AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 22, 2005
AN EXHIBIT LIST CAN BE FOUND ON PAGE II-2.
REGISTRATION NO. 333-123292
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 2
TO
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
LEVIN TEXTILES INTERNATIONAL INC.
(Name of small business issuer in its charter)
DELAWARE 2200 98-0437836
- ------------------------------ --------------------------- ------------------
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
315 E. 2nd Avenue
Vancouver, British Columbia
Canada V5T 1B9
(604) 215-3294
(Address and telephone number of principal executive offices)
Simon Levin, President
315 E. 2nd Avenue
Vancouver, British Columbia
Canada V5T 1B9
(604) 215-3294
(Name, address and telephone number of agent for service)
COPIES TO:
Marc Ross, Esq.
Sichenzia Ross Friedman Ference LLP
1065 Avenue of the Americas
New York, New York 10018
(212) 930-9700
APPROXIMATE DATE OF PROPOSED SALE TO PUBLIC:
As soon as practicable after this registration statement becomes effective.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. |_|
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
CALCULATION OF REGISTRATION FEE
===================================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED SECURITY (1) PRICE REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par value per share, 780,000 $0.10 $78,000 $9.18
to be offered by the selling stockholders
- -----------------------------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par value per share, 2,500,000 $0.10 $250,000 $29.43
for sale by the Company
- -----------------------------------------------------------------------------------------------------------------------------------
Total 3,280,000 $328,000 $38.61 (2)
===================================================================================================================================
- ----------
(1) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(e) under the Securities Act of 1933.
(2) Fee previously paid.
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a)
may determine.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES
IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
PRELIMINARY PROSPETUS, SUBJECT TO COMPLETION, DATED AUGUST 22, 2005
LEVIN TEXTILES INTERNATIONAL INC.
3,280,000 SHARES OF
COMMON STOCK
This prospectus relates to the sale of 3,280,000 shares of our common
stock, par value $.001 per share. Of the 3,280,000 shares, up to 2,500,000
shares may be sold by us at $0.10 per share. The common stock will be sold
through our sole officer and director, Simon Levin, to investors, both inside
and outside the United States. For purposes of this offering, the officer and
director involved in offering and selling the shares on our behalf may be deemed
to be an underwriter of this offering. The shares will be sold as a
self-underwritten offering with no minimum number of shares required to be sold
in order for us to accept funds. We have no arrangement to place the proceeds of
this offering in an escrow, trust or similar account. We will offer shares
pursuant to this prospectus until December 31, 2005. No assurance can be given
on the number of shares we will sell or that we will be able to sell any shares.
In addition, this prospectus relates to the resale of up to 780,000 shares
of common stock by selling stockholders. The selling stockholders may sell their
common stock from time to time in private negotiated transactions. The selling
stockholders will offer or sell shares of our common stock at $0.10 per share
unless and until the offering price is changed by subsequent amendment to this
prospectus or our shares are quoted on the OTC Bulletin Board. Should our shares
become listed on the OTC Bulletin Board, selling stockholders may then sell
shares at prevailing market prices or privately negotiated prices. We will not
receive any proceeds from the resale of shares of common stock by the selling
stockholders. We have paid the expenses of preparing this prospectus and the
related registration expenses.
Our common stock is not currently traded on any exchange or quotation
system.
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 2.
We may amend or supplement this prospectus from time to time by filing
amendments or supplements as required. You should read the entire prospectus and
any amendments or supplements carefully before you make your investment
decision.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
================================================================================================================
PRICE TO THE PUBLIC MAXIMUM SELLING PROCEEDS TO THE
COMMISSION COMPANY (1)
- ----------------------------------------------------------------------------------------------------------------
Per Share $0.10 0 $0.10
- ----------------------------------------------------------------------------------------------------------------
2,500,000 shares of common stock offered by $250,000 0 $250,000
us
- ----------------------------------------------------------------------------------------------------------------
780,000 shares of common stock offered by $78,000 0 0
selling stockholders
- ----------------------------------------------------------------------------------------------------------------
- ----------
(1) Before deducting expenses related to the offering anticipated to be
$15,000
TABLE OF CONTENTS
PAGE
Prospectus Summary 1
Risk Factors 2
The Offering 6
Use of Proceeds 6
Dilution 7
Market For Common Stock 7
Dividend Policy 8
Forward Looking Statements 8
Business 9
Description of Property 14
Legal Proceedings 14
Management's Discussion and Analysis and Plan of Operations 15
Management 17
Executive Compensation 18
Certain Relationships and Related Transactions 19
Security Ownership of Certain Beneficial Owners and Management 20
Plan of Distribution 21
Selling Stockholders 24
Description of Securities 25
Indemnification for Securities Act Liabilities 26
Legal Matters 26
Experts 26
Additional Information 26
Index to Financial Statements 27
PROSPECTUS SUMMARY
The following summary highlights selected information contained in this
prospectus. This summary does not contain all the information you should
consider before investing in the securities. Before making an investment
decision, you should read the entire prospectus carefully, including the "RISK
FACTORS" section, the financial statements and the notes to the financial
statements.
LEVIN TEXTILES INTERNATIONAL INC.
We were incorporated under the laws of the State of Delaware on July 7,
2004 to act as a holding company for our wholly-owned subsidiary, Levin
Industries Ltd. By a Share Purchase Agreement dated July 22, 2004, we acquired
100% of the issued and outstanding common stock of Levin Industries Ltd. in
consideration for the issue of 2,500,000 shares of our common stock. Levin
Industries was incorporated on February 16, 2004 under the Company Act of
British Columbia and was owned by Simon Levin, our President. Levin Industries
is a sales and marketing company based in Vancouver, British Columbia, Canada.
Levin Industries' goal it is to generate manufacturing contracts and place them
in manufacturing facilities in North America and Asia. Levin Industries receives
a fixed commission for the procurement of these contracts. Levin Industries also
intends to acquire minority interests in manufacturing facilities in Asia. We
are a development stage business and have had nominal revenues since our
formation. There is currently no public market for our common stock. Subsequent
to this offering, we hope to have our common stock approved for quotation on the
Over-The-Counter Bulletin Board.
We currently have one client, ANK Apparel, which is an affiliate of ours.
To date, all of our revenues have resulted from our contract with ANK Apparel.
We own approximately 16% of the issued and outstanding shares of common stock of
ANK Apparel.
We have incurred losses since our inception and we expect to incur losses
for the foreseeable future. For the period from February 16, 2004 (date of
inception) to May 31, 2005, we incurred a net loss of $37,585. As a result of
operating losses from inception and our being a development stage company, these
issues raise substantial doubt about our ability to continue as a going concern.
Our principal executive offices are located at 315 E. 2nd Avenue,
Vancouver, British Columbia, Canada V5T 1B9. Our telephone number is (604)
215-3294.
OFFERING SUMMARY
Selling stockholders are offering for resale up to 780,000 shares of our
common stock which they currently own. We will not be involved in the offer or
sale of these shares other than registering such shares for resale pursuant to
this prospectus.
We are offering up to 2,500,000 shares of its common stock in order to
raise up to $250,000 of proceeds to be used in our business operations.
1
SUMMARY OF FINANCIAL INFORMATION
May 31, August 31,
2005 2004
$ $
---------- ---------
(Unaudited) (Audited)
BALANCE SHEET
Total Assets 89,986 11,288
Total Liabilities 61,773 24,496
Total Stockholders' Equity (Deficit) 28,213 (13,208)
From From
February 16, 2004 Nine Month February 16, 2004
(Date of Inception) Period Ended (Date of Inception)
to May 31, May 31, to August 31,
2005 2005 2004
$ $ $
------------------ ------------ -----------------
(unaudited) (unaudited) (audited)
STATEMENT OF OPERATIONS
Revenue 92,870 67,773 25,097
Total Expenses 123,025 58,094 64,931
Net Income (Loss) (37,166) 2,668 (39,834)
Comprehensive Income (Loss) (37,585) 2,249 (39,834)
Net Income (Loss) Per Share - Basic and Diluted -- (0.06)
2
RISK FACTORS
Our business involves a high degree of risk. Potential investors should
carefully consider the risks and uncertainties described below and the other
information in this prospectus before deciding whether to invest in shares of
our common stock. If any of the following risks actually occur, our business,
financial condition, and results of operations could be materially and adversely
affected. This could cause the trading price of our common stock to decline,
with the loss of part or all of an investment in the common stock.
RISKS RELATED TO OUR BUSINESS
OUR FINANCIAL STATUS CREATES DOUBT WHETHER WE WILL CONTINUE AS A GOING CONCERN
FOR MORE THAN 12 MONTHS FROM THE DATE OF THIS PROSPECTUS. IF WE DO NOT CONTINUE
AS A GOING CONCERN, INVESTORS WILL LOSE THEIR ENTIRE INVESTMENT.
We reported a net loss totaling $37,166 from February 16, 2004, our date
of inception, until May 31, 2005. We will require additional working capital to
develop business operations. We intend to raise additional working capital
either through private placements, public offerings and/or bank financing. There
are no assurances that we will be able to achieve a level of revenues adequate
to generate sufficient cash flow from operations or obtain additional financing
through private placements, public offerings and/or bank financing necessary to
support our working capital requirements. To the extent that funds generated
from any private placements, public offerings and/or bank financing are
insufficient, we will have to raise additional working capital. No assurance can
be given that additional financing will be available, or if available, will be
on acceptable terms. These conditions raise substantial doubt about our ability
to continue as a going concern. If adequate working capital is not available we
may be forced to discontinue operations, which would cause investors to lose the
entire amount of their investment.
WE ARE A DEVELOPMENT STAGE COMPANY AND HAVE A LIMITED OPERATING HISTORY UPON
WHICH AN EVALUATION OF OUR PROSPECTS CAN BE MADE. FOR THAT REASON, IT WOULD BE
DIFFICULT FOR A POTENTIAL INVESTOR TO JUDGE OUR PROSPECTS FOR SUCCESS.
We were organized in July 2004 and our operating subsidiary was organized
in February 2004 and have had limited operations since our inception from which
to evaluate our business and prospects. There can be no assurance that our
future proposed operations will be implemented successfully or that we will ever
have profits. If we are unable to sustain our operations, you may lose your
entire investment. We face all the risks inherent in a new business, including
the expenses, difficulties, complications and delays frequently encountered in
connection with conducting operations, including capital requirements and
management's potential underestimation of initial and ongoing costs. In
evaluating our business and prospects, these difficulties should be considered.
IF WE ARE UNABLE TO OBTAIN ADDITIONAL FUNDING OUR BUSINESS OPERATIONS WILL BE
HARMED AND IF WE DO OBTAIN ADDITIONAL FINANCING OUR THEN EXISTING SHAREHOLDERS
MAY SUFFER SUBSTANTIAL DILUTION.
Based upon our current cash reserves and forecasted operations, we believe
that we will need to obtain at least $1 million in outside funding to implement
our plan of operation over the next twelve months. Although we are seeking to
raise up to $250,000 in this offering, there is no assurance that this amount or
any meaningful amount can be raised in this offering. Our need for additional
capital to finance our business strategy, operations, and growth will be greater
should, among other things, revenue or expense estimates prove to be incorrect.
If we fail to arrange for sufficient capital in the future, we may be required
to reduce the scope of our business activities until we can obtain adequate
financing. We may not be able to obtain additional financing in sufficient
amounts or on acceptable terms when needed, which could adversely affect our
operating results and prospects. Debt financing must be repaid regardless of
whether or not we generate profits or cash flows from our business activities.
Equity financing may result in dilution to existing stockholders.
3
THE LOSS OF SIMON LEVIN COULD RESULT IN THE TERMINATION OF OUR BUSINESS; IF WE
ARE NOT ABLE TO RETAIN ADDITIONAL KEY PERSONNEL, OUR BUSINESS COULD SUFFER.
Our success depends to a large degree upon the skills of Mr. Levin, our
sole officer and director, and upon our ability to identify, hire, and retain
additional senior management, sales, marketing and financial personnel. We may
not be able to retain our existing key personnel or to attract and retain
additional key personnel. Mr. Levin is our sole officer, director and majority
shareholder, and our business is solely reliant on his ability to conduct
business. The loss of Mr. Levin could result in the termination of our business
operations. We do not have "key person" insurance on the life of Mr. Levin. The
failure to attract, integrate, motivate, and retain additional key employees
could have a material adverse effect on our business.
WE ARE CURRENTLY DEPENDENT ON OUR CONTRACT WITH ANK APPAREL, AN AFFILIATE OF
OURS, TO GENERATE REVENUES, THE LOSS OF WHICH COULD SIGNIFICANTLY REDUCE
REVENUE.
