UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
-----------
ANNUAL REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the year ended January 31, 2003
Commission File Number 001-14503
DECTRON INTERNATIONALE INC.
------------------------------------------------
(Exact name of registrant as specified in its charter)
Quebec, Canada N/A
------------------------------------------------- -------------------
(State of Incorporation 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 Exchange Act:
Common Stock, No Par Value
Redeemable Common Stock Purchase Warrants
-----------------------------------------
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 whether the Registrant is an accelerated filer
as defined in Rule 12b-2 of the Exchange Act. Yes | | No |X|
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-K or any
amendment to this Form 10-K. Yes X No __
The issuer's revenues for the most recent fiscal year were $ 36,883,064
The aggregate market value of the voting stock held by non-affiliates
of the registrant based upon the closing price on April 28, 2003 of $4.01 was
approximately $4,128,524
As of April 28, 2003, there were 2,919,500 shares of Common Stock, no
par value per share, outstanding.
Documents incorporated by reference: None.
DECTRON INTERNATIONALE INC.
2003 ANNUAL REPORT ON FORM 10-K/A
TABLE OF CONTENTS
PART I
Item 1. Business................................................................................. 1
Item 2. Properties............................................................................... 6
Item 3. Legal Proceedings........................................................................ 6
Item 4. Submission of Matters to Vote of Security Holders........................................ 6
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.................... 6
Item 6. Selected Financial Data.................................................................. 7
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.... 8
Item 7A. Quantitative and Qualitative Disclosures About Market Risk............................... 12
Item 8. Financial Statements and Supplementary Data.............................................. 12
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosures.............................................................................. 12
Item 9A. Controls and Procedures.................................................................. 13
PART III
Item 10. Directors and Executive Officers of the Registrant....................................... 13
Item 11. Executive Compensation................................................................... 15
Item 12. Security Ownership of Certain Beneficial Owners and Management........................... 18
Item 13. Certain Relationships and Related Transactions........................................... 20
Item 14. Principal Accounting Fees and Services................................................... 21
Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K.......................... 21
Signatures........................................................................................22
EXPLANATORY NOTE
Dectron is filing this amendment to its Form 10-KSB filed for the fiscal year
ended January 31, 2003 on Form 10-K/A to reflect that it was as of such date not
a "Small Business Issuer" as defined in Item 10 of Reg S-B. In consequence
thereof, Dectron has revised the disclosure contained in its Form 10-KSB to
comply with the requirements of Reg S-K. Dectron's financial statements were
filed in compliance with Reg S-K and are thus not included in this Form 10-K/A.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained herein including, without limitation,
those concerning (i) the strategy of Dectron Internationale Inc. ("Dectron"),
(ii) Dectron's expansion plans and (iii) Dectron's capital expenditures, contain
forward-looking statements (within the meaning of Section 27A of the Securities
Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") concerning Dectron's
operations, economic performance and financial condition. Because such
statements involve risks and uncertainties, actual results may differ materially
from those expressed or implied by such forward-looking statements. Factors that
could cause such differences include, but are not limited to, those discussed
under "Business." Dectron undertakes no obligation to publicly release the
result of any revisions to these forward-looking statements that may be made to
reflect any future events or circumstances.
EXCHANGE RATE DATA
Dectron maintains its books of account in Canadian dollars, but has
provided the financial data in this Form 10-K/A in United States dollars and on
the basis of generally accepted accounting principles as applied in the United
States, and Dectron's audit has been conducted in accordance with generally
accepted auditing standards in the United States. All references to dollar
amounts in this Form 10-K/A, unless otherwise indicated, are to United States
dollars.
The following table sets forth, for the periods indicated, certain
exchange rates based on the noon buying rate in New York City for cable
transfers in Canadian dollars. Such rates are the number of United States
dollars per one Canadian dollar and are the inverse of rates quoted by the
Federal Reserve Bank of New York for Canadian dollars per US$1.00. The average
exchange rate is based on the average of the exchange rates on the last day of
each month during such periods. On April 28, 2003, the exchange rate was
Cdn$0.6904 per US$1.00.
------------------------------- ---------------- ---------------- ---------------- ---------------- ----------------
Year Ended December 31, 1998 1999 2000 2001 2002
------------------------------- ---------------- ---------------- ---------------- ---------------- ----------------
Rate at end of period $0.6532 $0.6929 $0.6669 $0.6267 $0.6572
------------------------------- ---------------- ---------------- ---------------- ---------------- ----------------
Average rate during period 0.6745 0.6730 0.6733 0.6444 0.6388
------------------------------- ---------------- ---------------- ---------------- ---------------- ----------------
High 0.7061 0.6929 0.6984 0.6697 0.6596
------------------------------- ---------------- ---------------- ---------------- ---------------- ----------------
Low 0.6376 0.6582 0.6410 0.6241 0.6206
------------------------------- ---------------- ---------------- ---------------- ---------------- ----------------
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Unless otherwise indicated, all reference to "Dectron," "us," "our" and
"we" refer to Dectron Internationale Inc. and its wholly-owned subsidiaries:
Dectron Inc. ("Dectron Inc."), Dectron USA, Inc. ("Dectron USA"), Refplus Inc.
("Refplus"), Thermoplus Air Inc. ("Thermoplus"), Circul-Aire Inc.
("Circul-Aire"), IPAC 2000, Inc., ("IPAC") and International Water Maker's Inc
("IWM").
Overview
Dectron is located primarily in and around Montreal, Quebec, Canada.
Through our operating subsidiaries, Dectron Inc., Refplus, Thermoplus,
Circul-Aire, IPAC and IWM, we manufacture and supply an array of products for
the dehumidification, refrigeration, air conditioning and indoor air quality
("IAQ") markets. The products manufactured and supplied include mechanical
dehumidifiers and energy recovery systems through Dectron Inc., and
refrigeration and air conditioning systems through Refplus and Thermoplus.
Thermoplus also has a line of air filtration products. Circul-aire specializes
in air, gas, dust and fume filtration, IAQ and heat recovery. IPAC specializes
in precision cooling products, air conditioning products and compressed air
products. IWM owns a patented process to extract significant amounts of moisture
from the Air. IWM's products provide filtered, de-mineralized water to a variety
of applications.
We believe that we have structured Dectron in such a way that, other
than with respect to the raw materials required to make the components for our
products and certain specialty products, we are not dependent on outside
suppliers for fabricated parts for our products. We have invested significant
resources in our manufacturing equipment and as a result we can manufacture the
most important components for any of our fabricated products, regardless of
whether the product is standard or a custom design.
Dectron Inc.
Dectron Inc., the largest of the subsidiaries, was incorporated in 1977
to develop, manufacture and market standard and custom design dehumidification
equipment. After extensive research and development, Dectron Inc. introduced a
line of indoor pool and commercial dehumidifiers under its DRY-O-TRON TM
trademark. This product line has experienced tremendous success in North America
and as a result has allowed us to become, in our opinion, the leader in North
America's indoor pool dehumidification business. We believe that Dectron is now
one of North America's leading manufacturers of dehumidification and closed
looped energy recyclers.
Dectron Inc.'s standard products are now primarily manufactured by
Thermoplus. As a result, Dectron Inc. focuses its own manufacturing operations
on the manufacture of its customized dehumidification systems. We believe that
the customized product market is where our competitive advantage is most
evident. Ordinarily, with a customized product, it is often very difficult to
commit to an aggressive delivery date for the finished product. However, since
we manufacture many of the component parts in-house, we are able to commit to an
aggressive delivery schedule. We have taken the necessary steps to align
ourselves with several suppliers of our raw materials so that we are not
dependent on any one supplier. In addition, we store a sufficient inventory of
raw material to supply our immediate needs. Some of our customized product
customers include Celebration City, Walt Disney World in Florida and the
Goodwill Games.
Dectron Inc., through its subsidiary Dectron USA, operates a sales
office in the United States located in Roswell, Georgia. This office supports
the efforts of Dectron Inc.'s network of trained manufacturer's representatives
who sell Dectron Inc.'s products throughout the United States. Dectron Inc. also
has sales representatives throughout Canada and overseas. We invite our
independent sales representatives and their technicians to be trained and
certified by Dectron Inc.'s own technical staff at no cost to the attendees at a
training school run by Dectron. We also use the training school to both market
our products and demonstrate to potential buyers, first hand, the technical
excellence our employees have to offer as a service to our customers. We believe
that customer service and technical expertise are a large part of what sets us
apart from our competitors. We also market our products in trade magazines,
through industry associations and by attending trade shows where we display and
demonstrate many of our products.
Refplus
Refplus was incorporated in 1993 to manufacture high quality modular
commercial and industrial refrigeration and air conditioning equipment for
commercial and special applications. Its products include refrigeration systems,
condensers, coils, walk-in storage coolers and freezers. In addition, Refplus
manufactures all of the heat transfer coils used by Dectron Inc. Refplus'
primary customers are supermarkets and convenience or grocery stores. Refplus'
product line, is designed around hydrofluorocarbon refrigerants ("HFC"), and
features high quality products intended to meet the needs of a broad range of
customers. See "Industry Background."
