2000.

In April 2000, the Company granted options for 13,333 shares of common
stock to three new employees under the 1999 Stock Option Plan. The exercise
price of the options is $2.50 per share. Vesting of 3,333 occurred immediately
while the remaining 10,000 shares vest over a three-year period.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001

10. STOCKHOLDERS' EQUITY (CONTINUED)

On June 20, 2000, the Board of Directors approved, subject to stockholder
approval, the 2000 Stock Option Plan (the "2000 Plan"). Under the 2000 Plan,
qualified or non-qualified stock options may be granted to key employees and
nonemployee directors of the Company. The exercise price and terms of any
options granted are determined at the date of grant.

In September 2000, options for 496,998 shares of common stock were granted
under the 1999 Plan to key employees and directors. The exercise price of the
options is $.625 per share. The options vested immediately and expire ten years
from the date of grant.

The remaining 68,275 shares available for grant under the 1999 Plan as of
the close of business on September 30, 2000, were transferred to and reserved
for issuance under the 2000 Plan. After transfer of the 1999 Plan remaining
shares to the 2000 Plan, 1,400,000 shares were reserved for issuance under the
2000 Plan.

In October 2001, options for 963,664 shares of common stock were granted
under the 2000 Plan to key employees and directors. The exercise price of the
options is $.90 per share. A majority of the options vest over a two-year
period, with the minority vesting over a three-year period.

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 except as noted above. 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:

[Enlarge/Download Table]

1999 2000 2001
--------------------- -------------------- ---------------------

Net income (loss):
As reported $ (1,656,702) $ (23,275,304) $ 5,022,268
Pro forma (2,614,269) (24,498,064) 3,939,015
Net income (loss) attributable to common
stockholders:
As reported (6,153,891) (18,287,921) 5,072,938
Pro forma (7,111,458) (19,510,681) 3,989,685
Basic and diluted income (loss) per common share:
As reported (1.19) (2.28) .61
Pro forma (1.38) (2.43) .48

The fair value of each option grant to employees was estimated on the date
of grant using the Black Scholes option-pricing model with the following
weighted average assumptions:

[Enlarge/Download Table]

1999 2000 2001
---------------------- -------------------- --------------------

Interest rate 5.02% 5.50% 4.56%
Dividends - - -
Expected volatility .753 .610 .500
Expected life in years 5 5 5

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001

10. STOCKHOLDERS' EQUITY (CONTINUED)

Stock option activity is summarized as follows:

[Enlarge/Download Table]

1999 2000 2001
-------------------- -------------------- --------------------

Outstanding, January 1 1,185,065 1,674,659 1,885,807
Granted 575,209 510,331 963,664
Exercised - - -
Canceled (85,615) (299,183) (79,758)
-------------------- -------------------- --------------------

Outstanding, December 31 1,674,659 1,885,807 2,769,713
==================== ==================== ====================

Exercisable 1,399,710 1,679,637 2,202,049

Available for grant 467,073 1,400,000 436,336

Average exercise price per share:
Outstanding, January 1 $ 2.67 $ 6.32 $ 4.44
Granted 15.28 .67 .90
Exercised - - -
Outstanding, December 31 6.32 4.44 3.24
Exercisable, December 31 4.30 3.74 3.02

Weighted average grant date fair value of options
granted during the year $ 9.88 $ .39 $ .81

The following table summarizes information about employee stock options
outstanding at December 31, 2001:

[Download Table]

OPTIONS OUTSTANDING WEIGHTED-AVERAGE
NUMBER OUTSTANDING EXERCISE PRICE REMAINING CONTRACTUAL LIFE
----------------------------------------------------------------------------------

492,802 $ 0.87 9 months
582,263 3.45 43
201,486 15.93 84
2,500 11.64 89
120,000 11.43 91
10,000 2.50 100
396,998 .63 105
963,664 .90 118

NON-EMPLOYEE STOCK OPTIONS AND PURCHASE WARRANTS

On October 22, 1997, the Company issued options to purchase 43,483 shares
of common stock to several consultants for services. The options were granted at
$0.87 per share, vested one year after the grant date and expire five years
after grant date. Options for 3,334 shares were exercised in 1999. In March
1998, the Company issued options to purchase 43,483 shares of common stock to
consultants for services. The options were granted at $3.45 per share and vested
immediately.

