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Previous: CAPITAL ENVIRONMENTAL RESOURCE INC, F-1/A, 1999-05-25 |
Next: CORINTHIAN COLLEGES INC, S-8, 1999-05-25 |
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB/A1
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 31, 1999
Commission File Number 001-14503
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, Quebec, Canada H4R 2C5
--------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(514) 334-9609
--------------
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value
Redeemable Common Stock Purchase Warrants
-----------------------------------------
(Title of Class)
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 | |
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 |
The Company's sales for the year ended January 31, 1999 were $20,215,849.
<PAGE>
As of April 29, 1999, the aggregate market value of the voting stock held by
non-affiliates of the registrant (based on The Nasdaq Stock Market closing price
of $2 5/16 on April 29, 1999) was $2,163,315.
As of April 29, 1999, there were 2,795,000 shares of the registrant's common
stock outstanding.
<PAGE>
The Company's Annual Report on Form 10-KSB filed May 3, 1999, is being amended
to reflect changes to Part III: Item 10 - FINANCIAL STATEMENTS.
PART I
Item 10. FINANCIAL STATEMENTS
The Financial Statements of the Company are as set forth below:
<PAGE>
SCHWARTZ LEVITSKY FELDMAN
Comptables Agrees
Chartered Accountants
Montreal, Toronto, Ottawa
DECTRON INTERNATIONALE INC.
CONSOLIDATED FINANCIAL STATEMENTS
AS AT JANUARY 31, 1999
TABLE OF CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors 1
Consolidated Balance Sheet 2 - 3
Consolidated Statement of Income 4
Consolidated Statement of Cash Flows 5 - 7
Consolidated Statement of Stockholders' Equity 8
Notes to Consolidated Financial Statements 9 - 24
</TABLE>
<PAGE>
SCHWARTZ LEVITSKY FELDMAN
Comptables Agrees
Chartered Accountants
Montreal, Toronto, Ottawa
REPORT OF INDEPENDENT AUDITORS
To the Stockholders of
Dectron Internationale Inc.
We have audited the consolidated balance sheet of Dectron Internationale Inc. as
at January 31, 1999 and the statements of income, cash flows and changes in
stockholders' equity for the year then ended. These consolidated financial
statements are the responsibility of the companies' management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards
in the United States of America. Those standards require that we plan and
perform an audit to obtain reasonable assurance whether the financial statements
are free of material misstatements. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements present fairly , in all
material respects, the consolidated financial position of Dectron Internationale
Inc. as at January 31, 1999 and the consolidated results of its operations and
its cash flows for the year then ended, in conformity with generally accepted
accounting principles in the United States of America.
Montreal, Quebec
April 7, 1999 Chartered Accountants
<PAGE>
DECTRON INTERNATIONALE INC.
CONSOLIDATED BALANCE SHEET
(AMOUNTS EXPRESSED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
JANUARY 31, JANUARY 31,
1999 1998
--------------- ---------------
$ $
<S> <C> <C>
ASSETS
Cash 389,702 28,155
Accounts receivable (note 2) 5,998,864 3,043,829
Inventory (note 3) 5,138,154 3,817,448
Current portion of loans receivable (note 4) 43,018 87,306
Prepaid expenses and sundry asset 629,260 292,931
--------------- ---------------
12,198,998 7,269,669
Sinking funds (note 5) 74,075 8,038
Loans receivable (note 4) 63,627 91,508
Property, plant and equipment (note 6) 5,406,295 4,111,085
Goodwill (note 7) 1,888,400 44,528
--------------- ---------------
19,631,395 11,524,828
--------------- ---------------
--------------- ---------------
</TABLE>
APPROVED ON BEHALF OF THE BOARD
Director
Director
<PAGE>
DECTRON INTERNATIONALE INC.
