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Plaintree Systems Inc. Audit Report / Information 2025
42658_rns_2025-07-29_35286be2-2b86-4b46-851f-309c9d0ae43b.pdf
Audit Report / Information
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Consolidated financial statements of Plaintree Systems Inc.
March 31, 2025 and March 31, 2024
Welch LLP
An Independent Member of BKR International
Plaintree Systems Inc.
March 31, 2025 and March 31, 2024
Table of Contents
Independent Auditor's Report...1-3
Consolidated statements of financial position...4
Consolidated statements of comprehensive earnings...5
Consolidated statements of cash flows...6
Consolidated statements of changes in equity...7
Notes to the consolidated financial statements...8-36
Welch LLP
An Independent Member of BKR International
Welch LLP
INDEPENDENT AUDITOR'S REPORT
To the shareholders of
PLAINTREE SYSTEMS INC.
Opinion
We have audited the consolidated financial statements of Plaintree Systems Inc. (the Company), which comprise the consolidated statements of financial position as at March 31, 2025 and 2024, the consolidated statements of comprehensive earnings, changes in equity and cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as at March 31, 2025 and 2024 and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards (IFRSs).
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated 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 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
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.
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements for the year ended March 31, 2025. These matters were 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 these matters. We have determined that the matter described below to be the key audit matter to be communicated in our auditor's report.
Welch LLP - Chartered Professional Accountants
350 Albert Street, Suite 700, Ottawa, Ontario K1R 1A4
T: 613-236-9191 F: 613-236-8258 W: welchllp.com
An Independent Member of BKR International
Page 1 of 36
Key Audit Matter - Cont'd.
Impairment of intangible assets
Description of matter
As detailed in financial statement note 10, the Company recorded an intangible asset impairment loss for the year ended March 31, 2025 of $781,419 resulting in an intangible asset balance of $NIL as at March 31, 2025. Management conducts an impairment assessment if events or circumstances indicate the carrying value of intangible assets may be impaired. An impairment loss is recognized when the carrying value of a cash generating unit (CGU) exceeds the CGU's recoverable amount. As at March 31, 2025 the Elmira CGU's carrying value exceeded its recoverable amount as the Company's financial performance for the Elmira CGU did not meet the Company's expectations. As at March 31, 2025 the Company noted indicators of impairment for the Elmira CGU given the operating loss realized and other factors and as a result the Company completed an impairment assessment for the Elmira CGU.
Why the matter is a key audit matter
The determination of a CGU's recoverable amount requires significant judgement when determining the inputs into the calculation of the recoverable amount including estimating the expected future net cash flows and the discount rate. This estimation uncertainty required auditor judgement and specialized skills and knowledge to evaluate management's estimate.
How the matter was addressed in the audit
The primary procedures performed to address the key audit matter included the following:
We evaluated the appropriateness of the future net cash flows by reviewing key assumptions used including forecasted growth rates against historical results, working capital assumptions, planned changes in margin against historical trends and management plans. We evaluated the fair value less cost of disposal assumptions including estimated brokerage costs and present value estimates to supporting documentation. We assessed the appropriateness of the valuation methodology used to calculate the CGU recoverable amount. We compared the approach and valuation model used to the fiscal 2024 impairment assessment. We involved a valuation professional to assist with assessing the discount rate used.
Other Information
Management is responsible for the other information. The other information comprises the information, other than the consolidated financial statements and our auditor's report thereon, in the Management's Discussion and Analysis.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the consolidated 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 consolidated 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.
Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated 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.
Welch LLP
An Independent Member of BKR International
Auditor's Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated 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 generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
- Identify and assess the risks of material misstatement of the consolidated 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 consolidated 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 consolidated financial statements, including the disclosures, and whether the consolidated 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.
The engagement partner on the audit resulting in this independent auditor's report is Bryan Haralovich.
Chartered Professional Accountants
Licensed Public Accountants
Ottawa, Ontario
July 24, 2025.
Welch LLP
An Independent Member of BKR International
Plaintree Systems Inc.
Consolidated statements of financial position
(audited)
(in Canadian dollars)
| March 31, 2025 | March 31, 2024 | |
|---|---|---|
| $ | $ | |
| Assets | ||
| Current assets | ||
| Trade receivables and other receivables | 2,846,396 | 2,842,969 |
| Unbilled revenue | 2,752,252 | 2,004,995 |
| Taxes receivable | 63,611 | 59,956 |
| Inventories (Note 4) | 3,564,235 | 3,939,972 |
| Prepaid expenses | 170,801 | 160,288 |
| Mortgage Receivable (Note 5) | 272,008 | 278,305 |
| 9,669,303 | 9,286,485 | |
| Property, plant and equipment (Note 9) | 4,189,355 | 4,806,300 |
| Intangible assets (Note 10) | - | 891,842 |
| 13,858,658 | 14,984,627 | |
| Liabilities | ||
| Current liabilities | ||
| Bank Indebtedness (Note 17) | 2,700,232 | 1,879,537 |
| Trade and other payables (Note 12) | 2,591,531 | 2,266,957 |
| Deferred revenue | 1,267,908 | 406,038 |
| Current portion of long-term debt and lease obligation (Note 6, 7) | 2,974,808 | 1,554,801 |
| Current portion of due to related parties (Note 11) | 50,000 | 50,000 |
| Current portion of government assistance (Note 8) | 87,921 | 81,825 |
| 9,672,400 | 6,239,158 | |
| Long-term debt and lease obligation (Note 6,7) | 157,872 | 2,801,051 |
| Government assistance (Note 8) | 229,608 | 286,616 |
| Due to related parties (Note 11) | 4,715,451 | 4,763,720 |
| 14,775,331 | 14,090,545 | |
| Shareholders' equity (deficiency) | ||
| Issued capital | 2 | 2 |
| Contributed surplus | 2,159,842 | 2,159,842 |
| Deficit | (3,076,517) | (1,265,763) |
| (916,673) | 894,081 | |
| 13,858,658 | 14,984,627 |
Approved by the Board
"David Watson"
"Girvan Patterson"
The accompanying notes are an integral part of the consolidated financial statements
Welch LLP
An Independent Member of BKR International
Plaintree Systems Inc.
Consolidated statements of comprehensive earnings
For the years ended March 31, 2025 and March 31, 2024
(audited)
(in Canadian dollars)
| Twelve months ended | ||
|---|---|---|
| March 31, 2025 | March 31, 2024 | |
| $ | $ | |
| Revenue | 23,847,195 | 24,204,805 |
| Cost of sales (Note 4) | 19,273,838 | 16,562,060 |
| Gross margin | 4,573,357 | 7,642,745 |
| Operating expenses | ||
| Engineering and design | 1,836,994 | 1,767,010 |
| Finance and administration | 1,957,511 | 2,227,864 |
| Sales and marketing | 1,490,672 | 1,906,358 |
| Bad debts | 26,920 | 27,638 |
| (Gain)/Loss on disposal of assets | (136,310) | 39,944 |
| Interest expense | 281,258 | 301,956 |
| (Gain)/Loss on foreign exchange | (89,934) | 197,670 |
| 5,367,111 | 6,468,440 | |
| Net earnings (loss) before income taxes and other income/expenses | (793,754) | 1,174,305 |
| Loss on Impairment (Note 10) | 995,621 | 360,000 |
| Gain on loan derecognition | - | (257,601) |
| Net earnings (loss) before income taxes | (1,789,375) | 1,071,906 |
| Income tax expense (note 16) | ||
| Current expense | 21,379 | - |
| 21,379 | - | |
| Net earnings (loss) and comprehensive earnings | (1,810,754) | 1,071,906 |
| Basic and diluted (loss) per common share (Note 14) | (0.25) | (0.03) |
| Weighted average common shares outstanding | 12,925,253 | 12,925,253 |
The accompanying notes are an integral part of the consolidated financial statements
Welch LLP
An Independent Member of BKR International
Plaintree Systems Inc.
Consolidated statements of cash flows
For the years ended March 31, 2025 and March 31, 2024
(audited)
(in Canadian dollars)
| Twelve months ended | ||
|---|---|---|
| March 31, 2025 | March 31, 2024 | |
| Operating activities | $ | $ |
| Comprehensive earnings (loss) | (1,810,754) | 1,071,906 |
| Add (deduct) items not affecting cash: | ||
| Depreciation of intangible assets | 141,514 | 194,740 |
| Depreciation of property, plant and equipment | 1,514,700 | 1,317,509 |
| Bad debts | 26,920 | 27,638 |
| (Gain)/Loss on disposal of assets | (136,310) | 39,944 |
| Loss on Impairment | 995,621 | 360,000 |
| Gain on loan derecognition | - | (257,601) |
| Write-down of inventory | 1,150,937 | 64,005 |
| Changes in non-cash operating working capital items | ||
| Deferred revenue | 861,870 | (1,141,305) |
| Inventories | (989,402) | 1,913 |
| Prepaid expenses and other receivables | (10,513) | (4,760) |
| Trade and other payables | 89,404 | 196,013 |
| Trade and other receivables | (34,002) | (310,948) |
| Unbilled revenue | (747,257) | 16,166 |
| Mortgage receivable | 6,297 | 5,926 |
| Cash (used) provided by operations | 1,059,025 | 1,581,147 |
| Investing activities | ||
| Payments to acquire intangible assets | (31,090) | (18,590) |
| Payments to acquire property, plant and equipment | (526,277) | (550,347) |
| Cash (used) in investing activities | (557,367) | (568,937) |
| Financing activities | ||
| Repayment of government assistance | (50,912) | (147,672) |
| Repayment of long-term debt | (426,685) | (962,970) |
| Proceeds from financing | 130,489 | 408,864 |
| Repayment of capital lease obligations | (926,975) | (941,316) |
| Repayment of related party borrowings (Note 10) | (48,269) | (151,923) |
| Cash (used) in financing activities | (1,322,353) | (1,795,017) |
| Net cash outflow | (820,695) | (782,807) |
| Indebtedness (beginning of the year) | (1,879,537) | (1,096,730) |
| Indebtedness, end of the period | (2,700,232) | (1,879,537) |
The accompanying notes are an integral part of the consolidated financial statements
Welch LLP
An Independent Member of BKR International
PLAINTREE SYSTEMS INC.
