ANNUAL
REPORT
20
19
Contribute to health through unique expertise in innovative medical products.
Opsens focuses on the measurement of pressure in interventional cardiology. The Company offers the OptoWire, an advanced
optical-based pressure guidewire that aims at improving the clinical outcomes of patients with coronary artery disease.
Instrumented with a second-generation optical sensor, the OptoWire is designed to provide the lowest drift in the industry and
access to the most difficult lesions to provide an accurate diagnosis. Opsens is also engaged in industrial activities.
Cardiology, Cornerstone of Opsens’ Growth
• Opsens’ products strategic in cardiology
• Product performance recognized by numerous key opinion leaders
• Company and markets growing strongly, supported by clinical
evidence and aging population
• Accumulation of clinical data – 80,000 cases completed
with the OptoWire
• Sales channels in more than 30 countries
• Development, innovation and continuous improvement
• Optimization of products and production costs
• New generation of products for coronary physiological
measurement, including Fractional Flow Reserve (FFR)
(OptoWire 3, OptoMonitor 3 and dPR)
• Structural cardiology – New market, new products.
Financial Performance
Opsens’ Annual Revenues ($ Millions)
35
30
25
20
15
10
5
0
2016
2017
2018
2019
FFR
Medical Total
Consolidated
Measuring, a Key Step Towards Better Heart Health
The Pressure Measurement Market in Cardiology
More than 10 years ago, the FAME study demonstrated that when a
patient’s lesions are assessed by FFR, major cardiovascular events
were reduced. Today, the market continues to be fueled by studies that
indicate the clinical and economic benefits of using coronary pressure
guidewires. Cardiologists, medical cardiology societies, insurance
companies and hospitals are increasing the demand for such products
and Opsens is committed to developing innovative products that
address the limitations of aging, competing technologies.
Advantages of Using Coronary Pressure Guidewires:
• Facilitate decision-making before performing invasive procedures;
• Improve the health of patients in general; and,
• Avoid unnecessary medical procedures.
In 2018, evaluation criteria extended the evaluation of blockages to
the use of pressure measurements without the injection of heart-
stimulating drugs. To meet this advancement and the request of
cardiologists, Opsens has commercialized
its diastolic pressure
algorithm called dPR to perform this measurement.
New Project in Structural Cardiology – Simplifying
Percutaneous Aortic Valve Replacement (TAVR)
Opsens’ technical and commercial capabilities have grown in recent years,
fueled by our success in the coronary market. Projects are underway in new
areas to build on our existing technology and infrastructure.
Opsens has identified one area of interest, aortic stenosis, a common and
severe valvular disease often treated by trans-aortic valve replacement.
This segment of structural cardiology is growing exponentially, driven
by an aging population, superior clinical outcomes and openness to
new indications.
Opsens expects to announce its new product in the first half of 2020,
for commercialization in 2021.
Opsens’ Sensor is Positioning the Company
for Partnerships in Cardiology
Several companies, including Abiomed and Monteris, are integrating
Opsens’ sensors into their products used in medical applications. These
collaborations highlight the quality of Opsens’ technology and position
the Company for new agreements. This year, Abiomed awarded Opsens
a five-year contract to supply a critical part of its heart pump technology.
Opsens’ products are gaining increasing recognition in cardiology
thanks to a steady growth in the number of uses and the release of data
demonstrating the value and benefits of working with the OptoWire in
clinical situations.
“ Monteris is proud to integrate
Opsens’ optical technology into its
Neuroblate Optic® family of laser
probes. The size, precision and MRI
compatibility of this technology
has allowed us to improve the
performance of our product and
will also allow us to develop future
systems and probe innovations. ”
Marty J. Emerson, President
and Chief Executive Officer,
Monteris Medical
LETTER TO SHAREHOLDERS
Opsens’ mission is to contribute to health through unique expertise in innovative medical products. Opsens’ technologies
and expertise have enabled the Company to generate record revenues. In future years, Opsens will continue to build on
this momentum to improve the health of patients with heart disease, offer new medical applications to position itself as a
leader in cardiology and create value for shareholders.
Measuring, a Key Step Towards Better Heart Health
Positioning Opsens’ Offer for Pressure Measurement
Coronary pressure guidewires to evaluate physiological measurement,
like Fractional Flow Reserve (FFR) and more recently by Opsens’
diastolic pressure algorithm (dPR), continue to prevail as the method
of choice in assessing coronary blockages. Studies show that when a
patient’s lesions are evaluated before a treatment is selected, his or her
results are significantly better. These improved outcomes translate into
lower costs and a significantly lower incidence of major cardiovascular
and cerebrovascular events and related deaths (FAME study).
New Cardiology Project – Simplifying Percutaneous
Aortic Valve Replacement (TAVR)
While Opsens’ revenues for coronary physiological measurement products
are growing in the various geographic markets, the Company has identified
a new application, where a pressure measurement guidewire could be
used to simplify the TAVR procedure. This would facilitate the work of
cardiologists and ultimately contribute to the health of patients.
The TAVR procedure is growing rapidly. This growth is driven by an aging
population, the interest in less invasive procedures, and recent convincing
clinical data that demonstrates the benefits of extending this procedure to
low-risk patients.
Opsens is developing a new guidewire to measure pressure when
delivering replacement valves in the percutaneous treatment of aortic
stenosis. This new guidewire would provide continuous hemodynamic
measurement before, during, and after the procedure. The concept has
been very well received by a panel of international experts and Opsens
anticipates marketing this product in 2021.
Opsens’ Second-Generation Sensor Positions
the Company for Partnerships in Cardiology
Several companies are integrating Opsens’ second-generation optical
sensor into their medical products. These collaborations highlight the
superiority of our technologies, the quality of our sensor and position the
Company for new, valuable agreements. This year, Abiomed awarded
Opsens a five-year contract to supply its optical sensor for a critical part
of its heart pump technology.
Opsens’ products are gaining increasing recognition in cardiology,
thanks to a steady growth in the number of uses and the release of data
demonstrating the value and benefits of working with the OptoWire in
clinical situations.
Practitioners’ feedback on the OptoWire’s performance continued to
be commendable in 2019. Opsens has just launched a new version of
the OptoWire and will soon release the third version of the OptoMonitor,
which will expand the reach of its products in catheterization labs while
improving the Company’s financial outlook.
The expansion of the sales team and distribution network covering more
than 30 countries resulted in a revenue growth of 36% to $32.8 million
this year. This growth was generated notably by an increase in income
for physiological measurement products and other medical income. In
particular, the weighting of consolidated revenues in the United States
reached 43%. This commercial and corporate progress provides a solid
foundation for the efficient execution of Opsens’ business plan.
