Opsens Annual Report 2012

FY2012 Annual Report · Opsens

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MEASURE, IMPROVE
ANNUAL REPORT 2012

OIL AND GAS

MEDICAL

CORPORATE PROFILE
Opsens is a leading developer, manufacturer, supplier and installer of a wide range of fiber optic solutions based on
proprietary patented technologies for the measurement of pressure, temperature and other parameters. The qualities
of our sensors allow us to offer measuring instruments that are effective and durable in extreme conditions. Opsens
wants to take advantage of these competitive advantages to focus primarily on two strongly growing markets: oil and
gas and the practice of FFR in medical instrumentation.

BREAKING NEWS
OPSENS SIGNS US$5 MILLION AGREEMENT FOR DISTRIBUTION RIGHTS AND OTHER RIGHTS FOR ITS FFR PRODUCTS
COVERING JAPAN, KOREA AND TAIWAN.

OPSENS REVENUE GROWTH

)
$
M

(
S
E
L
A
S

3,1 M $

0,4 M $

8,5 M $

6,0 M $

6,3 M $

5,3 M $

2,4 M $

4,2 M $

YEARS

2009

2010

2011

2012

Oil and Gas

Other divisions

OIL AND GAS
(BARRELS /DAY X 000)

2,500

2,000

1,500

1,000

500

SAGD PRODUCTION
(FORECASTS)

NUMBER OF BARRELS PRODUCED BY
SAGD WILL QUADRUPLE BY 2020

YEARS

2012

2016

2020

MEDICAL INSTRUMENTATION – FFR

FFR MARKET,
GROWTH OF
35 % / YEAR

500

)
$
M

(
S
E
L
A
S

250

YEARS

2008

2010

2012

2014

2016

www.opsens.co m

HIGHLIGHTS 2012
• Opsens’ revenues reached $8.5 M in 2012, a 41% increase over 2011.

This growth was generated mainly in the oil and gas market.

• For the medical instrumentation market, Opsens has developed the
OptoWire, a guide wire to measure Fractional Flow Reserve (“FFR”).
Opsens is confident it will successfully enter this market, given
the quality and anticipated performance of
its product, which
distinguishes
itself from those currently available. The FFR
instrumentation market is moving towards a billion dollars annually.

OUTLOOK FOR 2013
• Opsens’ OPP-W sensor for SAGD has completed the adoption phase.
It can be expected that the number of installations will continue to grow.

• Opsens aims to expand its customer base and applications for the
OPP-W sensor. Opsens also wants to extend its product line to
accentuate its technological lead.

• The market for SAGD wells instrumentation will be closely related to the
number of wells and to SAGD production, which are both expected to
grow sharply in the coming years.

OUTLOOK FOR 2013
• Filing for regulatory 510 k approval in the United States.

• Opsens’ OptoWire

its mechanical
properties and by the quality of its measurement in the presence of
fluids (blood).

is highly differentiated by

FFR MARKET

• Disposable and easy to produce, the OptoWire will generate a strong
gross margin. For Opsens, the penetration of a fraction of the current
market will have a major impact on consolidated sales.

• Opsens expects to become the third player in FFR, the first one with

• US$170 MILLION CURRENTLY

a guide wire instrumented with a fiber optic pressure sensor.

• POTENTIAL OF $US ONE BILLION
ANNUALLY

LETTER TO SHAREHOLDERS

Dear Shareholders,

Fiscal year 2013 has started on a high note with the signing of our first
distribution agreement, for a total amount of US$5 million, for our
OptoWire, which measures Fractional Flow Reserve (“ FFR “). This
agreement allowed Opsens to collect US$2 million at closing and
opens the way to an additional payment of US$1 million upon receipt of
regulatory approval in Japan, as well as future distribution revenues.
These amounts were accompanied by a US$2 million convertible
debenture. The conclusion of the agreement is the first in a series
of milestones that the company aims to achieve promptly to quickly
commercialize its unique product to a very promising market with
strong growth.

During fiscal 2012, Opsens continued to roll out its plan to create value
for shareholders. This plan focuses on the SAGD market for oil and
gas and on the FFR market in medical instrumentation. Within these
two business opportunities targeting large markets, Opsens intends
to demonstrate the added value of its solutions to promote the value
of the Company in the near future.

OIL AND GAS
In 2012, consolidated revenues grew by 41% to nearly $8.5 million. This
growth was mainly driven by oil and gas activities with revenues up
more than $2 million from $4.2 million to $6.3 million, a 50% increase.

Alberta’s oil producers have invested massively in the management
and monitoring of SAGD wells in recent years. This trend should
continue as industry forecasts anticipate that the number of barrels
produced will quadruple by 2020. Opsens is well positioned to benefit
from this growth in terms of product range and quality of expertise in
the installation of sensors.

The Steam Assisted Gravity Drainage (“SAGD”) environment is
characterized by intense heat and by the presence of hydrogen and
corrosive agents. It is in this environment that our products stand out
instruments. Opsens’
significantly compared
OPP-W sensor measures pressure and temperature at high
temperature to provide the necessary information to help oil
producers in their efforts to constantly improve production while
reducing maintenance costs.

traditional

FFR AND MEDICAL INSTRUMENTATION
The signing of an agreement with a Japanese partner is the first step
to globally cover the FFR market, which grew by more than 35% in
2011 to nearly US$170 million. Following the publication of new clinical
data recognized by cardiologists, experts expect that the FFR market
could reach US$1 billion annually.

Opsens selected the FFR market because of its size, anticipated
profitability, compatibility with
its technology and regulatory
environment. The application Opsens chose, meets all these
requirements and more, since the OptoWire is used in the treatment
of heart disease in a growing and aging population. Also, the disposable
product will generate an excellent profit margin. We have applied our
optical sensor technology for the FFR market and have high aspirations
about our market penetration once the OptoWire is approved, because
of the products’ qualities and expected performance compared to
products on the market.

Opsens has reached several milestones in the development of the
OptoWire. Our work has brought us great confidence in the value of
our solution for cardiologists, particularly from the point of view of
mechanical performance and quality of the pressure measurement
in the presence of blood. Over the next year, Opsens will complete
verification and validation of the product, file for 510 k in the United
States, to conduct initial marketing and CE marking during the period
beginning September 1, 2013.

I thank our customers for the confidence they have in our products.
I thank the Opsens team whose quality of work supports the growth
of our business. I would like to acknowledge the contribution of our
directors in our growth. They deploy their knowledge and energy to the
benefit of the company. Finally and most importantly, I wish to
thank our shareholders for the trust they have placed in Opsens
and the patience they have shown. We are committed to meeting their
expectations.

(s) Pierre Carrier

Chairman of the Board,
President and Chief Executive Officer

www.opsens.co m

MANAGEMENT DISCUSSION & ANALYSIS
Annual report for shareholders
Fiscal year ended August 31, 2012

The following comments are intended to provide a review and analysis of the operating results and financial position
of Opsens Inc. as of August 31, 2012, and for the three months and year ended this date, in comparison with the
corresponding periods ended August 31, 2011. They should be read and interpreted in conjunction with the audited
financial statements as well as the accompanying notes as at August 31, 2012.

Unless stated otherwise, the Management Discussion and Analysis has been prepared in accordance with
International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board
(“IASB”) on a consolidated basis. This document was prepared on November 27, 2012. All amounts are in Canadian
dollars.

This report contains forward-looking statements that involve risks and uncertainties. These forward-looking
statements are not guarantees of our future results, and actual results could differ significantly from those foreseen by
such statements due to several factors, including economic conditions, capital expenditures in the measuring
instrument sector, currency exchange rate variation, and our ability to manage Opsens successfully under these
uncertain conditions. Consequently, the reader should not place undue reliance on these forward-looking statements.
These forward-looking statements are only valid as at the date of this document. The Company is under no obligation
to revise or update these forward-looking statements in order to reflect the events or circumstances that occur after
the date of this analysis, except when it is required by law.

CORPORATE OVERVIEW

Opsens Inc. (the “Company”) is a leading developer, manufacturer, supplier and installer of a wide range of fiber
optic solutions based on proprietary patented technologies for the measurement of pressure, temperature and other
parameters. The qualities of our sensors allow us to offer measuring instruments that are effective and durable in
extreme conditions. Opsens is using its competitive advantages to focus primarily on two strong growth markets: oil
and gas and FFR medical instrumentation.

Opsens holds six (6) patents and has four (4) patents pending covering its products and technology provided to its
markets, giving the Company freedom to operate. With its patented technologies and highly recognized expertise,
Opsens meets consumers’ needs in the medical, oil and gas, and laboratory markets. Since December 11, 2007,
activities in the oil and gas market have been performed by the wholly-owned subsidiary Opsens Solutions Inc.
(“Opsens Solutions”), formerly Inflo Solutions Inc.

VISION, STRATEGY, AND OUTLOOK

The worldwide market for fiber optic and conventional sensors is a multi-billion dollar market. Opsens’ sales and
marketing strategy aims to provide solutions for the various current niche markets and develop specific new markets.
The Company’s expertise, know-how, and patented technology are the keys to new production techniques improving
the reliability of measuring equipment. Also, the Opsens production technique called MEMS (Micro-Electro-
Mechanical-System) encourages penetration into markets traditionally occupied by conventional sensors through
higher production volumes and reduced manufacturing costs.

In 2013, Opsens expects its net loss will increase from year 2012 due to verification and validation expenses for the
OptoWire FFR device.

SELECTED CONSOLIDATED FINANCIAL DATA

(In thousands of Canadian dollars, except for

information per share)

Year Ended
August 31, 2012
$

Year Ended
August 31, 2011
$

Year Ended
August 31, 2010
$

Sales

Cost of sales
Gross margin

Administrative expenses
Marketing expenses
R&D expenses
Financial income
Gain on disposal

Profit (Loss) before income taxes
Income taxes
Net Profit (Net loss)
Net Profit (Net loss) per share – Basic
Net Profit (Net loss) per share - Diluted

(In thousands of Canadian dollars)

Current assets
Total assets

Current liabilities
Long-term debt
Shareholders' equity

8,462

5,722
2,740

2,304
929
1,534
(97)
-
4,670

(1,930)
-
(1,930)
(0.04)
(0.04)

6,005

4,157
1,848

2,204
659
1,543
(89)
-
4,317

(2,469)
-
(2,469)
(0.05)
(0.05)

5,281

3,187
2,094

1,742
904
1,233
(41)
(2,375)
1,463

631
-
631
0.01
0.01

As at
August 31,
2012
$

As at
August 31,
2011
$

As at
September 1,
2010
$

5,895
7,735

1,595
507
5,633

6,927
8,593

1,137
30
7,426

9,597
11,390

1,527
130
9,733

No dividend was declared per share for each share class.

On February 12, 2010, the Company completed a private placement of 4,287,500 units at a price of $0.85 per unit for
gross proceeds of $3,644,375.

SUMMARY OF CONSOLIDATED QUARTERLY RESULTS

The summary below presents the periods in which Opsens published unaudited interim financial statements.

(Unaudited, IFRS based, in thousands of

Canadian dollars)

Three-month
period ended
August 31, 2012
$

Three-month
period ended
May 31, 2012
$

Three-month
period ended
February 29, 2012
$

Three-month
period ended
November 30, 2011
$

Revenues
Net profit (net loss) for the period

Net profit (net loss) per share – Basic
Net profit (net loss) per share – Diluted

1,416
(639)

(0.01)
(0.01)

2,174
(357)

(0.01)
(0.01)

2,377
(675)

(0.01)
(0.01)

2,495
(259)

(0.01)
(0.01)

(Unaudited, IFRS based, in thousands of

Canadian dollars)

Three-month
period ended
August 31, 2011
$

Three-month
period ended
May 31, 2011
$

Three-month
period ended
February 28, 2011
$

Three-month
period ended
November 30, 2010
$

Revenues
Net profit (net loss) for the period

Net profit (net loss) per share – Basic
Net profit (net loss) per share – Diluted

1,107
(718)

(0.02)
(0.02)

2,415
(378)

(0.01)
(0.01)

1,336
(669)

(0.01)
(0.01)

1,147
(704)

(0.01)
(0.01)

FOURTH QUARTER 2012

The Company recorded a net loss of $639,000 or 1 cent a share in the fourth quarter compared with a net loss of
$718,000 or 2 cents a share a year earlier. The increase in net income, in the fourth quarter of fiscal 2012, compared with
the comparative quarter is mainly due to the increase in revenues and the decrease in general spending in administrative,
marketing and research and development expenses. Seasonal fluctuations and year-end adjustments had no impact on
operating revenues and net loss for the fourth quarter 2012.

Revenue totalled $1,416,000 for the quarter ended August 31, 2012, compared with $1,107,000 a year earlier, following
mainly an increase in oil and gas revenues.

Administrative expenses decreased at $493,000 for the latest quarter, compared with $651,000 for the same period in
2011. During the fourth quarter of 2011, the Company recorded a bad debt expense of $100,000 compared with an
amount of less than $15,000 in the comparative quarter 2012. In addition, wages and payroll taxes were also lower due
to the performance-based compensation.

Marketing expenses for the quarter were slightly lower at $182,000 versus $201,000 a year earlier mainly due to grants
received from the provincial government.

Research and development expenses totalled $348,000 for the quarter ended August 31, 2012, compared with $391,000
for the same period in 2011. The variation is mainly explained by a grant regarding the development of the OptoWire for
the measurement of FFR.

Historically, the Company’s revenues and net results have been little affected by seasons. Seasonal fluctuations have
become more significant with the increase weighting of sales in the oil and gas field, since business activity is generally
greater in the winter for this sector.

PERFORMANCE INDICATORS

In order to evaluate the Company’s performance and generate long-term value for its shareholders, the Company has
identified the following financial and non-financial performance indicators:

1) Distribution, sales, and long-term recurring revenues;
2) Products and innovation;
3) Short-term financial performance and cash flows;
4) Strategic acquisitions and development of new projects.

YEARS ENDED AUGUST 31, 2012, AND AUGUST 31, 2011

DISTRIBUTION, SALES, AND LONG-TERM RECURRING REVENUES

(In thousands of dollars except for

percentage data figures)

Year Ended
August 31, 2012
$

Year Ended
August 31, 2011
$

Revenues
Variation (%)

Gross margin
Variation (%)

8,462

6,005

40.9 %

2,740

1,848

48.3 %

The Company reported revenue of $8,462,000 for the year ended August 31, 2012, compared with $6,005,000 a year
earlier, an increase of 40.9%. The growth includes a sales increase of close to $2,100,000 in the oil and gas market.
Rising income in oil and gas is due to the increased market acceptance of our products. Also, income in the laboratory
sector increased because of an improvement in the general economic conditions and government budgets for this sector.

Sales in the oil and gas sector totalled $6,300,000, compared with $4,200,000 for 2011. Management anticipates that
revenues from oil and gas will continue to grow on a long-term basis as the OPP-W sensor becomes more mature and as
we extend its applications and market other products.

Sales in medical instrumentation were close to $558,000 in fiscal 2012 compared with $430,000 for 2011. For the year
ended August 31, 2012, a significant proportion of medical sales were made to OEM customers for pressure
measurement for preclinical use. We expect sales to increase in this market in 2013 in view of the development
programs of OEM customers and our more mature product line for pressure and temperature measurement.

(In thousands of Canadian dollars except

for percentage data figures)

Year ended
August 31, 2012
Opsens Inc.’s
reportable
segment
$

Year ended
August 31, 2012
Opsens Solutions
Inc.’s reportable
segment
$

Year ended
August 31, 2012

Eliminations
$

Year ended
August 31, 2012
Consolidated
financial
statements
$

Revenues
Cost of revenues
Gross margin
Gross margin rate (%)

3,439
2,592
847
25

6,283
4,390
1,893
30

(1,260)
(1,260)
-

8,462
5,722
2,740
32

(In thousands of Canadian dollars except

for percentage data figures)

Year ended
August 31, 2011
Opsens Inc.’s
reportable
segment
$

Year ended
August 31, 2011
Opsens Solutions
Inc.’s reportable
segment
$

Year ended
August 31, 2011

Eliminations
$

Year ended
August 31, 2011
Consolidated
financial
statements
$

Revenues
Cost of revenues
Gross margin
Gross margin rate (%)

2,431
1,800
631
26

4,193
2,976
1,217
29

(619)
(619)
-

6,005
4,157
1,848
31

The gross margin rate on product sales remained stable in fiscal 2012 from a year earlier. However, the rate remains
below what is expected in the medium term, given the overhead costs to cope with the increase in expected medium
term sales.

The Company expects the gross margin rate for Opsens Inc. and Opsens Solutions Inc. to move toward its minimum
target of 40% as revenue grows.

As at August 31, 2012, the backlog amounted to $888,000 ($1,755,000 at August 31, 2011).

Given that a proportion of the Company's revenue is generated in U.S. dollars, while most costs are incurred in
Canadian dollars, fluctuation in the exchange rate affects revenue and net income. For the fiscal year ended August
31, 2012, the average exchange rate was higher than the previous year, which affected sales positively by $28,000.

Market acceptance of fiber optic sensors is increasing in the Company’s markets, leading to higher sales. That said,
some sectors such as oil and gas are seeing additional competition. Opsens is addressing the added competition by
highlighting the performance characteristics of its products compared with those of its competitors. For the periods
ended August 31, 2012 and 2011, pricing fluctuations did not have a significant impact on revenues. No product was
launch during years ended August 31, 2012 and August 31, 2011.

PRODUCTS AND INNOVATION

The Company is constantly working to improve its position in terms of intellectual property and what it can offer to
its customers. In fiscal 2012, the Company focused on continuous improvements to its technology in markets with
the highest perceived potential payoff, particularly oil and gas and medical devices.

