<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 2000
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE EXCHANGE ACT
For the transition period from ____________ to ________________
Commission file number 001-14503
DECTRON INTERNATIONALE INC.
(Exact name of Small Business Issuer 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 H4R 2C5
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(514) 334-9609 (Issuer's telephone number, including area code)
--------------
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
/ /
The number of shares outstanding of the registrant's Common Stock, No
Par Value, on September 14, 2000 was 2,795,000 shares.
Transitional Small Business Disclosure Format (check one):
Yes No X
--- ---
1
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DECTRON INTERNATIONALE INC.
JULY 31, 2000 QUARTERLY REPORT ON FORM 10-QSB
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page Number
<S> <C>
Item 1. Financial Statements
Interim Consolidated Balance Sheets as of July 31, 2000 and January 31, 2000.................... 3
Interim Consolidated Statements of Earnings
for the three months and six months ended July 31, 2000 and 1999........................... 5
Interim Consolidated Statements of Cash Flows
for the six months ended July 31, 2000 and 1999............................................ 7
Interim Consolidated Statements of Stockholders' Equity
for the six months ended July 31, 2000 and 1999............................................ 10
Notes to Interim Consolidated Financial Statements.............................................. 11
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations...................................................................... 13
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders............................................. 16
Item 6. Exhibits and Reports on Form 8-K................................................................ 16
</TABLE>
2
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DECTRON INTERNATIONALE INC.
Interim Consolidated Balance Sheets
As at July 31, 2000 and January 31, 2000
(Amounts Expressed in United States Dollars)
July 31, January 31,
2000 2000
$ $
---------- ----------
A S S E T S
CURRENT
Cash 283,641 220,562
Accounts receivable 9,253,494 7,626,840
Inventory 9,244,004 8,169,607
Prepaid expenses and sundry assets 1,148,886 1,062,973
Deferred income taxes -- 9,351
---------- ----------
TOTAL CURRENT ASSETS 19,930,025 17,089,333
LOANS RECEIVABLE 105,059 179,939
PROPERTY, PLANT AND EQUIPMENT 11,249,953 7,673,802
DEPOSIT ON BUILDING -- 1,000,000
INTANGIBLES 139,268 99,218
GOODWILL 1,703,243 1,759,297
DEFERRED INCOME TAXES 235,670 107,152
---------- ----------
TOTAL ASSETS 33,363,218 27,908,741
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
3
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DECTRON INTERNATIONALE INC.
Interim Consolidated Balance Sheets
As at July 31, 2000 and January 31, 2000
(Amounts Expressed in United States Dollars)
July 31, January 31,
2000 2000
$ $
----------- -----------
L I A B I L I T I E S
CURRENT
Bank loans 8,169,555 5,616,167
Accounts payable and accrued expenses 6,288,332 5,096,977
Income taxes payable 4,685 64,013
Deferred income taxes 23,130 --
Current portion of long-term debt 971,390 1,263,073
Current portion of deferred revenue 201,388 228,079
----------- -----------
TOTAL CURRENT LIABILITIES 15,658,480 12,268,309
LONG-TERM DEBT 6,720,674 4,657,838
DUE TO DIRECTOR 17,700 51,905
LOAN PAYABLE 256,915 275,057
DEFERRED REVENUE 825,397 732,158
----------- -----------
TOTAL LIABILITIES 23,479,166 17,985,267
----------- -----------
STOCKHOLDERS' EQUITY
CAPITAL STOCK 6,849,609 6,849,609
TREASURY STOCK (88,780) (88,780)
ACCUMULATED OTHER COMPREHENSIVE INCOME (285,176) 289,121
RETAINED EARNINGS 3,408,399 2,873,524
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 9,884,052 9,923,474
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 33,363,218 27,908,741
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
4
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DECTRON INTERNATIONALE INC.
Interim Consolidated Statements of Earnings
For the Six Months Ended July 31, 2000 and 1999
(Amounts Expressed in United States Dollars)
Six Six
Months Months
Ended Ended
July 31, July 31,
2000 1999
-----------------------
$ $
Net sales 19,222,181 14,282,994
Cost of sales 13,163,953 9,797,322
---------- ----------
Gross profit 6,058,228 4,485,672
---------- ----------
Operating expenses
Selling 2,556,593 1,734,945
General and administrative 1,220,914 797,534
Depreciation and amortization 747,004 520,015
Interest expense 745,607 173,763
---------- ----------
5,270,118 3,226,257
---------- ----------
Earnings before income taxes 788,110 1,259,415
Income taxes 253,235 405,532
---------- ----------
Net Earnings 534,875 853,883
========== ==========
Net earnings per common share, basic and diluted 0.19 0.31
========== ==========
Weighted average number of common shares outstanding 2,795,000 2,795,000
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
5
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DECTRON INTERNATIONALE INC.