Optimization of Production Activities
In 2019, Opsens maintained a steady improvement in efficiency as
demonstrated by the increase in its profit margin. After more than
80,000 OptoWire uses, the launch of a new version of its flagship
product will enable the Company to continue to evolve into operational
excellence and improve its competitiveness, reduce production costs
and increase profit margins.
Industrial Sector
The industrial sector is now focusing on aeronautics, semiconductors and
other markets. Revenues increased during the year for Opsens Solutions,
Opsens’ wholly-owned subsidiary. The trend is expected to continue in
2020 given our multiple discussions for high-potential opportunities.
Perspective
In 2020, our priority remains steadfast. We want to increase the impact
of our products in cardiology, from a commercial, clinical and financial
point of view. A generalized revenue growth is anticipated for our
products for physiological measurement, other medical and industrial
revenues. The development of a new product to facilitate the TAVR
procedure should also contribute to the Company’s advancement.
I thank the shareholders for their support in deploying our strategy. I would
also like to thank customers, employees, administrators, suppliers and
partners for their support in the development of Opsens.
In closing, we look forward to meeting you at the annual meeting of
shareholders to be held in January 2020.
Louis Laflamme
President and CEO
2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS FOR THE YEAR ENDED AUGUST 31, 2019
The following comments are intended to provide a review and analysis of the results of operations, financial condition
and cash flows of Opsens Inc. for the fourth quarter and year ended August 31, 2019 in comparison with the
corresponding period ended August 31, 2018. In this Management’s Discussion and Analysis (MD&A), Opsens, “the
Company”, “we”, “us” and “our” mean Opsens Inc. and its subsidiary. This MD&A should be read and interpreted in
conjunction with the information contained in our annual consolidated financial statements for the years ended
August 31, 2019 and 2018, which have been prepared in accordance with International Financial Reporting Standards
(IFRS) as issued by the International Accounting Standards Board. This document was prepared on November 13,
2019. All amounts are in Canadian dollars unless otherwise indicated.
This MD&A contains forward-looking statements with respect to the Company. These forward-looking statements, by
their nature, require the Company to make certain assumptions and necessarily involve known and unknown risks and
uncertainties that could cause actual results to differ materially from those expressed or implied in these forward-
looking statements. Forward-looking statements are not guarantees of performance. These forward-looking statements,
including financial outlooks, may involve, but are not limited to, comments with respect to the Company’s business or
financial objectives, its strategies or future actions, its targets, expectations for financial condition or outlook for
operations and future contingent payments. Words such as “may”, “will”, “would”, “could”, “expect”, “believe”,
“plan”, “anticipate”, “intend”, “estimate”, “continue”, or the negative or comparable terminology, as well as terms
usually used in the future and conditional, are intended to identify forward-looking statements.
Information contained in forward-looking statements is based upon certain material assumptions that were applied in
drawing a conclusion or making a forecast or projection, including management’s perceptions of historical trends,
current conditions and expected future developments, as well as other considerations that are believed to be appropriate
in the circumstances. The Company considers these assumptions to be reasonable based on all currently available
information, but cautions the reader that these assumptions regarding future events, many of which are beyond its
control, may ultimately prove to be incorrect since they are subject to risks and uncertainties that affect the Company
and its business. The forward-looking information set forth therein reflects the Company’s expectations as of
November 13, 2019 and is subject to change after this date. The Company disclaims any intention or obligation to
update or revise any forward-looking statements, whether as a result of new information, future events or otherwise,
other than as required by law.
OVERVIEW
The Company's primary focus is on physiological measurement such as Fractional Flow Reserve (FFR) and dPR in
the interventional cardiology market. This measurement is mainly used for the diagnosis of blockages in the coronary
arteries and has potential to extend to other physiological measurement. Opsens offers an optical guidewire (OptoWire)
to measure pressure to diagnose and improve clinical outcomes in patients with coronary heart disease. Opsens also
operates in the industrial sector through its wholly-owned subsidiary Opsens Solutions Inc. (Solutions). Solutions
develops, manufactures and installs innovative measurement solutions using fiber optic sensors for critical and
demanding industrial applications.
Opsens owns ten patents and has nine patents pending to protect technologies in its medical and industrial sectors.
SECTORS OF ACTIVITY
In the medical field, Opsens markets the OptoWire and the OptoMonitor for interventional cardiology to provide
cardiologists with an optimized pressure guidewire to navigate coronary arteries and cross blockages with ease while
measuring intracoronary blood pressure. This procedure is called FFR measurement also referred to as physiological
measurement.
Opsens has obtained the required commercial approvals for the OptoWire and OptoMonitor in the world's largest
markets, namely the United States, Europe, Japan and Canada. Furthermore, Opsens developed a product that allows
3 physicians to diagnose the coronary-artery blockages at rest. This new product, known as dPR, is Opsens’ resting
pressure measurement method. It is available through the OptoMonitor and works in combination with the OptoWire.
Opsens’ dPR is already being marketed in Japan, Canada and Europe.
Opsens has established a direct sales force in the U.S. and Canada and utilizes distributors in Europe (including the
Middle East) and Japan.
Opsens also provides a broad selection of miniature optical sensors to measure pressure and temperature that can be
used in a wide range of applications and can be integrated into other medical devices.
In the industrial sector, Opsens' expertise, technology and products meet the needs of multiple markets, including
aerospace, semiconductor, geotechnical, structural, oil and gas, mining, laboratories and others. Opsens' portfolio of
products and technologies can be adapted to measure various parameters under the most difficult conditions and bring
significant benefits in terms of optimizing production and reducing risks to the environment and health.
MARKET OVERVIEW
In the medical field, particularly in interventional cardiology, FFR and dPR represent a significant and growing
opportunity for the Company. In recent years, the prevalence of coronary heart disease has increased rapidly. In the
AHA report, "Heart Disease and Stroke Statistics - 2017", which is based on health data compiled in more than 190
countries, coronary heart disease is the leading cause of death worldwide with 17.3 million deaths per year. This
number is expected to exceed 23.6 million deaths in 2030. Coronary heart disease is one of the leading causes of death
in the developed world, and the cost of managing and treating these diseases is a significant burden to society. The
benefits of FFR were demonstrated in various clinical studies such as FAME I and FAME II published in 2009 and
2012, respectively in the New England Journal of Medicine. The FAME I study showed that the FFR-guided treatment
rather than the standard angiography alone led to a reduction in mortality, myocardial infarction, readmission for
percutaneous coronary intervention and coronary bypass by about 30% after a year. Several reports have also shown
inaccurate diagnoses that can lead to misuse or inappropriate use of "stents."