Research and development costs amounted to $1,534,000 and $1,543,000 respectively for years 2012 and 2011.
Although these expenses were stable in 2012, we are expecting an increase in R&D costs in 2013 since the OptoWire
project will be in its last development steps before entering the regulatory approval process.

In oil and gas over the next year, Opsens will continue to develop its existing product line while improving its ability
to respond to customer needs for multiple specifications in the measurement of pressure and temperature.

In 2011, Opsens Inc. unveiled its offering for cardiologists to use in the measurement of Fractional Flow Reserve
(“FFR”). FFR is an index of the functional severity of a coronary stenosis that is calculated from pressure
measurements taken before and after a narrowing of the arteries during coronary arteriography. This increasingly
used approach enables an “on the spot” diagnosis for a better assessment as to whether a stent is an appropriate
intervention to improve blood circulation in the cardiovascular system.

A study published in 2009 in the New England Journal of Medicine, “Fractional Flow Reserve vs. Angiography for
Multivessel Evaluation”, found that a stent was not always an appropriate intervention, and that its overuse was
actually doing patients more harm than good in some cases. Patients of doctors using FFR had fewer stents used and
better outcomes overall, the study found.

The FFR market represents a significant opportunity for Opsens. Opsens intends to fully exploit this opportunity by
an aggressive development of the OptoWire through the stages of preclinical, regulatory and commercialization.
Opsens wants to proceed to commercialization of a FFR product in fiscal year 2014. The agreement signed with the
Japanese distributor in November 2012 is the first step toward commercialization.

OptoWire for the Measurement of Fractional Flow Reserve

Unlike traditional guide wires, the OptoWire is a guide wire instrumented with a fiber optic pressure sensor, which is
low-drift and will provide a high-fidelity measurement of blood pressure in coronary arteries. In addition to more
reliable measurement, the OptoWire aims to offer better mechanical performances in terms of trackability,
torquability and support over other existing pressure guide wires.

On November 19, 2012, the Company announced the granting of distribution and other rights to OptoWire and
OptoMonitor, Opsens’ products for measuring FFR. Under the terms of the agreement, the Company will receive:

• US$3 M for the distribution rights for its FFR products for Japan, Korea and Taiwan, which includes:

o US$2 M at signing;
o US$1 M once Opsens gets regulatory approval for its FFR devices in Japan;

• US$2 M in convertible debenture, at signing.

Scientific Advisory Board

To support the development and refinement of the OptoWire, Opsens has put together a scientific advisory board of
experts in the field of FFR and clinical research, composed of Drs. Morton Kern, Olivier F. Bertrand and Michael J.
Lim. These leading cardiologists are advising the Company on the development, clinical studies and
commercialization of the OptoWire.

SHORT-TERM FINANCIAL PERFORMANCE AND CASH FLOWS

Non-IFRS financial measure - EBITDAO

Capital management

The Company uses its capital to finance marketing expenses, research and development activities, administrative
charges, working capital and capital assets. Historically, the Company has financed activities through rounds of
public and private financing, debt financing as well as government grants.

The Company quarterly reviews net loss and Earnings Before Interest, Taxes, Depreciation, Amortization and Stock
option-based compensation "EBITDAO". EBITDAO has no normalized sense prescribed by the IFRS. It is not very
probable that this measure is comparable with measures of the same type presented by other issuers. EBITDAO is
defined by the Company as the cash flows from operating activities without taking in consideration non-cash
expenses and non-cash operating working capital items.

Reconciliation of EBITDAO to the Annual Results

(In thousands of Canadian dollars)

Year Ended
August 31, 2011
$

Year Ended
August 31, 2010
$

Net gain (loss) for the period
Financial expenses (income)
Amortization of property, plant, and equipment
Amortization of intangible assets
EBITDA
Stock-based compensation costs
EBITDAO
Gain on disposal
EBITDAO and gain on disposal

(1,930)
(97)
230
35
(1,762)
137
(1,625)
-
(1,625)

(2,469)
(89)
182
26
(2,350)
162
(2,188)
-
(2,188)

631
(41)
195
37
822
223
1,045
(2,375)
(1,330)

Net gain (net loss)

For the year ended August 31, 2012, net loss totalled $1,930,000, compared with a net loss of $2,469,000 a year
earlier. The slight improvement in net results and EBITDAO for year 2012 compared with year 2011 mainly reflects
higher gross profit with the counterbalancing effect of higher expenses for marketing, administration and other
variations.

In fiscal 2013, net results and EBITDAO will be strongly influenced by product sales figures and R&D expenses.
The expected increased R&D expenses should contribute to a negative variance of the EBITDAO despite the
expansion of marketing activities within the oil and gas market following previous OPP-W installations.

The Company has an authorized line of credit for a maximum amount of $200,000, $50,000 of which is available at
all times and which is not limited by margin requirements. When using the line of credit in an amount varying from
$50,000 and $100,000, the available credit is limited to an amount equal to 75% of Canadian accounts receivable and
65% of foreign accounts receivable plus 50% of inventories of raw materials and finished goods. If the amount used
exceeds $100,000, the credit available is limited to an amount equal to 75% of Canadian accounts receivable and
90% of ensured foreign accounts receivable plus 50% of inventories of raw materials and finished goods. Under the
terms and conditions of the credit agreement, the Company is subject to certain covenants with respect to
maintaining minimum financial ratios related to the maintenance of a maximum ratio of 3 to 1 for total debt to
equity, and a ratio of at least than 1.5 to 1 for debt to working capital, with a minimum working capital of $200,000.
The covenants were met as of August 31, 2012.

At the end of fiscal year ended August 31, 2011, the Company has received approval for financial support from the
Ministry of Economic Development, Innovation and Export, in the form of a repayable contribution of $413,590 for
the development of a portfolio of products for FFR. Simultaneously, a loan worth $500,000 was granted to the
Company to support the project. Opsens cashed an amount of $657,000 in year 2012. Opsens expects to receive the
remaining cash proceeds of $256,590 in year 2013.

INFORMATION BY REPORTABLE SEGMENTS

Sector’s Information

The Company’s reportable segments are strategic business units managed separately as one is focused on
developing, producing, and supplying fiber optic sensors (Opsens Inc.) and the other (Opsens Solutions Inc.) is
specialized in commercialization and installation of optical and conventional sensors for the oil and gas industry.

The same accounting policies are used for both reportable segments. Operations are carried out in the normal course
of operations and are measured at the exchange value.

2012

Opsens

Opsens Inc.

Solutions

Total Opsens inc.

Solutions

2011

Total

2,179,251

6,282,679

1,260,182

8,461,930

1,260,182

1,812,047

4,193,092

6,005,139

618,977

148,492

81,632

230,124

134,278

47,799

182,077

30,425

4,133

(371,978)

275,611

34,558

(96,367)

22,065

3,341

25,406

(311,484 )

222,613

(88,871)

(1,895,102)

(34,576)

(1,929,678)

(2,120,405 )

(348,452)

(2,468,857)

88,871

212,747

301,618

153,401

218,085

371,486

91,943
4,741,097

44,758
2,993,942

136,701
7,735,039

85,724
6,021,838

21,465
2,571,814

107,189
8,593,652

External sales

Internal sales

Amortization of property,
plant and equipment

Amortization of

intangible assets

Financial expenses

Net earnings (loss)

Acquisition of property,
plant and equipment

Acquisition of

intangible assets

Segment assets

Geographic segment’s information

Revenue per geographic sector

Canada

United States

Other

2012

2011

6,396,767

1,297,038

768,125

8,461,930

4,332,673

1,020,566

651,900

6,005,139

Revenues are attributed to geographic sector based on the clients’ location.

Capital assets, which include property, plant and equipment and intangible assets, are all located in Canada.

During the year ended August 31, 2012, revenues from two clients represent individually more than 10% of the total
revenues of the company, i.e. approximately 47.4% (Opsens Solutions Inc.’ reportable segment) and, 18.2% (Opsens
Solutions Inc.’ reportable segment).

During the year ended August 31, 2011, revenues from four clients represent individually more than 10% of the total
revenues of the company, i.e. approximately 35.5% (Opsens Solutions Inc.’ reportable segment), 14.8% (Opsens
Solutions Inc.’ reportable segment), 11.8% (Opsens Solutions Inc.’ reportable segment) and 10.0% (Opsens Inc.’
reportable segment).

Administrative expenses

Administrative expenses were $2,304,000 and $2,204,000 respectively for the years ended August 31, 2012, and
2011. The increase in administrative expenses is the result of an increase in legal fees related to the EasyWire lawsuit
settled on March 1, 2012 and other variations.

Sales and marketing expenses

Sales and marketing expenses were $929,000 for year 2012, compared to $659,000 a year earlier, a $270,000
variance. Sales and marketing expenses increased due to the addition of head count supporting sales in the Opsens
Solutions Inc. operating unit. Sales and marketing expenses should remain relatively stable in 2013.

Financial expenses (income)

Financial income reached $97,000 for the year ended August 31, 2012 compared with financial income of $89,000
the previous year. The increase in financial income during fiscal 2012 is the direct result of a mainly favourable
change of $135,000 in the gain / loss on foreign exchange and an unfavourable change in interest income of
$110,000.

Financing activities cash flow

On February 12, 2010, the Company closed a private placement of 4,287,500 units at a price of $0.85 per unit for
gross proceeds of $3,644,375. Each unit is comprised of one common share and one-half common share purchase
warrant of the Company. Each warrant will entitle the holder to purchase one common share of the Company at a
price of $1.15 for a period of 24 months following the closing of the offering. Opsens paid to the agents a cash
commission equal to $254,404 and issued broker compensation warrants entitling the agents to purchase 299,299
common shares of Opsens. The broker warrants shall be issuable at an exercise price per common share equal to the
offering price for a period of 24 months from the closing of the offering. The net proceeds of the private placement
will be used for marketing, general working capital purposes and potentially for acquisitions. Opsens will expand its
sales and marketing activities and finalize main product development partnerships, which should provide long-term
recurring revenues.

Warrants exercised and expired

During the year ended August 31, 2012, 2,443,049 warrants entitling their holders to acquire one common share of
the Company at an average price of $1.11 expired.

During the year ended August 31, 2011, 204,167 warrants entitling their holders to acquire one common share of the
Company at a price of $0.60 expired.

During the year ended August 31, 2010, 178,889 warrants entitling their holders to acquire one common share of the
Company at a price of $0.80 per share were exercised for a total amount of $143,111. The book value of the
exercised warrants was transferred to share capital for an amount of $63,469.

During the year ended August 31, 2010, 150,890 and 2,355,563 warrants entitling its holder to acquire one common
share of the Company at a price of $0.80 and $1.10 per share respectively expired.

Stock options exercised, granted and expired

For the year ended August 31, 2012, the Company granted to some employees and Directors a total of 1,684,000
stock options with an average exercise price of $0.22, and cancelled or forfeited 2,442,000 stock options with an
exercise price of $0.47 a share.

For the period ended August 31, 2011, the Company granted to some employees and Directors a total of 453,000
stock options with an average exercise price of $0.36, and cancelled 416,500 stock options with an exercise price of
$0.68 a share.

During the year ended August 31, 2010, 1,250 stock options entitling their holders to acquire one common share of
the Company at a price of $0.87 per share were exercised for a total amount of $1,088. The book value of the
exercised warrants was transferred to share capital for an amount of $316.

For the year ended August 31, 2010, the Company granted to some employees and Directors a total of 1,359,750
stock options with an average exercise price of $0.40, and cancelled 6,000 stock options with an exercise price of
$0.68 a share.

On November 27, 2012, the following components of shareholders' equity are outstanding:

Common shares
Stock options
Convertible debenture

Securities on a fully diluted basis

47,865,983
3,499,000
4,000,000

55,364,983

The number of shares that would be issued upon conversion of the debenture may vary depending on various
parameters such as the exchange rate and the conversion price per share. In the table above, the conversion was
carried out on the assumption that the Canadian dollar is even with the U.S. dollar and the conversion price is equal
to the minimum conversion price which is $ 0.50 per share.

Investing activities cash flow

Opsens purchases amounted, for each of its segmented units R&D equipment, production equipment and
administrative equipment, to $302,000 for the year ended August 31, 2012. Investments have been made especially
to support Opsens Solutions’ revenue growth.

As for intangible assets, Opsens invested $137,000 for the period ended August 31, 2012. These investments
involved software and patent protection for the Company's inventions.

Cash and cash equivalents

On August 31, 2012, the Company had cash and cash equivalents of $2,577,000, compared with $3,747,000 as of
August 31, 2011. Of this amount as at August 31, 2012, $1,284,000 was invested in highly liquid, safe investments.
The Company also has an available line of credit in the amount of $200,000. This line of credit incurs interest at
prime +2%. The restrictive clauses of the Company’s financial institution are respected.

Financial position

As at August 31, 2012, Opsens had a working capital of $4,300,000, compared with a working capital of $5,790,000
as at August 31, 2011. Based on the private placement completed on February 12, 2010, the use of proceeds from the
high-power transformers sale, the exercised warrants, its cash and cash equivalents, its working capital, and its order
backlog, Opsens has the financial resources necessary to maintain short-term operations, honour its commitments,
and support its anticipated growth and development activities. From a medium-term perspective, Opsens may need to
raise additional financing by issuing equity securities and debt. In the long term, there is uncertainty about obtaining
additional financing, given the risks and uncertainties identified in the Risks and uncertainties section. During fiscal
2013, fluctuation in cash assets will depend particularly on the rate of revenue growth.

For 2013, the Company does not anticipate additional investment into the working capital.

Subsequent event

On November 19, 2012, the Company announced the granting of distribution and other rights to OptoWire
and OptoMonitor and received at closing US$4 M.

Commitments

Leases

The Company leases offices in Québec under an operating lease expiring on January 31, 2014. This agreement is
renewable for an additional five-year period. Future rent, without considering the escalation clause, will amount to
$208,202.

The Company leases offices in Alberta under an operating lease expiring on April 30, 2015. This agreement is
renewable for an additional five-year period. Future rent, without considering the escalation clause, will amount to
$347,039.

Opsens Solutions Inc. rents four vehicles under operating lease expiring in September 2013, October 2013 and May
2014. Future rent payments will amount to $77,228.

Future payments for the leases and other commitments, totalizing $632,469, required in each of the next five years
are as follows:

2013

2014

2015

2016

2017

323,601

212,927

95,941

In 2012, the offices lease expense is $295,221 ($254,296 in 2011).

Licence

Under an exclusive licence with a third party, the Company is committed to provide exclusive distribution of some of
its products for a defined territory.

Related-party transactions

In the normal course of its operations, the Company has entered into transactions with related parties. These
transactions have been measured at the exchange amount.

Professional fees to a company

Controlled by a director

Fees are incurred for the Company’s FFR activities.

Financial instruments

Cash equivalents

2012

2011

34,937

50,511

The Company is exposed to various types of risks in the management of its cash and cash equivalents, including
those related to the use of financial instruments. To manage these risks, controls were put in place, particularly those
related to investment policy. The investment policy is approved by the board of directors. The Company’s
investment policy aims primarily to protect capital, while considering return on investment and income taxes.

Market risk

Market risk is the risk that the value of a financial instrument will fluctuate as a result of changes in the parameters
underlying their measurement, particularly interest rates, foreign exchange rates and market prices.

Interest rate risk

Interest rate risk exists when interest rate fluctuations modify the cash flows of the Company’s investments. The
Company owns investments with fixed interest rates. As of August 31, 2012, the Company was holding more than
49.8% (78.4% as at August 31, 2011; 81.4% as at September 1, 2010) of its cash equivalents in all time redeemable
term-deposit.

Financial charges (income)

Interest and bank charges

Interest on long-term debt

Loss (gain) on foreign currency translation

Interest income

2012

34,500

27,634

(34,184 )

(124,317 )

(96,367 )

2011

22,107

18,187

100,880

(230,045)

(88,871)

Credit risk

The use of financial instruments, such as cash and cash equivalents, receivables and balance of purchase price to be
received can create a credit risk that is the risk of financial loss resulting from a counterparty’s inability or refusal to
fully discharge its contractual obligations. The Company’s credit risk management policies include the authorization
to carry out investment transactions with recognized financial institutions, with credit ratings of at least A and higher,
in either bonds, money market funds or guaranteed investment certificates. Consequently, the Company manages
credit risk by complying with established investment policies.

Concentration risk

Concentration risk exists when investments are made with multiple entities that share similar characteristics or when
a large investment is made with a single entity. As of August 31, 2012, the Company was holding more than 49.8%
(78.4% as at August 31, 2011; 81.4% as at September 1, 2010) of its cash equivalents portfolio in all-time
redeemable term deposit with the same financial institution.

The Company provides credit for a conventional period of 30 days to its customers in the normal course of business.
Credit evaluations are performed on an ongoing basis of all its accounts receivable and an allowance for doubtful
accounts is recorded when those accounts are deemed uncollectible. Two major customers represent 71.4% of the
Company’s accounts receivable as at August 31, 2012 (69.7% as at August 31, 2011; 66.1% as at
September 1, 2010).

As at August 31, 2012, 25.1% (10.8% as at August 31, 2011; 23.8% as at September 1, 2010) of the accounts
receivable were of more than 90 days whereas 60.5% (55.8% as at August 31, 2011; 61.5% as at September 1, 2010)
of those were with less than 30 days. The maximum exposure to the risk of credit for receivable corresponded to
their book value. On August 31, 2012, the bad debt provision was established at $21,861 ($3,082 on August 31,
2011; $6,110 as at September 1, 2010).

Management considers that substantially all receivables are fully collectible as most of our customers are large
corporations with good credit standing and no history of default.

Interest rate and cash flow risk

The Company is exposed to interest rate fluctuations on certain long-term debt that bears interest at variable rates.
The Company does not actively manage this risk.

