<PAGE>


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

                     ANNUAL REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                       For the year ended January 31, 2001

                        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            (I.R.S. Employer Identification No.)
 Jurisdiction of Incorporation or
 Organization)


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 if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-B is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB.
Yes X       No __
    -

         The issuer's revenues for the most recent fiscal year were $35,061,903.

         The aggregate market value of the voting stock held by non-affiliates
of the registrant based upon the closing price on April 26, 2001 of $3.60 was
approximately $3,277,825.

         As of April 26, 2001, there were 2,795,000 shares of Common Stock, no
par value per share, outstanding.

         Documents incorporated by reference: None.

<PAGE>



                           DECTRON INTERNATIONALE INC.
                        2001ANNUAL REPORT ON FORM 10-KSB

                                TABLE OF CONTENTS


                                     PART I
<TABLE>
<S>               <C>
Item 1.           Business........................................................................................4
Item 2.           Properties......................................................................................9
Item 3.           Legal Proceedings..............................................................................10
Item 4.           Submission of Matters to Vote of Security Holders..............................................10

                                     PART II

Item 5.           Market for Registrant's Common Equity and Related Stockholder Matter ..........................11
Item 6.           Management's Discussion and Analysis of Financial Condition and Results of Operations..........12
Item 7.           Financial Statements...........................................................................17
Item 8.           Changes in and Disagreements with Accountants on Accounting and Financial Disclosures..........17

                                    PART III

Item 9.           Directors and Executive Officers of the Registrant.............................................18
Item 10.          Executive Compensation.........................................................................21
Item 11.          Security Ownership of Certain Beneficial Owners and Management.................................24
Item 12.          Certain Relationships and Related Transactions.................................................25
Item 14.          Exhibits, Financial Statement Schedules and Reports on Form 8-K................................27

Signatures        ...............................................................................................28
</TABLE>



                                       2
<PAGE>


                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-KSB 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-KSB, 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$1.00. The average
exchange rate is based on the average of the exchange rates on the last day of
each month during such periods. On April 26, 2001, the exchange rate was Cdn$
0.6470 per US$ 1.00.


<TABLE>
<CAPTION>

Year Ended December 31,                    1996        1997        1998          1999          2000
-----------------------                    ----        ----        ----          ----          ----
<S>                                      <C>         <C>          <C>           <C>           <C>
Rate at end of period                    $0.7299     $0.6991      $0.6532       $0.6929       $0.6669

Average rate during period                0.7353      0.7223       0.6745        0.6730        0.6733

High                                      0.7212      0.6945       0.7061        0.6929        0.6984

Low                                       0.7526      0.7467       0.6376        0.6582        0.6410
</TABLE>


                                       3

<PAGE>

                                     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"), Klaasco ("Klaasco"),
Circul-aire ("Circul-aire"), IPAC 2000, Inc., ("IPAC") and Groupe Prodapec 2000
Inc.

Overview

         Dectron is located primarily in and around Montreal, Quebec, Canada.
Through our operating subsidiaries, Dectron Inc., Refplus, Thermoplus, Klaasco,
Circul-aire and IPAC, 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. Klaasco is
responsible for producing the bulk of our special steel enclosures, electrical
control panels, and other steel products. However, each of our manufacturing
subsidiaries has the capability of doing their own sheet metal work.

         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

                                       4

<PAGE>


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 small network of sales representatives in Canada,
however, the majority of its sales are conducted through a network of
independent wholesalers.

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


                                       5
<PAGE>

systems are engineered and manufactured to withstand the most severe industrial
environments, including those containing corrosive gases.


 Klaasco

              In 1989, Dectron acquired Klaasco, which has been an in-house
manufacturer of a wide range of metal products for more than 20 years. Most of
Klaasco's product demand has been special enclosures, electrical control panels,
control room consoles, shelters and busbars. Although most of Klaasco's products
are manufactured for Dectron Inc., it does manufacture some metal products for
sales to unaffiliated companies. We believe that the acquisition of Klaasco was
an important strategic decision and it has given us the quality assurance,
product control and a significantly greater ability to meet aggressive delivery
deadlines.

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.

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 new 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.



                                       6
<PAGE>


         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 product lines, along with our swimming pool
dehumidifiers.

         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
2001. 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.



                                       7
<PAGE>


         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.

         Klaasco does not currently market a significant amount of its products
to outside purchasers. The majority of Klaasco's revenues are derived from sales
to Dectron Inc.

         IPAC markets its products through regional representatives in the
United States and Canada.

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
compete on various basis, including price, quality and ability to meet delivery
schedules. Dectron Inc. competes with, among others, DesertAire and Engineered
Air, and Refplus and Thermoplus compete with, among others, Cancoil and
Keeprite. Circul-aire competes with, among others, Purafil and Unisob. IPAC
competes with, among others, Pomona and Canatal. 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.



                                       8
<PAGE>


Employees

         As of April 26, 2001, Dectron (including our subsidiaries) employed a
total of approximately 449 full-time employees, 5 of which are in executive
positions, 48 of whom are engaged in engineering and research and development,
47 of whom are engaged in sales and related services, 43 of whom are in
administration, and the remainder of which are in production. 56 of our
employees, all of which work at Thermoplus, are represented by an in-house
union. 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 two United States and two Canadian patents. The patents expire
between 2007 and 2015. Three of the patents relate to swimming pool
dehumidifiers and the other relates to the Method and Apparatus for Controlling
Heat Rejection in a Refrigeration System.

         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.

Recent Events

         Dectron has signed an exclusive option to purchase a Florida company.
By combining Dectron's expertise in production, engineering and sales with this
company's technology, we believe that such company is poised to open an exciting
new market in creating water from air. We further believe that Dectron's
acquisition program, proven manufacturing capability and new capacity has
uniquely positioned Dectron in the forefront of this new and exciting market.

         During Fiscal 2001, Dectron also purchased Groupe Prodapec 2000 Inc.,
one of its regional sales representatives in the Montreal, Quebec region.

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 nine additional manufacturing facilities, of which seven are leased
and three are owned. Nine 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 seven leased facilities, three of the leases
expire on January 31, 2005. , one June 30, 2010, one January 31, 2003, one
December 31, 2001 and the last one March 31, 2006. We also lease, for a monthly
rent of $667, a 1,000 square foot sales facility in Roswell, Georgia. In
addition, we lease, for a monthly rent of approximately $834, a 3,700 square
foot sales and warehousing facility in Toronto, Ontario. And also, we lease a
4,000 facility in St-Hippolyte, Quebec for approximately $ 661. Our facilities
have an aggregate of approximately 410,000 square feet. We pay an aggregate of
approximately $41,420 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-9001certification 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.



                                       9
<PAGE>


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.



                                       10
<PAGE>


                                     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 26, 2001, we had 2,795,000 shares
of common stock and 1,150,000 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.


<TABLE>
<CAPTION>
                                                     COMMON STOCK                      WARRANTS
                                                 High            Low             High            Low
<S>                                             <C>             <C>             <C>             <C>
Fiscal year ended January 31, 2001:             $5.688          $2.000          $0.875          $0.125

First quarter (2/1/00 thru 4/30/00)             $4.250          $3.000          $0.875          $0.375

Second quarter (5/1/00 thru 7/31/00)            $3.063          $2.000          $0.625          $0.250

Third quarter ( 8/1/00 thru 10/31/00)           $5.688          $2.000          $0.750          $0.125

Fourth quarter ( 11/1/00 thru 1/31/01)          $4.625          $3.750          $0.500          $0.250


Fiscal year ended January 31, 2000:             $5.25           $2.250          $0.938          $0.188

First quarter (2/1/99 thru 4/30/99)             $5.25           $2.250          $0.938          $0.188

Second quarter (5/1/99 thru 7/31/99)            $2.938          $2.281          $0.500          $0.250

Third quarter ( 8/1/99 thru 10/31/99)           $4.688          $2.875          $0.625          $0.313

Fourth quarter ( 11/1/99 thru 1/31/00)          $3.938          $2.531          $0.625          $0.313
</TABLE>


         As of April 26, 2001, there were 48 shareholders of record and
approximately 6 beneficial owners.

         On April 26, 2001, the last sale price of our common stock and warrants
as reported on the Nasdaq SmallCap Market was $3.60 and $0.50 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.




                                       11
<PAGE>



ITEM 6.  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-KSB. The statements contained in this
Annual Report on Form 10-KSB 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

         The Company 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. The Company secures its contracts
through a network of representatives. The Company is 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. The Company 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. The Company believes 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.

         During the last 30 months, the company has acquired two companies each
specializing on a particular market segment of the IAQ market. In 1998 the
company acquired Circul-aire a manufacturer of contaminant control solutions.
The addition of Circul-aire along with its chemical filtration technology
continues to provide significant strategic value Dectron.

         In 1999, the company acquired IPAC, a manufacturer of precision air
conditioning equipment. Management believes that demand for this segment has
decreased significantly due to a slowdown in the telecommunications and
Information Technology Markets.