CONSOLIDATED BALANCE SHEET
(AMOUNTS EXPRESSED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
JANUARY 31, JANUARY 31,
1999 1998
--------------- ---------------
$ $
<S> <C> <C>
LIABILITIES
Bank loans (note 8) 2,831,015 3,127,340
Accounts payable and accrued expenses
(note 9) 4,098,077 1,964,280
Income taxes payable 7,896 200,502
Current portion of long-term debt (note 10) 440,523 427,116
Notes payable (note 11) 533,199 -
Other loan payable 64,553 -
Current portion of deferred revenue (note 14) 161,226 127,857
--------------- ---------------
8,136,489 5,847,095
Long-term debt (note 10) 1,605,947 1,564,384
Due to director (note 12) 51,639 67,345
Loan payable (note 13) 259,052 355,336
Deferred revenue (note 14) 605,345 470,058
Deferred income taxes 426,300 410,643
--------------- ---------------
11,084,772 8,714,861
--------------- ---------------
Minority interest in equity consolidated entity -- 352,469
--------------- ---------------
STOCKHOLDERS' EQUITY
Capital stock (note 15) 6,867,529 1,934,695
Retained earnings 1,746,761 617,580
Cumulative translation adjustments (67,667) (94,777)
--------------- ---------------
Total stockholders' equity 8,546,623 2,457,498
--------------- ---------------
Total liabilities and stockholders' equity 19,631,395 11,524,828
--------------- ---------------
--------------- ---------------
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
DECTRON INTERNATIONALE INC.
CONSOLIDATED STATEMENT OF INCOME
(AMOUNTS EXPRESSED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
YEAR YEAR YEAR
ENDED ENDED ENDED
JANUARY 31, JANUARY 31, JANUARY 31,
1999 1998 1997
--------------- --------------- ---------------
$ $ $
<S> <C> <C> <C>
Net sales 20,215,849 16,370,849 12,712,413
Cost of sales 13,697,877 10,777,360 8,478,285
--------------- --------------- ---------------
Gross profit 6,517,972 5,593,489 4,234,128
--------------- --------------- ---------------
Operating expenses
Selling 2,527,915 2,272,053 1,332,843
General and administrative 1,219,981 1,304,014 1,287,971
Depreciation and amortization 733,744 461,100 289,256
Interest expense 395,941 287,677 334,493
--------------- --------------- ---------------
4,877,581 4,324,844 3,244,563
--------------- --------------- ---------------
Income before income taxes and minority
interest 1,640,391 1,268,645 989,565
Income taxes (note 16) 511,210 405,314 223,697
--------------- --------------- ---------------
Income before minority interest 1,129,181 863,331 765,868
Minority interest in earnings of consolidated
entity -- -- 69,090
--------------- --------------- ---------------
Net income 1,129,181 863,331 696,778
--------------- --------------- ---------------
--------------- --------------- ---------------
Net income per weighted
average common stock 0.54 0.49 0.40
--------------- --------------- ---------------
--------------- --------------- ---------------
Weighted average number of common stock
outstanding 2,082,781 1,750,000 1,750,000
--------------- --------------- ---------------
--------------- --------------- ---------------
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
DECTRON INTERNATIONALE INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(AMOUNTS EXPRESSED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
YEAR YEAR YEAR
ENDED ENDED ENDED
JANUARY 31, JANUARY 31, JANUARY 31,
1999 1998 1997
--------------- --------------- ---------------
$ $ $
<S> <C> <C> <C>
Cash flows from operating activities:
Net income 1,129,181 863,331 696,778
Adjustments to reconcile net income to net cash (used in) provided by
operating activities:
Depreciation and amortization 733,744 461,100 289,256
Loss on disposal of property, plant and
equipment -- -- 6,000
Minority interest -- -- 69,090
Increase in accounts receivable (2,955,035) (385,013) (527,956)
Increase in inventory (1,320,706) (1,311,838) (895,202)
Increase in prepaid expenses and sundry
assets (336,329) (116,901) (69,866)
Increase in accounts payable and accrued
expenses 2,133,797 309,169 12,074
Increase (decrease) in income taxes
payable (192,606) 299,641 171,087
Increase (decrease) in deferred income
taxes 15,657 (164,587) 8,640
Increase in deferred revenue 168,656 110,279 91,749
--------------- --------------- ---------------
Net cash (used in) provided by operating
activities (623,641) 65,181 (148,350)
--------------- --------------- ---------------
</TABLE>
<PAGE>
DECTRON INTERNATIONALE INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(AMOUNTS EXPRESSED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