Assuming the cash equivalents and long-term debt as reported on August 31, 2012 had been the same throughout the
period, a hypothetical 1% interest rate increase would have had an unfavourable impact of $3,386 on the net loss for
the year ended August 31, 2012 ($589 on the net loss for the year ended August 31, 2011). The net loss would have
had an equal but opposite effect for a hypothetical 1% interest rate decrease.

Foreign exchange risk

The Company realizes certain sales and purchases and certain supplies and professional services in US dollars.
Therefore, it is exposed to foreign currency fluctuations. The Company does not actively manage this risk.

For the years ended August 31, 2012 and 2011, if the Canadian dollar had strengthened 10% against the US dollar
with all other variables held constant, net loss would have been $39,000 higher (net loss would have been $6,000
lower for the year ended August 31, 2011). Conversely, if the Canadian dollar had weakened 10% against the US
dollar with all other variables held constant, net loss would have been $39,000 lower for the year ended August 31,
2012 (net loss would have been $6,000 higher for the year ended August 31, 2011).

As at August 31, 2012, August 31, 2011 and September 1, 2010, the risk to which the Company was exposed is
established as follows:

Cash (US$505,784)

Accounts receivable (US$208,368)

Balance of purchase price to be received (US$-)

Accounts payable and accrued liabilities

(US$296,434)

Total

Liquidity risk

As of
August 31,
2012
$

498,551

205,388

As of
August 31,
2011
$

232,191

118,200

424,493

As of
September 1,
2010
$

509,164

501,350

826,037

(292,195)
411,744

(48,217 )
726,667

(93,826)
1,742,725

Liquidity risk represents the possibility of the Company not being able to raise the funds needed to meet financial
commitments at the appropriate time and under reasonable conditions. The Company manages this risk by
maintaining permanent and sufficient liquidity to meet current and future financial obligations, under both normal
and exceptional circumstances. The funding strategies used to manage this risk include turning to capital markets to
carry out issues of equity and debt securities.

The following are the contractual maturities of the financial liabilities (principal and interest, assuming current
interest rates) as at August 31, 2012, August 31, 2011 and September 1, 2010:

August 31, 2012

Accounts payable and

Total

0 to 12

months

accrued liabilities

1,343,905

1 year to

2 years to

More than

2 years

5 years

149,626

837,302

195,523

164,247

327,906

2,181,207

1,539,428

164,247

327,906

Long-term debt

Total

August 31, 2011

Accounts payable and

accrued liabilities

Long-term debt

Total

0 to 12

months

1 year to

2 years to

More than

2 years

5 years

971,108

140,460

971,108

106,040

1,111,568

1,077,148

27,719

6,701

September 1, 2010

Total

0 to 12

months

Accounts payable and

accrued liabilities

1,370,389

Long-term debt

Total

Fair value

341,727

154,117

1,712,116

1,524,506

1 year to

2 years to

More than

2 years

5 years

90,039

97,571

The fair value of cash and cash equivalents, accounts receivable, short-term balance of purchase price receivable and
accounts payable and accrued liabilities approximates their carrying value due to their short-term maturities.

The fair value of long-term debt is based on the discounted value of future cash flows under the current financial
arrangements at the interest rate the Company expects to currently negotiate for loans with similar terms and
conditions and maturity dates. The fair value of long-term debt approximates its carrying value due to the current
market rates.

STRATEGIC ACQUISITIONS AND NEW PROJECT DEVELOPMENT

In its business plan, Opsens has identified some acquisition targets for growth. In order to maximize value creation
for our shareholders, and based on the opportunities, Opsens may make strategic acquisitions. Opsens remains open
to any business opportunities that could occur at any time.

On August 16, 2010, Opsens reached an agreement to license through an Intellectual Property and Assignment
Agreement (“the Agreement”) its technology in the high-power transformers business to a subsidiary of LumaSense
Technologies Inc., of Santa Clara, California, representing Opsens’ exit from that line of business.

The Agreement gives LumaSense exclusive rights to use Opsens’ technology in the transformer business.
LumaSense will also have access to Opsens’ existing distribution channels for its transformer business. LumaSense
has paid Opsens US$2.2 million in cash upon closing and will pay a further US$500,000 in one year and
US$500,000 two years after closing.

The Agreement was recorded as a disposal. Gain on disposal calculation had been calculated as following:

Proceeds

Cash received at closing

Balance of purchase price to be received as of
August 16, 2011 (nominal value of 500,000 $US)**

Balance of purchase price to be received as of

August 16, 2012 (nominal value of 500,000 $US)***

Disposal expenses

Inventory and purchases credit

Other expenses and accrued expenses

Deferred revenues – manufacturing agreement*

Gain on disposal

Amount

2,190,720

443,360

376,856

3,010,936

150,000

265,829

220,000

635,829

2,375,107

* Opsens engaged in a manufacturing agreement with terms and conditions that are beneficial to LumaSense.
** Amount received as at August 31, 2011.
***Amount received as at August 31, 2012.

CAPACITY TO PRODUCE RESULTS

As discussed in the section regarding financial position, the Company has the required financial resources for its
short-term operations, to fulfill its commitments, to support its growth plan and for the development of its activities.
On a mid-term perspective, it is possible that additional financing, through the issuance of shares or through debt
financing, might be required.

During the next year, the activity level should not require additional investment in working capital. Investments in
capital of a few hundreds of thousands of dollars will be needed to respond to Opsens’ operational needs.

From the human resources’ perspective, there are no vacancies in the major executive and technical positions within
the Company. However, additional production personnel will be required in Quebec and Alberta. Taking into
account the employment market in Canada, Opsens is confident in its capacity to recruit qualified human resources
in a timely fashion.

Regarding the strategy on corporate executive remuneration, it is oriented towards creation of long-term value for the
shareholders. Several corporate executives hold an important share and share-purchase option position, with rights to
be acquired over a four-year period in order to align shareholders’ interest with corporate executives’ interest. This
long-term vision stimulates innovation and the development of recurrent revenues.

ADOPTION OF IFRS - IMPACTS

International Financial Reporting Standards

As stated by the Canadian Accounting Standards Board (“CASB”), the Company was required to adopt International
Financial Reporting Standards (“IFRS”). The Company will be required to use IFRS for its interim and annual
financial statements beginning on September 1, 2011 and to provide a restated comparative statement in accordance
with IFRS.

The following table presents certain choices made by management pertaining to the Standard IFRS 1 (First-time
adoption of IFRS).

Standards

Topic

International standards

IFRS 1

First-time Adoption of
IFRS

Deemed cost of
property, plant
and equipment

Stock option costs

Designation of
financial
instruments

An entity may elect to
measure an item of
property, plant and
equipment at the date
of transition to IFRS
at its fair value and
use that fair value as
its deemed cost at
that date.

A first-time adopter is
encouraged, but not
required, to apply
IFRS 2 to equity
instruments that were
granted after
November 7, 2002
and that vested
before the date of
transition to IFRS.

Possibility of
redesignating
financial
instruments on the
transition date

Business combinations Costs incurred to effect a
business combination are
expensed in the period
incurred.

Management’s
comments

Given the type of
capital assets held,
management
accounted for them as at
the transition date at
their depreciated cost
in accordance with
IFRS rather than at
their fair value on this
date.

Management made the
choice not to apply IFRS
2 in order to avoid
revising calculations of
equity instruments on
which the rights were
vested before
September 1, 2010.

Management
reviewed the
classification of its
financial instruments and
decided to maintain
its prior designation
after the transition.
The Corporation elected
not to retrospectively
apply IFRS 3 to business
combinations that
occurred prior to its
transition date and such
business combinations
will not be restated.

Reconciliation of Equity as of September 1st, 2010

Share capital

Stock options

Warrants

Contributed surplus

Deficit

Canadian GAAP
Balance
August 31, 2010
Audited

15,201,618

1,065,677

861,782

1,328,600

(8,597,742)

9,859,935

IFRS
Reclassification

IFRS
Adjustments

IFRS
Balance
September 1,
2010

1,328,600

(1,328,600)

15,201,618

ii) (214,071)

(126,737 )

851,606

2,190,382

ii) 214,071

(8,510,408)

(126,737 )

9,733,198

i) The adjustment results from a change in accounting policies for property, plant and equipment. The
Company has decided to change its current diminishing balance method for tangible assets for the
straight-line method. A retrospective application has been made and the opening balance of Deficit as
of September 1, 2010 has been adjusted. As a result, the balance of property, plant and equipment has
been reduced by $126,737.

ii) The adjustment results from stock options costs. A retrospective application has been made and the opening
balance of Deficit as of September 1, 2010 has been adjusted. As a result, the balance of deficit has
been decreased by $214,071.

ACCOUNTING POLICIES

Principles of consolidation

The consolidated financial statements include the accounts of the Company and those of its wholly-owned subsidiary
Opsens Solutions Inc. from the acquisition date.

These consolidated financial statements have been approved by the Board of Directors on November 27, 2012.

Presentation Currency and Foreign Currency Translation

The consolidated financial statements are presented in Canadian dollars, which is also the functional currency of the
Company as this is the principal currency of the economic environment in which it operates.

Foreign currency transactions are translated into Canadian dollars as follows: monetary assets and liabilities are
translated at the exchange rates in effect at the financial position date, non-monetary assets and liabilities are
translated at historical rates, revenues and expenses are translated at the exchange rates in effect at the time of the
transaction and exchange gains or losses resulting from translation are carried to earning.

Cash and cash equivalents

Cash and cash equivalents include cash and short-term investments redeemable anytime or with a maturity of three
months or less beginning on the acquisition date.

Inventories

The cost of inventories is essentially determined using the moving average method. The cost of work in progress and
finished goods comprises the cost of raw materials and an applicable share of the cost of labour and manufacturing
overhead based on normal production capability. Inventories are valued at the lower of cost and net realisable value.

When impairment is recognized, a new assessment of net realisable value is performed in each subsequent period.
When the circumstances that justified writing down the inventories below cost no longer exist, or when there is a
clear indication of an increase in net realizable value due to a change in the economic situation, the amount of the
write-down is reversed such that the new carrying amount is the lower of the cost or the revised net realisable value.

Property, plant and equipment and intangible assets

Property, plant and equipment and intangible assets with finite lives are recorded at their acquisition cost.
Depreciation is recorded using the straight-line method based on estimated useful lives taking into account any
residual value, as follows:

Property, plant and equipment

Office furniture and equipment
Production equipment
Automotive equipment
Research and development equipment

Research and development computer equipment

Computer equipment
Leasehold improvements

Intangible assets with finite lives
Patents

Software

10 years
7 years
7 years
7 years
3 years
3 years
Lease term

Term of underlying
patent, 5 to 20 years
3 years

Depreciation methods, residual values and useful lives of property, plant and equipment, and intangible assets are
reviewed at each financial year-end. Any change is accounted for prospectively as a change in accounting estimates.

Intangible assets with indefinite lives

Intangible assets with indefinite lives are recorded at cost and are tested for impairment annually or more frequently
if events or changes in circumstances indicate a potential impairment in value. The excess of the carrying value over
the fair value is recorded in loss.

Leases

Assets under leasing agreements are classified at the inception of the lease as (i) finance leases whenever the terms of
the lease transfer substantially all the risks and rewards of ownership of the asset to the lessee, or as (ii) operating
leases for all other leases. All of the Company’s current leases are classified as operating leases.

Operating lease rentals are recognized in the consolidated statement of earnings on a straight-line basis over the
period of the lease. Any lessee incentives are deferred and then recognized evenly over the lease term.

Impairment of long-lived assets

At the end of each reporting period, assets are reviewed for indication of any impairment. In such case, the asset’s
recoverable value is calculated to establish the amount of the impairment loss, if any. If it is not possible to
determine the recoverable value for an individual asset, then the recoverable value of the assets is determined on the
basis of its cash generating unit to which the asset belongs.

The recoverable value is the higher of an asset’s fair value less the cost to sell and its value in use. Value in use is the
present value of estimated future cash flows discounted using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks to the asset for which estimated future cash flows were not
adjusted.

Goodwill

Goodwill representing the excess of purchase price over fair value of the net identifiable assets of acquired
businesses is tested for impairment annually or more frequently when an event or circumstance occurs that indicates
that goodwill might be impaired. When the carrying amount exceeds the fair value, an impairment loss is recognized
in the statement of loss in an amount equal to the excess. Goodwill is not deductible for tax purposes.

Warranty Provision

The Company offers a standard 12-month warranty for the surface materials. For the downhole materials, Opsens
guarantees that the downhole materials shall be free from defects but given that the downhole environmental
conditions are not exactly known, Opsens does not guarantee the performance of the downhole materials once
entered the wellbore. The estimated cost of the warrant is based on the history of defective products and accessories,
the probability that these defects will arise and the costs to repair them.

Revenue recognition

Opsens Inc. reportable segment revenues related to the sale of products are recognized when persuasive evidence of
an arrangement exists, delivery has occurred, the price to the buyer is fixed or determinable and collection is
reasonably assured.

Opsens Solutions Inc. reportable segment revenues related to the sale or products and sensor installation services are
recognized when persuasive evidence of an arrangement exists, on-site installation has occurred, the price to the
buyer is fixed or determinable and collection is reasonably assured. For contract revenues earned over a long period,
revenues are recorded using the percentage of completion method. Therefore, these revenues are recognized
proportionately with the degree of completion of the work. The Company uses the efforts expended method to
calculate the degree of completion of work based on the number of hours incurred as at the balance sheet date
compared to the estimated total number of hours. Work in progress is valued by taking into consideration the number
of hours worked but not yet invoiced and the payments received. Losses are recorded as soon as they become
apparent.

Stock-based compensation and other stock-based payments

The Company offers a stock option plan which is determined as an equity-settled plan and issues from time to time
warrants to certain investors.

The Company uses the fair value method to assess the fair value of stock options or warrants as at their date of
allocation. The fair value is determined using the Black-Scholes option pricing model and is recognized through net
income over the vesting period with an offset to the corresponding shareholder’s equity account. When stock options
or warrants are exercised, the corresponding account and the proceeds received by the Company are credited to share
capital.

Income taxes

The Company accounts for income taxes using the tax liability method. Under this method, deferred income tax
assets and liabilities are recognized for deductible or taxable temporary differences between the carrying value and
the tax value of the assets and liabilities based on the enacted or substantially enacted tax rates expected to apply to
the year in which the differences are expected to reverse.

The Company establishes a valuation allowance against deferred income tax assets if, based on available
information, it is more likely than not that some or all the deferred income tax assets will not be realized.

Government assistance and income tax credits for research and development

Government grants are recorded when there is reasonable assurance that the Company has complied with and will
continue to comply with all the conditions of the grant. Non-repayable grants or contributions related to operating
expenses are included in the statement of loss when the related expenses are incurred. Grants related to capital
expenditures are netted against the related assets when acquired.

The Company is also eligible for income tax credits for scientific research and experimental development (SR&ED)
awarded by the federal and provincial governments. The portion of SR&ED credits immediately receivable is
accounted for in the year during which the related costs or capital expenses are incurred. The portion of SR&ED
credits not immediately receivable is accounted for in the year during which these costs or expenses are incurred,
provided the Company has reasonable assurance that these credits will be recovered.

Income tax credits are applied against expenses or related assets. Recorded income tax credits are based on
management’s estimates of amounts expected to be recovered and are subject to an audit by the taxation authorities.

Loss per share

Loss per share is determined using the weighted average number of outstanding shares during the period. The
Company uses the treasury stock method to calculate the diluting effect of share purchase options and warrants.
Reconciliations of the numerators and the denominators used in the calculation of the basic and diluted loss are
disclosed in accordance with IFRS.

Financial instruments

Financial assets and financial liabilities are initially recognized at fair value and their subsequent measurement is
dependent on their classification as described below. Their classification depends on the purpose, for which the
financial instruments were acquired or issued, their characteristics and the Company’s designation of such
instruments. Settlement date accounting is used.

Cash and cash equivalents, accounts receivable and balance of purchase price are classified as loans and receivables.
They are recorded at amortized cost using the effective interest method which, at initial recognition, corresponds to
fair value.

The Company classifies its financial liabilities (accounts payable, accrued liabilities, and long-term debt) as “other
liabilities.” Financial liabilities are initially measured at cost, and subsequent revaluations are recorded at amortized
cost using the effective interest rate method.

The effective interest method is a method of calculating the amortized cost of a financial instrument and of allocating
interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future
cash flows (including all fees and points paid or received that form an integral part of the effective interest rate,
transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where
appropriate, a shorter period, to the net carrying amount on initial recognition.

Transaction fees related to “other liabilities” are capitalized and presented against long-term debt. They are
amortized using the effective interest rate and are recorded in the income statement.

Critical accounting estimates and judgments

In preparing these consolidated financial statements under IFRS, management is required to make judgments,
estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from
other sources. The estimates and associated assumptions are based on historical experience and other factors that are
considered to be relevant. Actual results may differ from these estimates.

The following are the critical judgments and key sources of estimation made by management:

• Recoverability of intangible assets and goodwill

The main judgments made by management as part of the impairment test are the following:

• Determining discounted cash flow projections based on management’s best estimate of the range of

economic conditions that will exist over the remaining useful life of the intangible assets;

• Determining a pre-tax discount rate that reflects current market assessments of the time value of

money and the risks specific to the Company.

•

Inventory measurement

On a regular basis, the Company assesses the value of its inventories. The obsolescence and the net realisable value
are reviewed on an ongoing basis by management, based on its experience and knowledge of the current market
conditions.

• Useful lives of property, plant and equipment

The Company reviews the estimated useful lives of property, plant and equipment at the end of each reporting
period.

• Government assistance and research and development tax credits

Government assistance is recorded in the financial statements when there is reasonable assurance that the Company
has complied with, and will continue to comply with, all of the conditions necessary to obtain the assistance. In
general, the Company recognizes 80 % of the amount that it expects to receive.

