<PAGE>


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


                                    FORM 10-Q

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

For the quarterly period ended November 30, 2002

                                       OR

[_]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

For the transition period from _____________________ to  _______________________


                         Commission file number 0-12490


                                 ACR GROUP, INC.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


              Texas                                       74-2008473
-----------------------------------             --------------------------------
(State or other jurisdiction of                        (I.R.S. Employer
 incorporation or organization)                       Identification No.)


3200 Wilcrest Drive, Suite 440, Houston, Texas           77042-6039
----------------------------------------------  --------------------------------
(Address of principal executive offices)                 (Zip Code)

                                 (713) 780-8532
--------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)


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, and (2) has been subject to such filing requirements
for the past 90 days. Yes X   No___
                         ---

Shares of Common Stock outstanding at December 31, 2002 - 10,681,294.

                                      -1-

<PAGE>

                         PART I - FINANCIAL INFORMATION

Item 1. - Financial Statements

                        ACR GROUP, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (In thousands)

                                     ASSETS

<TABLE>
<CAPTION>
                                                                        November 30,     February 28,
                                                                           2002              2002
                                                                        ------------     ------------
                                                                        (Unaudited)
<S>                                                                     <C>              <C>
Current assets:
   Cash                                                                 $        121     $        129
   Accounts receivable, net                                                   16,705           16,858
   Inventory                                                                  23,596           25,987
   Prepaid expenses and other                                                    283              275
   Deferred income taxes                                                         843              487
                                                                        ------------     ------------

                  Total current assets                                        41,548           43,736
                                                                        ------------     ------------

Property and equipment, net of accumulated
   depreciation                                                                5,085            5,405
Deferred income taxes                                                            454              973
Goodwill, net of accumulated amortization                                      5,258            5,991
Other assets                                                                     453              525
                                                                        ------------     ------------

                                                                        $     52,798     $     56,630
                                                                        ============     ============

                                 LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
   Current maturities of long-term debt
      and capital lease obligations                                     $        413     $        898
   Accounts payable                                                           16,943           19,411
   Accrued expenses and other liabilities                                      2,561            2,027
                                                                        ------------     ------------

                  Total current liabilities                                   19,917           22,336

Long-term debt and capital lease obligations,
   less current maturities                                                    21,295           23,728
                                                                        ------------     ------------

                  Total liabilities                                           41,212           46,064
                                                                        ------------     ------------

Shareholders' equity:
   Common stock                                                                  107              107
   Additional paid-in capital                                                 41,691           41,691
   Accumulated deficit                                                       (30,212)         (31,232)
                                                                        ------------     ------------

                  Total shareholders' equity                                  11,586           10,566
                                                                        ------------     ------------

                                                                        $     52,798     $     56,630
                                                                        ============     ============
</TABLE>

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

                                      -2-

<PAGE>

                        ACR GROUP, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                    (In thousands, except per share amounts)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                     Nine months ended       Three months ended
                                                        November 30,            November 30,
                                                   --------------------     --------------------
                                                      2002       2001         2002       2001
                                                   ----------  --------     --------   ---------

<S>                                                <C>         <C>          <C>        <C>
Sales                                              $  128,581  $ 123,226    $  37,902  $  37,007
Cost of sales                                         100,276     96,723       29,422     29,026
                                                   ----------  ---------    ---------  ---------

Gross profit                                           28,305     26,503        8,480      7,981

Selling, general and administrative
expenses                                              (25,303)   (23,765)      (8,348)    (7,975)
                                                   ----------  ---------    ---------  ---------

Operating income                                        3,002      2,738          132          6

Interest expense                                       (1,339)    (1,646)        (423)      (463)
Other non-operating income                                350        359          134        129
                                                   ----------  ---------    ---------  ---------

Income (loss) before income taxes                       2,013      1,451         (157)      (328)
Provision (benefit) for income taxes:
   Current                                                 97        147          (13)         8
   Deferred                                               413        200          (36)        --
                                                   ----------  ---------    ---------  ---------

Income (loss) before cumulative effect
   of accounting change                                 1,503      1,104         (108)      (336)
Cumulative effect of change in
   accounting principle, net of tax                      (483)        --           --         --
                                                   ----------  ---------    ---------  ---------

Net income (loss)                                  $    1,020  $   1,104    $    (108) $    (336)
                                                   ==========  =========    =========  =========


Basic and diluted earnings (loss) per share:
Earnings (loss) per share before
   cumulative effect of accounting change                 .14        .10         (.01)      (.03)

Cumulative effect of accounting change                   (.04)        --           --         --
                                                   ----------  ---------    ---------  ---------

