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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                   FORM 10-KSB

[X]   Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
      Act of 1934

                              For the fiscal year ended
                                  December 31, 2002

                               Commission File Number
                                       0-50186

                           LEVCOR INTERNATIONAL, INC.
           (Exact name of the registrant as specified in its charter)

           Delaware                                           06-0842701
(State or other jurisdiction of                            (I.R.S. Employer
Incorporation or organization)                            Identification No.)

                  462 Seventh Avenue, New York, New York 10018
                    (Address of principal executive offices)

                                 (212) 354-8500
                         (Registrant's telephone number)

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

                                      None

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

                     Common Stock, par value $0.01 per share

      Indicate by check mark whether the issuer: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                               Yes [X]   No [_]


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

      Issuer's revenues for the fiscal year ended December 31, 2002: $10,497,000

      At March 5, 2003, approximately 5,125,252 shares of common stock, par
value $0.01 per share, of the issuer were outstanding and the aggregate market
value of the voting common stock held by non-affiliates was approximately
$5,922,851.

      Transitional Small Business Disclosure Format: Yes [_] No [_]

      Documents incorporated by reference: None

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<PAGE>

                INDEX TO ANNUAL REPORT ON FORM 10-KSB FILED WITH
                     THE SECURITIES AND EXCHANGE COMMISSION
                          YEAR ENDED DECEMBER 31, 2002

                              ITEMS IN FORM 10-KSB
                              --------------------

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                                                                                                                   Page
<S>                                                                                                                 <C>
PART I..........................................................................................................    1

   Item 1.   DESCRIPTION OF BUSINESS............................................................................    1

   Item 2.   DESCRIPTION OF PROPERTY............................................................................    8

   Item 3.   LEGAL PROCEEDINGS..................................................................................    8

   Item 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................................................   10

PART II.........................................................................................................   12

   Item 5.   MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS...........................................   12

   Item 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION..........................................   12

   Item 7.   FINANCIAL STATEMENTS...............................................................................   18

   Item 8.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE...............   36

PART III........................................................................................................   37

   Item 9.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.................................................   37

   Item 10.  EXECUTIVE COMPENSATION.............................................................................   37

   Item 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.....   37

   Item 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.....................................................   37

   Item 13.  EXHIBITS, LISTS AND REPORTS ON FORM 8-K............................................................   37

   Item 14.  CONTROLS AND PROCEDURES............................................................................   40
</TABLE>


<PAGE>


                                    PART I.


         This 2002 Annual Report on Form 10-KSB contains statements which
constitute forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. Those statements include statements regarding the
intent and belief or current expectations of the Company and its management
team. Prospective investors are cautioned that any such forward-looking
statements are not guarantees of future performance and involve risks and
uncertainties, and that actual results may differ materially from those
projected in the forward-looking statements. Such risks and uncertainties
include, among other things, future revenue opportunities, integration of
Carlyle Industries, Inc. with the business of the Company and the development of
the combined businesses, the future growth of the Company's customer base and
strategic and distribution relationships, future capital needs, marketing and
sales force, the possible acquisition of complementary products and businesses
and other risks and uncertainties that may be detailed herein, and from
time-to-time, in the Company's other reports filed with the Securities and
Exchange Commission. The Company undertakes no obligation to publicly update any
forward-looking statements for any reason, even if new information becomes
available or other events occur in the future.

Item 1.  DESCRIPTION OF BUSINESS.

General

         Levcor International, Inc. ("Levcor" or the "Company") was incorporated
in 1964 as Pantepec International, Inc. under the laws of the Islands of Bermuda
and was reorganized in 1967 under the laws of the State of Delaware. In 1995,
Pantepec International, Inc. changed its name to Levcor International, Inc.

         In 1995, the Company acquired a woven fabric converting business that
converts cotton, synthetics and blend fabrics for sale to domestic apparel
manufacturers. This acquisition formed the basis of the Company's current
business.

         In 1999, the Company purchased a knit fabric and processing business
that produces knit fabrics used in the production of apparel.

         In 2000, the Company started a new woven fabrics division that
specifically targeted the dress market. As a result of the soft retailing
climate for dresses, the woven division did not produce management's anticipated
results and, therefore, was scaled back significantly during the first quarter
of 2002.

         On January 6, 2003, the Company completed its acquisition of Carlyle
Industries, Inc. ("Carlyle"). In the merger, each five shares of Carlyle common
stock were converted into one share of Company common stock, par value $0.01 per
share, and each share of Carlyle Series B preferred stock was converted into one
share of Company Series A preferred stock, par value $0.01 per share. In
addition, the Company assumed Carlyle stock options which became options to
purchase approximately 220,000 shares of Company common stock. The merger was
accounted for as a reverse acquisition. The purchase price, exclusive of assumed
liabilities, was valued at approximately $6.8 million. Liabilities of
approximately $5.7 million were also assumed.

         As a result of the merger with Carlyle, the Company now operates two
lines of businesses - the historical textile conversion and processing business
operated by Levcor (the "Textile Conversion Division") and the historical retail

<PAGE>

buttons, embellishments, gift and craft products manufacturing, packaging and
distribution business previously operated by Carlyle (the "Crafts Division").

Strategy

         The Company's strategy to expand its business and improve profitability
includes, among other things:

         o        expanding the distribution channels for its textile conversion
                  products into retail markets;

         o        expanding its craft distribution product offerings, business
                  and customer base to wholesale markets;

         o        reducing the risks of continuing as a relatively small
                  independent company in industries that are increasingly
                  competitive;

         o        increasing its access to credit markets; and

         o        decreasing administrative costs.

Products and Customers

         Textile Conversion Division

         The Textile Conversion Division converts woven textile fabrics and
processes knit textile fabrics which are sold for production principally to
domestic manufacturers of women's apparel. The textile fabric converting process
consists of (i) designing fabrics, (ii) purchasing yarns both dyed and undyed
and commissioning knitting mills to knit the yarns into greige (unfinished)
fabric according to the Company's specifications, and (iii) commissioning fabric
finishers to finish the fabrics through a process of washing, bleaching, dyeing
and applying certain chemical finishes to greige fabric according to the
Company's specifications. Finished apparel fabric is fabric that is ready to be
cut and sewn into garments. The Company contracts with commercial transporters
to deliver greige fabric from textile mills to the fabric finishers. The Company
receives orders for the sale of finished fabrics through its sales personnel and
independent commissioned agents.

         The principal raw materials used by the Company to fabricate textiles
are typically a combination or blend of two or more fibers, such as rayon,
acetate, polyester, cotton and acrylic. Four of the Company's principal
suppliers of greige goods and yarn and the primary knitters and finishers
accounted for approximately 49% of the Company's purchases in 2002.

         During fiscal 2002, the Company's five largest customers accounted for
approximately 68% of the Company's shipments. During fiscal 2001, the Company's
two largest customers accounted for approximately 58% of the Company's
shipments.

         Crafts Division

         The Crafts Division manufactures, packages and distributes buttons,
embellishments, gift and craft products and complimentary product lines,
including appliques, craft kits and fashion and jewelry accessories. These
products are marketed to the Company's home sewing and craft customers. The
Company's products are sold to mass merchandisers, specialty chains and
independent retailers and wholesalers. Products are sold under the La Mode (R),
Le Chic (R), Streamline (R), Westwater Enterprises (R), Favorite Findings (R),
and Button Fashion (R) registered trademarks and the Le Bouton, La Petite,

                                      -2-

<PAGE>

Classic, Boutique Elegant and Mill Mountain brand names. The Crafts Division
also produces and distributes a private-label button line for one of the
nation's best-known retailers.

         The button products are sold primarily for use in the home sewing
market where buttons are used for garment construction, replacement and the
upgrading and/or restyling of ready-to-wear clothing. More modest button usage
is found in craft projects, home decorating and garment manufacturing. The
domestic market is concentrated and is served by national and regional fabric
specialty chains, mass merchandisers, independent fabric stores, notions
wholesalers and craft stores and chains.

         The Crafts Division's button lines are sourced from more than 75 button
manufacturers from around the world, with most buttons coming from the
traditional markets of Europe and Asia. Button manufacturers specialize in
different materials (e.g.,plastic, wood, glass, leather, metal, jewel and pearl)
and have varying approaches to fashion, coloration, finishing and other factors.
Most craft and gift products are developed within the Company and produced in
the U.S. and Asia.

         All imported and domestically purchased buttons for sale in the North
American market are shipped to the Company's Lansing, Iowa facility for carding
and distribution to customers. As thousands of button styles are received in
bulk, computerized card printing systems enable Blumenthal/Lansing Company, LLC
to economically imprint millions of button cards with such necessary data as
style number, price, number of buttons, bar code, country of origin and care
instructions. The Company also blister-packages and shrink-wraps some products.
Domestic shipments are made primarily to individual stores with a smaller
percentage to warehouse locations. Craft and gift products are also distributed
from the Lansing, Iowa facility. The European business is primarily serviced by
distributors from the Company's manufacturing and distribution facility in
Holland.

         The Crafts Division's accounts include fabric and craft specialty
chains, mass merchandisers carrying buttons and crafts, distributors and many
independent stores. Mass merchandisers and specialty chain customers are
characterized by the need for sophisticated electronic support, rapid
turn-around of merchandise and direct-to-store service to customers with
hundreds to thousands of locations nationwide. The Crafts Division enjoys
long-standing ties to all of its key accounts and the average relationship with
its ten largest customers extends over 20 years. Due to the large account nature
of its customer base, most customer contact is coordinated by management and
additional sales coverage is provided by regional sales managers. Many smaller
retailers are serviced by independent representatives and representative
organizations.

         During the years ended December 31, 2002 and 2001, Carlyle conducted
business with four customers whose aggregate sales volume represented
approximately 79% and 74% of Carlyle's net revenues, respectively. These
customers also represented approximately 82% of the total outstanding accounts
receivable as of December 31, 2002 and 2001.

         The Company believes that its crafts business depends on trends within
the crafts market and the more mature home-sewing market. The retail customer
base for buttons has changed substantially over the past two decades as
department stores and small independent fabric stores have been replaced by mass
merchandisers and specialty retail chains which have continued to consolidate
recently through mergers and store closings. In response to this trend, the
Company has broadened its lines to include embellishments, novelty buttons and
products used in the craft and gift industries which are not viewed by
management as mature markets. In addition, the Company has sought to expand its
markets beyond the traditional U.S. retail outlets by expansion into the major
European countries.

                                      -3-

<PAGE>

Competition

         The textile conversion business in which the Company competes is
extremely competitive, and it competes on the basis of the price and uniqueness
in styling of its fabrics. The Company competes with numerous domestic and
foreign fabric manufacturers, including companies that are larger in size and
have financial resources that are greater than that of the Company. Foreign
competition, in particular, is a significant factor in the textile conversion
business, as the United States textile industry has been and continues to be
negatively impacted by existing worldwide trade practices.

         The bulk of the Company's crafts revenues are derived in the United
States. The crafts market in the United States is served by many competitors.
The Company competes on the basis of product innovation, range of selection,
brand names, price, display techniques and speed of distribution. The Company
competes primarily with full-line button packagers and distributors in the
general button market and several smaller competitors in the promotional button
market. The craft and gift markets are served by many and varied competitors
with innovation and competitive pricing being of major importance.

Backlog

         The Textile Conversion Division has no backlog as it converts and
processes fabric to order. Carlyle fills at least 95% of its orders within 48
hours and as a result, had no backlog of any significance at either December 31,
2002 or 2001.

Employees

         The Company currently employs 179 persons, all of whom are employed
full time, and none of its employees are represented by a collective bargaining
agreement. The Company believes relations with employees are satisfactory.


FACTORS THAT COULD AFFECT OUR FUTURE RESULTS

Expected Benefits of the Merger May Not Be Realized.

         Although the Company expects that the merger will result in benefits to
it, the Company may not realize those benefits because of integration and other
challenges relating to the merger. The failure of the Company to realize any of
the anticipated benefits of the merger could seriously harm the results of
operations of the Company. The challenges involved include the following:

         o        demonstrating to its customers that the merger will not result
                  in adverse changes in customer service standards or business
                  focus and helping customers conduct business easily with the
                  Company;

         o        preserving distribution, marketing or other important
                  relationships and resolving potential conflicts that may
                  arise;

         o        minimizing the diversion of management attention from ongoing
                  business concerns; and

         o        persuading employees that the business culture of the Textile
                  Conversion Division and Crafts Division are compatible,
                  maintaining employee morale and retaining key employees.

                                      -4-

<PAGE>

The Merger Could Negatively Impact the Financial Results of the Company.

         If the benefits of the merger do not exceed the costs associated with
the merger, including transaction costs and the dilution to the Company's
stockholders resulting from the issuance of shares in connection with the
merger, the Company's financial results, including earnings per share, could be
decreased.

The Company May Be Dependent Upon Its Principal Stockholder To Fund Its Future
Operations.

         Losses sustained in prior years have adversely affected the Company's
liquidity. At December 31, 2002, Levcor had a stockholders' deficiency of
approximately $3.6 million. Robert A. Levinson has agreed to continue to
personally support the Company's cash requirements through January 2, 2005.
Levcor has successfully implemented several actions to reduce losses and improve
cash flow. There can be no assurance that Mr. Levinson will continue to
personally support the Company's cash requirements, or that these measures will
otherwise continue to be successful.

The Company's Business Is Extremely Competitive.