Since inception, Refplus has manufactured some complex products for
application in fruit storage facilities, industrial baking facilities and blast
chillers for meat processing plants. We believe that our Refplus product lines
offer an excellent opportunity for future expansion. See "Expansion Plans."
Refplus has a network of sales representatives in Canada, however, the
majority of its sales are conducted through a network of independent
wholesalers. See "Sales and Marketing."
Thermoplus
In 1987, Keepkool Transfer de Chaleur Inc. ("Keepkool"), the former
parent company of Thermoplus, purchased the manufacturing facilities of York
International in St-Jerome, Quebec. Keepkool was owned by a group of investors
active in the heating, ventilation and air-conditioning ("HVAC") industry, which
group included Ness Lakdawala, our President and CEO, to manufacture air
conditioning systems. Since inception, Thermoplus has introduced and sold a
variety of HVAC product lines through a network of Canadian wholesalers. In
1995, Thermoplus introduced specialized product lines in the field of
dehumidification and specialized air conditioning.
Thermoplus' present product lines include dehumidification equipment,
water source air conditioners and heat pumps, portable or mobile air
conditioning equipment, industrial air handlers, air to fluid heat exchangers
and IAQ filtration products. These product lines are sold through a network of
Canadian wholesalers and HVAC representatives. Although Thermoplus' products are
sold throughout North America, with some exports outside of North America, the
majority of its revenues are derived from sales to Dectron Inc. We believe that
Thermoplus' product lines have growth potential, estimating that the present
potential for growth in both sales and manufacturing output is roughly 3 times
its present output. See "Expansion Plans."
Circul-Aire
In 1998, Dectron acquired the Circul-aire Group, consisting of Cascade
Technologies Inc. 9048-3140 Quebec, Inc. and its subsidiaries, and P.M. Wright
Ltd. (collectively referred to as "Circul-aire"). Circul-aire is considered one
of the pioneers of the air treatment industry and is a worldwide recognized
leader in the advanced technologies of gas-phase filtration and energy recovery.
Circul-aire's reputation has been built on years of research and development and
growing numbers of worldwide satisfied customers. Circul-aire's in house
laboratory and team of experienced engineers offer a systematic integrated
approach in solving ever changing and difficult environmental control problems.
Unique systems are designed and manufactured in Circul-aire's facilities to suit
specific applications. Equipment efficiency and filter media life is optimized
with Circul-aire's preventive maintenance program.
Circul-aire's Multi-Mix TM media and integrated systems are used to
reduce the odor and corrosion potential of commercial, institutional, sewage
treatment and industrial environments. Combined with air-to-air heat exchanger
options, Circul-aire's systems recuperate valuable energy from various
airstreams. All Circul-aire systems are engineered and manufactured to withstand
the most severe industrial environments, including those containing corrosive
gases.
IPAC
IPAC was acquired by Dectron in September 1999. IPAC specializes in the
business of precision cooling products, air conditioning products and compressed
air products, and manufactures industrial products, heat transfer products,
compressed air products, engineered systems sheet metal fabrication and painting
products. We believe that IPAC's products, such as steam traps for steam coils
in HVAC systems, complement and complete our existing product lines. IPAC also
provides us with a manufacturing facility in the United States and opens a new
market to Dectron, the compressed air market, in which we believe IPAC to be
well established.
2
INTERNATIONAL WATER MAKER'S INC.
In July 2002, Dectron acquired International Water Maker's Inc. IWM
owns a patented process to extract significant amounts of moisture from the air.
Dectron believes this unique technology surpasses any other water-generation
technology currently on the market, given that using minimal energy, it provides
filtered, de-mineralized water to a variety of applications.
IWM has products designed specifically for residential, commercial,
institutional, agricultural, military and specialized industrial applications.
For instance, its MRU product line - which has been deemed "Best Practice" by
one of the top three oil production companies - provides a unique system of
on-line cleaning for gas turbine blades that results in sustained high
operating-efficiency and cost-savings for offshore and onshore oil platforms.
IWM complements Dectron's line of products by adding a water filtration
process to our extensive line of air filtration products thereby placing Dectron
in a unique position of filtering both air and water contaminates.
Industry Background; Product Application
Dectron is aware of an increased public movement to encourage healthy
environments in all public places and the resulting market potential for its
products. For example, the hazards of second hand smoke have led to the ban of
cigarette smoking in most public areas. The public's demands have also been
focused on finding engineered solutions to ensure a healthy and comfortable
environment in schools and in the workplace. The theme has become much wider in
scope and has gained recognition as IAQ.
The American Society of Heating, Refrigeration and Air Conditioning
Engineers ("ASHRAE") is the organization that sets ventilation standards in the
heating, refrigeration and air-conditioning industries for the United States and
Canada. ASHRAE has revised and re-drafted virtually all of the previous
ventilation standards with the objective to meet the public demand for healthier
indoor environments and to eliminate potential health hazards such as the
much-publicized "Sick Building Syndrome." These standards are found in Article
62-1989R "Standard for Acceptable Ventilation Rates" ("62-1989R") and have
gained the acceptance and support of many important and related institutions
such as the International Society for Indoor Air Quality ("ISIAQ") and other
worldwide environmental associations.
We believe that the standards in 62-1989R will have a far-reaching
effect on the fresh air requirements for all new and existing public buildings
in Canada and the United States. These standards specify, among other things,
that 5 to 20 cubic feet per minute (CFM) per person of fresh air should be
introduced into all public places. The exact amount depends on the level of
activity and the capacity of the space in question.
As a result, a market has been created by these new fresh air
requirements. HVAC experts agree that the biggest challenge and key to avoid
"Sick Building Syndrome" is to introduce fresh air and to remove humidity from
the air. Moisture and humidity has been identified as one of the main causes of
health hazards such as Legionnaire's Disease.
Heightened IAQ awareness has created a niche market for new product
development. Dectron has developed a product line of "Make-Up Air Dehumidifiers"
that we believe can solve what we perceive as the two main problems in IAQ:
moisture and humidity. Dectron's products are capable of bringing the required
amounts of outdoor air into public areas while at the same time dehumidifying
the air, thus addressing the problems of moisture and humidity.
Our engineers have designed our products for the IAQ market with a
reversible Water Source Heat Pump, a commonly used heating system that can be
easily connected to the popular water loop systems found today in almost every
building in every major North American city. We believe that Dectron's Make-Up
Air Dehumidifiers represent the most economical solution to meet the new
standards for healthy buildings, and have the potential to become one of our
most important and fastest growing products lines, along with our swimming pool
dehumidifiers.
3
In addition, we intend to aggressively market Thermoplus' Air
Filtration & Purification product line that we believe offers a comprehensive
solution to IAQ in industrial and non-industrial applications.
Our goal is to aggressively expand into the IAQ market, while
continuing to maintain and expand the individual markets we currently serve.
Business Strategy
Our objective is to become North America's leading supplier of
dehumidification, refrigeration and other IAQ products, and to develop a strong
international sales network. As we intensify our marketing efforts, we will
continue to attempt to increase our market share for our various products. We
intend to place special emphasis in the short term on our Refplus products in
the United States to address the need for HFC refrigeration, and on Thermoplus'
Make-Up Air and Air Filtration & Purification products for the IAQ market.
Sales and Marketing
Our current sales and marketing efforts take place at the subsidiary
level, with each subsidiary taking its own approach with respect to its
products.
Dectron Inc. markets its products on several levels. Dectron Inc.
markets its products directly through trade magazines and industry associations,
as well as by attending and demonstrating its products at numerous trade shows
throughout North America. Regionally, Dectron Inc. markets its products through
non-employee sales representatives who enjoy exclusive rights to their
respective sales regions. At present, Dectron Inc. has approximately 120
regional representatives throughout North America, and expects to add more in
2004. Internationally, Dectron Inc. has sales coverage in England, Portugal,
Israel, Kuwait and Taiwan. We believe that while the international markets
provide tremendous growth opportunities for us, it is important to first develop
a strong support network.
Thermoplus' advertising and marketing is limited because the majority
of its revenues are derived from sales made to Dectron Inc. and Refplus.
Thermoplus primarily sells its products through wholesalers in Canada, and
through manufacturing representatives, one based in Canada and the other based
in the United States. However, we also market Thermoplus' products, including
its Air Filtration & Purification product line for the IAQ market, through
Dectron Inc.'s sales representatives.