On November 1, 1998, the Company issued stock warrants to purchase 41,667
shares of common stock at $30 per share to a consultant. The warrants vested
immediately and expire five years from the date of issue.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001

10. STOCKHOLDERS' EQUITY (CONTINUED)

In August 2000, warrants to purchase 200,000 shares of common stock were
issued as consideration for various investment banking services. The warrants
are immediately exercisable as follows: 50,000 shares at $4 per share; 50,000
shares at $5 per share; 50,000 shares at $6 per share; and 50,000 shares at $7
per share. The warrants expire two years after the effective date of a
registration statement registering the underlying shares. The $7,000 approximate
value of the warrants has been expensed and also included as an increase to
paid-in capital in 2000.

In October 2000, the Company issued warrants to purchase 200,000 shares of
common stock at $12 per share to satisfy certain obligations with its
underwriters arising in connection with the Company's December 2, 1999 public
offering of common stock. The warrants expire two years after the issuance date.

In October 2000, the Company issued warrants to purchase 340,000 shares of
common stock at $12 per share and agreed to the payment of $60,000 to WestPark
Capital, Inc. (WestPark) for WestPark to act as the Company's non-exclusive
financial advisor. The warrants expire two years after the issuance date. In
addition to the above compensation, various contingent fee arrangements were
agreed upon to be paid to WestPark for raising debt or equity capital for the
Company or for providing merger and acquisition candidates to the Company. The
agreement is for two years. The fair value of these warrants and the other
warrants noted above issued in October 2000 is not significant.

As discussed in Note 7, GE Equity has warrants to purchase 561,343 shares
of common stock at $.03 per share. As discussed in Note 8, the holders of the
mandatorily redeemable Series C preferred stock agreed to convert all of their
$6,000,000 of preferred stock, including related warrants, into a warrant to
purchase 1,100,000 shares of common stock of the Company at an exercise price of
$.28 per share. In 2001, 150,000 shares were purchased.

In March 2001, the Company issued warrants in connection with restructured
debt to purchase 1,157,030 shares of common stock at $.28 per share. The fair
value of these warrants amounting to $474,382 has been credited to paid in
capital. The warrants expire five years after the issuance date. The warrants
contain certain registration rights.

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THERMOVIEW INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001

10. STOCKHOLDERS' EQUITY (CONTINUED)

COMMON SHARES RESERVED

The following table summarizes the number of shares of common stock
reserved for future issuance as of December 31, 2001:

[Download Table]

Employee stock options:
Options granted 2,769,713
Shares reserved for future grants under 2000 Plan 436,336
Stock purchase warrants issued in connection with:
Series C convertible preferred stock 950,000
GE Equity senior subordinated promissory note 561,343
Financial advisory services 865,500
Other stock options and stock purchase warrants 125,299
Restructure transaction 1,157,030
--------------------
6,865,221
====================

11. EMPLOYEE BENEFIT PLANS

Effective January 1, 1999, the Company established a defined contribution
401(k) profit sharing plan and trust for the benefit of all its employees,
subject to certain age and service requirements. Plan participants may make
salary reduction contributions to the plan which are subject to Internal Revenue
Service contribution limitations. The Company makes matching employer
contributions of twenty-five percent of the first six percent of the employees'
contributions. Employee contributions vest immediately. Employer contributions
vest over a six-year period. The Company contributed $105,328 to this plan in
1999, $282,431 to this plan in 2000, and $234,963 in 2001.

12. UNUSUAL CHARGES

As a result of the Company's decisions to reduce emphasis on the
manufacturing segment and to enhance cash flow and profitability of the
Company's retail operations, the Company recorded unusual charges of $11,150,000
in 2000.