The measurement of FFR has been shown to be more accurate and now holds the highest recommendation from the
European Society of Cardiology (Class IA).
In the United States, support for the increasing use of FFR continues to grow. In March 2017, the appropriate use
criteria ("AUC") for stable ischemic heart disease were updated to emphasize the use of FFR given its importance. The
goal of the AUC is to provide a framework for assessing general clinical practices and improving the quality of care.
The new AUCs reflect a recognition of the role and value of FFR, which should be beneficial for the expand use of
FFR technologies. Payers, including Medicare, use the AUC to help formulate their repayment criteria.
In April 2018, the Ministry of Health, Labour and Welfare (MHLW) in Japan introduced a new regulation requiring
the physiology evaluation of all coronary artery stenosis prior to its treatment, specifically mentioning FFR as an
evaluation method. The MHLW revised the medical fees and established a requirement to assess functional ischemia
(blockage of arteries) prior to treatment.
These recent developments contribute to the steady growth of the FFR market. According to management and industry
sources estimates (1), this market exceeds US$500 million worldwide in 2019 and is expected to exceed US$1 billion
annually in the medium term (2025).
(1)
Opsens FFR Market Calculations based on GRAND VIEW RESEARCH (Feb 2019),
4 In the industrial field, the Company focuses mainly on the following markets:
- Pressure Monitoring Solutions Market: Opportunities are mainly related to absolute and differential pressure
measurements. Pressure measurements are at the heart of many industrial applications in aeronautic, energy,
geotechnics and oil and gas. The new industrial versions of the pressure sensor and the latest of a differential
pressure sensor are the main flagship products for these applications;
- Traditional Niche Applications Market: Opsens is currently engaged in niche applications such as
semiconductor, electro-explosive devices (EEDs), Steam Assisted Gravity Drainage (SAGD) in Western
Canada, and in laboratories (special projects and customized products);
- Structural Integrity Monitoring Market: Opportunities are mainly related to stress, load and displacement
measures. The applications are in geotechnics, civil engineering, energy and oil and gas. The new industrial
versions of strain sensors such as the extensometer and the load cell are the main flagship products for these
applications.
COMPETITION
In the medical sector, the FFR and dPR measurement market have five competitors and is currently dominated by
two major players who commercialize a first-generation electrical technology. Competition is based on technological
advantages, brand recognition, customer service, marketing support and price.
In the industrial sector, there are significant number of competitors in the field. Competition is based primarily on
technological advantages. Our direct competition is made up of both open and closed-end companies with a global
presence.
5 CORPORATE GROWTH STRATEGY
Opsens' growth strategy is to become a key player in the medical sector, particularly in the field of interventional
cardiology, focusing on the measurement of FFR and dPR, where its products and technologies offer major advantages
over the competition. The Company also aims to capitalize on its technologies and products in the industrial markets.
To this end, the Company implements its corporate strategy based on its various segments of operations.
In the medical sector, the Company's growth strategy in the field of interventional cardiology is carried out by:
-
Increase of its market shares in the fast-growing FFR and dPR market
To achieve this, management has set up the following sales force:
Direct Sales Force: Opsens has established a sales team, hiring a seasoned staff with solid expertise
in interventional cardiology. This sales force has been implemented to increase Opsens’ market and
commercialization penetration in the United States and Canada;
Distributor Sales Force: Opsens has signed distribution agreements in Europe, Asia and the Middle
East. These agreements allow Opsens to focus on market penetration with leading business partners
in their respective markets.
Interventional cardiologists have started focusing on new measurements performed at rest. These
measurements require greater accuracy and constant and repeated guidewire performance over time. With its
second-generation optical sensor, the Company is convinced that there will be a growing interest in the
OptoWire’s recognized features which include:
A low-drift measurement technology for improved reliability of FFR measurements, essential in
cardiologists' decision-making;
Better connectivity as the OptoWire is insensitive to blood contamination. It can be easily
reconnected without compromising accuracy of the measurement.
-
Clinical Data
The Company is presently conducting a variety of clinical studies to demonstrate the value of Opsens’
products.
-
Innovation
In this ever-evolving and state-of-the-art market, Opsens plans to leverage its expertise in fiber optic sensing
medical devices to create new FFR products and develop new fiber optic sensing technologies for cardiology
assessment that address other invasive unmet medical needs. Commitment to innovation has always been a
driving force behind the Company’s success and desire to improve its intellectual property portfolio and value
proposition for customers.
As an example of innovation, the Company is developing a pressure guidewire designed to assist cardiologists
during a Trans Aortic Valve Replacement procedure (TAVR). This innovation is a structural heart pressure
guidewire that measures critical hemodynamics information in real time during a valve replacement
procedure.
In other medical products, Opsens offers a broad selection of miniature optical sensors to measure pressure
and temperature that can be used in a wide range of applications and that can be integrated into other medical
(2)
Per 60601-2-34
6 devices. The Company also aims to partner with key players in the industry, such as its partnership with
Abiomed inc. (Abiomed), for the use of its miniature sensors and technology.
In the industrial sector, the Company's business strategy is achieved by:
•
•
•
Development of a sales and distribution network Opsens Solutions has set up a sales and distribution
network to increase its visibility in the various markets;
Target Market Opsens Solutions' target markets are semiconductors, aerospace and laboratories. These
are markets where Opsens' products offer unique advantages over its competitors;
Innovation Opsens Solutions continually invests in innovations of its products, so they can offer unique
advantages over its competitors. For example, the Company's optical strain and pressure sensors have
received the attention of major players in the aerospace industry because they require no shielding or
grounding and because of their ease of deployment.
NON-IFRS FINANCIAL MEASURES - EBITDACO
The Company quarterly reviews net loss and Earnings Before Interest, Taxes, Depreciation, Amortisation, Change in
fair value of embedded derivative and Stock-based compensation costs (EBITDACO). EBITDACO has no normalized
sense prescribed by IFRS. It is not very probable that this measure is comparable with measures of the same type
presented by other issuers. EBITDACO is defined by the Company as the addition of net loss, financial expenses
(revenues), depreciation and amortisation, change in fair value of embedded derivative and stock-based compensation
costs. The Company uses EBITDACO for the purposes of evaluating its historical and prospective financial
performance. This measure also helps the Company to plan and forecast for future periods as well as to make
operational and strategic decisions. The Company believes that providing this information to investors, in addition to
IFRS measures, allows them to see the Company’s results through the eyes of management, and to better understand
its historical and future financial performance.