Consolidated Statement of changes in equity
For the years ended March 31, 2025 and March 31, 2024
(audited)
(in Canadian dollars)
| Common Shares Number | Issued Capital | Preferred Shares (1) Number | Issued Capital | Contributed Surplus | Retained earnings (deficit) | Shareholders' Equity | |
|---|---|---|---|---|---|---|---|
| $ | $ | $ | $ | $ | |||
| Balances at April 1, 2024 | 12,925,253 | 1 | 18,325 | 1 | 2,159,842 | (1,265,763) | 894,081 |
| Net earnings and comprehensive earnings | (1,810,754) | (1,810,754) | |||||
| Balances at March 31, 2025 | 12,925,253 | 1 | 18,325 | 1 | 2,159,842 | (3,076,517) | (916,673) |
| Common Shares Number | Issued Capital | Preferred Shares (1) Number | Issued Capital | Contributed Surplus | Retained earnings (deficit) | Shareholders' Equity | |
| $ | $ | $ | $ | $ | |||
| Balances at April 1, 2023 | 12,925,253 | 1 | 18,325 | 1 | 2,159,842 | (2,337,669) | (177,825) |
| Net earnings and comprehensive earnings | 1,071,906 | 1,071,906 | |||||
| Balances at March 31, 2024 | 12,925,253 | 1 | 18,325 | 1 | 2,159,842 | (1,265,763) | 894,081 |
(1) Class A Shares have a 8% cumulative dividend, calculated on redemption amount, redeemable at the option of the Company at any time at $1000 per share plus accrued dividends; non-voting.
The accompanying notes are an integral part of the consolidated financial statements
Welch LLP
An Independent Member of BKR International
Welch LLP
An Independent Member of BKR International
Plaintree Systems Inc.
Notes to the consolidated financial statements
March 31, 2025 and March 31, 2024
(In Canadian dollars)
1. Description of the business
Plaintree Systems Inc. ("Plaintree" or the "Company") was incorporated in Canada under the Canada Business Corporation Act and is publicly traded on the Canadian Securities Exchange ("CSE") under "NPT". Plaintree is a diversified company with proprietary technologies and manufacturing capabilities in structural design and aerospace. The Company operates an Applied Electronics division, consisting of the Hypernetics division, Summit Aerospace USA Inc. ("Summit Aerospace") and the Elmira Stove Works business, and a Specialty Structures division consisting of the Triodetic business and Spotton Corporation. The Hypernetics business manufactures avionic components for various applications, including aircraft anti-skid braking systems, aircraft indicators, solenoids, and permanent magnet alternators. The Triodetic business is a design/build manufacturer of steel, aluminum, and stainless-steel specialty structures such as commercial domes, free form structures, barrel vaults, space frames, and industrial dome coverings. Summit Aerospace specializes in the high-end machining of super-alloys for the aircraft and helicopter markets. Spotton's business involves the design and manufacture of high-end custom hydraulic and pneumatic cylinders for the industrial, automation and oil and gas markets. The Elmira Stove Works business manufactures custom vintage-inspired kitchen appliances for the North American consumer market.
The address of the Company's registered office and principal place of business is 10 Didak Drive, Arnprior, Ontario.
2. Basis of presentation
(a) Statement of compliance
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") and were approved for issue by the Board of Directors on July 24, 2025.
(b) Basis of measurement
These consolidated financial statements have been prepared on a historical cost basis except for share-based compensation and for the purchase price allocation for business combinations, which are measured at fair value. Historical cost is generally based upon the fair value of the consideration given in exchange for assets.
(c) Basis of consolidation
The consolidated financial statements include the accounts of Plaintree Systems Inc. and its wholly-owned subsidiaries: Summit Aerospace USA Inc. and Triodetic Inc. (U.S. companies), and Triodetic Ltd, Spotton Corporation, and Elmira Stove Works Inc. (Canadian companies). Subsidiaries are entities controlled by the Company. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The accounting policies of subsidiaries align with the policies adopted by the Company. All inter-company transactions have been eliminated.
Page 8 of 36
WELch LLP
An Independent Member of BKR International
Plaintree Systems Inc.
Notes to the consolidated financial statements
March 31, 2025 and March 31, 2024
(In Canadian dollars)
3. Significant accounting policies
The significant accounting policies include the following:
Inventories
Inventories are valued using a standard costing formula and are stated at the lower of cost and net realizable value. Costs, including an appropriate portion of fixed and variable overhead expenses, are allocated to the weighted average cost of inventory by the method most appropriate to the particular class of inventory. Net realizable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment for losses. When parts of material items of property, plant and equipment have significantly different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. Depreciation is recognized so as to write off the cost of assets less their residual values over their useful lives using the straight-line method as follows:
| Building | 20 years |
|---|---|
| Leasehold improvements | 10 years |
| Factory equipment | 10 years |
| Computer equipment | 3 years |
| Office equipment and furniture | 10 years |
| Vehicles | 4 years |
Leases and right-of-use assets
At inception of a contract, the Company assesses whether a contract is, or contains, a lease based on whether the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Company recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured based on 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 lease incentives received. The assets are depreciated to the earlier of the end of the useful life of the right-of-use asset or the lease term using the straight-line method as this most closely reflects the expected pattern of consumption of the future economic benefits. The lease term includes periods covered by an option to extend if the Company is reasonably certain to exercise that option.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company's incremental borrowing rate.
Generally, the Company uses its incremental borrowing rate as the discount rate.
The lease liability is measured at amortized cost using the effective interest method. It is re-measured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Company's estimate of the amount expected to be payable under a residual value guarantee, or if the Company changes its assessment of whether it will exercise a purchase, extension or termination option. When the lease liability is re-measured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset or is recorded in profit or loss if the carrying amount of the right of use asset has been reduced to zero. Variable costs are not included in the measurement of the lease liability.
Page 9 of 36
WELch LLP
An Independent Member of BKR International
Plaintree Systems Inc.
Notes to the consolidated financial statements
March 31, 2025 and March 31, 2024
(In Canadian dollars)
3. Significant accounting policies - Cont'd.
Intangible assets
The Company's intangible assets consist of brands, a customer relationship, a non-competition agreement and software. Intangible assets are stated at cost less accumulated depreciation and accumulated impairment for losses. The Company uses the income approach to determine the fair value of its acquired intangible assets. This approach is a valuation technique that calculates the fair value of an intangible asset based on the cash flows that an asset can be expected to generate over its remaining useful life. These assets are capitalized and are amortized to operations over their estimated useful lives from the date that they are acquired and available for use, since this most closely reflects the expected usage and consumption patterns related to the future economic benefits embodied in the assets. The Company considers the length of time over which it expects to earn or recover the present value of the assets. Depreciation is recognized so as to write off the cost of assets over their useful lives using the straight-line method as follows:
| Software | 2 years |
|---|---|
| Customer relationship | 10 years |
| Non-competition agreement | 6.5 years |
| Brands | 10 years |
The Company's policy is to review all long-lived assets, including property, plant and equipment, and intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company will record an impairment of the asset if the recoverable amount, determined as the higher of an asset's fair value less costs to sell or the discounted future cash flows generated from use and eventual disposal of an asset, is less than its carrying value. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period.
Revenue recognition
Revenue is recognized upon transfer of control of products or services to customers at an amount that reflects the consideration the Company expects to receive in exchange for the products or services. This is achieved through applying the following five-step model:
- Identification of the contract, or contracts, with a customer
- Identification of the performance obligation in the contract
- Determination of the transaction price
- Allocation of the transaction price to the performance obligation in the contract
- Recognition of revenue when, or as, the Company satisfies a performance obligation
The Company generates substantially all of its revenue from contracts with customers, whether formal or implied for the delivery of customized products and services, except for Elmira where standard products are sold.
Page 10 of 36
WELch LLP
An Independent Member of BKR International
Plaintree Systems Inc.
Notes to the consolidated financial statements
March 31, 2025 and March 31, 2024
(In Canadian dollars)
3. Significant accounting policies - Cont'd.
Revenue recognition - Cont'd.
Given the custom nature of the products sold by the Company revenue is recognize over time using the percentage of completion method of services rendered that reflects the extent of work accomplished. Management estimates the percentage-of-completion by reference to measures of performance that are reasonably determinable and are directly related to the activities critical to completion of the contract.
The Company uses this method of revenue recognition as projected contract revenue and costs may reasonably be estimated based on the Company's business practices, methods and historical experience.
This method requires estimates of costs and profits over the entire term of the contract. Management regularly reviews underlying estimates of project profitability; revisions to estimates are reflected in the statement of income in the period in which the facts that give rise to the revision become known. Provisions for estimated losses, if any, are recognized in the period in which the loss is determined. Contract losses are measured as the amount by which the estimated costs of the contract exceed the estimated total revenue from the contract.