The unusual charges specifically relate to management's and the Board's
decisions to close and abandon two ThermoView subsidiaries' operations as
follows:

OPERATION ACTIVITY
Precision Window Mfg., Inc. Manufacturer of windows in St. Louis,
(Precision) Missouri

American Home Developers Co., Inc. Retailer of primarily textured
(American Home Developers) coatings in Los Angeles, California

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THERMOVIEW INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001

12. UNUSUAL CHARGES (CONTINUED)

The Company's consolidated results of operations for 1999 and 2000 include
the following amounts for these entities:

[Download Table]

INCOME (LOSS)
FROM OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999 REVENUES BEFORE UNUSUAL CHARGES
------------------------------------ -------- ----------------------

Precision $ 7,607,208 $ 543,547
American Home Developers 4,401,973 (174,624)

FOR THE YEAR ENDED DECEMBER 31, 2000
------------------------------------
Precision $ 2,878,600 $ (2,042,985)
American Home Developers 1,473,200 (487,785)

The unusual charges consist of the following:

[Enlarge/Download Table]

AMERICAN HOME
PRECISION DEVELOPERS TOTAL
--------- ---------- -----

Goodwill write-off $ 3,075,484 $ 6,891,348 $ 9,966,832
Write down of tangible assets to net realizable value 793,168 10,000 803,168
Reserve for expected loss on lease 180,000 - 180,000
Additional warranty accrual 200,000 - 200,000
----------------- ----------------- ------------------
$ 4,248,652 $ 6,901,348 $ 11,150,000
================= ================= ==================

Precision had significant operating losses in 2000, and management was not
successful in locating a purchaser of the business. Because of the poor
operating performance of Precision in 2000 and anticipated future losses,
management and the Board decided in June 2000 to close this subsidiary and
abandon the business. The Company substantially completed this process in August
2000. The writedown of tangible assets to net realizable value noted above
relates to Precision's inventories and equipment expected to be sold below cost
based on estimates of selling prices. Precision's warranty reserve has been
adjusted for the expected increase in warranty costs which will occur as a
result of having to use an outside party to perform warranty work once Precision
is closed. Precision's manufacturing facilities are leased under an agreement
and the expected loss on the lease was estimated to be $180,000.

American Home Developers incurred losses and had negative cash flow in
2000. Since this subsidiary sold to a different customer base and the
development of its product mix was moving contrary to the diversified home
improvement product mix of ThermoView's other southern California locations,
management concluded in June 2000 that closing this unprofitable operation and
abandoning its underlying business was a better alternative than trying to merge
the subsidiary with other ThermoView businesses. The operation was closed in
July 2000.

13. CONTINGENCIES AND COMMITMENTS

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001

13. CONTINGENCIES AND COMMITMENTS (CONTINUED)

alleging breach of contract, common law fraud, fraudulent misstatements and
omissions in connection with the sale of securities, negligent
misrepresentations and breach of fiduciary duty. These claims are in connection
with the mandatory conversion of ThermoView's 10% Series A convertible preferred
stock, held by the two funds, into common stock upon completion of the initial
public offering in December 1999, and purchases by the two funds of ThermoView's
common stock from ThermoView stockholders. The funds are seeking rescission of
their purchases of the series A preferred stock in the amount of $3,250,000,
plus interest and unspecified damages in connection with their purchases of the
common stock. ThermoView filed a notice to dismiss certain claims and an answer
denying liability on the remainder of the clams. ThermoView also exercised an
election for the removal of the action to the US District Court of Colorado, and
the matter was designated by the US District Court as Civil Action No. 00-B-722.
Pro Futures filed a motion to remand the action back to the original venue. The
Court rendered an opinion which dismissed certain named individuals due to lack
of personal jurisdiction in Colorado courts and retained venue within the US
District Court. In December 2001, the Court granted summary judgment dismissing
all defendants. In January 2002, Pro Futures filed a notice of appeal to the
Court's decision. Although ThermoView continues to believe that the claims are
without merit and intends to vigorously defend the suit, we cannot predict the
outcome of the matter, however, it could have a material adverse effect on our
results of operations and cash flow. No amounts have been provided in the
accompanying consolidated financial statements for this matter.

