SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------- 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, 2002 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. --------------------------- (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 - ---------------------------- ------- (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 12, 2002, 2,795,000 Common Shares outstanding Transitional Small Business Disclosure (check One): Yes [ ] No [ X ] DECTRON INTERNATIONALE INC. INDEX PAGE ---- PART I - FINANCIAL INFORMATION Item 1- Financial Statements Interim Consolidated Balance Sheets - at April 30, 2002 and January 31, 2002 ................................ 2-3 Interim Consolidated Statements of Earnings - For the three months ended April 30, 2002 and the three months ended April 30, 2001 .................................................... 4 Interim Consolidated Statements of Cash Flows - For the three months ended April 30, 2002 and three months ended April 30, 2001......................................................... 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 SIGNATURES................................................................................................... 13 Item 1. Financial Statements DECTRON INTERNATIONALE INC. INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS AT APRIL 30, 2002 TABLE OF CONTENTS Interim Consolidated Balance Sheets 2 - 3 Interim Consolidated Statements of Earnings 4 Interim Consolidated Statements of Cash Flows 5 - 7 Interim Consolidated Statements of Stockholders' Equity 8 Notes to Consolidated Financial Statements 9 - 10 DECTRON INTERNATIONALE INC. Interim Consolidated Balance Sheets As at April 30, 2002 and January 31, 2002 (Amounts Expressed in United States Dollars) Page 2 - -------------------------------------------------------------------------------- April 30, January 31, 2002 2002 --------------- --------------- Assets Current Cash $ 371,148 $ 86,727 Accounts receivable 9,922,098 8,056,304 Income taxes receivable -- 58,313 Inventory 9,328,522 9,186,114 Prepaid expenses and sundry assets 780,458 555,327 Deferred income taxes 46,546 46,546 --------------- --------------- 20,448,772 17,989,331 Loans receivable 423,097 517,164 Property, plant and equipment 9,654,077 9,804,587 Intangibles 134,735 139,048 Goodwill 1,314,511 1,298,942 Deferred income taxes 812,333 811,566 --------------- --------------- $ 32,787,525 $ 30,560,638 =============== =============== DECTRON INTERNATIONALE INC. Interim Consolidated Balance Sheets As at April 30, 2002 and January 31, 2002 (Amounts Expressed in United States Dollars) Page 3 - -------------------------------------------------------------------------------- April 30, January 31, 2002 2002 --------------- --------------- Liabilities Current Bank loans $ 9,498,684 $ 8,326,166 Accounts payable and accrued expenses 5,048,991 4,341,533 Current portion of long-term debt 955,219 1,336,058 Income tax payable 48,039 -- --------------- --------------- 15,550,933 14,003,757 Long-term debt 5,444,273 5,170,364 Loan payable 194,071 192,355 Deferred revenue 1,400,560 1,343,816 --------------- --------------- 22,589,837 20,710,292 --------------- --------------- Stockholders' equity Capital stock 6,752,933 6,752,933 Treasury stock (88,780) (88,780) Accumulated other comprehensive loss (470,927) (591,822) Retained earnings 4,004,462 3,778,015 --------------- --------------- 10,197,688 9,850,346 --------------- --------------- Total liabilities and stockholders' equity $ 32,787,525 $ 30,560,638 =============== =============== DECTRON INTERNATIONALE INC. Interim Consolidated Statements of Earnings For the Three Month Period Ended April 30, 2002 and April 30, 2001 (Amounts Expressed in United States Dollars) Page 4 - -------------------------------------------------------------------------------- Three Three Months Months Ended Ended April 30, April 30, 2002 2001 --------------- --------------- Net Sales $ 9,049,105 $ 9,639,831 Cost of sales 6,237,956 6,278,006 --------------- --------------- Gross profit 2,811,149 3,361,825 --------------- --------------- Operating expenses Selling 1,142,851 1,303,430 General and administrative 751,299 791,640 Depreciation and amortization 316,708 379,989 Interest expense 285,781 419,611 --------------- --------------- 2,496,639 2,894,670 --------------- --------------- Income before income taxes 