Where products sold are not customized, the company recognizes revenue at a point in time upon delivery of the goods.
Progress billings are recorded as deferred revenue to the extent that the billings exceed revenue recognized to date. Unbilled revenue is recorded to the extent that revenue has been recognized, but not yet billed to the customer.
Warranty obligations associated with the sale of equipment are assurance-type warranties and therefore do not represent a distinct performance obligation. The Company records a provision for assurance-type warranties at the time equipment sales are recognized as revenue.
Professional services may be provided for training and support. Professional services are typically billed on a time and material basis and revenue is recognized over time as the services are performed or delivered.
Generally the Company's performance obligations have an expected duration of under one year and as such the Company has elected to apply the practical expedient available under IFRS 15 to not disclose information relating to remaining performance obligations.
The Company recognizes an asset for the incremental costs of obtaining a contract with a customer if it expects the costs to be recoverable. Capitalized contract acquisition costs are amortized consistent with the pattern of transfer to the customer for the goods and services to which the asset relates. The Company applies the practical expedient available under IFRS 15 and does not capitalize incremental costs of obtaining contracts if the amortization period is one year or less. The Company had no material contract assets or liabilities.
The Company has elected to apply the practical expedient to not adjust the total consideration over the contract term for the effect of a financing component if the period between the transfer of services to the customer and the customer's payment for these services is expected to be one year or less.
Business combination
Business combinations are accounted for using the acquisition method. The cost of the business combination is measured as the aggregate of the fair values (at the date of exchange) of assets acquired and liabilities incurred or assumed. The acquiree's identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3, Business Combinations, are recognized at their fair values at the acquisition date. Acquisition costs are expensed as incurred.
Page 11 of 36
WELch LLP
An Independent Member of BKR International
Plaintree Systems Inc.
Notes to the consolidated financial statements
March 31, 2025 and March 31, 2024
(In Canadian dollars)
3. Significant accounting policies - Cont'd.
Functional currency
The Canadian dollar is the functional currency of the parent company and its subsidiaries.
Monetary assets and liabilities, which are denominated in foreign currencies, are translated to the entity's functional currency at period end exchange rates, and transactions included in the consolidated statement of comprehensive earnings are translated at average rates prevailing during the period. Exchange gains and losses resulting from the translation of these amounts are included in the consolidated statement of comprehensive earnings.
The accounts of the Company's wholly-owned U.S. subsidiaries, which have Canadian dollar functional currencies, have been translated into Canadian dollars using the exchange rates at period end for monetary items and at exchange rates at the transaction date for non-monetary items measured at historical costs. Exchange gains and losses resulting from the translation of these amounts are included in the consolidated statement of comprehensive earnings
Stock option plans
The Company measures equity settled stock options granted based on their fair value at the grant date and recognizes compensation expense over the vesting period. Expected forfeitures are estimated at the date of grant and subsequently adjusted if further information indicates actual forfeitures may vary from the original estimate. The impact of the revision of the original estimate is recognized in net earnings. Consideration paid by employees on the exercise of stock options is recorded as share capital and the related share-based payments are transferred from contributed surplus to share capital.
Investment tax credits and government assistance
Investment tax credits and government assistance are recorded as a reduction of the related expense or cost of the asset acquired. The benefits are recognized when the Company has complied with the terms and conditions of the approved grant program or applicable tax legislation.
Research and development expenditures
Current research costs are expensed as incurred while expenditures for research and development equipment, net of related investment tax credits, are capitalized.
Development costs are deferred and amortized when the criteria for deferral under IFRS are met, or otherwise, are expensed as incurred. To date, no such costs have been capitalized.
Income taxes
The Company's deferred income tax assets and liabilities are recognized for the future tax consequences attributable to tax loss carry-forwards and to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred income tax assets and liabilities are measured using tax rates that have been enacted or substantively enacted, applied to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred income tax assets and liabilities of a change of statutory tax rates is recognized in income in the period of enactment or substantive enactment. Deferred income tax assets are recognized to the extent it is probable that taxable profit will be available against which the deductible temporary difference can be utilized.
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, by the reporting date, in the countries where the Company operates and generates taxable income or operating losses.
Page 12 of 36
Welch LLP
An Independent Member of BKR International
Plaintree Systems Inc.
Notes to the consolidated financial statements
March 31, 2025 and March 31, 2024
(In Canadian dollars)
3. Significant accounting policies - Cont'd.
Basic earnings (loss) per share for continued and discontinued operations
Earnings (loss) per share has been calculated on the basis of net income attributable to common shareholders divided by the weighted average number of common shares outstanding during the period. Earnings (loss) attributable to common shareholders is equal to net income (loss) less the dividends accumulated on the preferred shares. Diluted earnings (loss) per common share is calculated by dividing the applicable net income attributable to common shareholders by the sum of the weighted average number of common shares outstanding and all additional common shares that would have been outstanding if potentially dilutive common shares had been issued during the period. The Company uses the treasury stock method in determining the denominator for earnings (loss) per share. Under this method, it is assumed that the proceeds from the exercise of options are used to repurchase common shares at the weighted average market price of the shares for the period.
Financial instruments
Financial assets and financial liabilities are recognized when the Company becomes party to the contractual provisions of the instrument.
All financial assets and financial liabilities are initially measured at fair value. Trade receivables are initially measured at the transaction price which represents fair value at the date of the transaction. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss ("FVTPL")) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.
Financial assets
All financial assets are recognized and de-recognized on trade date.
The Company determines the classification of its financial assets on the basis of both the business model for managing the financial assets and the contractual cash flow characteristics of the financial asset. Financial assets are not reclassified subsequent to their initial recognition unless the Company changes its business model for managing financial assets.
A financial asset is measured at amortized cost if it is held within a business model whose objective is to hold assets to collect contractual cash flows, and its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
| Financial asset | Classification under IFRS 9 |
|---|---|
| Cash and cash equivalents | Amortized cost |
| Trade and other receivables | Amortized cost |
| Unbilled receivables | Amortized cost |
| Mortgage receivable | Amortized cost |
Page 13 of 36
WELch LLP
An Independent Member of BKR International
Plaintree Systems Inc.
Notes to the consolidated financial statements
March 31, 2025 and March 31, 2024
(In Canadian dollars)
3. Significant accounting policies - Cont'd.
Financial instruments – Cont'd.
Amortized cost
Subsequent to initial recognition, financial assets at amortized cost are measured using the effective interest method, less any impairment. Interest income is recognized by applying the effective interest rate except for short-term receivables where the interest revenue would be immaterial. Interest income, foreign exchange gains and losses, impairment, and any gain or loss on de-recognition are recognized in profit or loss.
Impairment of financial assets
The Company measures a loss allowance based on the lifetime expected credit losses. Lifetime expected credit losses are estimated based on factors such as the Company's past experience of collecting payments, the number of delayed payments in the portfolio past the average credit period, observable changes in national or local economic conditions that correlate with default on receivables, financial difficulty of the borrower, and it becoming probable that the borrower will enter bankruptcy or financial re-organization.
Financial assets are written off when there is no reasonable expectation of recovery.
Financial liabilities
The Company determines the classification of its financial liabilities at initial recognition. The Company's financial liabilities are classified as follows:
| Financial liability | Classification under IFRS |
|---|---|
| Trade payables and accrued liabilities | Amortized cost |
| Bank loans, loans | Amortized cost |
Amortized cost
Financial liabilities at amortized cost are measured using the effective interest rate method, including the impact of deferred financing fees.
De-recognition of financial liabilities
The Company derecognizes a financial liability (in whole or part) from its balance sheet when it is extinguished. This occurs when the obligation in the contract is discharged, cancelled or expires.
A financial liability is extinguished when the debtor either:
- Discharges the liability:
- The company pays the creditor and is released from its primary obligation.
-
Payments can be made in cash, other financial assets, goods or services.
-
Cancellation or expiry:
- The company and the creditor agree to cancel the liability.
- The liability expires or is legally voided.
Page 14 of 36
WELch LLP
An Independent Member of BKR International
Plaintree Systems Inc.
Notes to the consolidated financial statements
March 31, 2025 and March 31, 2024
(In Canadian dollars)
3. Significant accounting policies - Cont'd.
Loan derecognition - Cont'd.
Assessment of derecognition:
The determination of whether a financial liability should be derecognized involves assessing whether the obligation has been substantially modified or settled. The following criteria are applied:
- Legal discharge:
-
The company obtains a legal release from the creditor indicating that the legal liability is no longer enforceable.
-
Settlement through negotiation:
- Any negotiations leading to the cancellation or substantial modification of the terms of the liability are documented and assessed.
-
If the terms are substantially modified, the original liability is derecognized and a new financial liability is recognized based on the modified terms.
-
Litigation outcomes:
- When a financial liability is subject to litigation, the Company assess the probability of successfully negating the payment obligation.
- If it is probable, based on legal opinions and management judgement, that the litigation will result in the liability being voided, the liability is derecognized.
Gains and losses on derecognition:
Any gain or loss arising from the derecognition of a financial liability is recognized in the income statement under 'Other Income' or 'Other Expenses'. The gain or loss is calculated as the difference between the carrying amount of the liability (or part of the liability) extinguished and the consideration paid, including any non-cash assets transferred or liabilities assumed.
Disclosure:
The Company provides comprehensive disclosures about the nature and financial effects of derecognition of financial liabilities, including the rationale and basis for derecognition, in its financial statements.
Critical accounting estimates and judgements
The preparation of financial statements requires management to select appropriate accounting policies and to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period.