Our revenue is dependent upon the contractual relationships we can
establish with companies to place their products in manufacturing facilities. We
currently have one contract with ANK Apparel and hope to general additional
contracts in the future. Although we believe we will continue to meet all of our
material obligations under such contracts, there can be no assurance that such
contracts will continue or will be available for renewal on favorable terms. The
loss of our contract with ANK Apparel would eliminate the source of all of our
revenues to date. We are currently seeking to develop additional contracts with
other manufacturers to reduce our dependence on the contract with ANK Apparel,
although there is no assurance that we will be successful in development new
contracts. Failure to obtain new contracts or extensions on current contracts
for any reason, could have a significant negative impact on our revenue.
A MANUFACTURER'S INABILITY TO PRODUCE OUR CLIENTS' GOODS ON TIME AND TO OUR
CLIENTS' SPECIFICATIONS COULD RESULT IN LOST REVENUE AND NET LOSSES.
We do not own or operate any manufacturing facilities and therefore depend
upon third parties for the manufacture of all of the products for which we
generate contracts for our clients. These products are manufactured to our
client specifications. The inability of a manufacturer to process our goods on
time, ship orders of the products in a timely manner or to meet the quality
standards could cause us to miss the delivery date requirements of our customers
for those items, which could result in cancellation of orders, refusal to accept
deliveries or a reduction in purchase prices, any of which could have a material
adverse effect as our revenues would decrease and we would incur net losses as a
result of the manufacture of such products, if any sales could be made. Because
of the seasonality the apparel business in particular, the dates on which
customers need and require shipments of products are critical, as styles and
consumer tastes change so rapidly in the apparel business, particularly from one
season to the next. Further, because quality is a leading factor when customers
and retailers accept or reject goods, any decline in quality by our third-party
manufacturers could be detrimental not only to a particular order, but also to
our future relationship with that particular customer.
IF A MANUFACTURER FAILS TO USE ACCEPTABLE LABOR PRACTICES, WE MIGHT HAVE DELAYS
IN SHIPMENTS OR FACE JOINT LIABILITY FOR VIOLATIONS, RESULTING IN DECREASED
REVENUE AND INCREASED EXPENSES.
While we require our independent manufacturers to operate in compliance
with applicable laws and regulations, we have no control over the ultimate
actions of our independent manufacturers. While our internal and vendor
operating guidelines promote ethical business practices and our staff
periodically visit and monitor the operations of our independent manufacturers,
we do not control these manufacturers or their labor practices. The violation of
labor or other laws by an independent manufacturer of ours or the divergence of
an independent manufacturer's labor practices from those generally accepted as
ethical in the United States, could interrupt, or otherwise disrupt the shipment
of finished products to our clients or damage our reputation. Any of these, in
turn, could have a material adverse effect on our financial condition and
results of operations. In particular, the laws governing garment manufacturers
in the State of California impose joint liability upon us and our independent
manufacturers for the labor practices of those independent manufacturers. As a
result, should one of our independent manufacturers be found in violation of
state labor laws, we could suffer financial or other unforeseen consequences. We
have never used or currently intend to use a manufacturer in the State of
California, although we cannot rule out using one in the future.
4
MANUFACTURING ACTIVITIES IN ASIA ARE RISKY AND COULD RESULT IN THE LOSS OF
BUSINESS
Our business plan contemplates entering into manufacturing agreements with
clothing manufacturing facilities in Asia, and China in particular. Operations
in China are subject to such risks as imposed duties, quotas and tariffs are
subject to change by the government. In addition, sectors of the economy are
subject to state control, which could reduce or eliminate our ability to
manufacture clothing in China. The risk of political pressures and "trade wars"
with countries such as the United States could potentially harm or disrupt our
business activities. As well, there is a risk of delays in shipping of products
as the goods are processed through customs. There is also a higher risk of goods
being stolen from ports in China awaiting shipment. Should any of this risks
come to fruition, it could have a significant negative effect on our results of
operations and could result in the loss of business.
THE OFFERING PRICE OF $0.10 PER SHARE WAS ARBITRARILY DETERMINED BY US AND IS
NOT BASED ON ANY TRADING MARKET VALUE WHICH MAKES THE OFFERING PRICE SPECULATIVE
AND SUBJECT TO SIGNIFICANT CHANGE AFTER PURCHASE.
The price of our common stock offered hereby has been arbitrarily
determined by us and bears no relationship to our earnings, book value or any
other recognized criteria of value. Our shares are not currently traded on any
stock market. Consequently, no established market value for our shares exists.
As a result, there is no assurance that shares purchased pursuant to this
prospectus can be resold at or above the offering price.
INVESTORS WILL EXPERIENCE AN IMMEDIATE AND SUBSTANTIAL DILUTION OF THEIR
INVESTMENT.
Purchasers in this offering will experience an immediate and substantial
dilution of their investment. Investors who purchase shares will pay a price per
share that substantially exceeds the value of our assets after subtracting its
liabilities. For more information on the dilution that investors will experience
regarding their investment please look at the "Dilution" section below.
THE ENTIRE AMOUNT OF ANY INVESTMENT MAY BE LOST DUE TO OPERATING EXPENSES.
We cannot ensure that any investment in us will not be lost due to
operating expenses, including those costs for keeping us an active reporting
company with the Securities and Exchange Commission. Our viability could also be
seriously affected by rising operating expenses such as: sales and marketing;
travel; electricity; insurance and administrative costs, security and regulatory
compliance. If we cannot control operating costs or adequately cover them, and
because there is no source of cash flow into our business, the investor should
consider that their entire investment could be lost.
NO UNDERWRITER IS BEING USED.
We are using our best efforts to market us and our shares of stock for
sale. We are not using any underwriting firm, placement agent or any other
person to market or sell the shares. There is no assurance that we can sell all
or any of the securities. There may be less of a due diligence review performed
by us in this offering than if the offering were being underwritten where an
underwriting firm would perform a thorough due diligence review of us.
WE MAY RECEIVE LITTLE OR NO PROCEEDS FROM THIS OFFERING.
We may receive little or no proceeds from this offering. It is intended
that the proceeds originally will be used to maintain the filing status with the
Securities and Exchange Commission and with any state securities commissions if
the shares are registered in any of the states or other jurisdictions which
require registration of securities. The proceeds will then be applied as per the
"Use of Proceeds" section below. A lack of proceeds will severely hinder our
marketing and travel, and will require us to scale back operations and seek
funding through other avenues.
5
WE DO NOT INTEND TO IMMEDIATELY REGISTER WITH ANY OF THE STATE OR OTHER
JURISDICTIONS, WHICH MAY RESULT IN FUTURE REGISTRATION COSTS AND LIMITED MARKETS
FOR RESALE.
We do not intend to immediately register the securities with any of the
states or other jurisdictions that may require registration in order to be sold
in said state or jurisdiction. This registration may need to be made at a future
date and will vary in costs depending on the state or jurisdiction. In states or
jurisdictions were such registration is required, investors may not be able to
freely trade the shares in that state or jurisdiction.
Each state has its own securities laws, often called "blue sky laws,"
which (1) limit sales of stock to a state's residents unless the stock is
registered in that state or qualifies for an exemption from registration and (2)
govern the reporting requirements for broker-dealers and stock brokers doing
business directly or indirectly in the state. Before a security is sold in a
state there must be a registration in place to cover the transaction or else it
must be exempt from registration. Also, the broker must be registered in that
state. We do not know whether our stock will be registered, or exempt, under the
laws of any states. A determination regarding registration will be made by the
broker-dealers, if any, who agree to serve as the market-makers for our stock.
There may be significant state blue sky law restrictions on the ability of
investors to sell and on purchasers to buy our stock. Accordingly, you should
consider the resale market for our securities to be limited. Shareholders may be
unable to resell their stock, or may be unable to resell it without the
significant expense of state registration or qualification.
OUR SOLE OFFICER AND DIRECTOR, MR. LEVIN, WILL OWN A CONTROLLING INTEREST IN OUR
VOTING STOCK AND INVESTORS WILL NOT HAVE ANY VOICE IN OUR MANAGEMENT.
Upon completion of this offering, our sole officer and director, Mr. Levin
will, in the aggregate, beneficially own approximately 50.51% of our outstanding
common stock. As a result, Mr. Levin will have the ability to control
substantially all matters submitted to our stockholders for approval, including:
o election of our board of directors;
o removal of any of our directors;
o amendment of our certificate of incorporation or bylaws; and
o adoption of measures that could delay or prevent a change in control
or impede a merger, takeover or other business combination involving
us.
As a result of his ownership and position, Mr. Levin is able to influence
all matters requiring stockholder approval, including the election of directors
and approval of significant corporate transactions. In addition, sales of
significant amounts of shares held by Mr. Levin, or the prospect of these sales,
could adversely affect the market price of our common stock. Mr. Levin's stock
ownership may discourage a potential acquirer from making a tender offer or
otherwise attempting to obtain control of us, which in turn could reduce our
stock price or prevent our stockholders from realizing a premium over our stock
price.
RISKS RELATED TO OUR COMMON STOCK
THERE IS CURRENTLY NO PUBLIC MARKET FOR OUR COMMON STOCK. FAILURE TO DEVELOP OR
MAINTAIN A TRADING MARKET COULD NEGATIVELY AFFECT THE VALUE OF OUR SHARES AND
MAKE IT DIFFICULT OR IMPOSSIBLE FOR YOU TO SELL YOUR SHARES.
Prior to this offering, there has been no public market for our common
stock and a public market for our common stock may not develop upon completion
of this offering. Failure to develop or maintain an active trading market could
negatively affect the value of our shares and make it difficult for you to sell
your shares or recover any part of your investment in us. Even if a market for
our common stock does develop, the market price of our common stock may be
highly volatile. In addition to the uncertainties relating to our future
operating performance and the profitability of our operations, factors such as
variations in our interim financial results, or various, as yet unpredictable
factors, many of which are beyond our control, may have a negative effect on the
market price of our common stock.
6
THE OFFERING
We are registering up to 2,500,000 shares of common stock for sale to the
public. The common stock will be sold by our sole officer and director Simon
Levin, to investors inside and outside the United States. Other than possible
reimbursement for out-of-pocket selling costs incurred by the officers and
directors in their selling efforts and costs of preparing this prospectus, no
commissions or other deductions will be paid from the proceeds raised. There is
no minimum number of shares that must be sold in order for us to accept funds
and consummate investor purchases.
DETERMINATION OF OFFERING PRICE
We have arbitrarily determined the initial public offering price of the
shares at $0.10 per share which price does not necessarily bear any relationship
to established valuation criteria such as earnings, book value or assets.
Rather, the offering price per share was derived from a subjective consideration
by management of various factors including:
o prevailing market conditions, including the history and prospects
for the industry in which we compete;
o our future prospects; and
o our capital structure.
Due to the arbitrary nature of the $0.10 offering price of the shares,
such valuation may not be indicative of prices that may prevail at any time or
from time to time in the future. You cannot be sure that a public market for any
of our securities will develop and continue or that the shares will ever trade
at a price higher than the offering price in this offering.
We are also registering on behalf of selling stockholders, for resale up
to 780,000 shares of common stock. The shares of common stock offered for resale
may be sold in a secondary offering by the selling stockholders by means of this
prospectus. The shares will be sold at a price of $0.10 per share. We will not
participate in the resale of shares by selling stockholders.
