2022
Annual Report
4
Letter to Shareholders
6
Management’s Discussion & Analysis
7
Company Profile and Core Business
8
Vision & Strategy
10
Financial Overview
Fiscal Year 2022 Compared to Fiscal Year 2021
Financial Highlights
12
Results of Operations
16
Financial & Capital Management
21
Change in Accounting Policies
21
Significant Accounting Judgments,
Estimates & Assumptions
22
Financial Instruments and Risk Management
23
Risk Factors
25
Controls & Procedures
28
Management Report
30
Independent Auditor’s Report
33
Consolidated Financial Statements
39
Notes to the Consolidated Financial Statements
1.
78
Corporate Information
Contents
1
2
INSCAPE 2022 ANNUAL REPORT
Letter to
Shareholders
In last year’s letter, we outlined our optimism for an economic recovery in the second half of our 2022 fiscal year
(ending April 30th) and cautioned that it would be a bumpy ride given new variants of the pandemic and differing
vaccination rates across North America. We were remarkably accurate in this respect as both of those factors
impacted the pace of the economic recovery during the first half of the 2022 calendar year, particularly the pace of
workers returning to offices. Additionally, certain geopolitical conflicts arose during the beginning of our fourth quarter
which increased uncertainty and further impacted supply chains through additional cost and lead time issues. While
we did see quarter over quarter revenue growth throughout the year, the pace of this growth was not at the level we
had expected largely as a result of the delay of workers returning to offices, even if hybrid based, and the continued
deferral of construction and related projects. Despite these constraints, and the ongoing level of economic uncertainty,
we remain of the opinion that economic recovery will continue even if its pace is slowed by actions currently being
taken by various governments to blunt the impact of price inflation particularly relating to energy.
Over the past few years, leading accounting firms have written about the ”survive, revive and thrive” stages necessary
for companies to emerge from the challenges thrust upon them since early 2020. As our work continues on Inscape’s
revival, we have remained focused on practical strategies to improve our operations for long term success.
Paramount to our revival efforts were management’s work to monetize non-core assets, raise cash and retire debt.
Continuing on this theme, several initiatives were completed during the fiscal year:
• monetization of real estate assets generating $35 million;
• full repayment of bridge debt facilities established at the end of fiscal 2021 to provide liquidity during
the 2022 fiscal year, leaving the company with cash and no debt at the end of fiscal 2022;
• during the first quarter, renewal of a four-year labor agreement with our hourly workforce at our Walls plant in New
York state;
• during the fourth quarter, renewal of a three-year collective bargaining agreement with our hourly workforce in our
Holland Landing furniture plant;
• initiated upgrade projects for both the company’s core ERP platform and core engineering software platforms.
The ERP upgrade is expected to be live by the 2nd quarter of the Fiscal 2023 and will improve our operating
effectiveness. The core engineering platform upgrade is being rolled out in connection with key product
development projects and the company will fully migrate to this industry standard over the next two years;
• launch of a new steel storage offering – “2Stor”- via a rollout over the second half of our 2022 fiscal year;
• rollout of our prototype laminate storage offering with proprietary designs;
• continued our efforts within our factories and elsewhere to properly position the business for long term
growth in sales and profitability.
Throughout, we have protected the health and safety of our employees while continuing to operate our factories in
compliance with government restrictions. Effective February 2022, Inscape also implemented our own hybrid work
model at all of our locations, as we intend to reflect the work environment that the majority of our customers are
adopting. We are proud of our accomplishments in this respect.
None of the above could have been accomplished without the valued contributions of our leadership team, our
employees, and our partners, as well as our Board of Directors whose continued support and guidance proved
invaluable. We wish to thank all of them for their unwavering commitments during this challenging year.
Bartley Bull,
Chairman
Eric Ehgoetz,
Director and Chief Executive Officer
4
3
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 of 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.
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, 2022 should be read in conjunction
with the accompanying Consolidated Financial Statements and Notes for the years ended April 30, 2022 and 2021.
The discussion and analysis
are as of July 14, 2022 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 that 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-
These forward-looking statements include known and
unknown risks, uncertainties, assumptions and other
factors which may cause actual results or achievements
to be materially different from those expressed or implied.
The forward-looking statements are subject to risks and
uncertainties that may cause the actual results to differ
materially from those anticipated in the discussion
(see “RISK FACTORS” for more information).
While management believes that the expectations
expressed by such forward-looking statements are
reasonable, we cannot assure that they will be correct.
In evaluating forward-looking information and statements,
readers should carefully consider the various factors which
could cause actual results or events to differ materially
from those indicated in the forward-looking information
and statements. Readers are cautioned that the foregoing
list of important factors is not exhaustive. Furthermore,
the Company will update its disclosure upon publication
of each fiscal quarter’s financial results and otherwise
disclaims any obligations to update publicly or otherwise
revise any such factors or any of the forward-looking
information or statements contained herein to reflect
subsequent information, events or developments,
changes in risk factors or otherwise.
Company
Profile & Core
Business
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.
Since 1888, Inscape has been designing products and
services that are focused on the future, so businesses
can adapt and evolve without investing in their workspaces
all over again. Our versatile portfolio includes systems
furniture, storage, and walls – all of which are adaptable
and built to last. Inscape’s wide dealer network,
showrooms in the United States and Canada, along with
full service and support for our clients enable us to stand
out from the crowd. We make it simple. We make it smart.
We make our clients wonder why they didn’t choose
us sooner.
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 313,000 square foot plant in Holland Landing,
Ontario, and a 30,000 square foot plant in Jamestown,
New York, USA.
Management’s
Discussion & Analysis
6
5
INSCAPE 2022 ANNUAL REPORT
Develop our Brands
– Inscape and
Offi ce Specialty
Both the Inscape brand and the
Offi ce Specialty brand off er strong
opportunities to deliver a diff erentiated
off ering. Emphasis now is on
exploiting the strengths of each and
exploring where opportunities exist
to best broaden our market share for
each individual brand.
Refi ne our
Product Off ering
Market forces have changed the
demand profi le. Inscape and Offi ce
Specialty off erings must play to the
Company’s core strengths and adapt
to new market opportunities for
growth. Storage solutions are a key
component of such off erings.
Regional
Focus
Focus remains on investment in
high opportunity and high margin
markets. Re-establishing certain
off erings nationally while supporting
others regionally will create a wider,
more sustainable and more robust
sales base.
Multiply our
Distribution Channels
Widening the sales opportunity
funnel by actively broadening the
number of distribution channels for
the Company’s products is critical.
This includes dealer channels;
independent rep channels; inside
sales team development, and
ecommerce channels.
Lever
Technology
Enable the Company through
strategic investments in technology-
driven capital equipment and
technology-based systems and
processes to unlock potential,
improve growth, competitiveness,
operating performance, and
speed to market.
Management has reviewed and refi ned its key strategic
initiatives during the past fi scal year to assure a fl exible
operational foundation and broaden opportunities
for growth. These are:
Vision & Strategy
8
7
INSCAPE 2022 ANNUAL REPORT
Fiscal Year 2022 Compared to Fiscal Year 2021
Fiscal year 2022 sales increased marginally to $38.7 million or 1.4% compared to the prior year. The Company
experienced three (3) consecutive quarters of increased sales as the business continues to rebound to pre-COVID levels.
Although management expects this trend to continue it won’t be without challenges as the Company manages cost
increases and supply chain challenges.
In fi scal year 2022, the Company incurred a net loss of $0.8 million or 6 cents per share, compared to a net loss of
$0.9 million, or 6 cent per share a year ago. In fi scal 2022, the Company’s sales were fl at due largely to the impact of
the COVID-19 pandemic and supply logistics disruptions, which also led to increased cost of raw materials. However,
the Company realized signifi cant gains on the sale and leaseback of the Holland Landing head offi ce property and on
the sale of the adjacent unused land. With the exclusion of these gains, in addition to other items such as stock-based
compensation and severance expenses, fi scal year 2022 had an adjusted net loss before taxes of $16.5 million compared
with last year’s adjusted net loss before taxes of $13.0 million. As of April 30, 2022, there were $0.4 million of inventory
write-downs, which resulted in lower margins and net income, as well as lower EBITDA and Adjusted EBITDA.
Financial Overview
Financial Highlights
(in thousands, except for per share amounts)
THREE MONTHS ENDED APRIL 30,
2022
2021
Sales
$
10,992
$
8,051
Net income
332
499
Basic and diluted earnings per share
0.02
0.03
Adjusted net loss before taxes
(4,633)
(4,906)
Adjusted EBITDA
$
(3,429)
$
(3,876)
YEARS ENDED APRIL 30,
2022
2021
Sales
$
38,741
$
38,203
Net loss
(839)
(891)
Basic and diluted loss per share
(0.06)
(0.06)
Adjusted net loss before taxes
(16,482)
(12,952)
Adjusted EBITDA
$
(11,808)
$
(8,714)
As at APRIL 30,
2022
2021
Total assets
$
55,630
$
41,972
Total liabilities
41,454
28,136
Cash & cash equivalents
8,284
3,736
Restricted cash
3,200
2,764
Weighted average number of shares for basic and diluted EPS
$
14,380,701
$ 14,380,701
10
9
INSCAPE 2022 ANNUAL REPORT
Sales
(in thousands)
2022
2021
CHANGE
Three Months Ended April 30
$
10,992
$
8,051
36.5%
Years Ended April 30
$
38,741
$
38,203
1.4%
Sales were higher in the fourth quarter and fi scal 2022 by 36.5% and 1.4% respectively as COVID-19 restrictions lessened
and economies rebounded. The Company experienced quarter over quarter improvements during the fi scal year as more
employees returned to the workplace. A customer price increase was instituted early in April which is expected to help
combat raw material cost increases that the Company experienced in the later half of the year.
Gross Profi t
(in thousands)
2022
% OF SALES
2021
% OF SALES
Three Months Ended April 30
$
1,723
15.7%
$
614
7.6%
Years Ended April 30
$
6,007
15.5%
$
6,934
18.2%
Gross profi t margins for the fourth quarter increased by 8.1 percentage points, however margins decreased by 2.7 percentage points
for fi scal 2022. The improvement in the quarter resulted from both improved sales and a one-time actuarial pension adjustment.
Gross profi t margin for the fi scal year declined primarily due to the increase in the cost of raw materials such as steel, petroleum-
based products (including plastics and foam), medium-density fi breboard (MDF), aluminum and other material inputs. During the
fi scal year, the steel price increased signifi cantly due to material shortages and logistic disruptions arising from the pandemic. The
Company did benefi t from headcount reductions, a new lease at the Walls plant and a new negotiated collective labour agreement
for the Holland Landing plant. The savings associated with these items are anticipated during fi scal 2023. The Company continues
to identify initiatives to achieve cost effi ciencies and improved margins as sales levels return to normal.
Selling, General & Administrative (SG&A) Expenses
(in thousands)
2022
% OF SALES
2021
% OF SALES
Three Months Ended April 30
$
5,930
53.9%
$
5,925
73.6%
Years Ended April 30
$
20,857
53.8%
$
20,536
53.8%
SG&A for the fourth quarter and fi scal 2022 were 53.9% and 53.8% of sales, compared to 73.6% and 53.8% for the
same periods of last year. The Company’s SG&A expenses are primarily fi xed costs accounting for over 90% of total
costs. The percentage relative to sales declined over the fi scal year and is expected to continue to drop as sales levels
improve and other operational effi ciencies are implemented.
Net Income (Loss)
(in thousands)
2022
% OF SALES
2021
% OF SALES
Three Months Ended April 30
$
332
3.0%
$
499
6.2%
Years Ended April 30
$
(839)
(2.2%)
$
(891)
(2.3%)
Fourth quarter net income of $0.3 million compared to net income of $0.5 million in the same quarter of last year. The current
quarter’s performance is primarily due to the improved gross profi t of $1.7 million, the gain on disposal of real property of
$1.6 million and the deferred tax recovery of $3.4 million, partially off set by $5.9 million of SG&A expenses and $0.4 million
of interest expense.
Results of Operations
Fiscal year 2022 ended with a net loss of $0.8 million compared to a net loss of $0.9 million in fi scal year 2021. Current year’s
results are attributable to gross profi t of $6.0 million, a $14.6 million gain on the disposal of real properties and a $2.0 million of
other income in the form of government grants and subsidies. These were partially off set by $20.9 million of SG&A expenses,
$1.8 million of interest expense - largely related to the revolving credit facility, and $0.7 million of unrealized losses on
derivative contracts.
The adjusted net loss before taxes and adjusted EBITDA are non-GAAP measures, which do not have any standardized
meaning prescribed by GAAP and are 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:
THREE MONTHS ENDED APRIL 30,
YEARS ENDED APRIL 30,
(in thousands)
2022
2021
2022
2021
Net loss before taxes
$
(3,065)
$
(2,356)
$
(766)
$
(3,717)
Adjust non-operating or
unusual items:
Unrealized loss (gain) on derivatives
52
(581)
713
(3,997)
Unrealized loss (gain) on
foreign exchange
15
(488)
(20)
(377)
Gain (loss) on disposal
of PP&E and intangibles
(1,624)
23
(14,609)
(209)
Other income – government grant
(2)
(1,916)
(1,979)
(5,308)
Stock based compensation
(136)
(110)
28
90
Severance obligation
127
522
151
566
Adjusted net loss before taxes
$
(4,633)
$
(4,906)
$
(16,482)
$
(12,952)
The following is a reconciliation of net loss before taxes calculated in accordance with GAAP to EBITDA and adjusted
EBITDA, the non-GAAP measures:
THREE MONTHS ENDED APRIL 30,
YEARS ENDED APRIL 30,
(in thousands)
2022
2021
2022
2021
Net loss before taxes
$
(3,065)
$
(2,356)
$
(766)
$
(3,717)
Interest
417
149
1,811
303
Depreciation
378
496
1,521
1,972
Amortization
409
385
1,342
1,963
EBITDA
$
(1,861)
$
(1,326)
$
3,908
$
521
Adjust non-operating or unusual items:
Unrealized loss (gain) on derivatives
$
52
$
(581)
$
713
$
(3,997)
Unrealized loss (gain) on
foreign exchange
15
(488)
(20)
(377)
Gain (loss) on disposal
of PP&E and intangibles
(1,624)
23
(14,609)
(209)
Other income – government grant
(2)
(1,916)
(1,979)
(5,308)
Stock based compensation
(136)
(110)
28
90
Severance obligation
127
522
151
566
Adjusted EBITDA
$
(3,429)
$
(3,876)
$
(11,808)
$
(8,714)
Income Tax
In accordance with IFRS requirements (IAS 12), deferred income tax assets relating to tax loss carry-forwards
were recognized during fi scal year 2022 due to probable future taxable income against which to realize them.