YEAR YEAR YEAR
ENDED ENDED ENDED
JANUARY 31, JANUARY 31, JANUARY 31,
1999 1998 1997
--------------- --------------- ---------------
$ $ $
<S> <C> <C> <C>
Cash flows from investing activities:
Purchase of property, plant and equipment (1,939,538) (1,978,811) (556,323)
Proceeds from disposal of property, plant
and equipment - 233,428 7,467
Acquisition of Goodwill (1,931,638) -- (60,147)
--------------- --------------- ---------------
Net cash used in investing activities (3,871,176) (1,745,383) (609,003)
--------------- --------------- ---------------
Cash flows from financing activities:
Acquisition of minority interest in equity
consolidated entity (352,469) -- 311,796
Sinking funds (66,037) (8,038) --
Grant receivable -- 25,019 (25,019)
Advances to directors (15,706) (29,996) 118,732
(Advances to) repayments from
corporate shareholders 72,169 (110,089) --
Repayments from loan receivable -- 47,950 --
Notes payable 533,199 -- --
Other loan payable 64,553 -- --
Advances from long-term debt 54,970 453,346 (30,606)
Advances from (repayment of)
loan payable (96,284) (320,320) 626,406
Advances (repayments) of bank
loans (296,325) 1,504,150 294,224
Issuance of common shares 4,932,834 -- (509,115)
--------------- --------------- ---------------
Net cash provided by financing activities 4,830,904 1,562,022 786,418
--------------- --------------- ---------------
Effect of foreign currency exchange rate
changes 25,460 94,334 (42,063)
--------------- --------------- ---------------
</TABLE>
<PAGE>
DECTRON INTERNATIONALE INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(AMOUNTS EXPRESSED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
YEAR YEAR YEAR
ENDED ENDED ENDED
JANUARY 31, JANUARY 31, JANUARY 31,
1999 1998 1997
--------------- --------------- ---------------
$ $ $
<S> <C> <C> <C>
Net increase (decrease) in cash and cash
equivalents 361,547 (23,846) (12,998)
Beginning of year 28,155 52,001 64,999
--------------- --------------- ---------------
End of year 389,702 28,155 52,001
--------------- --------------- ---------------
--------------- --------------- ---------------
Supplemental disclosure of cash
flow information
Interest 450,324 317,784 279,004
--------------- --------------- ---------------
--------------- --------------- ---------------
Income taxes 398,091 358,315 116,460
--------------- --------------- ---------------
--------------- --------------- ---------------
</TABLE>
<PAGE>
DECTRON INTERNATIONALE INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(AMOUNTS EXPRESSED IN U.S. DOLLARS)
AS AT JANUARY 31, 1999
<TABLE>
<CAPTION>
COMMON STOCK CUMULATIVE
-----------------------------------
RETAINED TRANSLATION
NUMBER AMOUNT EARNINGS ADJUSTMENTS
--------------
$ $ $
<S> <C> <C> <C> <C>
Balance (deficit) January 31, 1995 91,292 1,934,713 (1,159,229) 45,108
Foreign currency translation -- -- -- 25
Net income for the year -- -- 726,397 --
-------------- --------------- --------------- ---------------
Balance January 31, 1996 91,292 1,934,713 (432,832) 45,133
Foreign currency translation -- -- -- 28,589
Net income for the year -- -- 696,778 --
Redemption of shares over
stated capital (25) (18) (509,697) --
-------------- --------------- --------------- ---------------
Balance January 31, 1997 91,267 1,934,695 (245,751) 73,722
Foreign currency translation -- -- -- (168,499)
Net income for the year -- -- 863,331 --
-------------- --------------- --------------- ---------------
Balance January 31, 1998 91,267 1,934,695 617,580 (94,777)
Redemption of shares (91,267) (1,934,695) -- --
Issuance of common shares 2,795,000 8,421,450 -- --
Cost of issuance -- (1,553,921) -- --
Foreign currency translation -- -- -- 27,110
Net income for the year -- -- 1,129,181 --
-------------- --------------- --------------- ---------------
Balance January 31, 1999 2,795,000 6,867,529 1,746,761 (67,667)
-------------- --------------- --------------- ---------------
-------------- --------------- --------------- ---------------
</TABLE>
<PAGE>
DECTRON INTERNATIONALE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN U.S. DOLLARS)
JANUARY 31, 1999
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.'s accounts
and of its wholly-owned subsidiaries, Refplus Inc., Thermoplus Air
Inc., Fiber Mobile Ltd. and Dectron U.S.A. Inc.
Circul-aire Group is comprised of 9048-3140 Quebec Inc. and
Cascades Technologies Inc.'s accounts and of its wholly-owned
subsidiaries, PM Wright Ltd., Purafil Canada Inc. and 122248 Canada
Inc.
