1 2 0 2 – T R O P E R L A U N E N P A A C S N I Annual Report 2 INSCAPE 2021 ANNUAL REPORT Contents 4 Letter to Shareholders 6 Management’s Discussion & Analysis 8 Vision & Strategy 10 Overview 11 Financial Highlights 12 Results of Operations 15 Summary of Quarterly Results 16 Liquidity & Capital Resources 19 Contractual Obligations 21 Change in Accounting Policies 25 Controls & Procedures 28 Management Report 30 Independent Auditor’s Report 33 Consolidated Financial Statements 39 Notes to the Consolidated Financial Statements 74 Corporate Information 3 Letter to Shareholders History teaches us great lessons. In our Letter to Shareholders last year, we talked about the COVID-19 pandemic being unprecedented. Except that wasn’t entirely accurate. Other than for those of us experiencing its impact today – this had happened before. One hundred years before, between 1918 and 1920, the world had previously experienced this situation with the Spanish Flu. Inscape was already a 30-year-old company at that time which subsequently survived and thrived. As noted last year, your management team engaged in real time strategies to react and adapt to its impact. In short, we sought to create opportunity from a crisis (with appropriate nods to Churchill and Einstein for their famous words in that regard) to reposition your company to successfully compete in a post COVID world with a different demand profile. While this work is not yet fully completed, we are extremely proud of our employees and leadership team who persevered through the many challenges and change initiatives that were necessary to create a new operating foundation for the future. Several initiatives were completed during the fiscal year: • moving our Walls plant in New York state to a new, lower cost, premises; • disposal of surplus equipment and the addition of a state-of-the-art laser turret press in our Holland Landing plant; • preparing for a different competitive landscape by re-assessing our competitive strengths and developing an execution plan to support both our Inscape brand and our Office Specialty brand for the new realities of the market; • reinvigorating our new product plans to ensure relevant offerings are launched into the market during Fiscal Year 2022 and thereafter; and, • developing a framework to implement some of the necessary changes to the business core operating model and identifying the other changes needed to occur in the early portion of the coming fiscal year to properly position the business for long term growth in sales and profitability. Management continues to focus on realignment of costs while investing in both the right talent and technology to drive topline growth and profitability once the economic recovery becomes evident. We also closed a new bank facility and initiated a comprehensive plan to ensure liquidity while we execute the necessary changes over the coming fiscal year. It is important that we acknowledge that we forecasted incorrectly this year – we had anticipated an economic recovery in the second half of the 2021 fiscal year, which did not materialize either for us or anyone else in our industry. We are optimistic about an economic recovery in the second half of the upcoming 2022 fiscal year but anticipate it will remain a bumpy ride while this takes hold given the introduction of new variants and differing vaccination rates. Once again, we successfully protected the health and safety of our employees while continuing to operate our factories in compliance with government restrictions. We are proud of our accomplishments in this respect. We wish to express our gratitude to the leadership team, our employees and our partners for their commitment and our Board of Directors for their continued support and guidance. Bartley Bull, Chair Eric Ehgoetz, Director and Chief Executive Officer 4 Letter to Shareholders 5 Management’s Discussion & Analysis The following Management’s Discussion and Analysis (“MD&A”) of operating results and financial condition of Inscape Corporation and its subsidiaries (“Inscape” or “the Company”) for the year ended April 30, 2021 should be read in conjunction with the accompanying Consolidated Financial Statements and Notes for the years ended April 30, 2021 and 2020. The discussion and analysis are as of July 15, 2021 unless otherwise stated. Additional information relating to the Company, including the Annual Information Form, is available on SEDAR at www.sedar.com or on our website www.myinscape.com. Non GAAP Measures In this MD&A, reference is made to EBITDA, which is not a measure of financial performance under International Financial Reporting Standards (“IFRS”). Inscape calculates EBITDA as earnings or loss before interest, taxes, depreciation and amortization. Management believes EBITDA is a useful measure that facilitates period-to-period operating comparisons and we believe some investors and analysts use it as well. This measure, as calculated by Inscape, does not have any standardized meaning prescribed by IFRS and is not necessarily comparable to similar measures presented by other issuers. Reference is also made to both adjusted net income or loss before taxes and adjusted EBITDA. Adjusted net income or loss before taxes excludes derivative fair value adjustments, unrealized exchange gains or losses, share-based compensation, severance and other non- recurring expenses such as gains or losses on disposal of capital assets and intangibles, restructuring expenses and proceeds from government subsidies and grants. Adjusted EBITDA is earnings before interest, taxes, depreciation and amortization with the exclusion of derivative fair value adjustments, unrealized exchange gains or losses, share-based compensation, severance and other non- recurring expenses such as gains or losses on disposal of capital assets and intangibles, restructuring expenses and proceeds from government subsidies and grants. Management believes adjusted net income and loss before taxes and adjusted EBITDA are useful measures that facilitate period-to-period operating comparisons. The adjusted net loss before taxes and adjusted EBITDA are a non-GAAP measure, which does not have any standardized meaning prescribed by GAAP and is therefore unlikely to be comparable to similar measures presented by other issuers. Forward‑looking Statements This report includes certain forward-looking statements that are based on the Company’s best information and judgments as at the date of this report. Readers are cautioned not to place undue reliance on forward-looking statements found throughout this document. These forward-looking statements are based on our plans, intentions or expectations which are based on, among other things, assumptions about the rate of economic growth in North America, growth expectations for the contract office furniture business and currency fluctuations. 6 Management’s Discussion & Analysis These forward-looking statements include known and Company Profile and Core Business unknown risks, uncertainties, assumptions and other Inscape Corporation (the “Company”) is a limited company factors which may cause actual results or achievements incorporated in Ontario, Canada, with Class B common to be materially different from those expressed or implied. shares listed on the Toronto Stock Exchange (TMX). The The forward-looking statements are subject to risks and Company’s registered office is at 67 Toll Road, Holland uncertainties that may cause the actual results to differ Landing, Ontario, Canada. materially from those anticipated in the discussion (see “Risks and Uncertainties” for more information). Since 1888, Inscape has been designing products and services that are focused on the future, so businesses can While management believes that the expectations adapt and evolve without investing in their workspaces expressed by such forward-looking statements are all over again. Our versatile portfolio includes systems reasonable, we cannot assure that they will be correct. In furniture, storage, and walls – all of which are adaptable evaluating forward-looking information and statements, and built to last. Inscape’s wide dealer network, readers should carefully consider the various factors which showrooms in the United States and Canada, along with could cause actual results or events to differ materially full service and support for all of our clients, enables us to from those indicated in the forward-looking information stand out from the crowd. We make it simple. We make and statements. Readers are cautioned that the foregoing it smart. We make our clients wonder why they didn’t list of important factors is not exhaustive. Furthermore, choose us sooner. the Company will update its disclosure upon publication of each fiscal quarter’s financial results and otherwise The Company reports in two reportable operating disclaims any obligations to update publicly or otherwise segments. The Office Furniture segment includes storage, revise any such factors or any of the forward-looking benching, systems and seating solutions products. information or statements contained herein to reflect The Walls segment includes architectural and movable subsequent information, events or developments, changes walls. The Company’s products are manufactured in two in risk factors or otherwise. facilities: a 308,000 square foot plant in Holland Landing, Ontario, and a 30,000 square foot plant in Jamestown, New York. 7 INSCAPE 2021 ANNUAL REPORT Vision & Strategy Management has reviewed and refined its key strategic initiatives during the past fiscal year to assure a flexible operational foundation and broaden opportunities for growth. These are: Develop our Brands – Inscape and Office Specialty Both the Inscape brand and the Office Specialty brand offer strong Refine our Product Offering Market forces have changed the demand profile. Inscape and Office Specialty offerings must play to the opportunities to deliver a differentiated Company’s core strengths and adapt offering. Emphasis now is on exploiting the strengths of each and exploring where opportunities exist to best broaden our market share for each individual brand. to new market opportunities for growth. Storage solutions are a key component of such offerings. 8 Vision & Strategy INSCAPE 2021 ANNUAL REPORT Multiply our Distribution Channels Regional Focus Lever Technology Widening the sales opportunity Focus remains on investment in Enable the Company through funnel by actively broadening the high opportunity and high margin strategic investments in technology- number of distribution channels for markets. Re-establishing certain driven capital equipment and the Company’s products is critical. offerings nationally while supporting technology-based systems and This includes dealer channels; others regionally will create a wider, processes to unlock potential, independent rep channels; inside more sustainable and more robust improve growth, competitiveness, sales team development, and sales base. operating performance, and speed ecommerce channels. to market. 9 Overview Fiscal Year 2021 Compared to Fiscal Year 2020 Fiscal year 2021 sales decreased by $37.6 million or 49.6% compared to the prior year. Both the Furniture and Walls business units contributed to the decline in sales which stemmed from a general reduction in customer demand, as well as, both shipment delays and pushouts of major projects to future quarters resulting from the economic impact of COVID-19. In fiscal year 2021, the Company incurred a net loss of $0.9 million or 6 cents per share, compared to a net loss of $5.4 million, or 38 cent per share a year ago. In Fiscal 2021, the Company’s sales were significantly lowered due largely to the impact of the COVID-19 pandemic, however there were significant unrealized gains related to derivative contracts, other income from tranche 2 forgivable government loan proceeds were received, and a deferred tax recovery related to assets held for sale, which had a significant impact on the reported net loss. With the exclusion of these items in addition to other items such as stock-based compensation and severance expenses, fiscal year 2021 had an adjusted net loss before taxes of $13.0 million compared with last year’s adjusted net loss before taxes of $5.2 million. As of April 30, 2021, there were $1.5 million of inventory write-downs, which resulted in lower margins and net income, as well as, lower EBITDA and Adjusted EBITDA. 10 Overview Financial Highlights (in thousands, except for per share amounts) Sales Net income (loss) Basic and diluted income (loss) per share Adjusted net loss before taxes Adjusted EBITDA Sales Net loss Basic and diluted loss per share Adjusted net loss before taxes Adjusted EBITDA Total assets Total liabilities Cash Restricted cash Weighted average number of shares for basic and diluted EPS THR EE MONTH S ENDED APRIL 30, $ $ $ $ $ $ 20 21 8,051 499 0.03 (4,906) (3,876) 2020 $ 14,443 (5,196) (0.36) (2,288) (1,038) $ Y EARS ENDE D APRIL 30, 20 21 38,203 (891) (0.06) (12,952) (8,714) 2020 75,818 (5,406) (0.38) (5,163) (1,381) $ $ AS AT APRIL 30, 20 21 41,972 28,136 3,736 2,764 14,380,701 2020 37,804 29,127 5,885 - $ $ 14,380,701 11 INSCAPE 2021 ANNUAL REPORT Results of Operations SAL ES (i n t hous and s) FISCAL 202 1 FI SC AL 20 20 CHANGE Three Months Ended April 30 Years Ended April 30 $ $ 8,051 38,203 $ $ 14,443 75,818 (44.3%) (49.6%) Sales in the fourth quarter and fiscal 2021 were 44.3% and 49.6% lower than the same periods of the previous year primarily related to the economic impact of COVID-19 pandemic, which resulted in both shipment delays and customer order pushouts in some of our major markets. In addition, during the fourth quarter the Walls plant was moved from Falconer, New York to Jamestown, New York, resulting in a shut down for close to a month which impacted sales and shipments. GROSS PROFI T (in tho u sa nds ) FISCAL 20 21 % OF SALES FI SC AL 20 20 % OF SALES Three Months Ended April 30 Years Ended April 30 $ $ 614 6,934 7.6% 18.2% $ $ 3,877 20,791 26.8% 27.4% Gross profit margin for the fourth quarter and fiscal 2021 decreased by 19.2 and 9.2 percentage points, respectively, over the same periods last year as a result of the lower sales volume due to the economic impact of the COVID-19 pandemic. In addition, for the fourth quarter and twelve months period ending April 30, 2021, inventory totaling $0.2 million and $1.5 million, respectively, relating to discontinued product lines and obsolescence were written off. The Company continues to identify initiatives to achieve cost efficiencies and improved margins as sales levels return to normal. However, gross profit margins without the effects of the excess inventory write-offs would have been 9.7% for the fourth quarter and 22.1% for the twelve months period ending April 30, 2021. SELLING, GENERAL & ADMINISTRATIVE EXPE NSES (SG & A ) (i n tho u sa nd s ) FISCAL 20 21 % OF S ALES FI SC AL 20 20 % OF SALES Three Months Ended April 30 Years Ended April 30 $ $ 5,925 20,536 73.6% 53.8% $ $ 6,565 26,382 45.5% 34.8% SG&A for the fourth quarter and fiscal 2021 were 73.6% and 53.8% of sales, compared to 45.5% and 34.8% for the same periods of last year. Despite the perception of the higher ratio percentages, the $0.6 million and $5.8 million actual decrease in SG&A expenses resulted from workforce reductions, decrease in marketing initiatives and lower selling, travel and entertainment expenses, partially offset by the non-recurring severance expense of $0.5 million. Collectively, these actions are largely the results of measures adopted by management to manage expenses during COVID-19. In the current fiscal, lower sales volumes impacted the overall higher SG&A to sales ratio. NET I NCO ME (LO SS) (i n thous a nd s ) FISCAL 20 21 % OF SALES FI SC AL 20 20 % OF SALES Three Months Ended April 30 Years Ended April 30 $ $ 499 (891) 6.2% (2.3%) $ $ (5,196) (5,406) (36.0%) (7.1%) 12 The fourth quarter net income of $0.5 million is greater than the net loss of $5.2 million in the same quarter of last year, primarily due to $1.9 million of other income in the form of government grants and subsidies, $0.6 million gain on the revaluation of derivative contracts, $0.4 million gain on foreign exchange, and a $2.9 million deferred tax recovery related to assets held for sale. Fiscal year 2021 ended with a net loss of $0.9 million compared to a net loss of $5.4 million in fiscal year 2020. This is primarily due to a $4.0 million gain on the revaluation of derivative contracts, $5.3 million of other income in the form of government grant and subsidies, and income tax recovery related to assets held for sale. The adjusted net (loss) income before taxes and adjusted EBITDA are non-GAAP measures, which do not have any standardized meaning prescribed by GAAP and is therefore unlikely to be comparable to similar measures presented by other issuers. The following is a reconciliation of net loss before taxes calculated in accordance with GAAP to adjusted net loss before taxes, the non-GAAP measure: (i n t ho u sa nds ) 20 21 20 20 20 21 2020 THR EE M ONT HS ENDED APR I L 3 0, Y EARS ENDE D APRIL 30, Net loss before taxes Adjust non-operating or unusual items: Unrealized (gain) loss on derivatives Unrealized (gain) loss on foreign exchange Loss (gain) on disposal of PP&E and intangibles Other income – government grant Stock based compensation Severance obligation Adjusted net loss before taxes $ (2,356) $ (5,237) $ (3,717) $ (5,391) (581) (488) 23 (1,916) (110) 522 (4,906) $ 3,032 (3,997) 1,994 224 (377) 289 (188) (517) (102) 500 (2,288) $ (209) (5,308) 90 566 (12,952) $ (1,957) (517) (379) 798 (5,163) $ The following is a reconciliation of net loss before taxes calculated in accordance with GAAP to EBITDA and adjusted EBITDA, the non-GAAP measures: THR EE M ONT HS ENDED APR I L 3 0, Y EARS ENDE D APRIL 30, (i n t ho u sa nds ) Net loss before taxes Interest Depreciation Amortization EBITDA Adjust non-operating or unusual items: Unrealized (gain) loss on derivatives Unrealized (gain) loss on $ $ $ 20 21 (2,356) 149 496 385 (1,326) $ $ 20 20 (5,237) 191 602 457 (3,987) $ $ 20 21 (3,717) 303 1,972 1,963 521 $ 2020 $ (5,391) 184 2,158 1,440 (1,609) (581) $ 3,032 $ (3,997) $ 1,994 foreign exchange (488) 224 (377) 289 Loss (gain) on disposal of PP&E and intangibles Other income – government grant Stock based compensation Severance obligation Adjusted EBITDA $ 23 (1,916) (110) 522 (3,876) $ (188) (517) (102) 500 (1,038) $ (209) (5,308) 90 566 (8,714) $ (1,957) (517) (379) 798 (1,381) Income Tax In accordance with IFRS requirements (IAS 12), deferred income tax benefits relating to tax loss carry-forward were recognized during fiscal 2021 due to probable future taxable income against which to realize them. See note 15.1 in the consolidated financial statements which include a reconciliation of the income tax expense and reversal of valuation allowance. 