         In the event the Company is unable to continue to be competitive in its
product offerings and services, the Company's business, results of operations
and financial condition may suffer. Competition in the domestic textile
converting business is based on price, uniqueness in styling of fabrics and the
ability to quickly respond to customers' orders. Competition in the crafts
distribution business is based on product innovation, range of selection, brand
names, price, display techniques and speed of distribution. We cannot assure you
that our domestic or foreign competitors will not be able to offer products that
are more attractive to our customers or potential customers than what we are
able to provide. A large number of domestic and foreign manufacturers supply
apparel and buttons to the United States market, many of which have a much more
significant market presence than does the Company. Some of the Company's
competitors also have substantially greater financial, marketing, personnel and
other resources than the Company. This may enable the Company's competitors to
compete more aggressively in pricing and marketing and to react more quickly to
market trends and to better weather market downturns. Increased competition by
existing and future competitors could result in reductions in sales or
reductions in prices of the Company's products. There is no assurance that the
Company will be able to compete successfully against present or future
competitors or that competitive pressures faced by the Company will not have a
material adverse effect on the Company's results of operations or financial
condition.

The Company Depends On Third Parties For Crucial Raw Materials And Services.

         The principal raw materials used by the Textile Conversion Division are
cotton, rayon and polyester. Cotton is available from a large number of
suppliers. The quantity of plantings, crop and weather conditions, agricultural
policies, domestic uses, exports and market conditions can significantly affect
the cost and availability of cotton. The price of polyester varies and is
determined by supply and demand as well as the price of petroleum used to
produce polyester. The Company depends on third party knitters, finishers and
transporters in the production and delivery of the finished fabrics it sells and
markets to apparel manufacturers. If any of its third party knitters, finishers
and transporters fail to timely produce quality products and in sufficient
quantity or fail to timely deliver finished products, the Company's results
would suffer. In 2002, four of the Company's principal suppliers of greige goods
and yarn and the primary knitters and finishers accounted for approximately 49%
of the Company's purchases.

                                      -5-

<PAGE>

The Company's Business Is Subject To The Seasonal Nature Of The Industry.

         The textile conversion business is seasonal and the Company expects to
realize higher revenues and operating income in the second and third calendar
quarters. Such seasonality takes into account the standard lead-time required by
the fashion industry to manufacture apparel, which corresponds to the respective
retail selling seasons. Standard lead-time is the period of time commencing when
the Company receives an order from a customer and ending when the order ships.
In response to this seasonality, the Company generally increases its inventory
levels, and thereby has higher working capital needs during the first and third
quarters of its fiscal year. The Company and the U.S. apparel industry in
general are sensitive to the business cycle of the national economy. Moreover,
the popularity, supply and demand for particular apparel products can change
significantly from year to year based on prevailing fashion trends and other
factors. Reflecting the cyclical nature of the apparel industry, many apparel
producers tend to increase capacity during years in which sales are strong.
These increases in capacity tend to accelerate a general economic downturn in
the apparel markets when demand weakens. These factors have contributed
historically to fluctuations in the Company's results of operations and they are
expected to continue to occur in the future. The Company may be unable to
compete successfully in any industry downturn.

         The crafts distribution business is largely based on reorders from its
retail customers and as a result the business is influenced by the buying habits
of consumers. Home sewing and craft activities take place on a year-round basis;
however, they are generally indoor activities and as a result they experience an
increased participation level during the fall, winter and early spring months.
Anticipating this pattern, the Company's retail customers place somewhat larger
reorders during the July through March period.

         The Company's seasonality, along with other factors that are beyond its
control, including general economic conditions, changes in consumer behavior,
weather conditions, availability of import quotas and currency exchange rate
fluctuations, could adversely affect the Company and cause its results of
operations to fluctuate. Results of operations in any period should not be
considered indicative of the results to be expected for any future period. The
sale of the Company's products is subject to substantial cyclical fluctuation.
Sales tend to decline in periods of recession or uncertainty regarding future
economic prospects that affect consumer spending, particularly on discretionary
items. This cyclicality and any related fluctuation in consumer demand could
have a material adverse effect on the Company's results of operations and
financial condition.

The Future Of The Company Will Depend On Key Personnel That It May Not Be Able
To Retain.

         If the Company does not succeed in retaining and motivating existing
personnel, its business will be affected, and the loss of such personnel might
result in the Company not being able to retain customer accounts, generate new
business or maintain sales. The Company depends on the continued services of its
key personnel particularly its employees comprising its sales and marketing
department and purchasing/distribution group as well as its two executive
officers, Robert A. Levinson and Edward F. Cooke. Each of these individuals has
acquired specialized knowledge and skills with respect to the Company's lines of
businesses and their respective operations. As a result, if any of these
individuals were to leave the Company, the Company could face substantial
difficulty in hiring qualified successors and could experience a loss in
productivity while any such successor obtains the necessary training and
experience.

                                      -6-

<PAGE>

The Crafts Business Is In An Industry That Is Subject To Significant
Fluctuations In Operating Results That May Result In Unexpected Reductions In
Revenue.

         The crafts business is in an industry that is subject to significant
fluctuations in operating results, which may lead to unexpected reductions in
revenues. Factors that may influence the Company's operating results include:

         o        the volume and timing of customer orders received;

         o        the timing and magnitude of customers' marketing campaigns;

         o        the loss or addition of a major customer;

         o        the availability and pricing of materials for our products;

         o        the increased expenses incurred in connection with the
                  introduction of new products;

         o        currency fluctuations;

         o        delays caused by third parties; and

         o        changes in our product mix.

Because the Company Generally Does Not Enter Into Long-Term Sales Contracts With
Its Customers, Its Sales May Decline If Its Existing Customers Choose Not To Buy
Its Products.

         Customers are not required to purchase its products on a long-term
basis. As a result, a customer that generates substantial revenue for the
Company in one period may not be a substantial source of revenue in a future
period. In addition, customers generally have the right to terminate their
relationship with the Company without penalty and with little or no notice.
Without long-term contracts with the majority of its customers, the Company
cannot be certain that its customers will continue to purchase its products or
that it will be able to maintain a consistent level of sales, as occurred in
2002 when the Textile Conversion Division lost a major customer which resulted
in a 48.5% decrease in sales.

The Company Is Impacted By Environmental Laws And Regulations.

         The Company is subject to a number of federal, state and local
environmental laws and regulations, including the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), and
comparable state statutes that impose joint and several liability on present and
former owners and operators, transporters and generators for remediation of
contaminated properties regardless of fault. In addition, the Company is subject
to laws concerning treatment, storage and disposal of waste, the discharge of
effluents into waterways, the emissions of substances into the air and various
health and safety matters. The Company's operations must meet extensive federal,
state and local regulatory standards in the areas of safety, health and
environmental pollution controls. Although the Company believes that its
business is operating in compliance in all material respects with such laws,
statutes and regulations, many of which provide for substantial penalties for
violations, there can be no assurance that future changes in federal, state, or
local regulations, interpretations of existing regulations or the discovery of
currently unknown problems or conditions will not require substantial additional
expenditures.

                                      -7-

<PAGE>

The Company May Not Have The Necessary Funds To Finance A Required Mandatory
Redemption Of The Series A Preferred Stock.

         The Company Series A preferred stock is subject to mandatory
redemption, in three equal annual installments on June 15, 2007, June 15, 2008
and June 15, 2009, at a price per share of Series A preferred stock equal to $1
per share, together with an amount representing accrued and unpaid dividends,
whether or not declared, to the date of redemption. This represents a
significant future liability of the Company. There can be no assurance that the
Company's business will generate sufficient cash flow from operations or that
future borrowings will be available in sufficient amounts to enable the Company
to redeem the Series A preferred stock when required to do so. In the event that
the Company fails to redeem the Series A preferred stock on any of the mandatory
redemption dates, the Series A preferred stockholders will be entitled to
receive cumulative cash dividends, and no distribution or dividend in cash,
shares of capital stock or other property will be paid or declared on the common
stock. Similarly, if the redemption on the Series A preferred is not met, and
should the Company liquidate or dissolve, no payment of any kind may be made to
the common stockholders without first satisfying the accrued cash dividends owed
to the Series A preferred stockholders. In addition, Series A preferred stock
payments are currently restricted under the Company's financing arrangements
with its lenders.

Item 2.  DESCRIPTION OF PROPERTY.

         The Company's principal offices are located at 462 Seventh Avenue, 20th
Floor, New York, New York 10018. The Company leases this property, approximately
6,500 square feet, at approximately $169,000 per year. The lease expires on
January 21, 2007.

         The Company also leases an 11,000 square foot office facility in
Carlstadt, New Jersey and owns a 104,000 square foot packaging and distribution
facility located in Lansing, Iowa and a 35,000 square foot manufacturing and
distribution facility located in Veendam, the Netherlands.

         The Company owns a former dye facility located in Emporia, Virginia,
which is leased to the purchaser of the Company's former Home Furnishings
division under a triple net fifty-year lease with a nominal base rent. In
addition, the Company owns one facility no longer used in operations: a 104,000
square foot former production facility at Watertown, Connecticut of which
approximately 45,500 square feet are leased to unrelated third parties.

         The Company believes that the facilities are adequate and suitable to
service its present and reasonably foreseeable needs.

Item 3.  LEGAL PROCEEDINGS.

         For a description of certain litigation proceedings against the
Company, see Note 9 to the Financial Statements.

         The Company is subject to a number of federal, state and local
environmental laws and regulations, including those concerning the treatment,
storage and disposal of waste, the discharge of effluents into waterways, the
emissions of substances into the air and various health and safety matters. In
addition, CERCLA and comparable state statutes generally impose joint and
several liability on present and former owners and operators, transporters and
generators for remediation of contaminated properties regardless of fault. These
parties are typically identified as "potentially responsible parties" or "PRPs."

                                      -8-

<PAGE>

         Approximately seven years ago a property owned by the Carlyle
Manufacturing Company, Inc. ("CM") (a non-operating subsidiary) located at 30
Echo Lake Road in Watertown, Connecticut was being investigated by the United
States Environmental Protection Agency ("EPA") for possible inclusion on the
National Priorities List promulgated pursuant to CERCLA but no such listing has
occurred. A Site Inspection conducted at this location detected certain on-site
soil and groundwater contamination, as well as contamination of nearby water.
This site is listed on the Connecticut State Hazardous Waste Disposal Site list,
but remediation activity has not been required by the Connecticut Department of
Environmental Protection ("CTDEP").

         CM owned an inactive facility located in North Grosvenordale,
Connecticut at which soil contamination had been found. Carlyle reported this
contamination to the CTDEP in 1989 and was working with the CTDEP to define
remedial options for the site, which it expected would focus primarily on
removal and possible stabilization of contaminated soil on site. Carlyle
estimated the cost of soil remediation at this site to be approximately $100,000
based upon information on the costs incurred by others in remediating similar
contamination at other locations. The facility was sold in 2001 and related
environmental liability was assumed by the buyer.

         On or about June 1992, Carlyle received notices from the EPA that
Carlyle, Belding Corticelli Thread Co. ("BCTC") (a discontinued operation) and
CM had been identified, along with 1,300 other parties, as PRPs in connection
with the alleged release of hazardous substances from the Solvents Recovery
Service of New England Superfund Site in Southington, Connecticut (the "SRS
site"). Carlyle settled its alleged liability in connection with the SRS sites
by paying $1,626 in connection with a settlement offered to de minimis parties
at the SRS site in 1994. BCTC and CM, along with other PRPs, committed to
perform the Remedial Investigation and Feasibility Study ("RIFS") and two
Non-Time Critical Removal Actions ("NTCRA") at the SRS site. The RIFS, and the
first NTCRA (except for certain maintenance activities) have been completed.
BCTC and CM have been allocated approximately 0.04% and 1.26%, respectively, of
costs incurred to date, based on their alleged volume of waste shipped to the
SRS site. It is presently anticipated that the EPA will not issue the record of
decision for this site for at least two years. The Company is unable, at this
time, to estimate the ultimate cost of the remedy for the SRS site.

         In April 2000, CM and BCTC (as well as numerous other members of the
SRS PRP Group) received written notification that they had been designated as
PRPs in connection with the alleged transshipment of waste from the SRS site to
the Angelillo Property Superfund site in Southington, Connecticut (the
"Angelillo Site") from October 30, 1967 through February 28, 1987. To date, the
EPA claims it has incurred approximately $1.2 million in response costs in
connection with the Angelillo Site and it has demanded reimbursement of those
costs (as well as interest and future costs) from CM, BCTC, and other PRPs. In
March 2001, the members of the SRS Group named as PRPs at the Angelillo Site
accepted EPA's offer to settle its claim for past costs relating to the
Angelillo transshipment site for a payment of $626,000. In May 2001, CM and BCTC
received invoices in the amounts of $12,574.20 and $349.01, respectively,
representing their share of the Angelillo settlement with EPA, and CM and BCTC
paid said amounts later that month.

         The Angelillo settlement agreement was subject to a public comment
period which has expired. In accordance with CERCLA, the EPA may modify or
withdraw its consent to this agreement if comments disclose facts or
considerations that cause it to believe that the agreement is inappropriate
improper or inadequate. The settling parties and the EPA are working towards a
resolution of all comments received from the public. The Company does not
believe it is probable that additional costs will be incurred at this site.