USE OF PROCEEDS
The proceeds from the sale of the shares of common stock offered by us are
estimated to be up to $250,000 based on a public offering price of $0.10 per
share. We intend to utilize the estimated proceeds during the twenty-four month
period following this offering for the following purposes:
- ---------------------------------- ---------------- ---------------- ---------------- -----------------
25% of Maximum 50% of Maximum 75% of Maximum Maximum Offering
Offering Amount Offering Amount Offering Amount Amount
- ---------------------------------- ---------------- ---------------- ---------------- -----------------
Total Proceeds $ 62,500 $ 125,000 $ 187,500 $ 250,000
Legal and Accounting Costs of $ 15,000 $ 15,000 $ 15,000 $ 15,000
Offering
Net Proceeds from Offering $ 47,500 $ 110,000 $ 172,500 $ 235,000
Use of Net Proceeds
Joint Ventures $ 21,000 $ 42,000 $ 63,000 $ 84,000
Research and Travel $ 6,000 $ 12,000 $ 18,000 $ 24,000
Marketing and
Advertising $ 9,500 $ 46,000 $ 80,500 $ 117,000
Working Capital $ 11,000 $ 10,000 $ 11,000 $ 10,000
- ---------------------------------- ---------------- ---------------- ---------------- -----------------
7
DILUTION
Our book value per share, as of May 31, 2005 was $0.01 per share. Without taking
into account any changes in our book value after May 31, 2005 and giving effect
to the sale by us of 1,250,000 or 2,500,000 shares of common stock offered
hereby (after deducting estimated offering expenses payable by us) the pro forma
book value at May 31, 2005, would have been approximately $128,213 or $0.03 per
share if 1,250,000 shares are sold and $253,213 or $0.04 per share if 2,500,000
shares are sold. This amount represents an immediate and significant dilution to
new investors. The following table illustrates this dilution per share:
1,250,000 2,500,000
Shares Sold Shares Sold
----------- -----------
Public offering price per share $ 0.10 $ 0.10
Weighted average price per share paid by existing stockholders $ 0.10 $ 0.10
Book Value per share at May 31, 2005 $ 0.01 $ 0.01
Book value per share after offering $ 0.03 $ 0.04
Increase per share attributable to existing stockholders $ 0.02 $ 0.03
Dilution per share to new investors $ 0.07 $ 0.06
The following table sets forth, as of May 31, 2005, certain information
regarding the existing stockholders and the investors purchasing shares of
common stock in this offering:
50% Shares Purchased 100% Shares Purchased
-------------------- ---------------------
Number of Amount Number of Amount
Shares Percent Invested Percent Shares Percent Invested Percent
--------- ------- --------- ------- --------- ------- --------- -------
Existing
Stockholders 3,439,500 73.3% $ 68,950 35.6% 3,439,500 57.9% $ 68,950 21.6%
New investors 1,250,000 26.7% $ 125,000 64.4% 2,500,000 42.1% $ 250,000 78.4%
--------- ----- --------- ----- --------- ----- --------- -----
Total 4,689,500 100% $ 193,950 100% 5,939,500 100% $ 318,950 100%
========= ===== ========= ===== ========= ===== ========= =====
MARKET FOR OUR COMMON STOCK
Our common stock is not quoted on any exchange and there is no public
trading market.
As of March 11, 2005, we had 3,439,500 issued and outstanding shares of
common stock and 13 stockholders of record. We do not have any outstanding
options, warrants or other arrangements providing for the issuance of additional
shares of our capital stock. Of the 3,439,500 shares of common stock
outstanding, none of these shares are eligible for resale pursuant to Rule 144
of the 1933 Act as they have been held for less than one year. Except for the
shares being registered in this prospectus, we do not have any current intention
or obligation to register any additional shares of common stock for sale.
There is no public market for our common stock. Trades of our common
stock, should a market ever develop, will be subject to Rule 15g-9 of the
Securities and Exchange Commission, which rule imposes certain requirements on
broker/dealers who sell securities subject to the rule to persons other than
established customers and accredited investors. For transactions covered by the
rule, brokers/dealers must make a special suitability determination for
purchasers of the securities and receive the purchaser's written agreement to
the transaction prior to sale. The SEC also has rules that regulate
broker/dealer practices in connection with transactions in "penny stocks". Penny
stocks generally are equity securities with a price of less than $5.00 (other
than securities registered on certain national securities exchanges or quoted on
8
the NASDAQ system, provided that current price and volume information with
respect to transactions in that security is provided by the exchange or system).
The penny stock rules require a broker/ dealer, prior to a transaction in a
penny stock not otherwise exempt from the rules, to deliver a standardized risk
disclosure document prepared by the SEC that provides information about penny
stocks and the nature and level of risks in the penny stock market. The
broker/dealer also must provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker/dealer and its
salesperson in the transaction, and monthly account statements showing the
market value of each penny stock held in the customer's account. The bid and
offer quotations, and the broker/dealer and salesperson compensation
information, must be given to the customer orally or in writing prior to
effecting the transaction and must be given to the customer in writing before or
with the customer's confirmation. These disclosure requirements may have the
effect of reducing the level of trading activity in the secondary market for our
common stock. As a result of these rules, investors in this offering, even if a
market for our shares ever develops, may find it difficult to sell their shares.
The provisions in our Certificate of Incorporation allow our board of
directors to issue preferred stock with rights, preferences and privileges
superior to our common stock. The issuance of preferred stock with such rights
may make the removal of management difficult even if such removal would be
considered beneficial to stockholders generally. It would have the effect of
limiting stockholder participation in certain transactions such as mergers or
tender offers if such transactions are not favored by our management. There are
no shares of preferred stock outstanding, and there are no current plans,
arrangements, commitments or undertakings to issue any preferred stock. However,
the board of directors has the authority to issue shares of preferred stock at
any time up to the amount authorized in our Certificate of Incorporation.
DIVIDEND POLICY
Holders of our common stock are entitled to receive such dividends as may
be declared by our board of directors and, in the event of liquidation, to share
pro rata in any distribution of our assets after payment of liabilities. We have
not paid any dividends on our common stock and we do not have any current plans
to pay any common stock dividends.
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements which relate to future
events or our future financial performance. In some cases, you can identify
forward-looking statements by terminology such as "may," "should," "expects,"
"plans," "anticipates," "believes," "estimates," "predicts," "potential" or
"continue" or the negative of these terms or other comparable terminology. These
statements are only predictions and involve known and unknown risks,
uncertainties and other factors, including the risks identified in the section
entitled "Risk Factors," that may cause our or our industry's actual results,
levels of activity, performance or achievements to be materially different from
any future results, levels of activity, performance or achievements expressed or
implied by these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Except as required by applicable law,
including the securities laws of the United States, we do not intend to update
any of the forward-looking statements to conform these statements to actual
results. The Private Securities Litigation Reform Act of 1995 and Section 27A of
the Securities Act and Section 21E of the Securities Exchange Act do not protect
any statements we make in connection with this offering.
9
BUSINESS
INTRODUCTION AND BACKGROUND
We were incorporated under the laws of the State of Delaware on July 7,
2004 to act as a holding company for our wholly-owned subsidiary, Levin
Industries Ltd. Levin Industries is a sales and marketing company based in
Vancouver, British Columbia, Canada. Levin Industries' goal it is to generate
manufacturing contracts and place them in manufacturing facilities in North
America and Asia. Levin Industries receives a fixed commission for the
procurement of these contracts. Levin Industries also intends to acquire
minority interests in manufacturing facilities in Asia. We are a development
stage business and have had nominal revenues since our formation.
CONTRACT PROCUREMENT
Our primary focus is to generate contracts with companies that create
technical outerwear clothing to place their manufacturing orders with
manufacturing facilities and we will oversee the process from design to finished
product. Technical outerwear clothing refers to garments that are used in
self-propelled sports such as skiing and hiking, and other garments that provide
moisture transfer, windproofing, waterproofing and extreme weather protection.
Many large fashion and apparel companies do not own their own
manufacturing facilities; instead, they have internal departments that are
responsible for finding manufacturing facilities, negotiating contracts and
overseeing the process at such facilities until the products are produced and
shipped. Our business involves contacting these fashion and apparel companies
and securing contracts with them to have their clothing and apparel manufactured
by a manufacturing company. Our fee comes from the contract that we enter into,
to be negotiated and determined during negotiations, with the manufacturing
facility for securing business on their behalf. We believe there is a growing
market for the outsourcing of this services from in-house to companies like
ours. We will assist our clients by arranging to have other companies perform
the following services on an outsourced basis:
o Design and development;
o Pattern making and grading;
o Fabric sourcing;
o Sample sewing;
o Production;
o Quality control;
o Private label development; and
o Duty, quota, brokerage and TPL services.
Design and development
- ----------------------
This involves the creation of actual designs, including styles, colors,
stitching and fabric selection through the process of having such designs make
into patterns, samples created and arranging for manufacturing of the products.
Pattern making and grading
- --------------------------
Creates first pattern or make alterations to existing hard paper patterns
or digitized data. All patterns are computerized using a Gerber pattern making
system. Gerber is a brand of software used in the pattern making and size
grading process which allows a hard cardboard pattern to be transferred onto
computer graphically and sized appropriately. Patterns made from sample or
specification. Grading involves making grade rules for the market that product
is intended, such as men, women, youth, child, toddler, etc.
10
Fabric sourcing
- ---------------
This service involves searching for the type, quality, fiber and amount of
fabric needed for the customers' needs.
Sample sewing
- -------------
This service involves finding companies to provide the sewing of samples
of the garments to be manufactured to ensure stitching, quality and proper
pattern design. The samples are provided to clients for proofing prior to full
manufacture of the garments. Samples can be sewn using various methods.
Production
- ----------
This involves placing orders with manufacturers to mass-produce a
customer's clothing line based upon developed patterns.
Quality control
- ---------------
This involves the assessment of product compliance with stated patterns,
including reviewing for proper material, color, stitching and gluing.
Private label development
- -------------------------
Involves the creation of a new, independent line of clothing. Private
labels are clothing lines for companies to sell in addition to, or instead of
nationally known brands. For example, a retail store may carry jeans from
nationally recognized brands such as Levi's, Polo, and Calvin Klein, but also
carry a brand of jeans made for that retain store and only sold in that retail
store. This typically involves the process from design to development.
Duty, quota, brokerage and tpl services.
- ----------------------------------------
This involves the many laws and regulations relating to the amount of
certain products that can be imported into a country at a particular time or
over a period of time. This also involves payment of various taxes, depending on
what type of goods are being shipped, where they are shipped from, where they
are shipped to and how much of the product is being shipped. Failure to comply
with these regulations could result in shipments being held up in transit or
large financial penalties, among other repercussions.
MANUFACTURING FACILITY OWNERSHIP
Our second business objective is to acquire ownership interests in
clothing manufacturing facilities in Asia. Our particular interest is the
Pacific Rim area, and we are primarily interested in looking at China at this
time. In connection with any contracts we would enter into with clothing
manufacturing facilities in Asia, it is our intention to negotiate to receive an
ownership interest at a discount to the market price. In return for the
ownership interest in the clothing manufacturing facility, we will provide a
guaranteed minimum amount of production business per month as well as sales and
marketing services for the facility in the the North American markets. Through
securing ownership interests in these facilities, we will have added incentive
to place future manufacturing contracts with such facilities and will help
ensure that our clients have access to clothing manufacturing facilities at the
best rate possible. This in turn will hopefully lead to additional business for
us. At this time, we have not had any contact or discussions with any clothing
manufacturing facilities concerning a potential acquisition of ownership
interests.
CONTRACT WITH AND OWNERSHIP IN ANK APPAREL SOURCE INC.
We entered into an agreement with ANK Apparel Source Inc. to procure
contracts on their behalf for the manufacture of clothing in ANK's manufacturing
facilities. Pursuant to our agreement with ANK, we receive a commission based
upon the total value of the contract we secure on their behalf. Our commission
is 2% of the net invoice amount of the contracts we procure. Upon reaching
commissions of $80,000 per year, we shall receive an additional 1.5%, or a total
of 3.5% commission on all contracts we procure from that point forward for the
rest of the year.
11
In addition, we own approximately 16% of the total issued and outstanding
shares of common stock of ANK. It is our intention for the immediate future to
place all manufacturing contracts we secure at ANK's Canadian manufacturing
facility. However, our contract with ANK does not require us to place all
manufacturing contracts with ANK. In the event that we acquire an ownership
interest in a clothing manufacturing facility in Asia, we can place new
manufacturing contracts with those facilities. Our agreement with ANK does not
prohibit us from acquiring competing interests or placing contacts with other
manufacturing facilities.
To date, we have secured four contracts to place manufacturing services
with ANK Apparel. The first contract was with Cabelas Inc. for the placement of
a $2 million contract. Our President, Simon Levin, has a pre-existing
relationship with this client and through this relationship, was able to
negotiate the contract. The second contract was with Alpha Broder for $2.1
million. We were referred to this company from an existing relationship that our
President, Simon Levin had. We contacted this company and secured the contract.
The last two contracts, with Gander Mountain Inc. and Running Room, for $2.5
million and $750 thousand, respectively, came about through cold calling
companies. Our revenues on these contracts were based upon our commission as
described above.
As of the date of this filing, ANK Apparel Source is our only client. Our
business, revenues and potential for future success is totally dependent on our
contract with ANK Apparel Source. We are seeking additional clients, although
there can be no assurance that we will be able to obtain additional clients or
that we will be able to keep ANK Apparel Source as a client.
ANK APPAREL SOURCE INC.
ANK Apparel Source Inc. was incorporated on November 7, 2001. It is in its
fourth year of business in the technical outerwear industry. Its primary source
of business is the manufacture of Technical Sports Outerwear Apparel for North
American and European markets. ANK does not have a brand or its own line of
clothing. ANK is a contract manufacturer. We own 16% of the issued and
outstanding shares of ANK Apparel. Other than our equity ownership, there are no
other affiliations between our company and our officer and director and ANK
Apparel and their officers and directors.