13 INSCAPE 2021 ANNUAL REPORT 14 Summary of Quarterly Results Selected unaudited quarterly financial information for the previous eight quarters from July 31, 2019 through April 30, 2021 is provided below: Selected Quarterly Information1 (in thousands, except per share amounts) (Unaudited) APR 30, 202 1 JAN 31 , 202 1 OCT 31, 202 0 JUL 31, 2020 QUARTERS ENDED $ $ Sales Gross profit Gross profit % Net income (loss) $ Basic and diluted income (loss) per share $ Adjusted net loss before taxes $ Adjusted EBITDA $ 8,051 614 7.6% 499 0.03 (4,906) (3,876) $ $ $ $ $ $ 11,625 2,658 22.9% (1,038) (0.07) (2,191) (1,179) $ $ $ $ $ $ 7,157 232 3.2% (3,732) (0.26) (4,659) (3,630) $ $ $ $ $ $ 11,370 3,430 30.2% 3,380 0.24 (1,197) (185) APR 30, 2020 JAN 31 , 20 20 OCT 3 1, 2 019 JUL 31, 2019 QUAR TERS ENDED Sales Gross profit Gross profit % Net (loss) income Basic & diluted (loss) income per share Adjusted net (loss) income before taxes Adjusted EBITDA $ $ $ $ $ $ 14,443 3,877 26.8% (5,196) (0.36) (2,288) (1,038) $ $ $ $ $ $ 17,376 4,371 25.2% 142 0.01 (1,591) (738) $ $ $ $ $ $ 23,322 6,765 29.0% 392 0.03 230 1,076 $ $ $ $ $ $ 20,677 5,778 27.9% (744) (0.05) (1,515) (680) 1Quarterly earnings per share may not add up to year-to-date earnings per share due to rounding. 15 INSCAPE 2021 ANNUAL REPORT Liquidity & Capital Resources Cash Flow Summary (in t hous and s) Net cash flow (used in) generated from: Operating activities before changes in working capital Net change in working capital Investing activities Financing activities Foreign exchange (loss) gain on cash Net increase in cash Cash, beginning of period Cash, end of period THR EE MONTH S ENDED APRIL 30, 20 21 2020 $ $ (3,654) (1,101) (2,044) 9,352 (45) 2,508 1,227 3,736 $ $ (1,549) 4,093 (81) 454 246 3,163 2,722 5,885 The fourth quarter cash outflow from operations (before changes in working capital) was $3.7 million compared to the previous year’s outflow of $1.5 million. The movement is primarily due to low sales volume, interest rates, exchange rate and share price fluctuations, related to the economic impact of the COVID-19 pandemic, which affected the valuation of derivative contracts and remeasurement of share-based compensation offset by financing activities and government grants and subsidies during the quarter. Net decrease in working capital was $1.1 million in the current quarter compared to a net increase of $4.1 million in the fourth quarter of last year. The net decrease resulted primarily from the settlement of accounts payable and restricted cash held as collateral security for the derivative contracts. Cash outflow in investing activities for the fourth quarter related to $2.0 million in property, plant and equipment additions compared to $0.1 million for the same period in the prior year. The current quarter included major capital investments in a new fully automated combination laser/turret press and leasehold expenses for the new plant and offices in Jamestown, New York. Net cash inflow from financing activities of $9.4 million, primarily related to the proceeds received from the revolving credit facility and forgivable government loan and Canadian Emergency Wage Subsidy (“CEWS”) program, less principal repayments for lease contracts. 16 Cash Flow Summary (i n t hous and s) Net cash flow (used in) generated from: Operating activities before changes in working capital Net change in working capital Investing activities Financing activities Foreign exchange (loss) gain on cash Net (decrease) increase in cash Cash, beginning of period Cash, end of period Y EARS ENDED APRIL 30, 20 21 2020 $ $ (6,219) (1,013) (2,589) 7,967 (295) (2,149) 5,885 3,736 $ (2,144) 402 3,799 454 109 2,620 3,265 5,885 $ As of April 30, 2021, the cash outflow from operations (before changes in working capital) was $6.2 million compared to the previous year’s outflow of $2.1 million. The movement is primarily due to the net loss related to the economic impact of the COVID-19 pandemic, the valuation of derivative contracts and deferred income tax recovery. Net decrease in working capital was $1.0 million as of April 30, 2021, compared to a net increase of $0.4 million for the same period last year. The net decrease related primarily to lower inventory levels of $2.1 million, lower accounts receivable of $3.9 million, partially offset by the increase in restricted cash. As of April 30, 2021, decreased inventory levels were largely due to discontinued product lines and obsolescence, as well as management SKU rationalization initiatives. The lower sales volume, due to the impact of the COVID-19 pandemic, drove accounts receivable to decrease by $3.9 million as of April 30, 2021. Restricted cash, held as collateral security for the derivative contracts, was a positive $2.8 million influx of cash, partially offsetting inventory, and accounts receivable as at fiscal 2021. Net cash outflow for investing activities of $2.6 million compared to a net cash inflow of $3.8 million in the prior year. The current year cash outflow included the first tranche of a major re-tooling investment into laser machinery. The prior year’s cash inflow of $3.8 million from investing activities consisted of $4.4 million proceeds from the sale and leaseback and sale of the DC Rollform business. Net cash inflow from financing activities of $8.0 million were primarily related to the proceeds received from the revolving credit facility. 17 INSCAPE 2021 ANNUAL REPORT Retirement Benefit Obligation As of April 30, 2021, the defined benefit obligation recognized a remeasurement gain of $6.5 million in other comprehensive income, primarily related to the favourable returns on the fair value of the plan assets of $4.7 million and actuarial gains which reduced benefits obligation of $1.8 million. The underlying drivers being the recovery of the economic indicators as the global economy prepares for post-pandemic growth. Remeasurements of the net defined benefit liabilities Actuarial gain (loss) due to actuarial experience Actuarial gain (loss) due to financial assumption changes Actuarial gain due to demographic assumption changes Return on plan assets greater (less) than discount rate Remeasurement effects recognized in other comprehensive income (loss) AS AT APR IL 30 , 202 1 AS AT APR I L 30, 2020 $ $ 886 815 61 4,704 6,466 $ $ (59) (2,050) 27 (1,058) (3,140) Credit Facility On April 29, 2021 the Company closed a new revolving committed credit facility with FrontWell Capital Partners Inc., with credit availability of the lesser of $15.0 million and availability pursuant to the Borrowing Base calculation representing accounts receivable, inventory, land and building, with a maturity date which is the earlier of (i) April 29, 2022, and (ii) the completion of the sale of the property classified as assets held for sale. The interest rate on the demand operating credit facility is Prime Rate plus 8.75% for Canadian dollar loans, US Base Rate plus 8.75% for US dollar loans. The agreement is secured by the Company’s accounts receivable, inventory, land and building (borrowing base), which is $6.2 million as at April 30, 2021. As at April 30, 2021, the Company has drawn $8.0 million on the demand operating credit facility of which $5.2 million is a Canadian dollar loan and $2.3 million is a US dollar loan ($2.8 million CDN) (2020 – not drawn), with related deferred financing charges in the amount of $0.1 million and foreign currency translation of $16 thousand, included in current liabilities. In addition, as at the date of this report the Company met all the required credit facility covenants. 18 Contractual Obligations The following is a summary of the Company’s contractual obligations as at April 30, 2021: (i n m i l l io n s) Lease liabilities Revolving credit facility Foreign exchange contracts PAY ME NTS DUE BY PERIOD TOTAL 1 Y EAR OR LESS 1‑ 5 Y EARS AFTER 5 YEARS $ 10.0 $ 8.0 0.6 0.7 8.0 0.6 $ 3.8 $ 5.5 ‑ ‑ ‑ ‑ $ 18.6 $ 9.3 $ 3.8 $ 5.5 Lease contracts are primarily in respect of the Company’s three showrooms and its US manufacturing facilities. See “Financial Instruments” discussed below for the Company’s obligations for foreign exchange contracts. Share Capital During fiscal 2021, share transactions were as follows: CLASS A CLASS B MULT IPLE VOT ING SHAR ES SUBOR DINATE VOT ING SHAR ES TOTAL (i n t hous and s) NUMB ER OF SHA RE S SHAR E NUMB ER SHAR E NUMB ER CAPI TAL OF SHARE S CAPI TAL OF SHARE S SHARE CAPITAL Balance, April 30, 2020 3,346 $ 237 11,035 $ 52,631 14,381 $ 52,868 Conversion of multiple voting shares into subordinate voting shares(1) (3,346) (237) 3,346 237 ‑ ‑ Balance, April 30, 2021 ‑ $ ‑ 14,381 $ 52,868 14,381 $ 52,868 (1) On October 30, 2020, the Class A multiple voting shares of the Company, previously held by Bhayana Management Ltd. and The Madan and Raksha M. Bhayana Family Foundation (collectively, the “Bhayana Family”), were converted into Class B subordinate voting shares. Subsequently, by way of a private placement, Pender Growth Fund (“PGF”), an unrelated party, entered into a Share Purchase Agreement (the “Purchase Agreement”) with the Bhayana Family pursuant to which PGF purchased a total of 6,886,981 Class B subordinate voting shares. On November 18, 2020, PGF completed the second and final tranche of the share purchase transaction, and holds in aggregate with other funds advised by PenderFund Capital Management Ltd. 7,927,321 subordinate voting shares of the Company, or approximately 55.12% of the total issued and outstanding subordinate voting shares of the Company, making PenderFund Capital Management Ltd. its ultimate parent. 19 INSCAPE 2021 ANNUAL REPORT Related Party Transactions The following was the remuneration of directors and other members of key management personnel, including the Chief Executive Officer, Chief Financial Officer, Chief Operations Officer, Chief Brand Officer, SVP Sales and Distribution, VP Manufacturing & Supply Chain and VP Human Resources. (in thous an ds ) Salaries and short-term benefits Post-employment benefits Share-based compensation Other Related Party Transactions THREE MONTHS ENDED APRIL 30, YEARS ENDED APRIL 30, 20 21 288 6 (137) 157 $ $ 20 20 410 8 656 1,074 $ $ 20 21 1,691 22 62 1,775 $ $ 2020 2,163 42 379 2,584 $ $ As a result of the October 30, 2020 purchase agreement between the Bhayana Family and PGF, PGF became the parent company of Inscape Corporation and holds and/or controls 55.12% of the total issued and outstanding subordinate voting shares of Inscape. 20 Change in Accounting Policies In 2021, there were no changes in accounting policies Provision for warranty is based on management’s which impacted on the Company’s business. judgment and review of any known exposures and historical claim experience. Significant Accounting Judgments, Estimates and Assumptions Percentage of completion percentages are based on In the application of the Company’s accounting policies, the Company’s onsite project management estimate of management is required to make judgments, estimates job progress. and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other Identification of cash generating units for the purposes sources. The estimates and associated assumptions are of performing impairment test of assets is based on based on historical experience and other factors that are management’s judgment of what constitutes the lowest considered to be relevant. Actual results may differ from group of assets that can generate cash flows largely these estimates. independent of other assets. Significant Estimates and Judgments in Determination to not recognize deferred tax assets is Applying Accounting Policies based on management’s judgment of the ability of the The following are estimates and judgments that the Company to achieve sufficient taxable income to use the management has made in the process of applying the deferred tax assets. Company’s accounting policies and that have the most significant effect on the amounts recognized in the COVID‑19 Pandemic financial statements. Significant Judgments The COVID-19 pandemic has continued to disrupt global health and the economy in 2021 and has created an indeterminate period of volatility in the markets in which the The Company assesses on a forward-looking basis the Company operates. The Company continues to monitor expected credit losses (“ECL”) associated with its assets developments and mitigate risks related to the COVID-19 carried at amortized costs, including other receivables. For pandemic and the impact on the business operations, trade and other receivables only, the Company applies the supply chain, and most importantly the health and safety simplified approach permitted by IFRS 9, which requires of its employees. the expected lifetime losses (based on management’s judgement and review of known exposures, credit As an evolving risk, the duration and full financial effect worthiness, and collection experience) to be recognized of the COVID-19 pandemic is unknown at this time. Any from initial recognition of the receivables. estimate of the length and severity of these developments Provision for inventories is based on the aging of accordingly affect the Company’s operations, financial inventories and management’s judgement of product results and condition in future periods. Therefore, life cycles in identifying obsolete items. the amounts recorded in these consolidated financial is therefore subject to significant uncertainty, and statements are based on the latest reliable information 21 INSCAPE 2021 ANNUAL REPORT available to management at the time the consolidated Liability for the Company’s performance and restricted financial statements were prepared, reflecting the share units is based on management’s best estimate of the information and conditions to date. However, given Company’s financial performance during the vesting period the level of uncertainty caused by COVID-19, these of the performance and restricted share units. assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount Determination of the company’s fair value of the principal of the affected asset or liability in the future. assets of each CGU less the costs to sell the assets is used to perform an impairment test of the assets. Asset Held for Sale The Company’s accounting policies relating to assets New Accounting Standards Adopted held for sale are described above. In applying this policy, The following amendments to standards and judgment is required in determining whether sale of certain interpretations became effective for the annual periods assets is highly probable, which is a necessary condition beginning on or after May 1, 2020. The application of for being presented within assets held for sale. these amendments and interpretations had no significant impact on the Company’s consolidated financial position or Government Assistance results of operations. Government assistance, including the Canada Emergency Wage Subsidy (“CEWS”) and the Canada Emergency Rent IAS 1, Presentation of Financial Statements and Subsidy (“CERS”), are recorded in the consolidated financial IAS 8, Accounting Policies, Changes in Accounting statements as described above, significant accounting Estimates and Errors policies. In applying this policy, judgment is required in The amendments to IAS 1 and IAS 8 clarify the definition determining whether government grants will be received and of materiality and seek to align the definition used in that the Company will comply with conditions attached. the Conceptual Framework with that in the standards Going Concern themselves as well as ensuring the definition of materiality is consistent across all IFRS. The concept of ‘obscuring’ Significant judgments exercised in applying accounting material information with immaterial information has been policies that have the most significant effect on the included as part of the new definition. The threshold for amounts recognized in the financial statements include materiality influencing users has been changed from ‘could the assessment of the Company’s ability to continue as a influence’ to ‘could reasonably be expected to influence’. going concern. The definition of material in IAS 8 has been replaced by a reference to the definition of material in IAS 1. In addition, The Company uses a forecasted cash flow to assess the IASB amended other Standards and the Conceptual the Company’s ability to continue as a going concern. Framework that contain a definition of ‘material’ or refer to Significant judgment is required to forecast the amount of the term ‘material’ to ensure consistency. new sales orders and total revenue and the timing of the related cash flows. Financial Instruments Significant Estimates The Company’s activities expose it primarily to the financial risks of changes in the US dollar exchange rates. The Estimated useful lives and residual values of intangible Company enters into a variety of derivative financial assets, property, plant and equipment are based on instruments to hedge the exchange rate risk arising on the management’s experience, the intended usage of the anticipated sales to the US. The use of financial derivatives assets and the expected technological advancement that is governed by the Company’s policies approved by may affect the life cycle and residual values of the assets. the Board of Directors. Compliance with policies and exposure limits is reviewed by the Board on a regular Defined benefit pension obligations are based on basis. The Company does not enter into or trade financial management’s best estimates on the long-term investment instruments, including derivative financial instruments, for return on pension fund assets, the discount rate of speculative purposes. obligations, mortality and the future rate of salary increase. 