Refplus' marketing and advertising is currently done almost exclusively
through trade magazines. Most of its sales are through wholesalers and original
equipment manufacturers. Generally, Refplus does not sell directly to the end
user. Its sales force currently consists of service personnel who are based at
Dectron's headquarters, outside sales people based in Canada and in the United
States, and two sales agencies covering Canada and the United States with
approximately 22 representatives. We believe that with the phasing out of
hydrochlorofluorocarbons ("HCFC") refrigeration products and the legislative
push towards HFC refrigeration products (such as Refplus products), Refplus'
product line is well suited for an aggressive growth commitment.
Circul-aire markets its products on several levels. In Canada, its
products are sold through a network of sales agents that cover every province
and major market area. In the United States, Circul-aire's products (air
filtration and energy recuperation) are sold through a network of core
representation organizations. We are presently looking for additional
representatives to more fully cover the United States market.
In Asia and Europe, Circul-aire's market is extended through agents
located in each major market. Circul-aire has also opened branch offices staffed
with sales, engineering and service personnel in Jakarta, Indonesia, Bangalore,
India and Vancouver, Canada.
Circul-aire advertises in industry journals, magazines, and its website
where prospective customers can obtain information on its products and also
actively participates in trade associations and tradeshows.
4
IPAC markets its products through regional representatives in the
United States and Canada.
IMW markets its products through its internal sales force.
Expansion
We have grown from a single product and single-market company into a
group of companies that cover a full range of humidity control, IAQ control,
energy recycling and refrigeration products and air purification, and have the
production potential for both custom engineered and mass-produced products. We
believe that the introduction of a complete line of products to penetrate all
segments of the IAQ market will put us in the unique position of being one of
the only fully integrated companies of our kind. We expect that with a strong
sales and marketing strategy to promote these and other subsequent products, we
will experience a period of substantial growth, although there can be no
assurance thereof. We plan to continuously inform our current and new targeted
customers about our products through technical seminars, product exhibitions and
publication of major events in industry journals.
We intend to strengthen our position in the United States by
establishing multiple regional sales and distribution offices. We believe that
our active presence in the United States with Dectron products will allow us to
closely track the performance of our products in the market and will help
solidify alternate distribution networks for our Refplus product. We also intend
to aggressively pursue other international markets, starting with South America,
followed by the Caribbean and Mexico.
The present need for specialized IAQ equipment in North America
represents a market, estimated by our management to be in the multi-million
dollar range, in which only a limited number of companies have presently taken
the lead. We believe that with our team of engineering and design specialists,
Dectron can be on the leading edge as a manufacturer and supplier of specialized
IAQ equipment into the next century.
Competition
The industries in which we compete are highly competitive. We compete
against a number of local, regional and national manufacturers in each of our
business segments, many of these competitors have been in existence longer than
us and some of which have substantially greater financial resources than us. We
believe that competition from new entrants, especially in the IAQ markets will
come, if at all, from large corporations which may be able to compete with us on
the basis of price, and as a result may have a material adverse affect on our
results of operations. In addition, there can be no assurance that other
companies will not develop new or enhanced products that are either more
effective than our products, or would render our products non-competitive or
obsolete.
Employees
As of April 28, 2003, Dectron (including our subsidiaries) employed a
total of approximately 486 full-time employees, 5 of which are in executive
positions, 58 of whom are engaged in engineering and research and development,
63 of whom are engaged in sales and related services, 24 of whom are in
administration, and the remainder of which are in production. An in-house union
represents 41 of our employees, all of which work at Thermoplus. Certain terms
of their employment are part of a collective bargaining agreement that expires
in 2005. Management considers its relations with its employees to be
satisfactory.
Patents and Trademarks
We have three United States and two Canadian patents. The patents
expire between 2007 and 2015. Three of the patents relate to swimming pool
dehumidifiers. One relates to the Method and Apparatus for Controlling Heat
Rejection in a Refrigeration System, and the other to the Extraction of Moisture
from Air.
We have trademarked the names "Dectron" and "Dry-O-Tron" in both the
United States and Canada. The trademarks come up for renewal between 2007 and
2015. We also hold the trademark in "MultiMix" and "MM Multi-Mix" in the United
States and Canada. The MultiMix and MMMulti-Mix trademarks will be due for
renewal in the year 2014. In addition, we hold the trademark in "CIRCUL-AIRE" in
the United States and Canada, which was renewed in 1999.
5
ITEM 2. PROPERTIES
We maintain our executive office at leased premises located at 4300
Poirier Blvd., Montreal, Quebec H4R 2C5. This lease expires January 31, 2005. We
also have eight manufacturing facilities, of which five are leased and three are
owned. Seven of our manufacturing facilities are located in or near Montreal,
Quebec, and one is located in Niagara Falls, New York. The manufacturing
facilities, which we own, are located in St. Jerome, Quebec, Boucherville,
Quebec, and Niagara Falls, New York. The facilities are in good condition and do
not require any significant capital expenditure. We maintain property insurance
on the three owned manufacturing facilities in an amount that we believe to be
sufficient. Of the five leased facilities, two of the leases expire on January
31, 2005, one June 30, 2010, one October 31, 2016 and one December 31, 2006. We
also lease, for a monthly rent of $946, a 1,000 square foot sales facility in
Roswell, Georgia. In addition, we lease, for a monthly rent of approximately
$1,418 a 3,700 square foot sales and warehousing facility in Toronto, Ontario.
And also, we lease a 1,000 square foot facility in Pompano Beach Florida, for
approximately $1,400. Our facilities have an aggregate of approximately 471,000
square feet. We pay an aggregate of approximately $42,044 rent per month. We
believe that suitable additional space will be available in the future on
commercially reasonable terms.
We are seeking International Quality Standard ISO-9001 certification
for our Dectron Inc. facility and International Quality Standard ISO-9002
certification for our Thermoplus facility. ISO 9001 and ISO 9002 require the
facility to meet certain stringent requirements established in Europe but
adopted throughout the world, which ensure that facilities' manufacturing
processes, equipment and associated quality control systems will satisfy
specific customer requirements. We believe that ISO certification will benefit
us in the markets in which we compete. There is no assurance that ISO
certification will be obtained in the near future, if at all.
ITEM 3. LEGAL PROCEEDINGS
There are no material legal proceedings now pending or threatened
against the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to the vote of the security holders.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
Our common stock and warrants are traded on the Nasdaq SmallCap Market
and the Boston Stock Exchange and have been so traded since the completion of
our initial public offering on October 5, 1998. Our common stock is listed on
the Nasdaq SmallCap Market under the symbol "DECT" and on the Boston Stock
Exchange under the Symbol "DRN." Our warrants are listed on the Nasdaq SmallCap
Market under the symbol "DECT W" and on the Boston Stock Exchange under the
Symbol "DRN&W." As of April 28, 2003, we had 2,919,500 shares of common stock
and 1,210,000 warrants outstanding. The following table sets forth the high and
low sales prices for our common stock and warrants as reported on the Nasdaq
SmallCap Market.
6
COMMON STOCK WARRANTS
--------------------- ---------------------
High Low High Low
-------- -------- -------- --------
Fiscal year ended January 31, 2003 $7.40 $3.200 $1.150 $0.070
First quarter (2/1/02 thru 4/30/02) $7.400 $5.500 $1.150 $0.690
Second quarter (5/1/02 thru 7/31/02) $5.600 $4.100 $0.990 $0.300
Third quarter (8/1/02 thru 10/31/02) $5.120 $3.200 $0.820 $0.210
Fourth quarter (11/1/02 thru 1/31/03) $5.550 $4.700 $0.540 $0.070
Fiscal year ended January 31, 2002: $7.450 $2.770 $1.120 $0.110
First quarter (2/1/01 thru 4/30/01) $4.125 $3.250 $0.500 $0.130
Second quarter (5/1/01 thru 7/31/01) $3.950 $2.770 $0.500 $0.120
Third quarter (8/1/01 thru 10/31/01) $7.450 $3.050 $1.120 $0.110
Fourth quarter (11/1/01 thru 1/31/02) $6.400 $4.280 $0.850 $0.500
As of April 28, 2003 there were 32 shareholders of record and
approximately 500 beneficial owners.
On April 28, 2003, the last sale price of our common stock and warrants
as reported on the Nasdaq SmallCap Market was $4.01 and $0.13 respectively.
Dividend Policy
We have never paid or declared dividends on our common stock. The
payment of cash dividends, if any, in the future, is within the discretion of
our Board of Directors and will depend on our earnings, capital requirements,
financial condition and other relevant factors. We intend to retain future
earning for use in our business.