ANK has a manufacturing facility in Canada, owns a 35% interest in another
facility in Hang Zhou, China and is negotiating to acquire an interest in
another facility in China. The Canadian facility has 120 operators, a gluing
facility for technical welding of pockets and seams and a quality control and
trimming section. There is also a cutting department on premise that consists of
the latest Gerber computerized pattern making, product grading and marker
producing technology. The cutting equipment is all computerized and fully
automated for consistency and accuracy. In addition, there is also an Embroidery
department consisting of 24 heads for bulk production and four head machines for
sampling. Within the facility, there is a small sewer-sewing floor, bulk fabric
storage, packaging and shipping departments for finished products. The facility
in Hang Zhou holds 100 operators with existing space to increase capacity to 200
sewers.
ANK Canadian facilities are slowly decreasing the manufacturing capacity
in Canada and increasing the capacity in Asia. This is due solely to the change
in the quota and duties being abolished or decreased. As a result, China without
quotas now makes it a prime location for manufacturing.
ANK Apparel offers full package programs consisting of patternmaking,
pattern size grading, fabric sourcing, sampling, fabric purchases for bulk
production, packaging development, labeling, UPC coding, and EDI capabilities.
ANK offers a second option of cut, make and trim only. This gives a customer an
option to bring an already developed style and in stock fabric to the facility
and have the production floor cut, sew and package the product.
Following is a list of some of ANK's current and recent customers:
o Polo RLX Sport Line;
o Moonstone;
12
o Marmot;
o Patagonia;
o Cloudvail;
o Cabela's;
o Gander Mountain;
o Bass Pro;
o Arcteryx;
o Alpha Broder;
o Costco;
o Running Room;
o Forzani Group; and
o Eddie Bauer.
ANK's strength is in the ability to develop and source technical fabric or
develop fabrics with foreign mills and service the customer in North America
rather than companies having to go offshore themselves. All development and
sampling is done in Canada and finished approved garments are then sent to the
Asian facility for production
ANK's produces the following types of fabrics and designs:
o Base layer and next to skin underwear - moisture transfer;
o Fleece Outerwear - Jackets, bottoms, vests - hoodies, men's, woman's
and kids;
o Soft shell technology for windproof and waterproof outerwear;
o Woven shells for wind resistance;
o Military ECWACS (Extended Cold Weather Clothing Systems) for Navy
Seals and Military Personnel; and
o Gloves, hates scarves and other accessory items.
CUSTOMERS AND MARKETING STRATEGY
We currently have one customer, ANK Apparel. We are seeking contracts with
additional customers. We intend to focus our marketing strategy on the attending
of trade shows and the networking of our President, Simon Levin, who has been
involved in this industry for over 15 years.
COMPETITION
The market for clothing manufacturing contracts is very competitive. Many
companies own their own manufacturing facilities or have long-standing business
relationships and personal ties with their existing manufacturers, which they
are reluctant to disrupt. Additionally, we do not own our own manufacturing
facility, so we are reliant upon other manufacturers whom we shall solicit to
fulfill manufacturing orders.
We must educate potential customers on the use and benefits of our
services, which can require significant time and resources. The period between
initial contact and the retention of our services is often long and subject to
delays associated with the lengthy approval and competitive evaluation processes
that typically accompany a customer's decision to change its outsourcing
relationships. For many customers, the cycle could take several months, and for
large customers, the cycle may require more than one year. If we are unable to
obtain new customers, it could result in increased operating and marketing
expenses and operating losses.
We also face direct competition from other manufacturing service brokers
who might also have contracts or relationships with existing manufacturing
facilities.
13
GOVERNMENTAL REGULATION
Although we are not subject to direct regulation by any local, state or
federal governments, we are influenced by various regulations. Our transactions
with our manufacturers and suppliers are subject to the risks of doing business
aboard. Imports into the United States and Canada are affected by, among other
things, the cost of transportation and the imposition of import duties and
restrictions. The United States, China, India, Nepal, Sri Lanka, and other
countries where products are manufactured may, from time to time, impose new
quotas, duties, tariffs or other restrictions, or adjust presently prevailing
quotas, duty or tariff levels, which could affect our operations and our ability
to import products various levels. We cannot predict the likelihood or frequency
of any such events occurring.
Import operations are subject to constraints imposed by bilateral textile
agreements between the United States and a number of foreign countries,
including Hong Kong and Korea. These agreements impose quotas on the amount and
type of goods which can be imported into the United States from these countries.
Such agreements also allow the United States to impose, at any time, restraints
on the importation of categories of merchandise that, under the terms of the
agreements, are not subject to specified limits. Imported products are also
subject to United States customs duties and in the ordinary course of business,
and we may from time to time be subject to claims by the United States Customs
Service for duties and other charges.
We monitor duty, tariff and quota related developments and will
continually seek to minimize our and our clients' potential exposure to
quota-related risks through, among other measures, geographical diversification
of manufacturing sources, the maintenance of overseas buying agents, allocation
of overseas production to merchandise categories where more quota is available
and shifts of production among countries and manufacturers.
In addition to the factors outlined above, future import operations may be
adversely affected by political instability resulting in the disruption of trade
from exporting countries, any significant fluctuation in the value of the dollar
against currencies and restrictions on the transfer of funds.
EMPLOYEES
We currently have one full time employee, Simon Levin. We consider our
relations with our employee to be good.
DESCRIPTION OF PROPERTY
We maintain our principal office at 315 E. 2nd Avenue, Vancouver, British
Columbia, Canada V5T 1B9. Our telephone number at that office is (604) 215-3294
and our facsimile number is (604) 255-3290. We lease 300 square feet of office
space. Our monthly rent for this location is $150 per month. The lease expires
on September 30, 2005 and we have an option to renew the lease. We believe that
our current office space and facilities are sufficient to meet our present needs
and do not anticipate any difficulty securing alternative or additional space,
as needed, on terms acceptable to us.
LEGAL PROCEEDINGS
From time to time, we may become involved in various lawsuits and legal
proceedings which arise in the ordinary course of business. However, litigation
is subject to inherent uncertainties, and an adverse result in these or other
matters may arise from time to time that may harm our business. We are currently
not aware of any such legal proceedings or claims that we believe will have,
individually or in the aggregate, a material adverse affect on our business,
financial condition or operating results.
14
MANAGEMENT'S DISCUSSION AND ANALYSIS
AND PLAN OF OPERATIONS
OVERVIEW
We were incorporated in the State of Delaware on July 7, 2004. Effective
July 16, 2004, we acquired all the outstanding common stock of Levin Industries
Ltd., a company under common control. Prior to the acquisition, we were a
non-operating shell corporation with net assets consisting solely of cash of
$25,000. The acquisition is a capital transaction in substance and therefore has
been accounted for as a recapitalization.
By a Share Purchase Agreement dated July 22, 2004, we acquired 100% of the
issued and outstanding common stock of Levin Industries Ltd. in consideration
for the issue of 2,500,000 shares of our common stock. Levin Industries was
incorporated on February 16, 2004 under the Company Act of British Columbia and
was owned by Simon Levin, our President. The principal business of Levin
Industries is in the garment manufacturing industry specializing in sales,
product development, initial sample approval, fabric sourcing, and product
placement.
Prior to the recapitalization, we were a non-operating shell company with
net assets consisting solely of cash of $25,000. Therefore, this acquisition is
a capital transaction in substance, rather than a business combination, and has
been accounted for as a recapitalization. Because Levin Industries is deemed to
be the acquirer for accounting purposes, the financial statements are presented
as a continuation of Levin Industries and include the results of operations of
Levin Industries since incorporation on February 16, 2004, and our results of
operations since the date of acquisition on July 22, 2004.
As at July 16, 2004, we had $25,000 of net assets which has been allocated
to additional paid in capital.
PLAN OF OPERATIONS
Our first objective is to increase the annual sales for ANK Apparel. To
achieve this goal, we will attend four major trades shows for the technical and
ski wear industries at which we will have a booth soliciting customers and
placing contracts in the ANK's facility. These four shows are the Magic Show,
Outdoor Retailer Show, SIA Show and the Shot Show. The Outdoor Retail Show takes
place in August 2005 while the remaining shows occur in January and February of
2006. The costs for the shows is anticipated to be approximately $15,000 and we
intend to cover the costs from our current cash on hand.
Our second objective is to solicit additional customers based upon
previous business relationships with Simon Levin, our President. This will
involve sales trips, conference calls and in-person meetings. These meetings are
expected to occur between July and October 2005 and are expected to cost
approximately $6,000. We intend to cover the costs from our current cash on
hand.
Our third objective is to travel to Vietnam during the fall of 2005 to
explore possible joint ventures for manufacturing facilities. Expenses are
estimated to be $10,000 and we intend to cover those costs from cash on hand,
money raised in this offering, revenues generated or we will look for
alternative funding sources.
Our fourth objective will be to travel to China to inspect ANK's
manufacturing facilities to ensure compliance with applicable laws and
regulations and to ensure that is has the ability and capacity to handle the
production capacity that we hope to deliver. Expenses are estimated to be $5,000
and we intend to cover those costs from cash on hand, money raised in this
offering, revenues generated or we will look for alternative funding sources.
Our fifth objective is to raise $250,000 via this public offering to
expedite our growth.
Our sixth objective is to travel to Vietnam Indonesia and/or Bangladesh
during the spring/early summer of 2006 to explore possible joint ventures for
manufacturing facilities. Expenses are estimated to be $50,000 and we intend to
cover those costs from cash on hand, money raised in this offering, revenues
generated or we will look for alternative funding sources.
15
RESULTS OF OPERATION
PERIOD FROM INCEPTION (FEBRUARY 16, 2004) TO MAY 31, 2005
We have commenced operations and have received $92,870 of revenues through
May 31, 2005. Start-up expenses of $123,025 were incurred in the period from
inception through May 31, 2005. Professional and consulting fees represented
$102,762 of these start-up expenses as we are using outside consultants in such
areas as legal, accounting, web design and marketing in developing our business.
Consulting fees include $55,304 paid to Mr. Levin. Included in operating
expenses in the period is $2,858 of rent donated by the Company's President.
We incurred a net loss of $37,166 during the period from inception through
May 31, 2005.
Prior to our acquisition of assets from Levin Industries on July 7, 2004,
our business had not yet commenced and no revenues had been generated.
LIQUIDITY AND CAPITAL RESOURCES
We have incurred operating losses since the inception of our business
(February 16, 2004), and, as of May 31, 2005, we have an accumulated deficit of
$37,166. At May 31, 2005, we had cash and cash equivalents of $27,037 and a net
working capital deficiency of $12,532.
To date, we have funded our operations through the issuance of common
stock. During the period from inception to March 1, 2005, we raised $25,000 from
the sale of 3,000,000 shares of common stock to our President, Simon Levin and
$43,950 from the sale of 439,500 shares of common stock to 12 unrelated persons.
We also received the benefit of having the costs of our premises donated by a
related party having a total value of $2,367.
On November 1, 2004, our President, Simon Levin, loaned us CDN$50,000. In
connection therewith, we executed a promissory note payable to Mr. Levin. The
note does not bear interest and is payable on demand. As of the date of this
filing, we have repaid $10,185 of the note and Mr. Levin has not made a demand
for repayment of the remaining principal.
While we have raised capital to meet our working capital and financing
needs in the past, additional financing is required in order to meet our current
and projected cash flow deficits from operations and development.
By adjusting our operations and development to the level of
capitalization, we believe we have sufficient capital resources to meet
projected cash flow deficits through the next twelve months. However, if
thereafter, we are not successful in generating sufficient liquidity from
operations or in raising sufficient capital resources, on terms acceptable to
us, this could have a material adverse effect on our business, results of
operations, liquidity and financial condition.
We have used the $68,950 cash raised to date from the sale of stock, which
includes the $25,000 raised from the sale of 3 million shares to Simon Levin,
our President, largely for legal and accounting services and general working
capital purposes.
We expect our expenses will continue to increase during the foreseeable
future as a result of increased marketing expenses and the enhancement of our
website. We are dependent on the proceeds from future debt or equity investments
to sustain our operations and implement our business plan. If we are unable to
raise sufficient capital, we will be required to delay or forego some portion of
our business plan, which may have a material adverse effect on our anticipated
results from operations and financial condition. Alternatively, we may seek
interim financing in the form of bank loans, private placement of debt or equity
securities, or some combination of these. Such interim financing may not be
available in the amounts or at the times when we require, and will likely not be
on terms favorable to us.
EMPLOYEES
We anticipate hiring one sales and marketing person within the next six
months.
16
MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS, DIRECTOR NOMINEES AND KEY EMPLOYEES
The following is the name and certain information regarding our current
Director and Executive Officer:
Name Age Position
---------------------- --- -----------------------------------------
Simon Levin 40 President, Principal Financial Officer,
Principal Accounting Officer, Secretary,
Treasurer and Director
Pursuant to our bylaws, our directors are elected at our annual meeting of
stockholders and each director holds office until his successor is elected and
qualified. Officers are elected by our Board of Directors and hold office until
an officer's successor has been duly appointed and qualified unless an officer
sooner dies, resigns or is removed by the Board. There are no family
relationships among any of our directors and executive officers.