See the notes to the consolidated fi nancial statements which include a reconciliation of the income tax provision.
12
11
INSCAPE 2022 ANNUAL REPORT
Selected unaudited quarterly fi nancial information for the previous eight quarters from July 31, 2020
through April 30, 2022 is provided below:
Selected Quarterly Information1
(in thousands, except per share amounts)
(Unaudited)
QUARTERS ENDED
APR 30, 2022
JAN 31, 2022
OCT 31, 2021
JUL 31, 2021
Sales
$
10,992
$
10,208
$
9,683
$
7,858
Gross profi t
$
1,723
$
1,470
$
2,207
$
607
Gross profi t %
15.7%
14.4%
22.8%
7.7%
Net income (loss)
$
332
$
4,838
$
(2,623)
$
(3,386)
Basic and diluted income (loss) per share
$
0.02
$
0.34
$
(0.18)
$
(0.24)
Adjusted net loss before taxes
$
(4,633)
$
(4,229)
$
(3,299)
$
(4,321)
EBITDA
$
(1,861)
$
9,604
$
(1,501)
$
(2,334)
Adjusted EBITDA
$
(3,429)
$
(2,930)
$
(2,179)
$
(3,270)
QUARTERS ENDED
APR 30, 2021
JAN 31, 2021
OCT 31, 2020
JUL 31, 2020
Sales
$
8,051
$
11,625
$
7,157
$
11,370
Gross profi t
$
614
$
2,658
$
232
$
3,430
Gross profi t %
7.6%
22.9%
3.2%
30.2%
Net income (loss)
$
499
$
(1,038)
$
(3,732)
$
3,380
Basic and diluted income (loss) per share
$
0.03
$
(0.07)
$
(0.26)
$
0.24
Adjusted net loss before taxes
$
(4,906)
$
(2,191)
$
(4,659)
$
(1,197)
EBITDA
$
(1,326)
$
(4)
$
(2,698
$
4,394
Adjusted EBITDA
$
(3,876)
$
(1,179)
$
(3,630)
$
(185)
1Quarterly earnings per share may not total year-to-date earnings per share due to rounding.
Summary of Quarterly Results
14
INSCAPE 2022 ANNUAL REPORT
13
Cash Flow Movements
Cash Flow Summary
THREE MONTHS ENDED APRIL 30,
(in thousands)
2022
2021
Net cash fl ow (used in) generated from:
Operating activities before changes in working capital
$
(4,303)
$
(3,654)
Net change in working capital
(3,031)
1,297
Investing activities
1,487
(2,044)
Financing activities
(119)
9,352
Foreign exchange (loss) gain on cash
(325)
322
Net (decrease) increase in cash
(6,291)
5,273
Cash, cash equivalents and restricted cash, beginning of period
17,775
1,227
Cash, cash equivalents and restricted cash, end of period
$
11,484
$
6,500
Fourth quarter cash outfl ow from operations (before changes in working capital) was $4.3 million compared to the
previous year’s outfl ow of $3.7 million.
Net decrease in working capital was $3.0 million in the current quarter compared to an increase of $1.3 million in the
comparative quarter of last year. The net decrease resulted mainly from increased accounts receivable from improved
fourth quarter credit sales, not yet due, partially off set by the settlement of accounts payable. In the comparative quarter
of last year, the Company had net collections from accounts receivable.
Cash infl ow in investing activities for the fourth quarter related to net proceeds of $1.6 million from the sale of the excess
unused land located at 70 Toll Road in Holland Landing, Ontario. The same quarter in the prior year included major capital
investments in a new fully automated combination laser/turret press and leasehold expenses for the new plant and offi ces
in Jamestown, New York.
Net cash outfl ow from fi nancing activities of $0.1 million was largely related to repayment of the principal portion of lease
contracts. In the prior year, net cash infl ow of $9.4 million was for the most part drawings under the revolving credit facility
and proceeds from the US government forgivable loan under the Paycheck Protection Program (PPP), less principal
repayments for lease contracts.
Financial & Capital
Management
Cash Flow Summary
YEARS ENDED APRIL 30,
(in thousands)
2022
2021
Net cash fl ow generated from (used in):
Operating activities before changes in working capital
$
(10,415)
$
(6,219)
Net change in working capital
(8,382)
1,743
Investing activities
32,661
(2,589)
Financing activities
(8,862)
7,967
Foreign exchange loss on cash
(18)
(287)
Net increase (decrease) in cash
4,984
615
Cash, cash equivalents and restricted cash, beginning of period
6,500
5,885
Cash, cash equivalents and restricted cash, end of period
$
11,484
$
6,500
As of April 30, 2022, the cash outfl ow from operations (before changes in working capital) was $10.4 million compared
to the previous year’s outfl ow of $6.2 million. The movement is primarily due to sales transactions in fi scal 2022 being
weighted in the later quarters as the Company experiences a gradual recovery of sales volume in line with relaxed
COVID-19 measures.
Net decrease in working capital was $8.4 million as of April 30, 2022, compared to net increase of $1.7 million for the
same period last year. The net decrease related primarily to increased sales during the fourth quarter with average
collection periods extending into fi scal 2023, and an investment in working capital which included increased inventory
and settlement of vendor accounts using infl ows from the sale of the properties in Holland Landing, Ontario. The
concurrent leaseback of the head offi ce location resulted in deposits of $2.5 million with the lessor.
Net cash infl ow from investing activities of $32.7 million compared to net cash outfl ow of $2.6 million in the prior
year. Current year’s cash infl ow included the gross proceeds of $34.5 million generated from the sale and leaseback
transactions relating to the Holland Landing properties.
Repayment of the revolving credit facility and various lease obligations were the primary drivers for the net cash outfl ow
from fi nancing activities of $8.9 million. In the prior year, the net cash infl ow related to the borrowings under the revolving
credit facility and proceeds from the PPP loan.
16
15
INSCAPE 2022 ANNUAL REPORT
Retirement Benefi t Obligation
As of April 30, 2022, the defi ned benefi t (DB) obligation recognized a remeasurement gain of $1.5 million (2021 - $6.5
million) in other comprehensive income, primarily due to actuarial gains of $3.7 million as outlined below, partially off set by
unfavourable returns on the fair value of the plan assets of $2.2 million.
As at
As at
APRIL 30, 2022
APRIL 30, 2021
Remeasurements of the net defi ned benefi t liabilities
Actuarial (loss) gain due to actuarial experience
$
(589)
$
886
Actuarial gain due to fi nancial assumption changes
4,320
815
Actuarial (loss) gain due to demographic assumption changes
(15)
61
Return on plan assets (less) greater than discount rate
(2,177)
4,704
Remeasurements effects recognized in other comprehensive income
$
1,539
$
6,466
Closure of the DB Plan
Eff ective April 2, 2022, accruals under the DB component of the Plan ceased and eff ective April 3, 2022, the Plan
provides benefi ts on a defi ned contribution (DC) basis only.
In addition, the Company off ered a Special Early Retirement Window (SERW) program to all active members of the DB
component of the plan, who is not a Maintenance Employee and has attained age 62 years and 17 years of continuous
service on or before April 3, 2022.
These changes resulted in a curtailment gain of $641 and SERW past service cost of $195, which were recognized in
pension expense for fi scal 2022 in accordance with IAS 19.
As apart of the closure of the DB component, Members have been provided with the option to convert their DB
entitlements and transfer a lump sum equivalent value to their DC account balance. These transfers are not expected
to occur until the end of fi scal 2023 or during fi scal 2024.
Credit Facility
On January 25, 2022, the Company repaid the Canadian and US dollar loans outstanding under the revolving credit
facility with FrontWell Capital Partners Inc. - $9.1 million and $6.9 million (US $5.4 million), respectively
The facility provided credit availability of the lesser of $16.0 million and availability pursuant to the Borrowing Base
calculation representing accounts receivable, inventories, land and building, with a maturity date which was the earlier
of (i) April 29, 2022, and (ii) the completion of the sale of property at 67 and 70 Toll Road in Holland Landing, Ontario.
The interest rate on the demand operating credit facility was Prime Rate plus 8.75% for Canadian dollar loans and US
Base Rate plus 8.75% for US dollar loans.
As of April 30, 2022 the Company had no new credit agreement or restrictive covenants.
Contractual Obligations
The following is a summary of the Company’s contractual obligations as of April 30, 2022:
PAYMENTS DUE BY PERIOD
(in millions)
TOTAL
1 YEAR OR
LESS
1-5 YEARS
AFTER 5
YEARS
Lease liabilities
$
28.8
$
2.2
$
10.0
$
16.6
Foreign exchange contracts
0.1
0.1
-
-
$
28.9
$
2.3
$
10.0
$
16.6
Lease contracts are primarily in respect of the Company’s three showrooms, its head offi ce and manufacturing facilities in
Canada and the United States of America. See “Financial Instruments” discussed below for the Company’s obligations for
foreign exchange contracts.
Share Capital
The Company has 14,380,701 Class B subordinated voting shares outstanding at April 30, 2022. The Class B
subordinated voting shares, which are listed on the Toronto Stock Exchange, carry one vote each.
18
17
INSCAPE 2022 ANNUAL REPORT
Related Party Transactions
The following were the remuneration of directors and other members of key management personnel, including the
Chief Executive Offi cer, Chief Financial Offi cer, SVP Sales and Distribution, VP Marketing & Product Design and VP
Manufacturing & Supply Chain.
THREE MONTHS ENDED APRIL 30,
YEARS ENDED APRIL 30,
(in thousands)
2022
2021
2022
2021
Salaries and short-term benefi ts
$
527
$
288
$
1,987
$
1,691
Post-employment benefi ts
-
6
4
22
Share-based compensation
(136)
(137)
28
62
$
391
$
157
$
2,019
$
1,775
Other Related Party Transactions
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.
In 2022, there were no change in accounting policies which impacted the Company’s business.
Signifi cant Accounting
Judgments, Estimates &
Assumptions
In the application of the Company’s accounting policies,
management is required to make judgments, estimates
and assumptions about the carrying amounts of assets
and liabilities that are not readily apparent from other
sources. The estimates and associated assumptions
are based on historical experience and other factors
considered relevant. Actual results may diff er from these
estimates.
Signifi cant Estimates and Judgments in Applying
Accounting Policies
The following are estimates and judgments that the
management has made in the process of applying the
Company’s accounting policies and that have the most
significant effect on the amounts recognized in the
financial statements.
Signifi cant 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
simplifi ed approach permitted by IFRS 9, which requires
the expected lifetime losses (based on management’s
judgment 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 judgment 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.
Identifi cation of cash generating units for the purposes
of performing impairment test of assets is based on
management’s judgment of what constitutes the lowest
group of assets that can generate cash fl ows largely
independent of other assets.
Change in
Accounting Policies
20
19
INSCAPE 2022 ANNUAL REPORT
Determination to not recognize deferred tax assets is
based on management’s judgment of the ability of the
Company to achieve sufficient taxable income to use the
deferred tax assets.
COVID-19 Pandemic
The COVID-19 pandemic continued to disrupt global
health and the economy in 2022, albeit to a more tolerable
and more manageable extent. Even with improved
conditions and the easing of restrictions globally, the
volatility of the markets in which the Company operates
remains unpredictable. The Company continues to monitor
developments and key indicators, and mitigate risks
related to the COVID-19 pandemic and the impact on the
business operations, supply chain, and most importantly
the health and safety of its employees.
As an evolving risk, the duration and full financial impact of
the COVID-19 pandemic and the timing of the Company’s
return to pre-pandemic levels of operations is unknown at
this time. Any estimate of the length and severity of these
developments is therefore subject to significant uncertainty,
and accordingly affect the Company’s operations, financial
results and condition in future periods.
Therefore, the amounts recorded in these consolidated
financial statements are based on the latest reliable
information available to management at the time the
consolidated financial statements were prepared, reflecting
the information and conditions to date. However, given
the level of uncertainty caused by COVID-19, these
assumptions and estimates could result in outcomes that
could require a material adjustment to the carrying amount
of the affected asset or liability in the future.
Assets Held for Sale
The Company’s accounting policies relating to assets
held for sale are described above. In applying this policy,
judgment is required in determining whether sale of certain
assets is highly probable, which is a necessary condition
for being presented within assets held for sale.
Government Assistance
Government assistance, including the Canada Emergency
Wage Subsidy (“CEWS”) and the Canada Emergency Rent
Subsidy (“CERS”), are recorded in the consolidated financial
statements as described above, significant accounting
policies. In applying this policy, judgment is required in
determining whether government grants will be received and
that the Company will comply with conditions attached.
Going Concern
Significant judgments exercised in applying accounting
policies that have the most significant effect on the
amounts recognized in the financial statements include
the assessment of the Company’s ability to continue as a
going concern.
The Company uses a forecasted cash flow to assess
the Company’s ability to continue as a going concern.
Significant judgment is required to forecast the amount of
new sales orders and total revenue and the timing of the
related cash flows.