22 As at April 30, 2021, the Company had outstanding US Competitive Environment dollar hedge contracts with settlement dates from May Office furniture is a mature and highly competitive industry. 2021 to May 2022. The total notional amounts under the Our main competitors include global companies with contracts are US$14,000 to $22,050 (2020 - $40,000 to strong brand name recognition and capability to utilize $50,000). Dependent on the spot CAD/US rate on each offshore outsourcing. This competitive environment settlement date, the Company can sell US dollars at rates results in price pressure and limits certain distributors’ ranging from $1.27 CAD/US to $1.35 CAD/US (2020 - ability to carry Inscape products along with those of $1.28 CAD/US to $1.50 CAD/US). These contracts had the competitors. The Company competes on product a mark-to-market unrealized gain of $606 (US$493) as design, functionality, innovation and customer service. Our at April 30, 2021 (2020 – unrealized loss of $3,391 or success will depend on building a distribution network US$2,437), which was recognized on the consolidated that is aligned with Inscape, targeting committed dealers statement of financial position as derivative asset. Any who lead with Inscape’s product lines and automating changes in the net gain or loss from the prior reporting processes to keep improving our productivity, quality and period due to addition of forward contracts, movements customer service. in the US currency exchange rate, reclassification of the unrealized gains or losses to realized income or loss are Raw Material and Commodity Costs recognized on the consolidated statement of operations Fluctuations in raw material and commodity prices could as unrealized gain or loss on derivatives of the year. There have a significant impact on the Company’s cost of sales were realized gains of $135 on the settlement of contracts and operating results. Since most of the raw materials during fiscal year 2021 (2020 – losses $275). and commodities used by the Company are not unique to Risks and Uncertainties the office furniture industry, their costs are often affected by supply and demand in other industries and countries. The following risks and uncertainties may adversely affect As a result, the Company may experience rising raw the Company’s business, operating results, cash flows material and commodity costs that cannot be recovered and financial condition. These may not be the Company’s from customers in a highly competitive environment. only risks and uncertainties. Other unknown or currently The Company manages its manufacturing costs by insignificant risks and uncertainties not discussed below locking in supply contract prices, improving production can have an adverse impact on the Company’s business yields, reducing spoilage, focusing on quality control and and financial performance. overseas sourcing, where appropriate. Natural Disasters US Dollar Exchange Rate Extraordinary weather conditions, or natural disasters, The US is the main market for the Company. Fluctuations such as hurricanes, tornadoes, floods, droughts, tsunamis, in the US/Canadian dollar exchange rate have a typhoons, and earthquakes and pandemics could disrupt significant impact on the operating results, cash flows operations at our facilities or those of our suppliers and and financial condition of the Company. One method the customers and increase our cost of sales and other Company uses to manage its foreign currency exposure operating expenses. is through the use of US dollar hedge instruments. The hedge instruments provide the Company with an General Economic and Market Conditions opportunity to lock in the US currency conversion rate at Demand for office furniture is sensitive to general economic a prevailing hedge rate to facilitate the business planning conditions such as the white-collar employment rate, process with pre-determined exchange rate exposure. corporate growth and profitability, government spending, However, the instruments do not completely eliminate office relocations and commercial property development. the effects of exchange rate fluctuations. To minimize The Company manages to moderate the impact of this risk the effect of exchange rate fluctuations, the Company by increasing the differentiation of our products to attract endeavors to create natural hedges through increasing new customers, the launching of new products to gain US suppliers where appropriate and seeks to increase market share and enhancing the coverage of customers Canadian dollar sales. and designers. 23 INSCAPE 2021 ANNUAL REPORT Access to the US Markets Disruption of the relationship or transition of an The Company depends heavily on unrestricted access to underperforming representative could have an adverse the US markets as a significant portion of the Company’s impact on our business in the affected market. The sales is derived from there. The Company’s business, Company manages this risk by maintaining strong operating results, cash flows and financial condition connection to performing representatives at the regional will be seriously affected if access to the US markets is senior management level. The Company also assesses the restricted due to political, social, economic or regulatory effectiveness of the representatives on a regular basis. reasons. Buy America sentiment and regulations may deny the Company’s chance in bidding contracts, especially Effectiveness of Growth Strategy Implementation with the government. The Company needs to monitor The Company seeks to grow its business and market closely developments in various US statutes, regulations, share by building committed distribution, developing procurement requirements and border crossing products and applications to meet customer needs, and restrictions. Where appropriate, the Company publicizes providing visualization tools to assist designers and clients its extensive investment in the US and contribution to the with solutions for workspaces. Effective implementation economy by operating a production plant in New York of these strategies is essential to the future growth of the State, providing employment opportunities in different Company. The Company’s sales and results of operations states and purchasing from US suppliers. will be adversely affected if there are delays or difficulties in carrying out the strategies. Effectiveness of Market Representatives The Company relies on the effectiveness of independent market representatives to market our products to customers. A market representative may choose to terminate its relationship with us or the effectiveness of a market representative may decline. 24 Controls & Procedures Disclosure Controls and Procedures Limitations of an Internal Control System The Chief Executive Officer and the Chief Financial Officer The Certifying Officers believe that any DC&P or ICFR, no (the “Certifying Officers”), along with other members of matter how well designed and operated, can provide only management, have designed, or caused to be designed reasonable, not absolute, assurance that the objectives under their supervision, Disclosure Controls and Procedures of the control system are met and that all control issues, (“DC&P”) to provide reasonable assurance that (i) material including instances of fraud, if any, within the Company information relating to the Company is made known to them have been prevented or detected. Further, the design of a by others, particularly during the period in which the annual control system must reflect the fact that there are resource filings are being prepared; and (ii) information required to be constraints, and the benefits of controls must be considered disclosed by the Company in its annual filings, interim filings relative to their costs. The design of any system of controls or other reports filed or submitted by it under securities is also based in part upon certain assumptions about the legislation is recorded, processed, summarized and reported likelihood of future events, and there can be no assurance within the time periods specified in securities legislation. that any design will succeed in achieving its stated goals under all potential (future) conditions. The Certifying Officers have evaluated, or caused to be evaluated under their supervision, the design and operating effectiveness of DC&P and have found that the Company’s DC&P are effective at the financial year-end. Internal Control over Financial Reporting The Certifying Officers, along with other members of management, have also designed, or caused to be designed under their supervision, Internal Control over Financial Reporting (“ICFR”) to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes prepared in accordance with IFRS. The Certifying Officers have used the Internal Control – Integrated Framework (2013 COSO Framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) to design the Company’s ICFR. The Certifying Officers have evaluated, or caused to be evaluated under their supervision, the design and operating effectiveness of ICFR and have found that the Company’s ICFR is effective in design and operation at the financial year end. During the year ended April 30, 2021, there has been no change in the Company’s ICFR that has materially affected, or is reasonably likely to materially affect, the Company’s ICFR. 25 INSCAPE 2021 ANNUAL REPORT 26 INSCAPE 2021 ANNUAL REPORT 27 Management Report TO THE SHAREHOLDERS OF INSCAPE CORPORATION Preparation of the consolidated financial statements accompanying this annual report and the presentation of all other information in the report are the responsibility of Management. The financial statements have been prepared in accordance with International Financial Reporting Standards and reflect Management’s best estimates and judgments. All other financial information in the report is consistent with that contained in the financial statements. The Board of Directors, through its Audit Committee, oversees Management in carrying out its responsibility for financial reporting and systems of internal control. The Audit Committee, which is composed of non-executive directors, meets regularly with Management and external auditors to satisfy itself as to the reliability and integrity of financial information and the safeguarding of assets. The financial statements have been reviewed and approved by the Board of Directors on the recommendation of the Audit Committee. Eric Ehgoetz, Director and Chief Executive Officer Jon Szczur Chief Financial Officer July 15, 2021 28 29 INSCAPE 2021 ANNUAL REPORT Independent Auditor’s Report To the Shareholders and the Board of Directors of Inscape Corporation Opinion Key Audit Matter We have audited the consolidated financial statements of A key audit matter is a matter that, in our professional Inscape Corporation (the “Company”), which comprise the judgment, was of most significance in our audit of the consolidated statements of financial position as at April consolidated financial statements for the year ended April 30, 2021 and 2020, and the consolidated statements 30, 2021. This matter was addressed in the context of our of operations, comprehensive income, changes in audit of the consolidated financial statements as a whole, shareholders’ equity and cash flows for the years then and in forming our opinion thereon, and we do not provide ended, and notes to the consolidated financial statements, a separate opinion on this matter. including a summary of significant accounting policies (collectively referred to as the “financial statements”). Property, plant and equipment – Refer to Notes 2 and In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at April 30, 2021 and 2020, and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards (“IFRS”). Basis for Opinion We conducted our audit in accordance with Canadian generally accepted auditing standards (“Canadian GAAS”). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. 6 to the consolidated financial statements Key Audit Matter Description At the end of each reporting period, the Company reviews the carrying amounts of its long-lived assets to determine whether there are any indicators that those assets might be impaired. If such indicators exist, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any. Where it is not possible to estimate the recoverable amount of an individual asset, the recoverable amount is estimated based on the cash-generating unit (“CGU”) to which the asset belongs. Indicators of impairment were identified for the Furniture CGU. The recoverable amount of the Furniture CGU mainly consists of the fair value less costs to sell of the land and building (the “real estate assets”) within the CGU. This required management to make significant judgements and assumptions related to the fair value of the real estate assets by evaluating directly comparable real estate transactions. The recoverable amount of the Furniture CGU exceeded its carrying value and no impairment loss was recognized. 30 Given the significant judgement made by management to conclude that there is a material misstatement of this measure the fair value of the real estate assets, performing other information, we are required to report that fact in this audit procedures to evaluate the reasonableness of these auditor’s report. We have nothing to report in this regard. judgments and assumptions, specifically those relating to identifying and verifying the sufficiency, relevance, The Annual Report is expected to be made available and comparability of the available public real estate to us after the date of the auditor’s report. If, based on transactions, required a high degree of auditor judgement. the work we will perform on this other information, we As a result, auditing those judgements required an conclude that there is a material misstatement of this increased extent of audit effort including the involvement other information, we are required to report that fact to of fair value specialists. those charged with governance. How the Key Audit Matter was Addressed in the Audit Responsibilities of Management and Those Charged With the assistance of our fair value specialists, our audit with Governance for the Financial Statements procedures related to the fair value less costs to sell of real Management is responsible for the preparation and fair estate assets included the following, among others: presentation of the financial statements in accordance with IFRS, and for such internal control as management • Evaluated the independent appraisal obtained by determines is necessary to enable the preparation management to estimate the fair value of the real estate of financial statements that are free from material assets by: misstatement, whether due to fraud or error. • Reviewing the source information and assumptions used by comparing those to relevant internal and external information, including industry information, to assess the relevance and comparability of public real estate transactions considered. • Performed an independent search of comparable transactions to search for contradictory evidence. In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. Other Information Management is responsible for the other information. The other information comprises: • • Management’s Discussion and Analysis The information, other than the financial statements and our auditor’s report thereon, in the Annual Report. Those charged with governance are responsible for overseeing the Company’s financial reporting process. Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from Our opinion on the financial statements does not material misstatement, whether due to fraud or error, cover the other information and we do not and will and to issue an auditor’s report that includes our opinion. not express any form of assurance conclusion thereon. Reasonable assurance is a high level of assurance, but is In connection with our audit of the financial statements, not a guarantee that an audit conducted in accordance our responsibility is to read the other information with Canadian GAAS will always detect a material identified above and, in doing so, consider whether misstatement when it exists. Misstatements can arise from the other information is materially inconsistent with the fraud or error and are considered material if, individually financial statements or our knowledge obtained in the or in the aggregate, they could reasonably be expected audit, or otherwise appears to be materially misstated. to influence the economic decisions of users taken on the basis of these financial statements. We obtained Management’s Discussion and Analysis prior to the date of this auditor’s report. If, based on the work we have performed on this other information, we 31 INSCAPE 2021 ANNUAL REPORT As part of an audit in accordance with Canadian GAAS, we We communicate with those charged with governance exercise professional judgment and maintain professional regarding, among other matters, the planned scope and skepticism throughout the audit. We also: timing of the audit and significant audit findings, including • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. the override of internal control. From the matters communicated with those charged with • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public • Conclude on the appropriateness of management’s use interest benefits of such communication. of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our The engagement partner on the audit resulting in this independent auditor’s report is Devin Thompson McLeod. auditor’s report to the related disclosures in the financial Chartered Professional Accountants statements or, if such disclosures are inadequate, to Licensed Public Accountants modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s Toronto, Ontario July 15, 2021 report. However, future events or conditions may cause the Company to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. 32 Consolidated Financial Statements The Consolidated Statements of Operations For the years ended April 30, (in thousands of Canadian dollars) NOT E SALES COST OF GOODS SOLD GROSS PROFIT EXP ENSES Selling, general and administrative Unrealized (gain) loss on foreign exchange Other income Unrealized (gain) loss on derivatives (Gain) loss on disposal of property, plant and equipment & intangible assets Interest expense (income) Loss before taxes Income tax (recovery) expense NET LOSS Net loss per share available to shareholders Basic Diluted 20 21 21 9 & 23 10.2 15.1 19 202 1 202 1 38,203 31,269 6,934 20,536 (377) (5,308) (3,997) (209) 6 10,651 (3,717) $ $ 2 02 0 2 02 0 75,818 55,027 20,791 26,382 289 (2,504) 1,994 30 (9) 26,182 (5,391) (2,826) (891) 15 $ (5,406) (0.06) (0.06) $ $ (0.38) (0.38) $ $ $ $ $ The accompanying notes are an integral part of these consolidated financial statements 33 INSCAPE 2021 ANNUAL REPORT Consolidated Statements of Comprehensive Income (Loss) For the years ended April 30, (in thousands of Canadian dollars) NET LOSS OTHER COMPREHENSIVE INCOME (LOSS) Items that may not be reclassified to earnings Remeasurement of defined benefit pension liabilities NOTE 14.2 Tax relating to remeasurement of retirement benefit obligations 15.2 Items that may be reclassified to earnings Exchange (loss) gain on translating foreign operations Other comprehensive income (loss) TOTAL COMPREHENSIVE INCOME (LOSS) $ $ 202 1 (891) 2 02 0 (5,406) $ 6,466 (275) (141) 6,050 5,159 (3,140) - 130 (3,010) (8,416) $ The accompanying notes are an integral part of these consolidated financial statements 34 Consolidated Statements of Financial Position As at April 30, (in thousands of Canadian dollars) A SSE TS Curre nt asse ts Cash Restricted cash Trade and other receivables Inventories Note receivable Assets held for sale Prepaid expenses and other assets Derivative financial assets No n‑ current as s et s Property, plant and equipment Intangible assets Right-of-use assets Derivative financial assets Note receivable Deferred tax assets TOTAL ASSETS LI AB ILI T IES Curre nt l ia bilit ie s Trade and other payables Lease liabilities Derivative financial liabilities Revolving credit facility Forgivable government loan Provisions No n‑ current liab ili tie s Retirement benefit obligation Lease liabilities Derivative financial liabilities Provisions Other long-term obligations TOTAL LIABILITIES SHA RE HOLDERS ’ EQ UIT Y Shareholders’ capital Contributed surplus Accumulated other comprehensive income (loss) Deficit TOTAL SHAREHOLDERS’ EQU IT Y TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY NOTE 202 1 2 02 0 2 4 5 11 6 10.2 6 7 8.1 10.2 11 15.1 12 8.2 10.2 22 23 13 14.2 8.2 10.2 13 16 17 $ $ $ $ $ $ 3,736 2,764 5,887 3,497 36 5,241 543 587 22,2 91 5,479 1,287 10,050 19 266 2,580 19,681 41,972 8,044 717 ‑ 7,858 219 226 17,064 1,083 9,342 ‑ 483 164 11,072 28,136 52,868 2,675 2,462 (44,169) 13,8 36 41,972 $ 5,885 - 10,255 5,785 - - 690 - 2 2,6 15 9,915 1,637 3,637 - - - 15,189 37,804 $ $ 11,923 2,035 2,122 - 1,199 203 17,482 7,340 1,856 1,269 1,057 123 11,645 29,127 52,868 2,675 (3,588) (43,278) 8 ,67 7 37,804 $ $ $ The accompanying notes are an integral part of these consolidated financial statements Approved by the Board of Directors, Bartley Bull, Chair Eric Ehgoetz, Director and Chief Executive Officer 35 INSCAPE 2021 ANNUAL REPORT Consolidated Statements of Changes in Shareholders’ Equity (in thousands of Canadian dollars) SHARE CAPITAL CONTRIBUTED SURPLUS CUMULATIVE REMEASUREMENT OF RETIREMENT BENEFIT OBLIGATION CUMULATIVE TRANSLATION GAIN TOTAL SHAREHOLDERS’ EQUITY DEFICIT Balance, April 30, 2019 $ 52,868 $ 2,675 $ (1,844) $ 1,266 $ (37,872) $ 17,093 Net loss Other comprehensive (loss) income - - - - - - (5,406) (5,406) (3,140) 130 - (3,010) Balance, April 30, 2020 $ 52,868 $ 2,675 $ (4,984) $ 1,396 $ (43,278) $ 8,677 Net loss Other comprehensive income (loss) ‑ ‑ ‑ ‑ Balance, April 30, 2021 $ 52,868 $ 2,675 $ ‑ ‑ (891) (891) 6,191 1,207 (141) ‑ 6,050 $ 1,255 $ (44,169) $ 13,836 The accompanying notes are an integral part of these consolidated financial statements 36 Consolidated Statements of Cash Flows For the years ended April 30, (in thousands of Canadian dollars) NOTE 202 1 2 02 0 202 1 2 02 0 Net (outflow) inflow of cash related to the following activities: OP ERAT I NG Net loss It ems not aff ec ting c as h Amortization and depreciation Deferred income tax recovery Interest expense on lease liabilities Unrealized (gain) loss on derivatives Share-based compensation Unrealized (gain) loss on foreign exchange Non-cash portion of other income 6,7 & 8.1 15.2 10.2 9 (Gain) loss on disposal of property, plant and equipment & intangible assets 6 & 7 Retirement benefit obligation expense net of employer contributions Cash used in operating activities before non‑cash working capital M o v ement s in no n‑c as h w ork i ng ca pi t al Trade and other receivables Inventories Prepaid expenses and other assets Trade and other payables Lease liabilities Provisions Income tax receivables and payables Changes in non‑cash operating items Increase in restricted cash Interest payment on lease liabilities Restricted shares settled Cash used in operating activities IN VE STI NG Note receivable - issued Additions to property, plant and equipment Additions to intangible assets Proceeds from disposal of property, plant and equipment Proceeds from sale of business Cash (used in) generated from investing activities 8.2 2 8.2 11 6 7 9 $ (891) $ (5,406) 3,935 (2,580) 293 (3,997) 76 (322) (2,688) (268) 223 (6,219) 3,930 2,103 106 (3,604) 8 (463) ‑ 2,080 (2,764) (293) (36) (7,232) (302) (2,540) ‑ 253 ‑ (2,589) 3,598 - 222 1,994 (379) 18 (2,504) 30 283 (2,144) 3,299 844 29 (3,484) 204 (263) 13 642 - (219) (21) (1,742) - (558) (63) 3,449 971 3,799 - 1,808 (1,354) - 454 109 2,620 FI NA NCI NG Proceeds from revolving credit facility Proceeds from forgivable government loan Principal portion of lease liabilities Financing fees Cash generated from financing activities Unrealized foreign exchange (gain) loss on cash Net cash (outflow) inflow Cash, beginning of year Cash, end of year 22 23 8.2 8,005 1,708 (1,615) 22 (131) 7,967 (295) (2,149) 5,885 3,265 $ 3,736 $ 5,885 The accompanying notes are an integral part of these consolidated financial statements 37 INSCAPE 2021 ANNUAL REPORT 38 Notes to the Consolidated Financial Statements (in thousands of Canadian dollars, except where indicated per share amounts) 1. GENERAL INFORMATION Inscape Corporation (the “Company”) is a limited company incorporated in Ontario, Canada, with Class B common shares listed on the Toronto Stock Exchange (TMX). The Company’s registered office is at 67 Toll Road, Holland Landing, Ontario, Canada. The Company is an office furniture manufacturer with production at two facilities in Canada and the United States in approximately 338,000 square feet of space. The Company serves its clients through a network of dealers and representatives supported by showrooms across North America. The Company reports in two reportable operating segments. The Office Furniture segment includes storage, benching, systems and seating solutions products. The Walls segment includes architectural and movable walls. The Company’s products are manufactured in two facilities: a 308,000 square foot plant in Holland Landing, Ontario, and a 30,000 square foot plant in Jamestown, New York. 2. SIGNIFICANT ACCOUNTING POLICIES Statement of compliance with IFRS including comparatives These consolidated financial statements have been prepared in accordance with International Financial Reporting Standard (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). The directors have, at the time of approving the financial statements, a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Thus, they continue to adopt the going concern basis of accounting in preparing the consolidated financial statements. These consolidated financial statements were approved and authorized for issuance by the Board of Directors of the Company on July 15, 2021. The consolidated financial statements are presented in Canadian dollars, the functional currency of the Company, and all values are rounded to the nearest thousands, except where indicated. 39 INSCAPE 2021 ANNUAL REPORT Basis of consolidation and/or installations through the dealer network. The consolidated financial statements include the accounts The obligation is measured at fair value of the incentive of the Company and its two wholly owned US subsidiaries, earned. The dealer incentives are recorded as a reduction Inscape Inc. and Inscape (New York) Inc. Subsidiaries to revenue in the Consolidated Statement of Operations. are consolidated from the date of acquisition and control and continue to be consolidated until the date that such Restricted cash control ceases. The Company controls an entity when the Restricted cash is cash where specific restrictions exist Company is exposed or has rights to variable returns from on the Company’s ability to use this cash. its involvement with the investee and has the ability to affect these returns through the Company’s power over the Restricted cash consists of cash held by the Company investee. All intra-group transactions, balances, income on deposit with its bank, as collateral security for certain and expenses are eliminated in full on consolidation. derivative financial instruments. Revenue recognition Sale of manufactured goods Assets classified as held for sale Non-current assets are classified as assets held for sale The Company’s revenue is generated from sales and when their carrying amount is to be recovered principally installation of manufactured goods to customers through through a sale transaction rather than through continuing a dealer network. For manufactured goods, revenue is use. This condition is regarded as met only when the recognized when the goods are shipped. Revenue is sale is highly probable and the assets are available for recognized when control of the assets passes to the immediate sale in their present condition. Management customer; the Company’s terms and condition state that must also be committed to a plan to sell the assets control of the assets transfers at shipping point. This is within one year from the date of classification. Assets where the customer gains control of the asset. classified as held for sale are measured at the lower of the carrying amount or fair value less costs to sell and are not Revenue from installation is recognized on a percentage depreciated from the date of classification. of completion based on physical stage of completion of the contract. This output method is the best measure of Leases progress as the nature of the products installed enable The Company assesses whether a contract is or contains a measurement to be reliably observed. lease, at inception of a contract. The Company recognizes a Right-of-use asset (“ROU”) and a corresponding lease The Company invoices the customer as the installation liability with respect to all lease arrangements in which it is occurs. The payments are received as per normal payment the lessee, at the commencement of the lease. terms established with the customer. The ROU asset is initially measured at cost, which Revenue from the sale of manufactured goods and comprises the initial amount of the lease liability adjusted for installation is measured at fair value of the consideration any lease payments made at or before the commencement received less applicable sales taxes, discounts, rebates and date, plus any initial direct costs incurred and an estimate dealer incentives. Sales-related warranties associated with of costs to dismantle and remove the underlying asset or the sales and installation of manufactured goods cannot be to restore the underlying asset or the site on which it is purchased separately and they serve as an assurance that located, less any incentives received. They are subsequently the products sold comply with agreed-upon specifications. measured at cost less accumulated depreciation and Accordingly, the Company accounts for warranties in impairment losses. accordance with IAS 37 (see Note 13). Dealer incentives The Company offers a variety of incentives to its dealer base The ROU asset is depreciated over the shorter of the lease term or the useful life of the underlying asset. to support sales initiatives. An obligation arises from the The ROU asset is subject to testing for impairment if there is incentives when the Company sells manufactured goods an indicator of impairment. 