SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-QSB
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For The Quarter Ended April 30, 2003 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For The Transition Period from _______to_______
Commission File Number 1-14503
DECTRON INTERNATIONALE INC.
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(Exact name of registrant as specified in its charter)
Quebec, Canada N/A
-------------- ---
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4300 Poirier Blvd., Montreal H4R 2C5
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 514-334 9609
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: June 13, 2003, 2,919,500
Common Shares outstanding
Transitional Small Business Disclosure (check One):
Yes [ ] No [ X ]
DECTRON INTERNATIONALE INC.
INDEX
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PAGE
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PART I - FINANCIAL INFORMATION
Item 1- Financial Statements
Interim Consolidated Balance Sheets - at April 30, 2003 and
January 31, 2003 ............................................................2-3
Interim Consolidated Statements of Earnings - For the three months ended
April 30, 2003 and the three months ended April 30, 2002 ......................4
Interim Consolidated Statements of Cash Flows - For the three months ended
April 30, 2003 and three months ended April 30, 2002.........................5-7
Interim Consolidated Statements of Stockholders' Equity........................8
Notes to Interim Financial Statements.......................................9-10
Item 2 - Management's Discussion and Analysis of Financial
Conditions and Results of Operations..............................11-12
Item 3.Controls and Procedures................................................13
PART I - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K .....................................14
SIGNATURES................................................................... 13
The accompanying notes are an integral part of these consolidated financial
statements.
Part I FINANCIAL INFORMATION
Item 1. Financial Statements
DECTRON INTERNATIONALE INC.
Interim Consolidated Balance Sheets
As at April 30, 2003 and January 31, 2003
(Amounts Expressed in United States Dollars)
--------------------------------------------------------------------------------
April 30, January 31,
2003 2003
--------------- ---------------
Assets
Current
Cash $ 1,013,752 $ 838,473
Accounts receivable 10,523,396 9,917,100
Inventory 11,044,422 9,525,297
Prepaid expenses and sundry assets 722,086 538,145
Loans receivable 21,164 23,113
Deferred income taxes 36,539 36,539
--------------- ---------------
23,363,308 20,876,718
Loans receivable 471,539 472,977
Property, plant and equipment 11,309,937 10,229,880
Intangibles 177,669 169,000
Goodwill 1,438,406 1,355,117
Deferred income taxes 1,221,655 1,297,745
--------------- ---------------
$ 37,982,514 $ 34,401,437
=============== ===============
The accompanying notes are an integral part of these consolidated financial
statements.
DECTRON INTERNATIONALE INC.
Interim Consolidated Balance Sheets
As at April 30, 2003 and January 31, 2003
(Amounts Expressed in United States Dollars)
--------------------------------------------------------------------------------
April 30, January 31,
2003 2003
--------------- ---------------
Liabilities
Current
Bank loans $ 9,725,335 $ 9,187,534
Accounts payable and accrued expenses 6,456,062 4,835,993
Income taxes payable 639,960 684,578
Current portion of long-term debt 1,134,286 1,090,576
Deferred revenue 5,168 4,732
Current portion of balance of sale 115,111 --
--------------- ---------------
18,075,922 15,803,413
Long-term debt 5,635,211 5,322,309
Balance of sale 183,131 --
Deferred revenue 1,498,690 1,442,809
--------------- ---------------
25,392,954 22,568,531
--------------- ---------------
Stockholders' equity
Capital stock 7,116,819 7,136,223
Treasury stock (88,780) (88,780)
Accumulated other comprehensive gain (loss) 587,524 (128,764)
Retained earnings 4,973,997 4,914,227
--------------- ---------------
12,589,560 11,832,906
--------------- ---------------
Total liabilities and stockholders' equity $ 37,982,514 $ 34,401,437
=============== ===============
The accompanying notes are an integral part of these consolidated financial
statements.
DECTRON INTERNATIONALE INC.