BACKGROUND OF EXECUTIVE OFFICERS AND DIRECTORS
SIMON LEVIN, PRESIDENT, PRINCIPAL FINANCIAL OFFICER, PRINCIPAL ACCOUNTING
OFFICER, SECRETARY, TREASURER AND DIRECTOR. Mr. Levin has been our President,
Principal Financial Officer, Principal Accounting Officer, Secretary, Treasurer
and Director since the Company was founded in July 2004. Mr. Levin has been the
President of Levin Industries, our wholly-owned subsidiary since its founding in
February 2004. Between 1995 and February 2004, Mr. Levin was an owner, Director
of Sales and Marketing and a member of the Board of Directors of Abaca Garment
Maker Ltd., a garment manufacturer based in Vancouver, Canada.
EMPLOYMENT AGREEMENTS
None. Although Mr. Levin does not have an employment agreement with us, it is
Mr. Levin's intention to continue working for us for at least the next 12
months.
DIRECTOR COMPENSATION
None.
17
EXECUTIVE COMPENSATION
We were incorporated under the laws of the State of Delaware on July 7,
2004. As a result, there has been no executive compensation for the last two
fiscal years. Information provided below includes that of our predecessor
company.
STOCK OPTION PLAN
We do not have a stock option plan and we have not issued any warrants,
options or other rights to acquire our securities.
EMPLOYEE PENSION, PROFIT SHARING OR OTHER RETIREMENT PLANS
We do not have a defined benefit, pension plan, profit sharing or other
retirement plan, although we may adopt one or more of such plans in the future.
DIRECTOR'S COMPENSATION
At present we do not pay our directors for attending meetings of our Board
of Directors, although we expect to adopt a director compensation policy in the
future. We have no standard arrangement pursuant to which our directors are
compensated for any services provided as a director or for committee
participation or special assignments.
CONSULTING FEES
We paid consulting fees of $30,950 to our President, Simon Levin, during
the nine months ended May 31, 2005. For the period from our date of inception,
February 16, 2004 to August 31, 2004, we paid consulting fees of $24,354 to our
President, Simon Levin.
18
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Our President, Simon Levin, donated the rent for our offices, valued at
$250 per month, from our inception through May 2005.
We acquired all of the issued and outstanding shares of common stock of
Levin Industries Ltd. from our President, Simon Levin.
At May 31, 2005, Simon Levin, our President, owes us $22,204 for various
advances we have made to him against future commissions. The amount is
non-interest bearing, unsecured and due on demand.
At August 31, 2004, we owed $7,661 to Simon Levin, our President, for
various advances made on our behalf. The amount was non-interest bearing,
unsecured and due on demand.
We paid consulting fees of $30,950 to Simon Levin, our President during
the nine month period ended May 31, 2005. We paid consulting fees of $24,354 to
Simon Levin, our President for the period from our inception to August 31, 2004.
We issued a promissory note for $42,150 (CDN$50,000) to Simon Levin, our
President for the acquisition of a 16% interest in ANK Apparel Source Inc.
During the nine-month period ended May 31, 2005, we repaid $10,185.
We generated commission income from ANK of $67,773 during the nine month
period ended May 31, 2005, representing 100% of total revenues.
19
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of August 1, 2005
with respect to the beneficial ownership of the outstanding common stock by (i)
any holder of more than five (5%) percent; (ii) each of our executive officers
and directors; and (iii) our directors and executive officers as a group. Except
as otherwise indicated, each of the stockholders listed below has sole voting
and investment power over the shares beneficially owned.
Percentage of Percentage of Common
Common Stock Common Stock Stock After Offering
Name of Beneficial Owner (1) Beneficially Owned Before Offering (3) (4)
----------------------------------------- ------------------------- --------------------- ----------------------
Simon Levin 3,000,000 87.22% 50.51%
----------------------------------------- ------------------------- --------------------- ----------------------
All officers and directors as a group 3,000,000 87.22% 50.51%
(1 person)
- ----------
* Less than 1%
(1) Except as otherwise indicated, the address of each beneficial owner is c/o
Levin Textiles International Inc., 315 E. 2nd Avenue, Vancouver, British
Columbia, Canada V5T 1B9.
(2) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to the shares shown. Except where indicated
by footnote and subject to community property laws where applicable, the
persons named in the table have sole voting and investment power with
respect to all shares of voting securities shown as beneficially owned by
them.
(3) Based on 3,439,500 shares outstanding.
(4) Based on 5,939,500 shares outstanding.
20
PLAN OF DISTRIBUTION
We plan to offer and sell a maximum of 2,500,000 shares of our common
stock to the public at a purchase price of ten cents ($0.10) per share. The
offering will terminate the earlier of one year from the date of registration,
or upon the sale of the 2,500,000th share. The offering will be made on a
"self-underwritten" basis, meaning we will sell shares through our sole officer
and director, Simon Levin, without an underwriter, and without any selling
agents. The offering will be made on a continuous basis. There will be no
extensions to this offering. This is not an underwritten offering. The gross
proceeds from this offering will be $250,000 if all the shares offered are sold.
Expenses related to the offering are estimated to be $15,000 which will be paid
by us from the proceeds of this offering. No commissions or other fees will be
paid, directly or indirectly, to any person, finder, underwriter, dealer or firm
in connection with solicitation of sales of the shares. If the subscription is
rejected, the funds will be immediately returned, without interest, by the
escrow agent to the investor.
There is no minimum investment or minimum number of shares that must be
sold in this offering. Any money we receive will be immediately appropriated by
us for the uses set forth in the Use of Proceeds section of this prospectus. The
funds will be placed in an escrow or trust account during the offering period.
Upon acceptance of the subscription the funds will be immediately available to
us, and no money will be returned to the investor once we accept the
subscription. Once the SEC declares this offering effective, the shares of
common stock represented by the offering will be registered pursuant to Section
5 of the Securities Act of 1933.
We will sell the shares in this offering through Simon Levin, our sole
officer and director. Mr. Levin will contact individuals and corporations
located both inside and outside the United States with whom he has an existing
or past pre-existing business or personal relationship and will offer to sell
them our common stock. Mr. Levin will receive no commission from the sale of any
shares. Mr. Levin will not register as a broker-dealer pursuant to Section 15 of
the Securities Exchange Act of 1934 in reliance upon Rule 3a4-1. Rule 3a4-1 sets
forth those conditions under which a person associated with an issuer may
participate in the offering of the issuer's securities and not be deemed to be a
broker-dealer. The conditions are that:
1. The person is not subject to a statutory disqualification, as that
term is defined in Section 3(a)(39) of the Act, at the time of his
participation; and,
2. The person is not compensated in connection with his participation
by the payment of commissions or other remuneration based either
directly or indirectly on transactions in securities; and
3. The person is not, at the time of their participation, an associated
person of a broker-dealer; and,
4. The person meets the conditions of Paragraph (a)(4)(ii) of Rule
3a4-1 of the Exchange Act, in that he (A) primarily performs, or is
intended primarily to perform at the end of the offering,
substantial duties for or on behalf of the issuer otherwise than in
connection with transactions in securities; and (B) is not a broker
or dealer, or an associated person of a broker or dealer, within the
preceding twelve months; and (C) does not participate in selling and
offering of securities for any issuer more than once every twelve
months other than in reliance on Paragraphs (a)(4)(i) or
(a)(4)(iii).
Mr. Levin is not subject to disqualification, is not being compensated,
and is not associated with a broker-dealer. Mr. Levin is and will continue to be
our sole officer and director at the end of the offering. He has not been during
the last twelve months and is currently not a broker/dealer or an associated
person of a broker/dealer. Mr. Levin has not during the last twelve months and
will not in the next twelve months offer or sell securities for another
corporation. Mr. Levin intends to contact persons with whom he had a past or has
a current personal or business relationship and solicit them to invest in this
offering.
PROCEDURES FOR SUBSCRIBING: If you decide to subscribe for any shares in
this offering, you must:
1. execute and deliver to us a subscription agreement; and
2. deliver a check or certified funds to us for acceptance or
rejection.
21
All checks for subscriptions must be made payable to "LEVIN TEXTILES
INTERNATIONAL ESCROW ACCOUNT."
RIGHT TO REJECT SUBSCRIPTIONS: We have the right to accept or reject
subscriptions in whole or in part, for any reason or for no reason. We will
immediately return all monies from rejected subscriptions to the subscriber,
without interest or deductions. We will accept or reject subscriptions for
securities within 48 hours after we receive them.
Regulation M of the Securities and Exchange Act of 1934, which replaced
Rule 10b-6, may prohibit a broker/dealer from engaging in any market making
activities with regard to a company's securities. Under ss.242.104 of Regulation
M, stabilizing is prohibited except for the purpose of preventing or retarding a
decline in the market price of a security. We do not plan to engage in any
passive stabilizing activities.
Once the SEC declares this offering effective, the shares of common stock
represented by the offering will be registered pursuant to Section 5 of the
Securities Act of 1933.
In addition, the selling stockholders may, from time to time, sell up to
780,000 shares of common stock which they own. The selling stockholders may sell
all or a portion of the shares of common stock in privately negotiated
transactions or otherwise. Such sales will be offered at $0.10 per share. Unless
and until the offering price is changed by subsequent amendment to this
prospectus or our shares are quoted on the OTC Bulletin Board. If our shares
become quoted on the OTC Bulletin Board, selling stock holders may then sell
their shares at prevailing market prices or privately negotiated prices.
The shares of common stock may be sold by the selling stockholders by one
or more of the following methods, without limitation:
(a) block trades in which the broker or dealer so engaged will attempt
to sell the shares of common stock as agent but may position and
resell a portion of the block as principal to facilitate the
transaction;
(b) ordinary brokerage transactions and transactions in which the broker
solicits purchasers;
(c) privately negotiated transactions; and
(d) a combination of any aforementioned methods of sale.
The offering of shares by the selling stockholders will run concurrently
with the offering of shares on our behalf. In this regard, the selling
stockholders, will be competing with us for the sale of shares.
Brokers or dealers may receive commissions or discounts from the selling
stockholders or, if any of the broker-dealers act as an agent for the purchaser
of said shares, from the purchaser in amounts to be negotiated which are not
expected to exceed those customary in the types of transactions involved. In
connection with such resales, the broker-dealer may pay to or receive from the
purchasers of the shares, commissions as described above. The selling
stockholders may also sell the shares of common stock in accordance with Rule
144 under the Securities Act, rather than pursuant to this prospectus.
The selling stockholders and any broker-dealers or agents that participate
with the selling stockholders in the sale of the shares of common stock may be
deemed to be "underwriters" within the meaning of the Securities Act in
connection with these sales. In that event, any commissions received by the
broker-dealers or agents and any profit on the resale of the shares of common
stock purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act. Furthermore, selling stockholders are
subject to Regulation M of the Exchange Act. Regulation M prohibits any
activities that could artificially influence the market for our common stock
during the period when shares are being sold pursuant to this prospectus.
Consequently, selling stockholders must refrain from directly or indirectly
attempting to induce any person to bid for or purchase the common stock being
offered with any information not contained in this prospectus. Regulation M also
prohibits any bids or purchases made in order to stabilize the price of our
common stock in connection with the stock offered pursuant to this prospectus.
22
A selling stockholder may enter into hedging transactions with
broker-dealers and the broker-dealers may engage in short sales of our common
stock in the course of hedging the positions they assume with such selling
stockholder, including, without limitation, in connection with the distribution
of our common stock by such broker-dealers, or pursuant to exemption from such
registration. A selling stockholder may also enter into option or other
transactions with broker-dealers that involve the delivery of the common stock
to the broker-dealers, who may then resell or otherwise transfer such common
stock. A selling stockholder may also loan or pledge the common stock to a
broker-dealer and the broker-dealer may sell the common stock so loaned or upon
default may sell or otherwise transfer the pledged common stock.
Under the securities laws of certain states, the shares of common stock
may be sold in such states only through registered or licensed brokers or
dealers or persons exempt from such registration. The selling stockholders are
advised to ensure that any brokers, dealers or agents affecting transactions on
behalf of the stockholders are registered to sell securities in such states. In
addition, in certain states the shares of common stock may not be sold unless
the shares have been registered or qualified for sale in such state or an
exemption from registration or qualification is available and is complied with.
All expenses of the registration statement estimated to be $15,000
including but not limited to, legal, accounting, printing and mailing fees have
or will be paid by us. We have agreed to pay the incremental costs of including
the selling stockholders' shares in this prospectus. However, any selling costs
or brokerage commissions incurred by each selling stockholder relating to the
sale of his/her shares will be paid by the selling stockholder.