Earnings (loss) per share                          $      .10  $     .10    $    (.01) $    (.03)
                                                   ==========  =========    =========  =========

Weighted average shares outstanding:
  Basic                                                10,681     10,681       10,681     10,681
                                                   ==========  =========    =========  =========

  Diluted                                              10,681     10,692       10,681     10,681
                                                   ==========  =========    =========  =========
</TABLE>

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

                                      -3-

<PAGE>

                        ACR GROUP, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
                                   (Unaudited)



                                                               Nine months ended
                                                                 November 30,
                                                             -------------------
                                                               2002       2001
                                                             -------    --------

Operating activities:
   Net income                                                $ 1,020    $ 1,104
   Adjustments to reconcile net income to
         net cash provided by operating activities:
      Cumulative effect of change in accounting principle        483          -
      Depreciation and amortization                              895      1,068
      Deferred income tax expense                                413        200
      Other                                                      (13)       (20)
      Changes in operating assets and liabilities:
         Accounts receivable                                     158     (2,534)
         Inventory                                             2,391     (1,345)
         Prepaid expenses and other assets                        33        205
         Accounts payable                                     (2,468)     3,719
         Accrued expenses and other liabilities                  534        705
                                                             -------    -------

Net cash provided by operating activities                      3,446      3,102
                                                             -------    -------

Investing activities:
   Acquisition of property and equipment                        (490)      (628)
   Proceeds from disposition of assets                            37         53
                                                             -------    -------

Net cash used in investing activities                           (453)      (575)
                                                             -------    -------

Financing activities:
   Net payments on revolving credit facility                  (2,487)    (2,721)
   (Payments) proceeds on long-term debt                        (514)       255
                                                             -------    -------

Net cash used in financing activities                         (3,001)    (2,466)
                                                             -------    -------

Net (decrease) increase in cash                                   (8)        61
Cash at beginning of year                                        129        171
                                                             -------    -------

Cash at end of period                                        $   121    $   232
                                                             =======    =======



Supplemental disclosure of cash flow information:
      Cash paid for
         Interest                                              1,234      1,612

         Income taxes                                             29         10



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

                                      -4-

<PAGE>

                        ACR GROUP, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

1  -  Basis of Presentation

      The accompanying unaudited condensed historical financial statements of
the Company have been prepared in accordance with accounting principles
generally accepted in the United States. Accordingly, they do not include all of
the information and footnotes required for complete financial statements, and
therefore should be reviewed in conjunction with the financial statements and
related notes thereto contained in the Company's annual report for the year
ended February 28, 2002 filed on Form 10-K with the Securities and Exchange
Commission. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Actual operating results for the three-month and nine-month periods
ended November 30, 2002, are not necessarily indicative of the results that may
be expected for the fiscal year ended February 28, 2003.

2  -  Summary of Significant Accounting Policies

      For a description of these policies, refer to Note 1 of the Notes to
Consolidated Financial Statements included in the Company's Annual Report on
Form 10-K for the year ended February 28, 2002.

3  -  Contingent Liabilities

      The Company has an arrangement with an HVACR equipment manufacturer and a
bonded warehouse agent whereby HVACR equipment is held for sale in bonded
warehouses located at the premises of certain of the Company's operations, with
payment due only when products are sold. The supplier retains legal title and
substantial management control with respect to the consigned inventory. The
Company is responsible for damage to and loss of inventory that may occur at its
premises. The Company has the ability to return consigned inventory, at its sole
discretion, to the supplier for a specified period of time after receipt of the
inventory. Such inventory is accounted for as consigned merchandise and is not
recorded on the Company's balance sheet. As of November 30, 2002, the cost of
such inventory held in the bonded warehouses was $6,745,000.

      The terms of the consignment agreement further provide that the Company
may be required to purchase inventory not sold within a specified period of
time. Historically, most consigned inventory is sold before the specified
purchase date, and the supplier has never enforced its right to demand payment,
instead permitting such inventory to remain on consignment. As of November 30,
2002, inventory of approximately $530,000 remained on consignment although it
had been held in excess of the allowable period of time.

4  -  New Accounting Pronouncements

      Effective March 1, 2002, the Company adopted Statement of Financial
Accounting Standards No. 144 (SFAS 144), "Accounting for the Impairment or
Disposal of Long-Lived Assets." The new standard requires one model of
accounting for long-lived assets to be disposed of and broadens the definition
of discontinued operations to include a component of a segment. The adoption of
SFAS 144 did not have any significant impact on its financial position or
results of operations.