                                      -9-

<PAGE>

         By third-party summons and complaint dated November 27, 1991, CM was
named as a third-party defendant in an action pending in the United States
District Court for the District of Rhode Island entitled United States v. Davis.
In addition to CM, approximately 60 other companies were joined as third-party
defendants. Amended third-party complaints named additional third-party
defendants. The third-party complaint against CM alleged claims for contribution
under CERCLA, common law indemnification and state law contribution. The
third-party complaint alleged that CM (and the majority of the other third-party
defendants) shipped waste to the Chemical Control Corporation, which waste was
commingled and then shipped to the Davis Liquid Waste site located in
Smithfield, Rhode Island. CM has entered into an agreement to settle liability
in connection with the above claims for payment of the sum of $200,000. The
Consent Decree was approved in 1998 by the Federal District Court. At least one
non-settling party appealed from the District Court's approval of the Consent
Decree. The appellate court affirmed the district court's approval of the
Consent Decree. The Company does not believe it is probable that additional
costs will be incurred at this site.

         The amounts referred to above do not include costs that the Company or
its subsidiaries may incur for consultants' or attorneys' fees or for
administrative expenses in connection with the Company's participation as part
of a PRP group. The reserve the Company has established for environmental
liabilities, in the amount of $1.3 million, represents the Company's best
current estimate of the costs of addressing all identified environmental
problems, including the obligations relating to the Remedial Investigation and
two Non-Time Critical Removal Actions at the Solvents Recovery Superfund site,
based on the Company's review of currently available evidence, and takes into
consideration the Company's prior experience in remediation and that of other
companies, as well as public information released by EPA and by the PRP groups
in which the Company or its subsidiaries are participating. Although the reserve
currently appears to be sufficient to cover these environmental liabilities,
there are uncertainties associated with environmental liabilities, and no
assurances can be given that the Company's estimate of any environmental
liability will not increase or decrease in the future. The uncertainties relate
to the difficulty of estimating the ultimate cost of any remediation that may be
undertaken, including any operating costs associated with remedial measures, the
duration of any remediation required, the amount of consultants' or attorneys'
fees that may be incurred, the administrative costs of participating in the PRP
groups, and any additional regulatory requirements that may be imposed by the
federal or state environmental agencies.

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         Voting results from the annual meeting of stockholders on December 31,
2002, were as follows:

                  1. Approval of merger with Carlyle Industries, Inc. The
         stockholders approved the merger with Carlyle. There were 1,284,080
         votes for the merger, 1,050 votes against and 2,332 votes abstaining.

                  2. Proposal to amend and restate the Certificate of
         Incorporation to provide for the issuance of a new class of preferred
         stock. The stockholders approved the proposal to amend and restate the
         Certificate of Incorporation to provide for the issuance of a new class
         of preferred stock and to change the par value of the Company common
         stock from $0.56 per share to $0.01 per share. There were 1,282,665
         votes for the proposal, 1,505 votes against the proposal, and 3,224
         votes abstaining.

                  3. Election of Directors. The stockholders elected the
         following six persons to serve as directors of the Company until the
         next annual meeting or until their successors are elected: Edward H.
         Cohen, Edward F. Cooke, Joseph S. DiMartino, Robert A. Levinson, John
         McConnaughy and Giandomenico Picco. There were 1,285,802 votes for, 25
         votes against, and 900 votes abstained.

                                      -10-

<PAGE>

                  4. Approval of the 2002 Stock Option Plan. The stockholders
         approved the 2002 Stock Option Plan. There were 1,280,279 votes for,
         5,443 votes against, and 2,413 votes abstained.

                  5. Approval of Friedman, Alpren & Green LLP as independent
         auditors for fiscal 2002. The stockholders approved the selection of
         Friedman, Alpren & Green as independent auditors for fiscal 2002. There
         were 1,774,604 votes for, 615 votes against, and 3,699 votes abstained.

                  6. Elect three persons to serve as directors if the merger is
         not consummated. There were 1,285,062 votes for, 701 votes against, and
         400 votes abstained.

                  7. To permit the Company's board of directors, in its
         discretion, to adjourn or postpone the Annual Meeting if necessary for
         further solicitation of proxies if there are not sufficient votes at
         the originally scheduled time of the Annual Meeting to approve each
         proposal. There were 1,775,041 votes for, 2,140 votes against, and
         1,957 votes abstained.

                                      -11-

<PAGE>

                                    PART II.


Item 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

         The Company's common stock is traded on the Over The Counter Bulletin
Board under the symbol "LEVC.OB." The par value of the Company's common stock
was changed from $0.56 to $0.01 per share, on January 6, 2003 in connection with
its merger with Carlyle. The common stock is traded sporadically, and no
established liquid trading market currently exists therefor.

         The following table sets forth the range of high and low bids of the
Company's common stock for the calendar quarters indicated.


                                  High              Low
         2002                  ---------        ---------
         First Quarter         $    2.25        $    1.85
         Second Quarter             3.15             1.61
         Third Quarter              1.61             1.26
         Fourth Quarter             2.50              .90

         2001
         First Quarter         $   2.438        $   1.188
         Second Quarter            4.400            1.250
         Third Quarter             5.000            2.150
         Fourth Quarter            3.000            1.800

Holders of Record

         As of March 5, 2003, there were approximately 6,500 holders of record
of Company common stock.

Dividend Policy

         The Company has not paid any cash dividends on shares of its common
stock and has no present intention to declare or pay cash common stock dividends
in the foreseeable future. The Company is restricted under the financing
arrangements it has with CIT Group/Financial Services, Inc. ("CIT") from
declaring or paying dividends on its common stock without first obtaining CIT's
consent. For a description of the financing arrangements, see "Liquidity and
Capital Resources."

Item 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

General

         On January 6, 2003, the Company completed its merger with Carlyle.
Because the merger was not closed until 2003, it had no effect on the Company's
2002 financial condition or results of operations except for the merger related
fees and expenses in the amount of $668,000 incurred by Levcor during fiscal
2002. Therefore, the following management's discussion and analysis only
reflects the Company's financial condition and results of operations prior to
the merger (except that the "Liquidity and Capital Resources" section discusses
aspects of the acquired Carlyle business as well).

         Information regarding Carlyle's financial statements and the unaudited
pro forma consolidated financial statements of the Company after giving effect
to the merger can be found in the Company's Amendment to Current Report on Form
8-K/A, filed with the SEC on March 21, 2003. The unaudited pro forma

                                      -12-

<PAGE>

consolidated financial statements are based on the historical financial
statements and accompanying notes of Carlyle which are included in the Form
8-K/A and the historical financial statements and accompanying notes of the
Company which are included elsewhere in this Form 10-KSB. The unaudited pro
forma consolidated financial statements assume that, for accounting purposes,
Carlyle acquired the Company. The unaudited pro forma consolidated balance sheet
assumes the merger was consummated on December 31, 2002 and combines the audited
December 31, 2002 balance sheet of Carlyle with the audited December 31, 2002
balance sheet of the Company. The 2002 unaudited pro forma consolidated
statement of income combines the year ended December 31, 2002 audited statement
of income for Carlyle with the year ended December 31, 2002 audited statement of
operations for the Company. The unaudited pro forma consolidated statement of
income assumes the merger took place on January 1, 2002.

         This management's discussion and analysis of financial condition and
results of operations should be read in conjunction with the Company's financial
statements and the related notes included elsewhere in this report.

Critical Accounting Policies

         The following is a brief discussion of the critical accounting policies
used in the preparation of the Company's financial statements, including those
accounting policies and methods used which require subjective judgments and are
considered very important to the understanding of the Company's financial
condition.

     Receivables

         Under the Company's factoring agreement with CIT, CIT purchases
substantially all of the trade accounts receivable without recourse and assumes
substantially all credit risk with respect to such accounts. The factoring
agreement allows the Company to obtain advances, computed on a borrowing base
formula, that bear interest at 1/2% above prime rate (interest rate at December
31, 2002 was 4.75%). The amounts due to the Company from CIT earn no interest.
The Company has pledged its accounts receivable and property and equipment as
collateral under the factoring agreement.

     Inventory

         Inventories are stated at the lower of cost (principally average cost)
or market. Inventories consist of yarn and greige goods (collectively considered
raw materials), work in process and finished goods. The Company estimates the
markdowns required for inventories based upon future marketability as well as
general economic conditions.

     Revenue Recognition

         Revenue is recognized when goods are shipped to customers. Usual sales
terms are FOB shipping point, at which time the Company has completed all
performance obligations to consummate the sale. During fiscal 2002 and 2001, the
Company did not recognize any revenues from bill and hold transactions.

     Debt and Debt Covenants

         At December 31, 2002, the Company was in compliance with all debt
covenants.

                                      -13-

<PAGE>

Results of Operations

Fiscal 2002 Compared to Fiscal 2001

         Sales for the year ended December 31, 2002 totaled $10.3 million, a
decrease of approximately $9.8 million, or 48.5%, from $20.1 million for the
year ended December 31, 2001. The decrease was the result of a decline in sales
in the woven division caused by the loss of a major customer's program from
fiscal 2001.

         Other revenue totaled $150,000 during the year ended December 31, 2002
as compared to $20,000 during the year ended December 31, 2001. Other income
consisted principally of income earned in financing customer import purchases.

         Cost of goods sold for the year ended December 31, 2002 totaled $8.4
million, a decrease of approximately $8.0 million, or 48.6%, from $16.4 million
for the year ended December 31, 2001. The decrease in cost of goods was directly
related to the reduction in sales in fiscal 2002 as compared with fiscal 2001.

         Gross profit for the year ended December 31, 2002 was approximately
$2.1 million, a decrease of approximately $1.6 million, or 44.7%, from $3.7
million for the year ended December 31, 2001. The decrease in gross profit was
primarily the result of reduced sales in fiscal 2002 as compared to fiscal 2001.
The gross profit percentage was 19.9% for the year ended December 31, 2002 as
compared to 18.6% for the year ended December 31, 2001.

         Selling, general and administrative expenses for the year ended
December 31, 2002 totaled $2.6 million as compared to $3.1 million for the year
ended December 31, 2001, a decrease of approximately $544,000, or 17.6%. The
decrease was due to the scaling back of the woven division, reduced factor fees
which vary with sales and other cost-cutting measures taken by the Company in
fiscal 2002. As a percentage of net sales, selling, general and administrative
expenses increased from 15.4% in fiscal 2001 to 24.3% in fiscal 2002.

         Merger related fees and expenses totaled $668,000 during the year ended
December 31, 2002.

         Loss on impairment of assets held for sale totaled $169,000 in fiscal
2002 as compared to $20,000 in fiscal 2001.

         Interest expense totaled approximately $202,000 in fiscal 2002 as
compared to $427,000 in fiscal 2001. The lower interest expense was the result
of reduced borrowings and lower interest rates. The Company replaced its old
term note with a new term loan on May 2, 2002 at a significantly lower interest
rate.

Liquidity and Capital Resources

         At December 31, 2002, the Company's principal sources of liquidity
included cash and cash equivalents of $4,000 and trade accounts receivable of
$203,000.

         The Company's principal sources of cash flow are from operations and
borrowings under credit facilities.

         Net cash flow used in operating activities totaled $270,000 during the
year ended December 31, 2002 as compared to $346,000 during the year ended
December 31, 2001. Net cash flow provided by investing activities totaled

                                      -14-

<PAGE>

$15,000 and $12,000, respectively, during the years ended December 31, 2002 and
2001. Net cash provided by financing activities totaled $256,000 and $330,000,
respectively, for the years ended December 31, 2002 and 2001.

         In September 1998, the Company entered into a factoring agreement with
CIT, whereby CIT purchases the Company's trade accounts receivable and assumes
substantially all credit risk with respect to such accounts. The amounts due to
the Company from CIT earn no interest. The factoring agreement allows the
Company to obtain advances that bear interest at 0.5% above prime rate. The
Company pledged its accounts receivable and property and equipment as collateral
under the factoring agreement. There is no set limit on borrowings. The amount
available for borrowing is based on a formula consisting of 90% of eligible
accounts receivable increased by side collateral and reduced by both the current
loan balance and outstanding letters of credit.

         On May 2, 2002, the Company borrowed $3.0 million from JPMorgan Chase
Bank ("JPMorgan") pursuant to a promissory note due May 3, 2004. The note bears
interest at a fixed rate per annum equal to the Adjusted LIBO Rate applicable to
such note plus 0.75% (a "Eurodollar Loan"). The interest on the note at December
31, 2002 was 2.469%. In addition, Robert A. Levinson a stockholder, officer and
director of the Company has provided certain additional collateral guaranteeing
the note. The proceeds of the note were used to payoff the outstanding balance
of approximately $1.4 million of a term note with CIT and pay down the Company's
advance position of $1.16 million with CIT. The remainder was used for working
capital requirements.

         If necessary, Mr. Levinson has agreed to personally support the
Company's cash requirements to enable it to fulfill its obligations through
January 2, 2005, to the extent necessary, up to a maximum amount of $3.0
million. The Company believes its reliance on such commitment is reasonable and
that Mr. Levinson has sufficient liquidity and net worth to honor such
commitment. The Company believes that Mr. Levinson's written commitment provides
the Company with the legal right to request and receive such advances. In the
event that Mr. Levinson did not honor such commitment, the Company would have
the right to sue Mr. Levinson for breach of his agreement.