Results of Operations

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.



                                       12
<PAGE>


         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 personal.

         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.

         Dectron realized good financial results in Fiscal 2000 and Fiscal 1999
that fell within our expectations, although compared with previous years, our
net margins were negatively affected by future investments incurred in Fiscal
2001. Our business plan called for (1) increasing international presence through
an extensive marketing campaign, (2) decreasing backlog by bringing on more
plant capacity and (3) innovating our product lines through acquisitions and
continuing research and development.

         Most of the negative impact on our margins has already been absorbed
and this year the positive financial effect of the investment will begin to be
realized, which we believe will position Dectron for bottom line growth.

Fiscal year ended January 31, 2000 ("Fiscal 2000") compared to fiscal ended year
January 31, 1999 ("Fiscal 1999")

         Revenues for the year ended January 31, 2000 were $31,402,954, a 53.2%
increase over prior year revenues of $10,907,614. This increase was in part due
to very good economic conditions in Dectron's principal market, the United
States of America, good economic conditions also in Canada, Dectron's secondary
market and contributions from Dectron's newly acquired division IPAC and 12
months of results of the Circul-aire Group.

         Gross profit increased by $4,436,318 to $11,234,298 over the same
period. This represents an increase of 2.6%, expressed in relation to sales.
Compared to the increase in sales of 53.2%, the gross profit increased by 65.3%
due to improve control over costs.



                                       13
<PAGE>


         Selling and marketing expenses increased $2,535,511 in Fiscal 2000.
This Increase reflects the costs of additional personnel and marketing expenses
necessitated by sales growth. Also, it reflects the integration of Circul-aire's
and IPAC's personal and a concerted effort from The Company to increase its
visibility by participating in a record amount of industrial shows. As a
percentage of revenues, selling and marketing expenses increased to 16.7% from
13.3%.

         General and administrative expenses increased by $735,729 to
$2,065,155. As a percentage of revenues, general and administrative increased to
6.5% from 6.4% of sales. Both percentage and dollar amount increases were due
partly to the integration of both Circul-aire's and IPAC's personal.

         Depreciation increased by $453,918 to $1,187,662 due to the acquisition
of Circul-aire's and IPAC's assets. As a percentage of sales, depreciation
increase from 3.5% to 3.7% in fiscal 2000.

         Financing expenses increased by $315,013 from $359,274 to $674,287. As
a percentage of revenues, financing expenses increased from 1.7% to 2.1%

         Income before income taxes was $2,036,538 an increases of $396,147
over the comparative period. Relative to sales, income before income taxes
decreased from 8.0% in Fiscal 1999 to 6.5% in Fiscal 2000.

         Income tax expenses as a percentage of taxable income increased from
31.2% for 1999 to 44.6% for 2000. Tax expenses increased by $398,565 mainly
because of the increase in taxable income.

         As a result of the above factors, Dectron's net income decreased from $
1,129,181 to $ 1,126,763, a decrease of 0.2%.


Liquidity and Capital Resources


         In Fiscal 2001, the Company generated a negative cash flow from
operating activities of $237,152 due mainly to higher accounts receivable and
inventory level. In Fiscal 2000, the Company generated a negative cash flow from
operating activities of $1,606,430 due mainly to higher accounts receivable and
the implementation of a stocking program.

         The principal source of cash was an increase in accounts payable of
$2,075,335, net income of $857,426, and amortization and depreciation in the
amount of $1,521,158. Accounts payable increased because of the increased volume
in business. Amortization and depreciation increased due to investment in
capital assets. The principal uses of cash were an increase in accounts
receivable of $1,919,376 and increase in inventory of $2,529,719. Increases in
accounts payable, accounts receivable, inventory and non-cash items are also
affected by the consolidation of Dectron's latest acquisition, IPAC 2001 Inc.
Cash flow from investing activities was reduced by $3,763,464 mainly as a result
of the acquisition of IPAC's property and new machinery and equipment for a
total of $3,644,995. Financing activities provided net cash flow in the amount
of $4,229,358. The principal sources of cash flow were from advances from
long-term debt in the amount of $1,882,102 and advances from bank loans in the
amount of $ 2,717,502. The principal uses of cash flow from financing were
advances for share purchase plan receivable of $131,099 and advances to loans
receivable of $209,322 . Net cash flow used after all activities was $75,114.




                                       14
<PAGE>


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.

         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 $1,652,000US and equipment note in the amount of $406,000US 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%


Fiscal 2000

         In fiscal 2000, the Company renewed a secured credit arrangement with
National Bank of Canada. This new facility included an aggregated credit line of
Cdn $9,500,000 of which Cdn 4,700,000 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 $4,000,000. Dectron's borrowings under the Line of
credit bears interest at Canadian prime plus .25%, which at January 31, 2000
amounted to 6.5%. 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.



                                       15
<PAGE>


         In September 1999, the company short-term bank financing in the amount
of $4,000,000 in order to finance the acquisition of the specified assets from
IPAC Inc. and IPAC 2000 Inc. at U.S. prime plus 3%. On February 23, 2001, the
Company replaced this short-term loan by a 5-year term loan in the amount of
$2,527,000 bearing interest at U.S. prime plus 1%. The Company also negotiated a
mezzanine loan in the amount of $1,000,000 bearing interest at U.S. prime plus
3% for a 3-year term.

         In May 1999, the Company also secured a 5 year financing in the amount
of Cdn $700,000 through the Immigrant Investors Program at an annual rate of
5.55%. The Immigrant Investors Program is a program in Canada through which
persons seeking Canadian Citizenship pool monies for investment in companies
that meet established criteria. Interest is paid monthly and the Company is
committed to make monthly payments of Cdn $3,900. in a sinking fund which is
given as security against the immigrant loan. The sinking fund proceeds will be
applied to the outstanding balance which is due in May 2004. The Company intends
to re-negotiate a new loan to replace the immigrant loan prior or the immigrant
loan's repayment date.

         Through the acquisition of Circul-aire, the company also acquired has
existing credit facilities with Royal Bank of Canada consisting of a line of
credit in the amount of Cdn $3,000,000. 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 $ 1,000,000. Dectron's
borrowings under the Line of credit bears interest at an average of Canadian
prime plus .5%, which at January 31, 2001 amounted to 7.5%. Interest on any
borrowings is payable monthly. Subsequent to the year-end, the Company has
signed a new bank agreement which made available an additional operating line of
credit of Cdn prime $500,000 bearing interest at prime plus 0.25%.

         In Fiscal 2000, the principal sources of cash were from advances from
bank loans in the amount of $2,669,311 and advances from long term debt for a
total of $3,94,8516. The principal uses of cash were increases in accounts
receivable of $2,007,191, in inventory of $3,031,453 and purchases of capital
assets for a total of $3,323,520 and a deposit on IPAC's property for $1,000,000

Foreign Exchange

         The Company is a Canadian company with U.S. sales amounting to
approximately 50% 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, 2001, the Company did not have a
formal foreign exchange policy in effect.



                                       16
<PAGE>



ITEM 7.  FINANCIAL STATEMENTS


         The financial statements are included at the end of this Annual Report
on Form 10-KSB at the pages included below.

<TABLE>
<CAPTION>
                                                                                                              Page
Financial Statements:                                                                                        Number
                                                                                                             ------
<S>                                                                                                          <C>
Report of Independent Auditors................................................................................F - 1

Consolidated Balance Sheets for the years ended January 31, 2001 and January 31, 2000 ...............F - 2 to F - 3

Consolidated Statements of Earnings for the years ended January 31, 2001, 2000 and 1999.......................F - 4

Consolidated Statements of Cash Flows for the years ended January 31, 2001, 2000 and 1999............F - 5 to F - 7

Consolidated Statements of Stockholders' Equity for the years ended January 31, 2001, 2000 and 1999...........F - 8

Notes to Consolidated Financial Statements..........................................................F - 9 to F - 26

</TABLE>



ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

         The Company has had no changes in or disagreements with its
Accountants.



                                       17
<PAGE>



                                    PART III

ITEM 9.  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:


<TABLE>
<CAPTION>

Name                                             Age     Position
----                                             ---     --------

<S>                                              <C>     <C>
Ness Lakdawala                                   67      Chairman of the Board of Directors, President and
                                                         Chief Executive Officer

Reinhold Kittler                                 63      Executive Vice President and Director

Roshan Katrak                                    57      Vice President of Human Relations and Director

Mauro Parissi                                    35      Chief Financial Officer, Secretary and Director

Michel Lecompte                                  51      Vice President of Operations of Refplus

David Lucas                                      41      Vice President of Dectron Inc.

Leena Lakdawala                                  33      Executive Vice President and Director

Richard Ness                                     37      Director


Liam Cheung                                      35      Director

Gilles Richard                                   62      Director

</TABLE>

---------


         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").

         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


                                       18

<PAGE>


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.

