Unless otherwise indicated, all reference to "Dectron," "us," "our" and "we" refer to Dectron Internationale Inc. and its wholly-owned subsidiaries: Dectron Inc. ("Dectron Inc."), Dectron USA, Inc. ("Dectron USA"), Refplus Inc. ("Refplus"), Thermoplus Air Inc. ("Thermoplus"), Circul-Aire Inc. ("Circul-Aire"), IPAC 2000, Inc., ("IPAC") and International Water Maker's Inc ("IWM").

Overview

Dectron is located primarily in and around Montreal, Quebec, Canada. Through our operating subsidiaries, Dectron Inc., Refplus, Thermoplus, Circul-Aire, IPAC and IWM, we manufacture and supply an array of products for the dehumidification, refrigeration, air conditioning and indoor air quality ("IAQ") markets. The products manufactured and supplied include mechanical dehumidifiers and energy recovery systems through Dectron Inc., and refrigeration and air conditioning systems through Refplus and Thermoplus. Thermoplus also has a line of air filtration products. Circul-aire specializes in air, gas, dust and fume filtration, IAQ and heat recovery. IPAC specializes in precision cooling products, air conditioning products and compressed air products. IWM owns a patented process to extract significant amounts of moisture from the Air. IWM's products provide filtered, de-mineralized water to a variety of applications.

We believe that we have structured Dectron in such a way that, other than with respect to the raw materials required to make the components for our products and certain specialty products, we are not dependent on outside suppliers for fabricated parts for our products. We have invested significant resources in our manufacturing equipment and as a result we can manufacture the most important components for any of our fabricated products, regardless of whether the product is standard or a custom design.

Dectron Inc.

Dectron Inc., the largest of the subsidiaries, was incorporated in 1977 to develop, manufacture and market standard and custom design dehumidification equipment. After extensive research and development, Dectron Inc. introduced a line of indoor pool and commercial dehumidifiers under its DRY-O-TRON TM trademark. This product line has experienced tremendous success in North America and as a result has allowed us to become, in our opinion, the leader in North America's indoor pool dehumidification business. We believe that Dectron is now one of North America's leading manufacturers of dehumidification and closed looped energy recyclers.

Dectron Inc.'s standard products are now primarily manufactured by Thermoplus. As a result, Dectron Inc. focuses its own manufacturing operations on the manufacture of its customized dehumidification systems. We believe that the customized product market is where our competitive advantage is most evident. Ordinarily, with a customized product, it is often very difficult to commit to an aggressive delivery date for the finished product. However, since we manufacture many of the component parts in-house, we are able to commit to an aggressive delivery schedule. We have taken the necessary steps to align ourselves with several suppliers of our raw materials so that we are not dependent on any one supplier. In addition, we store a sufficient inventory of raw material to supply our immediate needs. Some of our customized product customers include Celebration City, Walt Disney World in Florida and the Goodwill Games.

Dectron Inc., through its subsidiary Dectron USA, operates a sales office in the United States located in Roswell, Georgia. This office supports the efforts of Dectron Inc.'s network of trained manufacturer's representatives who sell Dectron Inc.'s products throughout the United States. Dectron Inc. also has sales representatives throughout Canada and overseas. We invite our independent sales representatives and their technicians to be trained and certified by Dectron Inc.'s own technical staff at no cost to the attendees at a training school run by Dectron. We also use the training school to both market our products and demonstrate to potential buyers, first hand, the technical excellence our employees have to offer as a service to our customers. We believe that customer service and technical expertise are a large part of what sets us apart from our competitors. We also market our products in trade magazines, through industry associations and by attending trade shows where we display and demonstrate many of our products.

Refplus

Refplus was incorporated in 1993 to manufacture high quality modular commercial and industrial refrigeration and air conditioning equipment for commercial and special applications. Its products include refrigeration systems, condensers, coils, walk-in storage coolers and freezers. In addition, Refplus manufactures all of the heat transfer coils used by Dectron Inc. Refplus' primary customers are supermarkets and convenience or grocery stores. Refplus' product line, is designed around hydrofluorocarbon refrigerants ("HFC"), and features high quality products intended to meet the needs of a broad range of customers. See "Industry Background."