         On June 5, 2002, the Company's board of directors determined that
because the financing arrangement with CIT had been paid-off in May 2002 and the
Company's other sources of financing were subject to lower interest rates, it
was in the Company's best interest to prepay a portion of the outstanding
principal amount owed to Mr. Levinson. On June 5, 2002, the Company prepaid
$220,000 of the outstanding principal amount owed to Mr. Levinson. The remaining
principal balance owed by the Company to Mr. Levinson as of December 31, 2002
totaled $500,000. The principal balance, together with accrued interest on this
obligation of $285,000, has been classified as a long-term obligation because
Mr. Levinson has promised not to demand payment until at least January 2, 2005.
The Company believes its reliance on such written undertaking is reasonable. In
the event that Mr. Levinson did demand repayment prior to January 2, 2005, the
Company believes that such demand would be unenforceable and that the Company
would have the right to sue Mr. Levinson for breach of his agreement. Mr.
Levinson reaffirmed this undertaking in writing on March 4, 2003.

         In January 2003, in connection with the merger with Carlyle, the
Company assumed approximately $4.7 million of Carlyle's revolving credit and
long-term debt. Carlyle had financing agreements (the "CIT Facilities") with
CIT, which provided for a maximum aggregate revolving credit of up to $7.5
million to Carlyle. The CIT Facilities are comprised of separate financing
agreements with each of the Company and its wholly-owned subsidiaries,
Blumenthal/Lansing Company, LLC and Westwater Industries, LLC. The financing
agreements with Blumenthal/Lansing Company, LLC and Westwater Industries, LLC
provide for revolving credit advances to such facilities based on eligible
accounts receivable and inventory and include a letter of credit agreement with
a limit of $500,000.

                                      -15-

<PAGE>

         The financing agreement with the Company provides for a term loan (the
"Term Loan") in the amount of $2.0 million and revolving credit of $500,000. The
Term Loan amortizes $12,000 per month during each of the first twenty-five
months followed by a final installment payment of $1.7 million during the
twenty-sixth month. All amounts outstanding under the CIT Facilities bear
interest at the Chase Bank N.A. prime rate plus 0.5% with a minimum rate of 5%.

         The CIT Facilities contain representations and warranties and events of
default customary for agreements of this nature, such as restrictions on
incurring more debt, acquisitions, preferred stock payments in excess of
$300,000 per year, the use of proceeds from the sale of assets and change in
voting control of the Company. The CIT Facilities also contain a subjective
acceleration clause which states that, except for the Term Loan, all remaining
obligations under the CIT Facilities shall, at CIT's option, be immediately due
and payable without notice or demand upon the occurrence of any change in the
Company's condition or affairs (financial or otherwise) that in CIT's sole
discretion exercised by CIT in accordance with CIT's business judgement
materially impairs the collateral or increases CIT's risk. In the case of the
Term Loan, CIT may accelerate the maturity in the event of a default by the
Company after thirteen months notice of such acceleration.

         In connection with the CIT Facilities, the Company and its subsidiaries
made guarantees and issued first priority liens covering substantially all of
the assets of the Company and its subsidiaries. In addition, Mr. Robert A.
Levinson provided certain collateral against advances provided under the CIT
Facilities.

         The Company believes that cash generated from the sale of fabrics, the
advances under the CIT factoring agreement, the proceeds from its term note with
JPMorgan and loans from Mr. Levinson (if needed) will be sufficient to fund
operations through 2004. The Company's unrestricted cash was approximately
$4,000 and $3,000 at December 31, 2002 and 2001, respectively.

         The Company's future minimum lease payments under noncancelable
operating leases at December 31, 2002 are approximately $704,000 for the years
2003 through 2007. These payments are for the Company's headquarters in New
York.

         In connection with the merger, the Company issued 4,555,007 shares of
its Series A preferred stock for 4,555,007 shares of Carlyle's Series B
preferred stock. The Series A preferred stock is subject to mandatory
redemption, to the extent the Company may lawfully do so, in three equal annual
installments on June 15, 2007, June 15, 2008 and June 15, 2009, in each case,
from funds legally available therefor, at a price per share of Series A
preferred stock equal to $1 per share, together with an amount representing
accrued and unpaid dividends, whether or not declared, to the date of
redemption.

         Dividends on the Series A preferred stock accrue at a rate of $0.06 per
annum per share when, as and if declared by the Company and are payable
quarterly on March 15, June 15, September 15 and December 15. Quarterly
dividends which are not paid in full in cash on any dividend payment date will
accumulate without interest. Under the terms of the CIT Facilities, preferred
stock redemption payments are currently restricted.

         Seasonality

         The business of the Company is seasonal and it generally realizes
higher revenues and operating income in the second and third calendar quarters.
Such seasonality takes into account the standard lead-time required by the
fashion industry to manufacture apparel, which corresponds to the respective
retail selling seasons. Standard lead-time is the period of time commencing with
when the Company receives an order from a customer and ending with when the
Company ships the order to the customer.

                                      -16-

<PAGE>

         Impact of Inflation

         The Company's results are affected by the impact of inflation on
operating costs. Historically, the Company has used selling price adjustments,
cost containment programs and improved operating efficiencies to offset the
otherwise negative impact of inflation on its operations.

New Accounting Pronouncements

SFAS No. 145

         In April 2002, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards Number No. 145, "Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections" ("SFAS 145"). SFAS 145 rescinds the provisions of SFAS No. 4 that
requires companies to classify certain gains and losses from debt
extinguishments as extraordinary items, eliminates the provisions of SFAS No. 44
regarding the Motor Carrier Act of 1980 and amends the provisions of SFAS No. 13
to require that certain lease modifications be treated as sale leaseback
transactions. The provisions of SFAS 145 related to the classification of debt
extinguishment is effective for fiscal years beginning after May 15, 2002. The
adoption of SFAS 145 is not expected to have a material impact on the Company's
results of operations and financial position.

SFAS No. 146

         In June 2002, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 146, "Accounting for Costs Associated with
Exit or Disposal Activities" ("SFAS 146"). SFAS 146 addresses financial
accounting and reporting for costs associated with exit or disposal activities
and nullifies Emerging Issues Task Force Issue No. 94-3, "Liability Recognition
for Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)." SFAS 146 requires that a
liability for a cost associated with an exit or disposal activity is recognized
when the liability is incurred. This statement also established that fair value
is the objective for initial measurement of the liability. The provisions of
SFAS 146 are effective for exit or disposal activities that are initiated after
December 31, 2002. The adoption of SFAS 146 is not expected to have a material
impact on the Company's results of operations and financial position.

SFAS No. 148

        In December 2002, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure" ("SFAS 148"), which amends Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"). SFAS 148 provides alternative methods of transition
for a voluntary change to the fair value based method of accounting for
stock-based employee compensation. (Under the fair value based method,
compensation cost for stock options is measured when options are issued.) In
addition, SFAS 148 amends the disclosure requirements of SFAS 123 to require
more prominent and more frequent disclosures in financial statements of the
effects of stock-based compensation.

        The transition guidance and annual disclosure provisions of SFAS 148 are
effective for fiscal years ending after December 15, 2002, with earlier
application permitted in certain circumstances. The interim disclosure
provisions are effective for financial reports containing financial statements
for interim periods beginning after December 15, 2002.

                                      -17-

<PAGE>

Item 7.  FINANCIAL STATEMENTS



                           LEVCOR INTERNATIONAL, INC.

                          INDEX TO FINANCIAL STATEMENTS

                                                                            Page
Audited Financial Statements

Report of Independent Certified Public Accountants..........................  19

Balance Sheet at Year Ended December 31, 2002 ..............................  20

Statements of Operations for the Years Ended December 31, 2002, and 2001 ...  21

Statements of Stockholders' Deficiency at December 31, 2002, and 2001.......  22

Statements of Cash Flows for the Years Ended December 31, 2002, and 2001....  23

Notes to Financial Statements...............................................  24





                                      -18-

<PAGE>

FRIEDMAN
ALPREN &                                                      1700 BROADWAY
GREEN LLP                                                     NEW YORK, NY 10019
CERTIFIED PUBLIC ACCOUNTANTS AND CONSULTANTS                  212-842-7000
                                                              FAX 212-842-7001
                                                              www.nyccpas.com



               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
               --------------------------------------------------



TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
   LEVCOR INTERNATIONAL, INC.


         We have audited the accompanying balance sheet of LEVCOR INTERNATIONAL,
INC. as of December 31, 2002, and the related statements of operations,
stockholders' deficiency and cash flows for the years ended December 31, 2002
and 2001. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

         In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of LEVCOR
INTERNATIONAL, INC. as of December 31, 2002, and the results of its operations
and its cash flows for the years ended December 31, 2002 and 2001 in conformity
with accounting principles generally accepted in the United States of America.




                                                     Friedman Alpren & Green LLP

New York, New York
March 4, 2003


                                      -19-

<PAGE>

                           LEVCOR INTERNATIONAL, INC.
                                  BALANCE SHEET
                                DECEMBER 31, 2002
                 (In thousands except share and per share data)

ASSETS
------

Current assets:
  Cash                                                           $      4
  Due from factor                                                     285
  Accounts receivable, trade (net of allowance of $17)                203
  Inventories, net                                                  1,445
  Other current assets                                                 35
                                                                 --------
     Total current assets                                           1,972
                                                                 --------
  Property and equipment, at cost less accumulated
      depreciation and amortization of $97                             59
  Assets held for sale                                                 50
  Security deposits                                                    35
                                                                 --------
         Total assets                                            $  2,116
                                                                 ========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
----------------------------------------

Current liabilities:
   Accounts payable and accrued expenses                         $  1,422
   Accrued merger fees and expenses                                   523
                                                                 --------
     Total current liabilities                                      1,945
                                                                 --------
Long-term debt                                                      3,000
Loans payable - officer/stockholder                                   785
                                                                 --------
         Total liabilities                                          5,730
                                                                 --------
Stockholders' deficiency:
   Common stock - par value $0.56 per share;
     authorized 15,000,000 shares,
     issued 2,395,794 shares and
     outstanding 2,338,194 shares                                   1,342
   Capital in excess of par value                                   5,277
   Accumulated deficit                                            (10,156)
                                                                 --------
                                                                   (3,537)
   Less - Treasury stock - at cost, 57,600 shares                     (77)
                                                                 --------
            Total stockholders' deficiency                         (3,614)
                                                                 --------
            Total liabilities and stockholders' deficiency       $  2,116
                                                                 ========

The accompanying notes are an integral part of these financial statements.


                                      -20-

<PAGE>

                           LEVCOR INTERNATIONAL, INC.
                            STATEMENTS OF OPERATIONS
                      (In thousands except per share data)



                                                     Years Ended December 31,
                                                      2002             2001
                                                    --------         -------
Net sales                                           $ 10,347         $20,108
Other revenue                                            150              20
                                                    --------         -------
Total revenue                                         10,497          20,128
Cost of goods sold                                     8,430          16,393
                                                    --------         -------
Gross profit                                           2,067           3,735
                                                    --------         -------
Selling, general and administrative expenses           2,552           3,096
Merger related fees and expenses                         668              --
Loss on impairment of assets held for sale               169              20
                                                    --------         -------
Income (loss) before interest expense                 (1,322)            619
Interest expense                                         202             427
                                                    --------         -------
Net income (loss)                                   $ (1,524)        $   192
                                                    ========         =======

Earnings per common share:

Basic and diluted earnings per common share         $   (.65)        $  0.08
                                                    ========         =======

Weighted average number of common shares
outstanding - basic                                    2,336           2,321
Potential common stock                                    72              74
                                                    --------         -------

Weighted average number of shares
   outstanding - diluted                               2,408           2,395
                                                    ========         =======



The accompanying notes are an integral part of these financial statements.

                                      -21-

<PAGE>

<TABLE>
                           LEVCOR INTERNATIONAL, INC.
                     STATEMENTS OF STOCKHOLDERS' DEFICIENCY
                             (Dollars in thousands)
<CAPTION>

                                            Common  Stock                                       Treasury Stock
                                       ----------------------   Capital in                  ----------------------       Total
                                                                 excess of   Accumulated                              Stockholders'
                                         Shares       Amount     Par Value     Deficit        Shares      Amount       Deficiency
                                       ---------    ---------    ---------    ---------     ---------    ---------     ---------
<S>                                    <C>          <C>          <C>          <C>              <C>       <C>           <C>
Balance, December 31, 2000             2,376,299    $   1,331    $   5,254    $  (8,825)       57,600    $     (77)    $  (2,316)

Shares issued for services rendered        7,348            4           13           --            --           --            17
Net income                                    --           --           --          192            --           --           192
                                       ---------    ---------    ---------    ---------     ---------    ---------     ---------
Balance December 31, 2001              2,383,647    $   1,335    $   5,267    $  (8,633)       57,600    $     (77)    $  (2,107)
                                       ---------    ---------    ---------    ---------     ---------    ---------     ---------

Shares issued for services rendered        2,381            1            4           --            --           --             5
Stock options exercised                    9,766            6            5           --            --           --            11
Net loss                                      --           --           --       (1,524)           --           --        (1,524)
                                       ---------    ---------    ---------    ---------     ---------    ---------     ---------

Balance December 31, 2002              2,395,794    $   1,342    $   5,277    $ (10,156)       57,600    $     (77)    $  (3,614)
                                       =========    =========    =========    =========     =========    =========     =========
</TABLE>


The accompanying notes are an integral part of these financial statements.