Revenue recognition
Application of the accounting principles related to measurement and recognition of revenue requires the Company to make judgments and estimates.
Revenue for customized products is recognized over time based on the estimated percentage-of-completion of services rendered at each period-end. This method requires management to estimate total costs and profits over the entire term of the contract.
Page 15 of 36
WELch LLP
An Independent Member of BKR International
Plaintree Systems Inc.
Notes to the consolidated financial statements
March 31, 2025 and March 31, 2024
(In Canadian dollars)
3. Significant accounting policies - Cont'd.
Impairment of trade receivables
Management determines the estimated recoverability of trade receivables based on the evaluation and ageing of trade receivables, including the current creditworthiness and the past collection history of the customers and reviews these estimates at the end of each reporting period. The Company maintains an allowance for doubtful accounts to provide for impairment of trade receivables.
Impairment of long-lived assets
The following abbreviations are referenced below:
- CGU: Cash generating unit
- FVLCD: Fair value, less costs of disposal
- VIU: Value in use
Long-lived assets, including property and equipment and intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset exceeds its recoverable amount. The recoverable amount of an asset or a CGU is the higher of its FVLCD, and its VIU. If the carrying amount of an asset exceeds its recoverable amount, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the recoverable amount. Where an impairment loss subsequently reverses, the carrying amount of the asset is increased, except for goodwill, to the lesser of the revised estimate of recoverable amount, and the carrying amount that would have been recorded had no impairment loss been recognized previously. Management uses information available to estimate if indicators of impairment exist when calculating the recoverable amount.
Determination of CGUs
Management is required to use judgement in determining which assets or group of assets make up appropriate CGUs for the level at which goodwill and intangible assets with indefinite lives are tested for impairment. A CGU is defined as the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets.
Useful lives of property, plant and equipment and intangible assets
Management determines the estimated useful lives of its property, plant and equipment based on historical experience of the actual lives of property, plant and equipment of similar nature and functions and reviews these estimates at the end of each reporting period. The useful lives of intangible assets are based on management's best estimate of the expected life of the economic benefits that will be derived from the assets.
Inventory Impairment
Inventories are measured at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. An impairment loss is recognized when the carrying amount exceeds net realizable value. Inventory impairment losses are reversed in subsequent periods if the reasons for the impairment no longer exist.
Page 16 of 36
WELch LLP
An Independent Member of BKR International
Plaintree Systems Inc.
Notes to the consolidated financial statements
March 31, 2025 and March 31, 2024
(In Canadian dollars)
3. Significant accounting policies - Cont'd.
Functional currency
Revenue contracts are priced in a variety of currencies whereas the cost structure inputs are primarily in Canadian dollars. Secondary indicators of functional currency, including financing and cash holdings are primarily in Canadian dollars. As the primary indicators of functional currency do not clearly indicate a specific currency, the indicators as a whole have been judged to indicate the Canadian dollar as the functional currency of the parent company and its subsidiaries.
Estimation uncertainty
Critical accounting policies and estimates utilized in the normal course of preparing the Company's consolidated financial statements require the determination of future cash flows utilized in assessing net recoverable amounts and net realizable values; allowance for bad debt; useful lives of property, equipment and intangible assets; percentage-of-completion for revenue recognition; unbilled revenue; deferred revenue; inventory obsolescence; ability to utilize tax losses; and measurement of deferred taxes. In making estimates, management relies on external information and observable conditions where possible, supplemented by internal analysis where required.
These estimates have been applied in a manner consistent with that in the prior periods and there are no known trends, commitments, events or uncertainties that we believe will materially affect the methodology or assumptions utilized in these consolidated financial statements. The estimates are impacted by many factors, some of which are highly uncertain. The interrelated nature of these factors prevents us from quantifying the overall impact of these movements on the Company's consolidated financial statements in a meaningful way. These sources of estimation uncertainty relate in varying degrees to virtually all asset and liability account balances.
4. Inventories
| March 31, 2025 | March 31, 2024 | |
|---|---|---|
| $ | $ | |
| Raw materials | 2,997,875 | 3,245,735 |
| Work in process | 554,786 | 644,843 |
| Finished goods | 11,575 | 49,394 |
| 3,564,235 | 3,939,972 |
The cost of inventories recognized as an expense during the year was $19,227,578 ($16,286,471 in 2024). The total carrying value of inventory as at March 31, 2025, was pledged as security through general security agreements under bank lines of credit and related party liabilities (see note 11 and 17).
The Company wrote down its inventories by $1,365,139 in fiscal 2025 ($64,005, in 2024) to reflect where the carrying amount exceeded net realizable value. This includes a $1,112,870 one-time provision on Elmira's inventory to reflect the custom nature of the stock and an impairment of $214,202 recorded against inventory, see Note 10. The Company had write-ups in the year totaling $52,301 ($38,102 in 2024).
Page 17 of 36
Welch LLP
An Independent Member of BKR International
Plaintree Systems Inc.
Notes to the consolidated financial statements
March 31, 2025 and March 31, 2024
(In Canadian dollars)
5. Mortgage receivable
In March 2020, the Company sold a building owned by it in Arnprior Ontario for $1.3 million. The consideration was paid by $1 million in cash and by a vendor take mortgage of $300,000. The vendor take-back mortgage has a five year term and earns interest at 6.076%. The Issuer has secured the vendor take-back mortgage by a charge over the building and other security. The building was not used by the Issuer in its operations and was leased to a third party. The gain on sale was $283,068. The purchaser was in default as of March 4, 2025 but was remedied by March 31, 2025 with a short-term agreement ensuring payment in the first quarter of fiscal 2026. Subsequent to the fiscal year end, the loan was fully paid and discharged. The remaining mortgage payments are as follows:
$
2026
272,008
Net mortgage receipts
272,008
6. Long-term debt
| March 31, 2025 | March 31, 2024 | |
|---|---|---|
| Non-revolving loan payable ($172,944 USD) in monthly blended installments of principal and interest, $9,883 USD, at a rate of 4.1%, secured by general security agreement, maturing April 2024. | 0 | 9,528 |
| Non-revolving loan payable in monthly installments of principal, $19,565 plus monthly interest at a rate of prime + 1%, secured by general security agreement, maturing March 2027. | 939,108 | 1,193,450 |
| Non-revolving loan payable in monthly blended installments of principal and interest, $15,148, at a rate of 3.640%, secured by general security agreement, maturing March 2026. | 178,243 | 364,168 |
| Deferred financing fees | (41,150) | (64,260) |
| 1,076,201 | 1,502,886 | |
| Current portion | (1,076,201) | (426,685) |
| - | 1,076,201 |
Principal repayments required on bank debt in the next five years and thereafter are as follows:
| $ | |
|---|---|
| 2026 | 389,856 |
| 2027 | 686,345 |
| Net loan re-payments | 1,076,201 |
Long-term debt, excluding non-covenant based instruments, totaling $1,117,351 ($1,567,145 in 2024) are subject to certain covenants, including a debt service covenant, which the Company was not in compliance with as at March 31, 2025 and as a result, $673,468 was included in the current portion of long-term debt. In fiscal year 2024, the company was in compliance with all covenants.
Page 18 of 36
Plaintree Systems Inc.
Notes to the consolidated financial statements
March 31, 2025 and March 31, 2024
(In Canadian dollars)
7. Lease Obligation
The Company's leases are for factory equipment, sales showroom and plant. The leases are typically 5 to 7 years in length and are subject to a range of interest rates from 4 to 8 percent per annum. During the second quarter of Fiscal 2022, the Company entered into a 5-year office lease agreement with a related party. During the first quarter of fiscal 2025, this lease was modified to a 2-year lease, modifying the existing 5-year building lease. This lease has been recorded as a right of use asset and lease liability on the consolidated statement of financial position. The landlord is a related party and has provided a three-month rent forgiveness in fiscal 2026 of $203,250 before tax. In the first quarter of Fiscal 2023, the Company entered into a 3-year showroom lease for the Elmira business in Elmira, Ontario, which has since expired. An 8-month extension was signed in Fiscal 2025 and recorded as an operating lease.
The following table presents the Company's lease obligations as at March 31, 2025:
| Factory Equipment Leases | Building Lease | Total | |
|---|---|---|---|
| Fiscal 2026 | 481,691 | 813,000 | 1,294,691 |
| Fiscal 2027 | 513,391 | - | 513,391 |
| Fiscal 2028 | 400,060 | - | 400,060 |
| Thereafter | 3,384 | - | 3,384 |
| Total future minimum lease payments | 1,398,526 | 813,000 | 2,211,526 |
| Inputed interest | (125,710) | (29,337) | (155,047) |
| Total lease liabilities | 1,272,816 | 783,663 | 2,056,479 |
| Less: current portion | (1,114,944) | (783,663) | (1,898,607) |
| Non-current portion | 157,872 | - | 157,872 |
The following table presents the Company's lease obligations as at March 31, 2024:
| Factory Equipment Leases | Building Lease | Total | |
|---|---|---|---|
| Fiscal 2025 | 493,764 | 634,352 | 1,128,116 |
| Fiscal 2026 | 433,419 | 609,750 | 1,043,169 |
| Fiscal 2027 | 394,910 | 152,438 | 547,348 |
| Fiscal 2028 | 399,488 | - | 399,488 |
| Total future minimum lease payments | 1,721,581 | 1,396,540 | 3,118,121 |
| Inputed interest | (209,456) | (55,699) | (265,155) |
| Total lease liabilities | 1,512,125 | 1,340,841 | 2,852,966 |
| Less: current portion | (493,764) | (634,352) | (1,128,116) |
| Non-current portion | 1,018,361 | 706,489 | 1,724,850 |
Interest expense on lease obligations for the year ended March 31, 2025 was $102,944 (2024 - $141,915). Variable lease payments for operating costs not included in the measurement of lease obligations for the year ended March 31, 2025 was $10,632 (2024 - $10,632).