Interim Consolidated Statements of Earnings
For the Three Month Period Ended April 30, 2003 and April 30, 2002
(Amounts Expressed in United States Dollars)
--------------------------------------------------------------------------------
Three Three
Months Months
Ended Ended
April 30, April 30,
2003 2002
--------------- ---------------
Net Sales $ 10,147,331 $ 9,049,105
Cost of sales 7,214,999 6,237,956
--------------- ---------------
Gross profit 2,932,332 2,811,149
--------------- ---------------
Operating expenses
Selling 1,317,282 1,142,851
General and administrative 1,067,873 751,299
Depreciation and amortization 411,395 316,708
Interest expense 48,957 285,781
--------------- ---------------
2,845,507 2,496,639
--------------- ---------------
Earnings before income taxes 86,825 314,510
Income taxes 27,055 88,063
--------------- ---------------
Net Earnings $ 59,770 $ 226,447
=============== ===============
Net earnings per common share, basic and diluted .02 0.08
=============== ===============
Weighted average number of common shares outstanding
Basic 2,938,129 2,795,000
Diluted 2,998,129 2,795,000
The accompanying notes are an integral part of these consolidated financial
statements.
DECTRON INTERNATIONALE INC.
Interim Consolidated Statements of Cash Flows
For the Three Month Period Ending April 30, 2003 and April 30, 2002
(Amounts Expressed in United States Dollars)
--------------------------------------------------------------------------------
Three Three
Months Months
Ended Ended
April 30, April 30,
2003 2002
--------------- ---------------
Operation activities:
Net earnings (loss) $ 59,770 $ 226,447
Adjustments to reconcile net earnings to net cash (used in) provided by
operating activities:
Depreciation and amortization 411,395 316,708
Increase in accounts receivable (606,296) (1,865,794)
Decrease in income taxes receivable -- 58,313
Decrease (increase) in inventory (1,519,125) 142,408
Increase (decrease) in prepaid expenses and sundry assets (183,941) (225,131)
Increase in accounts payable and accrued expenses 1,620,069 707,458
Decrease (increase) in income taxes payable 44,618 48,039
Increase in deferred revenue 56,317 56,744
Decrease in deferred income taxes 76,090 --
--------------- ---------------
Net cash used in operating activities (41,103) (534,808)
--------------- ---------------
The accompanying notes are an integral part of these consolidated financial
statements.
DECTRON INTERNATIONALE INC.
Interim Consolidated Statements of Cash Flows
For the Three Month Period Ending April 30, 2003 and April 30, 2002
(Amounts Expressed in United States Dollars)
--------------------------------------------------------------------------------
Three Three
Months Months
Ended Ended
April 30, April 30,
2003 2002
--------------- ---------------
Investing activities:
Acquisition of property, plant and equipment (1,500,121) (19,995)
--------------- ---------------
Net cash used in investing activities (1,500,121) (19,995)
--------------- ---------------
Financing activities
Advances to share purchase plan (106,404) --
Issuance of share capital 87,000 --
Repayments (advances) from loan receivable (511) 94,067
Advances from bank loans 537,801 1,172,518
Advances from (repayments of) long-term debt 356,612 (106,930)
Advances from balance of sales 298,242 --
--------------- ---------------
Net cash provided by financing activities 1,172,740 1,159,655
--------------- ---------------
Effect of foreign currency exchange rate on cash and cash equivalents 543,763 (320,431)
--------------- ---------------
The accompanying notes are an integral part of these consolidated financial
statements.
DECTRON INTERNATIONALE INC.
Interim Consolidated Statements of Cash Flows
For the Three Month Period Ending April 30, 2003 and April 30, 2002
(Amounts Expressed in United States Dollars)
--------------------------------------------------------------------------------
Three Three
Months Months
Ended Ended
April 30, April 30,
2003 2002
--------------- ---------------
Net increase in cash and cash equivalents 175,279 284,421
Cash and cash equivalents, beginning of period 838,473 86,727
--------------- ---------------
Cash and cash equivalents, end of period $ 1,013,752 $ 371,148
=============== ===============
Supplemental disclosure of cash flow information
Interest paid $ 340,936 $ 167,862
=============== ===============
Income taxes paid $ 115,833 $ 32,044
=============== ===============
The accompanying notes are an integral part of these consolidated financial
statements.