RECONCILIATION OF EBITDACO TO NET LOSS
(In thousands of Canadian dollars)
Year Ended
August 31, 2019
$
Year Ended
August 31, 2018
$
Year Ended
August 31, 2017
$
Net loss
Financial expenses (revenues)
Depreciation of property, plant and equipment
Amortisation of intangible assets
Change in fair value of embedded derivative
EBITDAC
Stock-based compensation costs
EBITDACO
(1,952)
157
802
91
-
(902)
489
(413)
(4,550)
(50)
801
98
501
(3,200)
(6,537)
(7)
699
90
164
(5,591)
618
864
(2,582)
(4,727)
The positive variance of EBITDACO for fiscal year 2019 when compared to last year is mainly explained by the
increase in revenues in the medical sector. This was partly offset by higher administrative, sales and marketing and
research and development expenses as explained further below.
7 SELECTED CONSOLIDATED FINANCIAL DATA
(In thousands of Canadian dollars, except for information per share) Year Ended
August 31,
2019
$
Year Ended
August 31,
2018
$
Year Ended
August 31,
2017
$
Revenues
Sales
Medical
Industrial
Licensing agreement
Cost of sales
Gross margin
Gross margin percentage
Expenses (revenues)
Administrative
Sales and marketing
Research and development
Financial expenses (revenues)
Change in fair value of embedded derivative
27,032
2,418
29,450
3,302
32,752
14,037
18,715
57%
4,593
11,116
4,801
157
-
20,667
19,991
2,121
22,112
1,958
24,070
11,330
12,740
53%
3,869
9,273
3,697
(50)
501
17,290
14,895
1,483
16,378
1,374
17,752
10,252
7,500
42%
3,774
6,975
3,131
(7)
164
14,037
Net loss and comprehensive loss
(1,952)
(4,550)
(6,537)
Basic and diluted net loss per share
(0.02)
(0.05)
(0.08)
Revenues
The Company reported revenues of $32,752,000 for the year ended August 31, 2019 compared to revenues of
$24,070,000 for the corresponding period in 2018, an increase of $8,682,000 or 36%.
Sales in the medical sector totalled $27,032,000 for the year ended August 31, 2019 compared to sales of $19,991,000
for the same period in 2018. The increase in medical sector revenues is mainly explained by a higher number of
OptoWire shipped when compared to the same period last year. FFR sales totalled $20,031,000 for the year ended
August 31, 2019, an increase of $5,782,000 compared to the $14,249,000 reported for the same period last year.
Sales in the industrial sector totalled $2,418,000 for the year ended August 31, 2019 compared to sales of $2,121,000
for the same period in 2018. The increase is mostly explained by higher volume of orders compared to the same period
last year.
The increase in revenues is also explained by the recognition of nonrecurring revenues of $3,302,000 for the
achievement of the last technical milestones of the Abiomed agreement ($1,958,000 for the year ended August 31,
2018).
For the year ended August 31, 2019 and 2018, pricing fluctuations did not have a significant impact on revenues.
The Company's revenues are generated in U.S. dollars, Canadian dollars, Euros and British pounds; fluctuations in the
exchange rate affect revenues and net earnings (loss). For the year ended August 31, 2019, revenues were positively
affected by $771,000 compared to the same period last year (sales were positively impacted by $372,000 for the year
ended August 31, 2018).
8 As at August 31, 2019, Opsens’ total backlog of orders amounted to $5,642,000 ($5,266,000 as at August 31, 2018).
Gross Margin
Information and analysis in this section do not take into consideration licensing revenues ($3,302,000 for the year
ended August 31, 2019 and $1,958,000 for the year ended August 31, 2018, respectively).
Gross margin was $15,413,000 for the year ended August 31, 2019 compared to $10,782,000 for the same period last
year. The gross margin percentage increased from 49% for the year ended August 31, 2018 to 52% for the year ended
August 31, 2019. The increase in gross margin is mainly explained by higher sales from our FFR medical products
line combine with a decrease in our production cost. The increase in gross margin percentage reflects a higher sales
volume and the related benefits of scale combined with enhanced productivity.
Administrative Expenses
Administrative expenses were $4,593,000 and $3,869,000, respectively, for the year ended August 31, 2019 and 2018.
The increase is mainly explained by higher headcount and by the fact that we reversed a loss allowance related to a
client in the industrial sector during the same period last year. This is partly offset by lower professionals’ fees.
Sales and Marketing Expenses
Sales and marketing expenses totalled $11,116,000 for the year ended August 31, 2019, an increase of $1,843,000 over
the $9,273,000 reported during the same period in 2018. The increase is largely explained by higher commissions,
tradeshows and consultants’ fees when compared to last year due to the expansion of Opsens’ sales presence for its
FFR products in the United States and EMEA.
Research and Development Expenses
Research and development expenses totalled 4,801,000 for the year ended August 31, 2019, an increase of $1,104,000
over the $3,697,000 reported during the same period in 2018. The increase is mainly explained by higher headcount
and subcontractors fees for our development activities related to the OW3, OM3 and dPR projects.
Financial Expenses (revenues)
Financial expenses totalled $157,000 for the year ended August 31, 2019 compared to financial revenue of $50,000
for the same period in 2018. The increase in financial expenses is mainly explained by a higher long-term debt expense
of $171,000 related to the CIBC agreement and by less favorable exchange rate of $53,000. This is partly offset by
higher interest revenue of $32,000.
Change in Fair Value of the Embedded Derivative
The change in fair value of embedded derivative comes from the change in fair market value of the conversion option
component of the convertible debenture. The convertible debenture contained a cash settlement feature, which under
IAS 32, Financial Instruments: Presentation, was accounted for as a compound financial instrument with a debt
component and a separate embedded derivative representing the conversion option. Both the debt and embedded
derivative components of this compound financial instrument were measured at fair value on initial recognition. The
debt component was subsequently accounted for at amortised cost using the effective interest rate method. The
embedded derivative was subsequently measured at fair value at each reporting date with gains and losses in fair value
recognized through profit or loss. During the year ended August 31, 2018, an expense of $501,000 was recorded in the
consolidated statements of loss and comprehensive loss. On November 16, 2017 the holder of the debenture exercised
its conversion option.