• Warranty provision

The Company estimated warranty provision based on the history of defective products and the probability that these
defects will arise and the related costs.

• Revenue recognition

For all sales, the Company uses a binding purchase order as evidence that sales arrangement exists. Delivery
generally occurs when the product is handed over to a transporter for shipment. At the time of the transaction, the
Company assesses whether the price associated with its revenue transaction is fixed or determinable and whether or
not collection is reasonably assured. The Company assesses collection based on a number of factors, including past
transaction history and the creditworthiness of the customer.

• Stock-based compensation

The Company uses judgment in assessing expected life, volatility, risk-free interest rate as well as the estimated
number of options that will ultimately vest.

• Functional currency

The Company applied judgment in determining the functional currency of the Company and its subsidiaries.
Functional currency was determined based on the currency that mainly influences sales prices, labor, materials and
other costs of providing services.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimates are revised if the revision affects only that period, or in the period of
the revision and future periods if the revision affects both the current and future periods.

FUTURE ACCOUNTING CHANGES

IFRS 9, Financial Instruments, simplifies the measurement and classification for financial assets by reducing the
number of measurement categories and removing complex rule-driven embedded derivative guidance in IAS 39,
Financial Instruments: Recognition and Measurement. The new standard also provides for a fair value option in the
designation of non-derivative financial instruments and its related classification and measurement. IFRS 9 is
effective from periods beginning January 1, 2015 with early adoption permitted.
The Company is required to adopt IFRS 9 for the annual period beginning September 1, 2015. A detailed review will
be completed in the future in order to determine if this Standard will have significant impacts.

IFRS 13, Fair value measurement, issued in May 2011, establishes a single framework for measuring fair value
where such measure is required under other standards. IFRS 13 will be effective for the annual period beginning on
January 1, 2013, with earlier application permitted. IFRS 13 will apply for both financial and non-financial items
measured at fair value. Under IFRS 13, the fair value is defined as the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market participants at the measurement date. The
Company will adopt IFRS 13 for the annual period beginning September 1, 2013. A detailed review will be
completed in the future in order to determine if this Standard will have significant impacts.

IFRS 10, Consolidated Financial Statements, replaces SIC-12 Consolidation – Special Purpose Entities and parts of
IAS 27 Consolidated and Separate Financial Statements and provides additional guidance regarding the concept of
control as the determining factor in whether an entity should be included within the consolidated financial statements
of the parent company. IFRS 10 is effective from periods beginning January 1, 2013 with early adoption permitted.

IFRS 11, Joint Arrangements, replaces IAS 31, Interests in Joint Ventures, with guidance that focuses on the rights
and obligations of the arrangement, rather than its legal form. It also withdraws the option to proportionately
consolidate an entity’s interest in joint ventures. The new standard requires that such interests be recognized using
the equity method. IFRS 11 is effective from periods beginning January 1, 2013 with early adoption permitted.

IFRS 12, Disclosure of Interests in Other Entities, is a new and comprehensive standard on disclosures requirements
for all forms of interests in other entities, including joint arrangements, associates, special purpose entities and other
off balance sheet vehicles. IFRS 12 is effective from periods beginning January 1, 2013 with early adoption
permitted.

IAS 27, Separate Financial Statements and IAS 28, Investments in Associates and Joint Ventures, were amended and
renamed to be consistent with the publication of IFRS 10, IFRS 11 and IFRS 12. IAS 27 amended and IAS 28
amended are applicable for periods beginning on or after January 1, 2013 with early adoption permitted if the entity
early adopts also IFRS 10, IFRS 11 and IFRS 12.

In June 2011, the IASB published an amendment to IAS 19, Employee Benefits. As the Company does not provide
benefits in the scope of this amendment, there will be no impact.

also requires items of other comprehensive income items to be grouped into those that will and will not be
reclassified to profit and loss in the future. Earlier application of this standard is permitted. The Company is currently
evaluating the impact of this standard.

RISK FACTORS AND UNCERTAINTIES

Opsens operates in an industry that is subject to various risks and uncertainties. The Company’s business, financial
position, and operating results could be impacted negatively by these risks and uncertainties. The risks and
uncertainties listed below are not the only risks and uncertainties that could impact the Company.

Capital requirements

Additional financing may be required for operating and investment activities. There is no guarantee that additional
capital would be available at conditions that would be acceptable for Opsens and favourable for its growth.

Revenues in the oil and gas field

Opsens draws most of its revenue from the sale of readout devices and fiber optic sensors in the oil and gas field. The
Company feels that the revenue from these products will continue to represent a significant share of Opsens’ revenue
for the foreseeable future. Consequently, Opsens is particularly vulnerable to fluctuations in the demand for its
products. Therefore, if demand for Opsens’ products decreases significantly, the Company and the operating results
could be unfavourably affected.

Labour and key personnel

Opsens depends on the services of its engineers, technical employees, and key management personnel. The loss of
one of these people could have a significant unfavourable impact on the Company, its operating results, and its
financial position. The success of Opsens is largely dependent upon its ability to identify, hire, train, motivate, and
retain highly skilled management employees, engineers, technical employees, and sales and marketing personnel.
Competition for its employees can be intense, and Opsens cannot ensure that it will be able to bring in and retain
highly skilled technical and management personnel in the future. Its ability to bring in and retain management and
technical personnel and the necessary sales and marketing employees could have an unfavourable impact on its
growth and future profitability. Opsens may be obligated to increase the compensation paid to current or new
employees, which could substantially increase operating expenses.

Growth management and market development

There is no guarantee that Opsens can develop its market significantly, thus affecting its profitability. Opsens’
expected rapid growth might create significant pressure on management, operations, and technical resources. Opsens
foresees increased operating and personnel expenses in the future. In order to manage its growth, Opsens may need
to increase the size of its technical and operational staff and manage its personnel while maintaining many effective
relationships with third parties. There is no guarantee that Opsens will be able to manage its business growth.
Opsens’ inability to establish consistent management systems, add economic resources, or manage its expansion
adequately would have a significant, unforeseeable effect on its activities and operating results.

Pricing policies

The competitive market in which Opsens operates could force it to reduce its prices. If its competitors offer large
discounts on certain products and services in order to gain market shares or sell products and services, Opsens may
need to lower its prices and offer other favourable terms in order to compete successfully. Such changes could reduce
profit margins and have an unfavourable impact on its operating results. Some of Opsens’ competitors could offer
products and services that compete with theirs for promotional purposes or as part of a long-term pricing strategy or
offer price guarantees or product implementation. With time, these practices could limit the prices Opsens may
charge for its products and services. If Opsens cannot offset these price reductions with a corresponding increase in
sales or decreased expenses, the decreased revenues from products and services could unfavourably affect its profit
margins and operating results.

Product failures and mistakes

Opsens products are complex and therefore may contain failures and mistakes that could be detected at any time in a
product’s life cycle. Failures and mistakes in its products could have a significant unfavourable impact on its
reputation, open it up to significant costs, delay product launch dates, and harm its ability to sell its products in the
future. The costs of correcting a failure or mistake in one of these products could be significant and could negatively
affect its operating margins. Although Opsens expects to continue to test products to detect failures and mistakes and
to work with its customers through its support and maintenance services in order to find and correct failures and
mistakes, they could appear in its products in the future.

Warranties, recalls, and legal proceedings

Opsens is exposed to warranty expenses, product recalls, and other claims, particularly if the products prove to be
defective, which would harm business development and the Company’s reputation.

Intellectual property and exclusive rights

In order to protect its intellectual property rights, Opsens relies on a combination of laws related to patents and
trademarks, trade secrets, confidentiality procedures, and contractual provisions. Despite Opsens’ best efforts to
protect its intellectual property rights, unauthorized individuals may attempt to copy certain aspects of Opsens
products or obtain information that Opsens considers to be its property. The monitoring of the unauthorized use of
exclusive technologies, if applicable, may prove difficult, time consuming, and expensive. In addition, the laws of
certain countries in which Opsens’ products will be sold do not protect products and their related intellectual
property rights in the same way the laws of Canada and the United States would. There is no certainty that Opsens
will successfully protect its intellectual property rights, which could unfavourably affect it. Patents applications,
claims, PCTs, and Continuations in Part files by Opsens could be incomplete, invalid, circumvented, or deemed not
applicable. Legal proceedings could prove necessary to carry out patent applications, claims, PCTs, and
Continuations in Part. These cases could lead to considerable expenses without any guarantee of success.
Intellectual property rights could be disputed. Despite Opsens’ best efforts to ensure its right to market its products
on its target markets, competitor patents could impede the sale potential of certain products.

Competition and technological obsolescence

Competitors and new companies could launch new products. In order to remain on the cutting edge of technology,
Opsens may need to launch a new generation of fiber optic sensors and develop its related products and services.
Whether it is competition from development companies and/or marketing of fiber optic sensors or a merger or
acquisition of existing companies, competition within certain fiber optic sensor industry sectors offering solutions
similar to what Opsens offers is vigorous and could increase. Some of Opsens’ competitors have significantly greater
financial, technical, distribution, and marketing resources than Opsens. Technological progress and product
development could make Opsens products obsolete or reduce their value.

Currency exchange rate

Since Opsens expects recording significant sales in U.S. dollars, while a large part of its operating expenses are
incurred in Canadian dollars, the exchange rate fluctuations between the two currencies may have an unfavourable
impact on its activities, financial position, and operating results. Based on outlooks in the oil and gas market, the
weighting of Canadian sales should increase during the coming fiscal years and, consequently, reduce Opsens’
currency exchange risk.

Restrictive clauses

The Company has restrictive clauses regarding indebtedness and working capital in the agreement with its financial
institution. If these restrictive clauses are not respected, Opsens may need to allocate a portion of its working capital
to repaying a debt valued at $456,382 as at August 31, 2012.

OTHER INFORMATION

Updated information on the Company can be found on the SEDAR Web site at http://www.sedar.com.

On behalf of management,
Chief Financial Officer and Secretary

(s) Louis Laflamme
_______________
November 27, 2012

Consolidated financial statements

Opsens Inc.

August 31, 2012 and August 31, 2011

Opsens Inc.
August 31, 2012 and August 31, 2011

Table of contents

Independent auditor’s report .............................................................................................................................. 1-2

Consolidated statements of loss and comprehensive loss.................................................................................... 3

Consolidated statements of changes in equity ................................................................................................... 4-5

Consolidated statements of financial position ....................................................................................................... 6

Consolidated statements of cash flows ................................................................................................................. 7

Notes to the consolidated financial statements ................................................................................................ 8-46

Samson Bélair/Deloitte &
Touche s.e.n.c.r.l.
925, Grande Allée Ouest
Bureau 400
Québec QC G1S 4Z4
Canada

Tél. : 418-624-3333
Téléc. : 418-624-0414
www.deloitte.ca

Independent auditor’s report

To the Shareholders of Opsens Inc.

We have audited the accompanying consolidated financial statements of Opsens Inc., which comprise the
consolidated statements of financial position as at August 31, 2012, August 31, 2011 and
September 1, 2010, and the consolidated statements of loss and comprehensive loss, statements of
changes in equity and statements of cash flows for the years ended August 31, 2012 and August 31, 2011,
and a summary of significant accounting policies and other explanatory information.

Management’s responsibility for the consolidated financial statements

Management is responsible for the preparation and fair presentation of these 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.

Auditor’s responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with Canadian generally accepted auditing standards. Those
standards require that we comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are free from material
misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the consolidated financial statements. The procedures selected depend on the auditor’s judgment,
including the assessment of the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the entity’s preparation and fair presentation of the consolidated financial statements 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 entity’s internal control. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of accounting estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide
a basis for our audit opinion.

Membre de / Member of Deloitte Touche Tohmatsu

Independent auditor’s report
Opsens Inc.
Page 2

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial
position of Opsens Inc. as at August 31, 2012, August 31, 2011 and September 1, 2010, and its financial
performance and its cash flows for the years ended August 31, 2012 and August 31, 2011 in accordance
with International Financial Reporting Standards.

November 26, 2012

______________________________
1 CPA auditor, CA, public accountancy permit No. A112991

Opsens Inc.
Consolidated statements of loss and comprehensive loss
Years ended August 31, 2012 and August 31, 2011

Revenues

Sales

Cost of sales

Gross margin

Expenses (revenues)

Administrative

Marketing

Research and development

Financial income (Note 4)

Loss before income taxes

Net loss and comprehensive loss

Net loss per share (Note 16)

Basic

Diluted

2012

2011

8,461,930

6,005,139

5,721,529

4,156,897

2,740,401

1,848,242

2,303,747

2,203,586

928,784

659,489

1,533,915

1,542,895

(96,367 )

(88,871)

4,670,079

4,317,099

(1,929,678 )

(2,468,857)

(1,929,678 )

(2,468,857)

(0.04 )

(0.05)

The accompanying notes are an integral part of the consolidated financial statements.

Additional information on the consolidated statements of loss and comprehensive loss is presented in Note 25.

Certain comparative figures have been restated and/or reclassified to conform to the current year IFRS presentation.
See notes 2 and 25 for more details.

Opsens Inc.
Consolidated statements of changes in equity
Year ended August 31, 2012

Common

Stock

Common

Reserve – Stock option

Warrants

options

Total

Warrants

(number)

plan

Deficit

Total

Reserve –

Balance as at

47,865,983

2,443,049

4,177,000

54,486,032

15,201,618

2,190,382

1,013,335

(10,979,265)

7,426,070

August 31, 2011

Options granted (Note 15b)

Options cancelled (Note 15b)

1,684,000

(2,442,000)

Warrants cancelled (Note 15c)

(2,443,049)

Stock-based compensation

(Note 15b)

Net loss and

137,089

comprehensive loss

(1,929,678)

(1,929,678 )

Balance as at

August 31, 2012

47,865,983

3,419,000

51,284,983

15,201,618

2,190,382

1,150,424

(12,908,943)

5,633,481

The accompanying notes are an integral part of the consolidated financial statements.

Certain comparative figures have been restated and/or reclassified to conform to the current year IFRS presentation. See notes 2 and 25 for more details.

Opsens Inc.
Consolidated statements of changes in equity
Year ended August 31, 2011

Common

Stock

Common

Reserve –

Stock

shares Warrants

options

Total

Warrants

option plan

Deficit

Total

(number)

Reserve –

Balance as at

September 1, 2010

47,865,983

2,647,216

4,140,500

54,653,699

15,201,618

2,190,382

851,606

(8,510,408)

9,733,198

Options granted (Note 15b)

Options cancelled (Note 15b)

Warrants cancelled (Note 15c)

Stock-based compensation

(Note 15b)

Net loss and comprehensive loss

Balance as at

453,000

(416,500)

(204,167)

161,729

(2,468,857)

(2,468,857 )

August 31, 2011

47,865,983

2,443,049

4,177,000

54,486,032

15,201,618

2,190,382

1,013,335

(10,979,265)

7,426,070

The accompanying notes are an integral part of the consolidated financial statements.

Certain comparative figures have been restated and/or reclassified to conform to the current year IFRS presentation. See notes 2 and 25 for more details.

Opsens Inc.
Consolidated statements of financial position

Assets
Current
Cash and cash equivalents (Note 17)
Trade and other receivables (Note 6)
Income tax credits receivable (Note 22)

Work in progress

Inventories (Note 7)

Prepaid expenses
Balance of purchase price to be

received – short term (Note 11)

Balance of purchase price to be

received – long-term (Note 11)
Property, plant and equipment (Note 8)
Intangible assets (Note 9)
Goodwill (Note 10)

Liabilities
Current
Accounts payable (Note 13)
Warranty provision (Note 19)
Current portion of long-term debt (Note 14)

Long-term debt (Note 14)

Shareholders’ equity
Share capital (Note 15a)
Reserve – Stock option plan (Note 15b)
Reserve – Warrants (Note 15c)
Deficit

as of
August 31,
2012
$

as of
August 31,
2011
$

as of
September 1,
2010
$

2,576,586
901,311
299,395
-
1,979,073
138,773

-
5,895,138

-
813,142
350,185
676,574
7,735,039

1,343,905
84,273
166,404
1,594,582
506,976
2,101,558

3,747,320
585,174
269,147
-
1,770,609
130,644

424,494
6,927,388

-
741,648
248,042
676,574
8,593,652

971,108
74,732
91,355
1,137,195
30,387
1,167,582

15,201,618
1,150,424
2,190,382
(12,908,943)
5,633,481
7,735,039

15,201,618
1,013,335
2,190,382
(10,979,265 )
7,426,070
8,593,652

5,347,801
2,055,923
152,080
40,000
1,428,439
144,338

428,024
9,596,605

398,013
552,239
166,259
676,574
11,389,690

1,370,389
31,860
125,001
1,527,250
129,242
1,656,492

15,201,618
851,606
2,190,382
(8,510,408)
9,733,198
11,389,690

The accompanying notes are an integral part of the consolidated financial statements.
Certain comparative figures have been restated and/or reclassified to conform to the current year IFRS presentation.
See notes 2 and 25 for more details.