Interim Consolidated Statements of Earnings
For the Three Months Ended July 31, 2000 and 1999
(Amounts Expressed in United States Dollars)
Three Three
Months Months
Ended Ended
July 31, July 31,
2000 1999
------------------------
$ $
Net sales 10,595,294 6,966,199
Cost of sales 7,427,743 4,640,536
---------- ----------
Gross profit 3,167,551 2,325,663
---------- ----------
Operating expenses
Selling 1,239,434 876,337
General and administrative 634,878 391,132
Depreciation and amortization 406,342 266,831
Interest expense 448,398 85,351
---------- ----------
2,729,052 1,619,651
---------- ----------
Earnings before income taxes 438,499 706,012
Income taxes 149,526 220,677
---------- ----------
Net Earnings 288,973 485,335
========== ==========
Net earnings per common share, basic and diluted
0.10 0.17
========== ==========
Weighted average number of common shares
outstanding 2,795,000 2,795,000
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
6
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DECTRON INTERNATIONALE INC.
Interim Consolidated Statements of Cash Flows
For the Six Months Ended July 31, 2000 and 1999
(Amounts Expressed in United States Dollars)
<TABLE>
<CAPTION>
Six Months Six Months
Ended Ended
July 31, July 31,
2000 1999
------------------------
$ $
<S> <C> <C>
Cash flows from operating activities:
Net earnings 534,875 853,883
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation and amortization 747,004 424,820
Increase in accounts receivable (1,626,654) (388,647)
Increase in inventory (1,074,397) (392,879)
Increase in prepaid expenses and sundry assets (85,913) (745,826)
Increase in accounts payable and accrued expenses 1,191,355 236,648
Increase (decrease) in income taxes payable (59,328) 12,206
Increase in deferred revenue 66,548 87,174
Increase in deferred income taxes (96,037) --
---------- ----------
Net cash (used in) provided by operating activities (402,547) 87,379
---------- ----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
7
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DECTRON INTERNATIONALE INC.
Interim Consolidated Statements of Cash Flows
For the Six Months Ended July 31, 2000 and 1999
(Amounts Expressed in United States Dollars)
Six Months Six Months
Ended Ended
July 31, July 31,
2000 1999
------------------------
$ $
Cash flows from investing activities:
Acquisition of property, plant and equipment (4,214,440) (777,042)
Deposit on building 1,000,000 --
Acquisition of Goodwill (92,711) --
---------- ----------
Net cash used in investing activities (3,307,151) (777,042)
Cash flows from financing activities:
Repayments from directors (34,205) --
Repayments from loans receivable 74,880 --
Advance from bank loans 2,553,388 1,108,345
Repayments of notes payables -- (304,053)
Repayments of other loan payable -- (64,553)
Advances from long-term debt 1,771,153 167,296
Advances (repayments of) from loan payable (18,142) 11,747
---------- ----------
Net cash provided by financing activities 4,347,074 918,782
Effect of foreign currency exchange rate changes (574,297) 63,833
---------- ----------
The accompanying notes are an integral part of these consolidated financial
statements.
8
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DECTRON INTERNATIONALE INC.
Interim Consolidated Statements of Cash Flows
For the Six Months Ended July 31, 2000 and 1999
(Amounts Expressed in United States Dollars)
Six Months Six Months
Ended Ended
July 31, July 31,
2000 1999
-------------------
$ $
------- -------
NET INCREASE IN CASH AND
CASH EQUIVALENTS 63,079 292,952
Cash and cash equivalents, beginning of year 220,562 389,702
------- -------
CASH AND CASH EQUIVALENTS, END OF YEAR 283,641 682,654
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Interest paid 558,009 110,856
======= =======
Income taxes paid 406,192 426,595
======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
9
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DECTRON INTERNATIONALE INC.
Interim Consolidated Statements of Stockholders' Equity
As at July 31, 2000 and January 31, 2000
(Amounts Expressed in United States Dollars)
<TABLE>
<CAPTION>
Capital Stock Cumulative Other
------------------------ Retained Comprehensive Treasury
Number Amount Earnings Income Stock
---------- ---------- ---------- ---------- ----------
$ $ $
<S> <C> <C> <C> <C> <C>
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 earnings for the year -- -- 1,129,181 -- --
---------- ---------- ---------- ---------- ----------
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 earnings for the year -- -- 1,126,763 -- --
---------- ---------- ---------- ---------- ----------
Balance January 31, 2000 2,795,000 6,849,609 2,873,524 289,121 (88,780)
========== ========== ========== ========== ==========
Net earnings for the period ended
July 31, 2000 -- -- 534,875 -- --
Foreign currency translation -- -- -- (574,297) --
---------- ---------- ---------- ---------- ----------
Balance July 31, 2000 2,795,000 6,849,609 3,408,399 (285,176) (88,780)
========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
10
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DECTRON INTERNATIONALE INC.