All material inter-company accounts transactions have been
eliminated.
b) Principal Activities
The registrant Dectron Internationale Inc., was incorporated on
March 30, 1998. These companies are principally engaged in the
production of dehumidification, refrigeration, indoor air quality
(IAQ), ventilation, air conditioning and air purification systems
in Canada and its distribution worldwide. The activities of Dectron
Internationale Inc., Cascades Technologies Inc., 9048-3140 Quebec
Inc. are immaterial in the aggregate, as their only activity is to
hold the investments in the operating companies.
c) Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, amounts due from
banks and any other highly liquid investments purchased with a
maturity of three months or less. The carrying amounts approximates
fair value because of the short maturity of these instruments.
d) Other Financial Instruments
The carrying amount of the company's accounts receivables and
payables approximates fair value because of the short maturity of
these instruments.
e) Inventory
Inventory is valued at the lower of cost and net realizable value.
Cost is determined on the first-in, first-out basis.
<PAGE>
DECTRON INTERNATIONALE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN U.S. DOLLARS)
JANUARY 31, 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
f) Property, Plant and Equipment
Property, plant and equipment are recorded at cost and are
amortized on the basis of their estimated useful lives at the
undernoted rates and methods:
<TABLE>
<S> <C> <C>
Building 4 or 5% Straight line
Machinery and manufacturing equipment 10% Straight line or 20% declining balance
Furniture and fixtures 15 or 20% Straight line or 20% declining balance
Computers 15 or 30% Straight line 0r 30% declining balance
Rolling stock 30% Straight line or 30% declining balance
Leasehold improvements Straight line over term of the lease
Equipment under capital lease 20 or 30% Declining balance
</TABLE>
Depreciation for assets acquired during the year are recorded at
one half of the indicated rates.
g) Goodwill
Goodwill is the excess of cost over the value of net assets
acquired. It is amortized on the straight line basis over ten
years.
h) Income Taxes
The company accounts for income taxes under the provisions of
statement of financial accounting standards No. 109, which requires
recognition of deferred tax assets and liabilities for the expected
future tax consequences of events that have been included in the
financial statements and tax returns. Deferred income taxes are
provided using the liability method. Under the liability method,
deferred income taxes are recognized for all significant temporary
differences between the tax and financial statements basis of
assets and liabilities.
i) Deferred Revenue
The company has sold extended warranty contracts covering a period
of four years beyond the one year basic guarantee. The deferred
revenue is recognized as income over the four year period on a
straight line basis commencing one year from the sale of the
contracts.
<PAGE>
DECTRON INTERNATIONALE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN U.S. DOLLARS)
JANUARY 31, 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
j) Net Income Per Weighted Average Common Stock
Net income per common stock is computed by dividing net income for
the year by the weighted average number of common stock outstanding
during the year.
k) Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles in the United States of
America requires management to make estimates and assumptions that
effect certain reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ
from these estimates.
l) Government Assistance and Investment Tax Credits
Government assistance and investment tax credits are recorded on
the accrual basis and are accounted for as a reduction of related
current or capital expenditures.
2. ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>
JANUARY 31, JANUARY 31,
1999 1998
--------------- ---------------
$ $
<S> <C> <C>
Accounts receivable 6,073,650 3,105,239
Less: Allowance for doubtful accounts 74,786 61,410
--------------- ---------------
Accounts receivable - net 5,998,864 3,043,829
--------------- ---------------
--------------- ---------------
</TABLE>
<PAGE>
DECTRON INTERNATIONALE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN U.S. DOLLARS)
JANUARY 31, 1999
3. INVENTORY
Inventory is comprised of the following:
<TABLE>
<CAPTION>
JANUARY 31, JANUARY 31,
1999 1998
--------------- ---------------
$ $
<S> <C> <C>
Raw materials 3,182,498 2,247,631
Work-in-process 856,308 580,112
Finished goods 1,099,348 989,705
--------------- ---------------
5,138,154 3,817,448
--------------- ---------------
--------------- ---------------
</TABLE>
4. LOANS RECEIVABLE
The loans receivable consist of the following:
<TABLE>
<CAPTION>
JANUARY 31, JANUARY 31,
1999 1998
--------------- ---------------
$ $
<S> <C> <C>
Loan receivable - private company (secured) 61,138 63,467
Loan receivable - corporate shareholder
(unsecured) 45,507 115,347
--------------- ---------------
106,645 178,814
Current portion 43,018 87,306
--------------- ---------------
63,627 91,508
--------------- ---------------
--------------- ---------------
</TABLE>
These loans are non-interest bearing with no specific terms of repayment
except for the current portion which is expected to be repaid prior to
January 31, 2000, and the balance is not expected to be received prior to
February 1, 2000.