ITEM 6. SELECTED FINANCIAL DATA
Year ended January 31,
-----------------------------------------------------------------------
1999 2000 2001 2002 2003
---- ---- ---- ---- ----
Consolidated Statement of Operations Data:
Net revenues 20,495,340 31,402,954 33,958,558 31,939,002 36,883,064
Costs of revenues 13,697,360 20,168,656 21,937,386 20,845,612 25,159,527
Gross profit 6,797,980 11,234,298 12,021,172 11,093,390 11,723,537
Selling, general and administrative, and 5,157,589 9,197,760 11,309,530 11,371,534 10,956,559
amortization
(Loss) income from operations 1,640,391 2,036,538 711,642 (278,144) 766,978
Other (expense) income, net (132,342)
(Loss) income from continuing operations before 1,640,391 2,036,538 711,642 (278,144) 634,636
income taxes and extraordinary gain
(Benefit from) provision for income taxes 511,210 909,775 82,503 (229,879) (194,386)
(Loss) income before extraordinary gain and 1,129,181 1,126,763 629,139 (48,265) 440,250
discontinued operations
Extraordinary gain
Cumulative effect of change in accounting principle
Preferred stock dividends
Increase to income available to common
stockholders from repurchase of preferred stock
Net (loss) income from discontinued operations, - - 228,287 95,330 105,276
net of tax
Gain on disposal of discontinued operations, net - - - - 590,686
of tax
Net (loss) income available to common stockholders 1,129,181 1,126,763 857,426 47,065 1,136,212
Basic (loss) income per share 0.54 0.40 0.31 0.02 0.40
(Loss) income per share assuming dilution 0.54 0.40 0.31 0.02 0.40
Weighted average shares outstanding 2,082,781 2,795,000 2,795,000 2,795,000 2,816,181
Weighted average shares outstanding assuming 2,082,781 2,795,000 2,795,000 2,795,000 2,848,729
dilution
Pro forma basic (loss) earnings per share assuming 0.38 0.09 0.40
the accounting change is applied retroactively
Pro forma (loss) earnings per share assuming the 0.38 0.09 0.40
accounting change is applied retroactively,
assuming dilution
7
At January 31,
------------------------------------------------------------------------------
1999 2000 2001 2002 2003
---- ---- ---- ---- ----
Consolidated Balance Sheet Data:
Working (deficit) capital 4,046,890 4,821,024 4,849,309 3,985,574 5,073,305
Total assets 19,381,087 27,985,089 35,159,985 30,560,638 34,401,437
Long-term debt 1,531,872 4,657,838 6,722,601 5,170,364 5,322,309
Total liabilities 10,834,464 18,061,615 24,814,040 20,710,292 22,568,531
Stockholders' equity 8,546,623 9,923,474 10,345,945 9,850,346 11,832,906
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the selected historical financial data, financial statements and notes
thereto and the other historical financial information of Dectron contained
elsewhere in this Annual Report on Form 10-K/A. The statements contained in this
Annual Report on Form 10-K/A that are not historical 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's expectations, intentions, beliefs or strategies regarding
the future. Forward-looking statements include Dectron's statements regarding
liquidity, anticipated cash needs and availability and anticipated expense
levels. All forward-looking statements included in this prospectus are based on
information available to Dectron on the date hereof, and Dectron assumes no
obligation to update any such forward-looking statement. It is important to note
that Dectron's actual results could differ materially from those in such
forward-looking statements.
Overview
Dectron has been in operation since June 1977 and has grown from a
single product and single market company into a group of manufacturers in order
to address the three most important factors affecting indoor air conditions:
temperature, humidity and contaminant control. We secure our contracts through a
network of representatives. We are not dependent upon any major customer for a
significant portion of its revenues.
Dectron's objective is to become a leading force in the IAQ market by
addressing combined technology niche applications and by providing superior
engineering services and product quality. Dectron intends to devote significant
efforts to the development of equipment for the IAQ market. Management
anticipates that the IAQ market will have enormous growth in the next 25 years.
We believe that there is a need in the North American market for specialized IAQ
equipment and this represents a tremendous opportunity. Notwithstanding the
present economic slowdown, Management foresees a stable market demand,
particularly in the humidity and temperature control side of the business.
Dectron has two subsidiaries that each specialize on a particular
market segment of the IAQ market, Circul-aire, a manufacturer of contaminant
control solutions, and IPAC, a manufacturer of precision air conditioning
equipment.
Results of Operations
Fiscal year ended January 31, 2003 ("Fiscal 2003") compared to fiscal year ended
January 31, 2002 ("Fiscal 2002")
Revenues for the year ended January 31, 2003 were $36,883,064, a 15.5%
increase over prior year revenues of $31,939,002.
Gross profit increased by $630,147 to $11,723,537 over the same period.
In comparison to the 15.5% increase in revenue gross profit increased by 5.7%.
8
Operating expenses decreased by $414,975 during Fiscal 2003.
Selling and marketing expenses decreased $475,394 in Fiscal 2003. As a
percentage of revenues, selling and marketing expenses decreased to 12.3% from
16.8%.
General and administrative expenses increased by $562,808 to
$3,655,127. As a percentage of revenues, general and administrative increased to
9.9% from 9.7% of sales.
Depreciation decreased by $211,701 to $1,356,364. As a percentage of
sales, depreciation decreased to 3.7% from 4.9%.
Financing expenses decreased by $290,688 from $1,341,308 to $1,050,620.
As a percentage of revenues, financing expenses decreased from 4.2% to 2.8%.
Earnings from operations increased by $1,045,122 from a loss of
$278,144 to earnings of $766,978.
Earnings before income taxes and discontinued operations increased to
$634,636 compared to a loss of $278,144 for fiscal 2002.
Tax expenses increased by $424,265 because mainly of an increase in
taxable income.
Earnings before discontinued operations in Fiscal 2003 was $440,250, an
increase of $488,515 from Fiscal 2002 loss of $48,265.
Earnings from discontinued operations net of taxes in Fiscal 2003 was
$105,276, an increase of $9,946 from Fiscal 2002.
Gain on discontinued operations, net of taxes in Fiscal 2003 was
$590,686, compared to none in Fiscal 2002.
As a result, Dectron reported net income of $1,136,212.
Fiscal year ended January 31, 2002 ("Fiscal 2002") compared to fiscal year ended
January 31, 2001 ("Fiscal 2001")
Revenues for the year ended January 31, 2002 were $31,939,002, a 5.9%
decrease over prior year revenues of $33,958,558.
Gross profit decreased by $927,882 to $11,093,390 over the same period.
In comparison to the 5.9% decrease in revenue gross profit decreased by 7.7%.
Operating expenses increase by $62,004 in 2002.
Selling and marketing expenses increased $51,378 in Fiscal 2002. As a
percentage of revenues, selling and marketing expenses increased to 16.8% from
15.6%.
General and administrative expenses increased by $56,999 to $3,092,319.
As a percentage of revenues, general and administrative increased to 9.7% from
8.9% of sales.
Depreciation increased by $46,907 to $1,568,065 due to the addition of
capital assets. As a percentage of sales, depreciation increased to 4.9% from
4.5%.
Financing expenses decreased by $93,280 from $1,434,588 to $1,341,308.
As a percentage of revenues, financing expenses remained stable at 4.2%.
Loss before income taxes and discontinued operations was $278,144 for
2003 compared to earnings of $711,722 in fiscal 2001.
9
Tax expenses decreased by $312,382 mainly because of the decrease in
taxable income and loss carry forwards.
Loss before discontinued operations in fiscal 2002 was $48,265, a
decrease of $677,504 from earnings of $629,239 in fiscal 2001.
Earnings from discontinued operations net of taxes in fiscal 2002 was
$95,330, a decrease of $132,957 from fiscal 2001.
As a result, Dectron reported net income of $47,065.
Fiscal year ended January 31, 2001 ("Fiscal 2001") compared to fiscal ended year
January 31, 2000 ("Fiscal 2000")
Revenues for the year ended January 31, 2001 were $35,061,903, a 11.7%
increase over prior year revenues of $31,402,954. This increase was in part due
to stable conditions in Dectron's principal market, the United States of
America, and also stable economic conditions also in Canada, Dectron's secondary
market, and 12 months of results of IPAC 2000.
Gross profit increased by $1,130,075 to $12,364,373 over the same
period. In comparison to the 11.7% increase in revenue gross profit slightly
increased by 0.5%.
Operating expenses increased significantly during fiscal year 2001.
Selling and marketing expenses increased $47,808 in Fiscal 2001. As a
percentage of revenues, selling and marketing expenses decreased to 15.1% from
16.7%.
General and administrative expenses increased by $1,030,848 to
$3,096,053. As a percentage of revenues, general and administrative increased to
8.8% from 6.5% of sales. Both percentage and dollar amount increases were due
partly to the integration of IPAC's personnel.
Depreciation increased by $333,496 to $1,521,158 due to the addition of
capital assets. As a percentage of sales, depreciation increased from 3.7% to
4.3% in fiscal 2001.
Financing expenses increased by $784,574 from $674,287 to $1,458,861.
As a percentage of revenues, financing expenses increased from 2.1% to 4.1%.
Income before income taxes was $969,887 a decrease of $1,066,651 over
the comparative period. Relative to sales, income before income taxes decreased
from 6.5% in Fiscal 2000 to 2.8% in Fiscal 2001.