         Reinhold Kittler has served as Executive Vice President and a Director
of Dectron since our inception, and has also served as the Chairman of Dectron
Inc. since 1994. From 1985 to 1993, Mr. Kittler was President of Dectron Inc. He
currently teaches refrigeration engineering at Vanier College in Montreal,
Quebec. Mr. Kittler has contributed extensively to the ASHRAE Handbook. Mr.
Kittler is a member of numerous industry related societies, including the Order
of Engineers of Quebec (since 1973), the International Institute of Ammonia
Refrigeration (since 1992), the Air Conditioning and Refrigeration Institute
(since 1996), the Refrigeration Services Engineers Society (since 1979) and
ASHRAE (since 1974). Mr. Kittler is frequently a guest speaker at industry
related symposiums.

         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.

         David Lucas has served as the Vice President of Dectron Inc. since
1996. From 1993 to 1996, Mr. Lucas was a management consultant for the Federal
Cooperative Housing Stabilization Fund, where he managed loan portfolios and
provided management consulting services. From 1991 to 1993, Mr. Lucas was
Director of Marketing for Dectron Inc. He received his Bachelor of Science in
Engineering Physics from Queen's University in Kingston Ontario in 1981, and his
MBA from the University of Western Ontario in 1988.

         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.

         Richard Ness has served as a Director of Dectron since 1998. Mr. Ness
is president and chief operating officer of Penson Financial Services Canada
Inc., a firm offering technical and operational services to investment dealers
in Canada. Previously, he was Vice President client services and member seat
holder of the Toronto Stock Exchange with Le Groupe Option Retraite, Inc. and
investment dealer with memberships on the Montreal and Toronto stock exchanges.
Prior to joining Option Retraite, he was vice president of operations at Marleau
Lemire Securities and chief financial officer of Marleau Lemire U.S.A., an
N.A.S.D. member firm.


                                       19
<PAGE>


         Liam Cheung has served as a Director of Dectron since 2001. Since 1997,
Mr. Cheung is 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 1997 to 1999, Mr. Cheung
was also President and Founder of LOC Information Inc. From 1992 to 1997, he
served as Executive Vice-President, Fixed Income of Marleau, Lemire Securities
Inc. Mr. Cheung received a Bachelor of Mathematics with Distinction from the
University of Waterloo in 1990.

         Gilles Richard has served as a Director of Dectron since 2001. Mr.
Richard is a semi-retired business man 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)

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.

         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.



                                       20
<PAGE>



Item 10.  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, 2001.

<TABLE>
<CAPTION>

                           Summary Compensation Table

          Name and                                                  Restricted                          Other
         Principal                          Annual                 Stock Awards                         Com-
          Position              Year      Salary (1)      Bonus                    Options/SARs       Pensation
----------------------------- --------- ---------------- --------- -------------- --------------- ------------------
<S>                           <C>       <C>              <C>       <C>            <C>             <C>
Ness Lakdawala                2001         $140,647        -0-          -0-            -0-               -0-
Chairman of the Board of      2000         $140,647        -0-          -0-            -0-               -0-
Directors, President, and     1999         $140,647        -0-          -0-            -0-               -0-
Chief Executive Officer

</TABLE>


(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 has been extended
for an additional two years at the same conditions as above.

         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 2001, 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



                                       21
<PAGE>


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 Plan

         We have adopted a Stock Option Plan (the "Plan") pursuant to which
650,000 shares of Common Stock are reserved for issuance, 349,000 options are
currently issued and outstanding.

          On September 2, 1999, the Board granted options under our 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 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 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
Plan is designed to enable management to attract and retain qualified and
competent directors, employees, consultants and independent contractors. Options
granted under the 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 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.



                                       22
<PAGE>


         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 Plan must be issued within five years from the
effective date of the 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 Plan.

         The 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 Plan may not be
increased without the consent of our stockholders.




                                       23
<PAGE>



ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth certain information as of April 26, 2001
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:


<TABLE>
<CAPTION>

                                              Amount and Nature of Beneficial         Percentage of Shares
 Names and Address of Beneficial Owner (1)             Ownership(2)                       Outstanding
 -----------------------------------------             ------------                       -----------
<S>                                          <C>                                  <C>
Ness Lakdawala                                             1,688,519(3)                          60.1%

Roshan Katrak                                              1,688,519(4)                          60.1%

Reinhold Kittler                                                   0                                 *

Mauro Parissi                                                 71,300(5)                           2.5%

Ralph Kittler                                                 12,000(6)                              *

Dave Lucas                                                    67,000                              2.4%

Richard Ness                                                   9,100(7)                              *

Leena Lakdawala                                               74,800(8)                           2.6%

Michel Lecompte                                               16,274(9)                              *

Liam Cheung                                                        0                                 *

Gilles Richard                                                     0                                 *

All directors and officers
As a group (11 persons)
(3)-(9)                                                    1,926,993                             68.1%
</TABLE>

* Less than one %.

(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.



                                       24
<PAGE>


(3)  Represents (i) 43,561 shares of Common Stock and 15,000 options to purchase
     Common Stock directly owned, (ii) 67,395 shares of 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 15,000 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 4,500 options to purchase Common Stock.

(6)  Represents 12,000 options to purchase Common Stock.  Ralph Kittler is the
     son of Reinhold Kittler, a director.

(7)  Represents 5,100 shares of Common Stock and 15,000 options to purchase
     Common Stock and 2,000 options to purchase Common Stock directly
     owned and 2,000 owned by Silvia Pedicelli, Mr. Ness' wife.

(8)  Represents 15,000 options to purchase Common Stock directly owned and
     59,800 shares of Common Stock owned by Mr. Aurelio Useche, Ms Lakdawala's
     husband.

(9)  Includes 6,000 options to purchase Common Stock.


ITEM 12. 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 $2,935 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 Montreal, Quebec manufacturing facilities from Roshaness
Inc., a company owned by Ness Lakdawala, for a monthly rent of $3,056 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 equally by Ness Lakdawala's children, for an aggregate
monthly lease payment of $15,011. 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.



                                       25
<PAGE>


         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 May 1999, we made loans of $123,061.31 to Mauro
Parissi, our Chief Financial Officer, $108,569.95 to Ralph Kittler, the son of
Reinhold Kittler, a Director, $134,064.48 to Dave Lucas, our 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%). The borrowers plan
to repay the loan through credit facilities they expect to take from the
National Bank of Canada.

         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.



                                       26
<PAGE>



ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

<TABLE>
<S>          <C>                                                                                               <C>
(a)          Financial Statements.

             Report of Independent Auditors....................................................................F- 1
             Consolidated Balance Sheets for the years ended January 31, 2001 and 2000................F- 2 to F - 3
             Consolidated Statements of Earnings
                 for the years ended January 31, 2001, 2000 and 1999...........................................F- 4
             Consolidated Statements of Cash Flows
                 for the years ended January 31, 2001, 2000 and 1999..................................F- 5 to F - 7
             Consolidated Statements of Stockholders' Equity
                 for the years ended January 31, 2001, 2000 and 1999...........................................F- 8
             Notes to Consolidated Financial Statements..............................................F- 9 to F - 26

(b)          Reports on Form 8-K.

             None.

(c)          Exhibits.

             None.

</TABLE>


                                       27


<PAGE>


                                   SIGNATURES


             Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.

                                       DECTRON INTERNATIONALE INC


                                       By: /s/ Ness Lakdawala
                                           ------------------------------------
                                           Ness Lakdawala
                                           Chairman and Chief Executive Officer


                               Dated: May 1, 2001


             Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.

<TABLE>
<S>                                         <C>                                              <C>

 /s/ Ness Lakdawala                         Chairman, President, Chief Executive             May 1, 2001
----------------------------------------    Officer
     Ness Lakdawala


/s/ Reinhold Kittler
-------------------------------------       Executive Vice President and Director            May 1, 2001
Reinhold Kittler


 /s/ Roshan Katrak                          Vice President of Human Relations                May 1, 2001
----------------------------------------    and Director
Roshan Katrak


 /s/ Mauro Parissi                          Chief Financial Officer, Secretary               May 1, 2001
----------------------------------------    and Director
Mauro Parissi


/s/ Michel Lecompte
----------------------------------------    Vice President of Operations of Refplus          May 1, 2001
Michel Lecompte


/s/ David Lucas
----------------------------------------    Vice President of Dectron Inc.                   May 1, 2001
David Lucas


/s/ Leena Lakdawala                         Executive Vice President and Director            May 1, 2001
----------------------------------------
Leena Lakdawala

</TABLE>


                                       28

<PAGE>



                           DECTRON INTERNATIONALE INC.
                        CONSOLIDATED FINANCIAL STATEMENTS
                             AS AT JANUARY 31, 2001





<PAGE>

                 [Letterhead of Schwartz Levitsky Feldman LLP]



                         REPORT OF INDEPENDENT AUDITORS


To the Stockholders of
Dectron Internationale Inc.