Approved by the board

Signed [Jean Lavigueur] director

Signed [Pierre Carrier] director

Opsens Inc.
Consolidated statements of cash flows
Years ended August 31, 2012 and August 31, 2011

Operating activities

Loss before income taxes

Adjustments for:

Depreciation of property, plant

and equipment

Amortization of intangible assets

Stock option-based compensation

Effect of foreign exchange rate changes on cash

held in foreign currency

Loss (profit) of unrealized foreign exchange

Net interest income

Interest paid

Changes in non-cash operating

working capital items (Note 17)

Investing activities

Acquisition of property, plant and equipment

Acquisition of intangible assets

Proceeds of assets disposal

Financing activities

Increase in long-term debt

Reimbursement of long-term debt

Effect of foreign exchange rate changes on cash

held in foreign currency

Decrease in cash and cash equivalents

Cash and cash equivalents at beginning

Cash and cash equivalents at end

2012

2011

(1,929,678 )

(2,468,857)

230,124

34,558

137,089

(19,921 )

(4,019 )

(62,456 )

182,077

25,406

161,729

21,602

74,576

(141,955)

(1,614,303 )

(2,145,422)

(7,771 )

(8,228)

(180,640 )

708,797

(1,802,714 )

(1,444,853)

(301,618 )

(136,701 )

498,740

60,421

695,601

(143,963 )

551,638

(371,486)

(107,189)

477,150

(1,525)

13,404

(145,905)

(132,501)

19,921

(21,602)

(1,170,734 )

(1,600,481)

3,747,320

2,576,586

5,347,801

3,747,320

The accompanying notes are an integral part of the consolidated financial statements.

Certain comparative figures have been restated and/or reclassified to conform to the current year IFRS presentation.
See notes 2 and 25 for more details.

Additional information on consolidated statements of cash flows is presented in Note 17.

Opsens Inc.
Notes to the consolidated financial statements
August 31, 2012 and August 31, 2011

1. Description of business

Opsens Inc. (the “Company”) is incorporated under the Business Corporation Act (Quebec). The Company
specializes in developing and manufacturing technical and scientific instruments. The Company’s head office is
located at 125-2014, Cyrille-Duquet, Quebec (Quebec), Canada.

2. Accounting policies, critical accounting estimates and judgments

The Company adopted International Financial Reporting Standard (IFRS) on September 1, 2011. Prior to this
adoption, the Company prepared its financial statements in accordance with Canadian generally accepted
accounting principles (“Canadian GAAP”). The financial statements for the year ended August 31, 2012 are the
first annual financial statements of the Company prepared in accordance with IFRS as published by the IASB
on that same date. The Company prepared its opening Statement of Financial Position as of
September 1, 2010. The accounting policies described in Note 2 are the accounting policies that the Company
used in preparing its opening Statement of Financial Position.

The significant accounting policies used to prepare these consolidated financial statements are summarized
below.

Principles of consolidation

The consolidated financial statements include the accounts of the Company and those of its wholly-owned
subsidiary Opsens Solutions Inc. from the acquisition date.

These consolidated financial statements have been approved by the Board of Directors on November 26, 2012.

Presentation Currency and Foreign Currency Translation

The consolidated financial statements are presented in Canadian dollars, which is also the functional currency
of the Company as this is the principal currency of the economic environment in which it operates.

Foreign currency transactions are translated into Canadian dollars as follows: monetary assets and liabilities
are translated at the exchange rates in effect at the financial position date, non-monetary assets and liabilities
are translated at historical rates, revenues and expenses are translated at the exchange rates in effect at the
time of the transaction and exchange gains or losses resulting from translation are carried to earning.

Cash and cash equivalents

Cash and cash equivalents include cash and short-term investments redeemable anytime or with a maturity of
three months or less beginning on the acquisition date.

Inventories

The cost of inventories is essentially determined using the moving average method. The cost of work in
progress and finished goods comprises the cost of raw materials and an applicable share of the cost of labour
and manufacturing overhead based on normal production capability. Inventories are valued at the lower of cost
and net realisable value.

When impairment is recognized, a new assessment of net realisable value is performed in each subsequent
period. When the circumstances that justified writing down the inventories below cost no longer exist, or when
there is a clear indication of an increase in net realizable value due to a change in the economic situation, the
amount of the write-down is reversed such that the new carrying amount is the lower of the cost or the revised
net realisable value.

Opsens Inc.
Notes to the consolidated financial statements
August 31, 2012 and August 31, 2011

2. Accounting policies, critical accounting estimates and judgments (continued)

Property, plant and equipment and intangible assets

Property, plant and equipment

Office furniture and equipment
Production equipment
Automotive equipment
Research and development equipment
Research and development computer equipment
Computer equipment
Leasehold improvements

Intangible assets with finite lives

Patents

Software

10 years
7 years
7 years
7 years
3 years
3 years
Lease term

Term of underlying
patent, 5 to 20 years
3 years

Depreciation methods, residual values and useful lives of property, plant and equipment and intangible assets
are reviewed at each financial year-end. Any change is accounted for prospectively as a change in accounting
estimates.

Intangible assets with indefinite lives

Intangible assets with indefinite lives are recorded at cost and are tested for impairment annually or more
frequently if events or changes in circumstances indicate a potential impairment in value. The excess of the
carrying value over the fair value is recorded in loss.

Leases

Assets under leasing agreements are classified at the inception of the lease as (i) finance leases whenever the
terms of the lease transfer substantially all the risks and rewards of ownership of the asset to the lessee, or as
(ii) operating leases for all other leases. All of the Company’s current leases are classified as operating leases.

Operating lease rentals are recognized in the consolidated statement of earnings on a straight-line basis over
the period of the lease. Any lessee incentives are deferred and then recognized evenly over the lease term.

Impairment of long-lived assets

At the end of each reporting period, assets are reviewed for indication of any impairment. In such case, the
asset’s recoverable value is calculated to establish the amount of the impairment loss, if any. It it is not possible
to determine the recoverable value for an individual asset, then the recoverable value of the assets is
determined on the basis of its cash generating unit to which the asset belongs.

The recoverable value is the higher of an asset’s fair value less the cost to sell and its value in use. Value in
use is the present value of estimated future cash flows discounted using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks to the asset for which estimated future
cash flows were not adjusted.

Opsens Inc.
Notes to the consolidated financial statements
August 31, 2012 and August 31, 2011

2. Accounting policies, critical accounting estimates and judgments (continued)

Goodwill

Goodwill representing the excess of purchase price over fair value of the net identifiable assets of acquired
businesses is tested for impairment annually or more frequently when an event or circumstance occurs that
indicates that goodwill might be impaired. When the carrying amount exceeds the fair value, an impairment loss
is recognized in the statement of loss in an amount equal to the excess. Goodwill is not deductible for tax
purposes.

Warranty Provision

The Company offers a standard 12-month warranty for the surface materials.

For the downhole materials, Opsens Inc. guarantees that the downhole materials shall be free from defects but
given that the downhole environmental conditions are not exactly known, Opsens Inc. does not guarantee the
performance of the downhole materials once entered the wellbore. The estimated cost of the warrant is based
on the history of defective products and accessories, the probability that these defects will arise and the costs
to repair them.

Revenue recognition

Opsens Inc. reportable segment revenues related to the sale of products are recognized when persuasive
evidence of an arrangement exists, delivery has occurred, the price to the buyer is fixed or determinable and
collection is reasonably assured.

Opsens Solutions Inc. reportable segment revenues related to the sale or products and sensor installation
services are recognized when persuasive evidence of an arrangement exists, on-site installation has occurred,
the price to the buyer is fixed or determinable and collection is reasonably assured. For contract revenues
earned over a long period, revenues are recorded using the percentage of completion method. Therefore,
these revenues are recognized proportionately with the degree of completion of the work. The Company uses
the efforts expended method to calculate the degree of completion of work based on the number of hours
incurred as at the balance sheet date compared to the estimated total number of hours. Work in progress is
valued by taking into consideration the number of hours worked but not yet invoiced and the payments
received. Losses are recorded as soon as they become apparent.

Stock-based compensation and other stock-based payments

The Company offers a stock option plan which is determined as an equity-settled plan and issues from time to
time warrants to certain investors.

The Company uses the fair value method to assess the fair value of stock options or warrants as at their date of
allocation. The fair value is determined using the Black-Scholes option pricing model and is recognized through
net income over the vesting period with an offset to the corresponding shareholder’s equity account. When
stock options or warrants are exercised, the corresponding account and the proceeds received by the
Company are credited to share capital.

Opsens Inc.
Notes to the consolidated financial statements
August 31, 2012 and August 31, 2011

2. Accounting policies, critical accounting estimates and judgments (continued)

Income taxes

The Company accounts for income taxes using the tax liability method. Under this method, deferred income tax
assets and liabilities are recognized for deductible or taxable temporary differences between the carrying value
and the tax value of the assets and liabilities based on the enacted or substantially enacted tax rates expected
to apply to the year in which the differences are expected to reverse.

Government assistance and income tax credits for research and development

Government grants are recorded when there is reasonable assurance that the Company has complied with and
will continue to comply with all the conditions of the grant. Non-repayable grants or contributions related to
operating expenses are included in the statement of loss when the related expenses are incurred. Grants
related to capital expenditures are netted against the related assets when acquired.

The Company is also eligible for income tax credits for scientific research and experimental development
(SR&ED) awarded by the federal and provincial governments. The portion of SR&ED credits immediately
receivable is accounted for in the year during which the related costs or capital expenses are incurred. The
portion of SR&ED credits not immediately receivable is accounted for in the year during which these costs or
expenses are incurred, provided the Company has reasonable assurance that these credits will be recovered.

Loss per share

Loss per share is determined using the weighted average number of outstanding shares during the period. The
Company uses the treasury stock method to calculate the diluting effect of share purchase options and
warrants. Reconciliations of the numerators and the denominators used in the calculation of the basic and
diluted loss are disclosed in accordance with IFRS.

Opsens Inc.
Notes to the consolidated financial statements
August 31, 2012 and August 31, 2011

2. Accounting policies, critical accounting estimates and judgments (continued)

Financial instruments

Financial assets and financial liabilities are initially recognized at fair value and their subsequent measurement
is dependent on their classification as described below. Their classification depends on the purpose, for which
the financial instruments were acquired or issued, their characteristics and the Company’s designation of such
instruments. Settlement date accounting is used.

Cash and cash equivalents, accounts receivable and balance of purchase price are classified as loans and
receivables. They are recorded at amortized cost using the effective interest method which, at initial
recognition, corresponds to fair value.

The Company classifies its financial liabilities (accounts payable, accrued liabilities, and long-term debt) as
“other liabilities.” Financial liabilities are recorded at amortized cost using the effective interest rate method.

The effective interest method is a method of calculating the amortized cost of a financial instrument and of
allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts
estimated future cash flows (including all fees and points paid or received that form an integral part of the
effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt
instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

Critical accounting estimates and judgments

In preparing these consolidated financial statements under IFRS, management is required to make judgments,
estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent
from other sources. The estimates and associated assumptions are based on historical experience and other
factors that are considered to be relevant. Actual results may differ from these estimates.

The following are the critical judgments and key sources of estimation made by management:

 Recoverability of intangible assets and goodwill

The main judgments made by management as part of the impairment test are the following:

 Determining discounted cash flow projections based on management’s best estimate of the range of

economic conditions that will exist over the remaining useful life of the intangible assets;

 Determining a pre-tax discount rate that reflects current market assessments of the time value of

money and the risks specific to the Company.

Opsens Inc.
Notes to the consolidated financial statements
August 31, 2012 and August 31, 2011

2. Accounting policies, critical accounting estimates and judgments (continued)

Critical accounting estimates and judgments (continued)

The following are the critical judgments and key sources of estimation made by management: (continued)



Inventory measurement

On a regular basis, the Company assesses the value of its inventories. The obsolescence and the net
realisable value are reviewed on an ongoing basis by management, based on its experience and
knowledge of the current market conditions.

 Useful lives of property, plant and equipment

The Company reviews the estimated useful lives of property, plant and equipment at the end of each
reporting period.

 Government assistance and research and development tax credits

Government assistance is recorded in the financial statements when there is reasonable assurance that
the Company has complied with, and will continue to comply with, all of the conditions necessary to obtain
the assistance. In general, the Company recognizes 80 % of the amount that it expects to receive.

 Warranty provision

The Company estimated warranty provision based on the history of defective products and the probability
that these defects will arise and the related costs.

 Revenue recognition

Delivery generally occurs when the product is handed over to a transporter for shipment. At the time of the
transaction, the Company assesses whether the price associated with its revenue transaction is fixed or
determinable and whether or not collection is reasonably assured. The Company assesses collection
based on a number of factors, including past transaction history and the creditworthiness of the customer.

 Stock-based compensation

The Company uses judgment in assessing expected life, volatility, risk-free interest rate as well as the
estimated number of options that will ultimately vest.

 Functional currency

The Company applied judgment in determining the functional currency of the Company and its
subsidiaries. Functional currency was determined based on the currency that mainly influences sales
prices, labor, materials and other costs of providing services.

For all these items, relevant accounting policies are discussed in the other parts of Note 2.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimates are revised if the revision affects only that period,
or in the period of the revision and future periods if the revision affects both the current and future periods.

Opsens Inc.
Notes to the consolidated financial statements
August 31, 2012 and August 31, 2011

3. Future accounting changes

IFRS 9, Financial Instruments, simplifies the measurement and classification for financial assets by reducing
the number of measurement categories and removing complex rule-driven embedded derivative guidance in
IAS 39, Financial Instruments: Recognition and Measurement. The new standard also provides for a fair value
option in the designation of non-derivative financial instruments and its related classification and measurement.
IFRS 9 is effective from periods beginning January 1, 2015 with early adoption permitted.

The Company is required to adopt IFRS 9 for the annual period beginning September 1, 2015. A detailed
review will be completed in the future in order to determine if this Standard will have significant impacts.

IFRS 13, Fair value measurement, issued in May 2011, establishes a single framework for measuring fair value
where such measure is required under other standards. IFRS 13 will be effective for the annual period
beginning on January 1, 2013, with earlier application permitted. IFRS 13 will apply for both financial and non-
financial items measured at fair value. Under IFRS 13, the fair value is defined as the price that would be
received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at
the measurement date. The Company will adopt IFRS 13 for the annual period beginning September 1, 2013. A
detailed review will be completed in the future in order to determine if this Standard will have significant
impacts.

IFRS 10, Consolidated Financial Statements, replaces SIC-12 Consolidation – Special Purpose Entities and
parts of IAS 27 Consolidated and Separate Financial Statements and provides additional guidance regarding
the concept of control as the determining factor in whether an entity should be included within the consolidated
financial statements of the parent company. IFRS 10 is effective from periods beginning January 1, 2013 with
early adoption permitted.

IFRS 11, Joint Arrangements, replaces IAS 31, Interests in Joint Ventures, with guidance that focuses on the
rights and obligations of the arrangement, rather than its legal form. It also withdraws the option to
proportionately consolidate an entity’s interest in joint ventures. The new standard requires that such interests
be recognized using the equity method. IFRS 11 is effective from periods beginning January 1, 2013 with early
adoption permitted.

IFRS 12, Disclosure of Interests in Other Entities, is a new and comprehensive standard on disclosures
requirements for all forms of interests in other entities, including joint arrangements, associates, special
purpose entities and other off balance sheet vehicles. IFRS 12 is effective from periods beginning
January 1, 2013 with early adoption permitted.

IAS 27, Separate Financial Statements and IAS 28, Investments in Associates and Joint Ventures, were
amended and renamed to be consistent with the publication of IFRS 10, IFRS 11 and IFRS 12. IAS 27
amended and IAS 28 amended are applicable for periods beginning on or after January 1, 2013 with early
adoption permitted if the entity early adopts also IFRS 10, IFRS 11 and IFRS 12.

In June 2011, the IASB published an amendment to IAS 19, Employee Benefits. As the Company does not
provide benefits in the scope of this amendment, there will be no impact.

In June 2011, the IASB also issued an amendment to IAS 1, Presentation of Items of Other Comprehensive
Income that will be effective for the annual period beginning on July 1, 2012. This amendment provides an
option to present comprehensive income in either one single continuous statement or in two separate but
consecutive statements. It also requires items of other comprehensive income items to be grouped into those
that will and will not be reclassified to profit and loss in the future. Earlier application of this standard is
permitted. The Company is currently evaluating the impact of this standard.

Opsens Inc.
Notes to the consolidated financial statements
August 31, 2012 and August 31, 2011

4. Financial instruments

Cash equivalents

The Company is exposed to various types of risks in the management of its cash and cash equivalents,
including those related to the use of financial instruments. To manage these risks, controls were put in place,
particularly those related to investment policy. The investment policy is approved by the board of directors. The
Company’s investment policy aims primarily to protect capital, while considering return on investment and
income taxes.

Market risk

Market risk is the risk that the value of a financial instrument will fluctuate as a result of changes in the
parameters underlying their measurement, particularly interest rates, foreign exchange rates and market prices.

Interest rate risk

Interest rate risk exists when interest rate fluctuations modify the cash flows of the Company’s investments.
The Company owns investments with fixed interest rates. As of August 31, 2012, the Company was holding
more than 49.8% (78.4% as at August 31, 2011; 81.4% as at September 1, 2010) of its cash equivalents in all
time redeemable term-deposit.

Financial charges (income)

Interest and bank charges

Interest on long-term debt

Loss (gain) on foreign currency translation

Interest income

Credit risk

2012

34,500

27,634

(34,184 )

(124,317 )

(96,367 )

2011

22,107

18,187

100,880

(230,045)

(88,871)

The use of financial instruments, such as cash and cash equivalents, receivables and balance of purchase
price to be received can create a credit risk that is the risk of financial loss resulting from a counterparty’s
inability or refusal to fully discharge its contractual obligations. The Company’s credit risk management policies
include the authorization to carry out investment transactions with recognized financial institutions, with credit
ratings of at least A and higher, in either bonds, money market funds or guaranteed investment certificates.
Consequently, the Company manages credit risk by complying with established investment policies.

Opsens Inc.
Notes to the consolidated financial statements
August 31, 2012 and August 31, 2011

4. Financial instruments (continued)

Concentration risk

Concentration risk exists when investments are made with multiple entities that share similar characteristics or
when a large investment is made with a single entity. As of August 31, 2012, the Company was holding more
than 49.8% (78.4% as at August 31, 2011; 81.4% as at September 1, 2010) of its cash equivalents portfolio in
all-time redeemable term deposit with the same financial institution.