Income tax expenses as a percentage of taxable income decreased from
44.6% for 2000 to 11.6% for 2001. Tax expenses decreased by $797,314 mainly
because of the decrease in taxable income and loss carry forwards.
As a result, Dectron reported net income of $857,426, a decrease of
1.1% in relation to sales.
Liquidity and Capital Resources
-------------------------------
In Fiscal 2003, the Company generated a positive cash flow from
operating activities of $208,028 due mainly to depreciation and amortization. In
Fiscal 2002, the Company generated a positive cash flow from operating
activities of $2,056,741 due mainly to lower accounts receivable and inventory
level
The principal sources of cash were depreciation and amortization in the
amount of $1,356,364 and income tax payable in the amount of $684,578. The
principal uses of cash were an increase in account receivable of $1,860,796.
10
Cash flow from investing activities increased by $329,585 mainly as a
result of the proceeds from the sale of a division in the amount of $961,640.
The principal use of cash was for the acquisition of equipment for a total of
$565,828.
Financing activities provided net cash flow in the amount of $190,366.
The principal source of cash was from bank loans in the amount of $861,368 and
issuance of shares in the amount of $502,300. The principal uses of cash flow
from financing were repayments of long-term debt in the amount of $884,960.
Net cash flow provided after all activities was $751,746
Fiscal 2003
In Fiscal 2003, the Company's secured credit arrangement with National
Bank of Canada remained in place as follows. This facility included an
aggregated credit line of Cdn $16,500,000 of which Cdn $8,250,000 can be
financed through Bankers Acceptance. The amount available to the Company is
equal to 75% of "eligible accounts receivable" as defined in the Line of Credit
Agreement, plus 50% of the inventory values, net of work in process, up to a
maximum advance against inventory of approximately Cdn $7,500,000. Dectron's
borrowings under the line of credit bears interest at Canadian prime plus .25%,
which at January 31, 2003 amounted to 4.5%. Interest on any borrowings is
payable monthly. The Company is in full compliance with all of the banking
covenants (including financial covenants and ratios) and is required to report
to its bankers on a monthly basis. The Company finances its operations mainly
through the use of Bankers Acceptance bearing an average lending rate of prime.
All borrowings are collateralized by the assets of the Company.
In April 2002, the company renegotiated a mortgage note and an
equipment note and replaced them with a new loan of $1,983,330 with National
Bank of Canada bearing interest at 7.18%.
In June 2002, the Company entered into a financial lease for an amount
of $400,000 bearing interest at 6.989%.
In August 2002, the Company entered into a financial lease for an
amount of $97,925 bearing interest at 6.025%.
In October 2002, the Company entered into a financial lease for an
amount of $267,896 bearing interest at 6.275%.
Fiscal 2002
In Fiscal 2002, the Company renewed a secured credit arrangement with
National Bank of Canada. This new facility included an aggregated credit line of
Cdn $16,500,000 of which Cdn $8,250,000 can be financed through Bankers
Acceptance. The amount available to the Company is equal to 75% of "eligible
accounts receivable" as defined in the Line of Credit Agreement, plus 50% of the
inventory values, net of work in process, up to a maximum advance against
inventory of approximately Cdn $7,500,000. Dectron's borrowings under the Line
of credit bears interest at Canadian prime plus .25%, which at January 31, 2003
amounted to 3.25%. Interest on any borrowings is payable monthly. The Company is
in full compliance with all of the banking covenants (including financial
covenants and ratios) and is required to report to its bankers on a monthly
basis. The Company finances its operations mainly through the use of Bankers
Acceptance bearing an average lending rate of prime. All borrowings are
collateralized by the assets of the Company.
Fiscal 2001
In Fiscal 2001, the Company renewed a secured credit arrangement with
National Bank of Canada. This new facility included an aggregated credit line of
Cdn $13,000,000 of which Cdn $6,000,000 can be financed through bankers
acceptance. The amount available to the Company is equal to 75% of "eligible
accounts receivable" as defined in the Line of Credit Agreement, plus 50% of the
inventory values, net of work in process, up to a maximum advance against
inventory of approximately $5,000,000. Dectron's borrowings under the Line of
credit bears interest at Canadian prime plus .25%, which at January 31, 2001
amounted to 7.25%. Interest on any borrowings is payable monthly. The Company is
in full compliance with all of the banking covenants (including financial
covenants and ratios) and is required to report to its bankers on a monthly
basis. The Company finances its operations mainly through the use of Bankers
Acceptance bearing an average lending rate of prime. All borrowings are
collateralized by the assets of the Company.
11
In Fiscal 2001, the Company also secured credit arrangement with
National Bank of Canada in New York. This new facility included an aggregated
credit line of US $1,250,000. The amount available to the Company is equal to
80% of "eligible accounts receivable" as defined in the Line of Credit
Agreement, plus 60% of the inventory values, net of work in process, up to a
maximum advance against inventory of approximately $625,000. Dectron's
borrowings under the Line of credit bears interest at American prime plus .5%.
Interest on any borrowings is payable monthly.
In February 2000, Dectron renegotiated a bank loan and replaced it with
a term loan in the amount of $2,527,000 USD bearing interest at the Bank's
American Prime Rate plus 1% for a term of 5 years and a mezzanine loan in the
amount of $1,000,000 USD bearing interest at the Bank's American Prime Rate
plus 3% for a term of three years.
In February 2000, the Company entered into a mortgage note in the
amount US$1,652,000 and equipment note in the amount of US$406,000 with the
National Bank of Canada both bearing interest a American prime plus .75%.
In August 2000, the Company entered into a note agreement with National
Bank of Canada for the purchase of new equipment bearing interest at the
American prime rate plus .75%.
In August 2000, the Company entered into two financial leases for a
total amount of Cdn $951,420 to finance equipment, both bearing interest at
8.48%.
In November 2000, the Company entered into two term loans for a total
of $700,000 to finance capital acquisitions bearing interest at prime plus .75%.
Foreign Exchange
The Company is a Canadian company with U.S. sales amounting to
approximately 55% of it's total sales while the majority of Dectron's expenses
are incurred in Cdn $. Due to the relatively high proportion of sales in U.S.$,
Dectron's results could be adversely affected by upward variations in the value
of the Canadian dollar. As of January 31, 2003, the Company did not have a
formal foreign exchange policy in effect.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk related to fluctuations in interest rates on our
debt. Increase in prevailing interest rates could increase our interest payment
obligations relating to variable rate debt. For example, a 100 basis point
increase in interest rates would increase our annual interest expense by
$120,000.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Form 10-KSB filed with the Commission on May 1, 2003 as well as the
Explanatory Note hereto.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
We have had no changes in or disagreements with our accountants.
12
ITEM 9A. CONTROLS AND PROCEDURES
Our Chief Executive Officer and Chief Financial Officer have concluded, based on
their evaluation within 90 days of the filing date of this report, that our
disclosure controls and procedures are effective for gathering, analyzing and
disclosing the information we are required to disclose in our reports filed
under the Securities Exchange Act of 1934. There have been no significant
changes in our internal controls or in other factors that could significantly
affect these controls subsequent to the date of the previously mentioned
evaluation.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16 (a) OF THE EXCHANGE ACT
The officers and directors of Dectron, and further information
concerning them, are as follows:
Name Age Position
----------------- ------ ---------------------------------------------------------------------------
Ness Lakdawala 69 Chairman of the Board of Directors, President and Chief Executive Officer
Roshan Katrak 59 Vice President of Human Relations and Director
Mauro Parissi 37 Chief Financial Officer, Secretary and Director
Michel Lecompte 53 Vice President of Operations of Refplus
Leena Lakdawala 35 Executive Vice President and Director
Liam Cheung 33 Director
Gilles Richard 64 Director
Each director is elected for a period of one year at our annual meeting
of stockholders and serves until the next such meeting and until his or her
successor is duly elected and qualified. Directors may be re-elected annually
without limitation. Officers are appointed by, and serve at the discretion of,
our Board of Directors (the "Board"). The board of directors met 3 times during
the year ended January 31, 2003.
Set forth below is a biographical description of each of our directors
and executive officers based on information supplied by each of them.
Ness Lakdawala has served as the President, Chief Executive Officer and
Chairman of Dectron since our inception, and has also served as the President
and Chief Executive Officer of Dectron Inc. since 1994. Prior to joining Dectron
Inc., Mr. Lakdawala was President of Blanchard Ness Limited, a company which he
founded in 1976. From 1987 to present, Mr. Lakdawala has served as the President
of Thermoplus. In January 1996, Thermoplus filed a proposal under the provisions
of the Bankruptcy Act which gave full payment to secured creditors who filed a
proof of claim. From 1987-1988, Mr. Lakdawala was Chairman of the Heating
Refrigeration Air Conditioning Institute of Canada. Mr. Lakdawala has also
served as the Governor of the American Society of Heating, Refrigeration and Air
Conditioning Engineers, Inc. ("ASHRAE"), the organization that sets ventilation
standards in Canada and the United States. Mr. Lakdawala is currently a member
of ASHRAE and the Refrigeration Service Engineers Society. Ness Lakdawala is the
husband of Roshan Katrak and the father of Leena Lakdawala.