Significant Estimates
Estimated useful lives and residual values of intangible
assets, property, plant and equipment are based on
management’s experience, the intended usage of the
assets and the expected technological advancement that
may affect the life cycle and residual values of the assets.
Defined benefit pension obligations are based on
management’s best estimates on the long-term
investment return on pension fund assets, the discount
rate of obligations, mortality and the future rate of salary
increases.
Liability for the Company’s performance share units and
restricted share units is based on the Company’s financial
performance during the vesting period of the share units.
Determination of the company’s fair value of the principal
assets of each CGU less the costs to sell the assets is
used to perform an impairment test of the assets.
New Accounting Standards
Adopted
(a) New standards, interpretations and amendments
adopted by the Company
There were no new standards, interpretations or
amendments that had a material impact on the Company’s
consolidated financial statements. The Company has not
early adopted any standard, interpretation or amendment
that has been issued but is not yet effective.
(b) Standards issued but not yet effective
There are no new standards issued but not yet effective
as of April 30, 2022 that have a material impact on the
Company’s consolidated financial statements.
Financial Instruments and
Risk Management
The Company’s activities expose it primarily to the financial
risks of changes in the US dollar exchange rates. The
Company uses derivative financial instruments to hedge
the exchange rate risk arising on 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
trade financial instruments, including derivative financial
instruments, for speculative purposes.
As of April 30, 2022, the Company had outstanding US
dollar hedge contracts with settlement dates from May
2022 to December 2022. The total notional amounts
under the contracts are US$8.5 million to $13.6 million
(2021 - $14.0 million to $22.1 million). Dependent on the
spot CAD/US rate on each settlement date, the Company
can sell US dollars at rates ranging from $1.22 CAD/US
to $1.34 CAD/US (2021 - $1.27 CAD/US to $1.35 CAD/
US). These contracts had a mark-to-market unrealized loss
of $107 thousand (US$84 thousand) as of April 30, 2022
(2021 – unrealized gain of $0.6 million or US$0.5 million),
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 dollar
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 for the year. There were realized gains
of $0.3 million on the settlement of contracts during fiscal
year 2022 (2021 – gains $0.1 million).
Risk Factors
The following risks and uncertainties may adversely affect
the Company’s business, operating results, cash flows
and financial condition. These may not be the Company’s
only risks and uncertainties. Other unknown or currently
insignificant risks and uncertainties not discussed below
can have an adverse impact on the Company’s business
and financial performance.
Natural Disasters
Extraordinary weather conditions, or natural disasters,
such as hurricanes, tornadoes, floods, droughts, tsunamis,
typhoons, and earthquakes and pandemics could disrupt
operations at our facilities or those of our suppliers and
customers and increase our cost of sales and other
operating expenses.
General Economic and Market Conditions
Demand for office furniture is sensitive to general
economic conditions such as the white-collar employment
rate, corporate growth and profitability, government
spending, office relocations and commercial property
development. The Company manages to moderate the
impact of this risk by increasing the differentiation of
our products to attract new customers, launching new
products to gain market share and enhancing the
coverage of customers and designers.
Competitive Environment
Office furniture is a mature and highly competitive industry.
Our main competitors include global companies with
strong brand recognition and the capability to utilize
offshore outsourcing. This competitive environment
results in price pressure and limits certain distributors’
ability to carry Inscape’s products along with those of
the competitors. The Company competes on product
design, functionality, innovation and customer service. Our
success will depend on building a distribution network
that is aligned with Inscape, targeting committed dealers
who lead with Inscape’s product lines and automating
processes to keep improving our productivity, quality and
customer service.
Raw Material and Commodity Costs
Fluctuations in raw material and commodity prices could
have a significant impact on the Company’s cost of sales
and operating results. Since most of the raw materials
and commodities used by the Company are not unique to
the office furniture industry, their costs are often affected
by supply and demand in other industries and countries.
As a result, the Company may experience rising raw
material and commodity costs that are not recoverable
from customers in a highly competitive environment.
The Company manages its manufacturing costs by
locking in supply contract prices, improving production
yields, reducing spoilage, focusing on quality control and
overseas sourcing, where appropriate.
US Dollar Exchange Rate
The US is the main market for the Company.
Fluctuations in the US/Canadian dollar exchange rate
have a significant impact on the operating results,
cash flows and financial condition of the Company.
22
21
INSCAPE 2022 ANNUAL REPORT
The Company uses US dollar hedge instruments as
one measure to manage its foreign currency exposure.
The hedge instruments provide the Company with an
opportunity to lock in the US currency conversion rate at
a prevailing hedge rate to facilitate the business planning
process with pre-determined exchange rate exposure.
However, the instruments do not completely remove
the effects of exchange rate fluctuations. To minimize
the effect of exchange rate fluctuations, the Company
endeavors to create natural hedges through increasing
US suppliers where appropriate and seeks to increase
Canadian dollar sales.
Access to the US Markets
The Company depends heavily on unrestricted access to
the US markets as a significant portion of the Company’s
sales is derived from there. The Company’s business,
operating results, cash flows and financial condition will
be seriously affected if access to US markets is restricted
due to political, social, economic, or regulatory reasons.
Buy America sentiment and regulations may deny the
Company’s chance in bidding contracts, especially US
government contracts. The Company continues to closely
monitor developments in various US statutes, regulations,
procurement requirements and border crossing
restrictions. Where appropriate, the Company publicizes
its extensive investment in the US and contribution to the
economy by operating a production plant in New York
State, providing employment opportunities in different
states and purchasing from US suppliers.
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 the Company or the
effectiveness of a market representative may decline.
Disruption of the relationship or transition of an
underperforming representative could have an adverse
impact on our business in the affected market. The
Company manages this risk by maintaining strong
connections to performing representatives at the regional
senior management level. The Company also assesses
the effectiveness of the representatives on a regular basis.
Effectiveness of Growth Strategy Implementation
The Company seeks to grow its business and market
share by building committed distribution, developing
products and applications to meet customer needs, and
providing visualization tools to assist designers and clients
with solutions for workspaces. Effective implementation
of these strategies is essential to the future growth of the
Company. The Company’s sales and results of operations
will be adversely affected if there are delays or difficulties in
carrying out these strategies.
Disclosure Controls and Procedures
The Chief Executive Officer and the Chief Financial Officer
(the “Certifying Officers”), along with other members of
management, have designed, or caused to be designed
under their supervision, Disclosure Controls and Procedures
(“DC&P”) to provide reasonable assurance that (i) material
information relating to the Company is made known to them
by others, particularly during the period in which the annual
filings are being prepared; and (ii) information required to be
disclosed by the Company in its annual filings, interim filings
or other reports filed or submitted by it under securities
legislation is recorded, processed, summarized and reported
within the time periods specified in securities legislation.
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, 2022, 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.
Limitations of an Internal Control System
The Certifying Officers believe that any DC&P or ICFR, no
matter how well designed and operated, can provide only
reasonable, not absolute, assurance that the objectives
of the control system are met and that all control issues,
including instances of fraud, if any, within the Company
have been prevented or detected. Further, the design of a
control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered
relative to their costs. The design of any system of controls
is also based in part upon certain assumptions about the
likelihood of future events, and there can be no assurance
that any design will succeed in achieving its stated goals
under all potential (future) conditions.
Controls & Procedures
24
23
INSCAPE 2022 ANNUAL REPORT
26
INSCAPE 2022 ANNUAL REPORT
25
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,
Jon Szczur
Director and Chief Executive Officer
Chief Financial Officer
July 14, 2022
Management
Report
28
INSCAPE 2022 ANNUAL REPORT
27
To the Shareholders and the
Board of Directors of Inscape Corporation
Opinion
We have audited the consolidated financial statements of
Inscape Corporation (the “Company”), which comprise the
consolidated statements of financial position as at April
30, 2022 and 2021, and the consolidated statements
of operations, comprehensive income (loss), changes in
shareholders’ equity and cash flows for the years then
ended, and notes to the consolidated financial statements,
including a summary of significant accounting policies
(collectively referred to as the “financial statements”).
In our opinion, the accompanying financial statements
present fairly, in all material respects, the financial position
of the Company as at April 30, 2022 and 2021, 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.
Key Audit Matter
A key audit matter is a matter that, in our professional
judgment, was of most significance in our audit of the
consolidated financial statements for the year ended April
30, 2022. This matter was addressed in the context of our
audit of the consolidated financial statements as a whole,
and in forming our opinion thereon, and we do not provide
a separate opinion on this matter.
Impairment of long-lived financial assets – Refer to
Note 2 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 was
determined using the present value of the estimated
future cash flows associated with the Furniture CGU. This
required management to make significant judgments and
assumptions related to the forecasted revenues and the
discount rate. The recoverable amount of the Furniture
CGU exceeded its carrying value and no impairment loss
was recognized.
Given the significant judgments made by management
to estimate the recoverable amount of the Furniture
CGU, performing audit procedures to evaluate the
reasonableness of the estimates and assumptions related
to the forecasted revenues and the discount rate required
a high degree of auditor judgment and an increased extent
of audit effort, including the involvement of fair value
specialists.
How the Key Audit Matter was Addressed in the Audit
Our audit procedures related to the forecasted revenues
and the discount rate used by management to estimate
the recoverable amount of the Furniture CGU included the
following, among others:
• Evaluated management’s ability to accurately forecast
revenues by comparing actual results to management’s
historical forecasts.
• Evaluated the reasonableness of management’s
forecasted revenues by comparing the forecast to:
•
Historical revenue levels and growth rates previously
achieved by the Company
•
Internal communications to management and the
Board of Directors
•
Forecasted information included in industry reports for
the Company and certain of its peer companies.
• With the assistance of our fair value specialists,
evaluated the reasonableness of the discount rate
by testing the source information underlying the
determination of the discount rate and developing a
range of independent estimates and comparing those
to the discount rate selected by management.
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.
Our opinion on the financial statements does not
cover the other information and we do not and will not
express any form of assurance conclusion thereon. In
connection with our audit of the financial statements, our
responsibility is to read the other information identified
above and, in doing so, consider whether the other
information is materially inconsistent with the financial
statements or our knowledge obtained in the audit, or
otherwise appears to be materially misstated.
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
conclude that there is a material misstatement of this
other information, we are required to report that fact in this
auditor’s report. We have nothing to report in this regard.
The Annual Report is expected to be made available to us
after the date of the auditor’s report. If, based on the work
we will perform on this other information, we conclude that
there is a material misstatement of this other information,
we are required to report that fact to those charged with
governance.
Responsibilities of Management and Those Charged
with Governance for the Financial Statements
Management is responsible for the preparation and fair
presentation of the financial statements in accordance
with IFRS, and for such internal control as management
determines is necessary to enable the preparation
of financial statements that are free from material
misstatement, whether due to fraud or error.
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.
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
material misstatement, whether due to fraud or error,
and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is
not a guarantee that an audit conducted in accordance
with Canadian GAAS will always detect a material
misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually
30
29
INSCAPE 2022 ANNUAL REPORT
Independent
Auditor’s Report
or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the
basis of these financial statements.
As part of an audit in accordance with Canadian GAAS,
we exercise professional judgment and maintain
professional skepticism throughout the audit. We also:
• 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 the override of internal control.
• 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.
• Conclude on the appropriateness of management’s
use 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 auditor’s report
to the related disclosures in the financial statements
or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit
evidence obtained up to the date of our auditor’s
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.
We communicate with those charged with governance
regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including
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.
From the matters communicated with those charged with
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
interest benefits of such communication.
The engagement partner on the audit resulting in this
independent auditor’s report is Kristi Gilder.