40 The lease liability is initially measured at the present value For the Company’s foreign operation where the Canadian of outstanding lease payments at the commencement dollar is its functional currency, the same policy described date, discounted by using the rate implicit in the lease. If above is applied to the translation of its assets and this rate cannot be readily determined, the Company uses liabilities for the purpose of presenting consolidated its incremental borrowing rate. The Company’s incremental financial statements. borrowing rate for a lease is the rate that the Company would pay to borrow an amount necessary to obtain an For the Company’s foreign operation where the US asset of a similar value to the right-of-use asset on a dollar is its functional currency, the assets and liabilities collateralized basis over a similar term. of the foreign operation for the purpose of presenting consolidated financial statements are expressed in Lease payments include fixed payments less any lease Canadian dollars using exchange rates prevailing at the incentives and any variable lease payments where end of the reporting period. Exchange differences arising, variability depends on an index or rate. Management if any, are recognized in other comprehensive income or exercises judgment in the process of applying IFRS 16 loss and accumulated in equity until the disposal of the and determining the appropriate lease term on a lease by foreign operation, when all of the accumulated exchange lease basis. Management considers many factors including differences in respect of that operation are reclassified any events that create an economic incentive to exercise to profit or loss. Revenues and expenses are translated a renewal option including performance, expected future into Canadian dollars at the average exchange rate for performance and past business practice. Renewal options the month in which the transactions occurred, unless are only included if the Management is reasonably certain exchange rates fluctuated significantly during that period that the option will be renewed. Variable lease payments or for non-recurring transactions of material amounts, that do not depend on an index or rate are not included in which case the exchange rates at the dates of the in the measurement of the ROU asset and lease liability. transactions are used. The related payments are recognized as an expense in the period in which the triggering event occurs and are included Employee future benefits in the consolidated statements of operations Contributions to defined contribution retirement benefit and comprehensive income (loss). plans are recognized as an expense when employees have rendered service entitling them to the contributions. Foreign currencies Transactions in foreign currencies are recognized at For defined benefit retirement benefit plans, the cost of the average exchange rate for the month in which the providing benefits is determined using the Projected Unit transactions occurred, unless exchange rates fluctuated Credit Method. Actuarial gains and losses and related significantly during that period or for non-recurring taxes are recognized in other comprehensive income or transactions of material amounts, in which case the loss as remeasurement of defined benefit liabilities. exchange rates at the dates of the transactions are used. At the end of each reporting period, monetary items The retirement benefit obligation recognized in the denominated in foreign currencies are retranslated at the statements of financial position represents the present rates prevailing at that date. Non-monetary items carried value of the defined benefit obligation as reduced by the at fair value that are denominated in foreign currencies are fair value of plan assets. Any asset resulting from this retranslated at the rates prevailing at the date when the calculation is limited to the present value of available fair value was determined. Non-monetary items that are refunds and reductions in future contributions to the measured in terms of historical cost in a foreign currency plan. The determination of a benefit expense requires are not retranslated. Exchange differences are recognized assumptions such as the discount rate to measure in profit or loss in the period in which they arise. obligations and the expected return on asset, the expected mortality rate and the expected rate of future compensation increases. 41 INSCAPE 2021 ANNUAL REPORT The present value of the defined benefit obligation is Deferred tax determined by discounting the estimated future cash Deferred tax is recognized on temporary differences outflows using interest rates of high-quality corporate between the carrying amounts of assets and liabilities in bonds and that have terms to maturity approximating the financial statements and the corresponding tax bases the terms of the related pension liability. used in the computation of taxable profit. Deferred tax Share‑based compensation liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized For share-based compensation arrangement in which for all deductible temporary differences to the extent that the term of the arrangement provides the employees it is probable that taxable profits will be available against and others providing similar services with the choice which those deductible temporary differences can be of settlement by equity instruments or in cash, the utilized. The carrying amount of deferred tax assets is transaction is accounted for as a cash-settled share- reviewed at the end of each reporting period and reduced based payment transaction. to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the For cash-settled share-based compensation, a liability is asset to be recovered. recognized for the goods or services acquired, measured initially at the fair value of the liability. The liability is Deferred tax assets and liabilities are measured at the tax subsequently measured at fair value using mark to market rates that are expected to apply in the period in which the accounting. Under the stock option plan, the fair value is liability is settled or the asset realized, based on tax rates determined by using the Black-Scholes-Merton Option (and tax laws) that have been enacted or substantively Pricing Model, which factors in the Company’s estimate enacted by the end of the reporting period. of the number of options that will eventually vest. Under the executives’ cash settled long-term incentive plan and Government grants the cash settled deferred share unit plan, the fair value is Government grants are recognized when there is based on the share price at the end of the reporting period reasonable assurance that the Company will comply with as well as the Company’s estimate of the number of shares any conditions attached to the grants and the grants will that will eventually vest. be received. Government grants are recognized in other At the end of each reporting period until the liability is Company incurs expenses for the related costs for which settled, and at the date of settlement, the fair value of the grants are intended to compensate. the liability is remeasured, with any changes in fair value recognized in profit or loss for the year. When a government loan is issued to the Company at a income on a systematic basis over the periods in which the Taxation below-market rate of interest, the loan is initially recorded at its net present value and accreted to its face value over Income tax expense represents the sum of the tax the period of the loan. The benefit of the below-market currently payable and deferred tax. rate of interest is accounted for as a government grant. It Current tax Current tax is based on taxable profit for the year. Taxable is measured as the difference between the initial carrying value of the loan and the cash proceeds received. profit differs from profit as reported in the consolidated Research and development costs statements of operations due to items of income or Research costs, including costs for new patents and expense that are taxable or deductible in other years and patent applications, are expensed in the period in which items that are never taxable or deductible. The Company’s they are incurred. Development costs are expensed in the liability for current tax is calculated using tax rates that period in which they are incurred unless certain criteria, have been enacted or substantively enacted by the end of including technical feasibility, commercial feasibility, intent the reporting period. and ability to develop and use the technology, are met for deferral and amortization. 42 Loss per share (“LPS”) Basic loss per common share is calculated using the weighted daily average number of common shares outstanding. Diluted loss per share is calculated using the treasury stock method. Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Depreciation is recognized when property, plant and equipment is available for use so as to write off the cost less their residual values over their useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at each year end, with the effect of any changes in estimate accounted for on a prospective basis. Depreciation ceases at the earlier of when the asset or component is derecognized, or when it is held for sale or included in a group that is classified as held for sale. Each component of an item of property, plant and equipment with a cost which is significant in relation to the total cost of the item and has a significantly different estimated useful life than the parent asset is depreciated separately. Component accounting is used for the Company’s buildings. Depreciation is calculated over the estimated useful life of the assets, at the following rates and methods: A SSE T CAT EG O RY DEP RE CI ATI ON R AT E DEP RE CIATION METHOD Land Building / Roof Leasehold improvements Machinery and equipment Tools, dies and jigs Office furniture and equipment Intangible assets nil 2.5% - 4% The lower of the estimated useful life and the term of the lease 6.6% - 20% 33.33% 10% - 50% nil Straight line Straight line Straight line Straight line Straight line Intangible assets are carried at cost less accumulated amortization and accumulated impairment losses. Amortization is recognized on a straight-line basis over their estimated useful lives. The estimated useful life and amortization method are reviewed at the end of each year-end, with the effect of any changes in estimate being accounted for on a prospective basis. Expenditure on research activities is recognized as an expense in the period in which it is incurred. Amortization is calculated over the estimated useful life of the assets, at the following rates and methods: A SSE T CAT EG O RY AMORTI ZAT ION R AT E AMORTI ZATION METHOD Licensed products Computer software Intellectual property 20% - 33.33% 20% - 33.33% 10% Straight line Straight line Straight line Impairment of long‑lived non‑financial assets At the end of each reporting period, the Company reviews the carrying amounts of its long-lived non-financial assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any. Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit (“CGU”) to which the asset belongs. A CGU is the smallest identifiable group of assets that generates cash flows that are largely independent of the cash flows from other assets or group of assets. 43 INSCAPE 2021 ANNUAL REPORT Recoverable amount is the higher of fair value less costs Net realizable value is the estimated selling price in the to sell and value in use, which is the present value of the ordinary course of business less the estimated costs estimated future cash flows from the use of the asset (or necessary to make the sale. The cost of work-in-progress cash-generating unit). and finished goods includes the cost of raw materials, and the applicable share of the cost of labour, fixed and The discount rates used in the present value calculation variable production overheads. are the pre-tax rates that reflect current market assessments of the time value of money and the risks Provisions specific to the asset. Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a If the recoverable amount is estimated to be less than the past event, it is probable that the Company will be required carrying amount of the asset (or cash-generating unit), the to settle the obligation, and a reliable estimate can be carrying amount is reduced to its recoverable amount. An made of the amount of the obligation. impairment loss is recognized immediately in profit or loss. At the end of each reporting period, the Company reviews The amount recognized as a provision is the best estimate whether there is any indication that an impairment loss of the consideration required to settle the present recognized in prior periods for an asset other than goodwill obligation at the end of the reporting period, taking into (or cash-generating unit) may no longer exist or may have account the risks and uncertainties surrounding the decreased. If any such indication exists, the recoverable obligation. Where a provision is measured using the cash amount of the asset (or cash-generating unit) is estimated flows estimated to settle the present obligation, its carrying in order to determine whether the impairment loss should amount is the present value of those cash flows. be reversed. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash- Financial assets generating unit) is increased to the revised estimate of its Financial assets consist of cash, restricted cash, trade recoverable amount, but so that the increased carrying and other receivables and note receivable and derivative amount does not exceed the carrying amount that would financial assets. These financial assets are initially have been determined had no impairment loss been measured at fair value plus transaction costs. They recognized for the asset (or cash-generating unit) in prior are subsequently measured at amortized cost, except years. A reversal of an impairment loss is recognized derivatives financial assets, as discussed below. immediately in profit or loss. Inventories Amortized cost is determined using the effective interest rate method, factoring in acquisition costs paid to third Raw materials are measured at the lower of cost and parties, and loss allowance. The effective interest rate is net realizable value, determined on a first-in, first-out the rate that exactly discounts the estimated future cash basis. Recoverable costs of raw materials that have no receipts through the expected life of the financial asset to consumption over a period of eighteen months may be the carrying amount. When calculating the effective interest written down based on the Company’s assessment of rate, the Company estimates future cash flows considering their future usage. When circumstances that previously all contractual terms of the financial instrument. caused inventories to be written down below cost no longer exist, the amount of the write-down previously recorded is reversed. Work-in-progress and finished goods are measured at the lower of cost and net realizable value, determined on a first-in, first-out basis. 44 The Company does not have any financial assets that are subsequently measured at fair value except for the derivative financial instrument which may be in an asset or liability position depending on the prevailing foreign exchange rates at such time. Financial assets are derecognized when the rights to receive cash flows from the asset have expired or the Company has transferred its rights to receive cash flows from an asset. Impairment of financial assets The Company recognizes an allowance for expected credit loss on accounts receivable that are measured at amortized cost. The amount of expected credit loss (“ECL”) is updated at each reporting date to reflect changes in credit risk since initial recognition of the respective financial instrument. The Company recognizes lifetime ECL for its trade and other receivables. The expected credit losses on these financial assets are estimated using the Company’s historical credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions, and an assessment of both the current as well as the forecast direction of conditions at the reporting date. Financial liabilities Financial liabilities are recognized initially at fair value and subsequently measured at either fair value or amortized cost. The Company’s financial liabilities are classified as ‘financial liabilities at amortized cost’ and include any borrowings and trade and other payables and are subsequently measured at amortized cost using the effective interest method. The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant year. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability. Classification of financial assets and liabilities The following is the classification of the Company’s financial assets and liabilities based on their characteristics and management’s choices and intentions related to them: A SSE T/ LIA BI LIT Y Cash Restricted cash Trade and other receivables Note receivable Trade and other payables Revolving credit facility Derivative assets and liabilities Derivative financial instruments CLASSIFI CATI ON UNDER I FR S 9 Amortized cost Amortized cost Amortized cost Amortized cost Amortized cost Amortized cost FVTPL The Company enters into a variety of derivative financial instruments to manage its exposure to foreign exchange rate risk. Derivatives are initially recognized at fair value at the date the derivative contract is entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognized in profit or loss immediately since the derivatives are not designated as hedging instruments for hedge accounting. 45 INSCAPE 2021 ANNUAL REPORT A derivative with a positive fair value is recognized as a SIGNIFICANT ACCOUNTING JUDGMENTS, financial asset; a derivative with a negative fair value is ESTIMATES AND ASSUMPTIONS recognized as a financial liability. A derivative is presented In the application of the Company’s accounting policies, as a non-current asset or a non-current liability if the management is required to make judgments, estimates remaining maturity of the instrument is more than 12 and assumptions about the carrying amounts of assets months and it is not expected to be realized or settled and liabilities that are not readily apparent from other within 12 months. Other derivatives are presented as sources. The estimates and associated assumptions are current assets or current liabilities. based on historical experience and other factors that are considered to be relevant. Actual results may differ from Non-performance risk, including the Company’s own these estimates. credit risk, is considered when determining the fair value of financial instruments. Significant estimates and judgments in applying accounting policies Share capital The following are estimates and judgments that the Common shares issued by the Company are recorded in the management has made in the process of applying the amount of the proceeds received, net of direct issue costs. Company’s accounting policies and that have the most significant effect on the amounts recognized in the financial statements. Significant judgments The Company assesses on a forward-looking basis the expected credit losses (“ECL”) associated with its assets carried at amortized costs, including other receivables. For trade and other receivables only, the Company applies the simplified approach permitted by IFRS 9, which requires the expected lifetime losses (based on management’s judgement and review of known exposures, credit worthiness, and collection experience) to be recognized from initial recognition of the receivables. Provision for inventories is based on the aging of inventories and management’s judgement of product life cycles in identifying obsolete items. Provision for warranty is based on management’s judgment and review of any known exposures and historical claim experience. Percentage of completion percentages are based on the Company’s onsite project management estimate of job progress. 