13
Roshan Katrak has served as Vice President of Human Relations of
Dectron since our inception, and has served in the same capacity with Dectron
Inc. since 1994. She has also served as a Director of Dectron since 1998. From
1976 to 1994, she was a Director of Blanchard Ness Limited, and from 1987 to
present has been Vice President of Human Relations for Thermoplus. In January
1996, Thermoplus filed a proposal under the provisions of the Bankruptcy Act
which gave full payment to secured creditors who filed a proof of claim. Mrs.
Katrak received her Honors Degree in Psychology in 1964. Roshan Katrak is the
wife of Ness Lakdawala and the mother of Leena Lakdawala.
Mauro Parissi, C.A. has served as the Chief Financial Officer,
Secretary and a Director of Dectron since our inception, and has also served as
the Controller of Dectron Inc. since 1996. From 1995-1996, Mr. Parissi was an
auditor with the firm of Mizgala & Cie. From 1990-1995, Mr. Parissi was an
auditor with the firm of Hart, David Lloyd, F.C.A., C.I.P. Mr. Parissi is
currently a member of The Canadian Institute of Chartered Accountants and The
Order of Chartered Accountants of Quebec. Mr. Parissi received his graduate
diploma in Public Accountancy from McGill University in 1995.
Michel Lecompte has served as the Vice President of Operations since
our inception and President of Refplus since 1994. From 1977 to 1994, Mr.
Lecompte was with Blanchard Ness as both Chief Engineer and Estimator. Mr.
Lecompte was involved in estimating commercial and industrial HVAC systems as
well as updating operating and maintenance procedures to improve existing
equipment efficiency. Mr. Lecompte also provided technical guidance to
construction departments and identified evaluated and resolved problems. Mr.
Lecompte is a member of ASHRAE and is a voting member of ASHRAE's Technical
Committee which establishes worldwide acceptance of HVAC standards. In addition,
Mr. Lecompte conducts many HVAC seminars focusing on refrigeration and heat
recovery. Mr. Lecompte is also a member of the Refrigeration Service Engineers
Society.
Leena Lakdawala has served as Executive Vice President and a Director
of Dectron since our inception, and has also served as Vice President of
Production and Administration for Dectron Inc. since 1994. She is currently a
member of the Heating Refrigeration and Air Conditioning Institute. Mrs.
Lakdawala received her B.A from Concordia University in 1993. Leena Lakdawala is
the daughter of Ness Lakdawala and Roshan Katrak.
Liam Cheung has served as a Director of Dectron since 2001. Since 2002,
Mr. Cheung is the Executive Vice-President and Chief Operating Officer for
Penson Financial Services Canada Inc., a firm offering technical and operational
services to investment dealers in Canada. From 1997 to 2002, Mr. Cheung was the
President and Founder of IC Education, a new economy e-learning company
delivering leading edge technology through a unique combination of business,
education and technology. From 1992 to 1997, he served as Executive
Vice-President, Fixed Income of Marleau, Lemire Securities Inc. From 1990 to
1992, Mr. Cheung was an actuarial specialist for Towers Perrin. Mr. Cheung
received a Bachelor of Mathematics with Distinction from the University of
Waterloo in 1990, is an Associate of the Society of Actuaries and also holds
Certified Financial Analyst Designation.
Gilles Richard has served as a Director of Dectron since 2001. Mr.
Richard is a semi-retired businessman who was previously the President of Le
Circuit Lincoln Mercury, the sixth largest dealership in Canada. Mr. Richard was
also involved with partner in a distributorship of lift-truck (Mitsubishi's
M-Lift), two computer companies which created software applications car
dealership, and most recently the construction of commercial and residential
buildings. Over the years, Mr. Richard was a director or officer of various
organizations such as the Nada (National Automobile Association) and CADA
(Canadian Automobile Association).
AUDIT COMMITTEE
The Company's board of directors has an audit committee comprised of Mauro
Parissi, Liam Cheung and Gilles Richard. The audit committee makes
recommendations to the board of directors regarding the independent auditors for
the Company, approves the scope of the annual audit activities of the Company's
independent auditors, review audit results and will have general responsibility
for all of the Company's auditing related matters.
Indemnification of Officers and Directors
Our Bylaws provide that we shall indemnify to the fullest extent
permitted by Canadian law our directors and officers (and former officers and
directors). Such indemnification includes all costs and expenses and charges
reasonably incurred in connection with the defense of any civil, criminal or
administrative action or proceeding to which such person is made a party by
reason of being or having been our officer or director if such person was
substantially successful on the merits in his or her defense of the action and
he or she acted honestly and in good faith with a view to our best interests,
and if a criminal or administrative action that is enforced by a monetary
penalty, such person had reasonable grounds to believe his or her conduct was
lawful.
14
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, may be permitted our directors, officers and
controlling persons and our underwriters pursuant to the foregoing provisions,
or otherwise, we have been advised that, in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the Securities Act of 1933, as amended, and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by us of expenses, incurred or paid by one of our directors,
officers or controlling persons in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person or by
our underwriters in connection with the securities being registered, we will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933, as amended, and will be governed by the final
adjudication of such issue.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Exchange Act requires Dectron's officers and
directors, and persons who own more than 10 percent of the registered class of
Dectron's equity securities to file reports of ownership on Forms 3, 4 and 5
with the SEC. Officers, directors and greater than 10 percent shareholders are
required by SEC regulation to furnish Dectron with copies of all Forms 3, 4 and
5 they file. Based solely upon its review of any such reports furnished to
Dectron, Dectron believes that during the fiscal year ended January 31, 2003,
such persons made all required filings.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth certain information regarding compensation paid
by Dectron during each of the last three fiscal years to our Chief Executive
Officer and to each of our executive officers who earned in excess of $100,000
during the year ended January 31, 2003.
Summary Compensation Table
Name and Principal Year Annual Salary (1) Bonus Restricted Options/ Other
Position Stock Awards SAR's Compensation
--------------------------- ---------- ------------------ ---------- ----------------- ----------- -----------------
Ness Lakwadala 2003 $142,380 - - - - - - - - - - - -
Chairman of the Board of 2002 $142,380 - - - - - - - - - - - -
Directors, President, and
Chief Executive Officer 2001 $140,647 - - - - - - - - - - - -
(1) This reflects the aggregate salaries paid to Mr. Lakdawala during the fiscal
years presented by Dectron, Refplus and Thermoplus.
Employment Agreements
We entered into an employment agreement with Mr. Ness Lakdawala, our
Chief Executive Officer on October 5, 1998, the effective date of our initial
public offering. The employment agreement is for a term of two years, renewable
for additional one-year periods. The employment agreement entitled Mr. Lakdawala
to an annual salary of $200,000, adjusted annually for increases in the Consumer
Price Index. In the event that we are subject to a takeover or a change of
control event, Mr. Lakdawala is entitled to a bonus equal, on an after tax
basis, to five times his then current annual base salary. Mr. Lakdawala's
employment agreement contains a non-competition provision, which forbids him
from engaging in a competitive business during his employment and for a period
of one year thereafter. Mr. Lakdawala's employment agreement was extended for an
additional two years on the same conditions as above in October 2000 and for an
additional two years on the same conditions in October 2002.
15
We do not currently have employment agreements with any of our other
officers or directors.
Board Compensation Report
Executive Compensation Policy
Dectron's executive compensation policy is designed to attract,
motivate, reward and retain the key executive talent necessary to achieve our
business objectives and contribute to our long-term success. In order to meet
these goals, Dectron's compensation policy for our executive officers focuses
primarily on determining appropriate salary levels and providing long-term
stock-based incentives. To a lesser extent, the Dectron's compensation policy
also contemplates performance-based cash bonuses. Dectron's compensation
principles for the Chief Executive Officer are identical to those of Dectron's
other executive officers.
Cash Compensation. In determining its recommendations for adjustments
to officers' base salaries for Fiscal 2003, we focused primarily on the scope of
each officer's responsibilities, each officer's contributions to Dectron's
success in moving toward its long-term goals during the fiscal year, the
accomplishment of goals set by the officer and approved by the Board for that
year, our assessment of the quality of services rendered by the officer,
comparison with compensation for officers of comparable companies and an
appraisal of our financial position. In certain situations, relating primarily
to the completion of important transactions or developments, we may also pay
cash bonuses, the amount of which will be determined based on the contribution
of the officer and the benefit to Dectron of the transaction or development.