                                       -5-

<PAGE>

      Effective March 1, 2002, the Company adopted SFAS No. 142, "Goodwill and
Other Intangible Assets," which establishes new accounting and reporting
requirements for goodwill and other intangible assets. Under SFAS No. 142, all
goodwill amortization ceased effective March 1, 2002. Goodwill amortization for
the three and nine-month periods ended November 30, 2002 would have otherwise
been $57,000 and $171,000 respectively. Material amounts of recorded goodwill
attributable to each of our applicable subsidiaries were tested for impairment
by comparing the fair value of each subsidiary with its carrying value. Fair
value was determined using both discounted cash flows and internal rates of
return. These impairment tests must be performed upon adoption of SFAS No. 142
and at least annually thereafter. Significant estimates used in the
methodologies include estimates of future cash flows and both future short-term
and long-term growth rates. On an ongoing basis (absent any impairment
indicators), we expect to perform our impairment tests during the fourth fiscal
quarter of each year.

      Based on our initial impairment tests, we recognized an after-tax charge
of $483,000 ($0.04 per share) in the first quarter of fiscal 2003 to reduce the
carrying value of goodwill of Lifetime Filter, Inc. to its implied fair value.
This impairment is a result of adopting a fair value approach, under SFAS No.
142, to testing impairment of goodwill as compared to the previous method
utilized in which evaluations of goodwill impairment were made by comparing
estimated future discounted cash flows to the carrying amount of the assets.
Under SFAS No. 142, the impairment adjustment recognized upon adoption of the
new rules was reflected as a cumulative effect of change in accounting principle
in our income statement for the first quarter of fiscal 2003. Impairment
adjustments recognized after adoption, if any, generally are required to be
recognized as operating expenses.

      The unaudited results of operations presented below for the nine-month and
three-month periods ended November 30, 2002, and adjusted results of operations
for the same periods ended November 30, 2001, reflect the operations of the
Company had we adopted the non-amortization provisions of SFAS No. 142 effective
March 1, 2001: (in thousands, except per share amounts)

                                          Nine months ended  Three months ended
                                             November 30,       November 30,
                                          ----------------- -------------------
                                            2002     2001     2002       2001
                                          -------  -------  --------  ---------

Net income (loss)                         $ 1,020  $ 1,104  $   (108) $    (336)
Add: Cumulative effect of change in
  accounting principle, net of tax            483        -         -          -
Add: Goodwill amortization, net of tax          -      113         -         38
                                          -------  -------  --------  ---------

Adjusted net income (loss)                $ 1,503  $ 1,217  $   (108) $    (298)
                                          =======  =======  ========  =========

Basic and diluted earnings per share:

   Reported net income (loss)                 .10      .10      (.01)      (.03)
   Cumulative effect of change in
      accounting principle, net of tax        .04        -         -          -
   Goodwill amortization, net of tax            -      .01         -          -
                                          -------  -------  --------  ---------

Adjusted net income (loss) per share      $   .14  $   .11  $   (.01) $    (.03)
                                          =======  =======  ========  =========

                                       -6-

<PAGE>

5 -   Income Taxes

      The provision for current income taxes consists principally of federal
alternative minimum taxes and state income taxes. The provision for deferred
taxes consists of a reduction of current deferred benefits expected to be
realized as a result of the anticipated utilization of net operating loss
carryforwards in fiscal 2003. The reduction is based on applying an effective
tax rate of 21.3% to current year taxable income. The Company has net operating
loss and tax credit carryforwards which offset substantially all of its federal
taxable income.

6 -   Debt

      The Company has a credit arrangement with a commercial bank ("Bank") that
includes both a revolving credit facility and a term loan facility for capital
expenditures. The maximum amounts that may be borrowed under such facilities are
$25 million and $1 million, respectively. At November 30, 2002, the Company had
available credit under such facilities of $0.7 million and $0.1 million,
respectively. The credit facilities mature in May 2004, and are automatically
extended for one-year periods unless either party gives notice of termination to
the other.

      In October 2002, the Company prepaid its outstanding indebtedness to The
Catalyst Fund, Ltd. ("Catalyst") and an affiliate of Catalyst. Such indebtedness
amounted to $229,000, and would otherwise have been payable in January 2003. In
December 2002, the Company paid Catalyst $45,000 to settle asserted claims and
cancel all outstanding warrants held by Catalyst pertaining to 925,000 shares of
the Company's common stock. The amount was recorded as an expense in December
2002.