<PAGE>
DECTRON INTERNATIONALE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN U.S. DOLLARS)
JANUARY 31, 1999
5. SINKING FUNDS
The sinking funds are restricted in use since all amounts paid into them
must be used to repay the immigration loans (see note 10-b and c).
6. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
JANUARY 31, JANUARY 31,
1999 1998
--------------- ---------------
$ $
<S> <C> <C>
Land 229,980 238,733
Building 1,977,700 1,732,386
Machinery and manufacturing equipment 4,788,949 2,983,063
Furniture and fixtures 513,720 322,367
Computers 1,175,318 529,722
Rolling stock 91,831 15,181
Leasehold improvements 424,463 340,833
Equipment under capital lease 520,779 52,139
--------------- ---------------
Cost 9,722,740 6,214,424
--------------- ---------------
Less accumulated depreciation and amortization:
Building 244,168 174,779
Machinery and manufacturing equipment 2,309,951 1,005,575
Furniture and fixtures 390,403 234,100
Computers 854,833 381,279
Rolling stock 24,760 2,087
Leasehold improvements 320,582 287,696
Equipment under capital lease 171,748 17,823
--------------- ---------------
4,316,445 2,103,339
--------------- ---------------
Net 5,406,295 4,111,085
--------------- ---------------
--------------- ---------------
</TABLE>
<PAGE>
DECTRON INTERNATIONALE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN U.S. DOLLARS)
JANUARY 31, 1999
7. GOODWILL
<TABLE>
<CAPTION>
JANUARY 31, JANUARY 31,
1999 1998
--------------- ---------------
$ $
<S> <C> <C>
Cost 1,987,298 55,660
Less: Accumulated amortization 98,898 11,132
--------------- ---------------
Net 1,888,400 44,528
--------------- ---------------
--------------- ---------------
</TABLE>
8. BANK LOANS
The bank loans bear interest at the prime lending rate plus 0.25% to 0.5%
per annum with interest payable monthly.
As security, the company has provided a moveable hypothec on accounts
receivable, inventories and commercial equipment, a $3,970,880 hypothec on
all assets of the company, including a first ranking hypothec in the
amount of $3,970,880 on the proceeds of all risks insurance on the
property and a solidary guarantee in the amount of $3,309,067.
The company finances its operations mainly through the use of Bankers
Acceptance bearing an average lending rate of less than prime.
<PAGE>
DECTRON INTERNATIONALE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN U.S. DOLLARS)
JANUARY 31, 1999
9. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
<TABLE>
<CAPTION>
JANUARY 31, JANUARY 31,
1999 1998
--------------- ---------------
$ $
<S> <C> <C>
Accounts payable and accrued expenses are comprised of the following:
Trade payables 2,723,858 1,285,294
Accrued expenses 1,374,219 678,986
--------------- ---------------
4,098,077 1,964,280
--------------- ---------------
--------------- ---------------
</TABLE>
10. LONG-TERM DEBT
<TABLE>
<CAPTION>
JANUARY 31, JANUARY 31,
1999 1998
--------------- ---------------
$ $
<S> <C> <C>
a) Balance of sale secured by land and building plus rent, present and
future on the building, without interest, repayable in semi-annual
repayments of $38,606 due April and October, maturing October 2000. 154,423 240,451
b) Immigration loan secured by a first ranking universal hypothec on the
universality of the property, moveable and immovable, present and
future and corporeal and incorporeal, bearing interest at 5.21% per
annum due on November 2002. 463,269 480,901
c) Immigration loan secured by a first ranking universal hypothec on the
universality of the property, moveable and immoveable, present and
future, corporeal and incorporeal, bearing interest at 5.59% per
annum, due on September 2003. 463,269 --
d) Bank loan, bearing interest at prime plus 1% per annum repayable in
monthly capital repayments of $1,483, maturing April 2002. 57,833 78,509
--------------- ---------------
Balance carried forward 1,138,794 799,861
--------------- ---------------
</TABLE>
<PAGE>
DECTRON INTERNATIONALE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN U.S. DOLLARS)
JANUARY 31, 1999
10. LONG-TERM DEBT (Continued)
<TABLE>
<CAPTION>
JANUARY 31, JANUARY 31,
1999 1998
--------------- ---------------
$ $
<S> <C> <C>
Balance brought forward 1,138,794 799,861
e) Bank loan, bearing interest at prime rate plus 1% per annum repayable
in monthly capital repayments of $5,032 and a final
repayment of $5,038 plus interest, maturing November 2001. 171,107 240,308
f) Loan secured by providing land and a personal guarantee from a
director as collateral bearing interest at prime plus 1% repayable by
monthly capital repayments of $1,324. This loan was repaid
during the year. -- 52,706
g) The loan from Societe Developpement Industriel du Quebec bearing
interest at a rate of approximately prime plus 1.50% which is
deferred and capitalized for the minimum of either 12 months or when
the accumulated interest is greater than 10% of the loan advance,
repayable in annual payments commencing June 30, 1997 at a rate of
15% of the prior year's net income to a maximum of $33,091 per annum.