On November 19, 2001, Nelson E. Clemmens, former director and president of
the Company, filed an action titled NELSON E. CLEMMENS V. THERMOVIEW INDUSTRIES,
INC., Civil Action No. 01-CI-07901 (Jefferson Circuit Court, November 19, 2001)
against ThermoView alleging subrogation and indemnity rights associated with Mr.
Clemmens' loss of guaranty collateral to PNC Bank, N.A. These claims are in
connection with the April 2000 amendment to ThermoView's 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, ThermoView 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 regard to guaranty of
$1,000,000. The Clemmens suit seeks to determine the respective rights and
duties of the parties concerning the loss of collateral. Our management believes
that no payment should be made for loss of guarantor collateral and we have
filed an answer and counter-claim in defense of our legal position. An
unfavorable determination of our position regarding this matter could have a
material adverse effect on our cash flow.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001

13. CONTINGENCIES AND COMMITMENTS (CONTINUED)

The Company is subject to other legal proceedings and claims which have
arisen in the ordinary course of its 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 the Company's 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 the
results of operations and financial condition of the Company.

In March 2000, the Company entered into a license agreement with Research
Frontiers Incorporated (Research Frontiers), a Delaware corporation with
headquarters located in Woodbury, New York, for the non-exclusive rights to
market windows which utilize variable light transmission technology developed by
Research Frontiers. The agreement provides for the payment of a royalty of 5% of
the net selling price of the licensed products as defined in the agreement to
Research Frontiers for products sold by us that incorporate such technology.
Additionally, the Company has agreed to pay to Research Frontiers an annual
minimum royalty of $37,500 for 2002 and $100,000 for 2003. The royalty is
payable in cash or shares of the Company's common stock at the Company's option.
Expense related to this agreement totaled $50,000 and $37,500 for 2000 and 2001,
respectively.

14. SEGMENT INFORMATION

The Company's business units have separate management teams and
infrastructures that operate primarily in the vinyl replacement windows, doors
and related home improvement products industry in various states in the Midwest
and in Southern California. The business units have been aggregated into three
reportable operating segments: retail, manufacturing, and financial services.

RETAIL

The retail segment includes the businesses that design, sell and install
vinyl replacement windows, doors and related home improvement products to
commercial and retail customers.

MANUFACTURING

The manufacturing segment includes the businesses that manufacture and sell
vinyl replacement windows to the Company's retail segment and to unaffiliated
customers.

FINANCIAL SERVICES

During 1999 and the first half of 2000, the financial services segment
financed a relatively small portion of the credit sales of the retail segment.
Key Home Credit, ThermoView's Owensboro, Kentucky, finance subsidiary, was
closed in July 2000 since expanding the subsidiary would have required
considerable capital.

The accounting policies of the segments are the same as those described in
Note 1. Intersegment sales prices are comparable to sales prices charged

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DECEMBER 31, 2001

14. SEGMENT INFORMATION (CONTINUED)

to unaffiliated customers. The Company evaluates performance based on income
from operations of the respective businesses.

Segment information for 1999 was as follows:

[Enlarge/Download Table]

Financial
Retail Manufacturing Services Corporate Consolidated
------ ------------- -------- --------- ------------

Revenues from external
customers $ 100,208,541 $ 7,750,935 $ 237,364 $ 1,695 $ 108,198,535
Intersegment revenues - 9,305,021 - - 9,305,021
Interest income 24,586 41,896 11,109 35,275 112,866
Interest expense 140,165 61,930 - 2,760,165 2,962,260
Income (loss) from
operations 6,443,942 865,256 (545,628) (5,200,878) 1,562,692
Depreciation and
amortization 2,959,678 539,051 21,275 839,242 4,359,246
Total assets 76,181,934 11,968,541 1,743,867 4,076,842 93,971,184
Additions to long-lived
assets:
Property and
equipment 960,771 560,426 4,786 555,427 2,081,410
Goodwill 31,702,290 4,241,817 - - 35,944,107

Segment information for 2000 was as follows:

[Enlarge/Download Table]

Financial
Retail Manufacturing Services Corporate Consolidated
------ ------------- -------- --------- ------------