                                       -7-

<PAGE>

7 -      Earnings Per Share

         The following table sets forth the computation of basic and diluted
earnings per share for the nine months and three months ended November 30, 2002
and 2001 (in thousands, except earnings per share information):


<TABLE>
<CAPTION>
                                                     Nine Months Ended              Three Months Ended
                                               ------------------------------  ---------------------------
                                                       November 30,                    November 30,
                                               ------------------------------  ---------------------------
                                                    2002           2001            2002            2001
                                               --------------  --------------  ----------     ------------
  <S>                                          <C>             <C>             <C>            <C>
  Numerator:

  Net income (loss)                               $ 1,020        $ 1,104           ($108)         ($336)

  Numerator for basic and diluted
   earnings (loss) per share - income
   available to common stockholders               $ 1,020        $ 1,104           ($108)         ($336)
                                               ==========      =========       ==========     ==========

  Denominator:

  Denominator for basic earnings (loss)
   per share - weighted average shares             10,681         10,681          10,681         10,681

  Effect of dilutive securities:

   Warrants                                             0             11               0              0
                                               ----------      ---------       ----------     ----------

  Dilutive potential common shares                      0             11               0              0
                                               ----------      ---------       ----------     ----------

  Denominator for diluted earnings (loss)
   per share - adj weighted average shares
   and assumed conversions                         10,681         10,692          10,681         10,681
                                               ==========      =========       ==========     ==========

  Basic earnings (loss) per share                 $   .10        $   .10         $ (0.01)       $ (0.03)
                                               ==========      =========       ==========     ==========

  Dilutive earnings (loss) per share              $   .10        $   .10         $ (0.01)       $ (0.03)
                                               ==========      =========       ==========     ==========
</TABLE>

                                      -8-

<PAGE>

                        ACR GROUP, INC. AND SUBSIDIARIES

Item 2. - Management's Discussion and Analysis of Financial Condition and
          Results of Operations

INTRODUCTION

     ACR Group, Inc. and its subsidiaries (collectively, the "Company") is an
independent distributor of heating, air conditioning and refrigeration ("HVACR")
equipment and related parts and supplies. The Company is among the ten largest
such distributors in the United States. Substantially all of the Company's sales
are to contractor dealers and institutional end-users. Generally accepted
accounting principles allow the aggregation of an enterprise's segment if they
are similar. Although the Company operates in different geographic areas, we
have reviewed the aggregation criteria and determined that the Company operates
as a single segment based on the high degree of similarity of the Company's
operations.

     This report on Form 10-Q includes certain statements that may be deemed to
be "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934. Forward-looking statements include statements concerning plans,
objectives, goals, strategies, future events or performance and underlying
assumptions and other statements, which are other than statements of historical
facts. Forward-looking statements involve risks and uncertainties that could
cause actual results or outcomes to differ materially. Such risks and
uncertainties may include the availability of debt or equity capital to fund the
Company's working capital requirements, unusual weather conditions, the effects
of competitive pricing, the strength of the construction market and general
economic conditions. Our expectations and beliefs are expressed in good faith
and we believe there is a reasonable basis for them, but there can be no
assurance that our expectations, beliefs or projections will be achieved or
accomplished. The forward-looking statements in this document are intended to be
subject to the safe harbor protection provided under the securities laws. The
Company assumes no obligation to publicly update or revise any forward-looking
statements to reflect subsequent events or circumstances.

COMPARISON OF RESULTS OF OPERATIONS FOR THE NINE-MONTH AND THREE MONTH PERIODS
ENDED NOVEMBER 30, 2002 AND NOVEMBER 30, 2001

Nine Months Ended November 30, 2002 compared to November 30, 2001

     The Company recognized net income of $1,020,000 for the nine-month period
ended November 30, 2002 (fiscal 2003) compared to net income of $1,104,000 for
the nine-month period ended November 30, 2001 (fiscal 2002). Comparability
between fiscal 2003 and fiscal 2002 is affected by two accounting developments.
The Company adopted SFAS No. 142 as of March 1, 2002 (see New Accounting
Pronouncements, below) and has recorded deferred income tax charges to reduce
the Company's deferred tax assets. Excluding these items, net income in fiscal
2003 would have been $1,916,000, compared to $1,304,000 in fiscal 2002, an
increase of 47%. The increase in such income was attributable to lower interest
costs and an improvement in the Company's gross margin percentage in the current
year.

     Consolidated sales increased 4% during the nine-month period ended November
30, 2002 compared to the same period in 2001. Sales growth exceeded 20% in
Tennessee and Florida, with single-digit percentage increases in all other trade
areas except for Colorado. Fiscal 2003 sales at the Company's business unit
based in Colorado declined 8% as continued economic weakness

                                       -9-

<PAGE>

curtailed new home starts and dampened demand for the Company's products.
Same-store sales in the first eleven months of calendar 2002 increased 6% over
2001, compared to a 7% increase in industry-wide product shipments during the
same period based on data compiled by a leading industry trade association.