9 Net Loss
As a result of the foregoing, net loss for the year ended August 31, 2019 was $1,952,000 compared to $4,550,000 for
the same period in 2018.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION DATA
(In thousands of Canadian dollars)
Current assets
Total assets
Current liabilities
Long-term liabilities
Shareholders' equity
As at
August 31,
2019
$
As at
August 31,
2018
$
As at
August 31,
2017
$
26,099
30,089
4,787
7,861
17,441
19,785
23,586
3,438
1,475
18,673
23,607
27,610
7,698
1,947
17,965
Total assets as at August 31, 2019 were $30,089,000 compared to $23,586,000 as at August 31, 2018. The increase is
mainly related to higher cash and cash equivalent of $3,969,000 related to the CIBC Innovation Banking (CIBC) debt
financing and by higher trade and other receivables of $2,299,000 following the increase in revenues in the medical
sector.
Current liabilities totalled $4,787,000 as at August 31, 2019 compared to $3,438,000 as at August 31, 2018. The
increase is mainly explained by higher accounts payables and accrued liabilities of $1,574,000 due to the increase in
sales in the medical sector.
Long-term liabilities totalled $7,861,000 as at August 31, 2019 compared to $1,475,000 as at August 31, 2018, an
increase of $6,385,000. The increase is mainly explained by a higher long-term debt of $6,481,000 following the
disbursement of the CIBC term loan.
10 SUMMARY OF CONSOLIDATED QUARTERLY RESULTS
The summary below presents the periods in which Opsens published unaudited interim financial statements.
(Unaudited, in thousands of Canadian dollars,
except for information per share)
Three-month
period ended
August 31,
2019
$
Three-month
period ended
May 31,
2019
$
Three-month
period ended
February 28,
2019
$
Three-month
period ended
November 30,
2018
$
Revenues
Net earnings (loss) for the period
7,867
(1,617)
7,863
(1,053)
Basic and diluted net earnings (loss) per share
(0.02)
(0.01)
7,919
(374)
(0.00)
9,103
1,092
0.01
(Unaudited, in thousands of Canadian dollars,
except for information per share)
Three-month
period ended
August 31,
2018
$
Three-month
period ended
May 31,
2018
$
Three-month
period ended
February 28,
2018
$
Three-month
period ended
November 30,
2017
$
Revenues
Net loss for the period
Basic and diluted net loss per share
5,866
(1,501)
(0.02)
6,398
(846)
(0.01)
5,442
(1,267)
(0.01)
6,364
(936)
(0.01)
For the medical sector, activities are generally slower in the fourth quarter due to the summer vacations of physicians.
For the year ended August 31, 2019, Opsens’ FFR business showed growth despite usual seasonal impact.
11 LIQUIDITY AND CAPITAL RESOURCES
As at August 31, 2019, the Company had cash and cash equivalents of $14,856,000 compared to $10,887,000 as at
August 31, 2018. Of this amount as at August 31, 2019, $13,581,000 was invested in highly-liquid, safe investments.
As at August 31, 2019, Opsens had a working capital of $21,312,000, compared to $16,347,000 as at August 31, 2018.
The increase in working capital is mainly related to higher cash and cash equivalents and by higher trade and other
receivables.
On February 27, 2019, Opsens announced that it has entered into a $8,000,000 credit agreement (the “Agreement”)
with CIBC. The Agreement consists of a $7,000,000 term loan, set to mature in 60 months with no principal payment
for a 24-month period following the signature of the Agreement, bearing interest at prime rate plus 2.00% per annum
and of a $1,000,000 revolving operating credit margin bearing interest at prime rate plus 1.00%, set to mature in one
year and that may be renewed on an annual basis. The disbursement of the $7,000,000 term loan occurred on March 1,
2019 and the revolving operating credit was also available at that time. Deferred financing fees related to the
Agreement includes professional fees and miscellaneous fees of $87,468. Under this Agreement, the Company is
subject to certain covenants, which were met as of the date of this MD&A.
On February 6, 2018, the Company entered into a loan agreement of $213,840, net of transaction costs of $2,160, with
Investissement Québec. This loan bears interest at prime rate plus 0.25%, is payable in monthly instalments of $4,500,
and will be maturing in February 2022. This loan is secured by a movable hypothec on the Company’s assets. Under
this loan agreement, the Company is subject to certain covenants with respect to maintaining certain financial ratios,
which were met as of the date of this MD&A.
Based on its cash and cash equivalents position, 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/or debt. From a long-
term perspective, there is uncertainty about obtaining additional financing, given the risks and uncertainties identified
in the Risks and Uncertainties section of the Annual Information Form. Changes in cash and cash equivalents will
largely depend on the rate of revenue growth in upcoming quarters.
12 SUMMARY OF CASH FLOWS
(In thousands of Canadian dollars)
Year Ended
August 31, 2019
$
Year Ended
August 31, 2018
$
Operating activities
Investing activities
Financing activities
Effect of foreign exchange rate changes on cash and cash equivalents
Net change in cash and cash equivalents
(1,247)
(1,005)
6,245
(24)
3,969
(1,052)
(530)
(148)
47
(1,683)
Operating Activities
For the year ended August 31, 2019, cash flows used by our operating activities were $1,247,000 compared to
$1,052,000 for the same period last year. The increase in cash flows used by our operating activities is mainly explained
by negative variance in changes in non-cash operating working capital items mostly related to trade and other
receivables related to the increase in sales in all sectors. This is partly offset by a positive variance of EBITDACO as
explained previously.
Investing Activities
For the year ended August 31, 2019, cash flows used by our investing activities reached $1,005,000 compared to
$530,000 for the same period in 2018. The increase in cash flows used is mainly explained by higher acquisition of
intangible assets for the medical sector and by the fact that last year, we cashed a tax credit for the acquisition of
property, plant and equipment.
Financing Activities
For the year ended August 31, 2019, cash flows generated by financing activities reached $6,245,000 compared to
cash flows used of $148,000 for the year ended August 31, 2018. The variation is mainly explained by the fact that we
signed a credit agreement with CIBC, as explained previously.
COMMITMENTS
Leases
The Company leases offices in Quebec City under operating leases expiring on May 31, 2021 and September 30, 2025.
The main agreement is renewable for an additional five-year period.
Future payments for the leases required in each of the forthcoming years totalling $4,147,840 are as follows:
2020
2021
2022
2023
2024
Thereafter
$
797,056
780,460
622,018
617,088
631,477
699,741
In 2019, the offices lease expense is $725,133 ($775,018 in 2018).
13 INFORMATION BY REPORTABLE SEGMENTS
Segmented Information
The Company is organized into two segments: Medical and Industrial.
