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Annual
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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
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