Welch LLP
An Independent Member of BKR International
Welch LLP
An Independent Member of BKR International
Plaintree Systems Inc.
Notes to the consolidated financial statements
March 31, 2025 and March 31, 2024
(In Canadian dollars)
7. Lease Obligation - Cont'd.
Expenses relating to short-term leases and leases of low value assets for the year ended March 31, 2025 were $9,375 (2024 - $9,375). Total cash outflow for leases was $1,253,391 (2024 - $1,160,160), including $1,161,080 (2024 - $1,020,157) of principal payments on lease obligations.
The following table presents the future contractual cash flows for short-term leases at March 31, 2025:
| $ | |
|---|---|
| 2026 | 21,680 |
| 2027 | 10,632 |
| 2028 | 5,358 |
Included in the factory equipment leases are $968,580 of leases subject to certain covenants ($1,114,878 in 2024), which the Company was not in compliance with as at March 31, 2024 and as a result, $703,623 was included in the current portion of long-term debt. In fiscal year 2024, the company was in compliance with all covenants.
8. Government assistance
The Company's Summit Aerospace USA Inc. division accepted a loan of $720,000 USD ($899,712CAD) from the Pennsylvania Industrial Development Authority (PIDA) as partial financing towards the manufacturing facility in Pocono Summit, PA purchased in May 2013. The loan carries a 15-year term, maturing in May 2029, with level monthly payments of principal and interest at a fixed rate of 1.5%. The loan is secured by the related land and building.
The Company records the government loan at its estimated fair value at the date in which the payments are recorded. The estimated fair value of the loan payable is determined by discounting future cash flows associated with the loan at a discount rate which represents the estimated borrowing rate to the Company. The difference between the face value of the loan and the estimated fair value is deemed to be government assistance. The loan payable is accreted to the face value over the term of the loan and is recognized as accretion expense.
| Loan present value | Deferred Government Assistance | Repayable government Assistance | |
|---|---|---|---|
| $ | $ | $ | |
| Opening Balance | 341,799 | 26,641 | 368,440 |
| Loan adjustment for exchange | 20,836 | 1,624 | 22,460 |
| Repayments | (73,370) | (73,370) | |
| Accretion | 21,304 | (21,304) | - |
| March 31, 2025 | 310,568 | 6,961 | 317,529 |
| Current Portion | (74,479) | (13,442) | (87,921) |
| Balance | 236,089 | (6,480) | 229,608 |
Page 20 of 36
Welch LLP
An Independent Member of BKR International
Plaintree Systems Inc.
Notes to the consolidated financial statements
March 31, 2025 and March 31, 2024
(In Canadian dollars)
8. Government assistance – Cont'd
Total future minimum loan payments, of obligations under government assistance for the next five years are as follows:
| $ | |
|---|---|
| 2026 | 74,483 |
| 2027 | 75,601 |
| 2028 | 76,746 |
| 2029 | 77,905 |
| 2030 and thereafter | 12,794 |
| Net loan re-payments | 317,529 |
The company did not record any government assistance in fiscal 2025.
9. Property, plant and equipment, right of use assets
| Factory equipment | Computer equipment | Furniture | Vehicles | Lease improvements | Building | Land | Total | |
|---|---|---|---|---|---|---|---|---|
| $ | $ | $ | $ | $ | $ | $ | $ | |
| Cost, balance | ||||||||
| March 31, 2023 | 13,424,268 | 1,170,423 | 202,313 | 421,086 | 2,313,010 | 3,933,069 | 124,557 | 21,588,726 |
| Additions | 495,822 | 8,927 | - | 12,000 | 33,598 | - | - | 550,347 |
| Disposals | (117,895) | (213,778) | - | (9,562) | - | - | - | (341,235) |
| March 31, 2024 | 13,802,194 | 965,572 | 202,313 | 423,524 | 2,346,608 | 3,933,069 | 124,557 | 21,797,837 |
| Additions | 912,819 | 10,622 | - | - | 37,710 | 248,668 | - | 1,209,819 |
| Disposals | (707,616) | - | - | (11,984) | - | - | - | (719,600) |
| March 31, 2025 | 14,007,397 | 976,194 | 202,313 | 411,540 | 2,384,318 | 4,181,737 | 124,557 | 22,288,055 |
| Depreciation, balance | ||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| March 31, 2023 | (10,976,069) | (1,150,198) | (202,313) | (420,614) | (1,582,829) | (1,643,296) | - | (15,975,320) |
| Depreciation | (487,809) | (11,966) | - | (2,473) | (154,809) | (660,452) | - | (1,317,509) |
| Disposal | 77,952 | 213,778 | - | 9,562 | - | - | - | 301,292 |
| March 31, 2024 | (11,385,926) | (948,386) | (202,313) | (413,526) | (1,737,638) | (2,303,748) | - | (16,991,538) |
| Depreciation | (530,206) | (11,883) | - | (3,000) | (109,350) | (860,261) | - | (1,514,700) |
| Disposal | 395,552 | - | - | 11,984 | - | - | - | 407,536 |
| March 31, 2025 | (11,520,580) | (960,269) | (202,313) | (404,542) | (1,846,989) | (3,164,009) | - | (18,098,701) |
| Carrying amount, | ||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| March 31, 2025 | 2,486,817 | 15,925 | (0) | 6,999 | 537,330 | 1,017,728 | 124,557 | 4,189,355 |
| March 31, 2024 | 2,416,268 | 17,186 | (0) | 9,999 | 608,970 | 1,629,321 | 124,557 | 4,806,300 |
Included in factory equipment are right of use assets with a cost of $3,341,086 and accumulated amortization of $1,169,921 (2024 - cost of $3,088,301 and accumulated amortization of $863,613) and included in building are right of use assets with a cost of $3,173,953 and accumulated depreciation of $2,406,732 (2024 - cost of $2,925,285 and accumulated amortization of $1,616,841). Some equipment with a value of $14,534 was fully amortized prior to its disposal and some equipment with a value of $6,370 and accumulated depreciation of $3,556 was disposed of during the year. Refer to Note 7 for a breakdown of the Company's lease obligations.
Page 21 of 36
WELch LLP
An Independent Member of BKR International
Plaintree Systems Inc.
Notes to the consolidated financial statements
March 31, 2025 and March 31, 2024
(In Canadian dollars)
10. Intangibles
| Cost, balance | Brand | Goodwill | Software | Customer Relationship and Non-compete | Total | ||
|---|---|---|---|---|---|---|---|
| $ | $ | ||||||
| March 31, 2023 | 655,000 | 186,816 | 449,719 | 616,000 | 1,907,538 | ||
| Additions | - | - | 18,590 | - | 18,590 | ||
| Impairment | (89,249) | (186,816) | - | (83,935) | (360,000) | ||
| Disposals | - | - | (104,758) | - | (104,758) | ||
| March 31, 2024 | 565,751 | - | 363,551 | 532,065 | 1,461,367 | ||
| Additions | - | - | 31,090 | - | 31,090 | ||
| Impairment | (380,407) | - | (43,255) | (357,757) | (781,419) | ||
| Disposals | - | - | - | - | - | ||
| March 31, 2025 | 185,344 | - | 351,386 | 174,308 | 711,038 | ||
| Accumulated Depreciation, balance | |||||||
| March 31, 2023 | (65,500) | - | (352,444) | (61,600) | (479,544) | ||
| Depreciation | (65,500) | - | (67,886) | (61,600) | (194,986) | ||
| Disposals | - | - | 104,759 | - | 104,759 | ||
| March 31, 2024 | (131,000) | - | (315,325) | (123,200) | (569,526) | ||
| Depreciation | (54,344) | - | (36,306) | (51,108) | (141,758) | ||
| Disposals | - | - | - | - | - | ||
| March 31, 2025 | (185,344) | - | (351,386) | (174,308) | (711,038) | ||
| Carrying amount, | |||||||
| March 31, 2025 | - | - | - | - | - | ||
| March 31, 2024 | 434,751 | - | 48,226 | 408,865 | 891,842 |
Management reviewed the recoverable amount of intangible assets for the CGU. The intangible asset carrying value is allocated to the Elmira CGU. The Elmira CGU is allocated to the Applied Electronics operating segment (see Note 15). Elmira Stove Works manufactures custom vintage-inspired kitchen appliances for the North American consumer market. The recoverable amount was assessed by reference to the fair value less costs of disposal ("FVLCD") calculation using level 3 fair value inputs. The near term cash flow estimate for the Elmira CGU forecasted negative cash flow including in the terminal period requiring the Company to assess fair value by reference to discounted asset values less Management's estimated disposal costs. The key assumption is that the intangible assets have no value under a liquidation model. The other assumptions (5% brokerage fee, and 6 month discount period) don't have a material impact on the estimate. The applied discount rate (WACC) of 27.11% per annum was influenced by interest rates, equity, and size risk premium rates.