Revenues from external
customers $ 91,612,078 $ 6,803,568 $ 31,753 $ 24,530 $ 98,471,929
Intersegment revenues - 3,898,586 - - 3,898,586
Interest income 35,423 9,008 91,622 17,046 153,099
Interest expense 140,952 24,112 - 4,545,985 4,711,049
Unusual charges 6,901,348 4,248,652 - - 11,150,000
Loss from operations (5,943,161) (5,643,028) (561,151) (4,898,014) (17,045,354)
Depreciation and
amortization 3,366,367 460,014 12,707 721,366 4,560,454
Total assets 63,944,341 6,906,985 157,790 701,691 71,710,807
Additions to long-lived
assets:
Property and equipment 806,253 251,020 - 165,205 1,222,478
Goodwill 508,827 22,678 - - 531,505

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001

14. SEGMENT INFORMATION (CONTINUED)

Segment information for 2001 was as follows:

[Enlarge/Download Table]

Financial
Retail Manufacturing Services Corporate(a) Consolidated
------ ------------- -------- --------- ------------

Revenues from external
customers $ 83,238,033 $ 6,972,915 $ 730 $ 115,664 $ 90,327,342
Intersegment revenues - 1,055,479 - - 1,055,479
Interest income 20,003 9,663 10,115 26,631 66,412
Interest expense 42,881 12,552 - 2,979,627 3,035,060
Income (loss) from
operations 2,656,863 766,183 (7,410) (2,574,829) 840,807
Depreciation and
amortization 3,230,331 361,492 4,777 384,186 3,980,786
Total assets 61,949,966 6,836,906 43,089 2,370,184 71,200,145
Additions to long-lived
assets:
Property and equipment 605,096 166,230 - 83,209 854,535
Goodwill 460,800 - - - 460,800

(a) For segment reporting purposes, corporate represents the operating costs
associated with the general oversight of the Company. Revenue from external
customers is mainly due to a volume rebate program that was established
during fiscal year 2001.

15. JOINT VENTURE

In October 2001, the Company 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. Upon acquisition, the joint
venture was located in Winnipeg, Manitoba, Canada, in one of Royal Group's
manufacturing plants.

10-K405 68th Page of 74 TOC 1st Previous Next ↓Bottom Just 68th
THERMOVIEW INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001

16. SELECTED QUARTERLY DATA (UNAUDITED)

Quarterly data for 2000 was as follows:

[Enlarge/Download Table]

First Second Third Fourth
----- ------ ----- ------

Revenues $21,476,416 $27,230,072 $26,384,581 $23,380,860
Gross profit 11,094,339 14,262,775 13,934,998 12,034,619
Unusual charges - (10,745,000) - (405,000)
Net loss (2,895,119) (16,357,697) (586,042) (3,436,446)
Net income (loss) attributable to
common stockholders (3,465,554) (17,078,132) (1,031,003) 3,286,768(a)
Basic and diluted income (loss) per
common share (0.44) (2.16) (0.13) 0.40

(a) Includes benefit of $6,900,730 related to converting Series C preferred
stock to a common stock purchase warrant and redeeming shares of Series D
preferred stock.

Quarterly data for 2001 was as follows:

[Enlarge/Download Table]

First Second Third Fourth
----- ------ ----- ------

Revenues $21,876,421 $23,678,603 $22,639,563 $22,132,755
Gross profit 11,435,956 12,783,149 11,652,420 11,759,102
Net income (loss) 5,469,206 (180,627) (307,714) 41,403
Net income (loss) attributable to
common stockholders 5,419,407 166,370 (358,620) (154,219)
Basic and diluted income (loss) per
common share 0.65 0.02 (0.04) (0.02)

17. SUBSEQUENT EVENT

In January 2002, we issued 310,588 shares of common stock upon the cashless
exercise of a stock purchase warrant issued in connection with the Series C
preferred stock.

10-K405 69th Page of 74 TOC 1st Previous Next ↓Bottom Just 69th
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

On October 25, 2001, the Board of Directors of ThermoView, on the
recommendation of the Audit Committee, dismissed Ernst & Young LLP and engaged
Arthur Andersen LLP as ThermoView's independent certifying accountants for the
year ended December 31, 2001.

Ernst & Young LLP was notified of their dismissal on October 25, 2001.