We have audited the consolidated balance sheets of Dectron Internationale Inc.
as at January 31, 2001 and 2000 and the related consolidated statements of
earnings, cash flows and changes in stockholders' equity for each of the years
ended January 31, 2001, 2000 and 1999. These consolidated financial statements
are the responsibility of the companies' management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audit.

We conducted our audit in accordance with generally accepted auditing standards
in the United States of America. Those standards require that we plan and
perform an audit to obtain reasonable assurance whether the financial statements
are free of material misstatements. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Dectron
Internationale Inc. as at January 31, 2001 and 2000 and the results of its
operations and its cash flows for each of the years ended January 31, 2001, 2000
and 1999, in conformity with generally accepted accounting principles in the
United States of America.

Since the accompanying financial statements have not been prepared and audited
in accordance with generally accepted accounting principles and generally
accepted auditing standards in Canada, they may not satisfy the reporting
requirements of Canadian statutes and regulations.






Montreal, Quebec
March 30, 2001                                            Chartered Accountants


                                      F-1
<PAGE>

                           DECTRON INTERNATIONALE INC.
                        CONSOLIDATED FINANCIAL STATEMENTS
                             AS AT JANUARY 31, 2001





                                TABLE OF CONTENTS



Report of Independent Auditors                                           F- 1

Consolidated Balance Sheets                                          F- 2 - 3

Consolidated Statements of Earnings                                      F- 4

Consolidated Statements of Cash Flows                                F- 5 - 7

Consolidated Statements of Stockholders' Equity                          F- 8

Notes to Consolidated Financial Statements                          F- 9 - 26


<PAGE>

DECTRON INTERNATIONALE INC.
Consolidated Balance Sheets
As at January 31, 2001 and January 31, 2000
(Amounts Expressed in United States Dollars)


<TABLE>
<CAPTION>
                                                           2001                2000
                                                            $                   $
ASSETS
<S>                                                   <C>                 <C>

     Cash                                                    145,448             220,562
     Accounts receivable (note 3)                          9,546,216           7,626,840
     Income taxes receivable                                 352,323                   -
     Inventory (note 4)                                   10,699,326           8,169,607
     Prepaid expenses and sundry assets                      766,318           1,062,973
     Deferred income taxes                                     9,465              85,699
                                                      ----------------    ----------------

                                                          21,519,096          17,165,681


     Loans receivable (note 5)                               388,261             179,939
     Property, plant and equipment (note 6)               11,074,016           7,673,802
     Deposit on building                                           -           1,000,000
     Intangibles (note 7)                                    115,610              99,218
     Goodwill (note 8)                                     1,584,997           1,759,297
     Deferred income taxes                                   478,005             107,152
                                                      ----------------    ----------------

                                                          35,159,985          27,985,089
                                                      ================    ================
</TABLE>


                 The accompanying notes are an integral part of
                    these consolidated financial statements.

                                       F-2

<PAGE>


DECTRON INTERNATIONALE INC.
Consolidated Balance Sheets
As at January 31, 2001 and January 31, 2000
(Amounts Expressed in United States Dollars)


<TABLE>
<CAPTION>

                                                                     2001                2000
                                                                      $                   $

LIABILITIES
<S>                                                           <C>                 <C>
     Bank loans (note 9)                                           8,333,669           5,616,167
     Accounts payable and accrued expenses (note 10)               7,172,312           5,096,977
     Income taxes payable                                                  -             140,361
     Current portion of long-term debt (note 11)                   1,080,412           1,263,073
     Current portion of deferred revenue (note 14)                   263,767             228,079
     Note payable                                                     83,394                   -
                                                              ----------------    ----------------

                                                                  16,933,554          12,344,657

     Long-term debt (note 11)                                      6,722,601           4,657,838
     Due to director (note 12)                                        14,020              51,905
     Loan payable (note 13)                                          198,723             275,057
     Deferred revenue (note 14)                                      945,142             732,158
                                                              ----------------    ----------------

                                                                  24,814,040          18,061,615
                                                              ----------------    ----------------

STOCKHOLDERS' EQUITY

     Capital stock (note 15)                                       6,718,510           6,849,609
     Treasury Stock                                                  (88,780)            (88,780)
     Accumulated other comprehensive income                          (14,735)            289,121
     Retained earnings                                             3,730,950           2,873,524
                                                              ----------------    ----------------

                                                                  10,345,945           9,923,474
                                                              ----------------    ----------------

Total liabilities and stockholders' equity                        35,159,985          27,985,089
                                                              ================    ================
</TABLE>


                 The accompanying notes are an integral part of
                    these consolidated financial statements.

                                       F-3

<PAGE>


DECTRON INTERNATIONALE INC.
Consolidated Statements of Earnings
For the Years Ended January 31
(Amounts Expressed in United States Dollars)

<TABLE>
<CAPTION>
                                                                       2001                2000                1999
                                                                        $                   $                   $
<S>                                                             <C>                  <C>                  <C>
Net sales                                                           35,061,903           31,402,954           20,495,340

Cost of sales                                                       22,697,530           20,168,656           13,697,360
                                                                -----------------    ----------------     ----------------

Gross profit                                                        12,364,373           11,234,298            6,797,980
                                                                -----------------    ----------------     ----------------

Operating expenses

     Selling                                                         5,318,464            5,270,656            2,735,145
     General and administrative                                      3,096,003            2,065,155            1,329,426
     Depreciation and amortization                                   1,521,158            1,187,662              733,744
     Interest expense                                                1,458,861              674,287              359,274
                                                                -----------------    ----------------     ----------------

                                                                    11,394,486            9,197,760            5,157,589
                                                                -----------------    ----------------     ----------------

Earnings before income taxes                                           969,887            2,036,538            1,640,391

     Income taxes (note 16)                                            112,461              909,775              511,210
                                                                -----------------    ----------------     ----------------

Net earnings                                                           857,426            1,126,763            1,129,181
                                                                =================    ================     ================

Net earnings per common share, basic and diluted                          0.31                 0.40                 0.54
                                                                =================    ================     ================

Weighted average number of common shares outstanding                 2,795,000            2,795,000            2,082,781
                                                                =================    ================     ================
</TABLE>


                 The accompanying notes are an integral part of
                    these consolidated financial statements.

                                       F-4

<PAGE>



DECTRON INTERNATIONALE INC.
Consolidated Statements of Cash Flows
For the Years Ended January 31
(Amounts Expressed in United States Dollars)


<TABLE>
<CAPTION>

                                                                       2001                2000                1999
                                                                        $                   $                   $
<S>                                                              <C>                  <C>                 <C>
  OPERATING ACTIVITIES:
       Net earnings                                                     857,426            1,126,763           1,129,181

  Adjustments to reconcile net earnings to net cash used
  in operating activities:
       Depreciation and amortization                                  1,521,158            1,187,662             733,744
       Increase in accounts receivable                               (1,919,376)          (2,007,191)         (2,575,820)
       Increase in income taxes receivable                             (352,323)                   -            (272,024)
       Increase in inventory                                         (2,529,719)          (3,031,453)         (1,320,706)
       Increase (decrease) in prepaid expenses and
       sundry assets                                                    296,655             (433,713)           (336,329)
       Increase in accounts payable and accrued
       expenses                                                       2,075,335            1,283,078           1,849,619
       Increase (decrease) in income taxes payable                     (140,361)             211,883                   -
       Increase in deferred revenue                                     248,672              193,666             168,656
       Increase (decrease) in deferred income taxes                    (294,619)            (137,125)             15,657
                                                                 -----------------    ----------------    -----------------

  Net cash used in operating activities                                (237,152)          (1,606,430)           (608,022)
                                                                 -----------------    ----------------    -----------------

</TABLE>


                 The accompanying notes are an integral part of
                    these consolidated financial statements.

                                       F-5

<PAGE>



DECTRON INTERNATIONALE INC.
Consolidated Statements of Cash Flows
For the Years Ended January 31
(Amounts Expressed in United States Dollars)


<TABLE>
<CAPTION>

                                                                       2001                2000                1999
                                                                        $                   $                   $
<S>                                                               <C>                  <C>                 <C>
  INVESTING ACTIVITIES:
       Acquisition of property, plant and equipment                   (4,844,995)         (3,323,520)         (1,941,188)
       Government grant received                                         200,000                   -                   -
       Deposit on building                                             1,000,000          (1,000,000)                  -
       Acquisition of intangibles                                        (27,335).          (101,764)                  -
       Acquisition of goodwill                                           (91,134)                  -          (1,931,638)
                                                                  ----------------    ----------------    ------------------

  Net cash used in investing activities                               (3,763,464)         (4,425,284)         (3,872,826)
                                                                  ----------------    ----------------    ------------------

  FINANCING ACTIVITIES:
       Acquisition of minority interest in equity
          consolidated entity                                                  -                   -            (352,469)
       (Advances to) repayments from directors                           (37,885)                266             (15,706)
       (Advances to) repayments from
          corporate shareholders                                               -              (1,113)             56,550
       (Advances to) repayments from loans receivable                   (208,322)            (56,562)                  -
       Advances from (repayments of) bank loans                        2,717,502           2,669,311            (180,484)
       Notes payable                                                      83,394            (533,199)            533,199
       Other loan payable                                                      -             (64,553)             64,553
       Advances from (repayments of) long-term debt                    1,882,102           3,948,516             (11,067)
       Advances from (repayments of) loans payable                       (76,334)             16,005             (96,284)
       Issuance of capital stock                                               -                   -           4,932,834
       Purchase of treasury stock                                              -             (88,780)                  -
       Advances for share purchase plan receivable                      (131,099)           (499,946)                  -
                                                                  ----------------    ----------------    ------------------

  Net cash provided by financing activities                            4,229,358           5,389,945           4,931,126
                                                                  ----------------    ----------------    ------------------

  Effect of foreign currency exchange rate changes                      (303,856)            356,788              27,110
                                                                  ----------------    ----------------    ------------------
</TABLE>

                 The accompanying notes are an integral part of
                    these consolidated financial statements.