46 Identification of cash generating units for the purposes Government assistance of performing impairment test of assets is based on Government assistance, including the Canada Emergency management’s judgment of what constitutes the lowest Wage Subsidy (“CEWS”) and the Canada Emergency group of assets that can generate cash flows largely Rent Subsidy (“CERS”), are recorded in the consolidated independent of other assets. financial statements as described above, significant accounting policies. In applying this policy, judgment is Determination to not recognize deferred tax assets is required in determining whether government grants will be based on management’s judgment of the ability of the received and that the Company will comply with conditions Company to achieve sufficient taxable income to use attached. the deferred tax assets. Going concern COVID‑19 Pandemic Significant judgments exercised in applying accounting The COVID-19 pandemic has continued to disrupt global policies that have the most significant effect on the health and the economy in 2021 and has created an amounts recognized in the financial statements include indeterminate period of volatility in the markets in which the the assessment of the Company’s ability to continue as Company operates. The Company continues to monitor a going concern. developments and mitigate risks related to the COVID-19 pandemic and the impact on the business operations, The Company uses a forecasted cash flow to assess supply chain, and most importantly the health and safety the Company’s ability to continue as a going concern. of its employees. Significant judgment is required to forecast the amount of new sales orders and total revenue and the timing of the As an evolving risk, the duration and full financial effect related cash flows. of the COVID-19 pandemic is unknown at this time. Any estimate of the length and severity of these developments Significant estimates is therefore subject to significant uncertainty, and Estimated useful lives and residual values of intangible accordingly affect the Company’s operations, financial assets, property, plant and equipment are based on results and condition in future periods. Therefore, management’s experience, the intended usage of the the amounts recorded in these consolidated financial assets and the expected technological advancement that statements are based on the latest reliable information may affect the life cycle and residual values of the assets. available to management at the time the consolidated financial statements were prepared, reflecting the Defined benefit pension obligations are based on information and conditions to date. However, given management’s best estimates on the long-term investment the level of uncertainty caused by COVID-19, these return on pension fund assets, the discount rate of assumptions and estimates could result in outcomes obligations, mortality and the future rate of salary increase. that could require a material adjustment to the carrying amount of the affected asset or liability in the future. Liability for the Company’s performance and restricted Asset held for sale share units is based on management’s best estimate of the Company’s financial performance during the vesting period The Company’s accounting policies relating to assets of the performance and restricted share units. held for sale are described above. In applying this policy, judgment is required in determining whether sale of certain Determination of the company’s fair value of the principal assets is highly probable, which is a necessary condition assets of each CGU less the costs to sell the assets is for being presented within assets held for sale. used to perform an impairment test of the assets. 47 INSCAPE 2021 ANNUAL REPORT 48 49 INSCAPE 2021 ANNUAL REPORT 3. NEW ACCOUNTING STANDARDS ADOPTED The following amendments to standards and interpretations became effective for the annual periods beginning on or after May 1, 2020. The application of these amendments and interpretations had no significant impact on the Company’s consolidated financial position or results of operations. IAS 1, Presentation of Financial Statements and IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors The amendments to IAS 1 and IAS 8 clarify the definition of materiality and seek to align the definition used in the Conceptual Framework with that in the standards themselves as well as ensuring the definition of materiality is consistent across all IFRS. The concept of ‘obscuring’ material information with immaterial information has been included as part of the new definition. The threshold for materiality influencing users has been changed from ‘could influence’ to ‘could reasonably be expected to influence’. The definition of material in IAS 8 has been replaced by a reference to the definition of material in IAS 1. In addition, the IASB amended other Standards and the Conceptual Framework that contain a definition of ‘material’ or refer to the term ‘material’ to ensure consistency. 4. TRADE AND OTHER RECEIVABLES Trade account receivables, gross Allowance for expected credit losses Other receivables An aging analysis of trade receivables: Current 1-30 days 31-60 days 61-90 days > 90 days 5. INVENTORIES Raw materials Work-in-progress Finished goods AS AT APR IL 30 , 20 21 AS AT APR I L 30, 2020 $ $ 5,323 (45) 5,278 609 5,887 $ 9,754 (216) 9,538 717 $ 10,255 AS AT APR IL 30 , 20 21 AS AT APR I L 30, 2020 $ $ 2,394 1,189 230 257 1,253 5,323 $ $ 3,892 1,987 1,438 472 1,965 9,754 AS AT APR IL 30 , 20 21 AS AT APR I L 30, 2020 $ $ 3,153 174 170 3,497 $ 5,004 219 562 $ 5,785 The cost of inventories recognized as cost of goods sold was $30,186 (2020 - $51,952). During the year, there was an inventory write-down to net realizable value of $1,513 (2020 - $282). 50 6. PROPERTY, PLANT AND EQUIPMENT AS AT APRIL 30, 202 1 COST: LAND BUILDINGS/ ROOF LEASEHOLD IMPROVEMENTS MACHINERY & EQUIPMENT TOOLS, DIES & JIGS OFFICE FURNITURE & EQUIPMENT CAPITAL PROJECTS IN PROGRESS (CIP) TOTAL Opening balance, May 1, 2020 $ 300 $ 15,237 $ 6,318 $ 39,979 $ 21,009 $ 11,965 $ 117 $ 94,925 Additions Disposals - - 63 - 311 1,675 64 137 (3,542) (1,255) (581) (2,849) Transferred to assets held for sale1 (300) (15,300) Impact of financial currency translation - - - (8) - (125) - (70) - (80) 290 (28) 2,540 (8,255) - (15,600) (3) (286) Ending balance, April 30, 2021 $ - $ - $ 3,079 $ 40,274 $ 20,422 $ 9,173 $ 376 $ 73,324 ACCUMULATED D EPR ECIAT IO N: Opening balance, May 1, 2020 $ - $ 10,070 $ 4,961 $ 37,722 $ 20,864 $ 11,393 $ - $ 85,010 Depreciation charge for the year Disposals Transferred to assets held for sale1 Impact of financial currency translation - - - - 289 - 467 454 (3,542) (1,234) (10,359) - - - - (108) 106 (580) - (71) 310 (2,823) - (74) - - - - 1,626 (8,179) (10,359) (253) Ending balance, April 30, 2021 Net book value, April 30, 2021 $ $ - $ - $ - $ 1,886 $ 36,834 $ 20,319 $ 8,806 $ - $ 67,845 - $ 1,193 $ 3,440 $ 103 $ 367 $ 376 $ 5,479 1As of March 24, 2021, the Company intends to enter into an agreement to sell and leaseback the land and building at the Holland Landing property within the next twelve months. As at April 30, 2021, the non-current assets has been reclassified as assets held for sale on the statement of financial position (Note 2). This property is part of the Furniture reportable segment. AS AT APRIL 30, 2020 COST: LAND BUILDINGS/ ROOF LEASEHOLD IMPROVEMENTS MACHINERY & EQUIPMENT TOOLS, DIES & JIGS OFFICE FURNITURE & EQUIPMENT CAPITAL PROJECTS IN PROGRESS (CIP) TOTAL Opening balance, May 1, 2019 $ 488 $ 19,079 $ 6,448 $ 39,933 $ 20,981 $ 12,403 $ 162 $ 99,494 Additions Disposal Transfers Impact of financial currency translation - 61 (186) (3,864) - (2) - (39) 71 (206) 11 (6) 80 (130) 59 37 11 (10) - 27 233 (684) (11) 24 102 558 - (5,080) (149) 2 (90) 43 Ending balance, April 30, 2020 $ 300 $ 15,237 $ 6,318 $ 39,979 $ 21,009 $ 11,965 $ 117 $ 94,925 ACCUMULATED DEP REC IAT ION : Opening balance, May 1, 2019 $ - $ 11,463 $ 4,601 $ 37,274 $ 20,733 $ 11,623 $ - $ 85,694 Depreciation charge for the year Disposal Impact of financial currency translation - - - 368 (1,744) (17) 476 (113) (3) 511 (92) 29 115 (10) 26 401 (654) 23 - - - 1,871 (2,613) 58 Ending balance, April 30, 2020 $ - $ 10,070 $ 4,961 $ 37,722 $ 20,864 $ 11,393 $ - $ 85,010 Net book value, April 30, 2020 $ 300 $ 5,167 $ 1,357 $ 2,257 $ 145 $ 572 $ 117 $ 9,915 51 INSCAPE 2021 ANNUAL REPORT 7. INTANGIBLE ASSETS AS AT APR IL 3 0, 2 021 LICEN SED PR ODUCTS COMP UTER SOFTWAR E INT ELLECTUAL PR OPE RTY COST: Opening balance, May 1, 2020 Disposals Impact of financial currency translation Ending balance, April 30, 2021 ACCUM ULATE D A MO RT I ZAT IO N: Opening balance, May 1, 2020 Amortization Disposals Impact of financial currency translation Ending balance, April 30, 2021 Net book value, April 30, 2021 $ $ $ $ $ 122 (48) ‑ 74 122 ‑ (48) - 74 - $ $ $ $ $ 11,021 (556) (39) 10,426 9,384 345 (556) (34) 9,139 1,287 $ $ $ $ $ 524 (103) ‑ 421 524 ‑ (103) - 421 - AS AT A PRIL 3 0 , 20 20 COST: Opening balance, May 1, 2019 Additions Disposals Transfers from CIP (Note 6) Exchange differences Ending balance, April 30, 2020 ACC U M ULATED AM OR TI ZAT ION : Opening balance, May 1, 2019 Amortization Disposals Exchange differences Ending balance, April 30, 2020 Net book value, April 30, 2020 LI CENSED PRODUCT S COMPUTER SOFTWARE I NTELLECTUAL PROPER TY $ $ $ $ $ 122 - - - - 122 122 - - - 122 - $ $ $ $ $ 10,906 63 (51) 90 13 11,021 9,138 288 (50) 8 9,384 1,637 $ $ $ $ $ 524 - - - - 524 524 - - - 524 - TOTAL 11,667 (707) (39) 10,921 10,030 345 (707) (34) 9,634 1,287 TOTAL 11,552 63 (51) 90 13 11,667 9,784 288 (50) 8 10,030 1,637 $ $ $ $ $ $ $ $ $ $ 52 8. LEASES 8.1 Right‑of‑use assets The following table presents changes in the cost and accumulated depreciation of the Company’s right-of-use assets: A S AT A PR IL 30 , 2021 SHOWROOMS FACILITIES OTHER TOTAL COS T: Opening balance, May 1, 2020 Additions Disposals Impact of financial currency translation Ending balance, April 30, 2021 A CCUM ULAT ED DEPR ECIAT ION: Opening balance, May 1, 2020 Amortization Disposals Impact of financial currency translation Ending balance, April 30, 2021 Net book value, April 30, 2021 $ $ $ $ $ 4,050 7,139 (635) ‑ 10,554 1,244 1,221 (635) - 1,830 8,724 $ $ $ $ $ 905 1,220 (832) (113) 1,180 173 711 (810) (37) 37 1,143 $ $ $ $ $ 124 137 (17) (13) 231 25 32 (5) (4) 48 183 $ $ $ $ $ 5,079 8,496 (1,484) (126) 11,965 1,442 1,964 (1,450) (41) 1,915 10,050 There were no expenses related to short-term or low-value leases during the year. AS AT A PRIL 30, 2020 SHOWROOMS FACILITIES OTHER TOTAL CO ST: Opening balance, May 1, 2019 Initial application of IFRS 16 Additions Impact of foreign currency translation Ending balance, April 30, 2020 AC C UM U LATED D EPRECI AT ION Opening balance, May 1, 2019 Depreciation Impact of foreign currency translation Ending balance, April 30, 2020 Net book value, April 30, 2020 $ $ $ $ $ - 4,050 - - 4,050 - 1,244 - 1,244 2,806 $ $ $ $ $ - - 871 34 905 - 170 3 173 732 $ $ $ $ $ - 119 - 5 124 - 25 - 25 99 $ $ $ $ $ - 4,169 871 39 5,079 - 1,439 3 1,442 3,637 There were no expenses related to short-term or low-value leases during the year. 53 INSCAPE 2021 ANNUAL REPORT 8.2 Lease liabilities The following table presents the Company’s lease liabilities at April 30, 2021: AS AT APR IL 3 0, 2 021 SHOWROOMS FACILITIES OTHER Opening balance, May 1, 2020 Additions Principal payments Disposals Exchange differences Ending balance, April 30, 2021 Current lease liabilities Non-current lease liabilities Ending balance, April 30, 2021 $ $ $ 3,277 7,139 (1,069) ‑ (612) 8,735 531 8,204 8,735 $ $ $ 512 1,220 (517) (15) (63) 1,137 120 1,017 1,137 $ $ $ 102 137 (29) (14) (9) 187 66 121 187 $ $ $ TOTAL 3,891 8,496 (1,615) (29) (684) 10,059 717 9,342 10,059 LE A SE T ERM : Not later than 1 year Later than 1 year and not later than 5 years Later than 5 years AS AT AP RI L 3 0, 20 20 SHOWROOMS FACILITIES OTHER Opening balance, May 1, 2019 Initial application of IFRS 16 Additions Principal payments Exchange differences Ending balance, April 30, 2020 Current lease liabilities Non-current lease liabilities Ending balance, April 30, 2020 $ $ $ - 4,282 - (1,109) 104 3,277 1,492 1,785 3,277 $ $ $ - - 722 (223) 13 512 512 - 512 $ $ $ - 119 - (22) 5 102 31 71 102 LEA S E TERM : Not later than 1 year Later than 1 year and not later than 5 years Later than 5 years AS AT APR IL 30, 2021 $ $ $ $ $ 717 3,811 5,531 10,059 TOTAL - 4,401 722 (1,354) 122 3,891 2,035 1,856 3,891 AS AT APRI L 30, 2020 $ $ 2,035 1,408 448 3,891 54 9. OTHER INCOME Details of other income during the year are presented below: DES CRIPT IO N Sale and leaseback Sale of business Government assistance Total 9.1 Sale and leaseback NOTE 9.1 9.2 23 $ $ 20 21 ‑ ‑ 5,308 5,308 $ $ 2020 1,252 735 517 2,504 On December 31, 2019, the Company completed a sale and leaseback of certain land and buildings (“property”) related to the Walls segment. The sale generated cash proceeds of $3,449 (US$2,618) compared to a carrying value of $2,346 (US$1,792) which resulted in a gain of $1,252 (US$939) recorded in loss (gain) on disposal of property, plant and equipment and intangibles. The leaseback resulted in the recognition of a right-of-use asset of $732 (US$527) and lease liabilities of $512 (US$368) at April 30, 2020, which subsequently expired in February 2021. 9.2 Sale of business On December 31, 2019, the Company sold its DC Rollform business, which engaged in metal fabrication within the Walls segment. The assets and liabilities disposed of at December 31, 2019 consisted of inventory, machinery and equipment, and tools for cash proceeds of $971 (US$737) and gain of $735 (US$557) recorded in loss (gain) on disposal of property, plant and equipment and intangibles. The DC Rollform business did not represent a strategic shift in the Company’s business and did not have a major effect on its operations and financial results. 10. FINANCIAL INSTRUMENTS 10.1 Capital risk management The Company’s objective when managing capital are to safeguard the entity’s ability to continue as a going concern, so that it can provide returns for shareholders and benefits for other stakeholders through growth in earnings. Management defines capital as the Company’s total capital, debt and reserves excluding accumulated other comprehensive income (loss) as summarized in the following table: Issued capital Contributed surplus Debt Deficit Total AS AT APR IL 30 , 202 1 AS AT APRIL 30, 2020 $ $ 52,868 2,675 (8,005) (44,169) 3,369 $ 52,868 2,675 - (43,278) $ 12,265 55 INSCAPE 2021 ANNUAL REPORT The Company manages its capital structure and makes modifications in response to changes in economic conditions and the risks associated with the underlying strategic initiatives. In order to maintain or adjust the capital structure, the Company may return capital to shareholders, or draw on its revolving credit facility. See Credit Facility for a description of the Company’s externally imposed covenants – Note 22. 