                                      -22-

<PAGE>

<TABLE>
                           LEVCOR INTERNATIONAL, INC.
                            STATEMENTS OF CASH FLOWS
                             (Dollars in thousands)
<CAPTION>

                                                                 Years Ended December 31
                                                                    2002          2001
                                                                  -------       -------
<S>                                                               <C>           <C>
Cash Flows From Operating Activities:
Net income (loss)                                                 $(1,524)      $   192
Adjustments to reconcile net income (loss) to
   net cash used in operating activities
   Depreciation and amortization                                       28            31
   Provision for doubtful accounts                                     --            11
   Services paid in common stock                                        5            17
   Loss on impairment of assets held for sale                         169            20
   Changes in operating assets and liabilities:
     Accounts receivable                                             (159)           89
     Inventories                                                      767         1,476
     Prepaid expenses and other current assets                         14            54
     Accrued interest on loan payable to officer/stockholder           36            43
     Accounts payable and accrued expenses                            (96)       (2,312)
     Accrued merger related fees and expenses                         523            --
     Deferred income                                                  (33)           33
                                                                  -------       -------
     Net cash used in operating activities                           (270)         (346)
                                                                  -------       -------

Cash Flows From Investing Activities:
   Proceeds from sale of assets held for sale                          15            21
   Purchases of property and equipment                                 --            (9)
                                                                  -------       -------
     Net cash provided by investing activities                         15            12
                                                                  -------       -------

Cash Flows From Financing Activities:
   Payment of long-term debt                                       (1,681)         (689)
   Proceeds from issuance of long term debt                         3,000            --
   Proceeds from (payments to) factor                              (1,074)        1,019
   Proceeds from exercise of stock options                             11            --
                                                                  -------       -------
     Net cash provided by financing activities                        256           330
                                                                  -------       -------
     Net increase (decrease) in cash and cash equivalents               1            (4)

Cash and cash equivalents beginning of year                             3             7
                                                                  -------       -------
Cash and cash equivalents end of year                             $     4       $     3
                                                                  =======       =======
Supplemental disclosure of cash flow information
   Cash paid during the year for:
       Interest                                                   $   154       $   383
                                                                  =======       =======
       Income taxes                                               $     1       $    --
                                                                  =======       =======

</TABLE>

The accompanying notes are an integral part of these financial statements.

                                      -23-

<PAGE>

                           LEVCOR INTERNATIONAL, INC.

                          NOTES TO FINANCIAL STATEMENTS


1 - SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations and Liquidity

         Levcor International, Inc. (the "Company") operates a fabric-converting
business that produces fabrics used in the production of apparel. The Company
sells its products to customers in the United States and Canada.

         The Company sustained substantial losses that have adversely affected
the Company's liquidity. At December 31, 2002, the Company had a stockholders'
deficiency of approximately $3.6 million. Robert A. Levinson, an officer,
director and stockholder of the Company has agreed to continue to personally
support the Company's cash requirements to enable the Company to meet its
current obligations through January 2, 2005 and to fund future operations.

         The Company has successfully implemented several actions to reduce
losses and improve cash flow. These actions include the merger with Carlyle
Industries, Inc. ("Carlyle") effective January 6, 2003 as described in Notes 2
and 15. Although there can be no assurance that these measures will continue to
be successful, the Company believes that future operations and support from
Robert A. Levinson will provide sufficient liquidity to fund current operations.

Inventories

         Inventories are stated at the lower of cost (principally average cost)
or market. Inventories consist of yarn and greige goods (collectively considered
raw materials), work in process and finished goods.

         The Company estimates the markdowns required for inventories based upon
future marketability as well as general economic conditions. Consequently, an
adverse change in those factors could affect the Company's estimate of the
markdowns.

Cost of Sales

         The significant items included in the Company's cost of sales include
purchases of yarn, purchases of greige goods, dyeing and finishing costs and
freight in.

Property and Equipment

         Property and equipment are stated at cost less accumulated depreciation
and amortization. Depreciation and amortization are provided for on a
straight-line basis, in amounts sufficient to relate the cost of depreciable
assets to operations over their estimated service lives, which range from three
to seven years. Leasehold improvements are amortized over the lesser of the
lease term or the service lives of the improvements.

Impairment and Disposal of Long-Lived Assets

         On an ongoing basis, the Company reviews the valuation of long-term
assets. As part of the review, the Company estimates the undiscounted future
cash flow expected to be generated by the related assets to determine whether an

                                      -24-

<PAGE>

impairment has occurred. If such future cash flows are insufficient to recover
the carrying amount of the assets, impairment is recognized and the carrying
value of any impaired assets would be reduced to fair value.

         The Company initiated a process to sell certain operating machinery and
equipment. This machinery and equipment was acquired in a business combination
in 1999. The machinery and equipment has never been used and, accordingly, no
depreciation has ever been taken. In 2001, the Company sold a portion of the
equipment for book value. In March 2003, the Company obtained an appraisal of
the remaining machinery and equipment indicating a value of approximately
$50,000. As a result of this appraisal, an impairment loss was recorded as of
December 31, 2002 in the amount of $169,000.

Earnings (Loss) Per Common Share

         The computation of basic net income (loss) per share of common stock is
based upon the weighted average number of common shares outstanding during the
period. Diluted net income (loss) per common share reflects additional shares
from the assumed exercise of stock options (see Note 10), if dilutive.

Income Taxes

         The Company accounts for income taxes using the asset and liability
method. Under this method, deferred income taxes are recognized for the
estimated future tax effects of the temporary differences between the financial
reporting basis and the tax basis of assets and liabilities.

Financial Instruments

         The Company's financial instruments include long-term debt and loans
payable to Robert A. Levinson. The fair value of the promissory note in favor of
JPMorgan Chase Bank, the largest portion of the long-term debt, approximates its
carrying value because that note had a market-based interest rate. It was not
practicable to estimate the fair value of the loans payable to Robert A.
Levinson because no market exists for that type of instrument.

New Accounting Pronouncements

SFAS No. 145

         In April 2002, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards Number No. 145, "Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections" ("SFAS 145"). SFAS 145 rescinds the provisions of SFAS No. 4 that
requires companies to classify certain gains and losses from debt
extinguishments as extraordinary items, eliminates the provisions of SFAS No. 44
regarding the Motor Carrier Act of 1980 and amends the provisions of SFAS No. 13
to require that certain lease modifications be treated as sale leaseback
transactions. The provisions of SFAS 145 related to the classification of debt
extinguishment is effective for fiscal years beginning after May 15, 2002. The
adoption of SFAS 145 is not expected to have a material impact on the Company's
results of operations and financial position.

SFAS  No. 146

         In June 2002, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 146, "Accounting for Costs Associated with
Exit or Disposal Activities" ("SFAS 146"). SFAS 146 addresses financial
accounting and reporting for costs associated with exit or disposal activities
and nullifies Emerging Issues Task Force Issue No. 94-3, "Liability Recognition
for Certain Employee Termination Benefits and Other Costs to Exit an Activity

                                      -25-

<PAGE>

(including Certain Costs Incurred in a Restructuring)." SFAS 146 requires that a
liability for a cost associated with an exit or disposal activity be recognized
when the liability is incurred. This statement also established that fair value
is the objective for initial measurement of the liability. The provisions of
SFAS 146 are effective for exit or disposal activities that are initiated after
December 31, 2002. The adoption of SFAS 146 is not expected to have a material
impact on the Company's results of operations and financial position.

SFAS No. 148

        In December 2002, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure" ("SFAS 148") which amends Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"). SFAS 148 provides alternative methods of transition
for a voluntary change to the fair value based method of accounting for
stock-based employee compensation. (Under the fair value based method,
compensation cost for stock options is measured when options are issued.) In
addition, SFAS 148 amends the disclosure requirements of SFAS 123 to require
more prominent and more frequent disclosures in financial statements of the
effects of stock-based compensation.

        The transition guidance and annual disclosure provisions of SFAS 148 are
effective for fiscal years ending after December 15, 2002, with earlier
application permitted in certain circumstances. The interim disclosure
provisions are effective for financial reports containing financial statements
for interim periods beginning after December 15, 2002.

Revenue Recognition

         Revenue is recognized when goods are shipped to customers. Usual sales
terms are FOB shipping point, at which time the Company has performed all
obligations to consummate the sale. On occasion, the Company recognizes revenue
from bill and hold sales for its most significant customer. The Company
recognizes revenue from these transactions only when all of the following
occurs: the risk of ownership has passed to the customer, the customer has made
a fixed commitment to purchase the goods, the customer has requested that the
transaction be on a bill and hold basis even though the goods are ready for
shipment, there is a fixed date of delivery, the Company has performed all
performance obligations to consummate the sale and the goods are segregated from
the remainder of the Company's goods in the warehouse. During the years ended
December 31, 2002 and 2001, the Company did not recognize any revenues from bill
and hold transactions.

         The significant costs included in selling, general and administrative
expenses are salaries, sales commissions, benefits and related payroll taxes,
rent and utilities, professional fees, factor fees, product development costs,
travel and entertainment and telecommunication expenses.

Shipping and Handling

         For each of the years December 31, 2002 and 2001, the Company billed
approximately $10,000 of shipping and handling fees to its customers. During the
same periods, the Company incurred shipping and handling costs of $143,000 and
$141,000, respectively.

Stock-Based Compensation Plans

         The Company maintains a stock option plan, as more fully described in
Note 10 to the financial statements, accounted for using the "intrinsic value"
method pursuant to the provisions of Accounting Principles Board Opinion No. 25,

                                      -26-

<PAGE>

"Accounting for Stock Issued to Employees." The fair value of options granted
and the pro forma effects on the Company's net income (loss) and net income
(loss) per share are disclosed pursuant to SFAS 123.

Use of Estimates in Financial Statements

         In preparing financial statements in conformity with generally accepted
accounting principles, management makes estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the financial statements, as well as the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.

Reclassifications

         Certain reclassifications have been made to the prior year financial
statements to conform to the current year presentation.


2 - SUBSEQUENT EVENT - MERGER WITH CARLYLE INDUSTRIES, INC.

         On January 6, 2003, the Company completed its acquisition of Carlyle
which was effected as a merger of Carlyle into the Company.

         In the merger, each five shares of Carlyle common stock were converted
into one share of Company common stock, par value $0.01 per share, and each
share of Carlyle Series B preferred stock was converted into one share of
Company Series A preferred stock, par value $0.01 per share. In addition, the
Company assumed Carlyle stock options which became options to purchase
approximately 220,000 shares of Company common stock. The merger was accounted
for as a reverse acquisition. The purchase price was valued at approximately
$6.9 million.

         Because the merger was not closed until 2003, it had no effect on the
Company's 2002 financial condition or results of operations, except for the
merger related fees and expenses in the amount of $668,000 as shown in the
Statement of Operations. See Note 15 for unaudited pro forma information
concerning the Carlyle merger.


3 - ACCOUNTS RECEIVABLE FACTORED

         Under a factoring agreement with CIT Group/Financial Services, Inc.
("CIT" or the "factor"), the factor purchases the trade accounts receivable
without recourse and assumes substantially all credit risks with respect to such
accounts. The factoring agreement allows the Company to obtain advances,
computed on a borrowing base formula from the factor at 4.75% (prime rate plus
0.5%). The amounts due to the Company from the factor earn no interest. The
Company has pledged its accounts receivable and property and equipment as
collateral under the factoring agreement.

4 - INVENTORIES

         The components of inventories at December 31, 2002, net of reserves,
are as follows (dollars in thousands):

               Raw materials              $  684
               Work in process               183
               Finished goods                578
                                          ------
                                          $1,445
                                          ======

                                      -27-

<PAGE>

         At December 31, 2002, inventories were valued on an average cost method
basis. Inventories are stated at the lower of cost or market.


5 - PROPERTY AND EQUIPMENT

         The components of property and equipment at December 31, 2002 consist
of the following (dollars in thousands):

         Computer hardware and software             $102
         Furniture and fixtures                       26
         Leasehold improvements                       18
         Machinery and equipment                      10
                                                    ----
                                                     156
         Less - Accumulated depreciation
            and amortization                          97
                                                    ----
                                                    $ 59
                                                    ====

6 - LONG-TERM DEBT

         Long-term debt at December 31, 2002 consisted of a promissory note
payable to JPMorgan Chase Bank, dated May 2, 2002, in the amount of $3.0
million. The promissory note has a maturity date of May 3, 2004. The note bears
interest at a fixed rate per annum equal to the Adjusted LIBO Rate applicable to
such note plus 0.75% (a "Eurodollar Loan"). The interest rate on the note at
December 31, 2002 was 2.469%. In additional, Robert A. Levinson, a stockholder,
officer and director of the Company, has provided certain additional collateral
guaranteeing the note. The proceeds of the note were used to pay off the
outstanding balance of $1,375,557 of the Company's term note with CIT and pay
down the Company's advance position of $1,160,000 with CIT. The remainder was
used for working capital requirements. Robert A. Levinson, a stockholder,
officer and director of the Company, has agreed to continue to personally
support the Company's cash requirements to enable the Company to meet its
current obligations through January 2, 2005 and to fund future operations.


7 - RELATED PARTY TRANSACTIONS

         Robert A. Levinson has provided a loan of $500,000 to the Company. At
December 31, 2002, the loan bears interest at 6% per annum. Mr. Levinson has
agreed not to require payment of the loan and $285,000 of the related accrued
interest at December 31, 2002, prior to January 2, 2005.