82,229 113,983
h) Bank term loan secured by machinery and equipment bearing interest at
prime plus 1.75% repayable in monthly capital repayments of
$2,758, maturing May 1999. 11,030 45,800
i) Small business investment loan, secured by machinery and equipment,
repayable in monthly instalments of $2,449 plus interest at prime
plus 1.75%, maturing February 2000. 35,407 63,479
j) Small business investment loan secured by a hypothec on specific
equipment plus a personal guarantee from a director of the company
bearing interest at prime plus 1.75% repayable by monthly capital
instalments of $1,970. This loan was repaid during the year. -- 103,652
--------------- ---------------
Balance carried forward 1,438,567 1,419,789
--------------- ---------------
</TABLE>
<PAGE>
DECTRON INTERNATIONALE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN U.S. DOLLARS)
JANUARY 31, 1999
10. LONG-TERM DEBT (Continued)
<TABLE>
<CAPTION>
JANUARY 31, JANUARY 31,
1999 1998
--------------- ---------------
$ $
<S> <C> <C>
Balance brought forward 1,438,567 1,419,789
k) Bank term loan secured by a first ranking universal hypothec on the
universality of the property, moveable and immoveable, present and
future and corporeal and incorporeal, bearing interest at 7.99% per
annum repayable in monthly capital repayments of $553 plus a final
repayment of $66,668 in December 2002.
92,088 102,477
l) Loan secured by a universal hypothec on land and building, plus
floating charge on all other assets bearing interest at prime plus 4%
repayable by monthly capital repayments of $1,655. This loan was
repaid during the year. -- 147,705
m) Loan secured by a first and fixed mortgage charge on the land and
building and a floating charge on all other assets, bearing interest
at 9 1/2% repayable by monthly capital repayments of $6,618. This
loan was repaid during the year. -- 274,801
n) Obligation under capital lease for machinery and equipment subject to
blended monthly instalments of $7,848 including imputed interest
at 7.64% per annum to April 2000. 159,609 --
0) Obligation under capital lease for furniture and lab equipment
subject to blended monthly instalments of $5,670 included imputed
interest at 7.10% per annum to April 2001. 173,357 --
p) Government loans, without guarantee nor interest, repayable 15 years
after their date of receipt, the first portion of $30,443 received
July 1989 is repayable in July 2004. 60,887 --
--------------- ---------------
Balance carried forward 1,924,508 1,944,772
--------------- ---------------
</TABLE>
<PAGE>
DECTRON INTERNATIONALE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN U.S. DOLLARS)
JANUARY 31, 1999
10. LONG-TERM DEBT (Continued)
<TABLE>
<CAPTION>
JANUARY 31, JANUARY 31,
1999 1998
--------------- ---------------
$ $
<S> <C> <C>
Balance brought forward 1,924,508 1,944,772
q) Government loan of an original amount of $205,083, without guarantee
nor interest, repayable in 4 equal annual instalments starting at the
latest on December 1, 1997, maturing in December 2000. 102,542 --
r) Other 19,420 46,728
--------------- ---------------
2,046,470 1,991,500
Less: Current portion 440,523 427,116
--------------- ---------------
1,605,947 1,564,384
--------------- ---------------
--------------- ---------------
</TABLE>
Future principal payment obligations are as follows:
<TABLE>
<S> <C>
2000 $ 440,523
2001 396,873
2002 145,015
2003 570,347
2004 493,712
---------------
$ 2,046,470
---------------
---------------
</TABLE>
11. NOTES PAYABLE
The notes payable are non-interest bearing for which a portion of $380,981
is payable by 12 equal monthly payments of $31,748 beginning February 1,
1999 and the balance of $152,218 is due prior to January 31, 2000.