DECTRON INTERNATIONALE INC.
Interim Consolidated Statements of Stockholders' Equity
For the Three Month Period Ending April 30, 2003
(Amounts Expressed in United States Dollars)
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Cumulative Other
Retained Comprehensive Treasury
Number Amount Earnings Income Stock
--------------- --------------- --------------- --------------- ---------------
Balance January 31, 2000 2,795,000 $ 6,849,609 $ 2,873,524 $ 289,121 $ (88,780)
=============== =============== =============== =============== ===============
Share purchase plan
receivable -- (131,099) -- -- --
Foreign currency translation -- -- -- (303,856) --
Net earnings for the year -- -- 857,426 -- --
--------------- --------------- --------------- --------------- ---------------
Balance January 31, 2001 2,795,000 $ 6,718,510 $ 3,730,950 $ (14,735) $ (88,780)
=============== =============== =============== =============== ===============
Share purchase plan
receivable -- $ 34,423 $ -- $ -- $ --
Foreign currency translation -- -- -- (577,087) --
Net earnings for the year -- -- 47,065 -- --
--------------- --------------- --------------- --------------- ---------------
Balance January 31, 2002 2,795,000 $ 6,752,933 $ 3,778,015 $ (591,822) $ (88,780)
=============== =============== =============== =============== ===============
Share purchase plan
receivable -- $ (119,010) $ -- $ -- $ --
Issuance of shares 124,500 502,300 -- -- --
Foreign currency translation -- -- -- 463,058 --
Net earnings for the year -- -- 1,136,212 -- --
--------------- --------------- --------------- --------------- ---------------
Balance January 31, 2003 2,919,500 $ 7,136,223 $ 4,914,227 $ (128,764) $ (88,780)
=============== =============== =============== =============== ===============
Share purchase plan receivable -- $ (106,404) $ -- $ -- $ --
Issuance of shares 29,000 87,000
Foreign currency translation -- -- -- 716,288 --
Net earnings (loss) for the
period -- -- 59,770 -- --
--------------- --------------- --------------- --------------- ---------------
Balance April 30, 2003 2,948,500 $ 7,116,819 $ 4,973,997 $ 587,524 $ (88,780)
=============== =============== =============== =============== ===============
The accompanying notes are an integral part of these consolidated financial
statements.
DECTRON INTERNATIONALE INC.
Notes to Interim Consolidated Financial Statements
As at April 30, 2003 and January 31, 2003
(Amounts Expressed in United States Dollars)
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1. Summary of significant accounting policies
a) Basis of Consolidated Financial Statements Presentation
These consolidated financial statements include the accounts of
Dectron Internationale Inc., Dectron Inc. Consolidated and
Circul-aire Group.
Dectron Inc. Consolidated is comprised of Dectron Inc. and of its
wholly-owned subsidiaries, Refplus Inc., Thermoplus Air Inc.,
Dectron U.S.A. Inc., and IPAC 2000 Inc.
Circul-aire Group is comprised of Cascade Technologies Inc., and of
its wholly-owned subsidiaries, Purafil Canada Inc. and Circul-aire
Inc. and its wholly-owned subsidiary Tranzmetal Inc.
All inter-company profits, transactions and account balances have
been eliminated.
b) Foreign Currency Translation
The company maintains its books and records in Canadian dollars.
The operation of the company's subsidiary in the United States is
an integrated corporation. As a result, monetary assets and
liabilities in foreign currency are translated into Canadian
dollars at exchange rates in effect at the balance sheet date,
whereas non-monetary assets and liabilities are translated at the
average exchange rates in effect at transaction dates. Income and
expenses in foreign currency are translated at the average rate
effective during the year with the exception of depreciation and
amortization, which is translated at the historical rate. Gains and
losses resulting from the translation of foreign currency
transactions are included in earnings.