Chartered Professional Accountants
Licensed Public Accountants
Toronto, Ontario
July 14, 2022
Consolidated Statements of Operations
For the years ended April 30,
(in thousands of Canadian dollars)
NOTE
2022
2021
SALES
21.1
$
38,741
$
38,203
COST OF GOODS SOLD
21
32,734
31,269
GROSS PROFIT
6,007
6,934
EXPENSES
Selling, general and administrative
21
20,857
20,536
Gain on foreign exchange
(20)
(377)
Other income
23
(1,979)
(5,308)
Loss (gain) on derivatives
10.2
713
(3,997)
Gain on disposal of property, plant and equipment
6.1
(14,609)
(209)
Interest expense
1,811
6
6,773
10,651
Loss before taxes
$
(766)
$
(3,717)
Income tax expense (recovery)
15.1
73
(2,826)
NET LOSS
$
(839)
$
(891)
Net loss per share available to shareholders
Basic
19
$
(0.06)
$
(0.06)
Diluted
$
(0.06)
$
(0.06)
Consolidated
Financial Statements
The accompanying notes are an integral part of these consolidated financial statements
32
31
INSCAPE 2022 ANNUAL REPORT
The accompanying notes are an integral part of these consolidated financial statements
Consolidated Statements of Comprehensive Income (Loss)
For the years ended April 30,
(in thousands of Canadian dollars)
NOTE
2022
2021
NET LOSS
$
(839)
$
(891)
OTHER COMPREHENSIVE INCOME
Items that may not be reclassified to earnings
Remeasurement of defined benefit pension liabilities
14.2
1,539
6,466
Tax relating to remeasurement of retirement benefit obligations
15.2
(446)
(275)
Items that may be reclassified to earnings
Exchange gain (loss) on translating foreign operations
86
(141)
Other comprehensive income (loss)
1,179
6,050
TOTAL COMPREHENSIVE INCOME
$
340
$
5,159
Consolidated Statements of Financial Position
As at April 30,
(in thousands of Canadian dollars)
ASSETS
NOTE
2022
2021
Current assets
Cash and cash equivalents
2
$
8,284
$
3,736
Restricted cash
2
3,200
2,764
Trade and other receivables
4
11,778
5,887
Inventories
5
4,926
3,497
Note receivable
11
40
36
Assets held for sale
6
-
5,241
Prepaid expenses and other assets
469
543
Derivative financial assets
10.2
-
587
28,697
22,291
Non-current assets
Property, plant and equipment
6
5,660
5,479
Intangible assets
7
826
1,287
Right-of-use assets
8.1
13,579
10,050
Other assets
9
2,700
-
Derivative financial assets
10.2
-
19
Note receivable
11
237
266
Retirement benefit assets
14.2
1,350
-
Deferred tax assets
15.2
2,581
2,580
26,933
19,681
TOTAL ASSETS
$
55,630
$
41,972
LIABILITIES
Current liabilities
Trade and other payables
12
$
10,794
$
8,044
Lease liabilities
8.2
2,158
717
Derivative financial liabilities
10.2
107
-
Revolving credit facility
22
-
7,858
Forgivable government loan
23
-
219
Income taxes payable
521
-
Provisions
13
80
226
13,660
17,064
Non-current liabilities
Retirement benefit obligation
14.2
654
1,083
Lease liabilities
8.2
26,653
9,342
Provisions
13
322
483
Other long-term obligations
16
165
164
27,794
11,072
TOTAL LIABILITIES
$
41,454
$
28,136
SHAREHOLDERS’ EQUITY
Shareholders’ capital
17
$
52,868
$
52,868
Contributed surplus
2,675
2,675
Accumulated other comprehensive income (loss)
3,641
2,462
Deficit
(45,008)
(44,169)
TOTAL SHAREHOLDERS’ EQUITY
14,176
13,836
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
$
55,630
$
41,972
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
34
33
INSCAPE 2022 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 (LOSS)
DEFICIT
TOTAL
SHAREHOLDERS’
EQUITY
Balance, April 30, 2020
$
52,868
$
2,675
$
(4,984)
$
1,396
$ (43,278)
$
8,677
Net loss
-
-
-
-
(891)
(891)
Other comprehensive
income (loss)
-
-
6,191
(141)
-
6,050
Balance, April 30, 2021
$
52,868
$
2,675
$
1,207
$
1,255
$ (44,169)
$
13,836
Net loss
-
-
-
-
(839)
(839)
Other comprehensive
income
-
-
1,093
86
-
1,179
Balance, April 30, 2022
$
52,868
$
2,675
$
2,300
$
1,341
$ (45,008)
$
14,176
The accompanying notes are an integral part of these consolidated financial statements
Consolidated Statements of Cash Flows
For the years ended April 30,
(in thousands of Canadian dollars)
NOTE 2022 2021
Net inflow (outflow) of cash related to the following activities:
OPERATING
Net loss
$
(839)
$
(891)
Items not affecting cash
Amortization and depreciation
6,7 & 8.1
2,863
3,935
Deferred income tax recovery
15.2
(1)
(2,580)
Interest expense
1,967
293
Unrealized loss (gain) on derivatives
10.2
713
(3,997)
Share-based compensation
28
76
Gain on foreign exchange
(20)
(322)
Non-cash portion of other income
23
(256)
(2,688)
Gain on disposal of property, plant and equipment
6 & 7
(14,609)
(268)
Retirement benefit obligation expense net of employer contributions
(261)
223
Cash used in operating activities before non-cash working capital
(10,415)
(6,219)
Movements in non-cash working capital
Trade and other receivables
(5,755)
3,930
Inventories
(1,374)
2,103
Prepaid expenses and other assets
(2,613)
106
Assets held for sale
(10)
-
Trade and other payables
2,727
(3,604)
Provisions
(321)
(463)
Income tax receivables and payables
519
-
Changes in non-cash operating items
(6,827)
2,072
Interest payment on lease liabilities and loan
8.2
(1,529)
(293)
Restricted shares and stock options settled
(26)
(36)
Cash used in operating activities
(18,797)
(4,476)
INVESTING
Note receivable - issued
11
-
(302)
Additions to property, plant and equipment
6
(1,186)
(2,540)
Additions to intangible assets
7
(25)
-
Proceeds from disposal of property, plant and equipment
6.1
33,836
253
Proceeds from note receivable
9
36
-
Cash generated from (used in) investing activities
32,661
(2,589)
FINANCING
Proceeds from revolving credit facility
22
6,925
8,005
Payment on revolving credit facility
22
(15,031)
-
Proceeds from forgivable government loan
23
(27)
1,708
Principal portion of lease liabilities
8.2
(729)
(1,615)
Financing fees
22
-
(131)
Cash (used in) generated from financing activities
(8,862)
7,967
Unrealized foreign exchange gain on cash
(18)
(287)
Net cash inflow (outflow)
4,984
615
Cash, cash equivalents and restricted cash, beginning of year
6,500
5,885
Cash, cash equivalents and restricted cash, end of year
$ 11,484
$ 6,500
The accompanying notes are an integral part of these consolidated financial statements
36
35
INSCAPE 2022 ANNUAL REPORT
(in thousands of Canadian dollars, except where indicated and 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, an approximately 313,000
square feet plant in Holland Landing, and a 30,000 square
feet plant in Jamestown, New York, USA. The Company
serves its clients through a network of dealers and
representatives supported by showrooms across
North America.
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”) effective for the year
ended April 30, 2022.
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 14, 2022.
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. Our US operation, Walls, uses the
US dollar as its functional currency.
Notes to the
Consolidated
Financial Statements
38
37
INSCAPE 2022 ANNUAL REPORT
Basis of consolidation
The consolidated financial statements include the accounts
of the Company and its two wholly owned US subsidiaries,
Inscape Inc. and Inscape (New York) Inc. Subsidiaries
are consolidated from the date of acquisition and control
and continue to be consolidated until the date that such
control ceases. The Company controls an entity when the
Company is exposed or has rights to variable returns from
its involvement with the investee and has the ability to
affect these returns through the Company’s power over the
investee. All intra-group transactions, balances, income
and expenses are eliminated in full on consolidation.
Basis of measurement
The consolidated financial statements have been prepared
on the historical cost basis, except for the following
significant items:
• derivative instruments are measured at fair value;
• defined benefit plan assets and liabilities are recognized at
the present value of the defined benefit obligation, less the
fair value of plan assets.
Revenue recognition
Sale of manufactured goods
The Company’s revenue is generated from sales and
installation of manufactured goods to customers through
a dealer network. For manufactured goods, revenue is
recognized at a point in time when the goods are shipped.
Revenue is recognized at a point in time when control of
the assets passes to the customer; the Company’s terms
and condition state that control of the assets transfers at
shipping point. This is where the customer gains control of
the asset.
Revenue from installation is recognized over time on a
percentage of completion based on physical stage of
completion of the contract. This output method is the best
measure of progress as the nature of the products installed
enable measurement to be reliably observed.
The Company invoices the customer as the installation
occurs. The payments are received as per normal payment
terms established with the customer.
Revenue from the sale of manufactured goods and
installation is measured at fair value of the consideration
received less applicable sales taxes, discounts, rebates
and dealer incentives. Sales-related warranties associated
with the sales and installation of manufactured goods
cannot be purchased separately and they serve as an
assurance that the products sold comply with agreed-upon
specifications. These assurance warranties are not distinct
and does not represent a separate performance obligation
for IFRS 15 purposes. Hence, the Company accounts for
warranties in accordance with IAS 37 (see Note 13).
Dealer incentives
The Company offers a variety of incentives to its dealer
base to support sales initiatives. An obligation arises from
the incentives when the Company sells manufactured
goods and/or installations through the dealer network. The
obligation is measured at fair value of the incentive earned.
The dealer incentives are recorded as a reduction to revenue
in the Consolidated Statement of Operations.
Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, bank
balances and short-term GIC investments, available on
demand. As at April 30, 2022, the Company had bank
balances of $3,273 and short-term investments, available
on demand, of $5,011.
Restricted cash
Restricted cash is cash where specific restrictions exist on
the Company’s ability to use this cash.
Restricted cash consists of cash held by the Company
on deposit with its bank, as collateral security for certain
derivative financial instruments and supporting letter of
credit issued in relation to certain lease contracts.
Assets classified as held for sale
Non-current assets are classified as assets held for sale
when their carrying amount is to be recovered principally
through a sale transaction rather than through continuing
use. This condition is regarded as met only when the
sale is highly probable and the assets are available for
immediate sale in their present condition. Management
must also be committed to a plan to sell the assets
within one year from the date of classification. Assets
classified as held for sale are measured at the lower of the
carrying amount or fair value less costs to sell and are not
depreciated from the date of classification.
Sale and Leaseback
For sale and leaseback transactions, the Company
applies the requirements of IFRS 15 Revenue to determine
whether the transfer of the asset should be accounted for
as a sale and is generally considered as such if there is
no repurchase option on the asset at the end of the lease
term. If the transfer of the asset is a sale, the Corporation
de-recognizes the underlying asset and recognizes a
right-of-use asset arising from the leaseback equal to
the retained portion of the previous carrying amount of
the sold asset. The residual is recognized through the
statement of operations as a gain on disposal of property,
plant and equipment & intangibles assets.
Leases
The Company assesses whether a contract is or contains a
lease, at inception of a contract. The Company recognizes
a right-of-use asset (“ROU”) and a corresponding lease
liability with respect to all lease arrangements in which it is
the lessee, at the commencement of the lease.
The ROU asset is initially measured at cost, which
comprises the initial amount of the lease liability
adjusted for any lease payments made at or before the
commencement date, plus any initial direct costs incurred
and an estimate of costs to dismantle and remove the
underlying asset or to restore the underlying asset or the
site on which it is located, less any incentives received.
They are subsequently measured at cost less accumulated
depreciation and impairment losses.
The ROU asset is depreciated on a straight-line basis
over the shorter of the lease term or the useful life of the
underlying asset.
The ROU asset is subject to testing for impairment if there
is an indicator of impairment.
The lease liability is initially measured at the present value
of outstanding lease payments at the commencement
date, discounted by using the rate implicit in the lease.
If this rate cannot be readily determined, the Company
uses its incremental borrowing rate. The Company’s
incremental borrowing rate for a lease is the rate that the
Company would pay to borrow an amount necessary to
obtain an asset of a similar value to the right-of-use asset
on a collateralized basis over a similar term. The lease
liability is subsequently measured at amortized cost using
the effective interest method. It is remeasured if there is a
change in future lease payments arising from a change in
an index or rate
Lease payments include fixed payments less any lease
incentives and any variable lease payments where
variability depends on an index or rate. Management
exercises judgment in the process of applying IFRS 16
and determining the appropriate lease term on a lease by
lease basis. Management considers many factors including
any events that create an economic incentive to exercise
a renewal option including performance, expected future
performance and past business practice. Renewal options
are only included if Management is reasonably certain
that the option will be renewed. Variable lease payments
that do not depend on an index or rate are not included
in the measurement of the ROU asset and lease liability.
The related payments are recognized as an expense in
the period in which the triggering event occurs and are
included in the consolidated statements of operations and
comprehensive income (loss).
Foreign currencies
Transactions in foreign currencies are recognized at
the average exchange rate for the month in which the
transactions occurred, unless exchange rates fluctuated
significantly during that period or for non-recurring
transactions of material amounts, in which case the
exchange rates at the dates of the transactions are used.
At the end of each reporting period, monetary items
denominated in foreign currencies are retranslated at the
rates prevailing at that date. Non-monetary items carried
at fair value that are denominated in foreign currencies are
retranslated at the rates prevailing at the date when the
fair value was determined. Non-monetary items that are
measured in terms of historical cost in a foreign currency
are not retranslated. Exchange differences are recognized
in the statement of operations in the period in which
they arise.
40
39
INSCAPE 2022 ANNUAL REPORT
For the Company’s foreign operation where the Canadian
dollar is its functional currency, the same policy described
above is applied to the translation of its assets and
liabilities for the purpose of presenting consolidated
financial statements.
For the Company’s foreign operation where the US
dollar is its functional currency, the assets and liabilities
of the foreign operation for the purpose of presenting
consolidated financial statements are expressed in
Canadian dollars using exchange rates prevailing at the
end of the reporting period. Revenues and expenses are
translated into Canadian dollars at the average exchange
rate for the month in which the transactions occurred,
unless exchange rates fluctuated significantly during
that period or for non-recurring transactions of material
amounts, in which case the exchange rates at the dates
of the transactions are used. Exchange differences arising,
if any, are recognized in other comprehensive income or
loss and accumulated in equity until the disposal of the
foreign operation, when all of the accumulated exchange
differences in respect of that operation are reclassified to
profit or loss.
Employee future benefits
Contributions to defined contribution retirement benefit
plans are recognized as an expense when employees have
rendered service entitling them to the contributions.
For defined benefit retirement benefit plans, the cost of
providing benefits is determined using the Projected Unit
Credit Method. Actuarial gains or losses arise from the
difference between the effective yield of plan assets for
a period and the expected yield on plan assets for the
period, from changes in actuarial assumptions used to
determine defined benefit obligations and from emerging
experience that differs from the selected assumptions.
Actuarial gains and losses and related taxes are
recognized in other comprehensive income or loss as
remeasurement of defined benefit liabilities in the period in
which they occur.
The retirement benefit obligation recognized in the
statements of financial position represents the present
value of the defined benefit obligation as reduced by the
fair value of plan assets. Any asset resulting from this
calculation is limited to the present value of available
refunds and reductions in future contributions to the
plan. The determination of a benefit expense requires
assumptions such as the discount rate to measure
obligations and the expected return on asset, the
expected mortality rate and the expected rate of future
compensation increases.
The present value of the defined benefit obligation is
determined by discounting the estimated future cash
outflows using interest rates of high-quality corporate
bonds and that have terms to maturity approximating the
terms of the related pension liability.
For the purposes of calculating the estimated rate of return
on plan assets, assets are measured at fair value.
