Mail Stop 3561
February 14, 2006
Mr. Jeremy Bowman
President and Chief Executive Officer
Allura International Inc.
1555 West 8th Avenue
Vancouver, B.C.
Canada V6J 1T5
Re: Allura International Inc.
Form 20-F for Fiscal Year Ended March 31, 2005
Filed October 14. 2005
File No. 0-30228
Dear Mr. Bowman:
We have reviewed your filing and have the following
comments.
We have limited our review to only your financial statements and
related disclosures and do not intend to expand our review to
other
portions of your documents. Where indicated, we think you should
revise your documents in response to these comments. If you
disagree, we will consider your explanation as to why our comment
is
inapplicable or a revision is unnecessary. Please be as detailed
as
necessary in your explanation. In some of our comments, we may
ask
you to provide us with information so we may better understand
your
disclosure. After reviewing this information, we may or may not
raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
Form 20-F for Fiscal Year Ended March 31, 2005
Item 5. Operating and Financial Review and Prospectus, page 20
A. Operating Results, page 20
1. We note that you identify a number of factors that affected the
increase in net sales and changes in cost of sales. Revise your
discussion to quantify the impact of each factor. Also discuss
whether you expect trends to continue or change and the reasons
why.
Refer to Item 303 of Regulation S-K.
2. Please disclose the types of expenses that you include in the
cost
of sales line item and the types of expenses that you include in
the
selling, general and administrative expenses line item. In doing
so,
please disclose specifically:
* Whether you include inbound freight charges, purchasing and
receiving costs, inspection costs, warehousing costs, internal
transfer costs, and other costs of your distribution network in
cost
of sales. If you currently exclude a portion of these costs from
cost of sales, please tell us why and disclose:
* In a footnote the line items that these excluded costs are
included
in and the amounts included in each line item for each period
presented, and
* In your MD&A that your gross margins may not be comparable to
others, since some entities include the costs related to their
distribution network in cost of sales and others like you exclude
all
or a portion of them from gross margin, including them in a line
item
such as selling, general and administrative expenses.
3. We note your disclosure that you paid additional marketing
dollars
to its major customers to assist with the promotion of new
programs.
Please provide us with more details on the nature of this
cooperative
advertising. Tell us how you considered the guidance in EITF 1-09
in
determining it was appropriate to record these incentives as
marketing expense rather than as a reduction of revenues for US
GAAP.
4. Revise your MD&A to indicate if you expect to generate more
than
minimal revenues from the services Bygo provides. Tell us and
disclose the amount of costs incurred by the subsidiary for all
periods presented.
B. Liquidity and Capital Resources, page 23
5. Revise to include a discussion of your future liquidity; i.e.
we
note your reliance on the bank loans in order to maintain
operations
in 2005. Tell us and disclose whether you expect cash flow to be
provided by operations in the near future.
6. Tell us and disclose the factors that led to the significant
inventory increase from 2004 to 2005 and whether you expect that
the
inventory balance will continue to increase significantly in
future
periods.
F. Tabular Disclosure of Contractual Obligations, page 25
7. Revise your disclosure to include the balances associated with
your current debt obligations in the column entitled "Less than 1
year."
Item 15. Controls and Procedures, page 40
8. We note your statement that "any controls and procedures, no
matter how well designed and operated, can provide only
reasonable,
rather than absolute, assurance of achieving the desired control
objectives." Please revise to state clearly, if true, that your
disclosure controls and procedures are designed to provide
reasonable
assurance of achieving their objectives and that your principal
executive officer and principal financial officer concluded that
your
disclosure controls and procedures are effective at that
reasonable
assurance level. In the alternative, remove the reference to the
level of assurance of your disclosure controls and procedures.
Please refer to Section II.F.4 of Management`s Reports on Internal
Control Over Financial Reporting and Certification of Disclosure
in
Exchange Act Periodic Reports, SEC Release No. 33-8238, available
on
our website at <http://www.sec.gov/rules/final/33-8238.htm>.
9. We note your statement that the chief executive officer and
chief
financial officer have concluded that the company`s disclosure
controls and procedures are effective "except as discussed below."