Equity Compensation. The grant of stock options to executive officers
constitutes an important element of long-term compensation for the executive
officers. The grant of stock options increases management's equity ownership in
us with the goal of ensuring that the interests of management remain closely
aligned with those of our stockholders. The Board believes that stock options in
Dectron provide a direct link between executive compensation and stockholder
value. By attaching vesting requirements, stock options also create an incentive
for executive officers to remain with us for the long term.
Chief Executive Officer Compensation
As indicated above, the factors and criteria upon which the
compensation of Ness Lakdawala, our Chief Executive Officer, is based are
identical to the criteria used in evaluating the compensation packages of the
other executive officers of Dectron. The Chief Executive Officer's individual
contributions to Dectron include his leadership role in establishing and
retaining a strong management team, developing and implementing our business
plans and attracting investment capital to Dectron. In addition, we have
reviewed compensation levels of chief executive officers at comparable companies
within our industry.
Other Compensation
Outside directors may be paid an honorarium for attending meetings of
the Board of Directors of Dectron, in an amount that management anticipates will
not exceed $500 per meeting.
Stock Option Plans
1999 Stock Option Plan
We have adopted a Stock Option Plan (the "1999 Plan") pursuant to which
650,000 shares of Common Stock are reserved for issuance, 241,500 options are
currently issued and outstanding.
16
On September 2, 1999, the Board granted options under our 1999 Stock
Option Plan to certain members of our Board and certain employees. Leena
Lakdawala, Roshan Katrak, Mauro Parissi, and Richard Ness were granted 60,000,
60,000, 18,000 and 8,000 options, respectively. Subject to certain limitations,
the options granted are exercisable one year after issuance. Subsequent to the
one-year anniversary date of the grant, the option holders may exercise the
option up to 25% per year of the total options granted for the following four
years. Each of the options will be fully exercisable on November 4, 2003, and
expire on November 4, 2004. The exercise price of the options is $3.00.
The 1999 Plan is administered by the Board of Directors, who will
determine, among other things, those individuals who shall receive options, the
time period during which the options may be partially or fully exercised, the
number of shares of Common Stock issuable upon the exercise of the options and
the option exercise price.
The 1999 Plan is effective for a period of five years, expiring in
2003. Options may be granted to officers, directors, consultants, key employees,
advisors and similar parties who provide us with their skills and expertise. The
1999 Plan is designed to enable management to attract and retain qualified and
competent directors, employees, consultants and independent contractors. Options
granted under the 1999 Plan may be exercisable for up to five years, and shall
be at an exercise price all as determined by the Board. Options are
non-transferable except by the laws of descent and distribution or a change in
control of Dectron, as defined in the 1999 Plan, and are exercisable only by the
participant during his or her lifetime. Change in control includes (i) the sale
of substantially all of the assets of Dectron and merger or consolidation with
another company, or (ii) a majority of the Board changes other than by election
by the stockholders pursuant to Board solicitation or by vacancies filled by the
Board caused by death or resignation of such person.
If a participant ceases affiliation with Dectron by reason of death,
permanent disability or retirement at or after age 70, the option remains
exercisable for one year from such occurrence but not beyond the option's
expiration date. Other types of termination allow the participant three months
to exercise, except for termination for cause, which results in immediate
termination of the option.
The exercise price of an option may not be less than the fair market
value per share of Common Stock on the date that the option is granted in order
to receive certain tax benefits under the Income Tax Act of Canada (the "ITA").
The ITA requires that the exercise price of all future options will be at least
85% of the fair market value of the Common Stock on the date of grant of the
options. A benefit equal to the amount by which the fair market value of the
shares at the time the employee acquires them exceeds the total of the amount
paid for the shares or the amount paid for the right to acquire the shares shall
be deemed to be received by the employee in the year the shares are acquired
pursuant to paragraph 7(1) of the ITA. Where the exercise price of the option is
equal to the fair market value of the shares at the time the option is granted,
paragraph 110(1)(d) of the ITA allows a deduction from income equal to one
quarter of the benefit as calculated above. If the exercise price of the option
is less than the fair market value at the time it is granted, no deduction under
paragraph 110(1)(d) is permitted. Options granted to any non-employees, whether
directors or consultants or otherwise will confer a tax benefit in contemplation
of the person becoming a stockholder pursuant to subsection 15(1) of the ITA.
Options under the 1999 Plan must be issued within five years from the
effective date of the 1999 Plan.
Any unexercised options that expire or that terminate upon an
employee's ceasing to be employed by Dectron become available again for issuance
under the 1999 Plan.
The 1999 Plan may be terminated or amended at any time by the Board of
Directors, except that the number of shares of Common Stock reserved for
issuance upon the exercise of options granted under the 1999 Plan may not be
increased without the consent of our stockholders.
2001 Stock Option Plan
We also adopted the 2001 Stock Option Plan (the "2001 Plan") pursuant
to which 500,000 shares of Common Stock are reserved for issuance, 115,500
options are currently issued and outstanding.
17
On January 4, 2002, the Board granted options under our 2001 Stock
Option Plan to certain members of our Board and certain employees. Leena
Lakdawala, Roshan Katrak, Mauro Parissi, Liam Cheung, and Gilles Richard were
granted 15,000, 15,000, 5,000, 3,000 and 3,000 options, respectively. Subject to
certain limitations, the options granted are exercisable one year after
issuance. Subsequent to the one-year anniversary date of the grant, the option
holders may exercise the option up to 25% per year of the total options granted
for the following four years. Each of the options will be fully exercisable on
January 4, 2006, and expire on January 4, 2007. The exercise price of the
options is $4.20.
The 2001 Plan is administered by the Board of Directors, who will
determine, among other things, those individuals who shall receive options, the
time period during which the options may be partially or fully exercised, the
number of shares of Common Stock issuable upon the exercise of the options and
the option exercise price.
The 2001 Plan is effective for a period of ten years, expiring in 2011.
Options may be granted to officers, directors, consultants, key employees,
advisors and similar parties who provide us with their skills and expertise. The
2001 Plan is designed to enable management to attract and retain qualified and
competent directors, employees, consultants and independent contractors. Options
granted under the 2001 Plan may be exercisable for up to ten years, and shall be
at an exercise price all as determined by the Board. Options are
non-transferable except by the laws of descent and distribution or a change in
control of Dectron, as defined in the 2001 Plan, and are exercisable only by the
participant during his or her lifetime. Change in control includes (i) the sale
of substantially all of the assets of Dectron and merger or consolidation with
another company, or (ii) a majority of the Board changes other than by election
by the stockholders pursuant to Board solicitation or by vacancies filled by the
Board caused by death or resignation of such person.
If a participant ceases affiliation with Dectron by reason of death,
permanent disability or retirement at or after age 70, the option remains
exercisable for one year from such occurrence but not beyond the option's
expiration date. Other types of termination allow the participant three months
to exercise, except for termination for cause, which results in immediate
termination of the option.
The exercise price of an option may not be less than the fair market
value per share of Common Stock on the date that the option is granted in order
to receive certain tax benefits under the Income Tax Act of Canada (the "ITA").
The ITA requires that the exercise price of all future options will be at least
85% of the fair market value of the Common Stock on the date of grant of the
options. A benefit equal to the amount by which the fair market value of the
shares at the time the employee acquires them exceeds the total of the amount
paid for the shares or the amount paid for the right to acquire the shares shall
be deemed to be received by the employee in the year the shares are acquired
pursuant to paragraph 7(1) of the ITA. Where the exercise price of the option is
equal to the fair market value of the shares at the time the option is granted,
paragraph 110(1)(d) of the ITA allows a deduction from income equal to one
quarter of the benefit as calculated above. If the exercise price of the option
is less than the fair market value at the time it is granted, no deduction under
paragraph 110(1)(d) is permitted. Options granted to any non-employees, whether
directors or consultants or otherwise will confer a tax benefit in contemplation
of the person becoming a stockholder pursuant to subsection 15(1) of the ITA.
Options under the 2001 Plan must be issued within ten years from the
effective date of the 2001 Plan.
Any unexercised options that expire or that terminate upon an
employee's ceasing to be employed by Dectron become available again for issuance
under the 2001 Plan.
The 2001 Plan may be terminated or amended at any time by the Board of
Directors, except that the number of shares of Common Stock reserved for
issuance upon the exercise of options granted under the 2001 Plan may not be
increased without the consent of our stockholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of April 28, 2003
with respect to each beneficial owner of 5% or more of the outstanding shares of
our common stock, each of our officers and directors, and all of our officers
and directors as a group:
18
Names and Address of Beneficial Owner Amount and Nature of Percentage of Shares
Owner(1) Beneficial Ownership (2) Outstanding
-------------------------------------- --------------------------- ----------------------
Ness Lakdawala 1,722,269 (3) 58%
Roshan Katrak 1,722,269 (4) 58%
Mauro Parissi 44,850 (5) 1.5%
Leena Lakdawala 100,050 (6) 3.4%
Michel Lecompte 18,974 (7) *
Liam Cheung 2,750 (8) *
Gilles Richard 1,050 (9) *
All directors and officers as a group 1,889,943 65.3%
(7 persons) (3)-(9)
* Less than 1%
(1) The address of each individual is c/o Dectron Internationale Inc., 4300
Poirier Blvd., Montreal, Quebec, Canada H4R 2C5.