10.2 Foreign currency risk management The Company’s activities expose it primarily to the financial risks of changes in the US dollar exchange rates. The Company enters into a variety of derivative financial instruments to hedge the exchange rate risk arising on the anticipated sales to the US. The use of financial derivatives is governed by the Company’s policies approved by the Board of Directors. Compliance with policies and exposure limits is reviewed by the Board on a regular basis. The Company does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes. As at April 30, 2021, the Company had outstanding US dollar hedge contracts with settlement dates from May 2021 to May 2022. The total notional amounts under the contracts are US$14,000 to $22,050 (2020 - $40,000 to $50,000). Dependent on the spot CAD/US rate on each settlement date, the Company can sell US dollars at rates ranging from $1.27 CAD/US to $1.35 CAD/US (2020 - $1.28 CAD/US to $1.50 CAD/US). These contracts had a mark-to-market unrealized gain of $606 (US$493) as at April 30, 2021 (2020 – unrealized loss of $3,391 or US$2,437), which was recognized on the consolidated statement of financial position as derivative asset. Any changes in the net gain or loss from the prior reporting period due to addition of forward contracts, movements in the US currency exchange rate, reclassification of the unrealized gains or losses to realized income or loss are recognized on the consolidated statement of operations as unrealized gain or loss on derivatives of the year. There were realized gains of $135 on the settlement of contracts during fiscal year 2021 (2020 – losses $275). The following reconciles the changes in the fair value of the derivatives at the beginning and the end of the year: Fair value of derivative liabilities, beginning of year $ (3,391) $ (1,397) AS AT APR IL 30 , 20 21 AS AT APR I L 30, 2020 Changes in fair value during the year: Increase (decrease) in fair value of new contracts added Reversal of derivative assets of contracts settled Increase (decrease) in fair values of outstanding contracts Net decrease (increase) in fair value of derivative liabilities recognized during the year Fair value of derivative assets (liabilities), end of year Current Long-term 535 2,271 1,191 3,997 606 587 19 606 (2,581) 728 (141) (1,994) (3,391) (2,122) (1,269) (3,391) $ $ $ $ $ $ 56 10.3 Foreign currency sensitivity analysis Based on the existing average US currency hedge contract rates and the mix of US dollar denominated sales and expenses for the year ended April 30, 2021, a 1% change in the Canadian dollar against the US dollar would have an impact of approximately $42 on the Company’s pre-tax earnings (2020 – $56). Based on the US dollar denominated assets and liabilities as at April 30, 2021, a 1% change in the Canadian dollar against the US dollar would have an impact of $315 on the unrealized exchange gain or loss reported in the Consolidated Statements of Operations (2020 - $281) and an impact of $162 on the Consolidated Statements of Comprehensive Income (Loss) (2020 - $168). 10.4 Credit risk management Credit risk refers to the risk that a counterparty may default on its contractual obligations resulting in a financial loss to the Company. The credit risk of counterparty non-performance continues to be relatively low, notwithstanding the impact of COVID-19. The Company’s cash, restricted cash, trade accounts receivable, loan receivable and derivative assets are subject to the risk that the counterparties may fail to discharge their obligation to pay the Company. As at April 30, 2021, the Company’s maximum direct exposure to credit risk is $13,153 (2020 – $16,140). The Company is in regular contact with its customers, suppliers and logistics providers, and to date have not experienced significant counterparty non-performance. However, if a key supplier (or any company within such supplier’s supply chain) or customer experiences financial difficulties or fails to comply with their contractual obligations, which may occur as the pandemic continues, this could result in a significant financial loss. The Company would also suffer a significant financial loss if an institution from which the Company purchased foreign exchange contracts and/or annuities for its pension plans defaults on their contractual obligations. With respect to its financial market activities, the Company has adopted a policy of dealing only with credit-worthy counterparties. In light of COVID-19, the Company assessed the financial stability and liquidity of its customers at the reporting date. No significant adjustments were made to the allowance for expected credit loss in connection with this assessment. The Company measures the loss allowance for trade receivables at an amount equal to lifetime expected credit losses (“ECL”). The ECL on trade receivables are estimated by assessing new customers’ credit history, reviewing credit limits, monitoring aging of accounts receivable, assessing specific customer information and reviewing general historical trends. Trade receivables consist of a large number of customers, spread across diverse industries and geographical areas. Ongoing credit evaluation is performed on the financial condition of accounts receivable. As at April 30, 2021, the allowance for expected credit losses was $45 (2020 - $216). The Company’s allowance for expected credit losses consist of sales allowances released during the year of $126 (2020 – $104) mainly from adjustments to expected lifetime credit losses. The amount written-off of $38 (2020 - $22) was from one customer where the Company could not collect. Below is a breakdown of the Company’s ECL: M OV EM ENT IN T HE A LLO WA NCE FOR ECL Balance, beginning of year Sales allowances adjustments Amount written-off Currency exchange Balance, end of year AS AT APR IL 30 , 20 21 AS AT APRIL 30, 2020 $ $ 216 $ (126) (38) (7) 45 $ 333 (104) (22) 9 216 57 INSCAPE 2021 ANNUAL REPORT 10.5 Liquidity risk management Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities as they fall due. The Company is exposed to liquidity risk primarily as a result of its drawings on the revolving credit facility, lease liabilities and trade and other payables. The Company continuously reviews both actual and forecasted cash flows to ensure that the Company has appropriate capital capacity. The primary source of liquidity is funds generated by operating activities; the Company also relies on the revolving credit facility as a source of funds for short-term working capital needs. Our debt maturities in future years are as disclosed in Note 22. The expected maturities of our undiscounted financial liabilities, excluding the revolving credit facility, do not differ significantly from the contractual maturities, other than as noted below. With respect to the revolving credit facility maturity, we expect to settle the balance outstanding in part with the funds received from the planned sale of the Holland Landing Property, as described in Note 6. The following table summarizes the amount of contractual undiscounted future cash flow requirements as at April 30, 2021: 2022 2023 2024 2025 2026 THEREAFTER TOTAL $ 8,044 $ 8,005 ‑ ‑ $ $ ‑ ‑ ‑ ‑ $ ‑ $ ‑ ‑ $ 8,044 8,005 ‑ Trade and other payables Revolving credit facility Interest commitments relating to revolving credit facility1 Lease liabilities Total contractual obligations $ 17,790 $ 1,024 717 ‑ 952 952 ‑ 953 ‑ 953 ‑ 953 ‑ 5,531 1,024 10,059 $ 953 $ 953 $ 953 $ 5,531 $ 27,132 1Interest commitments are calculated based on the term revolving credit facility balance at the interest rate of prime/base plus 8.75% as at April 30, 2021. As at April 30, 2021, the Company had $6,150 available in its borrowing base based on accounts receivable, inventories and real estate. These facilities are secured by the Company’s property. As at April 30, 2021 the Company had drawn down $8,005 on the revolving credit facility (2020 – not drawn) and an unused authorized balance of over $6,000 available (see Note 22). The Company expects to meet its other obligations from operating cash flows and proceeds of maturing financial assets from the expected proceeds from the sale of the Holland Landing property (Assets held for sale – Note 6), allowing the Company to repay funds drawn under the revolving credit facility. 10.6 Fair value hierarchy The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable. • Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities. • Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). • Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs). 58 The following table illustrates the classification of financial assets in the fair value hierarchy as at April 30, 2021: Derivative financial assets Total net financial assets LEVEL 1 LEVEL 2 LEVEL 3 $ $ ‑ - $ $ 606 606 $ $ ‑ - The following table illustrates the classification of financial liabilities in the fair value hierarchy as at April 30, 2020: Derivative financial liabilities Total net financial liabilities LEVEL 1 LEVEL 2 LEVE L 3 $ $ - - $ $ 3,391 3,391 $ $ - - There were no transfers between Level 1, 2 and 3 in the periods. 11. NOTE RECEIVABLE On January 19, 2021, the Company entered into a lease agreement for the plant in Jamestown, New York. Subsequent to entering into the lease, the Company issued a note receivable to the lessor, an unrelated party, in the amount of $250 USD. The principal outstanding under this note receivable as at April 30, 2021 is $302 (2020 - $nil) and is repayable in 84 monthly payments of $4 until it is fully paid off in February 2028, at a seven percent (7%) annual interest rate. Interest income for the year ended April 30, 2021 was $4 (2020 - $nil). 12. TRADE AND OTHER PAYABLES Trade accounts payable Accrued liabilities Sales tax payable Other payables 13. PROVISIONS P ROV ISI ON DUE T O WA RRA NT Y Balance, beginning of year Provisions made during the year Provisions reversed and used during the year Impact of financial currency translation Balance, end of year Current Non-Current AS AT APR IL 30 , 20 21 AS AT APRIL 30, 2020 $ $ 2,661 5,160 132 91 8,044 $ 4,375 5,972 145 1,431 $ 11,923 AS AT APR IL 30 , 20 21 AS AT APRIL 30, 2020 $ $ $ 1,260 336 (791) (96) 709 226 483 $ 1,440 143 (369) 46 1,260 203 1,057 $ $ 59 INSCAPE 2021 ANNUAL REPORT 14. RETIREMENT BENEFIT OBLIGATION 14.1 Defined contribution plans The Company operates a defined contribution retirement benefit plan for all qualifying employees. The assets of the plans are held separately from those of the Company in funds under the control of trustees. The total expense recognized in the consolidated statements of operations of $121 (2020 - $164) represents contributions made to the plan by the Company. The total employer’s expected contribution to the plan for the upcoming fiscal year is anticipated to be approximately $123. 14.2 Defined benefit pension plans The Company operated one defined benefit pension plan for qualifying employees in Canada and one defined benefit pension plan for qualifying employees in the US. No other post-retirement benefits are provided to these employees. The Canadian defined benefit pension plan is contributory in nature. The US defined benefit plan is non-contributory, and the accrued benefits were frozen in August 2013. The Canadian plan is registered under the Ontario Pension Benefits Act, RSO 1990 and the Income Tax Act. The US plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). Both plans are legally separate from the Company and are monitored by a pension committee. The pension committee is responsible for policy setting. The pension plans expose the Company to actuarial risk, currency risk, credit risk, interest rate risk and market risk. Actuarial valuations are prepared at least every three years for the Canadian plan and every year for the US plan. The most recent actuarial valuations were as at December 31, 2017 for the Canadian plan and July 1, 2019 for the US plan. The present value of the defined benefit obligation, and the related current service cost and past service cost, were measured using the Projected Unit Credit Method. Actuarial gains and losses are recognized immediately in other comprehensive income as a part of remeasurement. The total employer’s expected contribution to the Canadian defined benefit plan for the upcoming fiscal year is anticipated to be approximately $338. The expected contribution to the US plan for the upcoming fiscal year are approximately $39. 60 Amounts recognized in the cost of goods sold and other comprehensive income in respect of these defined benefit plans are as follows: DEFI NED B ENEFI T PLANS Benefits earned during the year Participant contribution Net interest cost Pension expense recognized RE M EA SUREM ENTS O F T HE NET D EFI NED B EN EFIT LIAB IL I TIE S Actuarial gain (loss) due to actuarial experience Actuarial gain (loss) due to financial assumption changes Actuarial gain due to demographic assumption changes Return on plan assets greater (less) than discount rate Remeasurements effects recognized in other comprehensive income (loss) AS AT APR IL 30 , 20 21 AS AT APRIL 30, 2020 $ $ $ 701 (87) 204 818 886 815 61 4,704 $ $ $ 659 (132) 157 684 (59) (2,050) 27 (1,058) $ 6,466 $ (3,140) CUM ULAT I VE A CT UA RIA L LO SSE S R E LATI NG T O N ET DE F IN ED B EN EFIT LIA BI LITI ES Balance, beginning of year Remeasurements recognized in the year Balance, end of year $ $ (4,984) 6,466 1,482 $ $ (1,844) (3,140) (4,984) The significant actuarial assumptions used in measuring the accrued defined benefit pension plans obligations are as follows: Discount rate at year end Rate of increase in future compensation M ORTA LIT Y TA B LES Canadian Plan U.S. Plan 202 1 2.69% to 3.40% 2.0% 202 1 2 02 0 2.49% to 3.20% 2.0% 2 02 0 2014 CPM Private Sector Table RP – 2014 / MP‑2020 (Society of Actuaries) 2014 CPM Private Sector Table RP – 2014 / MP-2019 (Society of Actuaries) A 1% increase in the discount rate would reduce the Canadian defined benefit obligation by approximately $2,890 (2020 - $3,085) and a 1% decrease in the discount rate would increase the Canadian defined benefit obligation by approximately $3,602 (2020 - $3,873). A 1% increase in the discount rate would reduce the US defined benefit obligation by approximately US$564 (2020 – US$707) and a 1% decrease in the discount rate would increase the US defined benefit obligation by approximately US$684 (2020 – US$864). The discount rates are based on a review of current market interest rates of AA corporate bond yields with a similar duration as the expected future cash outflows for the pension payments. 61 INSCAPE 2021 ANNUAL REPORT The amount included in the consolidated statements of financial position arising from the entity’s obligation in respect of its defined benefit plans is as follows: Defined benefit obligation, beginning of year Current service cost Interest cost Benefits and expenses paid Actuarial (gain) loss Foreign exchange rate changes Defined benefit obligation, end of year Fair value of plan assets, beginning of year Interest Income Employer contributions Employee contributions Benefits and expenses paid Return on plan assets greater than discount rate Foreign exchange rate changes Fair value of plan assets, end of year Defined benefit obligation, net end of year Major categories of plan assets at the end of the year are as follows: Equity securities Debt securities Cash and cash equivalents Total 62 AS AT APR IL 30 , 20 21 AS AT APR I L 30, 2020 $ $ $ $ $ 30,241 701 876 (1,510) (1,763) (974) 27,571 22,901 672 297 87 (1,510) 4,704 (663) 26,488 1,083 $ $ $ $ $ 27,509 659 978 (1,225) 2,082 238 30,241 23,592 821 433 132 (1,225) (1,058) 206 22,901 7,340 AS AT APR IL 30 , 20 21 AS AT APR I L 30, 2020 62% 23% 15% 100% 64% 23% 13% 100% 15. INCOME TAXES 15.1 Income tax recognized in profit or loss The Company’s income tax expense (recovery) comprises: Current Deferred AS AT APR IL 30 , 20 21 AS AT APRIL 30, 2020 $ $ 29 (2,855) (2,826) $ $ 15 - 15 The income tax provision for the years can be reconciled to the accounting loss as follows: Loss before income taxes Basic statutory income tax rate Reconciling items: Permanent differences True-up Impact of tax rate differences Impact of changes in tax law (Recognition) non-recognition of deferred tax assets Other Income tax (recovery) expense AS AT APR IL 30 , 20 21 AS AT APRIL 30, 2020 $ $ (3,717) 25.34% (942) $ (5,391) 25.34% (1,366) 1,639 (71) (94) ‑ (3,319) (39) (2,826) $ 50 35 (117) (7) 1,075 345 15 The Company’s basic Canadian statutory income tax rate is the aggregate of the federal income tax rate of 15% (2020 -15%) and the blended provincial tax rate of 10.34% (2020 – 10.34%). The basic US statutory income tax rate is the aggregate of the federal income tax rate of 21% (2020 – 21%) and the average rate for various states of 4.2% (2020 – 3.4%). 63 INSCAPE 2021 ANNUAL REPORT 15.2 Net deferred income tax assets and liabilities The Company recognized net deferred income tax assets of $2,580 (2020 - $nil) relating to unused tax losses of $4,078, previously part of the unrecognized deferred income tax assets as at April 30, 2020. It is management’s assessment that there is sufficient positive evidence to conclude that the net deferred income tax assets will be realized against the Company’s expected profits in the foreseeable future. Management’s assessment is based on the Company’s decision to sell the Holland Landing property. The sale will allow for the Canadian entity deferred income tax asset to be recovered in a foreseeable future. Deferred income tax assets and liabilities arising from the effect of temporary differences are as follows: DEFERRED TAX ASSETS AND LIABILITIES APRIL 30, 2020 RECOGNIZED RECOGNIZED IN OTHER IN PROFIT COMPREHENSIVE INCOME (LOSS) OR LOSS Property, plant and equipment Retirement benefit obligation Derivative assets (liabilities) Reserves $ Capital loss carryforwards Non-capital loss carryforwards Unrecognized (recognized) deferred income tax assets 15.3 Loss carry forwards (1,344) $ 780 859 773 1,068 30 2,980 4,078 (2,304) $ ‑ $ ‑ (1,013) 183 (3,134) ‑ 2,692 (442) (1,056) ‑ - (1,056) ‑ - (1,056) (4,078) 3,297 781 $ - $ 2,855 $ (275) $ EXCHANGE DIFFERENCES AND OTHER APRIL 30, 2021 156 $ ‑ ‑ - 156 ‑ (156) ‑ ‑ - $ (3,492) (276) (154) 956 (2,966) 30 5,516 2,580 ‑ 2,580 As at April 30, 2021, the Company has unused non-capital losses of $45,520 (2020 - $37,872), consisting of Canadian non-capital loss of $13,171 and US net operating losses of $32,349 – US$24,716 (2020 – Canadian $10,828 and US net operating losses of $27,044 – US$ 19,442) which may be carried forward and used to reduce future years’ taxable income. US non-capital losses of $32,349, of which $17,549 are limited to 80% of taxable income (determined without regard to the deduction), have an indefinite life and no expiry period. The Company has asserted that it is electing to recognize a portion of the unrecognized appreciated gain on certain properties for tax purposes immediately prior to the loss restriction event, which occurred with the change in majority ownership of the Company that took place on October 30, 2020. Without applying the aforementioned election, the pre- acquisition non-capital losses totaling $10,435 and capital losses totaling $236 would be restricted in their future application. 