Given the exceptions noted, it remains unclear whether your chief
executive officer and chief financial officer have concluded that
your disclosure controls and procedures are effective. Please
revise
your disclosure to state, in clear and unqualified language, the
conclusions reached by your chief executive officer and your chief
financial officer on the effectiveness of your disclosure controls
and procedures. For example, if true, you can state that your
disclosure controls and procedures are effective including
consideration of the identified matters, so long as you provide
appropriate disclosure explaining how the disclosure controls and
procedures were determined to be effective in light of the
identified
matters. Or, if true, you can state that given the identified
matters, your disclosure controls and procedures are not
effective.
You should not, however, state the conclusion in your current
disclosure, which appears to state that your disclosure controls
and
procedures are effective except to the extent they are not
effective.
10. We note your discussion of two of the more significant
examples
of your material weaknesses. Tell us and disclose how many
material
weaknesses were noted during the audit of the 2005 financial
statements. Disclose in greater detail the nature of each
material
weakness. In this regard, also revise to disclose the specific
steps
that the company has taken, if any, to remediate the material
weaknesses and disclose whether the company still believes the
material weaknesses continue to exist at the end of the period
covered by the report.
11. For each material weakness, disclose when it was identified,
by
whom it was identified, and when the material weakness first
began.
12. We note your disclosure that "[e]xcept for the matters
referred
to above, there have been no changes in our internal controls over
financial reporting or other factors, which could significantly
affect internal controls over financial reporting subsequent to
the
date of the evaluation." Revise to state clearly, if correct,
that
there were changes in your internal control over financial
reporting
that occurred during this quarter that have materially affected,
or
are reasonably likely to materially affect, your internal control
over financial reporting.
Note 2. Summary of Significant Accounting Policies, page 51
Inventories, page 51
13. We note your disclosure on page 16 that new products are
typically introduced at the beginning of each calendar year and
replace older styles whose performance has declined. We also note
your discussion that styles are discontinued if they fail to
achieve
desired sales levels. Tell us and disclose in more detail how you
monitor inventory obsolescence. How often do you update your
estimated selling prices? Please also tell us whether your
experience has been that some products that are significantly
written
down are later sold, and if so, please quantify these amounts for
all
periods presented.
14. Disclose the obsolescence reserve balances and provide a
rollforward of the reserve balance to illustrate the amounts
included
in the current period in cost of sales for obsolescence.
15. Tell us how your process differs, if at all, for inventory on
consignment at customer locations. After a customer returns
unsold
products to you that had previously been on consignment, do you
typically try to sell these products to other customers, or do you
evaluate these for obsolescence?
16. Please expand your disclosure to clarify if cost is determined
by
specific identification or another method.
Note 6. Property and equipment, page 56
17. Tell us and disclose how you have evaluated the amounts
capitalized for software for impairment given that you have
generated
minimal revenues from the Bygo operations to date.
* * * *
As appropriate, please amend your filing and respond to
these
comments within 10 business days or tell us when you will provide
us
with a response. You may wish to provide us with marked copies of
the amendment to expedite our review. Please furnish a cover
letter
with your amendment that keys your responses to our comments and
provides any requested information. Detailed cover letters
greatly
facilitate our review. Please understand that we may have
additional
comments after reviewing your amendment and responses to our
comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing to be certain that the
filing includes all information required under the Securities
Exchange Act of 1934 and that they have provided all information
investors require for an informed investment decision. Since the
company and its management are in possession of all facts relating
to
a company`s disclosure, they are responsible for the accuracy and
adequacy of the disclosures they have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in the filings;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filings; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filings or
in
response to our comments on your filings.
You may contact Kathy Kerrigan, Staff Accountant, at (202)
551-
3369 or Donna DiSilvio, at (202) 551-3202 if you have questions
regarding comments on the financial statements and related
matters.
Please contact me at (202) 551-3841 with any other questions.
Sincerely,
Michael Moran
Accountant Branch Chief
Mr. Jeremy Bowman
Allura International Inc.
February 14, 2006
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