Actuarial gains or losses arise from the difference between
the effective yield of plan assets for a period and the
expected yield on plan assets for the period, from changes
in actuarial assumptions used to determine defined benefit
obligations and from emerging experience that differs from
the selected assumptions. Actuarial gains or losses are
recognized under other comprehensive income (loss) in the
period in which they occur.
Net interest is recognized in consolidated statements of
loss and comprehensive loss calculated using the discount
rate by reference to market yields at the valuation date and
when plan assets and obligations are measured.
Net defined benefit liability is determined based on the
excess of plan obligations over plan assets.
Share-based compensation
For share-based compensation arrangements in which
the term of the arrangement provides the employees
and others providing similar services with the choice
of settlement by equity instruments or in cash, the
transaction is accounted for as a cash-settled share-
based payment transaction.
For cash-settled share-based compensation, a liability is
recognized for the goods or services acquired, measured
initially at the fair value of the liability. The liability is
subsequently measured at fair value using mark to market
accounting. Under the stock option plan, the fair value is
determined by using the Black-Scholes-Merton Option
Pricing Model, which factors in the Company’s estimate
of the number of options that will eventually vest. Under
the executives’ cash settled long-term incentive plan and
the cash settled deferred share unit plan, the fair value
is based on the share price at the end of the reporting
period as well as the Company’s estimate of the number
of shares that will eventually vest.
At the end of each reporting period until the liability is
settled, and at the date of settlement, the fair value of
the liability is remeasured, with any changes in fair value
recognized in profit or loss for the year.
Taxation
Income tax expense represents the sum of the tax
currently payable and deferred tax.
Current tax
Current tax is based on taxable profit for the year. Taxable
profit differs from profit as reported in the consolidated
statements of operations due to items of income or
expense that are taxable or deductible in other years and
items that are never taxable or deductible. The Company’s
liability for current tax is calculated using tax rates that
have been enacted or substantively enacted by the end of
the reporting period.
Current income tax relating to items recognized directly in
equity is recognized in equity and not in the consolidated
statements of operations. Management periodically
evaluates positions taken in the tax returns with respect to
situations in which applicable tax regulations are subject to
interpretation and establishes provisions where appropriate
in accordance with IFRIC 23 Uncertainty over Income Tax
Treatments.
Deferred tax
Deferred tax is recognized on temporary differences
between the carrying amounts of assets and liabilities in
the financial statements and the corresponding tax bases
used in the computation of taxable profit. Deferred tax
liabilities are generally recognized for all taxable temporary
differences. Deferred tax assets are generally recognized
for all deductible temporary differences to the extent that
it is probable that taxable profits will be available against
which those deductible temporary differences can be
utilized. The carrying amount of deferred tax assets is
reviewed at the end of each reporting period and reduced
to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the
asset to be recovered.
Deferred tax assets and liabilities are measured at the tax
rates that are expected to apply in the period in which the
liability is settled or the asset realized, based on tax rates
(and tax laws) that have been enacted or substantively
enacted by the end of the reporting period.
Government grants
Government grants are recognized when there is
reasonable assurance that the Company will comply with
any conditions attached to the grants and the grants will
be received. Government grants are recognized in other
income on a systematic basis over the periods in which the
Company incurs expenses for the related costs for which
the grants are intended to compensate.
When a government loan is issued to the Company at a
below-market rate of interest, the loan is initially recorded
at its net present value and accreted to its face value over
the period of the loan. The benefit of the below-market
rate of interest is accounted for as a government grant. It
is measured as the difference between the initial carrying
value of the loan and the cash proceeds received.
Research and development costs
Research costs, including costs for new patents and
patent applications, are expensed in the period in which
they are incurred. Development costs are expensed in the
period in which they are incurred unless certain criteria in
IAS 38, including technical feasibility, commercial feasibility,
intent and ability to develop and use the technology, are
met for deferral and amortization.
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.
42
41
INSCAPE 2022 ANNUAL REPORT
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:
Asset category
Useful lives
Depreciation method
Land
Nil
Nil
Building / Roof
25 – 40 years
Straight line
Leasehold improvements
The lower of the estimated useful life
Straight line
and the term of the lease
Machinery and equipment
5 – 20 years
Straight line
Tools, dies and jigs
3 years
Straight line
Office furniture and equipment
2 – 10 years
Straight line
Intangible assets
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:
Asset category
Useful lives
Amortization method
Licensed products
3 – 5 years
Straight line
Computer software
3 – 5 years
Straight line
Intellectual property
10 years
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.
Recoverable amount is the higher of fair value less costs
to sell and value in use, which is the present value of the
estimated future cash flows from the use of the asset (or
cash-generating unit).
The discount rates used in the present value calculation
are the pre-tax rates that reflect current market
assessments of the time value of money and the risks
specific to the asset.
If the recoverable amount is estimated to be less than the
carrying amount of the asset (or cash-generating unit), the
carrying amount is reduced to its recoverable amount. An
impairment loss is recognized immediately in profit or loss.
At the end of each reporting period, the Company reviews
whether there is any indication that an impairment loss
recognized in prior periods for an asset other than goodwill
(or cash-generating unit) may no longer exist or may have
decreased. If any such indication exists, the recoverable
amount of the asset (or cash-generating unit) is estimated
in order to determine whether the impairment loss should
be reversed. Where an impairment loss subsequently
reverses, the carrying amount of the asset (or cash-
generating unit) is increased to the revised estimate of its
recoverable amount, but so that the increased carrying
amount does not exceed the carrying amount that would
have been determined had no impairment loss been
recognized for the asset (or cash-generating unit) in prior
years. A reversal of an impairment loss is recognized
immediately in profit or loss.
Inventories
Raw materials are measured at the lower of cost and
net realizable value, determined on a first-in, first-out
basis. Recoverable costs of raw materials that have no
consumption over a period of eighteen months may be
written down based on the Company’s assessment of
their future usage. When circumstances that previously
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.
Net realizable value is the estimated selling price in the
ordinary course of business less the estimated costs
necessary to make the sale. The cost of work-in-progress
and finished goods includes the cost of raw materials,
and the applicable share of the cost of labour, fixed and
variable production overheads.
Provisions
Provisions are recognized when the Company has a
present obligation (legal or constructive) as a result of a
past event, it is probable that the Company will be required
to settle the obligation, and a reliable estimate can be
made of the amount of the obligation.
The amount recognized as a provision is the best estimate
of the consideration required to settle the present
obligation at the end of the reporting period, taking into
account the risks and uncertainties surrounding the
obligation. Where a provision is measured using the cash
flows estimated to settle the present obligation, its carrying
amount is the present value of those cash flows.
44
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INSCAPE 2022 ANNUAL REPORT
Financial assets
Financial assets consist of cash and cash equivalents, restricted cash, trade and other receivables, note receivable and
derivative financial assets. These financial assets are initially measured at fair value plus transaction costs. They are
subsequently measured at amortized cost, except derivatives financial assets, as discussed below.
Amortized cost is determined using the effective interest rate method, factoring in acquisition costs paid to third parties,
and loss allowance. The effective interest rate is the rate that exactly discounts the estimated future cash receipts through
the expected life of the financial asset to the carrying amount. When calculating the effective interest rate, the Company
estimates future cash flows considering all contractual terms of the financial instrument.
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. These derivatives have been classified as fair value through profit or loss.
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:
Asset/ Liability
Classification under IFRS 9
Cash and cash equivalents
Amortized cost
Restricted cash
Amortized cost
Trade and other receivables
Amortized cost
Note receivable
Amortized cost
Trade and other payables
Amortized cost
Revolving credit facility
Amortized cost
Derivative assets and liabilities
FVTPL
Derivative financial instruments
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.
A derivative with a positive fair value is recognized as a
financial asset; a derivative with a negative fair value is
recognized as a financial liability. A derivative is presented
as a non-current asset or a non-current liability if the
remaining maturity of the instrument is more than 12
months and it is not expected to be realized or settled
within 12 months. Other derivatives are presented as
current assets or current liabilities.
Non-performance risk, including the Company’s own
credit risk, is considered when determining the fair value of
financial instruments.
Share capital
Common shares issued by the Company are recorded in the
amount of the proceeds received, net of direct issue costs.
SIGNIFICANT ACCOUNTING JUDGMENTS,
ESTIMATES AND ASSUMPTIONS
The application of the Company’s accounting policies
requires management to use estimates and judgments that
can have a significant effect on the revenues, expenses,
comprehensive income, assets and liabilities recognized
and disclosures made in the consolidated financial
statements. The estimates and associated assumptions
are based on historical experience and other factors that
are considered to be relevant. Actual results may differ
from these estimates materially.
Significant estimates and judgments
in applying accounting policies
The following are estimates and judgments that the
management has made in the process of applying the
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
judgment 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 judgment 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, an output method. The project manager enables
the Company to track the progress toward completion
of the contract by measuring outputs to date relative to
total estimated outputs needed to satisfy the performance
obligation.
Identification of cash generating units for the purposes
of performing impairment test of assets is based on
management’s judgment of what constitutes the lowest
group of assets that can generate cash flows largely
independent of other assets.
Determination to not recognize deferred tax assets is
based on management’s judgment of the ability of the
Company to achieve sufficient taxable income to use
the deferred tax assets.
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INSCAPE 2022 ANNUAL REPORT
COVID-19 Pandemic
The COVID-19 pandemic has continued to disrupt global
health and the economy in 2022 and has created an
indeterminate period of volatility in the markets in which the
Company operates. The Company continues to monitor
developments and mitigate risks related to the COVID-19
pandemic and the impact on the business operations,
supply chain, and most importantly the health and safety
of its employees.
As an evolving risk, the duration and full financial effect
of the COVID-19 pandemic is unknown at this time. Any
estimate of the length and severity of these developments
is therefore subject to significant uncertainty, and
accordingly affect the Company’s operations, financial
results and condition in future periods. Therefore,
the amounts recorded in these consolidated financial
statements are based on the latest reliable information
available to management at the time the consolidated
financial statements were prepared, reflecting the
information and conditions to date. However, given
the level of uncertainty caused by COVID-19, these
assumptions and estimates could result in outcomes
that could require a material adjustment to revenue and
expenses, and the carrying amount of the affected asset or
liability in the future.
Asset held for sale
The Company’s accounting policies relating to assets
held for sale are described above. In applying this policy,
judgment is required in determining whether sale of certain
assets is highly probable, which is a necessary condition
for being presented within assets held for sale.
Government assistance
Government assistance, including the Canada Emergency
Wage Subsidy (“CEWS”) and the Canada Emergency
Rent Subsidy (“CERS”), are recorded in the consolidated
financial statements as described above, significant
accounting policies. In applying this policy, judgment is
required in determining whether government grants will be
received and that the Company will comply with conditions
attached.
Going concern
Significant judgments exercised in applying accounting
policies that have the most significant effect on the
amounts recognized in the financial statements include
the assessment of the Company’s ability to continue as a
going concern.
The Company uses a forecasted cash flow to assess
the Company’s ability to continue as a going concern.
Significant judgment is required to forecast the amount of
new sales orders and total revenue and the timing of the
related cash flows.
Significant estimates
Estimated useful lives and residual values of intangible
assets, property, plant and equipment are based on
management’s experience, the intended usage of the
assets and the expected technological advancement that
may affect the life cycle and residual values of the assets.
Defined benefit pension obligations are based on
management’s best estimates on the long-term investment
return on pension fund assets, the discount rate of
obligations, mortality and the future rate of salary increase.
Liability for the Company’s performance and restricted
share units is based on management’s best estimate of the
Company’s financial performance during the vesting period
of the performance and restricted share units.
Determination of the company’s fair value of the principal
assets of each CGU less the costs to sell the assets is
used to perform an impairment test of the assets.
The calculation of recoverable amounts used in impairment
testing require significant estimates, which are reviewed
in detail as part of the budget and strategic plan process
during the fourth quarter of 2022. For purposes of
impairment testing, management exercises judgment
to identify independent cash inflows for the Walls and
Furniture CGUs. Management also make significant
judgment on the outcome of strategic decisions to improve
the profitability of the Company. Examples of events
or circumstances that could result in changes to the
underlying key assumptions and judgments used in the
impairment tests, and therefore impact the recoverable
amounts may included but are not limited to: the length,
duration and impact of COVID-19 on the economy,
including measures adopted by governmental or public
authorities in response to the pandemic; adverse macro
economic conditions; volatility in the equity and debt
markets which could result in higher discount rates;
and current and future competitive conditions and the
Company’s position in the competitive environment. The
outcome of these judgments may vary significantly and
affects the profitability of the CGUs.
The recoverable amounts of CGUs are based on fair
value less costs of disposal, which was determined using
present value of forecasted future cash flows. The fair value
measurements are categorized within Level 3 of the fair
value hierarchy since the inputs used in the discounted
cash flow model are Level 3 inputs (inputs that are not
based on observable market data). The estimated future
cash flows for the first five years are based on the budget
and strategic plan. After the initial five years, long-range
forecasts prepared by management are used using the
projected inflation rates in United States. Terminal growth
rate is determined at year 6.
Forecast future cash flows are based on management’s
best estimate of the expected annual sales, which
are based on management’s market forecasts and
the Company’s pre-pandemic sales levels. Other key
estimates used to determine the recoverable amount
include future sales under existing firm orders, expected
future orders, timing of payments based on expected
delivery schedules, procurement costs based on existing
contracts with suppliers, future labor costs, general market
conditions, foreign exchange rates, costs to complete
the re-engineering and right-sizing of the Holland Landing
plant and applicable long-range forecast income tax rates,
terminal growth rate and post-tax discount rate of 13.5%
based on a weighted average cost of capital calculated
using market-based inputs.
The application of IFRS 16 requires the use of estimates
that affect the measurement of right-of-use-assets and
lease liabilities, including the appropriate discount rate
used to measure lease liabilities. The Company discounts
lease payments at its incremental borrowing rate, which
is based on estimates of the risk-free interest rate, credit
spreads and lease terms. In addition, it assesses the
duration of the lease based on the terms of the contract
and the renewal options it has reasonable certainty to
exercise. A change in these assumptions could affect the
amounts recorded.