Management determined that an impairment charge was required to write off intangible assets of $380,407 on Brand, $357,757 on Customer Relationship, and $43,255 on Software for a combined $781,419 impairment, with an additional impairment of $214,202 against inventory. The recoverable amount was assessed as the higher of the value in use and the fair value less costs of disposal. The fair value less costs of disposal method provided a higher result due several factors. The share purchase agreement for Elmira warranted that all products were fit for sale. The sellers had not kept up the Canadian Standards Association ("CSA") reporting which is required to sell appliances in North America. In 2024, CSA pulled Elmira's right to ship ranges, including electric, gas, and mixed fuel, pending a recertification process. This process has continued into 2025, resulting in a large build-up of finished goods for products that were not impacted and re-designs of the ranges to meet the new standards. Order acceptance has slowed materially due to geopolitical and market headwinds. With three-quarters of Elmira's customers residing in the United States, this has had a devastating impact on new business. Elmira was unable to operate as it had historically resulting in negative value in use, and so a change in testing methodology was required using the fair value less costs of disposal. The recoverable amount of the CGU amounted to $414,188 as at March 31, 2025.
Page 22 of 36
WELch LLP
An Independent Member of BKR International
Plaintree Systems Inc.
Notes to the consolidated financial statements
March 31, 2025 and March 31, 2024
(In Canadian dollars)
11. Due to related parties
| March 31, 2025 | March 31, 2024 | |
|---|---|---|
| Due to senior officers | $ 3,615,401 | $ 3,663,669 |
| Dividends payable | 60,000 | 60,000 |
| Due to Targa Group Inc. | 247,672 | 247,672 |
| Due to Tidal Quality Management Inc. | 398,388 | 398,388 |
| Due to Targa Group Inc, line of credit interest | 242,598 | 242,598 |
| Due to Targa Group Inc, demand loan interest | 201,393 | 201,393 |
| Less: current portion | 4,765,451 | |
| (50,000) | 4,813,720 | |
| (50,000) | ||
| 4,715,451 | 4,763,720 |
Targa Group Inc. and Tidal Quality Management Inc. are companies under common control.
As at March 31, 2025, a balance of $3,615,401 ($2,479,767 principal and $1,135,634 interest); March 31, 2024 - $3,663,669 ($2,528,035 principal and $1,135,634 interest) remained owing to senior officers of the Company. The parties agreed to discontinue interest payments accruing on balances as of April 1, 2016. During the year payments in the amount of $48,268 were repaid to senior officers. As of March 31, 2025, $50,000 was classified as current. The balance of the amount is classified as long-term, as the related party has agreed with third-party lenders to postpone repayments.
On July 14, 2011, the board of directors of the Company declared a cash dividend of $10.91405 per Class A preferred share ($200,000 in the aggregate) payable on July 22, 2011, to the holders of record at the close of business on July 18, 2011. The Class A preferred shares are held by related parties and are entitled to annual cumulative dividends of 8% on the $1,000 redemption amount of the Class A preferred share. An amount of $60,000 ($60,000 in 2024) of the dividend remains outstanding as at March 31, 2025. The balance of the amount is classified as long-term, as the related party has agreed with third-party lenders to postpone repayments.
As at March 31, 2025, interest in the amount of $247,672 ($247,672 in 2024) on a loan from Targa remains outstanding. The balance of the amount is classified as long-term, as the related party has agreed with third-party lenders to postpone repayments.
As at March 31, 2025, a balance of $398,388 ($215,500 rent arrears and $182,888 interest); March 31, 2024 - $398,388 ($215,500 rent arrears and $182,888 interest) remained owing to a related party controlled by Targa, Tidal Quality Management Corp. The party agreed to discontinue interest accruing on unpaid balances as at April 1, 2016. Until then the interest rate was at bank prime plus 2%. The balance of the amount is classified as long-term, as the related party has agreed with third-party lenders to postpone repayments.
The Company has a revolving line of credit of up to $1,000,000 with Targa. Under the loan agreements, all amounts advanced to the Company are payable on demand and bear interest at bank prime plus 2%. The Targa Credit Line is secured by a security interest granted over the assets of the Company. As at March 31, 2025, $NIL ($NIL in 2024) remained outstanding on the line of credit with accumulated interest of $242,598 ($242,598 in 2024) outstanding for a balance of $242,598 ($242,598 in 2024). The balance of the amount is classified as long-term, as the related party has agreed with third-party lenders to postpone repayments.
Page 23 of 36
Welch LLP
An Independent Member of BKR International
Plaintree Systems Inc.
Notes to the consolidated financial statements
March 31, 2025 and March 31, 2024
(In Canadian dollars)
11. Due to related parties - Cont'd.
Interest in the amount of $66,581 ($66,581 in 2023) remained outstanding on a demand loan with Targa. The balance of the amount is classified as long-term, as the related party has agreed with third-party lenders to postpone repayments. Accumulated interest in the amount of $134,812 ($134,812 in 2023), on a loan from Targa remains outstanding as of March 31, 2024. The balance of the amount is classified as long-term, as the related party has agreed with third-party lenders to postpone repayments.
Rents paid to Tidal Quality Management Corp during the year ended March 31, 2025 totaled $992,140 (2024 - $685,976). The above related party transactions are measured at their exchange amount, which is the amount agreed to by the parties. See note 7 for additional details.
During the year two directors provided consulting services for consideration of $35,000 (2024 - $36,300) which has been recorded as an expense in the year.
12. Trade and other payables
Trade and other payables are comprised of the following:
| March 31, 2025 | March 31, 2024 | |
|---|---|---|
| $ | $ | |
| Accounts payable | 1,819,199 | 1,400,229 |
| Accrued liabilities | 274,902 | 462,770 |
| Salaries and benefits payable | 497,430 | 403,958 |
| 2,591,531 | 2,266,957 |
13. Share capital
Authorized, unlimited number
Common shares, voting
Class A preferred shares
Class A preferred shares entitled to a cumulative dividend, calculated on a redemption amount, payable in priority to dividends on common shares, redeemable at the option of the Company at any time at $1000 per share plus 8% cumulative dividends, calculated on redemption amount, redeemable at the option of the Company at any time liquidation preference of the redemption value plus cumulative dividends (when and if declared) to common shares; non-voting. As of March 31, 2025, the accrued and unpaid dividends on Class A preferred shares were $24,122,000 ($22,656,000 in 2024).
Stock option plans
Stock options
Under the Company's Stock Option Plan, the Company is authorized to issue up to 12,000,000 stock options to its employees, officers, directors or consultants.
Stock options are granted with an exercise price equal to the stock's fair market value at the date of grant and the maximum term of an option is ten years. Options are granted periodically and vest immediately on the date of grant.
Page 24 of 36
Welch LLP
An Independent Member of BKR International
Plaintree Systems Inc.
Notes to the consolidated financial statements
March 31, 2025 and March 31, 2024
(In Canadian dollars)
13. Share capital - Cont'd.
Information related to the share options outstanding at March 31, 2025 is presented below:
| Number of shares | Weighted average exercise prices | |
|---|---|---|
| # | $ | |
| Options outstanding, beginning of year | 880,000 | 0.11 |
| Granted | 0 | 0 |
| Options outstanding, end of year | 880,000 | 0.11 |
The following table summarizes information about stock options outstanding at March 31, 2025:
| Exercise Price | Options Outstanding | |||
|---|---|---|---|---|
| Number outstanding at March 31, 2025 | Weighted average remaining contractual life (in years) | Weighted average exercise price | Number excercisable at March 31, 2025 | |
| $ | # | $ | # | |
| 0.11 | 880,000 | 4.72 | 0.11 | 880,000 |
During the year ended March 31, 2020, 880,000 stock options were granted to employees and directors of the Company at an exercise price of $0.11 with an expiry date of December 16, 2029.
| Grant Date | Options Granted | Stock Price | Exercise Price | Expected Life | Volatility | Dividend Rate | Risk Free Rate | Per-Share Weighted Average Fair Value |
|---|---|---|---|---|---|---|---|---|
| $ | $ | $ | ||||||
| December 16, 2019 | 880,000 | 0.08 | 0.11 | 5 years | 214% | 0% | 1.67% | 0.08 |
Page 25 of 36
Welch LLP
An Independent Member of BKR International
Plaintree Systems Inc.
Notes to the consolidated financial statements
March 31, 2025 and March 31, 2024
(In Canadian dollars)
14. Basic and diluted earnings per common share
Net (loss) income attributable to common shares used in the numerator of basic and diluted earnings per share is calculated as follows:
For the years ended March 31, 2025 and 2024, diluted earnings per share equals basic earnings per share due to the anti-dilutive effect of options and convertible instruments.
| March 31, 2025 | March 31, 2024 | |
|---|---|---|
| $ | $ | |
| Net profit/(loss) from operations | (1,810,754) | 1,071,906 |
| Cumulative dividends on preferred shares - per annum | (1,466,000) | (1,466,000) |
| Net (loss) attributed to common shares | ||
| (basis and diluted) | (3,276,754) | (394,094) |
| Basic and diluted weighted average shares outstanding | 12,925,253 | 12,925,253 |
| Basic and diluted (loss) per share from operations | (0.25) | (0.03) |
15. Business segment information
The Company's chief decision maker, the CEO, tracks the Company's operations as two business segments - the design, development, manufacture, marketing and support of electronic product, and the specialty structural products. The Company determines the geographical location of revenue based on the location of its customers. Of the total balance of $4,189,355 (2024 - $4,806,300) in property, plant and equipment, $3,481,048 (2024 - $3,917,598) is located in Canada and $708,307 (2024 - $888,702) in the United States. All the Company's intangible assets are primarily located in Canada.
Page 26 of 36
Welch LLP
An Independent Member of BKR International
Plaintree Systems Inc.