                                       F-6

<PAGE>


DECTRON INTERNATIONALE INC.
Consolidated Statements of Cash Flows
For the Years Ended January 31
(Amounts Expressed in United States Dollars)


<TABLE>
<CAPTION>

                                                                       2001                2000                1999
                                                                        $                   $                   $
<S>                                                               <C>                 <C>                 <C>
Net increase (decrease) in cash and cash equivalents                     (75,114)           (284,981)            477,388

     Cash and cash equivalents, beginning of year                        220,562             505,543              28,155
                                                                  ---------------     ---------------     ---------------

     Cash and cash equivalents, end of year                              145,448             220,562             505,543
                                                                  ===============     ===============     ===============

Supplemental disclosure of cash flow information

     Interest paid                                                     1,299,423             522,558             450,324
                                                                  ===============     ===============     ===============

     Income taxes paid                                                   959,492             706,339             398,091
                                                                  ===============     ===============     ===============
</TABLE>

                 The accompanying notes are an integral part of
                    these consolidated financial statements.

                                       F-7

<PAGE>


DECTRON INTERNATIONALE INC.
Consolidated Statements of Stockholders' Equity
For the Years Ended January 31
(Amounts Expressed in United States Dollars)


<TABLE>
<CAPTION>
                                                                           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                    -                    -               -             27,110                -
 translation
 Net income 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                           -                    -               -                  -          (88,780)
 common shares
 Share purchase plan                          -             (499,946)              -                  -                -
 receivable
 Deferred tax benefit                                        482,026               -                  -                -
 Foreign Currency                             -                    -               -            356,788                -
 translation
 Net income for the year                                           -       1,126,763                  -                -
                                  -----------------   ---------------    ---------------   ----------------   -------------

 Balance, January 31, 2000            2,795,000            6,849,609       2,873,524            289,121          (88,780)
                                  =================   ===============    ===============   ================   =============

 Share purchase plan                          -             (131,099)              -                  -                -
 receivable
 Foreign currency                             -                    -               -           (303,856)
 translations
 Net income for the year                      -                    -         857,426                  -                -
                                  -----------------   ---------------    ---------------   ----------------   -------------

 Balance, January 31, 2001            2,795,000            6,718,510       3,730,950            (14,735)         (88,780)
                                  =================   ===============    ===============   ================   =============
</TABLE>


                 The accompanying notes are an integral part of
                    these consolidated financial statements.

                                       F-8

<PAGE>



DECTRON INTERNATIONALE INC.
Notes to Consolidated Financial Statements
January 31, 2001 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., IPAC 2000 Inc. and Le Groupe
          Prodapec (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)   Principal Activities

          The company Dectron Internationale Inc., was incorporated on March 30,
          1998. These companies are principally engaged in the production of
          dehumidification, refrigeration, indoor air quality (IAQ),
          ventilation, air conditioning and air purification systems in Canada
          and its distribution world wide. The activities of Dectron
          Internationale Inc., Cascade Technologies Inc., 9048-3140 Quebec Inc.
          are immaterial in the aggregate, as their only activity is to hold the
          investments in the operating companies.

     c)   Cash and Cash Equivalents

          Cash and cash equivalents include cash on hand, amounts due from banks
          and any other highly liquid investments purchased with a maturity of
          three months or less. The carrying amounts approximate fair value
          because of the short maturity of these instruments.

     d)   Revenue Recognition

          Contract revenue is accounted for under the percentage of completion
          method prorated on units produced. When a terminal loss on a contract
          can be reasonably estimated, the total estimated amount of the loss is
          charged to income for the year.

     e)   Inventory

          Inventory of raw materials is valued at the lower of cost and
          replacement cost and inventory of work-in-process and finished goods
          at the lower of cost and net realizable value. Cost is determined on
          the first-in, first-out basis.


                                       F-9
<PAGE>



DECTRON INTERNATIONALE INC.
Notes to Consolidated Financial Statements
January 31, 2001 and January 31, 2000
(Amounts Expressed in United States Dollars)


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     f)   Property, Plant and Equipment

          Property, plant and equipment are recorded at cost and are depreciated
          or amortized on the basis of their estimated useful lives at the
          undernoted rates and methods:

<TABLE>
<S>                                               <C>                   <C>
          Building                                4 or 5%               Straight-line
          Machinery and equipment                 10%                   Straight-line or 20% declining balance
          Furniture and fixtures                  15 or 20%             Straight-line or 20% declining balance
          Computer equipment                      15 or 30%             Straight-line 0r 30% declining balance
          Rolling stock                           30%                   Straight-line or 30% declining balance
          Equipment under capital leases          20 or 30%             Declining balance
          Leasehold improvements                                        Straight-line over term of the lease

</TABLE>

          Depreciation and amortization for assets acquired during the year are
          recorded at one-half of the indicated rates.

     g)   Intangibles

          Intangibles represent patents and trademarks costs. These intangibles
          are being amortized on the straight-line basis over a fifteen year
          period.

     h)   Goodwill

          Goodwill is the excess of cost over the value of net assets acquired.
          It is amortized on the straight-line basis over ten years.

     i)   Deferred Revenue

          The company has sold extended warranty contracts covering a period of
          four years beyond the one year basic guarantee. The deferred revenue
          is recognized as income over the four year period on a straight-line
          basis commencing one year from the sale of the contracts.

     j)   Income Taxes

          The company accounts for income taxes under the provisions of
          statement of financial accounting standards No. 109, which requires
          recognition of deferred tax assets and liabilities for the expected
          future tax consequences of events that have been included in the
          financial statements and tax returns. Deferred income taxes are
          provided using the liability method. Under the liability method,
          deferred income taxes are recognized for all significant temporary
          differences between the tax and financial statements basis of assets
          and liabilities.


                                      F-10

<PAGE>


DECTRON INTERNATIONALE INC.
Notes to Consolidated Financial Statements
January 31, 2001 and January 31, 2000
(Amounts Expressed in United States Dollars)



1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     k)   Foreign Currency Translation

          The company maintains its books and records in Canadian dollars.
          Foreign currency transactions are translated using the temporal
          method. Under this method, all monetary items are translated into
          Canadian funds at the rate of exchange prevailing at balance sheet
          date. Non-monetary items are translated at historical rates. Income
          and expenses are translated at the rate in effect on the transaction
          dates. Transaction gains and losses are included in the determination
          of earnings for the year.

          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.

     l)   Earnings or Loss Per Share

          The company has adopted FAS No. 128, "Earnings per Share" which
          requires disclosure on the financial statements of "basic" and
          "diluted" earnings (loss) per share. Basic earnings (loss) per share
          is computed by dividing net income (loss) by the weighted average
          number of common shares outstanding for the year. Diluted earnings
          (loss) per share is computed by dividing net income (loss) by the
          weighted average number of common shares outstanding plus common stock
          equivalents (if dilutive) related to warrants for each year.

     m)   Use of Estimates

          The preparation of financial statements in conformity with generally
          accepted accounting principles in the United States of America
          requires management to make estimates and assumptions that affect
          certain reported amounts of assets and liabilities and disclosures of
          contingent assets and liabilities at the date of the financial
          statements and the reported amounts of revenues and expenses during
          the reporting period. Actual results could differ from those
          estimates.

                                      F-11

<PAGE>


DECTRON INTERNATIONALE INC.
Notes to Consolidated Financial Statements
January 31, 2001 and January 31, 2000
(Amounts Expressed in United States Dollars)



1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     n)   Long-lived Assets

          The company adopted the provisions of FAS No. 121, Accounting for the
          Impairment of Long-lived Assets and for Long-lived Assets to be
          Disposed of. FAS No. 121 requires that long-lived assets held and used
          by an entity be reviewed for impairment whenever events or changes in
          circumstances indicate that the carrying amount of an asset may not be
          recoverable. Management used its best estimate of the undiscounted
          cash flows to evaluate the carrying amount and have determined that no
          impairment has occurred.