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INSCAPE 2022 ANNUAL REPORT
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INSCAPE 2022 ANNUAL REPORT
3. NEW ACCOUNTING STANDARDS ADOPTED
(a) New standards, interpretations and amendments adopted by the Company
There were no new standards, interpretations or amendments that had a material impact to the Company’s consolidated
financial statements. The Company has not early adopted any standard, interpretation or amendment that has been
issued but is not yet effective.
(b) Standards issued but not yet effective
There are no new standards issued but not yet effective as at January 1, 2022 that are expected to have a material impact
to the Company’s consolidated financial statements.
4. TRADE AND OTHER RECEIVABLES
As at
As at
APRIL 30, 2022
APRIL 30, 2021
Trade account receivables, gross
$
9,256
$
5,323
Allowance for expected credit losses
(9)
(45)
9,247
5,278
Other receivables
2,531
609
$
11,778
$
5,887
Included in other receivables was $1,624 related to the sale of surplus land at 70 Toll Road, Holland Landing, Ontario,
which was subsequently collected on May 2, 2022.
As at
As at
APRIL 30, 2022
APRIL 30, 2021
An aging analysis of trade receivables:
Current
$
3,611
$
2,394
1-30 days
2,645
1,189
31-60 days
624
230
61-90 days
595
257
> 90 days
1,781
1,253
$
9,256
$
5,323
5. INVENTORIES
As at
As at
APRIL 30, 2022
APRIL 30, 2021
Raw materials
$
3,946
$
3,153
Work-in-progress
288
174
Finished goods
692
170
$
4,926
$
3,497
The cost of inventories recognized as cost of goods sold was $31,073 (2021 - $30,186). During the year, there was an
inventory write-down to net realizable value of $378 (2021 - $1,513).
6. PROPERTY, PLANT AND EQUIPMENT
As at APRIL 30, 2022
LEASEHOLD
IMPROVEMENTS
MACHINERY &
EQUIPMENT
TOOLS, DIES
& JIGS
OFFICE
FURNITURE &
EQUIPMENT
CAPITAL
PROJECTS
IN PROGRESS
(CIP)
TOTAL
COST:
Opening balance, May 1, 2021
$
3,079
$
40,274
$
20,422
$
9,173
$
376
$
73,324
Additions
29
742
117
52
246
1,186
Disposals
-
(25)
-
(5,745)
-
(5,770)
Transfers
-
123
22
-
(145)
-
Impact of financial currency translation
12
29
6
15
1
63
Ending balance, April 30, 2022
$
3,120
$
41,143
$
20,567
$
3,495
$
478
$
68,803
ACCUMULATED DEPRECIATION:
Opening balance, May 1, 2021
$
1,886
$
36,834
$
20,319
$
8,806
-
$ 67,845
Depreciation charge for the year
218
545
74
189
-
1,026
Disposals
-
(25)
-
(5,744)
-
(5,769)
Transfers
-
-
-
-
-
-
Impact of financial currency translation
-
26
6
9
-
41
Ending balance, April 30, 2022
$
2,104
$
37,380
$
20,399
$
3,260
-
$ 63,143
Net book value, April 30, 2022
$
1,016
$
3,763
$
168
$
235
$
478
$
5,660
As at APRIL 30, 2021
LAND
BUILDINGS/
ROOF
LEASEHOLD
IMPROVEMENTS
MACHINERY &
EQUIPMENT
TOOLS, DIES
& JIGS
OFFICE
FURNITURE &
EQUIPMENT
CAPITAL
PROJECTS
IN PROGRESS
(CIP)
TOTAL
COST:
Opening balance, May 1, 2020
$
300
$
15,237
$
6,318
$
39,979
$
21,009
$
11,965
$
117
$ 94,925
Additions
-
63
311
1,675
64
137
290
2,540
Disposal
-
-
(3,542)
(1,255)
(581)
(2,849)
(28)
(8,255)
Transferred to assets held for sale1
(300)
(15,300)
-
-
-
-
-
(15,600)
Impact of financial currency translation
-
-
(8)
(125)
(70)
(80)
(3)
(286)
Ending balance, April 30, 2021
-
-
$
3,079
$
40,274
$
20,422
$
9,173
$
376
$ 73,324
ACCUMULATED DEPRECIATION:
Opening balance, May 1, 2020
-
$
10,070
$
4,961
$
37,722
$
20,864
$
11,393
-
$ 85,010
Depreciation charge for the year
-
289
467
454
106
310
-
1,626
Disposal
-
-
(3,542)
(1,234)
(580)
(2,823)
-
(8,179)
Transferred to assets held for sale1
-
(10,359)
-
-
-
-
-
(10,359)
Impact of financial currency translation
-
-
-
(108)
(71)
(74)
-
(253)
Ending balance, April 30, 2021
-
-
$
1,886
$
36,834
$
20,319
$
8,806
-
$ 67,845
Net book value, April 30, 2021
-
-
$
1,193
$
3,440
$
103
$
367
$
376
$
5,47
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.
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INSCAPE 2022 ANNUAL REPORT
6.1 Holland Landing Sale Transactions
Sale and Leaseback
On January 25, 2022, the Company completed a sale and leaseback of the land and buildings (“the property”) at 67
Toll Road in Holland Landing, Ontario to a third-party purchaser. The property, which was included in assets held for
sale immediately prior to sale, had a carrying value of $5,237 (2021 - $5,229), during the current fiscal year incremental
building improvements of $8 were added. The transaction qualifies for sales recognition under IFRS 15 and the Company
recorded a gain of $12,985. The lease liability reflects the net present value of future lease payments. The gross sale
proceeds of $32,750 were primarily used to repay in-full borrowings under the Revolving Credit Facility and provided
working capital for continued business operations.
The lease related to this transaction has an initial term of 10 years as well as two 5-years extension terms, at the option
of the Company. At the commencement of the lease, the Company recorded a lease liability of $16,699 and a right-of-
use assets of $2,715. The incremental borrowing rate of the lease was 6.5%. Management’s valuation of the sale and
leaseback was completed over the first 10-year horizon only, given high probability of changes in our industry.
Sale of Surplus Property and motor vehicle
On April 29, 2022, the Company completed a sale of surplus property at 70 Toll Road in Holland Landing, Ontario to a
third-party purchaser. The property, which was included in assets held for sale immediately prior to sale, had a carrying
value of $12. The sale generated cash proceeds of $1,700 and resulted in a net gain of $1,605.
During the year, the Company disposed of a fully depreciated vehicle at the Walls plant for proceeds of $11.
54
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INSCAPE 2022 ANNUAL REPORT
7. INTANGIBLE ASSETS
LICENSED
COMPUTER
INTELLECTUAL
As at APRIL 30, 2022
PRODUCTS
SOFTWARE
PROPERTY
TOTAL
COST:
Opening balance, May 1, 2021
$
74
$
10,426
$
421
$
10,921
Additions
-
25
-
25
Disposals
(74)
(4,450)
-
(4,524)
Impact of financial currency translation
-
1
-
1
Ending balance, April 30, 2022
$
-
$
6,002
$
421
$
6,423
ACCUMULATED AMORTIZATION:
Opening balance, May 1, 2021
$ 74
$
9,139
$
421
$
9,634
Amortization
-
486
-
486
Disposals
(74)
(4,450)
-
(4,524)
Impact of financial currency translation
-
1
-
1
Ending balance, April 30, 2022
$
-
$
5,176
$
421
$
5,597
Net book value, April 30, 2022
$
-
$
826
$
-
$
826
LICENSED
COMPUTER
INTELLECTUAL
As at APRIL 30, 2021
PRODUCTS
SOFTWARE
PROPERTY
TOTAL
COST:
Opening balance, May 1, 2020
$
122
$
11,021
$
524
$
11,667
Disposals
(48)
(556)
(103)
(707)
Impact of financial currency translation
-
(39)
-
(39)
Ending balance, April 30, 2021
$
74
$
10,426
$
421
$
10,921
ACCUMULATED AMORTIZATION:
Opening balance, May 1, 2020
$
122
$
9,384
$
524
$
10,030
Amortization
-
345
-
345
Disposals
(48)
(556)
(103)
(707)
Impact of financial currency translation
-
(34)
-
(34)
Ending balance, April 30, 2021
$
74
$
9,139
$
421
$
9,634
Net book value, April 30, 2021
$
-
$
1,287
$
-
$
1,287
8. LEASES
8.1 Right-of-Use Assets
As at APRIL 30, 2022
SHOWROOMS
FACILITIES
OTHER
TOTAL
COST:
Opening balance, May 1, 2021
$
10,554
$
1,180
$
231
$
11,965
Additions
2,024
2,778
29
4,831
Disposals
-
-
-
-
Impact of financial currency translation
-
50
6
56
Ending balance, April 30, 2022
$
12,578
$
4,008
$
266
$
16,852
ACCUMULATED DEPRECIATION:
Opening balance, May 1, 2021
$
1,830
$
37
$
48
$
1,915
Amortization
1,046
234
70
1,350
Disposals
-
-
-
-
Impact of financial currency translation
-
5
3
8
Ending balance, April 30, 2022
$
2,876
$
276
$
121
$
3,273
Net book value, April 30, 2022
$
9,702
$
3,732
$
145
$
13,579
There were no expenses related to short-term or low-value leases during the year.
As at APRIL 30, 2021
SHOWROOMS
FACILITIES
OTHER
TOTAL
COST:
Opening balance, May 1, 2020
$
4,050
$
905
$
124
$
5,079
Additions
7,139
1,220
137
8,496
Disposals
(635)
(832)
(17)
(1,484)
Impact of foreign currency translation
-
(113)
(13)
(126)
Ending balance, April 30, 2021
$
10,554
$
1,180
$
231
$
11,965
ACCUMULATED DEPRECIATION
Opening balance, May 1, 2020
$
1,244
$
173
$
25
$
1,442
Amortization
1,221
711
32
1,964
Depreciation
(635)
(810)
(5)
(1,450)
Impact of foreign currency translation
-
(37)
(4)
(41)
Ending balance, April 30, 2021
$
1,830
$
37
$
48
$
1,915
Net book value, April 30, 2021
$
8,724
$
1,143
$
183
$
10,050
There were no expenses related to short-term, low-value nor variable leases during the year.
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INSCAPE 2022 ANNUAL REPORT
8.2 Lease Liabilities
The following table presents the Company’s lease liabilities at April 30, 2022:
As at APRIL 30, 2022
SHOWROOMS
FACILITIES
OTHER
TOTAL
Opening balance, May 1, 2021
$
8,735
$
1,137
$
187
$
10,059
Additions
2,082
17,012
28
19,122
Principal payments
(541)
(122)
(66)
(729)
Disposals
-
-
-
-
Impact of financial currency translation
312
45
2
359
Ending balance, April 30, 2022
$
10,588
$
18,072
$
151
$
28,811
Current lease liabilities
881
1,199
78
2,158
Non-current lease liabilities
9,707
16,873
73
26,653
Ending balance, April 30, 2022
$
10,588
$
18,072
$
151
$
28,811
As at
APRIL 30, 2022
LEASE TERM:
Not later than 1 year
$
2,158
Later than 1 year and not later than 5 years
10,051
Later than 5 years
16,602
$
28,811
As at APRIL 30, 2021
SHOWROOMS
FACILITIES
OTHER
TOTAL
Opening balance, May 1, 2020
$
3,277
$
512
$
102
$
3,891
Additions
7,139
1,220
137
8,496
Principal payments
(1,069)
(517)
(29)
(1,615)
Disposals
-
(15)
(14)
(29)
Exchange differences
(612)
(63)
(9)
(684)
Ending balance, April 30, 2021
$
8,735
$
1,137
$
187
$
10,059
Current lease liabilities
531
120
66
717
Non-current lease liabilities
8,204
1,017
121
9,342
Ending balance, April 30, 2021
$
8,735
$
1,137
$
187
$
10,059
As at
APRIL 30, 2021
LEASE TERM:
Not later than 1 year
$
717
Later than 1 year and not later than 5 years
3,811
Later than 5 years
5,531
$
10,059
9. OTHER ASSETS
As at
As at
OTHER ASSETS CONSIST OF:
APRIL 30, 2022
APRIL 30, 2021
Current
$
-
$
-
Non-current
2,700
-
$
2,700
$
-
Other assets relate primarily to deposits paid to lessor for three leased properties, namely Holland Landing Ontario
($2,500), the Toronto Showroom ($33), the New York Showroom ($147) and the Washington Showroom ($20), in the
U.S. The contracts generally provide for scheduled reduction of the security deposits over the lease term. There are no
reductions within the next twelve-month period.
10. FINANCIAL INSTRUMENTS
10.1 Capital Risk Management
The Company’s objective when managing capital is 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 as summarized in the following table:
As at
As at
APRIL 30, 2022
APRIL 30, 2021
Issued capital
$
52,868
$
52,868
Contributed surplus
2,675
2,675
Debt
-
(8,005)
Deficit
(45,008)
(44,169)
Total
$
10,535
$
3,369
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. As at April 30, 2022, the Company closed out previous revolving credit
facility and have not entered into any new facility.
See Credit Facility for a description of the Company’s externally imposed covenants – Note 22.
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INSCAPE 2022 ANNUAL REPORT
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, 2022, the Company had outstanding US dollar hedge contracts with settlement dates from May 2022
to December 2022. The total notional amounts under the contracts are US$8,500 to US$13,600 (2021 - US$14,000 to
US$22,050). Dependent on the spot CAD/US rate on each settlement date, the Company can sell US dollars at rates
ranging from $1.22 CAD/US to $1.34 CAD/US (2021 - $1.27 CAD/US to $1.35 CAD/US). These contracts had a mark-
to-market unrealized loss of $107 (US$84) as at April 30, 2022 (2021 – unrealized gain of $606 or US$493), which was
recognized on the consolidated statement of financial position as derivative liability. 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, gain or
losses on derivatives are recognized on the consolidated statement of operations as unrealized gain or loss on derivatives
of the year. There were realized gains of $272 on the settlement of contracts during fiscal year 2022 (2021 – gains $135).