Operational credit risk

The Company provides credit for a conventional period of 30 days to its customers in the normal course of
business. Credit evaluations are performed on an ongoing basis of all its accounts receivable and an allowance
for doubtful accounts is recorded when those accounts are deemed uncollectible. Two major customers
represent 71.4% of the Company’s accounts receivable as at August 31, 2012 (69.7% as at August 31, 2011;
66.1% as at September 1, 2010).

As at August 31, 2012, 25.1% (10.8% as at August 31, 2011; 23.8% as at September 1, 2010) of the accounts
receivable were of more than 90 days whereas 60.5% (55.8% as at August 31, 2011; 61.5% as at
September 1, 2010) of those were with less than 30 days. The maximum exposure to the risk of credit for
receivable corresponded to their book value. On August 31, 2012, the bad debt provision was established
at $21,861 ($3,082 on August 31, 2011; $6,110 as at September 1, 2010).

Management considers that substantially all receivables are fully collectible as most of our customers are large
corporations with good credit standing and no history of default.

Interest rate and cash flow risk

The Company is exposed to interest rate fluctuations on certain long-term debt that bears interest at variable
rates. The Company does not actively manage this risk.

Assuming the cash equivalents and long-term debt as reported on August 31, 2012 had been the same
throughout the period, a hypothetical 1% interest rate increase would have had an unfavourable impact of
$3,386 on the net loss for the year ended August 31, 2012 ($589 on the net loss for the year ended
August 31, 2011). The net loss would have had an equal but opposite effect for a hypothetical 1% interest rate
decrease.

Foreign exchange risk

The Company realizes certain sales and purchases and certain supplies and professional services in
US dollars. Therefore, it is exposed to foreign currency fluctuations. The Company does not actively manage
this risk.

For the years ended August 31, 2012 and 2011, if the Canadian dollar had strengthened 10% against the US
dollar with all other variables held constant, net loss would have been $39,000 higher (net loss would have
been $6,000 lower for the year ended August 31, 2011). Conversely, if the Canadian dollar had weakened 10%
against the US dollar with all other variables held constant, net loss would have been $39,000 lower for the
year ended August 31, 2012 (net loss would have been $6,000 higher for the year ended August 31, 2011).

Opsens Inc.
Notes to the consolidated financial statements
August 31, 2012 and August 31, 2011

4. Financial instruments (continued)

As at August 31, 2012, August 31, 2011 and September 1, 2010, the risk to which the Company was exposed
is established as follows:

As of
August 31,
2012
$

498,551

205,388

As of
August 31,
2011
$

As of
September 1,
2010
$

232,191

118,200

424,493

509,164

501,350

826,037

(292,195)
411,744

(48,217 )
726,667

(93,826)
1,742,725

Cash (US$505,784)

Accounts receivable (US$208,368)

Balance of purchase price to be received (US$-)

Accounts payable and accrued liabilities

(US$296,434)

Total

Liquidity risk

Liquidity risk represents the possibility of the Company not being able to raise the funds needed to meet
financial commitments at the appropriate time and under reasonable conditions. The Company manages this
risk by maintaining permanent and sufficient liquidity to meet current and future financial obligations, under both
normal and exceptional circumstances. The funding strategies used to manage this risk include turning to
capital markets to carry out issues of equity and debt securities.

The following are the contractual maturities of the financial liabilities (principal and interest, assuming current
interest rates) as at August 31, 2012, August 31, 2011 and September 1, 2010:

August 31, 2012

0 to 12

1 year to

2 years to

More than

Total

months

2 years

5 years

Accounts payable and

accrued liabilities

1,343,905

Long-term debt

837,302

195,523

164,247

327,906

149,626

Total

2,181,207

1,539,428

164,247

327,906

149,626

August 31, 2011

0 to 12

1 year to

2 years to

More than

Total

months

2 years

5 years

Accounts payable and

accrued liabilities

971,108

Long-term debt

140,460

106,040

Total

1,111,568

1,077,148

27,719

6,701

Opsens Inc.
Notes to the consolidated financial statements
August 31, 2012 and August 31, 2011

4. Financial instruments (continued)

September 1, 2010

0 to 12

1 year to

2 years to

More than

Total

months

2 years

5 years

Accounts payable and

accrued liabilities

1,370,389

Long-term debt

341,727

154,117

Total

Fair value

1,712,116

1,524,506

90,039

97,571

The fair value of cash and cash equivalents, accounts receivable, short-term balance of purchase price
receivable and accounts payable and accrued liabilities approximates their carrying value due to their short-
term maturities.

The fair value of long-term debt is based on the discounted value of future cash flows under the current
financial arrangements at the interest rate the Company expects to currently negotiate for loans with similar
terms and conditions and maturity dates. The fair value of long-term debt approximates its carrying value due to
the current market rates.

5. Capital management

The Company uses its capital (long-term debt and share capital) to finance marketing expenses, research and
development activities, administrative, working capital and capital assets. Historically, the Company has
financed activities through rounds of public and private financing, debt financing as well as government grants.

The Company believes that its current liquid assets are sufficient to finance its activities in the short-term.

The Company has an authorized line of credit for a maximum amount of $200,000, $50,000 of which is
available at all times and which does not take into consideration the margining. When using the line of credit in
an amount varying from $50,000 and $100,000, the available credit is limited to an amount that is equal to 75%
of Canadian accounts receivable and 65% of foreign accounts receivable plus 50% of inventories of raw
materials and finished goods. If the amount used exceeds $100,000, the credit available is limited to an amount
equal to 75% of Canadian accounts receivable and 90% of ensured foreign accounts receivable plus 50% of
inventories of raw materials and finished goods. This line of credit bears interest at the financial institution’s
prime rate plus 2% and is repayable on a weekly basis by $5,000 tranches. It is secured by a first-rank movable
hypothec for an amount of $750,000 on the universality of receivables and inventories. Under the terms and
conditions of the credit agreement, the Company is subject to certain covenants with respect to maintaining
minimum financial ratios. These ratios also apply to long-term debt valued of $456,381 as of August 31, 2012
($31,749 as of August 31, 2011; $55,561 as of September 1, 2010). The covenants were met as of
August 31, 2012, August 31, 2011 and September 1, 2010. The credit line was not used at the end of any
period presented.

The Company also has credit cards for a maximum amount of $87,000 ($50,000 as of August 31, 2011 and
September 1, 2010) to finance its current operations. The balance used on these credit cards bears interest at
the financial institution’s prime rate plus 4%.

Opsens Inc.
Notes to the consolidated financial statements
August 31, 2012 and August 31, 2011

6. Trade and other receivables

Trade

Allowance for doubtful accounts

Taxes receivable

Contributions receivable

Total

Allowance for doubtful accounts variation

Balance at beginning

Unused amounts reversed during the year

Additional provisions recognized

Balance at end

Inventories

Raw materials

Finished goods

Total

As of

August 31,

September 1,

2012

724,383

(21,861)

38,075

160,714

901,311

2011

2010

542,993

1,938,099

(3,082 )

45,263

(6,110)

28,901

95,033

585,174

2,055,923

August 31,

2012

(3,082 )
-

(18,779 )

(21,861 )

2011

(6,110)

3,028

(3,082)

As of

August 31,

September 1,

2012

795,918

1,183,155

1,979,073

2011

753,826

1,016,783

1,770,609

2010

669,149

759,290

1,428,439

Opsens Inc.
Notes to the consolidated financial statements
August 31, 2012 and August 31, 2011

8. Property, plant and equipment

Office

Leased

office

Research and Research and

development development

equipment,

computer

net of

equipment,

income tax

net of

furniture

Leased

credits and

income tax

and

Production

automative

equipment

grants of

$23,834

credits of

Computer

Leasehold

$3,078

equipment

improvements

Total

Cost

Balance at August 31, 2011

Additions

Balance at August 31, 2012

89,320

14,087

103,407

Accumulated depreciation

Balance at August 31, 2011

Depreciation

Balance at August 31, 2012

49,769

7,349

57,118

8,326

6,757

314

7,071

405,209

202,036

607,245

89,135

76,321

165,456

59,028

35,476

7,066

42,542

828,610

61,242

889,852

560,253

87,055

647,308

30,599

180,691

380

4,962

92,180

18,911

1,693,963

301,618

30,979

185,653

111,091

1,995,581

27,776

1,809

29,585

149,230

23,846

173,076

33,919

26,364

60,283

952,315

230,124

1,182,439

Net book value

at August 31, 2012

46,289

1,255

441,789

16,486

242,544

1,394

12,577

50,808

813,142

Opsens Inc.
Notes to the consolidated financial statements
August 31, 2012 and August 31, 2011

8. Property, plant and equipment (continued)

Office

Leased

office

Research and Research and

development development

equipment,

computer

net of

equipment,

income tax

net of

furniture

Leased

credits and

income tax

and

Production

automative

equipment

grants of

$23,834

credits of

Computer

Leasehold

$3,078

equipment

improvements

Total

Cost

Balance at September 1, 2010

Additions

Balance at August 31, 2011

Accumulated depreciation

Balance at September 1, 2010

Depreciation

Balance at August 31, 2011

85,114

4,206

89,320

43,118

6,651

49,769

8,326

6,365

392

6,757

173,383

231,826

405,209

52,582

36,553

89,135

59,028

25,382

10,094

35,476

761,751

66,859

828,610

484,324

75,929

560,253

27,122

3,477

30,599

26,179

1,597

27,776

167,845

12,846

180,691

111,308

37,922

149,230

39,908

52,272

92,180

1,322,477

371,486

1,693,963

20,980

12,939

33,919

770,238

182,077

952,315

Net book value

at August 31, 2011

Net book value

at August 31, 2010

39,551

1,569

316,074

23,552

268,357

2,823

31,461

58,261

741,648

41,996

1,961

120,801

33,646

277,427

943

56,537

18,928

552,239

Opsens Inc.
Notes to the consolidated financial statements
August 31, 2012 and August 31, 2011

Intangible assets

Indefinite lives –
Trademarks
$

Limited lives –
Patents
$

Limited lives –
software,
net of income
tax credits of
$1,518
$

200
-
200

-
-
-

327,630
125,440
453,070

83,431
31,271
114,702

49,795
11,261
61,056

46,152
3,287
49,439

Total
$

377,625
136,701
514,326

129,583
34,558
164,141

200

338,368

11,617

350,185

Indefinite lives –
Trademarks
$

Limited lives –
Patents
$

Limited lives –
software,
net of income
tax credits of
$1,518
$

Total
$

200
-
200

-
-
-

223,485
104,145
327,630

60,921
22,510
83,431

46,751
3,044
49,795

270,436
107,189
377,625

43,256
2,896
46,152

104,177
25,406
129,583

200

244,199

3,643

248,042

Cost
Balance at August 31, 2011
Additions
Balance at August 31, 2012

Accumulated depreciation
Balance at August 31, 2011
Depreciation
Balance at August 31, 2012

Net book value

at August 31, 2012

Cost
Balance at September 1, 2010
Additions
Balance at August 31, 2011

Accumulated depreciation
Balance at September 1, 2010
Depreciation
Balance at August 31, 2011

Net book value

at August 31, 2011

Net book value

at September 1, 2010

200

162,564

3,495

166,259

Opsens Inc.
Notes to the consolidated financial statements
August 31, 2012 and August 31, 2011

10. Goodwill

The recoverable amount of cash-generating unit (CGU) of Opsens Solutions inc. was determined according to
calculations of the value in use. These calculations call upon cash flow projections before income taxes
founded on financial budgets approved by management and which cover two periods. Cash flows that go
beyond this period are extrapolated using the estimated growth rates presented below. These growth rates do
not exceed the average long-term growth rates of the market which the CGU operates.

Growth rate

Long-term growth rate

Discount rate

As of

August 31,

September 1,

2012

17,9

2011

24,35

2010

Management determined the gross margin forecast according to its expectations in terms of market
development. The long-term growth rates used are expected market rates. The discount rate is the interest rate
used to establish the present value of future cash flows, and the rates used are before income taxes which take
into account specific risks in relation to relevant activity sectors.

11. Balance of purchase price to be received

Balance of purchase price to be received of
US$1,000,000 payable in two amounts of
US$500,000 at the end of each next two years
following agreement signature, actualized at an
implicit annual rate of 15%

Imputed interests (at 15% rate)

Balance receivable – short-term

Balance receivable – long-term

As of

August 31,

September 1,

2012

2011

2010

353,808

70,686

424,494

820,216

5,821

826,037

428,024

398,013

Opsens Inc.
Notes to the consolidated financial statements
August 31, 2012 and August 31, 2011

12. Authorized line of credit

The Company has an authorized line of credit for a maximum amount of $200,000, $50,000 of which is
available at all times and does not take into consideration the margining. When using the line of credit in an
amount varying from $50,000 and $100,000, the available credit is limited to an amount that is equal to 75% of
Canadian accounts receivable and 65% of foreign accounts receivable plus 50% of inventories of raw materials
and finished goods. If the amount used exceeds $100,000, the credit available is limited to an amount equal to
75% of Canadian accounts receivable and 90% of ensured foreign accounts receivable plus 50% of inventories
of raw materials and finished goods. This line of credit bears interest at the financial institution’s prime rate plus
2% and is repayable on a weekly basis by $5,000 tranches. It is secured by a first-rank movable hypothec for
an amount of $750,000 on the universality of receivables and inventories. Under the terms and conditions of
the credit agreement, the Company is subject to certain covenants with respect to maintaining minimum
financial ratios (see Note 5). The Company respects these financial ratios as at August 31, 2012, but the credit
line was not used at the end of the period.

The Company also has credit cards for a maximum amount of $87,000 to finance its current operations. The
balance used on these credit cards bears interest at the financial institution’s prime rate plus 4%.

13. Accounts payable

Suppliers

Disposal expenses payable

Total

As of

August 31,

September 1,

2012

1,343,905

2011

942,046

29,062

971,108

2010

734,560

635,829

1,370,389

Opsens Inc.
Notes to the consolidated financial statements
August 31, 2012 and August 31, 2011

14. Long-term debt

Contributions repayable to Canada Economic
Development, without interest, repayable in five
equal and consecutive annual instalments effective
of $39,567 and $20,000, maturing in
February 2012 and June 2013
Debt balance

Imputed interest

Business Development Bank of Canada (BDC)
loan of an authorized amount of $285,000, bearing
interest at the Bank’s prime rate plus 2.5%,
repayable in monthly principal instalments
of $3,690 and a final payment of $870 in
January 2012, secured by a first-rank movable
hypothec in the amount of $285,000 on the
universality of the Company’s present and future,
tangible and intangible property, subordinated only
with respect to trade accounts receivable and
inventories provided as security for the operating
loans or operating lines of credits, and for which
the BDC granted a subordinate clause in favour of
Investissement Québec for an amount of
$255,750 on the intellectual property, and by joint
and several suretyship of certain shareholders for
an amount equal to 25% of the outstanding
commitment

Canada Small Business Financing Act loan, for an
authorized amount of $119,340, bearing interest at
the financial institution’s prime rate plus 2.75%
annually, repayable in monthly principal
instalments of $1,423 until December 2011,
secured by a first-rank movable hypothec in the
amount of $119,340 on specific property

Capital lease, bearing interest at 13,5%, payable in
monthly instalments of $1,367, including interest
and a final payment of $1,417, maturing in
December 2010

As of
August 31,
2012
$

As of
August 31,
2011
$

As of
September 1,
2010
$

19,996
(3,772)
16,224

79,562
(10,044 )
69,518

139,129
(23,448)
115,681

15,630

59,910

7,937

31,749

4,513

Amounts carried forward

16,224

93,085

211,853

Opsens Inc.
Notes to the consolidated financial statements
August 31, 2012 and August 31, 2011

14. Long-term debt (continued)

As of
August 31,
2012
$

As of
August 31,
2011
$

As of
September 1,
2010
$

Amounts carried forward

16,224

93,085

211,853

Capital lease, bearing interest at 10.6%, payable in
monthly instalments of $98, including interest and
a final payment of $486 maturing in March 2010

Contributions repayable to Ministère du
Développement économique, de l’Innovation et de
l’Exportation (MDEIE), without interest, repayable
in five equal and consecutive annual instalments
effective of $49,875, maturing five years after the
last disbursement
Debt balance

Imputed interest

Desjardins Loan, bearing interest at prime rate plus
2.4%, payable in monthly instalments of $10,905,
including interest and a final payment of $9,286
maturing in February 2016

Capital lease, bearing interest at 7.25%, payable in
monthly instalments of $1,029, including interest
and a final payment of $1,029 maturing in
September 2016

Capital lease, bearing interest at 13.5%, payable in
monthly instalments of $140, including interest and
a final payment of $740 maturing in August 2012

Capital lease, bearing interest at 9.7%, payable in
monthly instalments of $837, including interest and
a final payment of $837 maturing in April 2014

Capital lease, bearing interest at 13.5%, payable in
monthly instalments of $375, including interest and
a final payment of $1,650 maturing in August 2012

Current portion

1,043

249,377
(108,409)
140,968

-
-
-

456,382

43,522

864

2,318

3,575

15,420

23,542

30,925

-
673,380

166,404
506,976

2,797
121,742

91,355
30,387

6,847
254,243

125,001
129,242

Opsens Inc.
Notes to the consolidated financial statements
August 31, 2012 and August 31, 2011

14. Long-term debt (continued)

Principal payments required over the next five years are as follows:

Obligations – Capital lease

Imputed

interest

3,947

2,364

1,362

540

Principal

payments

19,302

16,689

10,988

11,810

1,017

Total

payments

23,249

19,053

12,350

1,023

2013

2014

2015

2016

2017

Debt and

principal portion

of capital

lease

Other

debts

147,102

130,864

130,857

113,685

199,507

166,404

147,553

141,845

125,495

200,524

Under the terms and conditions of the agreement on long-term debt with its financial institution, the Company is
subject to certain covenants with respect to maintaining minimum financial ratios (see Note 5).