12. DUE TO DIRECTOR
The amount due to director is unsecured, non-interest bearing and is due
on April 15, 2002.
<PAGE>
DECTRON INTERNATIONALE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN U.S. DOLLARS)
JANUARY 31, 1999
13. LOAN PAYABLE
This loan payable is non-interest bearing and is owed to a private
company, due on April 15, 2002.
14. DEFERRED REVENUE
<TABLE>
<CAPTION>
JANUARY 31, JANUARY 31,
1999 1998
--------------- ---------------
$ $
<S> <C> <C>
Deferred revenue 766,571 597,915
Current portion 161,226 127,857
--------------- ---------------
605,345 470,058
--------------- ---------------
--------------- ---------------
</TABLE>
Deferred revenue will be recognized as income as follows:
<TABLE>
<S> <C>
2000 $ 161,226
2001 216,524
2002 177,409
2003 136,867
2004 74,545
---------------
$ 766,571
---------------
---------------
</TABLE>
<PAGE>
DECTRON INTERNATIONALE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN U.S. DOLLARS)
JANUARY 31, 1999
15. CAPITAL STOCK
a) Authorized
An unlimited number of preferred shares, non-cumulative, voting,
no par value
An unlimited number of common shares, voting, no par value
b) Issued
<TABLE>
<CAPTION>
JANUARY 31, JANUARY 31,
1999 1998
--------------- ---------------
$ $
<S> <C> <C>
2,795,000 common shares 6,867,529 --
Thermoplus Air Inc.
91,242 Class A common shares -- 1,934,525
159653 Canada Inc.
1,571,000 Class D shares -- 152
25 Class A shares -- 18
--------------- ---------------
6,867,529 1,934,695
--------------- ---------------
--------------- ---------------
</TABLE>
c) On October 5, 1998 the company issued 1,000,000 common shares in an
Initial Public Offering (the "IPO") for gross proceeds of $6,000,000
and 1,000,000 warrants for $125,000 less underwriting commission and
other expenses of $1,443,533 ($866,120 net of income taxes
recoverable).
On November 15, 1998 the company issued an additional 45,000 common
shares for gross proceeds of $270,000 and 150,000 warrants for $18,750
less underwriting commission and other expenses of $37,400.
Immediately prior to the "IPO" the company issued 1,750,000 common
shares for a share for share exchange valued at $1,596,433.
<PAGE>
DECTRON INTERNATIONALE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN U.S. DOLLARS)
JANUARY 31, 1999
16. INCOME TAXES
Provision for income taxes consists of the following:
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
JANUARY 31, JANUARY 31,
1999 1998
$ $
<S> <C> <C>
a) Current 480,064 531,383
Deferred (recovered) 31,146 (126,069)
--------------- --------------
511,210 405,314
--------------- --------------
--------------- --------------
b)
Current income taxes consists of amount
calculated at basic combined federal and 480,064 568,446
provincial rates
Increase (decrease) resulting from:
Application of losses carried
forward from prior year -- (20,224)
Small business deduction -- (22,984)
Manufacturing and processing (114,828) (72,051)
Timing differences 145,974 84,267
Other -- (6,071)
--------------- --------------
Effective income taxes 511,210 531,383
--------------- --------------
--------------- --------------
</TABLE>
c) Deferred income taxes represent the tax benefits derived from timing
differences between depreciation of plant and equipment and
recognition of warranty revenue charged to operations and amounts
deducted from taxable income.
<PAGE>
DECTRON INTERNATIONALE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN U.S. DOLLARS)
JANUARY 31, 1999
17. COMMITMENTS AND CONTINGENCIES
a) The company is committed to payments under operating leases for its
premises totalling $344,560. Annual payments for the next three years
are as follows:
<TABLE>
<S> <C>
2000 $ 223,302
2001 108,510
2002 12,748
---------------
$ 344,560
---------------
---------------
</TABLE>
b) The company is committed to make monthly payments of $10,302 into
sinking funds which are given as security against the immigration
loans. The annual payments for the next five years are as follows:
<TABLE>
<S> <C>
2000 $ 123,630
2001 123,630
2002 123,630
2003 123,630
2004 58,450
</TABLE>
c) The company is in the process of constructing additional
manufacturing facilities. The expected cost to complete the project
is approximately $595,500 of which $284,500 has been incurred to
date.
d) The company sells warranties on its products. Since there is no
history of claims, no liability has been set up in the accounts.