23
SELLING STOCKHOLDERS
The following table sets forth the common stock ownership of the selling
stockholders as of August 1, 2005. Other than as set forth in the following
table, the selling stockholders have not held any position or office or had any
other material relationship with us or any of our predecessors or affiliates
within the past three years.
SHARES BENEFICIALLY OWNED SHARES BENEFICIALLY OWNED
PRIOR TO THE OFFERING AFTER THE OFFERING (1)
------------------------- -------------------------
TOTAL SHARES OFFERED
NAME NUMBER PERCENT (2) BY THIS PROSPECTUS (1) NUMBER PERCENT
- ----------------------- ----------- ---------- ------------------------ ---------- ----------
Karl Catill 45,000 1.3% 45,000 0 0%
Duane Cole 40,000 1.2% 40,000 0 0%
Trenton L. Dahl 27,000 * 27,000 0 0%
Will Davis 50,000 1.5% 50,000 0 0%
Dilshad Jamal 42,000 1.2% 42,000 0 0%
Bruce Korhonen 27,500 * 27,500 0 0%
Catherine Lai 45,000 1.3% 45,000 0 0%
Simon Levin 3,000,000 87.2% 340,500 2,659,500 44.8%
Ezio Montagliani 28,000 * 28,000 0 0%
Ajay K. Pathak 31,000 * 31,000 0 0%
Anita Pathak 30,000 * 30,000 0 0%
Sandra Sanders 45,000 1.3% 45,000 0 0%
Jonathan C.F. Shea 29,000 * 29,000 0 0%
- ----------
* Less than 1%.
(1) Assumes that all securities registered will be sold and that all shares of
common stock being registered and sold by us as described in this
prospectus will be issued.
(2) Applicable percentage ownership is based on 3,439,500 shares of common
stock outstanding as of August 1, 2005, together with securities
exercisable or convertible into shares of common stock within 60 days of
August 1, 2005. Beneficial ownership is determined in accordance with the
rules of the Securities and Exchange Commission and generally includes
voting or investment power with respect to securities. Shares of common
stock that are currently exercisable or exercisable within 60 days of
August 1, 2005 are deemed to be beneficially owned by the person holding
such securities for the purpose of computing the percentage of ownership
of such person, but are not treated as outstanding for the purpose of
computing the percentage ownership of any other person.
24
DESCRIPTION OF SECURITIES
The following description of our capital stock is a summary and is
qualified in its entirety by the provisions of our Articles of Incorporation,
with amendments, all of which have been filed as exhibits to our registration
statement of which this prospectus is a part.
DIVIDEND POLICY
We have not had any earnings or profits and have not paid any dividends.
Our proposed operations are capital intensive and we need working capital.
Therefore, we will be required to reinvest any future earnings in our
operations. Our Board of Directors has no present intention of declaring any
cash dividends, as we expect to re-invest all profits in the business for
additional working capital for continuity and growth. The future declaration and
payment of dividends will be determined by our Board of Directors after
considering the conditions then existing, including our earnings, financial
condition, capital requirements, and other factors.
There are no restrictions in our articles of incorporation or bylaws that
restrict us from declaring dividends.
CAPITAL STRUCTURE
Our authorized capital stock consists of 100,005,000 shares of capital
stock, par value $.001 per share, of which 100,000,000 shares are common stock
and 5,000 shares are preferred stock that may be issued in one or more series at
the discretion of the Board of Directors. As of August 1, 2005, 3,439,500 shares
of common stock and 0 shares of Preferred Stock are issued and outstanding.
COMMON STOCK
The holders of common stock are entitled to one vote for each share held
of record on all matters to be voted on by the stockholders. The holders of
common stock are entitled to receive dividends ratably, when, as and if declared
by the Board of Directors, out of funds legally available therefor. In the event
of a liquidation, dissolution or winding-up of Levin Textiles International
Inc., the holders of common stock are entitled to share equally and ratably in
all assets remaining available for distribution after payment of liabilities and
after provision is made for each class of stock, if any, having preference over
the common stock.
The holders of shares of common stock, as such, have no conversion,
preemptive, or other subscription rights and there are no redemption provisions
applicable to the common stock. All of the outstanding shares of common stock
are, and the shares of common stock offered by us hereby, when issued against
the consideration set forth in this prospectus, will be, validly issued, fully
paid and non-assessable.
PREFERRED STOCK
Shares of preferred stock may be issued from time to time in one or more
series as may from time to time be determined by our Board of Directors. Our
Board of Directors has authority, without action by the stockholders, to
determine the voting rights, preferences as to dividends and liquidation,
conversion rights and any other rights of such series. Any preferred shares, if
and when issued in the discretion of the Board of Directors, may carry voting,
conversion or other rights superior to those of the shares of common stock and
may adversely affect the voting power and rights of the common stockholders. Our
Board of Directors has not designated any series or class of preferred stock
and, as such, there are no shares of preferred stock currently outstanding.
OPTIONS AND WARRANTS
We have not yet issued any options, warrants or other rights to acquire
our securities.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is Colonial Stock
Transfer, Salt Lake City, Utah.
25
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Our Articles of Incorporation provide to the fullest extent permitted by
Section 145 of the General Corporation Law of the State of Delaware, that our
directors or officers shall not be personally liable to us or our shareholders
for damages for breach of such director's or officer's fiduciary duty. The
effect of this provision of our Articles of Incorporation, as amended and
restated, is to eliminate our rights and our shareholders (through shareholders'
derivative suits on behalf of our company) to recover damages against a director
or officer for breach of the fiduciary duty of care as a director or officer
(including breaches resulting from negligent or grossly negligent behavior),
except under certain situations defined by statute. We believe that the
indemnification provisions in our Articles of Incorporation, as amended, are
necessary to attract and retain qualified persons as directors and officers.
Our By Laws also provide that the Board of Directors may also authorize
our company to indemnify our employees or agents, and to advance the reasonable
expenses of such persons, to the same extent, following the same determinations
and upon the same conditions as are required for the indemnification of and
advancement of expenses to our directors and officers. As of the date of this
Registration Statement, the Board of Directors has not extended indemnification
rights to persons other than directors and officers.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling us
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for
Levin Textiles International Inc. by Sichenzia Ross Friedman Ference LLP, New
York, New York.
EXPERTS
Financial statements for Levin Textiles International, Inc. audited from
February 16, 2004, the date of inception, to and as of August 31, 2004, included
in this prospectus, have been audited by Manning Elliott, Chartered Accountants,
independent registered public accountants, as stated in their report appearing
herein and are so included herein in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
ADDITIONAL INFORMATION
We have not previously been required to comply with the reporting
requirements of the Securities Exchange Act. We have filed with the SEC a
registration statement on Form SB-2 to register the securities offered by this
prospectus. The prospectus is part of the registration statement, and, as
permitted by the SEC's rules, does not contain all of the information in the
registration statement. For future information about us and the securities
offered under this prospectus, you may refer to the registration statement and
to the exhibits filed as a part of the registration statement. We are not
required to deliver an annual report to security holders and we do not
anticipate sending annual reports to our security holders.
In addition, after the effective date of this prospectus, we will be
required to file annual, quarterly, and current reports, or other information
with the SEC as provided by the Securities Exchange Act. You may read and copy
any reports, statements or other information we file at the SEC's public
reference facility maintained by the SEC at 100 F Street, N.E., Washington, D.C.
20549. You can request copies of these documents, upon payment of a duplicating
fee, by writing to the SEC. Please call the SEC at 1-800-SEC-0330 for further
information on the operation of the public reference room. Our SEC filings are
also available to the public through the SEC Internet site at http\\www.sec.gov.
26
LEVIN TEXTILES INTERNATIONAL INC.
INDEX TO FINANCIAL STATEMENTS
Page
Report of Independent Registered Public Accounting Firm F-1
Consolidated Balance Sheets F-2
Consolidated Statements of Operations F-3
Consolidated Statements of Cash Flows F-4
Consolidated Statement of Stockholders' Equity (Deficit) F-5
Notes to Consolidated Financial Statements F-6
27
[GRAPHIC OMITTED][GRAPHIC OMITTED]
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors
of Levin Textiles International, Inc.
(A Development Stage Company)
We have audited the accompanying consolidated balance sheet of Levin Textiles
International, Inc. (A Development Stage Company) as of August 31, 2004 and the
related consolidated statements of operations, stockholders' equity and cash
flows for the period from February 16, 2004 (Date of Inception) to August 31,
2004. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Levin Textiles
International, Inc. (A Development Stage Company), as of August 31, 2004, and
the results of its operations, cash flows and stockholders' equity for the
period from February 16, 2004 (Date of Inception) to August 31, 2004, in
conformity with accounting principles generally accepted in the United States.
The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company is in the development stage and
has losses from operations since inception. These factors raise substantial
doubt about the Company's ability to continue as a going concern. Management's
plans in regard to these matters are also discussed in Note 1. The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ "Manning Elliott"
CHARTERED ACCOUNTANTS
Vancouver, Canada
November 8, 2004
F-1
Levin Textiles International, Inc.
(A Development Stage Company)
Consolidated Balance Sheets
(Expressed in US dollars)
May 31, August 31,
2005 2004
$ $
(unaudited) (audited)
ASSETS
Current Assets
Cash 27,037 10,185
Due from related party (Note 4(a)) 22,204 --
- -----------------------------------------------------------------------------------------------
Total Current Assets 49,241 10,185
Investment (Note 2(k)) 39,810 --
Property and Equipment (Note 3) 935 1,103
- -----------------------------------------------------------------------------------------------
Total Assets 89,986 11,288
===============================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts payable 17,462 3,243
Accrued liabilities (Note 7) 5,891 13,592
Income taxes payable 6,890 --
Due to a related party (Note 4(a)) -- 7,661
Promissory note to a related party (Note 4(e)) 31,530 --
- -----------------------------------------------------------------------------------------------
Total Liabilities 61,773 24,496
- -----------------------------------------------------------------------------------------------
Contingencies and Commitments (Note 1)
Stockholders' Equity (Deficit)
Preferred Stock, 5,000 shares authorized, with a par value of $0.001,
None issued and outstanding -- --
Common Stock, 100,000,000 shares authorized, with a par value of $0.001,
3,439,500 and 3,000,000 shares issued and outstanding, respectively 3,439 3,000
Additional Paid in Capital 60,484 22,001
Donated Capital 1,875 1,625
Accumulated Other Comprehensive Loss (419) --
Deficit Accumulated During the Development Stage (37,166) (39,834)
- -----------------------------------------------------------------------------------------------
Total Stockholders' Equity (Deficit) 28,213 (13,208)
- -----------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity (Deficit) 89,986 11,288
===============================================================================================
(The accompanying notes are an integral part of the financial statements)
F-2
Levin Textiles International, Inc.
(A Development Stage Company)
Consolidated Statements of Operations
(Expressed in US dollars)
Accumulated from Accumulated from
February 16, 2004 Nine Month February 16, 2004
(Date of Inception) Period Ended (Date of Inception)
to May 31, May 31, to August 31,
2005 2005 2004
$ $ $
(unaudited) (unaudited) (audited)
- ---------------------------------------------------------------------------------------------------
Revenue 92,870 67,773 25,097
- ---------------------------------------------------------------------------------------------------
Expenses
Amortization 264 228 36
Consulting fees to related party (Note 4(b)) 55,304 30,950 24,354
Consulting fees 3,828 3,828 --
General and administrative 4,559 2,673 1,886
Professional fees 43,630 15,141 28,489
Rent (Note 4(c)) 2,858 1,233 1,625
Travel 12,582 4,041 8,541
- ---------------------------------------------------------------------------------------------------
Total Expenses 123,025 58,094 64,931
- ---------------------------------------------------------------------------------------------------
Net Income (Loss) Before Provision for Income Taxes (30,155) 9,679 (39,834)
Provision for Income Taxes (7,011) (7,011) --
- ---------------------------------------------------------------------------------------------------
Net Income (Loss) (37,166) 2,668 (39,834)
Other Comprehensive Loss
Foreign currency translation adjustment (419) (419) --
- ---------------------------------------------------------------------------------------------------
Comprehensive Income (Loss) (37,585) 2,249 (39,834)
===================================================================================================
Net Loss Per Share - Basic and Diluted -- (0.06)
===================================================================================================
Weighted Average Shares Outstanding 3,163,000 627,000
===================================================================================================
(The accompanying notes are an integral part of the financial statements)
F-3
Levin Textiles International, Inc.