The reports of Ernst & Young LLP on ThermoView's consolidated financial
statements for each of the two years in the period ended December 31, 2000 and
1999, did not contain any adverse opinion or disclaimer of opinion and were not
qualified or modified as to uncertainty, audit scope, or accounting principles.

During the two years in the period ended December 31, 2000, and the
subsequent interim period preceding the dismissal of Ernst & Young LLP on
October 25, 2001, there were no disagreements with Ernst & Young LLP on any
matters of accounting principles or practices, financial statement disclosure,
or auditing scope or procedures which, if not resolved to the satisfaction of
Ernst & Young LLP, would have caused the firm to make reference to the matter of
the disagreement in their reports.

During the two years in the period ended December 31, 2000, and the
subsequent interim period preceding the dismissal of Ernst & Young LLP on
October 25, 2001, no reportable events occurred in connection with the
relationship between Ernst & Young LLP and ThermoView.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information regarding directors appearing in ThermoView's Notice of Annual
Meeting of Shareholders and Proxy Statement for the annual meeting of
shareholders to be held on April 25, 2002 (the "2002 Proxy Statement") is
incorporated herein by reference. Information regarding executive officers
appearing under "Executive Compensation" in the 2002 Proxy Statement is
incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

Information appearing under "Executive Compensation" in the 2002 Proxy
Statement is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information regarding security ownership of certain beneficial owners and
management appearing under "Security Ownership" in the 2002 Proxy Statement is
incorporated herein by reference.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information regarding certain relationships and related transactions
appearing under "Certain Relationships and Related Transactions" in the 2002
Proxy Statement is incorporated herein by reference.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

A. INDEX TO FINANCIAL STATEMENTS

1. FINANCIAL STATEMENTS (INCLUDED UNDER ITEM 8):
The Index to the Consolidated Financial Statements of ThermoView
Industries, Inc. is included on page 32 of this Form 10-K and is
incorporated herein by reference.

2. FINANCIAL STATEMENT SCHEDULES:
The following consolidated financial statement schedule of ThermoView
Industries, Inc. is included in Item 14(d):

Schedule II Valuation and qualifying accounts.

All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are
not required under the related instructions or are inapplicable and
therefore have been omitted.

B. REPORTS ON FORM 8-K

1. JOINT VENTURE NEWS RELEASE
On November 1, 2001, the Company issued a news release concerning the
joint venture with Royal Group Technology, which is filed as an
Exhibit 99.1 incorporated herein by reference.

2. NOTICE OF CHANGE OF ACCOUNTANTS
On November 1, 2001, the Company reported a change in certifying
accountants as described in Item 9. above.

C. EXHIBITS

Reference is made to the Index of Exhibits immediately preceding the
exhibits hereto (beginning on page 71), which index is incorporated herein
by reference.

10-K405 71st Page of 74 TOC 1st Previous Next ↓Bottom Just 71st
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Form 10-K to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Louisville, Commonwealth of Kentucky, on the 18th day of March, 2002.

ThermoView Industries, Inc.

By: /s/ Stephen A. Hoffmann
---------------------------------------
Stephen A. Hoffmann,
Chairman of the Board

Pursuant to the requirements of the Securities Exchange Act of 1934, this
Form 10-K has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

SIGNATURE TITLE DATE

/s/ Stephen A. Hoffmann Chairman of the Board March 18, 2002
----------------------- (principal executive officer)
Stephen A. Hoffmann

/s/ Charles L. Smith Chief Executive Officer March 18, 2002
-------------------- and Director
Charles L. Smith

/s/ James J. TerBeest Chief Financial Officer March 18, 2002
--------------------- (principal financial and
James J. TerBeest accounting officer)

/s/ Ronald L. Carmicle Director March 18, 2002
----------------------
Ronald L. Carmicle

/s/ Robert L. Cox Director March 18, 2002
-----------------
Robert L. Cox

/s/ Raymond C. Dauenhauer, Jr. Director March 18, 2002
------------------------------
Raymond C. Dauenhauer, Jr.