314,510 467,155 Income taxes 88,063 58,394 --------------- --------------- Net Income $ 226,447 $ 408,761 =============== =============== Net earnings per common share, basic and diluted 0.08 0.15 =============== =============== Weighted average number of common shares outstanding 2,795,000 2,795,000 =============== =============== DECTRON INTERNATIONALE INC. Interim Consolidated Statements of Cash Flows For the Three Month Period Ending April 30, 2002 and April 30, 2001 (Amounts Expressed in United States Dollars) Page 5 - -------------------------------------------------------------------------------- Three Three Months Months Ended Ended April 30, April 30, 2002 2001 --------------- --------------- Cash flows from operation activities: Net Income $ 226,447 $ 408,761 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation and amortization 316,708 379,989 Increase in accounts receivable (1,865,794) (2,422,804) Decrease in income taxes receivables 58,313 11,359 Decrease (increase) in inventory 142,408 (25,496) Increase in prepaid expenses and sundry assets (225,131) (145,153) Increase in accounts payable and accrued expenses 707,458 1,019,672 Increase in income taxes payable 48,039 -- Increase in deferred revenue 56,744 242,455 Increase in deferred income taxes -- 15,928 --------------- --------------- Net cash used in operating activities (534,808) (515,289) --------------- --------------- DECTRON INTERNATIONALE INC. Interim Consolidated Statements of Cash Flows For the Three Month Period Ending April 30, 2002 and April 30, 2001 (Amounts Expressed in United States Dollars) Page 6 - -------------------------------------------------------------------------------- Three Three Months Months Ended Ended April 30, April 30, 2002 2001 --------------- --------------- Cash Flows from investing activities: Acquisition of property, plant and equipment (19,995) -- --------------- --------------- Net cash used in investing activities (19,995) -- --------------- --------------- Cash flows from financing activities Repayments from share purchase plan -- 106,394 Repayments from directors -- (14,020) Repayments from loan receivable 94,067 6,402 Advances from bank loans 1,172,518 1,006,602 Repayments of notes payables -- (83,394) Advances from (repayments of) long-term debt (106,930) (113,504) Advances from (repayments of) loan payable -- 45,726 --------------- --------------- Net cash provided by financing activities 1,159,655 954,206 --------------- --------------- Effect of foreign currency exchange rate changes (320,431) (282,336) --------------- --------------- DECTRON INTERNATIONALE INC. Interim Consolidated Statements of Cash Flows For the Three Month Period Ending April 30, 2002 and April 30, 2001 (Amounts Expressed in United States Dollars) Page 7 - -------------------------------------------------------------------------------- Three Three Months Months Ended Ended April 30, April 30, 2002 2001 --------------- --------------- NET INCREASE IN CASH AND CASH EQUIVALENTS 284,421 156,581 Cash and cash equivalents, beginning of period 86,727 145,448 --------------- --------------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 371,148 $ 302,029 =============== =============== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Interest paid $ 167,862 $ 290,270 =============== =============== Income taxes paid $ 32,044 $ 208,449 =============== =============== DECTRON INTERNATIONALE INC. Interim Consolidated Statements of Stockholders' Equity For the Three Month Period Ending April 30, 2002 (Amounts Expressed in United States Dollars) Page 8 - -------------------------------------------------------------------------------- Cumulative Other Retained Comprehensive Treasury Number Amount Earnings Income Stock --------------- --------------- --------------- --------------- --------------- Balance January 31, 1999 2,795,000 $ 6,867,529 $ 1,746,761 $ (67,667) $ -- =============== =============== =============== =============== =============== Purchase of 20,000 common shares -- $ -- $ -- $ -- $ (88,780) Share purchase plan receivable -- (499,946) -- -- -- Deferred tax benefit -- 482,026 -- -- -- Foreign currency translation -- -- -- 356,788 -- Net income for the year -- -- 1,126,763 -- -- --------------- --------------- --------------- --------------- --------------- 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 income 