Notes to Interim Consolidated Financial Statements
As at July 31, 2000 and January 31, 2000
(Amounts Expressed in United States Dollars)
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., Fiber Mobile Ltd., Dectron U.S.A. Inc., Le Groupe
Prodapec 2000 Inc. and IPAC 2000 Inc.
Circul-aire Group is comprised of 9048-3140 Quebec Inc. and Cascade
Technologies Inc., and of its wholly-owned subsidiaries, PM Wright
Ltd., Purafil Canada Inc. and 122248 Canada 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 operations 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. Revenues and expenses in foreign
currency are translated at the average rate effective during
the year with the exception of depreciation, 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 ("CDN
$") 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.
11
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DECTRON INTERNATIONALE INC.
Notes to Interim Consolidated Financial Statements
As at July 31, 2000 and January 31, 2000
(Amounts Expressed in United States Dollars)
2. SEGMENTED INFORMATION
<TABLE>
<CAPTION>
July 31, July 31,
2000 1999
$ $
<S> <C> <C>
a) The breakdown of sales by geographic area is as
follows:
Canada 6,895,035 5,202,450
United States of America 10,849,088 7,124,589
International 1,478,058 1,955,955
----------- -----------
19,222,181 14,282,994
=========== ===========
<CAPTION>
b) The breakdown of identifiable assets by
geographic area is as follows:
July 31, July 31,
2000 1999
$ $
<S> <C> <C>
Canada 25,330,302 21,774,458
United States 8,032,916 -
----------- -----------
33,363,218 21,774,458
=========== ===========
</TABLE>
12
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
financial statements and notes thereto and the other historical financial
information of Dectron Internationale Inc. contained elsewhere in this Form
10-QSB. The statements contained in this Form 10-QSB that are not historical and
are forward looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Exchange Act of 1934,
including statements regarding Dectron Internationale Inc. expectations,
intentions, beliefs or strategies regarding the future. Forward-looking
statements include Dectron Internationale, Inc.'s statements regarding
liquidity, anticipated cash needs and availability and anticipated expense
levels. All forward-looking statements included in this Form 10-QSB are based on
information available to Dectron Internationale Inc. on the date hereof, and
ThinkPath.com Inc. assumes no obligation to update any such forward-looking
statement. It is important to note that Dectron Internationale, Inc's actual
results could differ materially from those in such forward-looking statements.
All dollar amounts stated throughout this Form-10QSB are in US dollars unless
otherwise indicated.
Results of Operations
Six month period ended July 31, 2000 compared to Six month period ended July 31,
1999.
Revenues for the six month period ended July 31, 2000 were $19,222,181,
a 34.58% increase over prior year of $14,282,994. A major part of this increase
is due to the consolidation of the Company's newly acquired division, Ipac 2000
Inc.
Gross profit increased by $1,572,556 to $6,058,228 over the same
period in 1999. This represents a slight increase of 0.11%, expressed in
relation to sales. Gross profit increased by 35.06% compared to an increase in
sales of 34.58% for the six month period ended July 31, 2000.
Selling and marketing expenses increased $821,648 for the six month
period ended July 31, 2000 from $1,734,945 to $2,556,593. This increase
reflects the costs of integrating Ipac's sales and marketing personnel and
related expenses into the Company's results. As a percentage of revenues,
selling and marketing expenses increased from 12.15% to 13.30% during the six
months ended July 31, 2000.
General and administrative expenses increased by $423,380 from $797,534
to $1,220,914. As a percentage of revenues, general and administrative increased
from 5.58% to 6.35%. The increase in dollar amount reflects the costs of
integrating Ipac's general and administrative expenses in the Company's results.
Amortization expenses increased by $226,989 from $520,015 to $747,004
As a percentage of revenues, amortization expenses increased from 3.64% to
3.89%.
Financing expenses increased by $571,844 from $173,763 to $745,607. As
a percentage of revenues, financing expenses increased from 1.22% to 3.88%. This
increase is due to new financing following the acquisition Ipac 2000 Inc. and of
new equipment in most of our major divisions.
Earnings before income taxes was $788,110, a decrease of $471,305
compared to the six month period ended July 31, 1999. Relative to sales,
earnings before income taxes decreased from 8.82% for the six month period ended
July 31, 1999 to 4.1% in the six month period ended July 31, 2000.
13
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Provisions for Income tax expenses as a percentage of taxable earnings
increased from 32.2% for the six month ended July 31, 1999 to 32.13% for 2000.
Tax expenses decreased by $152,297 mainly because of the decrease in taxable
income.