Medical segment: In this segment, Opsens focuses mainly on physiological measurement such as Fractional Flow
Reserve (FFR) and dPR in the interventional cardiology market but also supplies a wide range of miniature optical
sensors to measure pressure and temperature to be used in a wide range of applications that can be integrated in other
medical devices. This also includes licensing revenue related to its optical sensor technology.
Industrial segment: In this segment, Opsens develops, manufactures and installs innovative fibre optic sensing
solutions for critical and demanding industrial applications.
The principal factors employed in the identification of the two segments reflected in this note include the Company’s
organizational structure, the nature of the reporting lines to the President and Chief Executive Officer and the structure
of internal reporting documentation such as management accounts and budgets.
The same accounting policies are used for both reportable segments. Operations are carried out in the normal course
of business and are measured at the exchange amount, which approximates prevailing prices in the markets.
Years ended August 31,
Medical
Industrial
$
$
2019
Total
$
Medical
Industrial
$
$
2018
Total
$
External sales
Internal sales
Gross margin
Depreciation of property,
30,334,061
2,417,457
32,751,518
21,949,230
2,120,501
24,069,731
-
17,350,499
66,040
66,040
1,364,634
18,715,133
-
11,416,874
149,210
149,210
1,322,538
12,739,412
plant and equipment
748,728
53,421
802,149
728,375
72,220
800,595
Amortisation of
intangible assets
Financial expenses
(revenues)
Change in fair value of
embedded derivative
75,660
15,624
91,284
82,292
15,396
97,688
(138,855 )
295,398
156,543
(320,393 )
270,289
(50,104 )
-
-
-
501,250
-
501,250
Net loss
(1,630,315 )
(321,493 )
(1,951,808 )
(4,240,173 )
(309,311 )
(4,549,484 )
Acquisition of property,
plant and equipment
Additions to
intangible assets
Segment assets
Segment liabilities
619,766
45,389
665,155
642,054
49,624
691,678
487,301
28,506,354
12,357,132
13,276
1,582,129
290,615
500,577
30,088,483
12,647,747
79,076
21,982,087
21,155
1,603,809
4,651,422
261,511
100,231
23,585,896
4,912,933
14
Geographic sector’s information
Revenue by geographic segment
United States
Japan
Canada
Other*
Years ended August 31,
2019
$
14,016,549
10,068,564
2,744,248
5,922,157
32,751,518
2018
$
10,250,126
6,539,888
1,987,216
5,292,501
24,069,731
* Comprised of revenues generated in countries for which amounts are individually not significant.
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, 2019, revenues from two clients represented individually more than 10% of the total
revenues of the Company, i.e., 31% (medical’s reportable segment) and 27% (medical’s reportable segment).
During the year ended August 31, 2018, revenues from two clients represented individually more than 10% of the total
revenues of the Company, i.e., 27% (medical’s reportable segment) and 25% (medical’s reportable segment).
Medical Segment
Information and analysis in this section for revenue and gross margin do not take into consideration licensing revenues
($3,302,000 for the year ended August 31, 2019 and $1,958,000 for the year ended August 31, 2018, respectively).
For the year ended August 31, 2019, sales from medical segment were $27,032,000 compared to $19,991,000 for the
year ended August 31, 2018, an increase of $7,041,000. The increase is mainly explained by higher FFR sales of
$5,782,000.
Gross margin was $14,048,000 for the year ended August 31, 2019 compared to $9,459,000 for the year ended
August 31, 2018, an increase of $4,589,000. The gross margin percentage for the year ended August 31, 2019 was
52% compared to 47% for the year ended August 31, 2018. The increase in gross margin is mainly explained by higher
sales from our FFR products combined with a decrease in our production cost. The increase in gross margin percentage
reflects higher sales volume and the related economies of scale combined with enhanced productivity.
Net loss for the medical segment was $1,630,000 for the year ended August 31, 2019 compared to $4,240,000 for the
same period last year. The decrease in net loss is mainly explained by a higher FFR sales and the improvement of the
gross margin, partly offset by higher administrative, sales and marketing and research and development expenses, as
explained previously.
Working capital for the medical segment as at August 31, 2019 was $20,192,000 compared to $15,183,000 as at
August 31, 2018. The increase of $5,009,000 is mainly explained by higher cash and cash equivalent of $3,815,000
and by trade and other receivables of $2,506,000, partly offset by higher accounts payable and accrued liabilities of
$1,538,000.
15 Industrial Segment
For the year ended August 31, 2019, external sales from industrial segment were $2,418,000 compared to $2,121,000
for the year ended August 31, 2018, an increase of $297,000 mostly explained by higher volume of orders compared
to the same period last year.
Gross margin was $1,365,000 for the year ended August 31, 2019 compared to $1,323,000 for the same period in 2018,
an increase of $42,000. Gross margin went from 58% for the year ended August 31, 2018 to 55% for the year ended
August 31, 2019. The decrease in gross margin percentage is mainly explained by higher headcounts.
Net loss for the industrial segment was $321,000 for the year ended August 31, 2019 compared to $309,000 for the
year ended August 31, 2018.
Working capital for the industrial segment as at August 31, 2019 was at $1,119,000 compared to $1,164,000 as at
August 31, 2018. The decrease is mainly explained by lower accounts receivables partly offset by higher cash and cash
equivalents.
FOURTH QUARTER 2019
Revenues
Revenues totalled $7,867,000 for the quarter ended August 31, 2019 compared to revenues of $5,866,000 for the
corresponding period in 2018, an increase of $2,001,000 or 34%. The increase is mainly explained by higher sales in
medical segment related to our FFR medical and other medical product lines as explained previously.
Gross Margin
Information and analysis in this section do not take into consideration licensing revenues (nil for the quarter ended
August 31, 2019 and $92,000 for the quarter ended August 31, 2018, respectively).
Gross margin was $3,993,000 for the quarter ended August 31, 2019 compared to $2,929,000 for the same period last
quarter. The gross margin percentage was stable at 51% for the quarter ended August 31, 2019 and 2018.
Administrative Expenses
Administrative expenses were $1,160,000 and $1,125,000, respectively, for the quarter ended August 31, 2019 and
2018. The increase is mainly explained by higher headcounts. This is partly offset by lower professional fees.
Sales and Marketing Expenses
Sales and marketing expenses totalled $3,175,000 for the quarter ended August 31, 2019, an increase of $793,000 over
the $2,382,000 reported during the same period in 2018. The increase is largely explained by higher commissions,
publicity, tradeshows and consultants’ fees when compared to last quarter due to the expansion of Opsens’ sales
presence for its FFR products in the United States and EMEA.