Since inception, Refplus has manufactured some complex products for application in fruit storage facilities, industrial baking facilities and blast chillers for meat processing plants. We believe that our Refplus product lines offer an excellent opportunity for future expansion. See "Expansion Plans."

Refplus has a network of sales representatives in Canada, however, the majority of its sales are conducted through a network of independent wholesalers. See "Sales and Marketing."

Thermoplus

In 1987, Keepkool Transfer de Chaleur Inc. ("Keepkool"), the former parent company of Thermoplus, purchased the manufacturing facilities of York International in St-Jerome, Quebec. Keepkool was owned by a group of investors active in the heating, ventilation and air-conditioning ("HVAC") industry, which group included Ness Lakdawala, our President and CEO, to manufacture air conditioning systems. Since inception, Thermoplus has introduced and sold a variety of HVAC product lines through a network of Canadian wholesalers. In 1995, Thermoplus introduced specialized product lines in the field of dehumidification and specialized air conditioning.

Thermoplus' present product lines include dehumidification equipment, water source air conditioners and heat pumps, portable or mobile air conditioning equipment, industrial air handlers, air to fluid heat exchangers and IAQ filtration products. These product lines are sold through a network of Canadian wholesalers and HVAC representatives. Although Thermoplus' products are sold throughout North America, with some exports outside of North America, the majority of its revenues are derived from sales to Dectron Inc. We believe that Thermoplus' product lines have growth potential, estimating that the present potential for growth in both sales and manufacturing output is roughly 3 times its present output. See "Expansion Plans."

Circul-Aire

In 1998, Dectron acquired the Circul-aire Group, consisting of Cascade Technologies Inc. 9048-3140 Quebec, Inc. and its subsidiaries, and P.M. Wright Ltd. (collectively referred to as "Circul-aire"). Circul-aire is considered one of the pioneers of the air treatment industry and is a worldwide recognized leader in the advanced technologies of gas-phase filtration and energy recovery. Circul-aire's reputation has been built on years of research and development and growing numbers of worldwide satisfied customers. Circul-aire's in house laboratory and team of experienced engineers offer a systematic integrated approach in solving ever changing and difficult environmental control problems. Unique systems are designed and manufactured in Circul-aire's facilities to suit specific applications. Equipment efficiency and filter media life is optimized with Circul-aire's preventive maintenance program.

Circul-aire's Multi-Mix TM media and integrated systems are used to reduce the odor and corrosion potential of commercial, institutional, sewage treatment and industrial environments. Combined with air-to-air heat exchanger options, Circul-aire's systems recuperate valuable energy from various airstreams. All Circul-aire systems are engineered and manufactured to withstand the most severe industrial environments, including those containing corrosive gases.

IPAC

IPAC was acquired by Dectron in September 1999. IPAC specializes in the business of precision cooling products, air conditioning products and compressed air products, and manufactures industrial products, heat transfer products, compressed air products, engineered systems sheet metal fabrication and painting products. We believe that IPAC's products, such as steam traps for steam coils in HVAC systems, complement and complete our existing product lines. IPAC also provides us with a manufacturing facility in the United States and opens a new market to Dectron, the compressed air market, in which we believe IPAC to be well established.

INTERNATIONAL WATER MAKER'S INC.

In July 2002, Dectron acquired International Water Maker's Inc. IWM owns a patented process to extract significant amounts of moisture from the air. Dectron believes this unique technology surpasses any other water-generation technology currently on the market, given that using minimal energy, it provides filtered, de-mineralized water to a variety of applications.

IWM has products designed specifically for residential, commercial, institutional, agricultural, military and specialized industrial applications. For instance, its MRU product line - which has been deemed "Best Practice" by one of the top three oil production companies - provides a unique system of on-line cleaning for gas turbine blades that results in sustained high operating-efficiency and cost-savings for offshore and onshore oil platforms.

IWM complements Dectron's line of products by adding a water filtration process to our extensive line of air filtration products thereby placing Dectron in a unique position of filtering both air and water contaminates.