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Expressed in US dollars)
Accumulated from Accumulated from
February 16, 2004 February 16, 2004
(Date of Inception) Nine Month Period (Date of Inception)
to May 31, Ended May 31, to August 31,
2005 2005 2004
$ $ $
(unaudited) (unaudited) (audited)
- -------------------------------------------------------------------------------------------------------------
Cash Flows Provided By Operating Activities
Net income (loss) (37,166) 2,668 (39,834)
Adjustments to reconcile net income (loss) to cash:
Amortization 264 228 36
Donated rent 1,875 250 1,625
Change in operating assets and liabilities:
Increase in accounts payable and accrued liabilities 23,024 6,189 16,835
Increase in income taxes payable 7,011 7,011 --
(Increase) decrease in due from related party (30,750) (38,411) 7,661
- -------------------------------------------------------------------------------------------------------------
Net Cash Used In Operating Activities (35,742) (22,065) (13,677)
- -------------------------------------------------------------------------------------------------------------
Cash Flows Used By Investing Activities
Cash received on acquisition of Levin Industries Ltd. 25,000 -- 25,000
Purchase of property and equipment (1,139) -- (1,139)
- -------------------------------------------------------------------------------------------------------------
Net Cash Flows Used In Investing Activities 23,861 -- 23,861
- -------------------------------------------------------------------------------------------------------------
Cash Flows Provided By Financing Activities
Proceeds from issuance of common shares 38,923 38,922 1
- -------------------------------------------------------------------------------------------------------------
Net Cash Flows Provided By Financing Activities 38,923 38,922 1
- -------------------------------------------------------------------------------------------------------------
Effect of Exchange Rate Changes on Cash (5) (5) --
- -------------------------------------------------------------------------------------------------------------
Increase in Cash 27,037 16,852 10,185
Cash - Beginning of Period -- 10,185 --
- -------------------------------------------------------------------------------------------------------------
Cash - End of Period 27,037 27,037 10,185
=============================================================================================================
Non-Cash Financing Activities
Investment acquired by issue of promissory note to
related party (Note 4(e)) 42,150 42,150 --
=============================================================================================================
Supplemental Disclosures
Interest paid -- -- --
Income taxes paid -- -- --
(The accompanying notes are an integral part of the financial statements)
F-4
Levin Textiles International, Inc.
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity (Deficit)
From February 16, 2004 (Date of Inception) to May 31, 2005
(Expressed in US dollars)
Deficit
Accumulated Accumulated
Additional During the Other
Paid-in Donated Development Comprehensive
Shares Amount Capital Capital Stage Loss Total
# $ $ $ $ $ $
- -----------------------------------------------------------------------------------------------------------------------------------
Balance - February 16, 2004 (Date of
Inception) -- -- -- -- -- -- --
Stock issued for cash 100 1 -- -- -- -- 1
Adjustment for reverse acquisition
- elimination of shares of Levin
Industries Ltd. (100) (1) -- -- -- -- (1)
- add issued shares of Levin Textiles --
International, Inc. 3,000,000 3,000 22,001 -- -- 25,001
Donated rent -- -- -- 1,625 -- -- 1,625
Net loss -- -- -- -- (39,834) -- (39,834)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance - August 31, 2004 (Audited) 3,000,000 3,000 22,001 1,625 (39,834) -- (13,208)
Stock issued for cash, net of issue --
costs of $5,028 439,500 439 38,483 -- -- 38,922
Donated rent -- -- -- 250 -- -- 250
Foreign currency translation adjustment -- -- -- -- -- (419) (419)
Net income -- -- -- -- 2,668 -- 2,668
- -----------------------------------------------------------------------------------------------------------------------------------
Balance - May 31, 2005 (Unaudited) 3,439,500 3,439 60,484 1,875 (37,166) (419) 28,213
===================================================================================================================================
(The accompanying notes are an integral part of the financial statements)
F-5
Levin Textiles International, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
May 31, 2005
1. DEVELOPMENT STAGE COMPANY
The Company was incorporated in the State of Delaware, USA on July 7, 2004.
Effective July 16, 2004, the Company acquired all the outstanding common
stock of Levin Industries Ltd. ("Industries"), a company under common
control. Prior to the acquisition, the Company was a non-operating shell
corporation with net assets consisting solely of cash of $25,000. The
acquisition is a capital transaction in substance and therefore has been
accounted for as a recapitalization. See Note 6.
The Company's principal business is in the garment manufacturing industry
(technical outerwear), specializing in sales, product development, initial
sample approval, fabric sourcing, and product placement in Asian Pacific
Rim and North American facilities.
The Company is in the development stage and planned principal activities
have commenced, but there has been no significant revenue therefrom. In a
development stage company, management devotes most of its activities to
developing a market for its products and services. The Company's primary
source of revenue is currently commission income from product sales to
third parties. These financial statements have been prepared on a going
concern basis, which implies the Company will continue to realize its
assets and discharge its liabilities in the normal course of business. The
Company has generated minimal revenues since inception and has never paid
any dividends and is unlikely to pay dividends or generate significant
earnings in the immediate or foreseeable future. The continuation of the
Company as a going concern and the ability of the Company to emerge from
the development stage is dependent upon the continued financial support
from its shareholders, the ability of the Company to obtain necessary
equity financing to continue operations, to generate significant revenues
and the attainment of profitable operations. As at February 28, 2005, the
Company has accumulated losses of $37,166 since inception. These financial
statements do not include any adjustments to the recoverability and
classification of recorded asset amounts and classification of liabilities
that might be necessary should the Company be unable to continue as a going
concern. These factors raise substantial doubt regarding the Company's
ability to continue as a going concern.
In December 2004, pursuant to a private placement, the Company issued
439,500 common shares at a price of $0.10 per share for cash proceeds of
$38,922 after issue costs.
The Company is planning to file an amended Form SB-2 Registration Statement
("SB-2") with the United States Securities and Exchange Commission to
register up to 780,000 shares of common stock held by existing shareholders
for resale at a price of $0.10 per share. Also pursuant to the SB-2, the
Company plans to offer up to 2,500,000 common shares at a price of $0.10
per share for maximum proceeds of $250,000 to the Company.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Basis of Presentation and Fiscal Year
These financials statements and related notes are presented in
accordance with accounting principles generally accepted in the
United States, and are expressed in US dollars. The Company has not
produced significant revenue from its principal business and is a
development stage company as defined by Statement of Financial
Accounting Standard ("SFAS") No. 7 "Accounting and Reporting by
Development Stage Enterprises". These financial statements include
the accounts of the Company and its wholly-owned subsidiary, Levin
Industries Ltd. All intercompany transactions and balances have been
eliminated. The Company's fiscal year-end is August 31.
b) Use of Estimates
The preparation of financial statements in conformity with U.S.
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 and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
F-6
Levin Textiles International, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
May 31, 2005
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
c) Other Comprehensive Loss
SFAS No. 130, "Reporting Comprehensive Income", establishes standards
for the reporting and display of comprehensive income (loss) and its
components in the financial statements. As at May 31, 2005, the
Company's only component of comprehensive loss was foreign currency
translation adjustments.
d) Cash and Cash Equivalents
The Company considers all highly liquid instruments with maturity of
three months or less at the time of issuance to be cash equivalents.
e) Concentrations
The fair value of financial instruments, which include accounts
receivable, accounts payable, accrued liabilities, income taxes
payable, and due from a related party were estimated to approximate
their carrying values due to the immediate or short-term maturity of
these financial instruments. The Company's operations are in Canada
resulting in exposure to market risks from changes in foreign
currency rates. The financial risk is the risk to the Company's
operations that arise from fluctuations in foreign exchange rates
and the degree of volatility of these rates. Currently, the Company
does not use derivative instruments to reduce its exposure to
foreign currency risk.
For the nine-month period ended May 31, 2005, revenues from a
single, related party customer represented 99.4% of total revenues.
Financial instruments that potentially subject the Company to credit
risk consist principally of cash. Cash was deposited with a high
quality institution.
f) Foreign Currency Transactions
During the nine-month period ended May 31, 2005, the functional
currency of the Company's wholly-owned subsidiary changed to the
Canadian dollar. The financial statements of this subsidiary are
translated to United States dollars in accordance with SFAS No. 52
"Foreign Currency Translation" using period-end rates of exchange for
assets and liabilities, and average rates of exchange for the period
for revenues and expenses. Translation gains (losses) are recorded in
accumulated other comprehensive income (loss) as a component of
stockholders' equity. Foreign currency transaction gains and losses are
included in current operations.
g) Revenue Recognition
The Company earns commission income from product sales made by an
affiliated company, ANK Apparel Source Inc. ("ANK"). Commission
income is recognized at the time products are shipped to customers
by ANK. The Company records commission income on a net basis in
accordance with EITF 99-19, "Reporting Revenue Gross as a Principal
vs. Net as an Agent". The Company recognizes revenue in accordance
with Securities and Exchange Commission Staff Accounting Bulletin
No. 104 ("SAB 104"), "Revenue Recognition in Financial Statements".
Revenue is recognized only when the price is fixed or determinable,
persuasive evidence of an arrangement exists, the product is shipped
by ANK, and collectibility is reasonably assured.
h) Property and Equipment
Property and equipment consists of computer hardware and is recorded
at cost. Computer hardware is being amortized on the straight line
basis over the estimated life of four years.
F-7
Levin Textiles International, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
May 31, 2005
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
i) Long-Lived Assets
In accordance with SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets", the carrying value of intangible
assets and other long-lived assets is reviewed on a regular basis
for the existence of facts or circumstances that may suggest
impairment. The Company recognizes impairment when the sum of the
expected undiscounted future cash flows is less than the carrying
amount of the asset. Impairment losses, if any, are measured as the
excess of the carrying amount of the asset over its estimated fair
value.
j) Basic and Diluted Net Income (Loss) per Share
The Company computes net income (loss) per share in accordance with
SFAS No. 128, "Earnings per Share" ("SFAS 128"). SFAS 128 requires
presentation of both basic and diluted earnings per share (EPS) on
the face of the income statement. Basic EPS is computed by dividing
net income (loss) available to common shareholders (numerator) by
the weighted average number of common shares outstanding
(denominator) during the period. Diluted EPS gives effect to all
dilutive potential common shares outstanding during the period
including stock options, using the treasury stock method, and
convertible preferred stock, using the if-converted method. In
computing diluted EPS, the average stock price for the period is
used in determining the number of shares assumed to be purchased
from the exercise of stock options or warrants. Diluted EPS excludes
all dilutive potential common shares if their effect is
anti-dilutive.
k) Investment
Investment consists of a 16% interest in the common shares of ANK
Apparel Source Inc., a private company incorporated in the Province
of British Columbia, Canada. These securities are classified as
available-for-sale and are recorded at a fair value of $39,810
(Cdn$50,000). Any unrealized gains and losses in the valuation of
the investment will be included in stockholders' equity.
l) Income Taxes
Potential benefits of income tax losses are not recognized in the
accounts until realization is more likely than not. The Company has
adopted SFAS No. 109 "Accounting for Income Taxes" as of its
inception. Pursuant to SFAS No. 109 the Company is required to
compute tax asset benefits for net operating losses carried forward.
Potential benefit of net operating losses have not been recognized
in these financial statements because the Company cannot be assured
it is more likely than not it will utilize the net operating losses
carried forward in future years.
F-8
Levin Textiles International, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
May 31, 2005
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
m) Recent Accounting Pronouncement
In December 2004, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standard (SFAS) No. 123R,
"Share Based Payment". SFAS 123R is a revision of SFAS No. 123
"Accounting for Stock-Based Compensation", and supersedes APB
Opinion No. 25, "Accounting for Stock Issued to Employees" and its
related implementation guidance. SFAS 123R establishes standards for
the accounting for transactions in which an entity exchanges its
equity instruments for goods or services. It also addresses
transactions in which an entity incurs liabilities in exchange for
goods or services that are based on the fair value of the entity's
equity instruments or that may be settled by the issuance of those
equity instruments. SFAS 123R focuses primarily on accounting for
transactions in which an entity obtains employee services in
share-based payment transactions. SFAS 123R requires a public entity
to measure the cost of employee services received in exchange for an
award of equity instruments based on the grant-date fair value of
the award (with limited exceptions). That cost will be recognized
over the period during which an employee is required to provide
service in exchange for the award - the requisite service period
(usually the vesting period). SFAS 123R requires that the
compensation cost relating to share-based payment transactions be
recognized in financial statements. That cost will be measured based
on the fair value of the equity or liability instruments issued.
Public entities that file as small business issuers will be required
to apply SFAS 123R in the first interim or annual reporting period
that begins after December 15, 2005. The adoption of this standard
is not expected to have a material effect on the Company's results
of operations or financial position.
In March 2005, the SEC staff issued Staff Accounting Bulletin No.
107 ("SAB 107") to give guidance on the implementation of SFAS 123R.
The Company will consider SAB 107 during implementation of SFAS
123R.