As a result of the above factors, the Company's net earnings decreased
from $853,883 to $534,875 a decrease of 37.36%.
Three month period ended July 31, 2000 compared to Three month period ended
July 31, 1999.
Revenues for the three month period ended July 31, 2000 were
$10,595,294, a 52.1% increase over prior year revenues of $6,966,199. A major
part of this increase is due to the consolidation of the Company's newly
acquired division, Ipac 2000 Inc.
Gross profit increased by $841,888 to $3,167,551 over the same period.
This represents a decrease of 3.48%, expressed in relation to sales. Gross
profit increased by 36.2% compared to an increase in sales of 52.1%.
Selling and marketing expenses increased $363,097 in the three month
period ended July 31, 2000. This increase reflects the costs of integrating
Ipac's sales and marketing personnel and related expenses into the Company's
results. As a percentage of revenues, selling and marketing expenses slightly
decreased from 12.58% to 11.70%
General and administrative expenses increased by $243,746 to $634,878.
As a percentage of revenues, general and administrative increased from 5.61% to
5.99%. The increase in dollar amount reflects the costs of integrating Ipac's
general and administrative expenses in the Company's results.
Amortization expenses increased by $139,511 from $266,831 to $406,342.
As a percentage of revenues, amortization expenses was stable at 3.8%.
Financing expenses increased by $363,047 from $85,351 to 448,398. As a
percentage of revenues, financing expenses increased from 1.23% to 4.23%. This
increase is due to new financing following the acquisition Ipac 2000 Inc. and of
new equipment in most of our major divisions.
Earnings before income taxes was $438,499, a decrease of $267,513
compared to the three month period ended July 31, 1999. Relative to sales,
income before income taxes decreased from 10.13% for the three month period
ended July 31, 1999 to 4.14% in the three month period ended July 31, 2000.
Provisions for Income tax as a percentage of taxable income increased
from 31.26% for the three month ended July 31, 1999 to 34.09% for 2000. Tax
expenses decreased by $71,151 mainly because of the decrease in taxable income.
As a result of the above factors, the Company's net earnings decreased
from $485,335 to $288,973, a decrease of 40.46%.
14
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Liquidity and Capital Resources
The Company had a positive net change in cash of $63,079 for the six
month period ended July 31, 2000. The principal sources of cash were an increase
in accounts payables in the amount of $1,191,355, advances of bank loans in the
amount of $2,553,388, advances from long-term debt of $1,771,153 and
depreciation and amortization of $747,004. Principal uses of cash were an
increase in accounts receivable in the amount of $1,626,654, acquisition of
assets in the amount of $4,214,440 and an increase in inventory in the amount
of $1,074,397.
The Company had a positive net change in cash of $292,952 for the six
month period ended July 31, 1999. The principal sources of cash were net
earnings of $853,883, advances of bank loans in the amount of $1,108,345 and
depreciation and amortization of $424,820. Principal uses of cash were the cost
of construction on the Company's new manufacturing facilities for $777,042, an
increase of $745,826 in prepaid expenses and sundry assets, an increase in
inventory in the amount of $392,879 and an increase in accounts receivable in
the amount of $388,647.
As at July 31, 2000, the Company had an aggregated line of credit of
$13,000,000 CDN, of which $8,169,555 U.S. was outstanding, bearing interest at
Cdn prime plus .25% with the National Bank of Canada.
15
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On July 28, 2000, the Company held its 1999 Annual Meeting of
Shareholders. At the annual meeting, the Company's shareholders were asked to
vote upon: (i) the election of seven directors to serve for the ensuing year;
and (ii) the appointment of an independent accounting firm for the ensuing year.
The following persons were elected as directors of the company for the
ensuing year by the votes next to such persons name:
For Withheld
Ness Lakdawala 1,896,407 35,300
Reinhold Kittler 1,896,407 35,300
Roshan Katrak 1,896,407 35,300
Mauro Parissi 1,896,407 35,300
Lenna Lakdawala 1,896,407 35,300
Richard Ness 1,896,407 35,300
Peter R. Richardson 1,896,407 35,300
Ness Lakdawala, Reinhold Kittler, Roshan Katrak, Mauro Parissi, Lenna Lakdawala,
Richard Ness and Peter R. Richardson were duly elected as Directors of the
Corporation to serve until the Annual Meeting of Stockholders in the year 2001
or until their respective successors have been duly elected and qualified.
Schwartz, Levitsky, Feldman, llp was approved to act as the Company's
independent chartered accountants for the ensuing year by the following vote:
For Against Abstain
1,896,407 300 0
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K.
The Company did not file any reports on Form 8-K during the three-month
period ended July 31, 2000.
16
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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.
Dated: September 14, 2000 By: /s/ Mauro Parissi
-------------------------------------
Mauro Parissi
Chief Financial Officer and Secretary
17