Research and Development Expenses
Research and development expenses totalled $1,116,000 for the quarter ended August 31, 2019, an increase of $70,000
over the $1,046,000 reported during the same period in 2018. The increase is mainly explained by higher headcount.
16 Financial expenses (revenues)
Financial expenses totalled $160,000 for the quarter ended August 31, 2019 compared to financial revenues of $32,000
for the same period in 2018. The increase in financial expenses is mainly explained by higher interest on long-term
debt of $92,000 related to the CIBC agreement and by less favorable exchange rate resulting in a negative impact of
$114,000.
Net loss
As a result of the foregoing, net loss for the quarter ended August 31, 2019 was $1,618,000 compared to 1,500,000 for
the same period in 2018.
INFORMATION ON SHARE CAPITAL
For the year ended August 31, 2019, the Company granted to some employees and directors a total of 2,818,500 stock
options with an average exercise price of $0.82, cancelled 588,250 stock options with an exercise price of $1.06,
whereas 311,500 stock options with an average exercise price of $0.62 were exercised, and 609,750 stock options with
an exercise price of $0.79 expired.
For the year ended August 31, 2018, the Company granted to some employees, directors and consultant a total of
2,284,500 stock options with an average exercise price of $0.99, cancelled 1,477,750 stock options with an exercise
price of $1.24, whereas 650,750 stock options with an average exercise price of $0.30 were exercised, and 427,250
stock options with an exercise price of $1.14 expired.
For the year ended August 31, 2018, 2,380,500 warrants with an average exercise price of $1.55 expired.
As at November 13, 2019, the following components of shareholders' equity are outstanding:
Common shares
Stock options
Securities on a fully-diluted basis
90,280,317
7,152,750
97,433,067
No dividend was declared per share for each share class.
RELATED PARTY TRANSACTIONS
Key management personnel, having authority and responsibility for planning, directing and controlling the activities
of the Company, comprise the Chief Executive Officer, the Executive Chairman, the Chief Financial Officer, the
President of Opsens Solutions Inc., and other vice presidents. Compensation of key management personnel and
directors during the year were as follows:
Short-term salaries and other benefits
Termination benefits
Option-based awards
Years ended August 31,
2019
$
923,554
-
131,177
1,054,731
2018
$
1,239,012
161,098
118,086
1,518,196
17 The compensation of key executives is determined by the Human Resources and Compensation Committee, taking
into consideration individual performance and market trends.
FINANCIAL INSTRUMENTS
Fair Value
The fair value of cash and cash equivalents, trade and other receivables 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.
Valuation Techniques and Assumptions Applied for the Purposes of Measuring Fair Value
The Company must maximize the use of observable inputs and minimize the use of unobservable inputs when
measuring fair value. The Company primarily applies the market approach for recurring fair value measurements. The
three input levels used by the Company to measure fair value are the following:
Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities. An active market for the asset
or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to
provide pricing information on an ongoing basis.
Level 2 – Quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that
are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value
of the assets or liabilities.
Risk Management
The main risks arising from the Company’s financial instruments are credit risk, liquidity risk, interest rate risk,
concentration risk and foreign exchange risk. These risks arise from exposures that occur in the normal course of
business and are managed on a consolidated basis.
Credit Risk
Credit risk is the risk of an unexpected loss if a customer or counterparty to a financial instrument fails to meet its
contractual obligations. The Company regularly monitors credit risk exposure and takes steps to mitigate the likelihood
of this exposure resulting in losses. The Company's exposure to credit risk currently relates to cash and cash equivalents
and to trade and other receivables. 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.
The credit risk associated with trade and other receivables is generally considered normal as trade receivables consist
of a large number of customers spread across diverse geographical areas. In general, the Company does not require
collateral or other security from customers for trade accounts receivable; however, credit is extended following an
evaluation of creditworthiness. In addition, the Company performs ongoing credit checks of all its customers and
establishes an allowance for doubtful accounts when accounts are determined to be uncollectible. Two major customers
represented 50% of the Company’s total accounts receivable as at August 31, 2019 (25% as at August 31, 2018).
18 As at August 31, 2019, 3% (32% as at August 31, 2018) of the accounts receivable were of more than 90 days whereas
59% (52% as at August 31, 2018) of those were less than 30 days. The maximum exposure to the risk of credit for
accounts receivable corresponded to their book value. As at August 31, 2019, the loss allowance was nil ($817,823 as
at August 31, 2018).
Liquidity Risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with financial
liabilities that are settled in cash and/or another financial asset. The Company’s approach is to ensure it will have
sufficient liquidity to meet operational, capital and regulatory requirements and obligations, under both normal and
stressed circumstances. Cash flow projections are prepared and reviewed quarterly by the Board of Directors to
ensure a sufficient continuity of funding. The funding strategies used to manage this risk include the Company’s
access to capital markets and debt securities issues.
The following are the contractual maturities of the financial liabilities (principal and interest, assuming current interest
rates) as at August 31, 2019 and August 31, 2018:
August 31, 2019
Carrying
amount
Cash flows
$
$
0 to 12
months
$
Accounts payable and
accrued liabilities
Long-term debt
Total
4,293,483
4,293,483
4,293,483
7,494,325
7,613,137
405,463
1,260,663
5,947,011
11,787,808
11,906,620
4,698,946
1,260,663
5,947,011
12 to 24
After
months
24 months
$
-
$
-
August 31, 2018
Carrying
amount
Cash flows
$
$
0 to 12
months
$
Accounts payable and
accrued liabilities
Long-term debt
Total
Interest Rate Risk
2,719,690
2,719,690
2,719,690
1,193,112
1,276,509
580,052
3,912,802
3,996,199
3,299,742
12 to 24
After
months
24 months
$
-
$
-
488,783
488,783
207,674
207,674
The Company’s exposure to interest rate risk is summarized as follows:
Cash and cash equivalents
Trade and other receivables
Accounts payable and accrued liabilities
Long-term debt
Fixed and variable interest rates
Non-interest-bearing
Non-interest-bearing
Non-interest-bearing and variable interest rates
19
Interest Rate Sensitivity Analysis
Interest rate risk exists when interest rate fluctuations modify the cash flows or the fair value of the Company’s
investments. The Company owns investments with fixed and variables interest rates. As at August 31, 2019, the
Company was holding more than 91% (91% as at August 31, 2018) of its cash and cash equivalents in all-time
redeemable term deposits.