     The Company's gross margin percentage on sales was 22.0% for the
nine-months ended November 30, 2002, compared to 21.5% for the same period in
2001. The increase in gross margin percentage was attributable to the Company's
continuing efforts to reduce the net purchase cost of inventory through national
buying arrangements and consolidation of decentralized purchasing to designated
suppliers, and to refinements in customer pricing models. Gross margin
improvement was particularly evident at certain branch operations opened in the
past two years. These margin improvement initiatives were partially offset by
reduced demand for sheet metal products manufactured by the Colorado business
unit for use in new home construction. The lower demand resulted in a lower
absorption rate of fixed manufacturing costs and, accordingly, a lower gross
margin percentage. The aggregate gross margin percentage of all of the Company's
other operations increased to 21.5% in the nine-month period ended November 30,
2002, compared to 20.2% in the preceding year.

     Selling, general and administrative ("SG&A") expenses increased 6% in the
nine-month period ended November 30, 2002 compared to the same period in 2001,
principally from increased payroll, insurance costs and rent expense. Expressed
as a percentage of sales, SG&A expenses increased in the nine-month period from
19.3% in 2001 to 19.7% in 2002.

     Interest expense decreased 19% from 2001 to 2002 as a result of lower
average interest rates on the Company's variable rate debt and a 5% decrease in
average outstanding debt. As a percentage of sales, interest expense decreased
to 1.0% in 2002 from 1.3% in 2001.

     The provision for deferred taxes consists of a reduction of current
deferred benefits expected to be realized as a result of the anticipated
utilization of net operating loss carryforwards in fiscal 2003. Substantially
all of the Company's net operating loss carryforward will either expire, or is
expected to be utilized, by the end of fiscal 2004. The Company has estimated a
tax rate of 21% to systematically amortize through fiscal 2004 the deferred tax
asset related to its net operating loss carryforward. This estimated tax rate is
likely to change periodically as the Company re-evaluates its estimate of
taxable income through fiscal 2004.

     The cumulative effect of the accounting change reflects the result of
adopting the provisions of SFAS No. 142, "Goodwill and Other Intangible Assets"
as of March 1, 2002. For further explanation, see New Accounting Pronouncements,
below.

Three Months Ended November 30, 2002 compared to November 30, 2001

     The Company recorded a net loss of $108,000 in the quarter ended November
30, 2002, compared to a net loss of $336,000 in the quarter ended November 30,
2001, a reduction of 68%. The Company recorded deferred tax benefits in the
quarter ended November 30, 2002 of $36,000 to recognize the benefit of the
Company's net operating loss generated in the current quarter. Excluding the
effect of such non-cash deferred tax benefit, the Company's net loss for the
third fiscal quarter decreased 57% from 2001 to 2002. As explained in the
comparison of nine-month results above, the decline in loss before taxes for the
third quarter was attributable to lower interest costs and an improvement in the
gross margin percentage on sales.

     Consolidated sales increased 2% during the quarter ended November 30, 2002
compared to the same quarter in 2001, while same store sales increased 3%

                                      -10-

<PAGE>

during the same comparative periods. The trends described above in the
nine-month comparison also generally applied for the third fiscal quarter,
except that sales in Georgia and Nevada also declined slightly compared to 2001.

     The Company's gross margin percentage on sales was 22.4% for the quarter
ended November 30, 2002, compared to 21.6% for the same period in 2001. The
increase in the gross margin percentage was attributable to the same factors as
mentioned earlier in the nine-month analysis.

     Selling, general and administrative ("SG&A") expenses increased 5% in the
quarter ended November 30, 2002 compared to the same period in 2001. This
increase is consistent with the increase for the nine-month period analyzed
above. Expressed as a percentage of sales, SG&A expenses increased in the
quarter from 21.5% in 2001 to 22.0% in 2002.

     Interest expense in the third quarter decreased 9% from 2001 to 2002 as a
result of both lower average interest rates on the Company's variable rate debt
and a 6% decrease in average outstanding debt. As a percentage of sales,
interest expense decreased to 1.1% in 2002 from 1.3% in 2001.

LIQUIDITY AND CAPITAL RESOURCES

     In the nine-month period ended November 30, 2002, the Company generated
cash flow from operations of $3,446,000, compared to $3,102,000 in 2001. Gross
accounts receivable represented 44 days of net sales as of November 30, 2002,
compared to 49 days at November 30, 2001, reflecting a continuous focus on
credit management and active collection efforts in the uncertain economic
environment. Inventory at November 30, 2002 was 6% less than at November 30,
2001, reflecting management's concerted effort to control purchasing and
inventory levels entering the fourth fiscal quarter, traditionally the slowest
in the Company's fiscal year.