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 income 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 -- -- $ -- $ -- $ -- Foreign currency translation -- -- -- 120,895 -- Net income for the period -- -- 226,447 -- -- --------------- --------------- --------------- --------------- --------------- Balance April 30, 2002 2,795,000 $ 6,752,933 $ 4,004,462 $ (470,927) $ (88,780) =============== =============== =============== =============== =============== DECTRON INTERNATIONALE INC. Notes to Interim Consolidated Financial Statements As at April 30, 2002 and January 31, 2002 (Amounts Expressed in United States Dollars) Page 9 - -------------------------------------------------------------------------------- 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. As of February 1, 2002, Fiber Mobile Ltd. and Le Groupe Prodapec (2000) Inc. were wound up into Dectron Inc. Circul-aire Group is comprised of Cascade Technologies Inc., and of its wholly-owned subsidiaries, PM Wright Ltd., and Purafil Canada Inc. As of February 1, 2002, 9048-3140 Quebec Inc. was wound up into Dectron Internationale Inc. and 122248 Canada Inc. was wound up into Cascade Technologies 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, 2002 and January 31,2001 (Amounts Expressed in United States Dollars) Page 10 - -------------------------------------------------------------------------------- 2. SEGMENTED INFORMATION April 30, April 30, 2002 2001 --------------- --------------- a) The breakdown of sales by geographic area is as follows: Canada $ 3,198,507 $ 2,691,290 United States of America 5,558,524 6,188,264 International 292,074 760,277 --------------- --------------- $ 9,049,105 $ 9,639,831 =============== =============== b) The breakdown of identifiable assets by geographic area is as follows: Canada $ 23,691,714 $ 28,247,860 United States 9,095,811 9,076,412 --------------- --------------- $ 32,787,525 $ 37,324,272 =============== =============== ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations 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 an decrease of 44.6%. Three-month period ended April 30, 2001 compared to three-month period ended April 30, 2000. Revenues for the three-month period ended April 30, 2001 were $9,639,831, a 11.8% increase over prior year revenues of $8,626,887. Gross profit increased by $471,148 to $3,361,825 over the same period. This represents an increase of 1.4%, expressed in relation to sales. Due to low manufacturing costs, gross profit increased by 16.3% compared to an increase in sales of 11.8%. Selling and marketing expenses decreased by $13,731 in the three-month period ended April 30, 2001. As a percentage of revenues, selling and marketing expenses decreased from 15.2% to 13.5%. General and administrative expenses increased by $205,604 from $586,036 to $791,640. As a percentage of revenues, general and administrative increased from 6.8% to 8.2%. Amortization expenses increased by $39,328 from $340,661 to $379,989. As a percentage of revenues, amortization expenses remained stable at 3.9% Financing expenses increased by $122,403 from $297,208 to $419,611. As a percentage of revenues, financing expenses increased from 3.4% to 4.3% Income before income taxes was $467,155 an increase of $117,544 compared to the three-month period ended April 30, 2000. Relative to sales, income before income taxes increased from 4.1% for the three-month period ended April 30, 2000 to 4.9% in the three month period ended April 30, 2001. Provisions for Income tax expenses as a percentage of taxable income decreased from 29.7% for the 3 month period ended April 30, 2000 to 12.5% for 2001. Tax expenses decreased by $45,315. As a result of the above factors, the Company's net income increased from $245,902 to $408,761 an increase of 66.2%. Liquidity and Capital Resources 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. The Company had a positive net change in cash of $156,581 for the three-month period ended April 30, 2001. The principal sources of cash were an increase of accounts payable in the amount of $1,019,672 and advances from bank loans in the amount of $1,006,602. The principal use of cash was an increase in account receivable in the amount of $2,422,804. 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 14, 2002 By: /s/ Mauro Parissi -------------------------- Mauro Parissi Chief Financial Officer and Secretary