(2) Based upon information furnished to us by the directors and executive
officers or obtained from our stock transfer books. We are informed that these
persons hold the sole voting and dispositive power with respect to the common
stock except as noted herein. For purposes of computing "beneficial ownership"
and the percentage of outstanding common stock held by each person or group of
persons named above as of the date of this annual report, any security which
such person or group of persons has the right to acquire within sixty (60) days
after such date is deemed to be outstanding for the purpose of computing
beneficial ownership and the percentage ownership of such person or persons, but
is not deemed to be outstanding for the purpose of computing the percentage
ownership of any other person.
(3) Represents (i) 43,561 shares of Common Stock directly owned, (ii) 67,395
shares of Common Stock and 48,750 options to purchase Common Stock owned by
Roshan Katrak, Mr. Lakdawala's wife, (iii) 69,684 shares of Common Stock owned
by Roshaness Inc., a company owned by Mr. Lakdawala, and (iv) 1,492,879 owned by
3103-7195 Quebec Inc., a company owned by Mr. Lakdawala's spouse and children.
(4) Represents (i) 67,395 shares of Common Stock and 48,750 options to purchase
Common Stock directly owned, (ii) 43,561 shares of Common Stock owned by Ness
Lakdawala, Ms. Katrak's husband, (iii) 69,684 shares of Common Stock owned by
Roshaness Inc., a Company owned by Ness Lakdawala, and (iv) 1,492,879 shares
owned by 3103-7195 Quebec Inc., a company owned by Ms. Katrak and her children.
(5) Includes 5,750 options to purchase Common Stock.
(6) Includes 40,250 options to purchase Common Stock.
(7) Includes 2,500 options to purchase Common Stock
(8) Includes 750 options to purchase Common Stock.
(9) Includes 750 options to purchase Common Stock
19
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
We lease our St. Hubert, Quebec manufacturing facility from Roshan
Katrak, our Vice President of Human Relations and the wife of Ness Lakdawala,
our President, Chairman and CEO, for a monthly rent of $3,069 per month. We
believe that the lease was made on terms no less favorable than could be
obtained from unaffiliated third parties.
We lease our Grande Allee manufacturing facilities from Investiness
Inc., a company owned by Ness Lakdawala's spouse and children, for an aggregate
monthly lease payment of $14,788. We believe that the lease was made on terms no
less favorable than could be obtained from unaffiliated third parties.
Immediately prior to the effective date of the Registration Statement
for our initial public offering (the "Offering"), we restructured our corporate
structure ("Restructuring"). In order to complete the Restructuring, (i) Dectron
Inc., which prior to the Restructuring owned a majority interest in Refplus,
acquired the minority interests in Refplus, which included both common stock and
preferred stock (and assumed Refplus' loan payables of approximately
Cdn$125,000) which is included in the Cdn$1,149,050 number mentioned below) in
exchange for 62,500 shares of Dectron's Common Stock and Cdn$102,503; (ii)
Dectron Inc. acquired all of the outstanding securities of Thermoplus, which
included both Common Stock and preferred stock, and assumed Thermoplus' parent
company's loan payables (approximately Cdn$497,000, which amount is included in
the Cdn$1,149,050 number mentioned below) in exchange for 194,621 shares of
Dectron's Common Stock and Cdn$423,738, and (iii) Dectron acquired all of the
issued and outstanding securities of Dectron Inc. in exchange for 1,492,879
shares of the Dectron's Common Stock. The shares of Dectron Inc. were owned by
159653 Canada, Inc. which was a holding company beneficially owned by Mr.
Lakdawala. The Refplus and Thermoplus' parent company loans payable represent
the repayment of loans made to such companies. In connection with the
Restructuring, we issued 1,750,000 shares of Common Stock and promissory notes
in the aggregate amount of Cdn$1,149,050. Of this amount, Cdn$557,050 (or
approximately U.S.$400,000) were repaid out of the proceeds of the Offering. Of
these amounts, an aggregate amount of 1,674,059 shares of Common Stock and
promissory notes in the aggregate amount of Cdn$592,000 were issued to Ness
Lakdawala, and his affiliates. The Cdn$592,000 was repaid out of Dectron's cash
flow, without interest, in 12 equal monthly installments which repayment
commenced three months after the Offering.
Mr. Lakdawala and his affiliates received their 1,674,059 shares of
Dectron for contributing their interest in Dectron's subsidiaries. Specifically,
Mr. Lakdawala's affiliate received 1,492,879 shares in exchange for 100% of
159653 Canada Inc., which owned 100% of Dectron Inc. prior to the Restructuring;
156,808 shares for a portion of their shares of KeepKool which represented 86%
of KeepKool (KeepKool owned 94% of Thermoplus prior to the Restructuring); and
24,372 share for his shares of 3294242 Canada Inc. which represented 61% of
3294242 (3294242 owned 49.99% of Refplus, Inc. prior to the Restructuring).
Dectron Inc. owned 50.01% of Refplus Inc. prior to the Restructuring. The two
promissory notes totaling Cdn$592,000 were issued to Mr. Lakdawala and his
affiliates in exchange for Cdn$222,000 of debt owed to Mr. Lakdalawa by KeepKool
and Cdn$370,000 for a portion of his shares of KeepKool.
The terms of the Restructuring were negotiated between Mr. Lakdawala
and the other owners of the minority interest in Refplus and Thermoplus. Mr.
Lakdawala and his affiliates held a majority interest in Thermoplus prior to the
Restructuring. Dectron owned a majority interest in Refplus prior to the
Restructuring and Mr. Lakdawala owned a majority of the 49.99% interest in
Refplus purchased by Dectron in the Restructuring. The value was arrived at
based on negotiations between Dectron and the sellers (other than Mr. Lakdawala
and his affiliates). Dectron did not have two independent disinterested
directors to ratify the transactions. There can be no assurance that such
transaction was on terms no less favorable than Dectron could have obtained from
other third parties, although management believes that they were as favorable.
Between March and June 2000, we made loans of $152,441 to Mauro
Parissi, our Chief Financial Officer, and $162,109 to Leena Lakdawala, our
Executive Vice-President. The loans were used to finance purchase of the
Dectron's stock and bore interest at the Canadian prescribed interest rate of
five percent (5%). As of Jan. 31, 2003, the loan balances of Mr. Parissi and Ms
Lakdadawala are $128,701 and, $195,932 respectively.
All future material transactions, including any loans, between Dectron
and its officers, directors, principal stockholders or affiliates of any of them
have been and will be on terms no less favorable to Dectron than those that can
be obtained from unaffiliated third parties, and will be approved in advance by
a majority of the independent and disinterested directors who had access, at
Dectron's expense, to Dectron's or independent legal counsel.
20
ITEM 14. PRINCIPAL ACCOUNTANT'S FEES AND SERVICES
Aggregate fees billed to our company for the fiscal years ended December 31,
2003 and 2002 by our principal accountant, Schwartz Levitsky Feldman, all
expressed in US Dollars, are as follows:
2003 2002
Audit Fees $ 66,117.13 $ 43,996.73
Audit-Related Fees - - - $ 2,890.30
Tax Fees $ 7,346.35 $ 4,174.87
All Other Fees $ 20,882.79 (1) - - -
Total $ 94,346 $ 51,062
(1) Consisting of fees charged for assistance in preparing our budget.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements.
Filed in conformity with Reg S-K on the Registrants's Form 10-KSB on
May 1, 2003.
(b) Reports on Form 8-K.
None.
(c) Exhibits.
99.1 - Certification Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 by Ness Lakdawala, Chairman, President and CEO.
99.2 - Certification Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 by Mauro Parissi, Chief Financial Officer
21
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.
By: /s/ Ness Lakdawala
------------------
Ness Lakdawala
Chairman and Chief Executive Officer
Dated: April 30, 2004
22
CERTIFICATIONS
I, Ness Lakdawala, certify that:
1. I have reviewed this annual report on Form 10-K/A of Dectron Internationale
Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying 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 annual report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and
c) Presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying 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 and material weaknesses in internal controls; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual 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: April 30, 2004
/s/ Ness Lakdawala
----------------------------------------
Ness Lakdawala
Chairman, President and Chief Executive Officer
23
CERTIFICATIONS
I, Mauro Parissi, certify that:
1. I have reviewed this annual report on Form 10-K/A of Dectron Internationale
Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying 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 annual report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and
c) Presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying 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 and material weaknesses in internal controls; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual 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: April 30, 2004
/s/ Mauro Parissi
----------------------------------------
Mauro Parissi
Chief Financial Officer
24