The translation of the financial statements from Canadian dollars
into United States dollars is performed for the convenience of the
reader. Balance sheet accounts are translated using closing
exchange rates in effect at the balance sheet date and income and
expense accounts are translated using an average exchange rate
prevailing during each reporting period. No representation is made
that the Canadian dollar amounts could have been, or could be,
converted into United States dollars at the rates on the respective
dates and or at any other certain rates. Adjustments resulting from
the translation are included in the accumulated other comprehensive
income in stockholder's equity.
DECTRON INTERNATIONALE INC.
Notes to Interim Consolidated Financial Statements
As at April 30, 2003 and January 31, 2003
(Amounts Expressed in United States Dollars)
--------------------------------------------------------------------------------
2. SEGMENTED INFORMATION
April 30, January 31,
2003 2003
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a) The breakdown of sales by geographic area is as follows:
Canada $ 5,235,332 $ 14,235,583
United States of America 3,781,324 20,623,100
International 1,130,675 2,024,381
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$ 10,147,331 $ 36,883,064
=============== ===============
b) The breakdown of identifiable assets by geographic area is as follows:
Canada $ 30,702,003 $ 26,391,369
United States 7,280,511 8,010,068
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$ 37,982,514 $ 34,401,437
=============== ===============
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
Three-month period ended April 30, 2003 compared to three-month period ended
April 30, 2002.
Revenues for the three-month period ended April 30, 2003 were $
10,147,331, a 12.1% increase over prior year revenues of $ 9,049,105.
Gross profit increased by $121,183 to $2,932,332 over the same period.
This represents an increase of 4.1%, expressed in relation to sales.
Selling and marketing expenses increased by $ 174,431 in the
three-month period ended April 30, 2003. As a percentage of revenues, selling
and marketing expenses increased from 12.6% to 13%.
General and administrative expenses increased by $ 316,574 from $
751,297 to $1,067,873. As a percentage of revenues, general and administrative
expenses increased from 8.3% to 10.5%.
Amortization expenses increased by $ 94,687 from $ 316,708 to $
411,395. As a percentage of revenues, amortization expenses increased from 3.5%
to 4.0% of sales.
Financing expenses decreased by $ 236,824 from $ 285,781 to $ 48,957.
As a percentage of revenues, financing expenses decreased from 3.1% to 0.5%
Income before income taxes was $ 86,525 a decrease of $ 227,686
compared to the three-month income of $314,510 period ended April 30, 2002.
Provisions for Income tax expenses as a percentage of taxable income
increased from 28% for the 3 month period ended April 30, 2002 to 31.16% for
2003. Tax expenses decreased by $61,008.
As a result of the above factors, the Company's net loss was $59,770 in
2003, compared to an income of $226,447 in 2002.
Three-month period ended April 30, 2002 compared to three-month period ended
April 30, 2001.
Revenues for the three-month period ended April 30, 2002 were $
9,049,105, a 6.1% decrease over prior year revenues of $ 9,639,831.
Gross profit decreased by $550,676 to $2,811,149 over the same period.
This represents a decrease of 3.8%, expressed in relation to sales.
Selling and marketing expenses decreased by $ 160,579 in the
three-month period ended April 30, 2002. As a percentage of revenues, selling
and marketing expenses decreased from 13.5% to 12.6%.
General and administrative expenses decreased by $ 40,341 from $
791,640 to $751,299. As a percentage of revenues, general and administrative
expenses increased from 8.2% to 8.3%.
Amortization expenses decreased by $ 63,281 from $ 379,989 to $
316,708. As a percentage of revenues, amortization expenses decreased from 3.9%
to 3.5% of sales.
Financing expenses decreased by $ 133,830 from $ 419,611 to $ 285,781.