Industry Background; Product Application

Dectron is aware of an increased public movement to encourage healthy environments in all public places and the resulting market potential for its products. For example, the hazards of second hand smoke have led to the ban of cigarette smoking in most public areas. The public's demands have also been focused on finding engineered solutions to ensure a healthy and comfortable environment in schools and in the workplace. The theme has become much wider in scope and has gained recognition as IAQ.

The American Society of Heating, Refrigeration and Air Conditioning Engineers ("ASHRAE") is the organization that sets ventilation standards in the heating, refrigeration and air-conditioning industries for the United States and Canada. ASHRAE has revised and re-drafted virtually all of the previous ventilation standards with the objective to meet the public demand for healthier indoor environments and to eliminate potential health hazards such as the much-publicized "Sick Building Syndrome." These standards are found in Article 62-1989R "Standard for Acceptable Ventilation Rates" ("62-1989R") and have gained the acceptance and support of many important and related institutions such as the International Society for Indoor Air Quality ("ISIAQ") and other worldwide environmental associations.

We believe that the standards in 62-1989R will have a far-reaching effect on the fresh air requirements for all new and existing public buildings in Canada and the United States. These standards specify, among other things, that 5 to 20 cubic feet per minute (CFM) per person of fresh air should be introduced into all public places. The exact amount depends on the level of activity and the capacity of the space in question.

As a result, a market has been created by these new fresh air requirements. HVAC experts agree that the biggest challenge and key to avoid "Sick Building Syndrome" is to introduce fresh air and to remove humidity from the air. Moisture and humidity has been identified as one of the main causes of health hazards such as Legionnaire's Disease.

Heightened IAQ awareness has created a niche market for new product development. Dectron has developed a product line of "Make-Up Air Dehumidifiers" that we believe can solve what we perceive as the two main problems in IAQ: moisture and humidity. Dectron's products are capable of bringing the required amounts of outdoor air into public areas while at the same time dehumidifying the air, thus addressing the problems of moisture and humidity.

Our engineers have designed our products for the IAQ market with a reversible Water Source Heat Pump, a commonly used heating system that can be easily connected to the popular water loop systems found today in almost every building in every major North American city. We believe that Dectron's Make-Up Air Dehumidifiers represent the most economical solution to meet the new standards for healthy buildings, and have the potential to become one of our most important and fastest growing products lines, along with our swimming pool dehumidifiers.

In addition, we intend to aggressively market Thermoplus' Air Filtration & Purification product line that we believe offers a comprehensive solution to IAQ in industrial and non-industrial applications.

Our goal is to aggressively expand into the IAQ market, while continuing to maintain and expand the individual markets we currently serve.

Business Strategy

Our objective is to become North America's leading supplier of dehumidification, refrigeration and other IAQ products, and to develop a strong international sales network. As we intensify our marketing efforts, we will continue to attempt to increase our market share for our various products. We intend to place special emphasis in the short term on our Refplus products in the United States to address the need for HFC refrigeration, and on Thermoplus' Make-Up Air and Air Filtration & Purification products for the IAQ market.

Sales and Marketing

Our current sales and marketing efforts take place at the subsidiary level, with each subsidiary taking its own approach with respect to its products.

Dectron Inc. markets its products on several levels. Dectron Inc. markets its products directly through trade magazines and industry associations, as well as by attending and demonstrating its products at numerous trade shows throughout North America. Regionally, Dectron Inc. markets its products through non-employee sales representatives who enjoy exclusive rights to their respective sales regions. At present, Dectron Inc. has approximately 120 regional representatives throughout North America, and expects to add more in 2004. Internationally, Dectron Inc. has sales coverage in England, Portugal, Israel, Kuwait and Taiwan. We believe that while the international markets provide tremendous growth opportunities for us, it is important to first develop a strong support network.

Thermoplus' advertising and marketing is limited because the majority of its revenues are derived from sales made to Dectron Inc. and Refplus. Thermoplus primarily sells its products through wholesalers in Canada, and through manufacturing representatives, one based in Canada and the other based in the United States. However, we also market Thermoplus' products, including its Air Filtration & Purification product line for the IAQ market, through Dectron Inc.'s sales representatives.