15. Share capital, stock-options and warrants

a) Share capital

Authorized, unlimited number

Common shares, voting and participating, without par value

Outstanding shares and the changes occurred during the year are as follows:

Issued and fully paid

Balance as at September 1, 2010

Balance as at August 31, 2011

Balance as at August 31, 2012

Number

Amount

47,865,983

15,201,618

47,865,983

15,201,618

47,865,983

15,201,618

Opsens Inc.
Notes to the consolidated financial statements
August 31, 2012 and August 31, 2011

15. Share capital, stock-options and warrants (continued)

b) Stock options

The Shareholders approved the stock option plan on January 16, 2012. The number of common shares
reserved by the Board of Directors for options granted under the plan shall not exceed 10% of the issued
and outstanding common shares of the Company. The plan is available to the Company’s directors,
consultants, officers and employees.

The stock option plan stipulates that the terms of the options and the option price shall be fixed by the
directors subject to the price restrictions and other requirements imposed by the TSX Venture Exchange.
The exercise period cannot exceed five years, beginning on the grant date. These options generally vest
over a four-year period, except for 510,000 outstanding options granted which are completely vested at
grant.

The compensation expense in regards to the stock option plan for the year ended August 31, 2012 is
$137,089 ($161,729 for the year ended August 31, 2011).

The fair value of options granted in 2012 was determined using the Black-Scholes option pricing model with
the following assumptions:

Risk-free interest rate

Expected volatility

Expected dividend yield on shares

Duration

Between 0.93% and 1.25%

Between 62% and 88%

5 years

Fair value per option at the grant date

Between $0.08 and $0.15

The Black-Scholes options valuation model was developed to estimate the fair value of traded options,
which have no vesting restrictions and are fully transferable, a practice which differs significantly from the
Company’s stock option awards. In addition, option valuation models require the input of highly-subjective
assumptions including the expected stock price volatility. Any changes in the subjective input assumptions
can affect the fair value estimate.

The situation of the outstanding stock option plan and the changes that took place between
September 1, 2010 and August 31, 2012 are as follows:

Outstanding as at September 1, 2010
Options granted
Options cancelled
Outstanding as at August 31, 2011
Options granted
Options forfeited
Options cancelled
Outstanding as at August 31, 2012

Options exercisable as at
August 31, 2012

Number of
options

4,140,500
453,000
(416,500 )
4,177,000
1,684,000
(1,350,000 )
(1,092,000 )
3,419,000

Weighted
average
exercise
price
$

0.54
0.36
0.68
0.51
0.22
0.47
0.47
0.39

1,573,313

0.54

Opsens Inc.
Notes to the consolidated financial statements
August 31, 2012 and August 31, 2011

15. Share capital, stock-options and warrants (continued)

b) Stock options (continued)

The table below provides information on the outstanding stock options as at August 31, 2012:

Exercise price
$
0.20
0.23
0.35
0.36
0.37
0.38
0.40
0.60
0.64
0.72
0.87
1.15

Number of outstanding stock
options

Number of exercisable stock
options

Weighted average
residual duration
(years)

804,000
870,000
278,000
120,750
181,250
250,000
90,000
50,000
50,000
500,000
215,000
10,000
3,419,000

100,000
100,000
114,500
67,875
135,938
212,500
67,500
25,000
25,000
500,000
215,000
10,000
1,573,313

4.72
4.21
3.84
2.83
1.62
3.08
1.27
1.82
1.79
0.28
0.64
2.21
3.08

c) Warrants

The situation of the outstanding warrants and the changes that took place between September 1, 2010 and
August 31, 2012 are as follows:

Outstanding as at September 1, 2010
Warrants expired
Outstanding as at August 31, 2011
Warrants expired
Outstanding as August 31, 2012

Number of
warrants

2,647,216
(204,167 )
2,443,049
(2,443,049 )
-

Weighted
average
exercise
price
$
1.07
0.60
1.11
1.11
-

Warrants exercisable as at August 31, 2012

i) Warrants expired

During the year ended August 31, 2012, 2,443,049 warrants entitling its holder to acquire one common
share of the Company at a average price of $1.11 per share expired.

During the year ended August 31, 2011, 204,167 warrants entitling its holder to acquire one common
share of the Company at a price of $0.60 per share expired.

Opsens Inc.
Notes to the consolidated financial statements
August 31, 2012 and August 31, 2011

16. Loss per share

The table below presents a reconciliation between the basic net profit and the diluted net profit per share:

Numerator

Net loss

Amount available for calculating

the loss per share

Denominator

Number of shares

2012

2011

(1,929,678 )

(2,468,857)

(1,929,678 )

(2,468,857)

Weighted average number of shares outstanding

47,865,983

Dilutive effect of stock options and warrants

Weighted average number of shares

outstanding on diluted basis

47,865,983

Amount per share

Loss per share

Basic

Diluted

(0.04 )

(0.05)

The calculation of dilution effects excludes options and warrants that have an anti-dilutive effect.

For the year ended August 31, 2012, should the Company’s basic earnings per share have been positive,
some options and warrants, at an exercise price of $0.20 and $0.23, would have been dilutive and would have
resulted in the addition of 49,582 shares to the weighted average number of shares outstanding used in the
diluted earnings per share calculation.

However, should the Company’s basic earnings per share have been positive for the year ended
August 31, 2011, some options and warrants, at an exercise price of $0.36 and $0.37 would have been dilutive
and would have resulted in the addition of 6,357 shares to the weighted average number of shares outstanding
used in the diluted earnings per share calculation.

Opsens Inc.
Notes to the consolidated financial statements
August 31, 2012 and August 31, 2011

17. Additional information on the statements of cash flows

Changes in non-cash operating working capital items

Accounts receivable
Income tax credits receivable
Work in progress
Inventories
Prepaid expenses
Accounts payable and accrued liabilities
Warranty provision

Cash and cash equivalents

Cash
Short-term investments

18. Commitments

Leases

2012
$

2011
$

(316,137 )
(30,248 )
-
(208,464 )
(8,129 )
372,797
9,541
(180,640 )

1,470,749
(117,067)
40,000
(342,170)
13,694
(399,281)
42,872
708,797

1,292,845
1,283,741
2,576,586

808,085
2,939,235
3,747,320

The Company leases offices in Québec under an operating lease expiring on January 31, 2014. This
agreement is renewable for an additional five-year period. Future rent, without considering the escalation
clause, will amount to $208,202.

Opsens Solutions Inc. rents four vehicles under operating lease expiring in September 2013, October 2013 and
May 2014. Future rent payments will amount to $77,228.

Future payments for the leases and other commitments, totalizing $632,469, required in each of the next five
years are as follows:

2013
2014
2015
2016
2017

323,601
212,927
95,941
-
-

In 2012, the offices lease expense is $295,221 ($254,296 in 2011).

Licence

Under an exclusive licence with a third party, the Company is committed to provide exclusive distribution of
some of its products for a defined territory.

Opsens Inc.
Notes to the consolidated financial statements
August 31, 2012 and August 31, 2011

19. Contractual guarantees

During the normal course of business, the Company replaces defective parts under warranties offered at the
sale of the products. The term of the warranties is generally 12 months. During the year ended
August 31, 2012, the Company recognized an expense for $99,741 ($59,872 for the year ended
August 31, 2011) for guarantees. A provision for $84,273 was recorded for guarantees as of August 31, 2012
($74,732 as at August 31, 2011; $31,860 as at September 1, 2010). The following table summarizes changes
in warranty provision:

Balance at beginning
Additional provisions recognized
Amounts used during the year

Balance at the end

2012

74,732
99,741
(90,200 )

84,273

2011

31,860
59,872
(17,000)

74,732

This provision estimate is based on past experience. The actual costs that the Company may incur, as well as
the moment when the parts should be replaced, can differ from the estimated amount.

20. Government assistance

Under an agreement reached with the Ministère du Développement économique, de l’Innovation et de
l’Exportation, the Company was granted non-refundable contribution for an amount of $100,000 to cover some
of its expenses incurred costs for the market development of Opsens products. For the year ended
August 31, 2012, the Company recorded contributions totalling $44,502 and $23,533 which were accounted
respectively against marketing expenses and administration expenses.

Under an agreement reached with the Ministère du Développement économique, de l’Innovation et de
l’Exportation, the Company was granted a refundable contribution for an amount of $413,590 not bearing
interest to cover some of its incurred costs to carry out a development of the OptoWire for Fractional Flow
Reserve. For the year ended August 31, 2012, the Company recorded for this refundable contribution an
amount of $78,717 against research and development expenses. As at August 31, 2012, an amount of
$164,213 remains to be received under the agreement.

Opsens Inc.
Notes to the consolidated financial statements
August 31, 2012 and August 31, 2011

21.

Income taxes

The effective income tax rate of the Company differs from the rate that would have been calculated using the
combined statutory tax rate (federal and provincial). The difference is generated as follows:

Income tax payable using the combined federal and provincial

statutory tax rate (27%; 29% in 2011)

Non-deductible expenses

Deductible financing fees

Non-taxable income tax credits

Losses carried forward

Income tax using effective income tax rate

2012

2011

(528,075 )

429,523

(51,139 )

(111,408 )

261,099

(719,104)

424,353

(73,669)

(132,027)

500,447

As at August 31, 2012, the Company has tax losses of approximately $8,150,400 for federal purposes and
$7,838,900 for provincial purposes that can be used to reduce future taxable income. These losses expire as
follows:

2023

2024

2025

2027

2028

2029

2030

2031

2032

Federal

Provincial

515,000

42,000

400

463,000

40,000

400

1,552,000

1,509,000

716,000

692,000

1,404,000

1,214,000

500,000

2,123,000

1,298,000

500,000

2,122,500

1,298,000

8,150,400

7,838,900

The Company also has undeducted research and development expenses in the amount of $4,170,000 for
federal purposes and $6,326,000 for provincial purposes that are deferred over an undetermined period.

Deferred income tax assets related to unclaimed tax losses, financing costs and research and development
expenses as well as non-refundable scientific research tax credits adding up to approximately $4,921,000 were
not accounted for due to the uncertainty concerning the Company’s ability to generate taxable income. In
addition, deferred tax liabilities of approximately $355,246 related to federal investment tax credits, property,
plant and equipment were not accounted for because any realization of such liabilities would be offset by a
deferred income tax asset.

Opsens Inc.
Notes to the consolidated financial statements
August 31, 2012 and August 31, 2011

22.

Income tax credits for scientific research

and experimental development

For tax purposes, research and development expenses are detailed as follows:

Federal

Provincial

2012

2011

1,225,609

1,117,301

1,230,765

1,117,301

These expenses have enabled the Company to become eligible for scientific research and experimental
development tax credits reimbursable for the following amounts:

Federal

Provincial

2012

327,882

2011

326,154

These credits were recorded in research and development expenses in the statement of loss.

Reimbursable scientific research income tax credits earned for the year ended August 31, 2012 have not yet
been reviewed by the taxation authorities, and the amounts granted could differ from those that have been
recorded.

Over the years, the Company qualified to federal income tax credits for scientific research and experimental
development, which were non-refundable and could be used against Part I Company tax. The accumulated
credits for the year ended on August 31, 2012 are about $1,360,582 and expire on a period of 10 to 20 years
beginning in 2014.

Opsens Inc.
Notes to the consolidated financial statements
August 31, 2012 and August 31, 2011

23. Segmented information

Sector’s Information

The Company’s reportable segments are strategic business units managed separately as one is focused on
developing, producing, and supplying fiber optic sensors (Opsens Inc.) and the other (Opsens Solutions Inc.) is
specialized in the commercialization and the installation of optical and conventional sensors for the oil and gas
industry.

Same accounting policies are used for both reportable segments. Operations are carried out in the normal
course of operations.

2012

Opsens

Solutions

Opsens

Solutions

Inc.

Total

Inc.

2011

Total

External sales

Internal sales

Depreciation of property,

2,179,251

6,282,679

8,461,930

1,812,047

4,193,092

6,005,139

1,260,182

618,977

plant and equipment

148,492

81,632

230,124

134,278

47,799

182,077

Amortization of

intangible assets

30,425

4,133

34,558

22,065

3,341

25,406

Financial expenses

(revenues)

Net loss

Acquisition of property,

(371,978 )

275,611

(96,367)

(311,484)

222,613

(88,871)

(1,895,102 )

(34,576)

(1,929,678)

(2,120,405)

(348,452 )

(2,468,857)

plant and equipment

88,871

212,747

301,618

153,401

218,085

371,486

Acquisition of

intangible assets

91,943

44,758

136,701

85,724

21,465

107,189

Segment assets

4,741,097

2,993,942

7,735,039

6,021,838

2,571,814

8,593,652

As of September 1, 2010, the segments assets amounted respectively to $8,345,391 and $3,044,299 for
Opsens Inc. and Opsens Solutions Inc. for total consolidated assets of $11,389,690.

Opsens Inc.
Notes to the consolidated financial statements
August 31, 2012 and August 31, 2011

23. Segmented information (continued)

Geographic segment’s information

Revenue per geographic sector

Canada

United States

Other

2012

2011

6,396,767

1,297,038

768,125

8,461,930

4,332,673

1,020,566

651,900

6,005,139

Revenues are attributed to the geographic sector based on the clients’ location.

Capital assets, which include property, plant and equipment and intangible assets, are all located in Canada.

During the year ended August 31, 2012, revenues from two clients represent individually more than 10% of the
total revenues of the Company, i.e. approximately 47.4% (Opsens Solutions Inc.’s reportable segment) and
18.2% (Opsens Solutions Inc.’s reportable segment).

During the year ended August 31, 2011, revenues from four clients represent individually more than 10% of the
total revenues of the Company, i.e. approximately 35.5% (Opsens Solutions Inc.’s reportable segment),
14.8% (Opsens Solutions Inc.’s reportable segment), 11.8% (Opsens Solutions Inc.’s reportable segment) and
10.0% (Opsens Inc.’s reportable segment).

24. Related-party transactions

In the normal course of its operations, the Company has entered into transactions with related parties.

Professional fees to a company

controlled by a director

Fees are incurred for the Company’s Fractional Flow Reserve (FFR) activities.

2012

34,937

2011

50,511

Opsens Inc.
Notes to the consolidated financial statements
August 31, 2012 and August 31, 2011

24. Related-party transactions (continued)

Key management personnel, having authority and responsibility for planning, directing and controlling the
activities of the Company, comprise the Chief Executive Officer, the Chief Financial Officer, the President of
Opsens Solutions Inc. and other vice presidents. Compensation of key management personnel during the year
was as follows:

Short-term salaries and other benefits

Option-based awards

2012

857,181

86,683

943,864

2011

812,029

Share-based value including the amount of the expenses for stock options, accounted for during the year.

The compensation of key executives is determined by the Human Resources Committee taking into
consideration the individual performance and market trends.

25. First-time adoption of IFRS

The Company adopted IFRS on September 1, 2011, with a date of transition on September 1, 2010.

The Company’s IFRS accounting policies presented in Note 2 have been consistently applied in preparing the
consolidated financial statements for the year ended August 31, 2012, the comparative information and the
opening consolidated statement of financial position at the date of transition.

The Company has applied the requirements of IFRS 1, First-Time Adoption of IFRS (“IFRS 1”) in preparing
these first IFRS consolidated financial statements. The effects of the transition to IFRS on equity and total
comprehensive loss are presented in this section and are further explained in the notes that accompany the
tables.

First-time adoption exemptions applied

IFRS 1 sets forth guidance for the initial adoption of IFRS. Under IFRS 1 the standards are applied
retrospectively at the transitional date with all adjustments to assets and liabilities taken to retained earnings
unless certain IFRS 1 optional exemptions are applied from full retrospective application. The Company has
applied the following to the optional exemptions and mandatory exceptions to the retrospective application in its
opening statement of financial position dated September 1, 2010:

Share-based payment transactions

IFRS 1 encourages, but does not require, first-time adopters to retrospectively apply IFRS 2, Share-based
Payments (“IFRS 2”) to equity instruments that were granted subsequent to November 7, 2002, and vested
before September 1, 2010. The Company has elected not to apply IFRS 2 to awards that were granted and
vested prior to September 1, 2010.

Opsens Inc.
Notes to the consolidated financial statements
August 31, 2012 and August 31, 2011

25. First-time adoption of IFRS (continued)

Deemed costs

IFRS 1 includes an optional exemption that relieves first-time adopters from the requirement to recreate cost
information for property, plant and equipment and intangible assets. Given the type of capital assets held, the
Company did not use this exemption and accounted for them as at the transition date at their amortized cost in
accordance with IAS 16, Property, Plant and Equipment (“IAS 16”), rather than at their fair value on this date.
The adjustments are explained in the reconciliations thereafter.

Designation of previously recognized financial instruments

IFRS 1 permits first-time adopters to re-designate financial instruments on the transition date. The Company
reviewed the classification of its financial instruments and decided to maintain its prior designation under IFRS.

Business combinations

IFRS 1 permits first-time adopters not to retrospectively apply IFRS 3, Business Combinations (“IFRS 3”) to
past business combinations (business combinations that occurred before the date of transition to IFRS and for
which purchase price allocation was finalized). For this reason, the Company decided not to retrospectively
restate business combinations that occurred prior to September 1, 2010.

First-time adoption mandatory exceptions applied

Estimates

In accordance with IFRS 1, an entity’s estimates under IFRS at the date of transition to IFRS must be
consistent with estimates made for the same date under previous GAAP, unless there is objective evidence
that those estimates were in error. The Company’s IFRS estimates as of September 1, 2010 are consistent with
its Canadian GAAP estimates for the same date.