In December 2004, FASB issued SFAS No. 153, "Exchanges of
Nonmonetary Assets - An Amendment of APB Opinion No. 29". The
guidance in APB Opinion No. 29, "Accounting for Nonmonetary
Transactions", is based on the principle that exchanges of
nonmonetary assets should be measured based on the fair value of the
assets exchanged. The guidance in that Opinion, however, included
certain exceptions to that principle. SFAS No. 153 amends Opinion
No. 29 to eliminate the exception for nonmonetary exchanges of
similar productive assets and replaces it with a general exception
for exchanges of nonmonetary assets that do not have commercial
substance. A nonmonetary exchange has commercial substance if the
future cash flows of the entity are expected to change significantly
as a result of the exchange. The provisions of SFAS No. 153 are
effective for nonmonetary asset exchanges occurring in fiscal
periods beginning after June 15, 2005. Early application is
permitted and companies must apply the standard prospectively. The
adoption of this standard is not expected to have a material effect
on the Company's results of operations or financial position.
FASB has also issued SFAS No. 151 and 152, but they will not have
any relationship to the operations of the Company therefore a
description and its impact for each on the Company's operations have
not been disclosed.
n) Interim Financial Statements
These interim unaudited financial statements have been prepared on
the same basis as the annual financial statements and in the opinion
of management, reflect all adjustments, which include only normal
recurring adjustments, necessary to present fairly the Company's
financial position, results of operations and cash flows for the
periods shown. The results of operations for such periods are not
necessarily indicative of the results expected for a full year or
for any future period.
F-9
Levin Textiles International, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
May 31, 2005
3. PROPERTY AND EQUIPMENT
May 31, August 31,
2005 2004
Accumulated Net Carrying Net Carrying
Cost Amortization Value Value
$ $ $ $
(Unaudited) (Audited)
----------------------------------------------------------------------------------------------------------
Computer hardware 1,196 261 935 1,103
==========================================================================================================
4. RELATED PARTY TRANSACTIONS/BALANCES
a) At May 31, 2005, $22,204 is owing from the President of the Company.
At August 31, 2004, the Company owed $7,661 to the President of the
Company. These amounts are non-interest bearing, unsecured and due
on demand.
b) Consulting fees of $30,950 were paid to the President of the Company
during the nine-month period ended May 31, 2005 (August 31, 2004 -
$24,354).
c) The President of the Company provided office premises to the Company
at no charge up to September 30, 2004. The donated office premises
were valued at $250 per month. During the nine-month period ended
May 31, 2005, donated rent of $250 was recorded (August 31, 2004 -
$1,625). Commencing October 1, 2004 the Company entered into a lease
agreement for a one year term (refer to Note 9).
d) The Company acquired all the issued and outstanding common shares of
Levin Industries Ltd. from the President of the Company (refer to
Note 6).
e) The Company issued a promissory note for $42,150 (CDN$50,000) to the
President of the Company for the acquisition of a 16% interest in
ANK Apparel Source Inc. ("ANK"). During the nine-month period ended
May 31, 2005, the Company repaid $10,620.
f) The Company generated commission income from ANK of $67,368 during
the nine-month period ended May 31, 2005, representing 99.4% of
total revenues
5. COMMON SHARES
a) On February 16, 2004, prior to the recapitalization, Levin
Industries Ltd. issued 100 shares of common stock at a price of
$0.01 per share in consideration for $1.
b) On July 15, 2004, prior to the recapitalization, the Company issued
500,000 shares of common stock to the President of the Company at a
price of $0.05 per share for cash proceeds of $25,000.
c) On July 16, 2004, the Company issued 2,500,000 shares of common
stock to the President of the Company at a fair value of $0.01 per
share in consideration for all the issued and outstanding share
capital of Industries.
d) In December 2004, pursuant to a private placement, the Company
issued 439,500 common shares at a price of $0.10 per share for cash
proceeds of $38,922, net of issue costs of $5,028.
6. CAPITAL TRANSACTION
By a Share Purchase Agreement dated July 22, 2004, the Company acquired
100% of the issued and outstanding common stock of Levin Industries Ltd.
("Industries") in consideration for the issue of 2,500,000 shares of
common stock of the Company. Industries was incorporated on February 16,
2004 under the Company Act of British Columbia and was owned by the
President of the Company. The principal business of Industries is in the
garment manufacturing industry specializing in sales, product development,
initial sample approval, fabric sourcing, and product placement.
F-10
Levin Textiles International, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
May 31, 2005
6. CAPITAL TRANSACTION (CONTINUED)
Prior to the recapitalization, the Company was a non-operating shell
company with net assets consisting solely of cash of $25,000. Therefore,
this acquisition is a capital transaction in substance, rather than a
business combination, and has been accounted for as a recapitalization
using the purchase method of accounting. Because Industries is deemed to
be the acquirer for accounting purposes, the financial statements are
presented as a continuation of Industries and include the results of
operations of Industries since incorporation on February 16, 2004, and the
results of operations of the Company since the date of acquisition on July
22, 2004.
As at July 16, 2004 the Company had $25,000 of net assets which has been
allocated to additional paid in capital.
7. ACCRUED LIABILITIES
As at May 31, 2005, accrued liabilities consist of accrued professional
fees of $5,533 (August 31, 2004 - $13,592) and accrued rent of $358
(August 31, 2004 - $nil).
8. INCOME TAX
The Company follows the provisions of SFAS No. 109, "Accounting for Income
Taxes". Pursuant to SFAS 109 the Company is required to compute tax asset
benefits for net operating losses carried forward. At August 31, 2004, the
Company had net operating losses carried forward totalling $13,000 for
Canadian tax purposes which expire starting in 2014, and $24,000 for US
tax purposes which expire starting in 2024. Pursuant to SFAS No. 109 the
Company is required to compute tax asset benefits for net operating losses
carried forward. Potential benefit of net operating losses have not been
recognized in these financial statements because the Company cannot be
assured it is more likely than not it will utilize the net operating
losses carried forward in future years
Income tax expense was as follows:
A reconciliation of the statutory federal income tax rate to the Company's
effective tax rate follows:
Canada United States
Statutory federal income tax rate 37.6% 35.0%
Change in valuation allowance (37.6%) (35.0%)
--------------------------------------------------------------------------
Effective income tax rate -- --
==========================================================================
The deferred tax liabilities and assets were as follows:
From
February 16, 2004
(Date of Inception)
to August 31,
2004
$
Deferred tax asset
- Net operating loss carry forwards 13,084
- Less valuation allowance (13,084)
--------------------------------------------------------------------------
Net deferred tax asset --
==========================================================================
9. COMMITMENT
On October 1, 2004, the Company entered into a lease agreement for office
premises at a rate of CDN$1,800 per annum, for a one year term expiring
September 30, 2005.
F-11
3,280,000
SHARES OF
COMMON STOCK
OF
LEVIN TEXTILES INTERNATIONAL INC.
PROSPECTUS
The date of this prospectus is __________, 2005
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS. IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY US. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, THE COMMON STOCK IN ANY JURISDICTION WHERE, OR
TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE
FACTS SET FORTH IN THIS PROSPECTUS OR IN OUR AFFAIRS SINCE THE DATE HEREOF.
Until 40 days after the first date upon which the security was bona fide offered
to the public by the issuer or by or through an underwriter (Item 503(e)) all
dealers effecting transactions in the registered securities, whether or not
participating in this offering, may be required to deliver a prospectus. This is
in addition to the obligation of dealers to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments and subscriptions.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our Articles of Incorporation provide to the fullest extent permitted by
Section 145 of the General Corporation Law of the State of Delaware, that our
directors or officers shall not be personally liable to us or our shareholders
for damages for breach of such director's or officer's fiduciary duty. The
effect of this provision of our Articles of Incorporation, as amended and
restated, is to eliminate our rights and our shareholders (through shareholders'
derivative suits on behalf of our company) to recover damages against a director
or officer for breach of the fiduciary duty of care as a director or officer
(including breaches resulting from negligent or grossly negligent behavior),
except under certain situations defined by statute. We believe that the
indemnification provisions in our Articles of Incorporation, as amended, are
necessary to attract and retain qualified persons as directors and officers.
Our By Laws also provide that the Board of Directors may also authorize
our company to indemnify our employees or agents, and to advance the reasonable
expenses of such persons, to the same extent, following the same determinations
and upon the same conditions as are required for the indemnification of and
advancement of expenses to our directors and officers. As of the date of this
Registration Statement, the Board of Directors has not extended indemnification
rights to persons other than directors and officers.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling us
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth an itemization of all estimated expenses,
all of which we will pay, in connection with the issuance and distribution of
the securities being registered:
Nature of Expense AMOUNT
----------------- ------------
SEC Registration fee $ 38.61
Accounting fees and expenses 3,000.00*
Legal fees and expenses 20,000.00*
------------
Blue Sky Fees and Expenses 100.00
Printing and Engraving Expenses 500.00
Miscellaneous 1,000.00
TOTAL $ 24,638.61*
- ----------
* Estimated
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
Since we were formed on February 16, 2004, we issued an aggregate of
3,439,500 shares of our common stock to 13 individuals pursuant to Section 4(2)
of the Securities Act of 1933, as amended (the "Securities Act"), and/or
Regulation S, promulgated pursuant to the Securities Act.
On July 22, 2004, we sold 500,000 shares of our common stock to our
President, Simon Levin, for consideration of $25,000.
On July 22, 2004, we issued 2,500,000 shares of our common stock to our
President, Simon Levin, in exchange for all of the issued and outstanding shares
of Levin Industries Ltd.
On December 31, 2004, we sold 439,500 shares of our common stock to 12
unrelated individuals in a private placement for $0.10 per share.
II-1
All of the foregoing issuances were exempt from registration under Section
4(2) of the Securities Act and/or Regulation S, promulgated pursuant to the
Securities Act. None of the purchasers who received shares under Regulation S
are U.S. persons as defined in Rule 902(k) of Regulation S, and no sales efforts
were conducted in the U.S., in accordance with Rule 903(c). In addition, all
sales made under Regulation S comply with Section (903(b)(3) of Regulation S.
Such purchasers acknowledged that the securities purchased must come to rest
outside the U.S., and the certificates contain a legend restricting the sale of
such securities until the Regulation S holding period is satisfied.
ITEM 27. EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------------------------------------------------------------
3.1 Certificate of Incorporation of Levin Textiles International Inc.
(1)
3.2 Bylaws (1)
5.1 Opinion of Sichenzia Ross Friedman Ference LLP (2)
10.1 Share purchase agreement, dated as of July 16, 2004, by and
between Levin Textiles International and Simon Levin (1)
10.2 Share purchase agreement, dated as of November 1, 2004, by and
between Levin Industries Ltd. and Simon Levin (1)
10.3 Promissory Note, dated November 1, 2004, issued by Levin
Industries Ltd. to Simon Levin (1)
10.4 Agreement dated as of February 16, 2004 by and between Levin
Industries Ltd. and A N' K Apparel Source Inc. (1)
21.1 List of Subsidiaries
23.1 Consent of Sichenzia Ross Friedman Ference LLP (Included in
Exhibit 5)
23.2 Consent of Manning Elliott, Chartered Accountants
- ----------
(1) Filed as an exhibit to the registration statement on Form SB-2 filed with
the Securities and Exchange Commission on March 14, 2005 and incorporated
herein by reference.
(2) Filed as an exhibit to amendment No. 1 to the registration statement on
Form SB-2 filed with the Securities and Exchange Commission on July 13,
2005 and incorporated herein by reference.
II-2
ITEM 28. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file a post-effective amendment to this Registration Statement
during any period in which offers or sales are being made:
(i) to include any Prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) to reflect in the Prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually, or in the
aggregate, represent a fundamental change in the information set forth in
the Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) ((S)230.424(b) of this Chapter) if, in the
aggregate, the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective Registration
Statement; and
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement of
any material change to such information in the Registration Statement.
(2) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
this offering.
(3) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
Registration Statement relating to the securities offered therein, and this
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(4) That, insofar as indemnification for liabilities arising from the
Securities Act may be permitted to directors, officers, and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(5) That, for purposes of determining any liability under the Securities
Act, the information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or Rule
497(h) under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
II-3
SIGNATURES
Pursuant to the requirements of the Act, the Company certifies that it has
reasonable grounds to believe that it meets all of the requirement for filing on
Form SB-2 and has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in British Columbia,
Canada on August 22, 2005.
LEVIN TEXTILES INTERNATIONAL INC.
By: /s/ SIMON LEVIN
---------------------------------------
Simon Levin,
President, Principal Executive Officer,
Principal Financial Officer, Principal
Accounting Officer, Secretary Treasurer
and Director
In accordance with the requirements of the Securities Act, this
Registration Statement has been signed below by the following persons on behalf
of the Company in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ---------------------- --------------------------------------- ---------------
/s/ SIMON LEVIN President, Principal Executive Officer, August 22, 2005
- ---------------------- Principal Financial Officer, Principal
Simon Levin Accounting Officer, Secretary, Treasurer
and Director
II-4