2.   COMPREHENSIVE INCOME

          The company has adopted FAS No. 130 "Reporting Comprehensive Income"
          which requires new standards for reporting and display of
          comprehensive income and its components in the financial statements.
          However, it does not affect net income or total stockholders' equity.
          The components of comprehensive income are as follows:


<TABLE>
<CAPTION>
                                                                       2001                2000                1999
                                                                        $                   $                   $
<S>                                                               <C>                 <C>                  <C>
          NET INCOME                                                    857,426           1,126,763           1,129,181

          OTHER COMPREHENSIVE INCOME

               Foreign currency translation                            (303,856)            356,788              27,110
                                                                  ---------------     ---------------     ---------------

          COMPREHENSIVE INCOME                                          553,570           1,483,551           1,156,291
                                                                  ===============     ===============     ===============

</TABLE>



                                      F-12

<PAGE>


DECTRON INTERNATIONALE INC.
Notes to Consolidated Financial Statements
January 31, 2001 and January 31, 2000
(Amounts Expressed in United States Dollars)



3.    ACCOUNTS RECEIVABLE

<TABLE>
<CAPTION>
                                                                                           2001                2000
                                                                                            $                   $
<S>                                                                                   <C>                 <C>
     Accounts receivable                                                                   9,877,727           7,786,400
     Less:  Allowance for doubtful accounts                                                  331,511             159,560
                                                                                      ---------------     ---------------

     Accounts receivable - net                                                             9,546,216           7,626,840
                                                                                      ===============     ===============
</TABLE>


4.    INVENTORY

      Inventory is comprised of the following:

<TABLE>
<CAPTION>
                                                                                           2001                2000
                                                                                            $                   $
<S>                                                                                   <C>                 <C>

     Raw materials                                                                         6,048,814           4,995,391
     Work-in-process                                                                       1,861,859           1,676,899
     Finished goods                                                                        2,788,653           1,497,317
                                                                                      ---------------     ---------------

                                                                                          10,699,326           8,169,607
                                                                                      ===============     ===============
</TABLE>


5.    LOANS RECEIVABLE

      The loans receivable consist of the following:

<TABLE>
<CAPTION>
                                                                                           2001                2000
                                                                                            $                   $

<S>                                                                                   <C>                 <C>
     Loan receivable - private companies                                                     326,628             151,813
     Loan receivable - corporate shareholder                                                  27,409              28,126
     Loan receivable - other                                                                  34,224                   -
                                                                                      ---------------     ---------------

                                                                                             388,261             179,939
                                                                                      ===============     ===============
</TABLE>


                                      F-13

<PAGE>


DECTRON INTERNATIONALE INC.
Notes to Consolidated Financial Statements
January 31, 2001 and January 31, 2000
(Amounts Expressed in United States Dollars)


6.    PROPERTY, PLANT AND EQUIPMENT

<TABLE>
<CAPTION>
                                                                                           2001                2000
                                                                                            $                   $
<S>                                                                                   <C>                 <C>

     Land                                                                                    479,900             239,457
     Building                                                                              5,005,583           2,556,424
     Machinery and equipment                                                               8,392,372           7,055,701
     Furniture and fixtures                                                                  641,447             650,993
     Computer equipment                                                                    1,589,485           1,452,354
     Rolling stock                                                                           163,336             106,629
     Equipment under capital leases                                                          779,881             542,239
     Leasehold improvements                                                                  635,791             564,159
                                                                                      ---------------     ---------------

     Cost                                                                                 17,687,795          13,167,956
                                                                                      ---------------     ---------------
     Less accumulated depreciation and amortization:

     Building                                                                                508,312             354,986
     Machinery and equipment                                                               3,693,799           2,997,693
     Furniture and fixtures                                                                  476,251             447,258
     Computer equipment                                                                    1,147,614           1,032,455
     Rolling stock                                                                            79,252              49,967
     Equipment under capital leases                                                          325,156             251,508
     Leasehold improvements                                                                  383,395             360,287
                                                                                      ---------------     ---------------

                                                                                           6,613,779           5,494,154
                                                                                      ---------------     ---------------

     Net                                                                                  11,074,016           7,673,802
                                                                                      ===============     ===============

</TABLE>

          Depreciation and amortization of property, plant and equipment for
          fiscal year 2001 amounted to $1,302,741 ($982,210 in 2000).


7.    INTANGIBLES

<TABLE>
<CAPTION>
                                                                                          2001                2000
                                                                                           $                   $
<S>                                                                                   <C>                 <C>
     Patents and trademarks costs                                                           125,860             101,764
     Less:  Accumulated amortization                                                         10,250               2,546
                                                                                     ---------------     ---------------

     Net                                                                                    115,610              99,218
                                                                                     ===============     ===============
</TABLE>

          Amortization of intangibles for fiscal year 2001 amounted to $7,704
          ($2,546 in 2000).


                                      F-14
<PAGE>



DECTRON INTERNATIONALE INC.
Notes to Consolidated Financial Statements
January 31, 2001 and January 31, 2000
(Amounts Expressed in United States Dollars)



8.    GOODWILL

<TABLE>
<CAPTION>
                                                                                           2001                2000
                                                                                            $                   $

<S>                                                                                   <C>                 <C>
     Cost                                                                                  2,094,475           2,069,190
     Less: Accumulated amortization                                                          509,478             309,893
                                                                                      ---------------     ---------------

     Net                                                                                   1,584,997           1,759,297
                                                                                      ===============     ===============

</TABLE>

     Amortization of goodwill for fiscal year 2001 amounted to $210,713
     ($202,906 in 2000)


9.   BANK LOANS

     The company has an available line of credit of $9,923,000 bearing interest
     between 0.25% and 0.5% per annum over the prime lending rate and it is
     renegotiated annually.

     Bank loans are secured by a first ranking moveable hypothec on accounts
     receivable, inventory and commercial equipment and a second ranking
     universal hypothec in the amount of $10,674,000 on the universality of the
     borrower's property, movable and immovable, present and future, corporeal
     and incorporeal. The company also provided a solidary guarantee in the
     amount of $4,337,000 and a rider designating the Bank as loss payee of the
     proceeds of all-risk insurance on the property charged as security.

     The company finances its operations mainly through the use of Banker's
     Acceptance bearing an average lending rate of less than prime.

     The average cost of financing for fiscal year 2001 is 10.54% (8.19% in
     2000).


10.  ACCOUNTS PAYABLE AND ACCRUED EXPENSES


<TABLE>
<CAPTION>
                                                                                           2001                2000
                                                                                            $                   $

     Accounts payable and accrued expenses are comprised of the following:
<S>                                                                                   <C>                 <C>
         Trade payables                                                                    5,366,575           3,469,390
         Accrued expenses                                                                  1,805,737           1,627,587
                                                                                      ---------------     ---------------

                                                                                           7,172,312           5,096,977
                                                                                      ===============     ===============
</TABLE>


                                      F-15

<PAGE>

DECTRON INTERNATIONALE INC.
Notes to Consolidated Financial Statements
January 31, 2001 and January 31, 2000
(Amounts Expressed in United States Dollars)


11.  LONG-TERM DEBT

<TABLE>
<CAPTION>
                                                                                               2001                2000
                                                                                                $                   $
<S>                                                                                   <C>                 <C>
     a)    Government loans, without guarantee nor interest, repayable 15 years
           after their date of receipt, the first portion of $30,689 is
           repayable in August 2002 and the second portion of $30,689 is
           repayable in July 2004.                                                            61,378              63,396

     b)    Immigration loans secured by a first ranking universal hypothec on
           the universality of the property, moveable and immovable, present and
           future, corporeal and incorporeal, bearing interest at variable rates
           from 5.21% to 5.59% per annum, due on different dates between
           November 2002 and May 2004. The loans are net of sinking funds since
           all amounts paid into them must be used to repay the loans.                       999,564           1,213,966

     c)    Bank term loan secured by a first ranking universal hypothec on the
           universality of the property, moveable and immovable, present and
           future and corporeal and incorporeal, bearing interest at 7.99% per
           annum repayable in monthly capital repayments of $557 plus a final
           repayment of $67,206 in December 2002.                                             79,462              88,978

     d)    Bank  term  loan  bearing  interest  at 7% per  annum,  repayable  in
           monthly capital repayments of $371, maturing June 2014.                            59,297              65,843

     e)    Bank term loan, bearing interest at prime plus 1% per annum repayable
           in monthly capital repayments of $1,495, maturing April 2002.                      22,417              41,685

     f)    Bank term loan, bearing interest at prime rate plus 1% per annum,
           repayable in monthly capital repayments of $5,073 and a final
           repayment of $5,078 plus interest, maturing November 2001.                         50,736             115,281
                                                                                      ---------------     ---------------

     Balance carried forward                                                               1,272,854           1,589,149
                                                                                      ---------------     ---------------
</TABLE>


                                      F-16

<PAGE>



DECTRON INTERNATIONALE INC.
Notes to Consolidated Financial Statements
January 31, 2001 and January 31, 2000
(Amounts Expressed in United States Dollars)