Reconciliations and presentation differences

IFRS employs a conceptual framework that is similar to Canadian GAAP. However, significant differences exist
in certain matters of recognition, measurement and disclosure. While adoption of IFRS has not changed the
Company’s actual cash flows, it has resulted in changes to the Company’s reported financial position and
results of operations. In order to allow the users of the financial statements to better understand these changes,
the following tables show the total effect of the transition on the Company’s Canadian GAAP statement of
comprehensive loss and the statement of financial position and show reconciliations of the comprehensive loss
and the equity to IFRS, with the resulting differences explained.

Certain presentation differences between Canadian GAAP and IFRS have no impact on reported income or
total equity. As can be seen in the following tables, some line items are described differently (renamed) under
IFRS compared to previous GAAP, although the assets and liabilities included in these line items are
unaffected.

The presentation in accordance with IFRS differs from the presentation in accordance with Canadian GAAP.

Impairment tests performed under IAS 36, Impairment of assets as of September 1, 2010 and August 31, 2011
did not give rise to any impairment loss.

Opsens Inc.
Notes to the consolidated financial statements
August 31, 2012 and August 31, 2011

25. First-time adoption of IFRS (continued)

An explanation of how the transition from Canadian GAAP to IFRS has affected the Company’s statement of
financial position and comprehensive income is set out as follows:

Reconciliation of Consolidated Statement of Financial Position as of September 1, 2010

Canadian GAAP

IFRS

IFRS Accounts

Balance Balance

Balance

IFRS

September 1, September 1,

August 31, 2010

Reclassification

Adjustments

2010 2010

5,347,801

2,055,923

152,080

40,000

1,428,439

144,338

428,024

9,596,605

398,013

670,059

175,176

676,574

11,516,427

Assets

Current

5,347,801 Cash and cash equivalents

2,055,923 Trade and other receivables

152,080

Investment tax credits receivable

40,000 Work in progress

1,428,439

Inventories

144,338 Prepaid expenses

Balance of purchase price to be

428,024

received – short-term

9,596,605

Balance of purchase price to be

398,013

received – long-term

c) (117,820)

552,239 Property, plant and equipment

c) (8,917)

166,259

Intangible assets

676,574 Goodwill

(126,737)

11,389,690

Current portion of long-term debt

125,001

1,402,249

(31,860)

31,860

1,527,250

129,242

1,656,492

15,201,618

1,065,677

1,370,389 Accounts payable

31,860 Warranty provision

125,001 Current portion of long-term debt

1,527,250

129,242 Long-term debt

1,656,492

15,201,618 Share capital

a) (214,071)

851,606 Reserve – Stock option plan

c) (126,737)

2,190,382 Reserve – Warrants

a) 214,071

(8,510,408 ) Deficit

(126,737)

9,733,198

(126,737)

11,389,690

861,782

e) 1,328,600

Contributed surplus

1,328,600

e) (1,328,600)

Deficit

(8,597,742)

9,859,935

11,516,427

Assets

Current

Cash and cash equivalents

Accounts receivable

Income tax credits receivable

Work in progress

Inventories

Prepaid expenses

Balance of purchase price to be

received – short-term

Balance of purchase price to be

received – long-term

Property, plant and equipment

Intangible assets

Goodwill

Liabilities

Current

Accounts payable and

accrued liabilities

Long-term debt

Share capital

Stock options

Warrants

Opsens Inc.
Notes to the consolidated financial statements
August 31, 2012 and August 31, 2011

25. First-time adoption of IFRS (continued)

Reconciliation of Consolidated Statement of Financial Position as of August 31, 2011

Canadian GAAP

IFRS

August 31, August 31,

August 31, 2011 Reclassification

Adjustments

2011 2011

IFRS IFRS Accounts

Assets

Current

3,747,320 Cash and cash equivalents

585,174 Trade and other receivables

269,147 Investment tax credits receivable

1,770,609 Inventories

130,644 Prepaid expenses

Balance of purchase price to be

424,494

received – short-term

6,927,388

c) (100,333)

741,648 Property, plant and equipment

c) (7,380)

248,042 Intangible assets

676,574 Goodwill

(107,713)

8,593,652

3,747,320

585,174

269,147

1,770,609

130,644

424,494

6,927,388

841,981

255,422

676,574

8,701,365

Current portion of long-term debt

91,355

1,045,840

(74,732)

74,732

1,137,195

30,387

1,167,582

15,201,618

971,108 Accounts payable

74,732 Warranty provision

91,355 Current portion of long-term debt

1,137,195

30,387 Long-term debt

1,167,582

15,201,618 Share capital

1,109,752

e) 141,126

a) (237,543)

1,013,335 Reserve – Stock option plan

802,727

e) 1,387,655

Contributed surplus

1,528,781

e) (1,528,781)

Deficit

(11,109,095)

7,533,783

8,701,365

c) (107,713)

2,190,382 Reserve – Warrants

a) 237,543

(10,979,265 ) Deficit

(107,713)

7,426,070

(107,713)

8,593,652

Assets

Current

Cash and cash equivalents

Accounts receivable

Income tax credits receivable

Inventories

Prepaid expenses

Balance of purchase price to

be received – short-term

Property, plant and equipment

Intangible assets

Goodwill

Liabilities

Current

Accounts payable and

accrued liabilities

Long-term debt

Share capital

Stock options

Warrants

Opsens Inc.
Notes to the consolidated financial statements
August 31, 2012 and August 31, 2011

25. First-time adoption of IFRS (continued)

Reconciliation of Statement of Loss and Comprehensive Loss for the year ended August 31, 2011

Canadian

GAAP

IFRS

Balance

Reclassification

Adjustments

Sales

6,005,139

IFRS

Balance

6,005,139

Cost of sales

4,094,791

72,661

(10,555 )

4,156,897

Gross margin

1,910,348

(72,661)

10,555

1,848,242

Expenses (revenues)

Administrative

Marketing

Research and

2,036,263

645,564

175,637

15,982

(8,314 )

(2,057 )

2,203,586

659,489

development

1,417,037

147,428

(21,570 )

1,542,895

Stock option-based

compensation

185,201

(185,201)

Depreciation of property,

plant and equipment

199,564

(199,564)

Amortization of

intangible assets

Financial income

26,943

(88,871)

(26,943)

(88,871)

4,421,701

(72,661)

(31,941 )

4,317,099

Loss before income taxes

(2,511,353)

42,496

(2,468,857)

Net loss and

comprehensive loss

(2,511,353)

42,496

(2,468,857)

Opsens Inc.
Notes to the consolidated financial statements
August 31, 2012 and August 31, 2011

25. First-time adoption of IFRS (continued)

As the presentation of the consolidated statements of loss and comprehensive loss are now presented by
function, under IFRS, the Company was required to reclassify certain expenses on the face of the consolidated
statements of net loss and comprehensive loss to their related function. In addition, the adjustments to the
financial statements are as a result of the following changes realized on transition to IFRS:

a) Share-based payments

Under Canadian GAAP, forfeitures on stock options were recognized only once the forfeitures were
realized. Under IFRS, the Company is required to estimate, at grant date, the number of forfeitures
expected to occur during the vesting period. The Company shall not subsequently reverse the amount
recognized for services received from an employee if the equity instruments are later forfeited.

The effects on the financial statements of the above adjustments related to share-based payments were as
follows:

i) The adjustments to the statements of financial position as at September 1, 2010 and August 31, 2011
resulted in a decrease in Reserve for Stock option plan and a corresponding decrease in deficit in the
amount of $214,071 and $237,543, respectively.

ii) The adjustments to the statement of net loss and comprehensive loss for the year ended

August 31, 2011 resulted in the following reclassifications and adjustments:

Stock option-based compensation

Cost of sales

Administrative

Marketing

Research and development

Stock option-based compensation – IFRS

IFRS adjustment

Year ended

August 31, 2011

185,201

15,460

113,290

13,925

19,054

161,729

23,472

As described above, the Company has elected not to apply IFRS 2 to awards that were granted and
vested prior to September 1, 2010.

Opsens Inc.
Notes to the consolidated financial statements
August 31, 2012 and August 31, 2011

25. First-time adoption of IFRS (continued)

b) Stock option-based compensation, depreciation of property, plant and equipment and amortization of

intangible assets

The Company reclassified depreciation of property, plant and equipment and amortization of intangible
assets to cost of sales, administrative expenses, marketing expenses and research and development
expenses as following:

Depreciation of property,

plant and equipment

Cost of sales

Administrative

Research and development

Depreciation of property, plant

and equipment – IFRS

IFRS adjustments

Amortization of intangible assets

Research and development

Amortization of intangible assets – IFRS

IFRS adjustments

Year ended

August 31, 2011

199,564

46,646

54,033

81,398

182,077

17,487

Year ended

August 31, 2011

26,943

25,406

1,537

Opsens Inc.
Notes to the consolidated financial statements
August 31, 2012 and August 31, 2011

25. First-time adoption of IFRS (continued)

c) Reconciliation of Shareholders’ equity

As of

August 31,

September 1,

2011

2010

Shareholders’ equity under Canadian GAAP, as reported

7,533,783

9,859,935

i) Adjustments to Shareholders’ equity under IFRS

Shareholders’ equity under IFRS, as reported

(107,713 )

7,426,070

(126,737)

9,733,198

i) The adjustment results from a change in accounting policies for property, plant and equipment. The
Company changed its current diminishing balance method for tangible assets for the straight-line
method. A retrospective application has been made and the opening balance of Deficit as of
September 1, 2010 has been adjusted. As a result, the balance of property, plant and equipment and
intangible assets has been reduced by $126,737 as of September 1, 2010.

d) Reconciliation of Total Comprehensive income

Note

25a)ii)

25b)

Total Comprehensive loss

under Canadian GAAP, as reported

Adjustments on net loss

Total adjustments on net loss

Total adjustments on

comprehensive loss

Total Comprehensive loss

under IFRS, as reported

e) Contributed surplus

For the year

ended on

August 31, 2011

(2,511,353)

23,472

17,487

1,537

42,496

(2,468,857)

The contributed surplus has been reclassified according to the nature of the different elements of which it
consists. An amount of $1,328,600 was recorded in the contributed surplus under Canadian GAAP
following the expiry of warrants. This amount has been reclassified in accordance with IFRS requirements
as of September 1, 2010. An amount of $1,387,655 has been reclassified to “Reserve – Warrants” as of
August 31, 2011. An amount of $141,126 has also been reclassified to “Reserve – Stock option plan” as of
August 31, 2011.

Opsens Inc.
Notes to the consolidated financial statements
August 31, 2012 and August 31, 2011

26. Additional information to the statements of loss and

comprehensive loss

Expenses (revenues) included in functions

2012

2011

Salaries & Other Benefits

4,198,650

3,849,684

Cost of sales

Administrative

Marketing

Research and development

Depreciation of Property, Plant and Equipment

230,124

182,077

Cost of sales

Administrative

Marketing

Research and development

Amortization of Intangible Assets

34,558

25,406

Cost of sales

Administrative

Marketing

Research and development

Government Assistance

Administrative

Marketing

Research and development

(146,752 )

(143,536)

Income tax credits for research and development

(327,882 )

(326,154)

Research and development

Opsens Inc.
Notes to the consolidated financial statements
August 31, 2012 and August 31, 2011

27. Subsequent events

Transaction announced on November 19, 2012

On November 19, 2012, the Company announced the granting of distribution and other rights to OptoWire and
OptoMonitor, Opsens’ products for measuring Fractional Flow Reserve (“FFR”). Under the terms of the
agreement, the Company will receive:

 US$3M for the distribution rights for its FFR products for Japan, Korea and Taiwan, which includes:

 US$2M at signing;

 US$1M once Opsens gets regulatory approval for its FFR devices in Japan;

 US$2M in convertible debenture, at signing.

The terms of the Convertible Debenture (“Debenture”) provide that the Company will receive US$2M at signing.
The Debenture will bear an interest rate of 2% annually for five (5) years. The Debenture carries a conversion
privilege, at the option of the lender, into Common Shares of the Company. If the Debenture is exercised, the
outstanding balance, inclusive of interest, will be converted into Units of the Company at a price equal to the
U.S. dollar equivalent of the closing price of the Common Shares on the TSX Venture Exchange on the last
trading day on which Common Shares were traded immediately preceding the receipt by Opsens of a
conversion notice from the holder of the Debenture, subject to a minimum conversion price of $0.50 and a
maximum conversion price of $0.75 per common share (the “Conversion Price”), provided that in the case of
the conversion of the accrued and unpaid interest, the Conversion Price shall not be less than the minimum
amount allowable under the policies of the TSX Venture Exchange. The Debenture would also be convertible
into Common Shares at the option of Opsens, at the Conversion Price, for a period of 30 days after a period of
twenty days when the average weighted closing price of the Common Shares exceeded $1.20 per Common
Share, with an average daily volume in excess of 50,000 common shares.

Grant of stock options

Opsens’ Board of Directors also authorized on November 26, 2012 the grant of a total of 80,000 stock options
to four Directors, as provided by the Opsens stock option plan adopted by the shareholders on
January 16, 2012.

Under the provisions of Opsens’ stock option plan, each stock option granted entitles the holder to subscribe to
one Opsens’ common share at the latest on November 26, 2017 and at a price equal to $0.24 per share. The
stock options granted to the directors entitle the holder to subscribe immediately to Opsens’ common shares.

CORPORATE INFORMATION

HEAD OFFICE
2014 Cyrille-Duquet St., Suite 125
Quebec City, QC G1N 4N6

Phone: 1 418 682-9996
Fax: 1 418 682-9939

OPSENS SOLUTIONS
7019 – 68th avenue NW
Edmonton, AB T6B 3E3

Phone: 1 780 930-1777
Fax: 1 780 930-2077

Website: www.opsens.com

INVESTOR RELATIONS:
For information about Opsens Inc. or to be placed on the mailing list for
quarterly reports and news releases, contact Marie-Claude Poitras at
the head office or marie-claude.poitras@opsens.com.

AUDITORS
Samson Bélair Deloitte & Touche
Quebec, QC

STOCK EXCHANGE LISTING
Toronto Venture Exchange

Symbol: OPS

Shares outstanding: 47,865,983 (as at August 31, 2012)

TRANSFER AGENT & REGISTRAR
Canadian Stock Transfer Company Inc. (CST) as administrative agent
for CIBC Mellon Trust Company (CIBC Mellon)

320 Bay Street
B1 Level
Toronto, ON M5H 4A6
1-800-387-0825

ANNUAL MEETING OF SHAREHOLDERS
Monday, January 21, 2013
10:30 a.m.
Alt Hotel, Quebec, Mezzanine.

GOVERNANCE

DIRECTORS
Pierre Carrier
Chairman, Chief Executive Officer

Claude Belleville
Vice President, Medical Devices

Gaétan Duplain
Vice President, Oil and Gas

Steven G. Arless
Director

Colin H. G. Cook
Director

Jean Lavigueur
Director

Denis M. Sirois
Director

OFFICERS
Pierre Carrier
President, Chief Executive Officer

Claude Belleville
Vice President, Medical Devices

Gaétan Duplain
Vice President Oil and Gas

Louis Laflamme, CPA, CA
Chief Financial Officer, Corporate Secretary

www.opsens.co m

MEDICAL INSTRUMENTATION

(“FFR”), a procedure

Opsens has developed the OptoWire, a guide wire to measure Fractional
Flow Reserve
interventional
cardiology to guide treatment of coronary blockages. Two major studies
on the practice of FFR concluded that treatment guided by this procedure
reduces patient mortality by 30% and reduces costs.

increasingly used

The practice of FFR is increasing rapidly. The market has been growing at a rate of
35% annually in recent years and it is expected that this growth will continue until it
reaches an expected billion dollars annually.

Two players share the market today with guide wires
instrumented with
conventional sensors. Opsens plans to become the third player in this market,
the first one with a guide wire instrumented with a fiber optic sensor. Opsens has
integrated its patented miniature fiber optic pressure sensor into its OptoWire
for a unique and effective guide wire designed to facilitate navigation through the
human body to easily reach lesions. In addition, our optical sensor is immune to
fluids (blood) and allows physicians to connect and reconnect the guide wire while
maintaining reliability of the measurement.

OPSENS’ OPTOWIRE IS CURRENTLY
IN THE VALIDATION PHASE.
Once the 510 k approval process is completed in the United States and CE marking
for other markets, the product will be marketed.

OIL AND GAS

Opsens offers integrated services for the management
of reservoirs and in situ environments to the oil and gas
market. Its near-term focus is Western Canada’s oil sands
market, where a growing demand to measure pressure/
temperature is identified. There is a large number of
active in situ oil sands projects in Alberta, and the majority
of oil and gas companies are involved.

Steam assisted gravity drainage (SAGD) is the most
common process for developing in situ reserves. In SAGD,
recovery rates are typically between 30% and 60%. To
optimize production and recovery rates, operators need
data on temperature/pressure below the surface directly
from the injecting and producer wells. Opsens’ OPP-W
sensor has demonstrated its ability to meet this need
by its real-time continuous measurement of pressure
and temperature.

www.opsens.co m

PRODUCTS AT WORK

MEDICAL DEVICES
Development of our first complete medical device
for the measurement of FFR.

OIL AND GAS
Helping operators optimize production in the
Western Canadian oil sands.

LABORATORIES AND SCIENTIFIC R&D
Ensuring measurement for high-tech
applications.

2014, Cyrille-Duquet St., Suite 125, Quebec City, QC
G1N 4N6T• 418.682.9996 F• 418.682.9939

7019 – 68th avenue NW, Edmonton, AB T6B 3E3
T• 780.930.1777 F• 780.930.2077

ww w.ops ens.com