The following reconciles the changes in the fair value of the derivatives at the beginning and the end of the year:
As at
As at
APRIL 30, 2022
APRIL 30, 2021
Fair value of derivative liabilities, beginning of year
$
606
$
(3,391)
Changes in fair value during the year:
(Decrease) increase in fair value of new contracts added
(107)
535
Realization of derivative assets (liabilities) of contracts settled
(74)
2,271
(Decrease) increase in fair values of outstanding contracts
(532)
1,191
Net (increase) decrease in fair value of derivative contracts
(713)
3,997
Fair value of derivative assets (liabilities), end of year
$
(107)
$
606
Current
$
(107)
$
587
Long-term
-
19
$
(107)
$
606
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, 2022, a 1% change in the Canadian dollar against the US dollar would have an
impact of approximately $44 on the Company’s pre-tax earnings (2021 – $42).
Based on the US dollar denominated assets and liabilities as at April 30, 2022, a 1% change in the Canadian dollar
against the US dollar would have an impact of $437 on the unrealized exchange gain or loss reported in the Consolidated
Statements of Operations (2021 - $315) and an impact of $194 on the Consolidated Statements of Comprehensive
Income (Loss) (2021 - $162).
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, 2022,
the Company’s maximum direct exposure to credit risk is $26,320 (2021 – $13,153).
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, 2022, the
allowance for expected credit losses was $9 (2021 - $45).
The Company’s allowance for expected credit losses consist of sales allowances released during the year of $26
(2021 – $126) mainly from adjustments to expected lifetime credit losses. The amount written-off of $11 (2021 - $38)
was from one customer where the Company could not collect. Below is a breakdown of the Company’s ECL:
As at
As at
MOVEMENT IN THE ALLOWANCE FOR ECL
APRIL 30, 2022
APRIL 30, 2021
Balance, beginning of year
$
45
$
216
Sales allowances adjustments
(26)
(126)
Amount written-off
(11)
(38)
Currency exchange
1
(7)
Balance, end of year
$
9
$
45
60
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INSCAPE 2022 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 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 and financial assets held; the Company
is debt-free.
The following table summarizes the amount of contractual undiscounted future cash flow requirements as at April 30, 2022:
2022
2023
2024
2025
2026
THEREAFTER TOTAL
Trade and other payables
$ 10,794
$
-
$
-
$
-
$
-
$
- $ 10,794
Lease liabilities
3,696
4,013
3,766
3,805
3,895
19,288 38,463
Total contractual obligations
$ 14,490
$
4,013
$ 3,766
$ 3,805
$ 3,895
$ 19,288 $ 49,257
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).
The following table illustrates the classification of financial assets (liabilities) in the fair value hierarchy as at April 30, 2022:
LEVEL 1
LEVEL 2
LEVEL 3
FINANCIAL ASSETS
Cash equivalents
$
-
$
5,011
$ -
FINANCIAL LIABILITIES
Derivative financial liabilities
$
-
$
107
$
-
Total net financial assets
$
-
$
4,904
$
-
The following table illustrates the classification of financial assets in the fair value hierarchy as at April 30, 2021:
LEVEL 1
LEVEL 2
LEVEL 3
Derivative financial liabilities
$
-
$
606
$
-
Total net financial liabilities
$
-
$
606
$
-
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 with a third party 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, at prevailing market rates.
The principal outstanding under this note receivable as at April 30, 2022 is $277 (2021 - $302) 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, 2022 was $20 (2021 - $4).
12. TRADE AND OTHER PAYABLES
As at
As at
APRIL 30, 2022
APRIL 30, 2021
Trade accounts payable
$
4,845
$
2,661
Accrued liabilities
5,271
5,160
Sales tax payable
137
132
Other payables
541
91
$
10,794
$
8,044
13. PROVISIONS
As at
As at
PROVISION DUE TO WARRANTY
APRIL 30, 2022
APRIL 30, 2021
Balance, beginning of year
$
709
$
1,260
Provisions made during the year
256
336
Provisions reversed and used during the year
(580)
(791)
Impact of financial currency translation
17
(96)
Balance, end of year
$
402
$
709
Current
80
226
Non-Current
$
322
$
483
The Company provides a warranty on all products sold to its customers. Warranties are not sold separately to customers.
The provision for warranty claims represents the present value of management’s best estimate of the future outflow of
economic resources that will be required to meet the Company’s obligations for warranties upon the sale of goods, which
may include repair or replacement of previously sold products. The estimate has been made on the basis of historical
warranty trends.
62
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INSCAPE 2022 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 $194 (2021 - $121) 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 $234.
14.2 Defined Benefit Pension Plans
The Company operates 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 of December 31, 2020, for the Canadian plan and July 1, 2020 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 $40. The expected contribution to the US plan
for the upcoming fiscal year are approximately $29.
14.2a Changes to the Canadian Defined Benefit Pension Plan
Effective April 2, 2022, accruals under the defined benefit component of the Plan ceased, and effective April 3, 2022, the
Plan provides benefits on a defined contribution basis only.
In addition, the Company offered a Special Early Retirement Window (SERW) program to all active members of the
defined benefit component of the plan, who is not a Maintenance Employee and has attained age 62 years and 17 years
of continuous service on or before April 3, 2022.
These changes resulted in a curtailment gain of $641 and SERW past service cost of $195, which were recognized in
pension expense for fiscal 2022 in accordance with IAS 19.
As part of the closure of the DB component, Members have been provided with the option to convert their DB
entitlements and transfer a lump sum equivalent value to their DC account balance. These transfers are not expected to
occur until the end of Fiscal 2023 or during Fiscal 2024.
Amounts recognized in the cost of goods sold and other comprehensive income in respect of these defined benefit plans
are as follows:
As at
As at
APRIL 30, 2022
APRIL 30, 2021
DEFINED BENEFIT PLANS
Benefits earned during the year
$
536
$
536
Participant contribution
(76)
(87)
Net interest cost
61
204
Pension expense recognized
$
521
$
818
REMEASUREMENTS OF THE NET DEFINED BENEFIT LIABILITIES
Actuarial (loss) gain due to actuarial experience
$
(589)
$
886
Actuarial gain due to financial assumption changes
4,320
815
Actuarial (loss) gain due to demographic assumption changes
(15)
61
Return on plan assets greater (less) than discount rate
(2,177)
4,704
Remeasurements effects recognized in other
comprehensive income
$
1,539
$
6,466
CUMULATIVE ACTUARIAL LOSSES RELATING TO NET DEFINED BENEFIT LIABILITIES
Balance, beginning of year
$
1,482
$
(4,984)
Remeasurements recognized in the year
1,539
6,466
Balance, end of year
$
3,021
$
1,482
The significant actuarial assumptions used in measuring the accrued defined benefit pension plans obligations are as follows:
2022
2021
Discount rate at year end
4.06% to 4.60%
2.69% to 3.40%
Rate of increase in future compensation
0.0%
2.0%
MORTALITY TABLES
2022
2021
Canadian Plan
2014 CPM Private Sector Table
2014 CPM Private Sector Table
with mortality improvements
projected using Scale MI-2017
U.S. Plan
RP – 2014 / MP-2021
RP – 2014 / MP-2020
Society of Actuaries)
(Society of Actuaries)
A 1% increase in the discount rate would reduce the Canadian defined benefit obligation by approximately $2,155
(2021 – $2,890) and a 1% decrease in the discount rate would increase the Canadian defined benefit obligation by
approximately $2,512 (2021 – $3,602).
A 1% increase in the discount rate would reduce the US defined benefit obligation by approximately US$432
(2021 – US$564) and a 1% decrease in the discount rate would increase the US defined benefit obligation by
approximately US$515 (2021 – US$684).
64
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INSCAPE 2022 ANNUAL REPORT
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.
The amount included in the consolidated statements of financial position arising from the Company’s obligation in respect
of its defined benefit plans is as follows:
As at
As at
APRIL 30, 2022
CANADIAN PLAN
US PLAN
APRIL 30, 2021
DEFINED BENEFIT OBLIGATION,
BEGINNING OF YEAR
$
27,571
$ 21,641
$ 5,980
$ 30,241
True-up
50
-
-
-
Current service cost
536
515
21
701
Past service cost adjustments
(446)
(446)
-
-
Interest cost
909
737
172
876
Benefits and expenses paid
(1,213)
(908)
(305)
(1,510)
Actuarial (gain)
(3,717)
(3,398)
(319)
(1,763)
Foreign exchange rate changes
237
-
237
(974)
Defined benefit obligation, end of year
$
23,927
$
18,141
$
5,786
$
27,571
FAIR VALUE OF PLAN ASSETS,
BEGINNING OF YEAR
$
26,488
$ 20,955
$
5,582
$
22,901
True-up
49
-
-
-
Interest income
848
703
145
672
Employers’ contributions
337
306
31
297
Employees’ contributions
76
76
-
87
Benefits and expenses paid
(1,213)
(908)
(305)
(1,510)
Return on plan assets greater
(2,179)
(1,641)
(538)
4,704
than discount rate
Foreign exchange rate changes
217
-
217
(663)
Fair value of plan assets, end of year
$
24,623
$
19,491
$
5,132
$
26,488
Defined benefit obligation (assets),
end of year
$
(696)
$
(1,350)
$
654
$
1,083
The fair value of the investments in the DB Plan for 2022 are categorized as a Level 1, 2 and 3 investments under fair
value hierarchy measurement, as outlined below:
FUND
LEVEL 1
LEVEL 2 LEVEL 3
TOTAL
Canadian Plan
$
5,049
$
13,725
$
717
$
19,491
US Plan
-
5,132
-
5,132
Total
$
5,049
$
18,857
$
717
$
24,623
During the year the Canadian Defined Benefit Plan, which had a liability position of $686 at April 30, 2021, experienced
a remeasurement of the actuarial liability and plan assets, which resulted in a reclassification from liability to net asset
position of $1,350 at April 30, 2022. It must be noted that, subsequent to the year-end, as of the date of this report,
the plan assets valuation declined due to market volatility which reversed the favourable asset position to a net liability
position.
During the year the US Defined Benefit Plan, which had a liability position of $397 at April 30, 2021, experienced a
remeasurement of the actuarial liability and plan assets, which resulted in a net liability position of $654 at April 30, 2022.
Given that the plans are legally separate these plans are recognized separately on the statement of financial position.
Major categories of plan assets at the end of the year are as follows:
As at
As at
APRIL 30, 2022
APRIL 30, 2021
Equity securities
25%
62%
Debt securities
65%
23%
Cash and cash equivalents
10%
15%
Total
100%
100%
66
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INSCAPE 2022 ANNUAL REPORT
15. INCOME TAXES
15.1 Income Tax Recognized in Profit or Loss
The Company’s income tax expense (recovery) comprises:
FOR THE
FOR THE
YEAR ENDED
YEAR ENDED
APRIL 30, 2022
APRIL 30, 2021
Current
$
519
$
29
Deferred
(446)
(2,855)
$
73
$
(2,826)
The income tax provision for the years can be reconciled to the accounting income (loss) as follows:
FOR THE
FOR THE
YEAR ENDED
YEAR ENDED
APRIL 30, 2022
APRIL 30, 2021
Loss before income taxes
$
(766)
$
(3,717)
Basic statutory income tax rate
25.34%
25.34%
(194)
(942)
Reconciling items:
Tax effect of non-taxable items relating to sale of the Holland Landing property
(2,244)
-
Permanent differences
352
1,639
True-up
(344)
(71)
Impact of tax rate differences
110
(94)
Non-recognition (recognition) of deferred tax assets
1,689
(3,319)
Tax rate changes
583
(15)
Prior year reassessment
130
-
Other
(9)
(24)
Income tax expense (recovery)
$
73
$
(2,826)
The Company’s basic Canadian statutory income tax rate is the aggregate of the federal income tax rate of 15% (2021 – 15%)
and the blended provincial tax rate of 10.34% (2021 – 10.34%). The basic US statutory income tax rate is the aggregate of the
federal income tax rate of 21% (2021 – 21%) and the average rate for various states of 3.3% (2021 – 4.2%).
As of April 30, 2022, the Company recorded a tax liability of $130 (2021 – $0) for prior year reassessment resulting from a tax
authority audit.
15.2 Net Deferred Income Tax Assets and Liabilities
Deferred income tax assets and liabilities arising from the effect of temporary differences are as follows:
RECOGNIZED
RECOGNIZED
IN OTHER
EXCHANGE
APRIL 30,
IN PROFIT COMPREHENSIVE
DIFFERENCES
2021
OR LOSS
INCOME
AND OTHER
APRIL 30, 2022
Property, plant and equipment
$
(3,492)
$
(616)
$
-
$
(93)
$
(4,201)
Retirement benefit obligation
(276)
-
(446)
-
(722)
Derivative assets (liabilities)
(154)
181
-
-
27
Reserves
956
4,071
-
-
5,027
(2,966)
3,636
(446)
(93)
131
Capital loss carryforwards
30
(30)
-
-
-
Non-capital loss carryforwards
5,516
(3,159)
-
93
2,450
$
2,580
$
447
$
(446)
$
- $
2,581
15.3 Loss Carry Forwards
As of April 30, 2022, the Company has unused net operating US losses of $41,747 – US$33,273 (2021 – $32,349 –
US$24,716) which may be carried forward and used to reduce future years’ taxable income.
US non-capital losses of $41,747, of which $27,559 are limited to 80% of taxable income (determined without regard to
the deduction), have an indefinite life and no expiry period.