     The Company has credit facilities with a commercial bank ("Bank") which
include a $25 million revolving line of credit and a $1 million term loan
facility for capital expenditures. Outstanding borrowings on the revolving
credit line change daily depending on cash collections and disbursements. During
the nine-month period ended November 30, 2002, the Company borrowed $243,000
from its capital expenditure facility. At November 30, 2002, the Company had
available credit of $0.7 and $0.1 million under the revolving credit facility
and the term loan facility, respectively. As of November 30, 2002, borrowings
under both credit facilities bear interest at the prime rate or LIBOR plus
2.75%, and the Company had elected the LIBOR option on substantially all
outstanding borrowings. Management believes that availability under the
revolving credit facility will be adequate to finance the Company's working
capital requirements of its existing operations for the foreseeable future.

     In October 2002, the Company prepaid its outstanding indebtedness to The
Catalyst Fund, Ltd. ("Catalyst") and an affiliate of Catalyst. Such indebtedness
amounted to $229,000, and would otherwise have been payable in January 2003. In
December 2002, the Company paid Catalyst $45,000 to settle asserted claims and
cancel all outstanding warrants held by Catalyst pertaining to 925,000 shares of
the Company's common stock. The amount was recorded as an expense in December
2002.

     The Company has approximately $4.7 million in tax loss carryforwards, of
which $3.4 million expires in fiscal 2003. Such operating loss carryforwards
will substantially limit the Company's federal income tax liabilities in fiscal
2003.

                                      -11-

<PAGE>

SEASONALITY

     The Company's sales volume and, accordingly, its operating income vary
significantly during its fiscal year. The highest levels of sales occur during
the times of the year when climatic conditions require the greatest use of air
conditioning, since the Company's operations are concentrated in the warmer
sections of the United States. Accordingly, sales will be highest in the
Company's second quarter ending August 31, and will be lowest in its fourth
quarter.

INFLATION

     The Company does not believe that inflation has had a material effect on
its results of operations in recent years. Generally, manufacturer price
increases attributable to inflation uniformly affect both the Company and its
competitors, and such increases are passed through to customers as an increase
in sales prices.

NEW ACCOUNTING PRONOUNCEMENTS

     Effective March 1, 2002, the Company adopted Statement of Financial
Standards No. 142, (SFAS 142) "Goodwill and Other Intangible Assets," which
establishes new accounting and reporting requirements for goodwill and other
intangible assets. Under SFAS No. 142, all goodwill amortization ceased
effective March 1, 2002. Goodwill amortization for the quarter and nine-month
periods ended November 30, 2002 would have otherwise been $57,000 and $171,000,
respectively. Material amounts of recorded goodwill attributable to each of our
reporting units were tested for impairment by comparing the fair value of each
reporting unit with its carrying value. Fair value was determined using
discounted cash flows, internal rates of return and market multiples. These
impairment tests are required to be performed at adoption of SFAS No. 142 and at
least annually thereafter. Significant estimates used in the methodologies
include estimates of future cash flows and both future short-term and long-term
growth rates. On an ongoing basis (absent any impairment indicators), we expect
to perform our impairment tests during our fourth fiscal quarter.

     Utilizing the new criteria, the Company determined that it was appropriate
to write off the entire unamortized amount of goodwill associated with its
filter manufacturing operation that was acquired in 1997. We reached that
conclusion upon consideration of the reporting unit's unprofitability for the
last two fiscal years and a substantial shift in both its product sales mix and
its customer base since the date of acquisition. Net of taxes, the writeoff
amounted to $483,000, or $0.04 per share, and in accordance with the new
standard, is reported in the income statement for the quarter ended November 30,
2002 as a cumulative effect of a change in accounting principle.

     Effective March 1, 2002, the Company adopted SFAS No. 144, "Accounting for
the Impairment or Disposal of Long-Lived Assets." The new standard requires one
model of accounting for long-lived assets to be disposed of, and broadens the
definition of discontinued operations to include a component of a segment. The
adoption of SFAS 144 did not have any significant impact on its financial
position or results of operations.

                                      -12-

<PAGE>

CRITICAL ACCOUNTING POLICIES

The accounting policies discussed below are critical to the Company's business
operations and an understanding of the Company's financial statements. The
financial statements are prepared in accordance with accounting principles
generally accepted in the United States. The preparation of these financial
statements requires management to make assumptions and estimates that affect the
reported amounts of assets, liabilities, revenues and expenses in each reporting
period. Management bases its estimates on historical experience and other
factors that are believed to be reasonable under the circumstances. Actual
results, once known, may vary from management's estimates.