Refplus' marketing and advertising is currently done almost exclusively through trade magazines. Most of its sales are through wholesalers and original equipment manufacturers. Generally, Refplus does not sell directly to the end user. Its sales force currently consists of service personnel who are based at Dectron's headquarters, outside sales people based in Canada and in the United States, and two sales agencies covering Canada and the United States with approximately 22 representatives. We believe that with the phasing out of hydrochlorofluorocarbons ("HCFC") refrigeration products and the legislative push towards HFC refrigeration products (such as Refplus products), Refplus' product line is well suited for an aggressive growth commitment.

Circul-aire markets its products on several levels. In Canada, its products are sold through a network of sales agents that cover every province and major market area. In the United States, Circul-aire's products (air filtration and energy recuperation) are sold through a network of core representation organizations. We are presently looking for additional representatives to more fully cover the United States market.

In Asia and Europe, Circul-aire's market is extended through agents located in each major market. Circul-aire has also opened branch offices staffed with sales, engineering and service personnel in Jakarta, Indonesia, Bangalore, India and Vancouver, Canada.

Circul-aire advertises in industry journals, magazines, and its website where prospective customers can obtain information on its products and also actively participates in trade associations and tradeshows.

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

IMW markets its products through its internal sales force.

Expansion

We have grown from a single product and single-market company into a group of companies that cover a full range of humidity control, IAQ control, energy recycling and refrigeration products and air purification, and have the production potential for both custom engineered and mass-produced products. We believe that the introduction of a complete line of products to penetrate all segments of the IAQ market will put us in the unique position of being one of the only fully integrated companies of our kind. We expect that with a strong sales and marketing strategy to promote these and other subsequent products, we will experience a period of substantial growth, although there can be no assurance thereof. We plan to continuously inform our current and new targeted customers about our products through technical seminars, product exhibitions and publication of major events in industry journals.

We intend to strengthen our position in the United States by establishing multiple regional sales and distribution offices. We believe that our active presence in the United States with Dectron products will allow us to closely track the performance of our products in the market and will help solidify alternate distribution networks for our Refplus product. We also intend to aggressively pursue other international markets, starting with South America, followed by the Caribbean and Mexico.

The present need for specialized IAQ equipment in North America represents a market, estimated by our management to be in the multi-million dollar range, in which only a limited number of companies have presently taken the lead. We believe that with our team of engineering and design specialists, Dectron can be on the leading edge as a manufacturer and supplier of specialized IAQ equipment into the next century.

Competition

The industries in which we compete are highly competitive. We compete against a number of local, regional and national manufacturers in each of our business segments, many of these competitors have been in existence longer than us and some of which have substantially greater financial resources than us. We believe that competition from new entrants, especially in the IAQ markets will come, if at all, from large corporations which may be able to compete with us on the basis of price, and as a result may have a material adverse affect on our results of operations. In addition, there can be no assurance that other companies will not develop new or enhanced products that are either more effective than our products, or would render our products non-competitive or obsolete.

Employees

As of April 28, 2003, Dectron (including our subsidiaries) employed a total of approximately 486 full-time employees, 5 of which are in executive positions, 58 of whom are engaged in engineering and research and development, 63 of whom are engaged in sales and related services, 24 of whom are in administration, and the remainder of which are in production. An in-house union represents 41 of our employees, all of which work at Thermoplus. Certain terms of their employment are part of a collective bargaining agreement that expires in 2005. Management considers its relations with its employees to be satisfactory.

Patents and Trademarks

We have three United States and two Canadian patents. The patents expire between 2007 and 2015. Three of the patents relate to swimming pool dehumidifiers. One relates to the Method and Apparatus for Controlling Heat Rejection in a Refrigeration System, and the other to the Extraction of Moisture from Air.

We have trademarked the names "Dectron" and "Dry-O-Tron" in both the United States and Canada. The trademarks come up for renewal between 2007 and 2015. We also hold the trademark in "MultiMix" and "MM Multi-Mix" in the United States and Canada. The MultiMix and MMMulti-Mix trademarks will be due for renewal in the year 2014. In addition, we hold the trademark in "CIRCUL-AIRE" in the United States and Canada, which was renewed in 1999.