16. OTHER LONG-TERM OBLIGATIONS
Other long-term obligations are comprised of the fair value of the Company’s stock-based compensation liabilities.
As at
As at
APRIL 30, 2022
APRIL 30, 2021
Deferred Share Units
$
25
$
27
Stock Options
98
72
Restricted Share Units
42
65
$
165
$
164
17. ISSUED CAPITAL
Authorized
Unlimited Class B subordinated voting shares, 1 vote per share
As at
As at
APRIL 30, 2022
APRIL 30, 2021
Issued and outstanding
Class B subordinated voting
14,380,701
14,380,701
14,380,701
14,380,701
68
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INSCAPE 2022 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 979,855 (2021 – 1,078,161).
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 270,000 Class B subordinated voting shares to expire in
five years were granted (2021 – 45,000) and 50,000 stock options were exercised.
520,145 stock options were outstanding as at April 30, 2022 (2021 – 421,839). 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, 2022 totaled $98 (2021 - $72). 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, 2022 was $nil (2021 - $2).
The assumptions used to compute the fair values and compensation expense under the model are as follows:
INPUTS TO THE
BLACK-SCHOLES-MERTON MODEL
2022 VALUES
2021 VALUES
BASIS
Expected remaining life of
0.2 to 4.6 years
0.2 to 4.6 years
Expiry dates of the options, history
the options
of forfeiture rates and early exercise
Risk-free interest rates
0.42% to 2.95%
0.01% to 1.19%
Market yield on US Treasury
securities at terms commensurate
with the expected remaining
life of the options
Expected volatility
37% to 84%
62% to 113%
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
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:
As at APRIL 30, 2022
As at APRIL 30, 2021
WEIGHTED
WEIGHTED
AVERAGE
AVERAGE
SHARES
EXERCISE PRICE
SHARES
EXERCISE PRICE
Outstanding, beginning of year
421,839
$ 1.75
1,143,415
$
1.95
Granted
270,000
1.07
45,000
0.99
Exercised
(50,000)
0.78
-
-
Expired
(39,378)
3.59
(53,734)
3.10
Forfeited
(82,316)
1.89
(712,842)
1.92
Outstanding, end of year
520,145
$
1.33
421,839
$
1.75
18.3 Share Options Outstanding at the End of the Year
The following summarizes the share options outstanding at the end of the year:
APRIL 30, 2022
OPTIONS OUTSTANDING
OPTIONS EXERCISABLE
WEIGHTED
NUMBER OF
AVERAGE
WEIGHTED
NUMBER
WEIGHTED
RANGE OF
OUTSTANDING
REMAINING LIFE
AVERAGE
EXERCISABLE AT
AVERAGE
EXERCISE PRICE
OPTIONS
IN YEARS
EXERCISE PRICE
YEAR END
EXERCISE PRICE
$0.78 to $2.55
480,179
2.95
$
1.14
333,008
$
1.14
$2.98 to $3.41
22,500
0.62
3.41
22,500
3.41
$3.65 to $4.02
17,466
0.18
3.70
17,466
3.70
$0.78 to $4.02
520,145
2.75
$
1.33
372,974
$
1.39
APRIL 30, 2021
OPTIONS OUTSTANDING
OPTIONS EXERCISABLE
WEIGHTED
NUMBER OF
AVERAGE
WEIGHTED
NUMBER
WEIGHTED
RANGE OF
OUTSTANDING
REMAINING LIFE
AVERAGE
EXERCISABLE AT
AVERAGE
EXERCISE PRICE
OPTIONS
IN YEARS
EXERCISE PRICE
YEAR END
EXERCISE PRICE
$0.78 to $2.55
330,042
2.87
$
1.24
177,500
$
0.96
$2.98 to $3.41
39,378
1.01
3.24
39,378
1.29
$3.65 to $4.02
52,419
0.94
3.84
52,419
2.11
$0.78 to $4.02
421,839
2.46
$
1.75
269,297
$
1.35
70
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INSCAPE 2022 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, 2022 were $nil (2021 - $nil).
As at April 30, 2022, 33,596 DSUs were outstanding with a total fair value of $25 measured at the closing price of the
shares at year end (2021 – 33,596 units, fair value $27).
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:
As at
As at
APRIL 30, 2022
APRIL 30, 2021
Outstanding, beginning of year
33,596
57,799
Forfeited/Exercised
-
(24,203)
Outstanding, end of year
33,596
33,596
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 and the amount of RSU held. During the year the Company
issued 95,332 RSU (2021 – 458,321). As at April 30, 2022, 224,268 RSU were outstanding (2021 – 206,757).
The intrinsic value of the Company’s vested RSUs outstanding as at April 30, 2022 was $35 (2021 - $56).
18.7 Movements in Restricted Share Units During the Year
The following summarizes the movements in RSU during the year:
As at
As at
APRIL 30, 2022
APRIL 30, 2021
Outstanding, beginning of year
206,757
225,279
Granted
95,332
458,321
Forfeited
(55,605)
(429,673)
Maturities
(22,216)
(47,170)
Outstanding, end of year
224,268
206,757
19. LOSS PER SHARE
The net loss and weighted average number of shares used in the calculation of basic and diluted loss per share are as follows:
As at
As at
APRIL 30, 2022
APRIL 30, 2021
Net Loss
$
(839)
$
(891)
Weighted average number of shares outstanding basic
14,380,701
14,380,701
Dilution impact of stock options
-
-
Weighted average number of shares outstanding diluted
14,380,701
14,380,701
Basic and diluted loss per share
$
(0.06)
$
(0.06)
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, 2022 and April 30, 2021.
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INSCAPE 2022 ANNUAL REPORT
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:
For the year ended
For the year ended
APRIL 30, 2022
APRIL 30, 2021
SEGMENTED SALES
Furniture
$
28,488
$
29,176
Walls
10,253
9,027
Total
$
38,741
$
38,203
SEGMENTED LOSS
Furniture
$
(10,866)
$
(8,903)
Walls
(3,984)
(4,699)
(14,850)
(13,602)
Unrealized gain on foreign exchange
20
377
Unrealized (loss) gain on derivatives (Note 10.2)
(713)
3,997
Other income (Note 23)
1,979
5,308
Gain on sale of property, plant and equipment
14,609
209
Interest expense
(1,811)
(6)
Loss before taxes
(766)
(3,717)
Income tax (expense) recovery
(73)
2,826
Net loss
$
(839)
$
(891)
AMORTIZATION AND DEPRECIATION
Furniture
$
2,522
$
3,076
Walls
341
859
Total
$
2,863
$
3,935
ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLES
As at
As at
APRIL 30, 2022 APRIL 30, 2021
Furniture
$
1,117
$
2,084
Walls
94
456
Total
$
1,211
$
2,540
SEGMENT ASSETS AND LIABILITIES
As at
As at
APRIL 30, 2022
APRIL 30, 2021
ASSETS
Furniture
$
48,701
$
35,777
Walls
6,929
6,195
Total assets
$
55,630
$
41,972
LIABILITIES
Furniture
$
36,683
$
23,827
Walls
4,771
4,309
Total liabilities
$
41,454
$
28,136
The Company’s revenue is based on geographical location as detailed below:
SALES FROM:
For the year ended
For the year ended
APRIL 30, 2022
APRIL 30, 2021
United States
$
36,835
$
36,156
Canada
1,906
2,047
Total
$
38,741
$
38,203
The Company’s identifiable non-current assets (i.e. property, plant and equipment, intangibles and right-of-use assets)
by geographical location are detailed below:
As at
As at
APRIL 30, 2022
APRIL 30, 2021
United States
$
10,936
$
9,893
Canada
9,129
6,923
Total
$
20,065
$
16,816
21. SUPPLEMENTAL INFORMATION
21.1 Revenue Split by Nature
For the year ended
For the year ended
APRIL 30, 2022
APRIL 30, 2021
Included in:
Product sales
$
35,669
$
36,028
Installation sales
3,072
2,175
$
38,741
$
38,203
21.2 Salaries, Wages and Benefits
For the year ended
For the year ended
APRIL 30, 2022
APRIL 30, 2021
Included in:
Cost of goods sold
$
9,614
$
10,047
Selling, general and administrative
10,865
11,056
$
20,479
$
21,103
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INSCAPE 2022 ANNUAL REPORT
21.3 Amortization and Depreciation
For the year ended
For the year ended
APRIL 30, 2022
APRIL 30, 2021
Included in:
Cost of goods sold
$
993
$
1,359
Selling, general and administrative
1,870
2,576
$
2,863
$
3,935
22. CREDIT FACILITY
On January 25, 2022, the Company repaid all amounts owing under the revolving credit facility with FrontWell Capital
Partners Inc. This included payments of $9,147 and USD 5,441 ($6,911) to repay principal and accrued interest.
The facility provided credit availability of the lesser of $16,000 and availability pursuant to the Borrowing Base calculation
representing accounts receivable, inventories, land and building, with a maturity date which was the earlier of (i) April
29, 2022, and (ii) the completion of the sale of certain mortgaged property, described as 70 and 67 Toll Road, Holland
Landing, Ontario. The interest rate on the demand operating credit facility was Prime Rate plus 8.75% for Canadian dollar
loans, US Base Rate plus 8.75% for US dollar loans.
As at April 30, 2022 the Company had no new credit agreement nor restrictive 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 over 24 months. Tranche 1 was forgiven as of the end of
fiscal 2021.
Tranche 2 for $1,800 (US $1,390) was received during the fourth quarter of fiscal 2021. Subsequent to April 30, 2021, the
Company received confirmation from U.S. Small Business Administration that its loan was forgiven.
In addition, the Company applied for and received grants from the Canadian government under the Canada Emergency
Wage Subsidy (“CEWS”) and Canada Emergency Rent Subsidy (“CERS”) programs. These assistance programs from the
Canadian government ended on October 23, 2021.
For the twelve months ended April 30, 2022, the Company incurred CEWS qualifying expenditures of $1,626 (2021
– $2,431), of which net subsidies of $1,626 (2021 - $2,732) were received and an accrual of $nil (2021 – $301) was
receivable in future periods.
For the year ended
For the year ended
OTHER INCOME DURING THE PERIOD:
APRIL 30, 2022
APRIL 30, 2021
Government Assistance:
SBA forgivable loan, utilized
$
(256)
$
(2,774)
CEWS program subsidies recognized
(1,626)
(2,431)
Canadian rent subsidies recognized
(97)
(103)
$
(1,979)
$
(5,308)
24. 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, SVP Sales and Distribution, VP Marketing & Product Design and VP
Manufacturing & Supply Chain.
For the year ended
For the year ended
APRIL 30, 2022
APRIL 30, 2021
Salaries and short-term benefits
$
1,987
$
1,691
Post-employment benefits
4
22
Share based compensations
28
62
$
2,019
$
1,775
25. SUBSEQUENT EVENTS
On June 29, 2022, the Company entered into a lease termination and surrender agreement with the landlord for the
premises housing the Toronto showroom (“the premises”) effective August 31, 2022, releasing the Company of all rights
and obligations under the lease which was scheduled to expire on March 31, 2028. As of April 30, 2022, the carrying
value of related right-of-use asset, lease liability and leasehold improvements (included with PP&E) reported in the
consolidated statements of financial position, were $815, $894 and $506, respectively. Simultaneously, on June 29, 2022,
the Company entered into an agreement of purchase and sale for consideration of $50 for the furniture, fixtures and
equipment with carrying value of $24, located at the premises.
On July 15, 2022, the Company entered into a Derivative Forward Contract arrangement with a different financial
institution. Under this arrangement the Company has outstanding US dollar hedge contracts with settlement dates from
August 2022 to April 2023. The total notional amounts under the contracts are US$7,800 to US$15,600. Dependent on
the spot CAD/US on each settlement date, the Company can sell US dollars at rates ranging from $1.300 CAD/US to
$1.325 CAD/USD. If the rate falls below $1.300 CAD/US, the Company has the right but not the obligation to trade at the
rate of $1.300 CAD/US. In addition, the Company has issued an order to unwind all remaining forward contracts under its
prevailing US dollar hedge arrangement, as described in Note 10.2.
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INSCAPE 2022 ANNUAL REPORT
Corporate Information
Board of Directors
Eric Ehgoetz, Director
Bartley Bull, Chair of the Board
Tracy Tidy, Director
Tania Bortolotto, Director
Dezsö J. Horváth, Director
Quentin Kong, Director
David LaSalle, Director
Neil McDonnell, Director
Chief Executive Offi cer
Eric Ehgoetz
Chief Financial Offi cer
Jon Szczur, CPA, CMA
Listing of Capital Stock
Toronto Stock Exchange (INQ)
Transfer Agent and Registrar
TSX Trust Company
PO Box 700, Postal Station B
Montreal, QC H3B 3K3
T 416 682 3860 or 800 387 0825
F 514 985 8843 or 888 249 6189
shareholderinquiries@tmx.com
Auditor
Deloitte LLP
Bay Adelaide East
8 Adelaide Street West, Suite 200
Toronto, ON M5H OA9
Corporate Offi ce
67 Toll Road
Holland Landing, ON L9N 1H2
T 905 836 7676
myinscape.com
Financial Calendar
May 1 to April 30
2022 Annual Meeting
The annual meeting of shareholders
will be held on September 15th, 2022
at 4:00 pm at Inscape’s
Corporate Headquarters:
67 Toll Road
Holland Landing, ON L9N 1H2
Investor Information
Shareholders seeking assistance
or information about the Company
are invited to contact Jon Szczur,
Chief Financial Offi cer, at:
67 Toll Road
Holland Landing, ON L9N 1H2
T 905 952 4102
jszczur@myinscape.com
info@myinscape.com
myinscape.com
INSCAPE 2022 ANNUAL REPORT
77
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 2022
® Trademarks of Inscape Corporation. Patents may be pending. Certain names, words, logos and graphics
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