         In addition to being a director of the Company, Edward H. Cohen serves
as counsel to the law firm of Katten Muchin Zavis Rosenman, New York, New York,
legal counsel to the Company. During the twelve months ended December 31, 2002,
fees for services provided to the Company by Katten Muchin Zavis Rosenman
totaled $418,000 of which $357,000 were merger related fees. During 2002, legal
fees totaling $5,000 was settled through the issuance to Katten Muchin Zavis
Rosenman of 2,381 shares of Company common stock with a fair market value of
$2.20 per share on the date of such issuance. Mr. Cohen does not share in any
fees paid by the Company to Katten Muchin Zavis Rosenman.


                                      -28-

<PAGE>

8 - INCOME TAXES

         The following summarizes the Company's deferred tax assets at December
31, 2002 (dollars in thousands):

         Net operating loss carryforwards                       $2,635
         Provision for losses on accounts receivable                 7
         Loss on impairment of assets held for sale                 76
         Capitalized inventory cost                                 89
                                                                ------
                                                                 2,807
         Less - Valuation allowance                              2,807
                                                                ------
                                                                $   --
                                                                ======

         At December 31, 2002, the Company had a net tax operating loss
carryforward of approximately $6.9 million available to reduce taxable income in
future years, expiration of which occurs between 2003 and 2022. No assurance can
be given as to the Company's ability to realize the net operating loss
carryforward. Additionally, the net operating loss carryforward is subject to
Internal Revenue Code Section 382, which limits the use of the net operating
loss, if there is a change in ownership.


9 - LITIGATION

         The 0.67% carried interest in the Kotaneelee gas field sold by the
Company in August 1991, as well as Magellan Petroleum Corporation's 2.67%
carried interest in such field, is held in trust by Canada Southern Petroleum
Ltd. ("Canada Southern"), which has a 30% carried interest in such field. In
late 1987, Canada Southern commenced an action against Allied-Signal, Inc. in
Florida alleging its failure to fulfill certain contractual obligations to
develop the field (the "Florida Action"). In September 1988, Allied-Signal, Inc.
commenced an action (the "Allied-Signal Action") in Calgary, Canada against Dome
Petroleum Limited, Amoco Production Company and Amoco Canada Petroleum Company,
Ltd. ("Amoco Canada" and, collectively, the "Amoco-Dome Group") seeking a
declaration that the defendants were responsible for the development of the
field, and also seeking reimbursement of its legal costs incurred in the Florida
Action. The Florida Action has since been dismissed.

         In March 1989, Allied-Signal, Inc. amended its complaint in the
Allied-Signal Action to add the Company, Canada Southern and Magellan Petroleum
Corporation ("Magellan") as additional defendants. Certain of the other
defendants in the Allied-Signal Action have filed counterclaims against the
Company and other defendants seeking indemnification for unspecified costs and
expenses incurred by them in defending the Allied-Signal Action. In January
1996, the Company, Allied-Signal, Inc., Canada Southern and Magellan Petroleum
Corporation entered into a settlement whereby each party agreed not to sue any
of the other parties and, subsequently, the Allied-Signal Action was
discontinued.

         Shortly after the Allied-Signal Action commenced, the Amoco-Dome Group
filed a counterclaim against the Company, Canada Southern and Magellan seeking
certain declaratory relief with respect to their alleged failure to fulfill
certain contractual obligations to develop and market gas from the Kotaneelee
gas field. The trial on the counterclaim action commenced on September 3, 1996,
and is ongoing.

         On October 27, 1989, in the Court of Queen's Bench of Alberta, Judicial
District of Calgary, Canada (the "Canada Court"), Canada Southern filed a
statement of claim against the Amoco-Dome Group, Columbia Gas Development of
Canada Ltd. ("Columbia"), Mobil Oil Canada Ltd. ("Mobil") and Esso Resources of
Canada Ltd. ("Esso") seeking a declaratory judgment (the "Declaratory Action")
regarding two issues relating to the Kotaneelee gas field. The Declaratory
Actions seeks a judgment on: (1) whether interest accrued on the carried
interest account (Canada Southern maintains it does not), and (2) whether
expenditures for gathering lines and dehydration equipment are expenditures
chargeable to the carried interest account (Canada Southern maintains they are).

                                      -29-

<PAGE>

Mobil, Esso and Columbia have filed answers essentially agreeing to the granting
of the relief requested by Canada Southern. The Amoco-Dome Group has now
admitted to the claim that interest does not accrue on the carried interest
account.

         In 1991, Anderson Exploration Ltd. acquired all of the shares in
Columbia, and changed its name to Anderson Oil & Gas Inc. ("Anderson"). Anderson
is now the sole operator of the Kotaneelee gas field, and is a direct defendant
in the Declaratory Action. Columbia's previous parent, The Columbia Gas System,
Inc., was reorganized in a bankruptcy proceeding in the United States, and is
contractually liable to Anderson in the Declaratory Action.

         On March 7, 1990, Canada Southern filed a statement of claim in the
Canada Court against the Amoco-Dome Group, Columbia, Mobil and Esso seeking
forfeiture of the Kotaneelee gas field, damages and other relief for breach of
fiduciary duty (the "Forfeiture Action"). The Company was added as a party
plaintiff to this action in November 1993. If such claim is upheld, the Company
could recover a 2 percent interest in the Kotaneelee gas field and damages. The
defendants have contested the claim and Canada Southern is pursuing discovery
and trial. Columbia filed a counterclaim seeking, if Canada Southern is
successful in its claims, repayment from Canada Southern, the Company and
Magellan Petroleum Corporation of all sums expended by Columbia on the
Kotaneelee gas fields before Canada Southern, the Company and Magellan Petroleum
Corporation are entitled to their interests. The trial commenced in September
1996, and is ongoing. Based on recently discovered evidence, Canada Southern
petitioned the Canada Court for leave to amend its complaint to add a claim that
the defendants in the action failed to develop the field in a timely manner.

         The field operator has entered into a contract for the sale of the
Kotaneelee gas field. The Company believes that it is too early to determine the
impact, if any, that this contract may have on the status of these cases.

         On August 6, 1991, the Company sold to an independent third party (the
"Buyer") its carried interest in a lease in property, including the Kotaneelee
gas field. The agreement for the transfer of the Company's interest provides
that the Company shall continue to prosecute the Declaratory Action and the
Forfeiture Action. The Company and the Buyer have agreed to share equally all
costs and expenses of the Declaratory Action and the Forfeiture Action and to
share equally any payments or other benefit resulting from the resolution of
such actions. The agreement further provides that the Company shall indemnify
the Buyer against all actions, proceedings, claims, demands, damages and
expenses brought against or suffered by the Buyer which arise out of, or are
attributable to, the Allied-Signal Action.

         The Company has been advised that under Canadian law certain costs
(known as "Taxable Costs") of a litigation may be assessed against a
nonprevailing party. Taxable costs consist primarily of attorneys and expert
witness fees incurred during a trial. Effective September 1, 1998, the Alberta
Rules of Court were amended to provide for a material increase in the costs
which may be awarded to the prevailing party in matters before the Court. In
addition, a judge in complex and lengthy trials has the discretion to increase
an award of Taxable Costs.

         The Company's ultimate legal and financial liability in respect to all
claims, lawsuits and proceedings referred to above cannot be estimated with any
degree of certainty. Accordingly, the Company has not recognized any loss
related to these contingencies.

                                      -30-

<PAGE>

10 - STOCK OPTION PLAN

         As described in Note 1, the Company has adopted the disclosure-only
provisions of SFAS 123 and, accordingly, no compensation cost has been
recognized for grants made under its stock option plan. Had compensation cost
been determined based on the fair value at the grant date for stock option
awards in 2002 and 2001 in accordance with the provisions of SFAS 123, the
Company's net income (loss) and net income (loss) per common share would have
been changed to the pro forma amounts indicated below (dollars in thousands):

                                                         2002           2001
                                                       --------       --------
         Net income (loss)
         As reported                                   $ (1,524)      $    192
         Pro forma                                       (1,615)            99
         Basic and diluted earnings (loss) per share
         As reported                                   $   (.65)      $    .08
         Pro forma                                         (.69)           .04


         The weighted-average fair value at date of grant for options granted
during 2002 and 2001 was $2.10 and $1.05 per option, respectively. The fair
value of each option at date of grant was estimated using the Black-Scholes
option pricing model with the following weighted-average assumptions for grants
in:

                                               2002                2001
                                             --------            --------
         Risk-free interest rates              4.94%           4.69% - 6.58%
         Expected life
            Employees                        10 years            9 years
            Officers/directors               10 years            9 years
         Expected volatility                   126%                 99%
         Expected dividends                   $ -0-               $ -0-


         The following table summarizes option activity for the years ended
December 31, 2002 and 2001:

                                                Incentive Options
                                            ----------------------
                                                           Weighted -
                                             Number          Average
                                               of           Exercise
                                             Options         Price
                                            --------         -----
         Balance, December 31, 2000          225,000         $ .74
            Granted                           61,700          1.05
                                            --------         -----
          Balance, December 31, 2001         286,700         $ .82
                                            --------         -----
           Grants                              5,000          2.10
           Cancelled                         (19,534)         1.10
           Exercised                          (9,766)         1.10
                                            --------         -----
         Balance, December 31, 2002          262,400         $ .81
                                            ========         =====

                                      -31-

<PAGE>

         The following table summarizes information about stock options as of
December 31, 2002:

<TABLE>
<CAPTION>
                                       Options Outstanding                         Options Exercisable
                        -------------------------------------------------      --------------------------
                                            Weighted -
                                             Average           Weighted -                       Weighted -
   Range of                                 Remaining           Average                          Average
   Exercise               Number           Contractual          Exercise         Number          Exercise
    Prices              Outstanding            Life              Price         Exercisable        Price
--------------          -----------      ---------------       ----------      -----------      ---------
<S>                       <C>                  <C>              <C>              <C>             <C>
$.25 to $.50               20,800              1.0              $   .36           20,800         $   .36
$.63 to $.81              200,000              6.5              $   .77          150,000         $   .81
$1.10 to $2.10             41,600              7.6              $  1.26           14,100         $  2.00
                          -------                                                -------
                          262,400                                                184,900
                          =======                                                ========
</TABLE>

11 - EMPLOYEE BENEFIT PLAN

         The Company's eligible employees may participate in a Company-sponsored
401(k) benefit plan (the "Plan"). The Plan covers substantially all employees
and permits employees to defer up to 15% of their salary up to statutory
maximums. The Plan also provides for the Company to make contributions solely at
the Company's discretion. There were no Company contributions to the Plan for
the years ended December 31, 2002 or 2001.

12 - LEASE COMMITMENT

         The Company holds an operating lease for office space that expires on
January 21, 2007. Approximate annual future minimum rents are as follows
(dollars in thousands):

                  2003                    $169
                  2004                     169
                  2005                     175
                  2006                     176
                  2007                      15
                                          ----
                                          $704

         In addition to minimum lease commitments, the operating lease requires
payments of real estate taxes, utilities and other occupancy costs. Rent expense
charged to operations under this lease was $179,000 and $174,000 for the years
ended December 31, 2002 and 2001, respectively.


13 - MAJOR CUSTOMERS

         During fiscal 2002, the Company's five largest customers accounted for
approximately 68% of the Company's shipments. During fiscal 2001, the Company's
two largest customers accounted for approximately 58% of the Company's
shipments.


14 - MAJOR SUPPLIER

         The principal raw materials used by the Company to fabricate textiles
are typically a combination or blend of two or more fibers, such as rayon,
acetate, polyester, cotton and acrylic. Four of the Company's principal
suppliers of raw materials, greige goods and yarn, and the primary knitters and
finishers accounted for approximately 49% of the Company's purchases in 2002.

                                      -32-

<PAGE>

Four of the Company's principal suppliers of raw materials, greige goods and
yarn, and the primary knitters and finishers accounted for approximately 60% of
the Company's purchases in 2001.


15 - PRO FORMA FINANCIAL INFORMATION  - CARLYLE MERGER

         On January 6, 2003, the Company completed its merger with Carlyle. The
transaction will be accounted for under the purchase method of accounting in
accordance with Statement of Financial Accounting Standards No. 141, "Business
Combinations." In completing the merger, for accounting purposes Carlyle is
treated as if it declared a 1-for-5 reverse stock split of its common stock and
subsequently exchanged its common stock for the Company's common stock on a
one-to-one ratio and its stock options for the Company's stock options on a
one-to-one ratio. The aggregate estimated purchase price is $12,533 and reflects
the fair value of the Company's common stock and options deemed acquired for
similar Carlyle instruments. The purchase price reflects Carlyle's acquisition
of the Company's net assets, which are total assets less the assumption of
$5,730 of the Company's debt and liabilities. The merger agreement did not
require any contingent consideration to be issued.