As a percentage of revenues, financing expenses decreased from 4.3% to 3.1%
Income before income taxes was $ 314,510 a decrease of $ 152,645
compared to the three-month period ended April 30, 2001. Relative to sales,
income before income taxes decreased from 4.9% for the three month period ended
April 30, 2001 to 3.5% in the three month period ended April 30, 2002.
Provisions for Income tax expenses as a percentage of taxable income
increased from 12.5% for the 3 month period ended April 30, 2001 to 28% for
2002. Tax expenses increased by $29,669.
As a result of the above factors, the Company's net income decreased
from $408,761 to $226,447 a decrease of 44.6%.
Liquidity and Capital Resources
The Company had a positive net change in cash of $ 175,279 for the
three-month period ended April 30, 2003. The principal sources of cash were
advances from accounts payable in the amount of $1,620,069 and an increase of
bank loan in the amount of $537,801. The principal use of cash was an increase
in inventory in the amount of $ 1,519,125 and acquisition of assets of
$1,500,121.
The Company had a positive net change in cash of $ 284,421 for the
three-month period ended April 30, 2002. The principal sources of cash were
advances from bank loans in the amount of $1,172,518 and an increase of accounts
payable in the amount of $707,458. The principal use of cash was an increase in
account receivable in the amount of $ 1,865,794.
ITEM 3. CONTROLS AND PROCEDURES
Immediately following the signature page of this report is the
Certification that is required under Section 302 of the Sarbanes-Oxley Act of
2002. This section of the report contains information concerning the controls
evaluation referred to in the Section 302 Certifications and the information
contained herein should be read in conjunction with the Certification.
Internal controls are designed with the objective of ensuring that
assets are safeguarded, transactions are authorized, and financial reports are
prepared on a timely basis in accordance with generally accepted accounting
principles in the United States. The disclosure procedures are designed to
comply with the regulations established by the Securities and Exchange
Commission.
Internal controls, no matter how designed, have limitations. It is the
Company's intent that the internal controls be conceived to provide adequate,
but not absolute, assurance that the objectives of the controls are met on a
consistent basis. Management plans to continue its review of internal controls
and disclosure procedures on an ongoing basis.
The Company's principal executive officer and principal financial
officer, after supervising and participating in an evaluation of the
effectiveness of the Company's internal and disclosure controls and procedures
as of April 30, 2003 (the "Evaluation Date"), have concluded that as of the
Evaluation Date, the Company's internal and disclosure controls and procedures
were effective.
There were no significant changes in the Company's internal and
disclosure controls or in other factors that could significantly affect such
internal and disclosure controls subsequent to the date of their evaluation.
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 by Ness Lakdawala
99.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 by Mauro Parisi
(b) Reports on Form 8-K.
There were no reports filed on Form 8-K during the period covered by this
report.
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.
DECTRON INTERNATIONALE INC.
June 16, 2003 By: /s/ Mauro Parissi
--------------------------
Mauro Parissi
Chief Financial Officer
CERTIFICATION
I, Ness Lakdawala, Chairman of the Board, Chief Executive Officer and President,
of Dectron Internationale Inc., certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Dectron
Internationale Inc.;
2. Based on my knowledge, this quarterly 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 quarterly report; and
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly report.
4. The registrant's other certifying officers 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
we 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 quarterly 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 quarterly report (the "Evaluation Date"); and
c) presented in this quarterly 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 officers 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.
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not 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: June 16, 2003
By: /s/ Ness Lakdawala
------------------
Ness Lakdawala, Chairman of the Board,
Chief Executive Officer and President
CERTIFICATION
I, Mauro Parissi, Chief Financial Officer, of Dectron Internationale Inc.,
certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Dectron
Internationale Inc.;
2. Based on my knowledge, this quarterly 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 quarterly report; and
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly report.
4. The registrant's other certifying officers 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
we 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 quarterly 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 quarterly report (the "Evaluation Date"); and
c) presented in this quarterly 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 officers 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.
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not 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: June 16, 2003
By: /s/ Mauro Parissi
-----------------
Mauro Parissi
Chief Financial Officer