Revenue Recognition

The Company recognizes revenue in accordance with SEC Statement of Accounting
Bulletin No. 101, "Revenue Recognition in Financial Statements". Substantially
all of the Company's revenues consist of sales of HVACR products that are
purchased by the Company from suppliers; less than 5% of the Company's sales are
of products that it manufactures. SAB 101 requires that four basic criteria must
be met before revenue can be recognized: (1) persuasive evidence of an
arrangement exists, (2) delivery has occurred or services have been rendered,
(3) the amounts recognized are fixed and determinable, and (4) collectibility is
reasonably assured. The Company records revenue after it receives an order from
a customer with a fixed determinable price and the order is either shipped or
delivered to the customer.

Allowance for Doubtful Accounts

The Company records an allowance for doubtful accounts for estimated losses
resulting from the inability to collect accounts receivable from customers. The
Company establishes the allowance based on historical experience, credit risk of
specific customers and transactions, and other factors. Management believes that
the lack of customer concentration is a significant factor that mitigates the
Company's accounts receivable credit risk. Two customers represent approximately
3 1/2% of consolidated sales, and no other customer comprises as much as 1% of
sales. The number of customers and their distribution across the geographic
areas served by the Company help to reduce the Company's credit exposure to a
single customer or to economic events that affect a particular geographic
region. Although the Company believes that its allowance for doubtful accounts
is adequate, any future condition that would impair the ability of a broad
section of the Company's customer base to make payments on a timely basis may
require the Company to record additional allowances.

Inventory

Inventories consist of HVACR equipment, parts and supplies and are valued at the
lower of cost or market value using the average cost method. Substantially all
inventories represent finished goods held for sale. Raw materials represent less
than 2% of inventories. When necessary, the carrying value of obsolete or excess
inventory is reduced to estimated net realizable value. The process for
evaluating the value of obsolete or excess inventory requires estimates by
management concerning future sales levels and the quantities and prices at which
such inventory can be sold in the ordinary course of business.

                                      -13-

<PAGE>

Item 3. - Quantitative and Qualitative Disclosures About Market Risk

     The Company is subject to market risk exposure related to changes in
interest rates on its senior credit facility, which includes revolving credit
and term notes. These instruments carry interest at a pre-agreed upon percentage
point spread from either the prime interest rate or LIBOR. Under its senior
credit facility the Company may, as its option, fix the interest rate for
certain borrowings based on a spread over LIBOR for 30 days to 6 months. At
November 30, 2002 the Company had $20.0 million outstanding under its credit
facilities with the bank, of which $10.0 million is subject to variable interest
rates. Based on this balance, an immediate change of one percent in the interest
rate would cause a change in interest expense of approximately $100,000, or $.01
per share, on an annual basis.

Item 4. - Statement Regarding Disclosure Controls and Procedures

     As of November 30, 2002, an evaluation was performed under the supervision
and with the participation of the Company's management, including the Chief
Executive Officer and the Chief Financial Officer, of the effectiveness of the
design and operation of the Company's disclosure controls and procedures. Based
on that evaluation, the Company's management, including the Chief Executive
Officer and the Chief Financial Officer, concluded that the Company's disclosure
controls and procedures were effective as of November 30, 2002. There have been
no significant changes in the Company's internal controls or in other factors
that could significantly affect internal controls subsequent to November 30,
2002.

                           PART II - OTHER INFORMATION

Item 6. - Exhibits and Reports on Form 8-K

(a)  Exhibits

     99.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section
          1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
          2002.

     99.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section
          1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
          2002.

(b)  Reports on Form 8-K.    None

                                      -14-

<PAGE>

                                   SIGNATURES

     Pursuant to the requirements 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.

                                               ACR GROUP, INC.



    January 14, 2003                           /s/ Anthony R. Maresca
----------------------------                   --------------------------------
Date                                           Anthony R. Maresca
                                               Senior Vice-President and
                                               Chief Financial Officer

                                      -15-

<PAGE>

                                 CERTIFICATIONS

I, Alex Trevino, Jr., certify that:

     (1). I have reviewed this quarterly report on Form 10-Q of ACR Group, Inc.;

     (2)  Based on my knowledge, this quarterly report does not contain any
          untrue statement of a material fact or omit to state a material fact
          necessary to make the statements made, in light of the circumstances
          under which such statements were made, not misleading with respect to
          the period covered by this quarterly report;