Notes to the consolidated financial statements
March 31, 2025 and March 31, 2024
(In Canadian dollars)
15. Business segment information - Cont'd.
Revenue by division
| Twelve months ending | |
|---|---|
| March 31, 2025 | March 31, 2024 |
| $ | $ |
| Applied Electronics | |
| 7,052,767 | 10,512,522 |
| Specialty Structures | |
| 16,794,428 | 13,692,283 |
| 23,847,195 | 24,204,805 |
Revenue by geographical location
| Twelve months ending | |
|---|---|
| March 31, 2025 | March 31, 2024 |
| $ | $ |
| Canada | |
| 10,578,881 | 9,810,267 |
| United States | |
| 7,608,984 | 14,188,291 |
| Other | |
| 5,659,330 | 206,247 |
| 23,847,195 | 24,204,805 |
Net earnings (loss) before taxes by division
| Twelve months ending | |
|---|---|
| March 31, 2025 | March 31, 2024 |
| $ | $ |
| Applied Electronics | |
| (3,264,771) | (754,024) |
| Specialty Structures | |
| 1,475,396 | 1,825,930 |
| (1,789,375) | 1,071,906 |
Loss on impairment by division
| Twelve months ending | |
|---|---|
| March 31, 2025 | March 31, 2024 |
| $ | $ |
| Applied Electronics | |
| 995,621 | 360,000 |
| Specialty Structures | |
| 0 | 0 |
| 995,621 | 360,000 |
Page 27 of 36
Welch LLP
An Independent Member of BKR International
Plaintree Systems Inc.
Notes to the consolidated financial statements
March 31, 2025 and March 31, 2024
(In Canadian dollars)
15. Business segment information – Cont’d.
| Twelve months ending | ||
|---|---|---|
| March 31, 2025 | March 31, 2024 | |
| Number of customers | 2 | 2 |
| % of total revenue | 10%, 29% | 11%, 15% |
| Assets by division | Twelve months ending | |
| March 31, 2025 | March 31, 2024 | |
| Applied Electronics | $ | $ |
| Specialty Structures | 6,517,582 | 9,458,465 |
| 7,341,077 | 5,526,162 | |
| Intangibles by division | Twelve months ending | |
| March 31, 2025 | March 31, 2024 | |
| Applied Electronics | $ | $ |
| Specialty Structures | 0 | 891,842 |
| 0 | 0 |
16. Income taxes
Deferred income taxes reflect the impact of loss carry-forwards and of temporary differences between amounts of assets and liabilities for financial reporting purposes and such amounts are measured by tax laws. The temporary differences and loss carry-forwards that gave rise to significant portions of the deferred tax asset, which have not been recognized, are as follows:
Page 28 of 36
Welch LLP
An Independent Member of BKR International
Plaintree Systems Inc.
Notes to the consolidated financial statements
March 31, 2025 and March 31, 2024
(In Canadian dollars)
16. Income taxes - Cont'd.
| 2025 | 2024 | |
|---|---|---|
| $ | $ | |
| Accounting depreciation in excess of tax | 442,000 | 160,000 |
| Intangible assets | 184,000 | (739,000) |
| Research and development expenses not deducted for tax | 8,982,000 | 14,957,000 |
| Losses available to offset future income taxes | 13,826,000 | 8,668,000 |
| Capital losses | 192,000 | 363,000 |
| Capital leases | 212,000 | 20,000 |
| Accruals | 2,511,000 | 2,385,000 |
| Other | 451,000 | 425,000 |
| 26,800,000 | 26,239,000 |
The Company has claimed less research and development expenses for income tax purposes than has been reflected in the financial statements. These unclaimed expenses total approximately $8,982,000 (2024 - $14,957,000) for Canadian federal and provincial tax purposes. These are available without expiry to reduce future years' taxable income.
As at March 31, 2025, the Company has approximately $33,000 (2024 - $33,000) of investment tax credits, relating primarily to research and development, available to reduce future year's Canadian federal income taxes. These potential benefits expire as follows:
| $ | |
|---|---|
| 2029 | 12,000 |
| 2030 | 16,000 |
| 2031 | 5,000 |
| 33,000 |
Page 29 of 36
Welch LLP
An Independent Member of BKR International
Plaintree Systems Inc.
Notes to the consolidated financial statements
March 31, 2025 and March 31, 2024
(In Canadian dollars)
16. Income taxes - Cont'd.
The provision for income taxes in the statement of comprehensive income differs from the amount computed by applying the Canadian statutory rate to the loss before income taxes for the following reasons:
| 2025 | 2024 | |
|---|---|---|
| $ | $ | |
| Expected income tax expense (benefit) | (434,988) | 267,976 |
| Changes in unrealized deferred tax assets | - | (346,101) |
| Future rate changes | 11,916 | (16,089) |
| True up on current taxes | - | (1,214) |
| True up on future taxes | - | (794) |
| Permanent differences | 273,115 | 96,600 |
| Foreign rate differential | (31,431) | (378) |
| Deductible temporary differences previously unrecognized | 188,729 | - |
| Other (minimum tax, elimination, etc.) | 14,038 | - |
| Income tax expense | 21,379 | - |
| Current income tax expense | 21,379 | - |
| Future income tax expense | - | - |
| Income tax expense | 21,379 | - |
The Company has non-capital losses available to reduce future years' Canadian federal taxable income totaling approximately $12,794,000 (2024 - $7,806,000). These potential benefits expire as follows:
| 2031 | 299,000 |
|---|---|
| 2032 | 513,000 |
| 2033 | 523,000 |
| 2034 | 582,000 |
| 2035 | 1,370,000 |
| 2036 | 1,556,000 |
| 2037 | 409,000 |
| 2038 | 398,000 |
| 2039 | 16,000 |
| 2040 | 269,000 |
| 2041 | 151,000 |
| 2042 | 79,000 |
| 2043 | 1,188,000 |
| 2044 | 415,000 |
| 2045 | 5,026,000 |
12,794,000
Page 30 of 36
Welch LLP
An Independent Member of BKR International
Plaintree Systems Inc.
Notes to the consolidated financial statements
March 31, 2025 and March 31, 2024
(In Canadian dollars)
16. Income taxes - Cont'd.
The Company has U.S. losses of approximately $1,032,000 (2024 – $862,000), which begin to expire in 2036 and $100,000 of losses that never expire.
17. Guarantees, commitments and contingencies
Guarantees
The Company has entered into agreements that contain features which meet the definition of a guarantee. The pronouncements define a guarantee to be a contract that contingently requires the Company to make payments (either in cash, financial instruments, other assets, common shares of the Company or through the provision of services) to a third party based on changes in an underlying economic characteristic (such as interest rates or market value) that is related to an asset, a liability or an equity security of the other party.
Leases
See note 7 for lease commitments.
Product warranties
As part of the normal sale of product, the Company provides its customers with standard one-year product warranties. The Company currently has parts only warranty obligations that are included with the normal sale of the product. A warranty provision of $35,417 has been recognized ($35,417 in 2024).
Bank facilities
The Company has in place a credit facility of up to $4,000,000 CAD through its bank based on acceptable trade receivables and inventory, subject to interest on balance outstanding of prime plus 0.75%. The total amount available to the Company as at March 31, 2025 was $3,814,496 CAD of which $2,700,232 was in use leaving $1,114,264 CAD available. The Company through its bank has in place a credit facility of up to $3,500,000 CAD for the issuance of standby letters of credit and/or letters of guarantee insured by Export Development Corporation ("EDC") Performance Security Guarantee of which $2,910,476 CAD was in use at March 31, 2025. The Company has in place a credit facility of up to $2,000,000 CAD to assist with financing of new and used equipment. As at March 31, 2025 $1,014,104 CAD was in use leaving $985,896 CAD available (Note 7 Lease obligations).
The credit facilities referenced above are subject to certain covenants, including a debt service covenant which the Company was not in compliance as at March 31, 2025. Refer to Note 6 and Note 7 for details.
Page 31 of 36
Welch LLP
An Independent Member of BKR International
Plaintree Systems Inc.
Notes to the consolidated financial statements
March 31, 2025 and March 31, 2024
(In Canadian dollars)
17. Guarantees, commitments and contingencies - Cont'd.
Contractual obligations
The following table provides a summary of the Company's obligations outstanding as at March 31, 2025:
Payments due by period
| Total | Current | 2026 | 2027 | 2028 | 2029 | Thereafter | |
|---|---|---|---|---|---|---|---|
| $ | $ | $ | $ | $ | $ | $ | |
| Bank indebtedness | 2,700,232 | 2,700,232 | |||||
| Accounts payable and accrued liabilities | 2,591,531 | 2,591,531 | |||||
| Due to related parties - convertible debentures | 247,672 | 247,672 | |||||
| Due to related parties - other | 4,073,789 | 50,000 | 4,023,789 | ||||
| Due to related parties - line of credit | 242,598 | 242,598 | |||||
| Due to related parties - demand loan | 201,393 | 201,393 | |||||
| Due to related parties - lease payments | 783,663 | 783,663 | |||||
| Lease commitments | 1,272,816 | 411,322 | 471,294 | 386,837 | 3,363 | ||
| Long-term debt | 1,393,729 | 477,215 | 769,651 | 66,462 | 67,621 | 12,780 | |
| 13,507,422 | 7,013,963 | 5,956,397 | 453,299 | 70,983 | 12,780 | 0 |
During the fiscal year 2024, a legal claim against the Company in the amount of $400,000 was filed by the former owners of Elmira Stove Works. Based on legal opinions and management's assessment, it is probable that the Company will be successful in negating the payment obligation, and therefore no provision has been recognized in the consolidated financial statements. Management believes the risk of an adverse outcome is minimal; however, should the litigation outcome be unfavorable, the Company may be required to recognize a liability in future periods. A counterclaim in the amount of $1,800,000 has been filed, but no amount has been recorded with respect to the counterclaim.