/s/ J. Sherman Henderson, III Director March 18, 2002
-----------------------------
J. Sherman Henderson, III

/s/ Bruce C. Merrick Director March 18, 2002
--------------------
Bruce C. Merrick

/s/ Rodney H. Thomas Director March 18, 2002
--------------------
Rodney H. Thomas

/s/ George T. Underhill Director March 18, 2002
-----------------------
George T. Underhill

10-K405 72nd Page of 74 TOC 1st Previous Next ↓Bottom Just 72nd
INDEX TO EXHIBITS

[Download Table]

EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS

10.85* -- Seventh Amendment to Loan Agreement dated as of March 22,
2001 by and among Borrowers and PNC Bank, N.A.
10.86* -- Amendment No. 4 and Waiver dated as of March 22, 2001 by and
between the registrant and GE Capital Equity Investments,
Inc.
10.87* -- Assignment and Acceptance Agreement dated as of March 22,
2001 by and among the registrant, GE Capital Equity
Investments, Inc. and various individuals and entities
10.88* -- Common Stock Purchase warrant W-5 dated as of March 22, 2001
by and among registrant and PNC Bank, N.A.
10.89* -- Common Stock Purchase warrant W-6 dated as of March 22, 2001
by and among registrant and GE Capital Equity Investments,
Inc.
10.90* -- Common Stock Purchase warrant dated as of March 22, 2001 by
and among registrant and the individuals identified on
Schedule A of the Index to Exhibits
10.91* -- Amended and Restated Series A Promissory Note dated as of
March 22, 2001 by and between registrant and its subsidiaries
and GE Capital Equity Investments, Inc.
10.92* -- Amended and Restated Series Series C Promissory Note dated as
of March 22, 2001 by and between registrant and its
subsidiaries and GE Capital Equity Investments, Inc.
10.93* -- Amended and Restated Series B Promissory Note dated as of
March 22, 2001 by and between registrant and its subsidiaries
and the individuals identified on Schedule A of the Index
to Exhibits
10.94* -- Consulting Services Agreement with Emerging Business
Solutions, LLC dated as of July 24, 200060
10.95* -- Series D & E Preferred Stock Agreement dated as of January 1,
2001 by and among registrant and Charles L. Smith
10.96* -- Senior Subordinated Note dated as of March 22, 2001 by and
between the registrant and its subsidiaries and GE capital
Equity Investments, Inc.
10.97* -- Promissory Note dated as of March 22, 2001 between registrant
and its subsidiaries and Stephen A. Hoffmann
10.98* -- Promissory Note dated as of March 28, 2001 between registrant
and its subsidiaries and Stephen A. Hoffmann
10.99* -- Eighth Amendment to Loan Agreement and Amendment and
Restatement of Note dated as of March 22, 2001 by and between
registrant and its subsidiaries and lenders
10.100* -- Amendment to Warrant dated as of March 22, 2001 by and
between registrant and GE capital Equity Investments, Inc.
10.101* -- Settlement Agreement and General Release dated as of March
22, 2001 by and between registrant and its subsidiaries and
Stephen A. Hoffmann
10.102* -- Audit Committee Charter of Registrant adopted June 2000
10.103* -- Settlement Agreement and General Release dated March 28,
2001, by and between Registrant and Richard E. Bowlds.
10.104* -- Promissory Noted dated March 28, 2001, by and between
Registrant and Stephen A. Hoffmann.
10.105* -- Preferred Stock Redemption Agreement dates as of June 29,
2001 by and between Registrant and Alvin W. Leingang.
10.106* -- Preferred Stock Redemption Agreement dates as of June 29,
2001 by and between Registrant and Steven B. Hoyt.

10-K405 73rd Page of 74 TOC 1st Previous Next ↓Bottom Just 73rd
10.107* -- Agreement dated as of October 12, 2001 by and between
Registrant and Dynast Plastics Limited.
10.108 -- Purchase and Rebate Agreement, dated January 1, 2002,
by and among Winchester Industries, Inc., and the registrant
16.1 -- Report of change of certifying accountant
99.1 -- Report of current events regarding joint venture
99.2 -- Arthur Andersen Representation
--------------

* Previously filed as an exhibit to ThermoView Industries, Inc.'s Form
10-K for period ending 12/31/2000 and Form 10-Q for periods ending
03/31/2001, 06/30/2001 and 09/30/2001, and incorporated herein by
reference.