11.   LONG-TERM DEBT (Continued)

<TABLE>
<CAPTION>
                                                                                               2001                2000
                                                                                                $                   $
<S>                                                                                         <C>             <C>
     Balance brought forward                                                               1,272,854           1,589,149

     g)    Loan from Investissement Quebec bearing interest at a rate of
           approximately prime plus 1.50% which is deferred and capitalized for
           the minimum of either 12 months or when the accumulated interest is
           greater than 10% of the loan advance, repayable in annual payments
           commencing June 30, 1997 at a rate of 15% of the prior year's net
           income to a maximum of $33,358 per annum.                                          21,737              45,421

     h)    Obligation under capital lease for machinery and equipment with
           carrying value of $225,317, repayable by 2 remaining equal payments
           of $5,715 including imputed interest of 7.24% plus a purchase option
           of $44,237, maturing April 2001.                                                   60,149             198,536

     i)     Obligation  under  capital  lease for  equipment  subject to blended
            monthly payments of $5,034  including  imputed interest of 8.48% per
            annum up to August 2005.                                                         228,723                   -

     j)    Obligation under capital lease for equipment subject to blended
           monthly payments of $7,501 including imputed interest of 8.48% per
           annum up to September 2005.                                                       340,841                   -

     k)    Obligation under capital lease for equipment subject to blended
           monthly payments of $1,094 including imputed interest of 7.27% per
           annum up to April 2005.                                                            48,684                   -

     l)    Bank term loan, bearing interest at prime plus 0.75% per annum,
           repayable in monthly capital repayments of $3,892, maturing December
           2005.                                                                             225,721                   -

     m)    Bank term loan, bearing interest at prime plus 0.75% per annum,
           repayable in monthly capital repayments of $3,892, maturing December
           2005.                                                                             229,612                   -
                                                                                      ---------------     ---------------

     Balance carried forward                                                               2,428,321           1,833,106
                                                                                      ---------------     ---------------
</TABLE>


                                      F-17

<PAGE>


DECTRON INTERNATIONALE INC.
Notes to Consolidated Financial Statements
January 31, 2001 and January 31, 2000
(Amounts Expressed in United States Dollars)

11.      LONG-TERM DEBT (Continued)

<TABLE>
<CAPTION>
                                                                                               2001                2000
                                                                                                $                   $
<S>                                                                                       <C>             <C>
     Balance brought forward                                                               2,428,321           1,833,106

     n)    Bank term loan, bearing interest at the Bank's American Prime Rate
           plus 0.75% per annum, repayable in monthly capital repayments of
           $6,767, maturing March 2005.                                                      287,245                   -

     o)    Bank term loan, bearing interest at the Bank's American Prime Rate
           plus 0.75% per annum, repayable in monthly capital repayments of $
           5,000, maturing October 2005.                                                     280,000                   -

     p)    Bank mortgage note bearing interest at the Bank's American Prime Rate
           plus 0.75% per annum, repayable in monthly capital repayments of
           $9,178 plus a final repayment of $1,110,511 in March 2005.                      1,560,222                   -

     q)    Bank term loan, bearing interest at the Bank's American Prime Rate
           plus 1% per annum, repayable in monthly capital repayments of
           $21,000, maturing February 2005.                                                  868,000                   -

     r)    Mezzanine loan bearing interest at the Bank's American Prime Rate
           plus 3% per annum, repayable in monthly capital repayments $16,000,
           maturing February 2003.                                                         2,359,000                   -

     s)    Other                                                                              20,225              30,701

     t)    Long term debt repaid during the year                                                   -           4,057,104
                                                                                      --------------      ---------------

                                                                                           7,803,013           5,920,911
           Less: Current portion                                                           1,080,412           1,263,073
                                                                                      --------------      ---------------

                                                                                           6,722,601           4,657,838
                                                                                      ==============      ===============

      Future principal payment obligations are as follows:

     2002                                                                                                $     1,080,412
     2003                                                                                                      1,337,073
     2004                                                                                                      1,445,655
     2005                                                                                                      1,200,640
     2006 and subsequent                                                                                       2,739,233
                                                                                                         ----------------

                                                                                                         $     7,803,013
                                                                                                         ================
</TABLE>

                                      F-18

<PAGE>


DECTRON INTERNATIONALE INC.
Notes to Consolidated Financial Statements
January 31, 2001 and January 31, 2000
(Amounts Expressed in United States Dollars)



12.  DUE TO DIRECTOR

     The amount due to director is unsecured, non-interest bearing and is due on
     April 15, 2002.


13.  LOAN PAYABLE

     This loan payable is non-interest bearing and is owed to private companies,
     due on April 15, 2002.


14.  DEFERRED REVENUE


<TABLE>
<CAPTION>
                                                                                           2001                2000
                                                                                            $                   $
<S>                                                                                   <C>                 <C>
     Deferred revenue                                                                      1,208,909            960,237
     Current portion                                                                         263,767            228,079
                                                                                      ---------------     ---------------

                                                                                             945,142            732,158
                                                                                      ===============     ===============

      Deferred revenue will be recognized as income as follows:

     2002                                                                                                 $      263,768
     2003                                                                                                        341,780
     2004                                                                                                        281,687
     2005                                                                                                        201,662
     2006                                                                                                        120,012
                                                                                                          ---------------

                                                                                                          $    1,208,909
                                                                                                          ===============
</TABLE>


15.  CAPITAL STOCK

     a)   Authorized

          An unlimited number of preferred shares, non-cumulative, voting, no
          par value

          An unlimited number of common shares, voting, no par value


                                      F-19

<PAGE>


DECTRON INTERNATIONALE INC.
Notes to Consolidated Financial Statements
January 31, 2001 and January 31, 2000
(Amounts Expressed in United States Dollars)


15.  CAPITAL STOCK (Continued)

     b)   Issued


<TABLE>
<CAPTION>

                                                                                           2001                2000
                                                                                            $                   $
<S>                                                                                   <C>                 <C>

              2,795,000                                                                    6,718,510          6,849,609
                                                                                      ===============     ===============

</TABLE>


     c)   On October 5, 1998 the company issued 1,000,000 common shares in an
          Initial Public Offering (the "IPO") for gross proceeds of $6,000,000
          and 1,000,000 warrants for $125,000 less underwriting commission and
          other expenses of $1,443,533 ($866,120 net of income taxes
          recoverable).

          On November 15, 1998 the company issued and additional 45,000 common
          shares for gross proceeds of $270,000 and 150,000 warrants for $18,750
          less underwriting commission and other expenses of $37,400.

          Immediately prior to the "IPO" the company issued 1,750,000 common
          shares for a share for share exchange valued at $1,596,433.

     d)   Purchase Warrants

          During the fiscal year 1999, Purchase Warrants ("Warrants") were
          issued pursuant to a Warrant Agreement between the company and J.P.
          Turner & Company, L.L.C. and Klein Maus and Shire Incorporated. Each
          Warrant entitles its holders to purchase, during the four year period
          commencing on October 5, 1999, one share of common stock at an
          exercise price of $9.00 per share, subject to adjustment in accordance
          with the anti-dilution and other provision referred to below.

          The Warrants may be redeemed by the company at any time commencing one
          year from October 5, 1999 (or earlier with the consent of the
          representatives) and prior to their expiration, at a redemption price
          of $0.125 per Warrant, on not less than 30 days prior written notice
          to the holders of such Warrants, provided that the closing bid price
          of the common stock, if traded on the Nasdaq SmallCap Market, or the
          last sale price of the common stock, if listed on the Nasdaq National
          Market or on a national exchange, is at least 133% ($12.00 per share,
          subject to adjustment) of the exercise price of the Warrants for a
          period of 30 consecutive trading days ending on the third day prior to
          the date the notice of redemption is given. Holders of Warrants shall
          have exercise rights until the close of the business day preceding the
          date fixed for redemption.



                                      F-20

<PAGE>


DECTRON INTERNATIONALE INC.
Notes to Consolidated Financial Statements
January 31, 2001 and January 31, 2000
(Amounts Expressed in United States Dollars)


15.  CAPITAL STOCK (continued)

     d)   Purchase Warrants (continued)

          The exercise price and the number of shares of common stock
          purchasable upon the exercise of the Warrants are subject to
          adjustment upon the occurrence of certain events, including stock
          dividends, stock splits, combinations or classification of the common
          stock. The Warrants do not confer upon holders any voting or any other
          rights of shareholders of the company.

          No Warrant will be exercisable unless at the time of exercise the
          company has filed with the Commission a current prospectus covering
          the issuance of common stock issuable upon the exercise of the Warrant
          and the issuance of shares has been registered or qualified or is
          deemed to be exempt from registration or qualification under the
          securities laws of the state of residence of the holder of the
          Warrant. The company has undertaken to use its best efforts to
          maintain a current prospectus relating to the issuance of shares of
          common stock upon the exercise of the Warrants until the expiration of
          the Warrants, subject to the terms of the Warrant Agreement. While it
          is the company's intention to maintain a current prospectus, there is
          no assurance that it will be able to do so.

     e)   Employee Stock Option Plan

          The company has adopted a Stock Option Plan (the "Plan") pursuant to
          which 650,000 shares of Common Stock are reserved for issuance,
          349,000 options are currently issued and outstanding.