         The pro forma purchase price information presented below is unaudited
and assumes the merger was consummated on December 31, 2002. The calculation of
the pro forma purchase price and the preliminary allocation to assets and
liabilities are as follows:

Purchase price allocation:                                (Dollars In thousands)

Fair value of shares of Carlyle common stock deemed issued      $  5,986
Fair value of outstanding vested and unvested options,
     net of unearned compensation of $112                            601
Direct acquisition costs incurred by Carlyle                         216
                                                                --------
         Total purchase price                                      6,803
Fair value of Levcor liabilities deemed assumed by Carlyle         5,730
                                                                --------
         Total purchase price plus liabilities deemed
             assumed by Carlyle                                 $ 12,533
                                                                ========
Fair value of Levcor assets deemed acquired:
Current assets                                                  $  1,972
Fixed assets                                                          59
Deferred tax asset                                                 2,100
Other assets                                                          85
Trademark                                                            250
Goodwill                                                           8,067
                                                                --------
         Total assets deemed acquired                             12,533
                                                                --------
Current liabilities                                               (1,945)
Long term debt                                                    (3,785)
                                                                --------
         Total liabilities deemed assumed                         (5,730)
                                                                --------
         Net assets deemed acquired                             $  6,803
                                                                ========

Pro Forma Financial Information

         Set forth in the following tables are certain unaudited pro forma
financial information as of December 31, 2002, and for the years ended December
31, 2002 and 2001. The balance sheet information as of December 31, 2002,
assumes the merger had closed on such date. The income statement information for
the years ended December 31, 2002 and 2001 has been prepared assuming the merger
was consummated on January 1, 2001. All pro forma information is based on
estimates and assumptions deemed appropriate by the Company. The pro forma

                                      -33-

<PAGE>

information is presented for illustrative purposes only. If the transaction had
occurred in the past, the Company's operating results might have been different
from those presented in the following table.

         The pro forma information should not be relied upon as an indication of
the operating results that the Company would have achieved if the transactions
had occurred on January 1, 2001. The pro forma information also should not be
used as an indication of the future results that the Company will achieve after
the transactions.

         The following should be considered in connection with the pro forma
financial information presented:

         o        Carlyle's historical results of operations for the year 2001
                  include $157,000 of amortization expense for goodwill related
                  to previous acquisitions.

         o        As of January 1, 2002, in accordance with new accounting
                  pronouncements recently issued, such goodwill ceased to be
                  amortized and, instead, is tested for impairment at least
                  annually.

         o        No goodwill amortization expense has been recognized in the
                  pro forma income statements.

                          Pro Forma Balance Sheet Data

                                                 Pro Forma Information
                                                         as of
                                                   December 31, 2002
                                                   -----------------
                                                (Dollars in thousands)

         Current assets                                  10,839
         Property, plant and equipment, net               2,458
         Goodwill                                        10,606
         Total Assets                                    30,324

         Current liabilities                              7,309
         Long term debt                                   4,732
         Other long term liabilities                     11,425
         Loan payable - officer/stockholder                 785
         Redeemable preferred stock                       4,567
         Common stockholders' equity                      1,506




                                      -34-

<PAGE>

<TABLE>

                         Pro Forma Income Statement Data
<CAPTION>
                                                              Pro Forma Information
                                                             Year Ended December 31,
                                                                 2002      2001
                                                               -------   -------
                                                             (Dollars in thousands)
<S>                                                            <C>       <C>
Net revenue                                                    $34,225   $45,052
Cost of goods sold                                              23,181    31,848
                                                               -------   -------
Gross profit                                                    11,044    13,204
                                                               -------   -------

Selling, general and administrative expenses                     8,908    10,354
Loss on impairment of assets held for sale                         169        20
                                                               -------   -------
Income before interest and income taxes                          1,967     2,830
Interest expense                                                   610       992
                                                               -------   -------
Income before income taxes                                       1,357     1,838
Provision for income taxes                                         489       662
                                                               -------   -------
Income before preferred dividends                                  868     1,176
Dividends on preferred stock                                       272       273
                                                               -------   -------
Net income                                                     $   596   $   903
                                                               =======   =======

Earnings per common share:

Basic earnings per common share                                $   .11   $   .18
                                                               =======   =======
Diluted earnings per share                                     $   .11   $   .17
                                                               =======   =======

Weighted average number of common shares outstanding - basic     5,219     5,125
Potential common stock                                              74        95
                                                               -------   -------

Weighted average number of shares outstanding - diluted          5,220     5,220
                                                               =======   =======
</TABLE>

16 - OTHER REVENUE

         Other revenue in the year ended December 31, 2002 consists principally
of financing fees earned for the financing of customer import purchases. Other
revenue in the year ended December 31, 2001 consists principally of
reimbursement of expenses.


17 - QUARTERLY FINANCIAL DATA (UNAUDITED)

         Selected quarterly unaudited financial data for the year ended December
31, 2002 are as follows (dollars in thousands except per share amounts):

<TABLE>
<CAPTION>
                                                        December 31,     September 30,        June 30,        March 31,
Quarter Ended                                               2002              2002              2002             2002
                                                          -------           -------           -------          -------
<S>                                                       <C>               <C>               <C>              <C>
Net sales                                                 $ 1,848           $ 1,405           $ 3,490          $ 3,604
Cost of sales                                               1,646             1,234             2,686            2,864
                                                          -------           -------           -------          -------
Gross profit                                                  202           $   171           $   804          $   740
                                                          =======           =======           =======          =======
Income (loss) applicable to common stock                  $(1,113)          $  (574)          $   113          $    18
                                                          =======           =======           =======          =======
Basic and diluted income (loss) per common share:

Basic and diluted                                         $  (.48)          $  (.25)          $   .05          $   .01
</TABLE>


                                      -35-
<PAGE>

Item 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE.

         Not applicable.







                                      -36-

<PAGE>

PART III.


Item 9.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

         The information required by this item is incorporated herein by
reference from the portion of the Company's definitive Proxy Statement to be
filed with the Securities and Exchange Commission on or prior to 120 days
following the end of the Company's fiscal year.

Item 10. EXECUTIVE COMPENSATION.

         The information required by this item is incorporated herein by
reference from the portion of the Company's definitive Proxy Statement to be
filed with the Securities and Exchange Commission on or prior to 120 days
following the end of the Company's fiscal year.


Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
         RELATED STOCKHOLDER MATTERS.

         The information required by this item is incorporated herein by
reference from the portion of the Company's definitive Proxy Statement to be
filed with the Securities and Exchange Commission on or prior to 120 days
following the end of the Company's fiscal year.

Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         The information required by this item is incorporated herein by
reference from the portion of the Company's definitive Proxy Statement to be
filed with the Securities and Exchange Commission on or prior to 120 days
following the end of the Company's fiscal year.

Item 13. EXHIBITS, LISTS AND REPORTS ON FORM 8-K.

(a)(1)   Financial Statements:
         --------------------

         The information required by this item is included in Item 7 of Part II
         of this Form 10-KSB.

(2)      Exhibits:
         --------

              The following exhibits are included in this report:


Exhibit
Number                          Description of Document

2.1      Agreement and Plan of Merger, dated as of May 24, 2002, by and among
         Levcor International, Inc. ("Levcor") and Carlyle Industries, Inc.
         (incorporated herein by reference to Amendment No. 6 to Levcor's
         Registration Statement on Form S-4 filed on November 26, 2002).

2.2      Asset Purchase Agreement, dated as of September 2, 1999, between Levcor
         and Andrex Industries Corp. (incorporated herein by reference to
         Levcor's Current Report on Form 8-K filed on September 17, 1999).


                                      -37-

<PAGE>

2.3      Amendment to Asset Purchase Agreement, dated August 3, 2000, effective
         as of April 1, between Levcor and Andrex Industries Corp. (incorporated
         herein by reference to Levcor's Form 10-KSB filed on April 1, 2002).

3.1      Amended and Restated Certificate of Incorporation filed January 7, 2003
         (incorporated herein by reference to Amendment No. 6 to Levcor's
         Registration Statement on Form S-4 filed on November 26, 2002).

3.2      By-Laws (incorporated herein by reference to Amendment No. 6 to
         Levcor's Registration Statement on Form S-4 filed on November 26,
         2002).

4.1      Specimen form of Levcor's Common Stock certificate (incorporated herein
         by reference to Levcor's Form 10-KSB filed on March 24, 1997).

10.1     1992 Stock Option Plan (incorporated herein by reference to Levcor's
         Form 10-K filed on March 30, 1993). +

10.2     Factoring Agreement, dated September 17, 1998, between Levcor and the
         CIT Group/Commercial Services, Inc. (incorporated herein by reference
         to Levcor's Form 10-QSB filed on November 16, 1998).

10.3     Amendment dated December 31, 2001 to the Factoring Agreement dated
         September 17, 1998 between Levcor and the CIT Group/Commercial
         Services, Inc. (incorporated herein by reference to Levcor's Form
         10-KSB filed on April 1, 2002).

10.4     Guaranty dated April 30, 2002, executed by Robert A. Levinson in favor
         of JPMorgan Chase Bank (incorporated herein by reference to Levcor's
         Form 10-QSB filed on May 15, 2002).

10.5     Pledge Agreement dated April 30, 2002, executed by Robert A. Levinson
         in favor of JPMorgan Chase Bank (incorporated herein by reference to
         Levcor's Form 10-QSB filed on May 15, 2002).

10.6     Promissory Note dated May 3, 2002 executed by Levcor in favor of
         JPMorgan Chase Bank (incorporated herein by reference to Levcor's Form
         10-QSB filed on May 15, 2002).

10.7     Letter dated February 28, 2002 from Mr. Robert A. Levinson
         (incorporated herein by reference to Levcor's Amendment No. 2 to
         Registration Statement on Form S-4 filed on October 4, 2002).

10.8     Letter dated September 27, 2002 from Mr. Robert A. Levinson
         (incorporated herein by reference to Levcor's Amendment No. 2 to
         Registration Statement on Form S-4 filed on October 4, 2002).

10.9     2002 Stock Option Plan (incorporated herein by reference to Amendment
         No. 6 to Levcor's Registration Statement on Form S-4 filed on November
         26, 2002). +

10.10    Financing Agreement dated January 24, 2002, among Carlyle and The CIT
         Group/Commercial Services, Inc. (incorporated herein by reference to
         Exhibit 99.1 to Carlyle's Current Report on Form 8-K/A filed on March
         14, 2002).

10.11    Accounts Receivable Financing Agreement dated January 24, 2002, among
         Blumenthal/Lansing Company and The CIT Group/Commercial Services, Inc.
         (incorporated herein by reference to Exhibit 99.2 to Carlyle's Current
         Report on Form 8-K/A filed on March 14, 2002).


                                      -38-

<PAGE>

10.12    Accounts Receivable Financing Agreement dated January 24, 2002, among
         Westwater Industries, Inc., and The CIT Group/Commercial Services, Inc.
         (incorporated herein by reference to Exhibit 99.3 to Carlyle's Current
         Report on Form 8-K/A filed on March 14, 2002).

10.13    Guaranty dated January 24, 2002, executed by Blumenthal/Lansing Company
         in favor of The CIT Group/Commercial Services, Inc. (incorporated
         herein by reference to Exhibit 99.4 to Carlyle's Current Report on Form
         8-K/A filed on March 14, 2002).

10.14    Guaranty dated January 24, 2002, executed by Carlyle in favor of The
         CIT Group/Commercial Services, Inc. (incorporated herein by reference
         to Exhibit 99.5 to Carlyle's Current Report on Form 8-K/A filed on
         March 14, 2002).

10.15    Guaranty dated January 24, 2002, executed by Westwater Industries, Inc.
         in favor of The CIT Group/Commercial Services, Inc. (incorporated
         herein by reference to Exhibit 99.6 to Carlyle's Current Report on Form
         8-K/A filed on March 14, 2002).

10.16    Guaranty dated January 24, 2002, executed by Button Fashion BV in favor
         of The CIT Group/Commercial Services, Inc. (incorporated herein by
         reference to Exhibit 99.7 to Carlyle's Current Report on Form 8-K/A
         filed on March 14, 2002).

10.17    Guaranty dated January 24, 2002 executed by Robert Levinson in favor of
         The CIT Group/Commercial Services, Inc. (incorporated herein by
         reference to Exhibit 99.8 to Carlyle's Current Report on Form 8-K/A
         filed on March 14, 2002).

10.18    Inventory Security Agreement dated January 24, 2002, among
         Blumenthal/Lansing Company and The CIT Group/Commercial Services, Inc.
         (incorporated herein by reference to Exhibit 99.9 to Carlyle's Current
         Report on Form 8-K/A filed on March 14, 2002).

10.19    Inventory Security Agreement dated January 24, 2002, among Westwater
         Industries, Inc. and The CIT Group/Commercial Services, Inc.
         (incorporated herein by reference to Exhibit 99.10 to Carlyle's Current
         Report on Form 8-K/A dated January 24, 2002, as filed on March 14,
         2002).

10.20    Inventory Security Agreement dated January 24, 2002, among Carlyle and
         The CIT Group/Commercial Services, Inc. (incorporated herein by
         reference to Exhibit 99.11 to Carlyle's Current Report on Form 8-K/A
         filed on March 14, 2002).

10.21    Equipment Security Agreement dated January 24, 2002, among
         Blumenthal/Lansing Company and The CIT Group/Commercial Services, Inc.
         (incorporated herein by reference to Exhibit 99.12 to Carlyle's current
         report on Form 8-K/A filed on March 14, 2002).

10.22    Equipment Security Agreement dated January 24, 2002, among Westwater
         Industries, Inc. and The CIT Group/Commercial Services, Inc.
         (incorporated herein by reference to Exhibit 99.13 to Carlyle's Current
         Report on Form 8-K/A filed on March 14, 2002).

10.23    Equipment Security Agreement dated January 24, 2002, among Carlyle and
         The CIT Group/Commercial Services, Inc. (incorporated herein by
         reference to Exhibit 99.14 to Carlyle's current report on Form 8-K/A
         filed on March 14, 2002).