     (3)  Based on my knowledge, the financial statements, and other financial
          information included in this quarterly report, fairly present in all
          material respects the financial condition, results of operations and
          cash flows of the registrant as of, and for, the periods presented in
          this quarterly report;

     (4)  The registrant's other certifying officer and I are responsible for
          establishing and maintaining disclosure controls and procedures (as
          defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
          and have:

               a)   designed such disclosure controls and procedures to ensure
                    that material information relating to the registrant,
                    including its consolidated subsidiaries, is made known to us
                    by others within those entities, particularly during the
                    period in which this quarterly report is being prepared;

               b)   evaluated the effectiveness of the registrant's disclosure
                    controls and procedures as of a date within 90 days prior to
                    the filing date of this quarterly report (the "Evaluation
                    Date"); and

               c)   presented in this quarterly report our conclusions about the
                    effectiveness of the disclosure controls and procedures
                    based on our evaluation as of the Evaluation Date;

     (5)  The registrant's other certifying officer and I have disclosed, based
          on our most recent evaluation, to the registrant's auditors and the
          audit committee of registrant's board of directors:

               a)   all significant deficiencies in the design or operation of
                    internal controls which could adversely affect the
                    registrant's ability to record, process, summarize and
                    report financial data and have identified for the
                    registrant's auditors any material weaknesses in internal
                    controls; and

               b)   any fraud, whether or not material, that involves management
                    or other employees who have a significant role in the
                    registrant's internal controls; and

     (6)  The registrant's other certifying officer and I have indicated in this
          quarterly report whether there were significant changes in internal
          controls or in other factors that could significantly affect internal
          controls subsequent to the date of our most recent

                                      -16-

<PAGE>

               evaluation, including any corrective actions with regard to
               significant deficiencies and material weaknesses.



January 14, 2003                            /s/ Alex Trevino, Jr.
------------------------                    ------------------------------------
Date                                        Alex Trevino, Jr.
                                            President and
                                            Chief Executive Officer

                                      -17-

<PAGE>

I, Anthony R. Maresca, certify that:

     (1). I have reviewed this quarterly report on Form 10-Q of ACR Group, Inc.;

     (2)  Based on my knowledge, this quarterly report does not contain any
          untrue statement of a material fact or omit to state a material fact
          necessary to make the statements made, in light of the circumstances
          under which such statements were made, not misleading with respect to
          the period covered by this quarterly report;

     (3)  Based on my knowledge, the financial statements, and other financial
          information included in this quarterly report, fairly present in all
          material respects the financial condition, results of operations and
          cash flows of the registrant as of, and for, the periods presented in
          this quarterly report;

     (4)  The registrant's other certifying officer and I are responsible for
          establishing and maintaining disclosure controls and procedures (as
          defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
          and have:

               a)   designed such disclosure controls and procedures to ensure
                    that material information relating to the registrant,
                    including its consolidated subsidiaries, is made known to us
                    by others within those entities, particularly during the
                    period in which this quarterly report is being prepared;

               b)   evaluated the effectiveness of the registrant's disclosure
                    controls and procedures as of a date within 90 days prior to
                    the filing date of this quarterly report (the "Evaluation
                    Date"); and

               c)   presented in this quarterly report our conclusions about the
                    effectiveness of the disclosure controls and procedures
                    based on our evaluation as of the Evaluation Date;

     (5)  The registrant's other certifying officer and I have disclosed, based
          on our most recent evaluation, to the registrant's auditors and the
          audit committee of registrant's board of directors:

               a)   all significant deficiencies in the design or operation of
                    internal controls which could adversely affect the
                    registrant's ability to record, process, summarize and
                    report financial data and have identified for the
                    registrant's auditors any material weaknesses in internal
                    controls; and

               b)   any fraud, whether or not material, that involves management
                    or other employees who have a significant role in the
                    registrant's internal controls; and

     (6)  The registrant's other certifying officer and I have indicated in this
          quarterly report whether there were significant changes in internal
          controls or in other factors that could significantly affect internal
          controls subsequent to the date of our most recent

                                      -18-

<PAGE>

               evaluation, including any corrective actions with regard to
               significant deficiencies and material weaknesses.



January 14, 2003                            /s/ Anthony R. Maresca
------------------------                    ------------------------------------
Date                                        Anthony R. Maresca
                                            Senior Vice-President and
                                            Chief Financial Officer

                                      -19-

<PAGE>

                                  EXHIBIT INDEX

Exhibit Number                 Description
--------------                 -----------

99.1                        CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS
                            ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES -
                            OXLEY ACT OF 2002

99.2                        CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS
                            ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES -
                            OXLEY ACT OF 2002

                                      -20-