18. Financial instruments
Fair value hierarchy
Financial instruments recorded at fair value on the Statements of Financial Position are classified using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:
Level 1 - valuation based on quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 - valuation techniques based on inputs other than quoted prices included in 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 - valuation techniques using inputs for the asset or liability that are not based on observable market data (unobservable inputs).
Page 32 of 36
WELch LLP
An Independent Member of BKR International
Plaintree Systems Inc.
Notes to the consolidated financial statements
March 31, 2025 and March 31, 2024
(In Canadian dollars)
18. Financial instruments - Cont'd.
The fair value hierarchy requires the use of observable market inputs whenever such inputs exist. A financial instrument is classified to the lowest level of the hierarchy for which a significant input has been considered in measuring fair value.
Cash is classified as a Level 1 financial instrument. During the year, there has been no significant transfer of amounts between Level 1 and Level 2. There are no items classified in Level 2 or 3 other than the Elmira CGU recoverable amount.
The Company has exposure to credit risk, market risk and liquidity risk associated with its financial assets and liabilities. The Board of Directors has overall responsibility for the establishment and oversight of the Company's risk management framework. The Audit Committee is responsible for developing and monitoring the Company's compliance with risk management policies and procedures. The Audit Committee regularly reports to the Board of Directors on its activities.
The Company's risk management program seeks to minimize potential adverse effects on the Company's financial performance and ultimately shareholder value. The Company manages its risks and risk exposures through a combination of insurance, a system of internal and disclosure controls, sound business practices and on occasion derivative financial instruments.
Credit risk
Credit risk arises from cash held with banks, the mortgage receivable and credit exposure to customers, and others from outstanding trade receivables and unbilled revenue. The objective of managing counterparty credit risk is to prevent losses on financial assets, specifically cash, trade receivables and unbilled revenue. The Company assesses the credit quality of counterparties, taking into account their financial position, past experience and other factors.
Mortgage receivable
Credit risk arises from the potential of not collecting the amount owing. The Company mitigates the risk via the security held and by monitoring the collection of amounts owing.
Cash
Cash consists of bank deposits. Credit risk associated with cash is minimized substantially by ensuring that these financial assets are invested in highly rated financial institutions.
Accounts receivable
Accounts receivable consists primarily of trade receivables. The Company's credit risk arises from the possibility that a counterparty which owes the Company money is unable or unwilling to meet its obligations in accordance with the terms and conditions in the contracts with the Company, which would result in a financial loss for the Company.
This risk is mitigated through established credit evaluation, approval and monitoring processes intended to mitigate potential credit risks. The carrying amount of trade receivables are reduced through the use of an allowance for doubtful accounts and the amount of the loss is recognized in the statement of comprehensive earnings. When a receivable balance is considered uncollectible, it is written off against the allowance for trade receivables.
Page 33 of 36
Welch LLP
An Independent Member of BKR International
Plaintree Systems Inc.
Notes to the consolidated financial statements
March 31, 2025 and March 31, 2024
(In Canadian dollars)
18. Financial instruments - Cont'd.
Maximum credit risk is limited to the balance in cash, trade receivables and unbilled revenue totaling $5,598,648 ($4,847,964 in 2024). As at March 31, 2025, trade receivables were comprised of two companies totaling 29% and 10% respectively (two companies totaling 15% and 11% respectively in 2024). As at March 31, 2025, the Company's ageing of accounts receivable was approximately 91% (87% - 2024) under sixty days, 5% (12% in 2024); over 60 - 90 days and 4% (1% March 31, 2024) over 90 days and the allowance for doubtful accounts was $61,651 ($31,231 in 2024).
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will affect the fair value of recognized assets and liabilities or future cash flows or the Company's results of operations.
Interest risk
The Company is financed through loans from related parties and bank loans, which bear interest at rates tied to the Canadian bank prime rate. The Company's exposure to interest rate risk relates primarily to variable interest rates on the Company's credit facilities as disclosed in note 18.
Foreign currency risk
There is a risk to the Company's earnings that arises from fluctuations in foreign exchange rates, and the degree of volatility of these rates. The Company's financial results are reported in Canadian dollars. The Company is exposed to foreign exchange fluctuations against the Canadian dollar as sales are primarily denominated in U.S. dollars and other foreign currencies, while expenditures are primarily denominated in Canadian dollars. The Company did not use derivative financial instruments to manage this risk. For the year ended March 31, 2025, the Company had a foreign exchange gain of $90,164 (loss of $197,670 in 2024). A 10% change in the value of the U.S. dollar against the Canadian dollar would have an approximate foreign exchange gain or loss of $207,936 and $178,039 for the fiscal years ended March 31, 2025 and 2024, respectively.
Assets and liabilities denominated in U.S. dollars are as follows:
US MONETARY
| March 31, 2025 | March 31, 2024 | |
|---|---|---|
| $ | $ | |
| Cash | 623,472 | 309,986 |
| Trade receivables | 1,135,128 | 1,056,363 |
| Unbilled revenue | 427,800 | 640,807 |
| Prepaid Expenses and Other Receivables | 45,263 | 24,208 |
| Trade and other payables | (376,115) | (408,817) |
| Long-term debt | (705,065) | (976,266) |
| 1,150,483 | 646,281 |
Page 34 of 36
Walech LLP
An Independent Member of BKR International
Plaintree Systems Inc.
Notes to the consolidated financial statements
March 31, 2025 and March 31, 2024
(In Canadian dollars)
18. Financial instruments - Cont'd.
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company maintains a positive working capital position. The Company aims to maintain a current ratio, defined as current assets over current liabilities, of at least 1:1.
The Company generally makes semi-monthly payments to vendors. As at March 31, 2025, 100% of the Company's undisputed accounts payable were current. The vast majority of accounts payable fall due for payment within forty-five days.
Fair values
The carrying amounts for cash, trade accounts receivable, and accounts payable and accrued liabilities approximate fair value due to the short maturity of these instruments or the terms of the instrument. The carrying amount for the long-term debt approximated fair value as the interest rate was reflective of rates currently available for similar debt. The fair value of the mortgage receivable approximates the carrying value as the interest rate is reflective of current rates.
19. Key Management Personnel Compensation
Key management personnel are those persons having the authority and responsibility for planning, directing and controlling activities of the entity, directly or indirectly. The key management personnel of the Company is the Company CEO, COO and CFO. The 2024 amounts have been updated to reflect the current year presentation. The CEO controls approximately 34.4% of the outstanding shares of the Company. Compensation provided to key management is as follows:
| March 31, 2025 | March 31, 2024 |
|---|---|
| $ | $ |
| 502,967 | 494,234 |
| 10,852 | 11,391 |
| 513,819 | 505,625 |
Wages and Consulting Fees
Health benefits
If terminated for other than just cause, the chief executive officer is entitled to eighteen months payment at the rate in effect at the time of termination, and the chief operations officer and chief financial officer and entitled to twelve months payment at the rate in effect at the time of termination.
20. Revenue
The Company derives its revenue principally from the provision of customized electronics and specialty structure services under fixed price contracts. Revenue is generally recorded as the work progresses using the percentage of completion method. The contract period for the electronics contracts is generally short with the performance obligation provided over time and billed on completion and delivery. The contract period for the Specialty Structures contracts can extend beyond a year with progress billings incorporated into the terms of the customer contract. Payment is generally due on issuance of the invoice. The company also receives deposits related to revenue recorded at a point in time. Deferred revenue is generally comprised of progress billings related to the Specialty Structures and Applied Electronics contracts.
Page 35 of 36
Welch LLP
An Independent Member of BKR International
Plaintree Systems Inc.
Notes to the consolidated financial statements
March 31, 2025 and March 31, 2024
(In Canadian dollars)
20. Revenue - Cont'd.
The following table presents the changes in deferred revenue:
| $ | |
|---|---|
| Opening balance, March 31, 2024 | 406,611 |
| Revenue Recognized | (364,463) |
| Amounts invoiced and deferred as at March 31, 2025 | 1,225,760 |
| Balance, March 31, 2025 | 1,267,908 |
21. Personnel expenses
The following table presents the personnel expenses of the Company:
| March 31, 2025 | March 31, 2024 | |
|---|---|---|
| $ | $ | |
| Salaries including bonuses | 7,089,070 | 6,719,939 |
| Benefits | 848,061 | 914,216 |
| Commissions | 194,008 | 346,653 |
| 8,131,139 | 7,980,808 |
22. Depreciation
The following table presents the depreciation expenses by function:
| March 31, 2025 | March 31, 2024 | |
|---|---|---|
| $ | $ | |
| Cost of goods sold | 1,211,350 | 1,106,955 |
| Selling and marketing | 277,003 | 292,702 |
| Engineering and design | 165,120 | 111,166 |
| General and administrative | 2,741 | 1,426 |
| 1,656,214 | 1,512,249 |
23. Subsequent Events
Subsequent to the fiscal year end the Company elected to begin the liquidation of its wholly owned subsidiary, Summit Aerospace USA Inc. (Summit) which forms part of the Applied Electronics business segment. Summit accounted for $2,408,450 of revenue or 10.1% of Plaintree's consolidated revenue, and Summit's net loss before income tax and other expenses was $416,058, representing 51.0% of the consolidated net loss before income tax and other expenses. Summit represents 11.7% of Plaintree's consolidated total assets.
Page 36 of 36