          On September 2, 1999, the Board granted options under the Stock Option
          Plan to certain members of the Board and certain employees. 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% of the
          total options per year 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 option is $3.00.

          The 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.


                                      F-21

<PAGE>



DECTRON INTERNATIONALE INC.
Notes to Consolidated Financial Statements
January 31, 2001 and January 31, 2000
(Amounts Expressed in United States Dollars)


15.  CAPITAL STOCK (Continued)

     e)   Employee Stock Option Plan (Continued)

          The Plan is effective for a period of five years, expiring in 2004.
          Options may be granted to officers, directors, consultants, key
          employees, advisors and similar parties who provide us with their
          skills and expertise. Options granted under the Plan may be
          exercisable for up to five year, 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 Plan, and are exercisable only by the participant
          during his or her lifetime. Change in control include (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.

          Option under the Plan must be issued within five years from the
          effective date of the 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 Plan.

          The 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 Plan may
          not be increased without consent of our stockholders.

     f)   Share Purchase Plan Receivable

          The SEC staff Accounting Bulletins require that accounts or notes
          receivable arising from transactions involving capital stock should be
          presented as deductions from shareholders' equity and not as assets.
          Accordingly, in order to comply with U.S. GAAP shareholders' equity
          has been reduced by $131,099 at January 31, 2001 ($499,946 - 2000), to
          reflect the loans due from certain employees and officers which relate
          to the purchase of common shares of the company.


                                      F-22

<PAGE>



DECTRON INTERNATIONALE INC.
Notes to Consolidated Financial Statements
January 31, 2001 and January 31, 2000
(Amounts Expressed in United States Dollars)



16.   INCOME TAXES

      Provision for income taxes consists of the following:

<TABLE>
<CAPTION>
                                                                                            2001               2000
                                                                                             $                   $
<S>                                                                                     <C>                <C>
     a)   Current                                                                             488,343          1,075,111
          Deferred (recovered)                                                               (375,882)          (165,336)
                                                                                       ---------------     --------------

                                                                                              112,461            909,775
                                                                                       ===============     ==============

     b)   Income taxes at Canadian statutory rates:
                                                                                              300,864            631,733

          Increase (decrease) resulting from:
          Large corporations                                                                   10,452              7,878
          Manufacturing and processing deduction
                                                                                             (132,375)          (105,547)
          Non-deductible expenses                                                              31,113             51,740
          Temporary differences                                                              (166,255)           332,638
          Application of losses carried forward                                              (302,094)           (16,307)
          Difference  between Canadian statutory rates
          and those applicable to foreign subsidiary
                                                                                              200,544            (14,056)
          Adjustment for prior year's taxes                                                    65,112                  -
          Other                                                                               105,102             21,696
                                                                                       ---------------     --------------

          Effective income taxes                                                              112,463            909,775
                                                                                       ===============     ==============
</TABLE>



     c)   Deferred income taxes represent the tax charges derived from temporary
          differences between amortization of property, plant and equipment and
          recognition of deferred revenue, and the actual amounts deducted from
          or added to the taxable income.

     d)   The company has operating losses of $800,000 which can be used to
          reduce future taxable income. The potential tax benefits of $302,094
          relating to the losses have been recognized in the company's accounts.
          The deductibility of these losses expires in 2008.

     e)   The company has recorded investment tax credits $67,500 which are
          deductible from income taxes payable in future years. The
          deductibility of these tax credits expires in 2008.


                                      F-23

<PAGE>



DECTRON INTERNATIONALE INC.
Notes to Consolidated Financial Statements
January 31, 2001 and January 31, 2000
(Amounts Expressed in United States Dollars)



17.  COMMITMENTS

     a)   The company is committed to payments under operating leases for its
          premises totalling $2,220,066. Annual payments for the next five years
          are as follows:

<TABLE>
<S>                                                                                                       <C>
          2002                                                                                            $      498,252
          2003                                                                                                   467,915
          2004                                                                                                   429,704
          2005                                                                                                   429,087
          2006                                                                                                   395,108
                                                                                                          ----------------

                                                                                                          $    2,220,066
                                                                                                          ================
</TABLE>


     b)   The company is committed to make monthly payments of $12,987 into
          sinking funds which are given as security against the immigration
          loans. The annual payments for the next four years are as follows:

<TABLE>
<S>                                                                                                       <C>
           2002                                                                                           $      155,848
           2003                                                                                                  150,644
           2004                                                                                                   89,887
           2005                                                                                                   10,408

</TABLE>

     c)   As at January 31, 2001 the company had outstanding letters of credit
          totaling $10,000.

          These letters of credit were incurred in the normal course of
          business.

18.   SEGMENTED INFORMATION

<TABLE>
<CAPTION>
                                                                       2001                2000                1999
                                                                        $                   $                    $
<S>                                                                <C>                   <C>                 <C>
     a)   The breakdown of sales by  geographic  area is as
          follows:

          Canada                                                      9,310,780           10,615,226           9,662,901
          United States of America                                   23,449,133           16,387,614          10,332,442
          International                                               2,301,990            4,400,114             499,997
                                                                 -----------------    ----------------    ----------------

                                                                     35,061,903           31,402,954          20,495,340
                                                                 =================    ================    ================
</TABLE>

                                      F-24

<PAGE>


DECTRON INTERNATIONALE INC.
Notes to Consolidated Financial Statements
January 31, 2001 and January 31, 2000
(Amounts Expressed in United States Dollars)



18.   SEGMENTED INFORMATION (Continued)

<TABLE>
<CAPTION>

                                                                       2001                2000                 1999
                                                                        $                   $                    $
<S>                                                               <C>                 <C>                  <C>
     b)   The breakdown of identifiable assets by
          geographic area is as follows:

          Canada                                                      26,337,494          23,217,699          19,381,087
          United States                                                8,822,491           4,767,390                   -
                                                                  ----------------    ----------------    -----------------

                                                                      35,159,985          27,985,089          19,381,087
                                                                  ================    ================    =================
</TABLE>


19.   FINANCIAL INSTRUMENTS

     a)   The fair value of cash, accounts receivable and accounts payable
          approximately correspond to their book value given their short-term
          maturity. The carrying amount of long-term debt approximates fair
          value because interest rates are close to market value.

     b)   The company has borrowed $1,401,027 in order to finance capital
          acquisitions (see note 11-b). Concurrently with these borrowings the
          company acquired an additional $1,601,174 of financing, for which it
          issued commercial paper of $1,601,174 with similar maturity and terms,
          as collateral. Since this commercial paper fully satisfies the
          required principal repayments of the additional financing, they have
          been offset and neither the asset nor the liability appears on the
          company's balance sheet.


                                      F-25

<PAGE>


DECTRON INTERNATIONALE INC.
Notes to Consolidated Financial Statements
January 31, 2001 and January 31, 2000
(Amounts Expressed in United States Dollars)



20.   SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>

                                                         First        Second       Third        Fourth
                           2001                         Quarter      Quarter      Quarter       Quarter        Total
                                                           $            $            $             $             $
<S>                                                   <C>         <C>             <C>            <C>          <C>
     Net Sales                                        8,626,887    10,595,294     9,407,507    6,432,215      35,061,903
     Gross Profit                                     2,890,677     3,167,551     3,918,231    2,387,914      12,364,373
     Operating earnings                                 646,819       886,897       921,271      (26,239)      2,428,748
     Net earnings (loss)                                245,902       288,973       394,303      (71,752)        857,426
     Earnings (loss) per common share                      0.09          0.10          0.14        (0.02)           0.31
     Average number of common shares outstanding
                                                      2,795,000     2,795,000     2,795,000    2,795,000       2,795,000


<CAPTION>

                                                         First        Second       Third        Fourth
                           2000                         Quarter      Quarter      Quarter       Quarter        Total
                                                           $            $            $             $             $
<S>                                                   <C>         <C>             <C>            <C>          <C>

     Net Sales                                        7,316,795     6,966,199     8,620,718    8,499,242      31,402,954
     Gross Profit                                     2,160,009     2,325,663     2,661,602    4,087,024      11,234,298
     Operating earnings                                 641,815       791,363       730,062      547,585       2,710,825
     Net earnings                                       368,548       485,335       380,089     (107,209)      1,126,763
     Earnings per common shares                            0.13          0.17          0.14        (0.04)           0.40
     Average number of common shares outstanding
                                                      2,795,000     2,795,000     2,795,000    2,795,000       2,795,000
</TABLE>


21.  COMPARATIVE FIGURES

     Certain figures in the 2000 and 1999 financial statements have been
     reclassified to conform with the basis of presentation used in 2001.


                                      F-26