10-K405 Last Page of 74 TOC 1st Previous Next ↓Bottom Just 74th
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
THERMOVIEW INDUSTRIES, INC.
DECEMBER 31, 2001

[Enlarge/Download Table]

Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Additions
----------------------------
Charged to
Balance At Charge to Other Balance
Beginning Costs and Accounts- Deductions- at End
Descriptions of Period Expenses Describe Describe of Period
------------ --------- -------- -------- -------- ---------

Year Ended December 31,
1999:
Deducted from asset
accounts:
Allowance for doubtful
accounts $ 237,000 $ 260,000 $ - $ (221,000)(1) $ 276,000
Reserve for losses on
finance receivables - 359,000 - (159,000)(1) 200,000
-------------- --------------- -------------- ---------------- ----------------
Total $ 237,000 $ 619,000 $ - $ (380,000) $ 476,000
============== =============== ============== ================ ================

Year Ended December 31,
2000:
Deducted from asset
accounts:
Allowance for doubtful
accounts $ 276,000 $ 800,000 $ - $ (195,000)(1) $ 881,000
Reserve for losses on
finance receivables 200,000 380,000 - (218,000)(1) 362,000
-------------- --------------- -------------- ---------------- ----------------
Total $ 476,000 $ 1,180,000 $ - $ (413,000) $ 1,243,000
============== =============== ============== ================ ================

Year Ended December 31,
2001
Deducted from asset
accounts:
Allowance for doubtful
accounts $ 881,000 $ 56,000 $ - $ (524,000)(1) $ 413,000
Reserve for losses on
finance receivables 362,000 - - (210,000)(1) 152,000
---------------- ---------------- ---------------- ---------------- ----------------
Total $ 1,243,000 $ 56,000 $ - $ (734,000) $ 565,000
================ ================ ================ ================ ================

(1) Uncollectible accounts written off, net of recoveries.

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Dates Referenced Herein and Documents Incorporated by Reference

		Referenced-On Page
This ‘10-K405’ Filing	Date	First	Last	Other Filings

	5/10/09	58
	4/16/09	58
	3/23/09	58
	7/1/04	54
	6/30/04	52		10-Q, 11-K
	4/30/04	51		8-K
	4/22/04	52	53
	3/31/04	51		10-Q, 8-K
	2/1/04	12	41
	7/1/03	58		4/A
	4/25/02	2	69	8-K/A, DEF 14A
Filed on:	3/26/02
	3/18/02	2	71
	3/1/02	18
	2/22/02	35
	1/1/02	28	73
For Period End:	12/31/01	1	74	11-K
	12/15/01	28	44
	11/19/01	17	64
	11/1/01	70		8-K
	10/25/01	69
	10/12/01	73
	10/1/01	54
	8/1/01	17	64
	6/29/01	72
	5/1/01	50
	3/28/01	72
	3/23/01	34		8-K
	3/22/01	51	72
	2/1/01	12	41
	1/1/01	50	72
	12/31/00	19	74	10-K405
	12/27/00	30	51
	10/23/00	53
	9/30/00	26	59	10-Q
	7/29/00	58
	6/30/00	30	51	10-12B, 10-Q, NT 10-Q
	6/20/00	59
	4/14/00	50
	3/3/00	16	63
	1/31/00	53
	12/31/99	19	74	10-K405, DEF 14A, NT 10-K, PRE 14A
	12/2/99	18	61	424B4
	10/14/99	50
	10/6/99	57
	10/5/99	18
	9/23/99	57
	9/9/99	57
	7/29/99	58
	7/8/99	50
	4/23/99	52
	4/19/99	52
	1/1/99	58	62
	12/31/98	19	58
	11/1/98	60
	10/15/98	56
	8/31/98	50	51
	6/12/98	56
	4/16/98	41
	4/15/98	19	57
	1/1/98	19
	12/31/97	19
	10/22/97	60
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Thermoview Industries Inc – ‘10-K405’ for 12/31/01

On: Tuesday, 3/26/02 · For: 12/31/01 · Accession #: 912057-2-11544 · File #: 1-15469

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Annual Report — [x] Reg. S-K Item 405 — Form 10-K
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