10.24    Letter of Credit Agreement dated January 24, 2002, among
         Blumenthal/Lansing Company and The CIT Group/Commercial Services, Inc.
         (incorporated herein by reference to Exhibit 99.15 to Carlyle's Current
         Report on Form 8-K/A filed on March 14, 2002).


                                      -39-
<PAGE>

10.25    Letter of Credit Agreement dated January 24, 2002, among Westwater
         Industries, Inc. and The CIT Group/Commercial Services, Inc.
         (incorporated herein by reference to Exhibit 99.16 to Carlyle's Current
         Report on Form 8-K/A filed on March 14, 2002).

10.26    Patent and Trademark Agreement dated January 24, 2002, among
         Blumenthal/Lansing Company and The CIT Group/Commercial Services, Inc.
         (incorporated herein by reference to Exhibit 99.17 to Carlyle's Current
         Report on Form 8-K/A filed on March 14, 2002).

10.27    Patent and Trademark Agreement dated January 24, 2002, among Westwater
         Industries, Inc. and The CIT Group/Commercial Services, Inc.
         (incorporated herein by reference to Exhibit 99.18 to Carlyle's Current
         Report on Form 8-K/A filed on March 14, 2002).

21       Subsidiaries of the Company.

99.1     Chief Executive Officer's Certificate, pursuant to 18 U.S.C. Section
         1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
         2002.

99.2     Chief Financial Officer's Certificate, pursuant to 18 U.S.C. Section
         1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
         2002.

 -----------------
+ Compensatory plan or arrangement required to be filed as an exhibit hereto.

(b)      Reports on Form 8-K:

         None.

Item 14. CONTROLS AND PROCEDURES.

         Within the 90 days prior to the filing date of this report, the Company
carried out an evaluation, under the supervision and with the participation of
the Company's management, (including the Company's Chief Executive Officer and
Chief Financial Officer), of the effectiveness of the design and operation of
the Company's disclosure controls and procedures pursuant to Exchange Act Rule
13a-14. Based upon that evaluation, the Company's Chief Executive Officer and
Chief Financial Officer concluded that the Company's disclosure controls and
procedures are effective in timely alerting them to material information
required to be included in the Company's periodic Securities and Exchange
Commission filings. There were no significant changes in the Company's internal
controls or in other factors that could significantly affect these controls
subsequent to the date of their evaluation.



                                      -40-

<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.


                                        LEVCOR INTERNATIONAL, INC.

Date: March 27, 2003                    By: /s/ ROBERT A. LEVINSON
                                           ------------------------------------
                                             Robert A. Levinson,
                                             Chairman of the Board,
                                             President and Chief
                                             Executive Officer

Date: March 27, 2003

                                        By: /s/ EDWARD F. COOKE
                                           ------------------------------------
                                             Edward F. Cooke,
                                             Chief Financial Officer,
                                             Vice President, Secretary,
                                             Treasurer and Director

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


/s/ ROBERT A. LEVINSON        3/27/03   /s/ EDWARD F. COOKE           3/27/03
-------------------------------------   ---------------------------------------
Robert A. Levinson            Date      Edward F. Cooke                  Date
Chairman of the Board, Chief            Chief Financial Officer,
Executive Officer and President         Vice President, Secretary, Treasurer
(Principal Executive Officer)           and Director
                                        (Principal Financial Officer)


/s/ EDWARD H. COHEN           3/27/03   /s/ JOSEPH S. DIMARTINO       3/27/03
-------------------------------------   ---------------------------------------
Edward H. Cohen               Date      Joseph S. DiMartino              Date
Director                                Director


/s/ JOHN MCCONNAUGHY          3/27/03   /s/ GIANDOMENICO PICCO        3/27/03
-------------------------------------   ---------------------------------------
John McConnaughy              Date      Giandomenico Picco               Date
Director                                Director



                                      -41-

<PAGE>

                                  Certification

I, Robert A. Levinson, certify that:

1. I have reviewed this annual report on Form 10-KSB of Levcor International,
Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) Designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;

b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

c) Presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):

a) All significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officer and I have indicated in this annual
report whether there were significant changes in internal controls or in other
factors that could significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.

Date: March 27, 2003

/s/ ROBERT A. LEVINSON
----------------------
Robert A. Levinson,
Chairman of the Board, President and Chief Executive Officer


                                      -42-

<PAGE>

                                  Certification

I, Edward F. Cooke, certify that:

1. I have reviewed this annual report on Form 10-KSB of Levcor International,
Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) Designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;

b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

c) Presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):

a) All significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officer and I have indicated in this annual
report whether there were significant changes in internal controls or in other
factors that could significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.

Date: March 27, 2003

/s/ EDWARD F. COOKE
----------------------
Edward F. Cooke,
Chief Financial Officer, Vice President, Secretary and Treasurer


                                      -43-

<PAGE>

                                  Exhibit Index


Exhibit
Number                       Description of Document

2.1      Agreement and Plan of Merger, dated as of May 24, 2002, by and among
         Levcor International, Inc. ("Levcor") and Carlyle Industries, Inc.
         (incorporated herein by reference to Amendment No. 6 to Levcor's
         Registration Statement on Form S-4 filed on November 26, 2002).

2.2      Asset Purchase Agreement, dated as of September 2, 1999, between Levcor
         and Andrex Industries Corp. (incorporated herein by reference to
         Levcor's Current Report on Form 8-K filed on September 17, 1999).

2.3      Amendment to Asset Purchase Agreement, dated August 3, 2000, effective
         as of April 1, between Levcor and Andrex Industries Corp. (incorporated
         herein by reference to Levcor's Form 10-KSB filed on April 1, 2002).

3.1      Amended and Restated Certificate of Incorporation filed January 7, 2003
         (incorporated herein by reference to Amendment No. 6 to Levcor's
         Registration Statement on Form S-4 filed on November 26, 2002).

3.2      By-Laws (incorporated herein by reference to Amendment No. 6 to
         Levcor's Registration Statement on Form S-4 filed on November 26,
         2002).

4.1      Specimen form of Levcor's Common Stock certificate (incorporated herein
         by reference to Levcor's Form 10-KSB filed on March 24, 1997).

10.1     1992 Stock Option Plan (incorporated herein by reference to Levcor's
         Form 10-K filed on March 30, 1993). +

10.2     Factoring Agreement, dated September 17, 1998, between Levcor and the
         CIT Group/Commercial Services, Inc. (incorporated herein by reference
         to Levcor's Form 10-QSB filed on November 16, 1998).

10.3     Amendment dated December 31, 2001 to the Factoring Agreement dated
         September 17, 1998 between Levcor and the CIT Group/Commercial
         Services, Inc. (incorporated herein by reference to Levcor's Form
         10-KSB filed on April 1, 2002).

10.4     Guaranty dated April 30, 2002, executed by Robert A. Levinson in favor
         of JPMorgan Chase Bank (incorporated herein by reference to Levcor's
         Form 10-QSB filed on May 15, 2002).

10.5     Pledge Agreement dated April 30, 2002, executed by Robert A. Levinson
         in favor of JPMorgan Chase Bank (incorporated herein by reference to
         Levcor's Form 10-QSB filed on May 15, 2002).

10.6     Promissory Note dated May 3, 2002 executed by Levcor in favor of
         JPMorgan Chase Bank (incorporated herein by reference to Levcor's Form
         10-QSB filed on May 15, 2002).

10.7     Letter dated February 28, 2002 from Mr. Robert A. Levinson
         (incorporated herein by reference to Levcor's Amendment No. 2 to
         Registration Statement on Form S-4 filed on October 4, 2002).


                                      -44-

<PAGE>

10.8     Letter dated September 27, 2002 from Mr. Robert A. Levinson
         (incorporated herein by reference to Levcor's Amendment No. 2 to
         Registration Statement on Form S-4 filed on October 4, 2002).

10.9     2002 Stock Option Plan (incorporated herein by reference to Amendment
         No. 6 to Levcor's Registration Statement on Form S-4 filed on November
         26, 2002). +

10.10    Financing Agreement dated January 24, 2002, among Carlyle and The CIT
         Group/Commercial Services, Inc. (incorporated herein by reference to
         Exhibit 99.1 to Carlyle's Current Report on Form 8-K/A filed on March
         14, 2002).

10.11    Accounts Receivable Financing Agreement dated January 24, 2002, among
         Blumenthal/Lansing Company and The CIT Group/Commercial Services, Inc.
         (incorporated herein by reference to Exhibit 99.2 to Carlyle's Current
         Report on Form 8-K/A filed on March 14, 2002).

10.12    Accounts Receivable Financing Agreement dated January 24, 2002, among
         Westwater Industries, Inc., and The CIT Group/Commercial Services, Inc.
         (incorporated herein by reference to Exhibit 99.3 to Carlyle's Current
         Report on Form 8-K/A filed on March 14, 2002).

10.13    Guaranty dated January 24, 2002, executed by Blumenthal/Lansing Company
         in favor of The CIT Group/Commercial Services, Inc. (incorporated
         herein by reference to Exhibit 99.4 to Carlyle's Current Report on Form
         8-K/A filed on March 14, 2002).

10.14    Guaranty dated January 24, 2002, executed by Carlyle in favor of The
         CIT Group/Commercial Services, Inc. (incorporated herein by reference
         to Exhibit 99.5 to Carlyle's Current Report on Form 8-K/A filed on
         March 14, 2002).

10.15    Guaranty dated January 24, 2002, executed by Westwater Industries, Inc.
         in favor of The CIT Group/Commercial Services, Inc. (incorporated
         herein by reference to Exhibit 99.6 to Carlyle's Current Report on Form
         8-K/A filed on March 14, 2002).

10.16    Guaranty dated January 24, 2002, executed by Button Fashion BV in favor
         of The CIT Group/Commercial Services, Inc. (incorporated herein by
         reference to Exhibit 99.7 to Carlyle's Current Report on Form 8-K/A
         filed on March 14, 2002).

10.17    Guaranty dated January 24, 2002 executed by Robert Levinson in favor of
         The CIT Group/Commercial Services, Inc. (incorporated herein by
         reference to Exhibit 99.8 to Carlyle's Current Report on Form 8-K/A
         filed on March 14, 2002).

10.18    Inventory Security Agreement dated January 24, 2002, among
         Blumenthal/Lansing Company and The CIT Group/Commercial Services, Inc.
         (incorporated herein by reference to Exhibit 99.9 to Carlyle's Current
         Report on Form 8-K/A filed on March 14, 2002).

10.19    Inventory Security Agreement dated January 24, 2002, among Westwater
         Industries, Inc. and The CIT Group/Commercial Services, Inc.
         (incorporated herein by reference to Exhibit 99.10 to Carlyle's Current
         Report on Form 8-K/A dated January 24, 2002, as filed on March 14,
         2002).

10.20    Inventory Security Agreement dated January 24, 2002, among Carlyle and
         The CIT Group/Commercial Services, Inc. (incorporated herein by
         reference to Exhibit 99.11 to Carlyle's Current Report on Form 8-K/A
         filed on March 14, 2002).


                                      -45-

<PAGE>

10.21    Equipment Security Agreement dated January 24, 2002, among
         Blumenthal/Lansing Company and The CIT Group/Commercial Services, Inc.
         (incorporated herein by reference to Exhibit 99.12 to Carlyle's current
         report on Form 8-K/A filed on March 14, 2002).

10.22    Equipment Security Agreement dated January 24, 2002, among Westwater
         Industries, Inc. and The CIT Group/Commercial Services, Inc.
         (incorporated herein by reference to Exhibit 99.13 to Carlyle's Current
         Report on Form 8-K/A filed on March 14, 2002).

10.23    Equipment Security Agreement dated January 24, 2002, among Carlyle and
         The CIT Group/Commercial Services, Inc. (incorporated herein by
         reference to Exhibit 99.14 to Carlyle's current report on Form 8-K/A
         filed on March 14, 2002).

10.24    Letter of Credit Agreement dated January 24, 2002, among
         Blumenthal/Lansing Company and The CIT Group/Commercial Services, Inc.
         (incorporated herein by reference to Exhibit 99.15 to Carlyle's Current
         Report on Form 8-K/A filed on March 14, 2002).

10.25    Letter of Credit Agreement dated January 24, 2002, among Westwater
         Industries, Inc. and The CIT Group/Commercial Services, Inc.
         (incorporated herein by reference to Exhibit 99.16 to Carlyle's Current
         Report on Form 8-K/A filed on March 14, 2002).

10.26    Patent and Trademark Agreement dated January 24, 2002, among
         Blumenthal/Lansing Company and The CIT Group/Commercial Services, Inc.
         (incorporated herein by reference to Exhibit 99.17 to Carlyle's Current
         Report on Form 8-K/A filed on March 14, 2002).

10.27    Patent and Trademark Agreement dated January 24, 2002, among Westwater
         Industries, Inc. and The CIT Group/Commercial Services, Inc.
         (incorporated herein by reference to Exhibit 99.18 to Carlyle's Current
         Report on Form 8-K/A filed on March 14, 2002).

21       Subsidiaries of the Company.

99.1     Chief Executive Officer's Certificate, pursuant to 18 U.S.C. Section
         1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
         2002.

99.2     Chief Financial Officer's Certificate, pursuant to 18 U.S.C. Section
         1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
         2002.

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+ Compensatory plan or arrangement required to be filed as an exhibit hereto.



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