Payments under these warranties are accounted for as current
expenditures.
18. SEGMENTED INFORMATION
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
JANUARY 31, JANUARY 31,
1999 1998
--------------- ---------------
$ $
<S> <C> <C>
The breakdown of sales by geographic area is as follows:
Canada 9,531,130 5,698,411
United States of America 10,191,540 10,672,438
International 493,179 -
--------------- ---------------
20,215,849 16,370,849
--------------- ---------------
--------------- ---------------
</TABLE>
DECTRON INTERNATIONALE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN U.S. DOLLARS)
JANUARY 31, 1999
19. ACQUISTIONS
a) Refplus Inc. and Thermoplus Air Inc.
On February 1st, 1998 the company acquired 49.99% interest in Refplus
Inc. for $430,180 and 100% interest in Thermoplus Air Inc. for
$1,408,755. The allocation of purchase price is summarized as
follows:
<TABLE>
<S> <C>
Current assets $ 1,161,885
Property, plant and equipment 1,852,492
Goodwill 590,877
Minority interest in Refplus Inc. (352,469)
Liabilities (1,413,850)
---------------
$ 1,838,935
---------------
---------------
</TABLE>
b) Circul-aire Group
On November 27, 1998 the company acquired 100% interest in Cascades
Technologies Inc. and 9048-3140 Quebec Inc., corporate shareholders
of the Circul-aire Group, for a total consideration of $2,377,895.
The allocation of purchase price is summarized as follows:
<TABLE>
<S> <C>
Current assets $ 3,611,627
Property, plant and equipment 758,234
Goodwill 1,340,761
Investment 237,263
Liabilities (3,569,990)
---------------
$ 2,377,895
---------------
---------------
</TABLE>
c) Accounting for Acquisitions
The acquisitions in a) and b) have been accounted for by the purchase
method and the results of operations of Refplus Inc., Thermoplus Air
Inc. and Circul-aire Group from their date of acquisition, have been
included in these consolidated financial statements.
<PAGE>
DECTRON INTERNATIONALE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN U.S. DOLLARS)
JANUARY 31, 1999
20. Uncertainty due to the Year 2000 Issue
The Year 2000 Issue arises because many computerized systems use two
digits rather than four to identify a year. Date-sensitive systems may
recognize the year 2000 as 1900 or some other date, resulting in errors
when information using the year 2000 is processed. In addition, similar
problems may arise in some systems which use certain dates in 1999 to
represent something other than a date. The effects of the Year 2000 Issue
may be experienced before, on, or after January 1, 2000, and, if not
addressed, the impact on operations and financial reporting may range from
minor errors to significant systems failure which could affect an entity's
ability to conduct normal business operations. It is not possible to be
certain that all aspects of the Year 2000 Issue affecting the entity,
including those related to the efforts of customers, suppliers, or other
third parties, will be fully resolved.
<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.
DECTRON INTERNATIONALE INC.
May 13, 1999
By: /s/ NESS LAKDAWALA
-------------------------
Ness Lakdawala
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons in the capacities and on
the date indicated.
<TABLE>
<CAPTION>
Name Position Date
- ---- -------- ----
<S> <C> <C>
/s/ NESS LAKDAWALA Chairman, Chief Executive May 13, 1999
- ---------------- Officer
Ness Lakdawala
Executive Vice President May 13, 1999
---------------------------- and Director
Reinhold Kittler
/s/ ROSHAN KATRAK Vice President of Human May 13, 1999
---------------------------- Relations and Director
Roshan Katrak
/s/ MAURO PARISSI Chief Financial Officer, May 13, 1999
---------------------------- Secretary and Director
Mauro Parissi
Director May 13, 1999
----------------------------
Guy Houle
/s/ LEENA LAKDAWALA Executive Vice President May 13, 1999
---------------------------- and Director
Leena Lakdawala
Director May 13, 1999
----------------------------
Richard Ness
</TABLE>
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