64 16. OTHER LONG‑TERM OBLIGATIONS Other long-term obligations are comprised of the fair value of the Company’s stock-based compensation liabilities. Deferred Share Units Stock Options Restricted Share Units 17. ISSUED CAPITAL As of April 30, 2021, share transactions were as follows: AS AT APR IL 30 , 20 21 AS AT APRIL 30, 2020 $ $ 27 72 65 164 $ $ 32 30 61 123 CLASS A CLASS B MULTIPLE VOTING SHARES SUBORDINATE VOTING SHARES TOTAL NUMBER SHARE OF SHARES CAPITAL NUMBER OF SHARES SHARE CAPITAL NUMBER OF SHARES SHARE CAPITAL 3,34 6 $ 237 11,0 35 $ 52,6 31 14,3 81 $ 5 2,8 68 (3,346) - (237) 3,346 $ - 14,381 $ 237 52,868 - 14,381 $ - 52,868 Balance, April 30, 2020 Conversion of multiple voting shares into subordinate voting shares(1) Balance, April 30, 2021 (1) On October 30, 2020, the Class A multiple voting shares of the Company, previously held by Bhayana Management Ltd. and The Madan and Raksha M. Bhayana Family Foundation (collectively, the “Bhayana Family”), were converted into Class B subordinate voting shares. Subsequently, by way of a private placement, Pender Growth Fund (“PGF”), an unrelated party, entered into a Share Purchase Agreement (the “Purchase Agreement”) with the Bhayana Family pursuant to which PGF purchased a total of 6,886,981 Class B subordinate voting shares. On November 18, 2020, PGF completed the second and final tranche of the share purchase transaction, and holds in aggregate with other funds advised by PenderFund Capital Management Ltd. 7,927,321 subordinate voting shares of the Company, or approximately 55.12% of the total issued and outstanding subordinate voting shares of the Company, making PenderFund Capital Management Ltd. its ultimate parent. 65 INSCAPE 2021 ANNUAL REPORT 18. SHARE‑BASED COMPENSATION 18.1 Stock option plan The Company has allotted and reserved 1,500,000 Class B subordinated voting shares under its Stock Option Plan. At the end of the year, the reserves available for grant are 1,078,161 (2020 – 356,585). Under the plan, options may be granted to purchase Class B subordinated voting shares at the market price determined at the time of grant. The plan also allows for the issuance of stock options with tandem share appreciation rights, which give the holder the right to elect to either receive cash in an amount equal to the excess of the quoted market price over the option price or to receive a Class B subordinated voting share by making a cash payment equal to the option. During the year, stock options with share appreciation rights for 45,000 Class B subordinated voting shares to expire in five years were granted (2020 – 408,185). 421,839 stock options were outstanding as at April 30, 2021 (2020 – 1,143,415). Fair values of these stock options based on the Black-Scholes-Merton Option Pricing Model are accounted for as liabilities and amortized over the vesting periods. Fair values of the amortized liabilities as at April 30, 2021 totaled $72 (2020 – $30). Fair values of the stock options were estimated using the Black-Scholes-Merton option pricing model. The intrinsic value of the vested stock options outstanding as at April 30, 2021 was $2 (2020 – $nil). The assumptions used to compute the fair values and compensation expense under the model are as follows: INPUT S T O T HE BLA CK ‑ SCHO LES ‑M ERT ON M ODEL 20 21 VALUES 20 20 VALUES BASIS Expected remaining life of the options 0.2 to 4.6 years 0.2 to 4.9 years Risk-free interest rates 0.01% to 1.19% 0.11% to 0.36% Expected volatility 62% to 113% 52% to 86% Expiry dates of the options, history of forfeiture rates and early exercise Market yield on US Treasury securities at terms commensurate with the expected remaining life of the options The Company’s daily share price over a period of time commensurate with the expected remaining life of the options Expected dividend yield 0% 0% The Company’s current dividend yield 66 18.2 Movements in share options during the year The following reconciles the share options outstanding at the beginning and the end of the year: Outstanding, beginning of year Granted Expired Forfeited Outstanding, end of year AS AT AP RI L 3 0, 2 021 AS AT APRIL 30, 2020 SHARES 1,143,415 45,000 (53,734) (712,842) 421,839 WEI GHTE D AVE R AG E EXERCISE PRICE $ $ 1.95 0.99 3.10 1.92 1.75 SHARES 1,012,795 408,185 (120,000) (157,565) 1,143,415 WEIGHTED AVERAGE EXERCISE PRICE $ $ 2.51 1.22 3.27 2.63 1.95 18.3 Share options outstanding at the end of the year The following summarizes the share options outstanding at the end of the year: A PRI L 3 0, 20 2 1 OP TIONS OUT STANDING OPT IONS EXERCISABL E RANGE OF EXERCISE PRICE $0.78 to $2.55 $2.98 to $3.41 $3.65 to $4.02 $0.78 to $4.02 NUMBER OF WEIGHTED AVERAGE OUTSTANDING REMAINING LIFE IN YEARS OPTIONS WEIGHTED AVERAGE EXERCISE PRICE NUMBER EXERCISABLE AT WEIGHTED AVERAGE YEAR END EXERCISE PRICE 330,042 39,378 52,419 421,839 2.87 1.01 0.94 2.46 $ $ 1.24 3.24 3.84 1.75 177,500 39,378 52,419 269,297 $ $ 0.96 1.29 2.11 1.35 A PRIL 30 , 20 20 OPTI ONS OUTSTAN DI NG OPTI ONS EXERCISABLE RANGE OF EXERCISE PRICE $0.78 to $2.55 $2.98 to $3.41 $3.65 to $4.02 $0.78 to $4.02 NUMBER OF OUTSTANDING OPTIONS WEIGHTED AVERAGE REMAINING LIFE IN YEARS WEIGHTED AVERAGE EXERCISE PRICE NUMBER EXERCISABLE AT YEAR END WEIGHTED AVERAGE EXERCISE PRICE 890,206 158,004 95,205 1,143,415 3.09 1.35 1.97 2.76 $ $ 1.53 2.02 3.82 1.95 212,500 111,605 36,150 360,255 $ $ 1.48 3.08 4.02 2.23 67 INSCAPE 2021 ANNUAL REPORT 18.4 Deferred share unit plan The Company has a Deferred Share Unit Plan for the members of the Board of Directors and the executives. Under the plan, each director receiving Director’s fees may elect to receive all or a percentage of the fees in the form of notional Class B subordinated voting shares of the Company called deferred share units (“DSU”). The issue price of each DSU is equal to the weighted average share price at which Class B subordinate voting shares of the Company were traded on the TMX during the last five-day period of the quarter prior to the DSU issue. Upon retirement from the Board, a director’s DSU is redeemed for cash based on the market price of the shares at the time of redemption. The intrinsic value of vested deferred share units outstanding as at April 30, 2021 were $nil (2020 - $nil). As at April 30, 2021, 33,596 DSUs were outstanding with a total fair value of $27 measured at the closing price of the shares at year end (2020 – 57,799 units, fair value $32). 18.5 Movements in deferred share units during the year The following reconciles the deferred share units at the beginning and the end of the year: Outstanding, beginning of year Forfeited/Exercised Outstanding, end of year AS AT APR IL 30 , 20 21 AS AT APR I L 30, 2020 57,799 (24,203) 33,596 57,799 - 57,799 18.6 Executives long‑term incentive plan The Company has a long-term incentive plan for eligible executives. Under the plan, annual grants of stock options and restricted share units (“RSU”) are issued to eligible executives based on each executive’s responsibilities and base salaries. The value of RSU redeemable at the end of a three-year vesting period is dependent upon the market price of the Class B subordinated voting shares of the Company. During the year the Company issued 458,321 RSU (2020 – 123,518). As at April 30, 2021, 206,757 RSU were outstanding (2020 – 225,279). The intrinsic value of the Company’s vested RSUs outstanding as at April 30, 2021 was $56 (2020 - $nil). 68 INSCAPE 2021 ANNUAL REPORT 18.7 Movements in restricted share units during the year The following summarizes the movements in RSU during the year: Outstanding, beginning of year Granted Forfeited Maturities Outstanding, end of year 19. LOSS PER SHARE AS AT APR IL 30 , 20 21 AS AT APRIL 30, 2020 225,279 458,321 (429,673) (47,170) 206,757 184,979 123,518 (53,137) (30,081) 225,279 The net loss and weighted average number of shares used in the calculation of basic and diluted loss per share are as follows: Net Loss Weighted average number of shares outstanding basic Dilution impact of stock options Weighted average number of shares outstanding diluted Basic and diluted loss per share AS AT APR IL 30 , 20 21 AS AT APRIL 30, 2020 $ $ (891) 14,380,701 - 14,380,701 (0.06) $ (5,406) 14,380,701 - 14,380,701 $ (0.38) Stock options are anti-dilutive and are therefore, not included in the computation of basic and diluted loss per share for the years ended April 30, 2021 and April 30, 2020. 69 20. SEGMENTED REPORTING The Company’s reportable segments include Furniture and Walls. In determining reportable segments, the Company looks at the shared economic characteristics. The chief decision maker, the CEO, monitors the operating results of the segments separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss and is measured consistently with operating profit or loss in the consolidated financial statements. Additionally, the product offerings, process and production are distinct and different between the operating segments. Aggregated in the Furniture segment are Systems, Benching, Storage and Seating. The aggregation is based on the similarity in those products’ functionalities, production or procurement, process of distribution and gross margin. Walls is a separate segment due to the different nature of movable walls compared to Furniture, the production process and the installation services involved in the selling of movable walls. The following is an analysis of the Company’s revenue and results from continuing operations, capital expenditures, amortization and depreciation by reportable segments: SE GM ENT ED SA LES Furniture Walls Total SE G M ENT ED LOSS Furniture Walls Unrealized gain (loss) on foreign exchange Unrealized gain (loss) on derivatives (Note 10.2) Other income (Note 23) Gain (loss) on sale of property, plant and equipment & intangibles Interest expense Loss before taxes Income tax recovery (expense) Net loss AMO RT IZATI ON AND DEPRE CI AT I ON Furniture Walls Total ADDI T IO NS T O PRO PE RT Y, PL ANT AND EQUI P MEN T AND I NTAN GI BLE S Furniture Walls Total 70 AS AT APR IL 30 , 20 21 AS AT APR I L 30, 2020 $ $ $ $ $ $ $ $ 29,176 9,027 38,203 (8,903) (4,699) (13,602) 377 3,997 5,308 209 (6) (3,717) 2,826 (891) $ $ $ 55,592 20,226 75,818 (2,795) (2,796) (5,591) (289) (1,994) 2,504 (30) 9 (5,391) (15) $ (5,406) 3,076 859 3,935 2,084 456 2,540 $ $ $ $ 3,227 371 3,598 516 105 621 SEGMENT ASSETS AND LIABILITIES A SSE TS Furniture Walls Total assets LI AB ILI T IES Furniture Walls Total liabilities The Company’s revenue is based on geographical location as detailed below: Sales from: United States Canada Total The Company’s identifiable non-current assets (i.e. property, plant and equipment and intangibles) by geographical location are detailed below: United States Canada Total 21. SUPPLEMENTAL INFORMATION 21.1 SALARIES, WAGES AND BENEFITS Included in: Cost of goods sold Selling, general and administrative 21.2 AMORTIZATION AND DEPRECIATION Included in: Cost of goods sold Selling, general and administrative AS AT APR IL 30 , 20 21 AS AT APRIL 30, 2020 $ $ $ $ $ $ $ $ 35,774 6,195 41,969 23,823 4,309 28,132 36,156 2,047 38,203 9,892 6,923 16,815 $ $ $ $ $ $ $ $ 27,719 10,089 37,808 20,451 8,717 29,168 69,876 5,942 75,818 3,658 11,531 15,189 AS AT APR IL 30 , 20 21 AS AT APRIL 30, 2020 $ $ 10,047 11,056 21,103 $ $ 16,008 14,298 30,306 AS AT APR IL 30 , 20 21 AS AT APRIL 30, 2020 $ $ 1,359 2,576 3,935 $ $ 861 2,737 3,598 71 INSCAPE 2021 ANNUAL REPORT 22. CREDIT FACILITY On April 29, 2021 the Company closed a new revolving committed credit facility with FrontWell Capital Partners Inc., with credit availability of the lesser of $15,000 and availability pursuant to the Borrowing Base calculation representing accounts receivable, inventories, land and building, with a maturity date which is the earlier of (i) April 29, 2022, and (ii) the completion of the sale of the property classified as assets held for sale (see Note 6). The interest rate on the demand operating credit facility is Prime Rate plus 8.75% for Canadian dollar loans, US Base Rate plus 8.75% for US dollar loans. The agreement is secured by the Company’s accounts receivable, inventories, land and building (borrowing base). As at April 30, 2021, the Company has drawn $8,005 on the demand operating credit facility of which $5,200 is a Canadian dollar loan and $2,300 is a US dollar loan ($2,805 CDN) (2020 – not drawn), with related deferred financing charges in the amount of $131 and foreign currency translation of $16, included in current liabilities. In addition, as at the date of this report the Company met all the required credit facility covenants. 23. GOVERNMENT ASSISTANCE In response to the COVID-19 pandemic, the Company received a United States government unsecured forgivable loan in two Tranches, with a 1.00% per annum interest rate, repayable in 24 months. Tranche 1 was received as of April 30, 2020 for $1,808 (US$1,300) and tranche 2 for $1,800 (US $1,390) was received during the fourth quarter of fiscal 2021. As at April 30, 2021, the loan for tranche 1 was forgiven and tranche 2 is expected to be forgiven subject to the terms of the Paycheck Protection Program. The loan will be forgivable if all employees are maintained on the payroll for eight weeks and the money is used for payroll, benefits, rent or utilities. In addition, the Company applied for and received grants from the Canadian government under the CEWS and CERS programs. As at April 30, 2021 the Company incurred qualifying expenditures of $2,431 (2020 - $nil), of which subsidies of $2,732 (2020 – $nil) were received, including $301 which has been deferred to future periods and included in trade and other payables in the Consolidated Statements of Financial Position. The CEWS program has been extended to September 25, 2021 by the Canadian government. The Company will continue to apply for this assistance as it qualifies. OTHER INCO ME DURI NG T HE P ER I OD: Government Assistance: SBA forgivable loan, utilized CEWS program subsidies recognized Canadian rent subsidies recognized AS AT APR IL 30 , 20 21 AS AT APR I L 30, 2020 $ $ (2,774) (2,431) (103) (5,308) $ $ (517) - - (517) 72 24. RELATED PARTY TRANSACTIONS The following was the remuneration of directors and other members of key management personnel, including Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Chief Brand Officer, VP Supply Chain, and VP Human Resources. Salaries and short-term benefits Post-employment benefits Share based compensations AS AT APR IL 30 , 20 21 AS AT APRIL 30, 2020 $ $ 1,691 22 62 1,775 $ 2,163 42 379 2,584 $ 25. SUBSEQUENT EVENTS In the first quarter of 2022, the Company entered into a new lease agreement for a showroom located in City of Chicago, County of Cook, State of Illinois. The new lease has an initial term of approximately 11 years and is expected to commence in December 1, 2021. The base rent under the new showroom lease agreement is approximately $430 per year for the first year, escalating 2.5% annually thereafter over the initial term including a rent free period of 16 months. The Company has an option to extend the term of the lease for an additional 5 years. 73 INSCAPE 2021 ANNUAL REPORT Corporate Information Board of Directors Eric Ehgoetz, Director Bartley Bull, Chair of the Board Chief Executive Officer Eric Ehgoetz Tracy Tidy, Director Chief Financial Officer Tania Bortolotto, Director Jon Szczur Dezsö J. Horváth, Director jszczur@myinscape.com Quentin Kong, Director David LaSalle, Director Listing of Capital Stock Financial Calendar Toronto Stock Exchange (INQ) May 1 to April 30 Transfer Agent and Registrar 2021 Annual Meeting AST Trust Company (Canada) The annual meeting of shareholders PO Box 700, Postal Station B will be held on September 16th, 2021 Montreal, QC H3B 3K3 at 4:00 pm at Inscape’s T 416 682 3860 or 800 387 0825 Corporate Headquarters: F 514 985 8843 or 888 249 6189 67 Toll Road astfinancial.com/ca-en Holland Landing, ON L9N 1H2 Auditor Deloitte LLP Investor Information Shareholders seeking assistance Bay Adelaide East or information about the Company 8 Adelaide Street West, Suite 200 are invited to contact Jon Szczur, Toronto, ON M5H OA9 Chief Financial Officer, at: Corporate Office 67 Toll Road 67 Toll Road Holland Landing, ON L9N 1H2 T 905 952 4102 Holland Landing, ON L9N 1H2 info@myinscape.com T 905 836 7676 myinscape.com myinscape.com 74 67 Toll Road, Holland Landing, ON L9N 1H2 T 905 836 7676 F 905 836 6000 Toll Free 1 866 467 2273 myinscape.com © Inscape Corporation 2021 ® Trademarks of Inscape Corporation. Patents may be pending. Certain names, words, logos and graphics or designs contained herein are trademarks or service marks of Inscape Corporation.
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