All else being equal, a hypothetical 1% interest rate increase or decrease would have an impact of $40,176 on net loss
and comprehensive loss for the year ended August 31, 2019 (not significant for the year ended August 31, 2018).
Financial Expenses (Revenues)
Interest and bank charges
Interest on long-term debt
Interest and imputed interest on the convertible debenture
Loss (gain) on foreign currency translation
Interest income
Concentration Risk
Years ended August 31,
2019
$
79,522
267,096
-
10,578
(200,653 )
156,543
2018
$
68,079
75,505
14,763
(42,170 )
(166,281 )
(50,104 )
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 at August 31, 2019 and 2018, the Company was holding 100% of
its cash equivalents portfolio in all-time redeemable term deposits with financial institutions with high
creditworthiness.
Foreign Exchange Risk
The Company realizes certain sales and purchases and certain supplies and professional services in U.S. dollars, Euros
and British pounds. Therefore, it is exposed to foreign currency fluctuations. The Company does not actively manage
this risk.
Foreign Currency Sensitivity Analysis
For the year ended August 31, 2019, if the Canadian dollar had strengthened 10% against the U.S. dollar with all other
variables held constant, net loss and comprehensive loss would have been $1,036,000 higher ($591,000 higher for the
year ended August 31, 2018). Conversely, if the Canadian dollar had weakened 10% against the U.S. dollar with all
other variables held constant, net loss and comprehensive loss would have been $1,036,000 lower for the year ended
August 31, 2019 ($591,000 lower for the year ended August 31, 2018).
For the year ended August 31, 2019, if the Canadian dollar had strengthened 10% against the Euro with all other
variables held constant, net loss and comprehensive loss would have been $284,000 higher ($345,000 higher for the
year ended August 31, 2018). Conversely, if the Canadian dollar had weakened 10% against the Euro with all other
variables held constant, net loss and comprehensive loss would have been $284,000 lower for the year ended August
31, 2019 ($345,000 lower for the year ended August 31, 2018).
For the year ended August 31, 2019, if the Canadian dollar had strengthened 10% against the British pound with all
20 other variables held constant, net loss and comprehensive loss would have been $26,000 higher (not significant for the
year ended August 31, 2018). Conversely, if the Canadian dollar had weakened 10% against the British pound with all
other variables held constant, net loss and comprehensive loss would have been $26,000 lower for the year ended
August 31, 2019 (not significant for the year ended August 31, 2018).
As at August 31, 2019 and August 31, 2018, the risk to which the Company was exposed is established as follows:
Cash and cash equivalents (US$616,438; US$599,807 as at
August 31, 2018)
Cash and cash equivalents (€ 68,066; € 643 as at
August 31, 2018)
Cash and cash equivalents (£ 54,329; £ 11,498 as at August 31,
2018)
Trade and other receivables (US$2,506,505; US$1,502,031 as at
August 31, 2018)
Trade and other receivables (€ 495,207; € 145,249 as at
August 31, 2018)
Trade and other receivables (£ 49,060; £ 131,788 as at
August 31, 2018)
Accounts payable and accrued liabilities (US$1,044,681;
US$526,291 as at August 31, 2018)
Accounts payable and accrued liabilities (€ 2,300;
€ 3,854 as at August 31, 2018)
Accounts payable and accrued liabilities (£ 37,712;
£ 4,537 as at August 31, 2018)
Total
CAPITAL MANAGEMENT
As at
August 31,
2019
$
As at
August 31,
2018
$
819,554
783,048
99,574
87,931
975
19,467
3,332,399
1,960,902
724,438
220,270
79,404
223,130
(1,388,903 )
(687,073 )
(3,365 )
(5,845 )
(61,037 )
3,689,995
(7,682 )
2,507,192
The Company's objective in managing capital, primarily composed of shareholders' equity and long-term debt, is to
ensure sufficient liquidity to fund production activities, R&D, general and administrative expenses, sales and marketing
expenses, working capital and capital expenditures.
In the past, the Company has had access to liquidity through non-dilutive sources, including the sale of non-core assets,
long-term debts, investment tax credits and government assistance, interest income and public equity offerings.
As at August 31, 2019, the Company's working capital amounted to $21,311,770 ($16,346,939 as at August 31,
2018), including cash and cash equivalents of $14,855,982 ($10,886,788 as at August 31, 2018). The accumulated
deficit at the same date was $40,678,055 ($41,625,541 as at August 31, 2018). Based on the Company's assessment,
which takes into account current cash and cash equivalents, as well as its strategic plan and corresponding budgets
and forecasts, the Company believes that it has sufficient liquidity and financial resources to fund planned
expenditures and other working capital needs for at least, but not limited to, the 12-month period after the reporting
date of August 31, 2019.
The Company believes that its current liquid assets are sufficient to finance its activities in the short-term.
The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions
and the risk characteristics of the underlying assets. Capital management objectives, policies and procedures have
remained unchanged since the last fiscal year.
21
For the years ended August 31, 2019 and 2018, the Company has not been in default on any of its obligations regarding
long-term debt.
CAPACITY TO PRODUCE RESULTS
As discussed in the section “LIQUIDITY AND CAPITAL RESOURCES”, 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
debt financing or any other means of financing, might be required.
From the human resources’ perspective, there are no vacancies in the major executive positions within the Company.
However, additional technical and production personnel as well as sales and marketing personnel will be required to
support the expected growth. Considering the employment market in Canada, the U.S. and Europe, the Company 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 creating 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 to align shareholders’ interest with corporate executives’ interest. This long-term
vision stimulates innovation and the development of recurring revenues.
NEW ACCOUNTING STANDARDS
New standards adopted by the Company during the year
IFRS 9, Financial Instruments
IFRS 9 Financial Instruments (IFRS 9) replaces the provisions of IAS 39 Financial Instruments: Recognition and
Measurement (IAS 39) that relate to the recognition, classification and measurement of financial assets and financial
liabilities, de-recognition of financial instruments, impairment of financial assets and hedge accounting.
The adoption of IFRS 9 on September 1, 2018 resulted in changes in accounting policies, however there were no
adjustments to the amounts recognized in these condensed consolidated interim financial statements.
The impairment of financial assets, including trade and other receivables, is now assessed using an expected credit loss
model: previously, the incurred loss model was used. The impact of applying the expected credit loss model was not
material.
The Company applied the modified retrospective method upon adoption of IFRS 9 on September 1, 2018. This method
requires the recognition of the cumulative effect of initially applying IFRS 9 to deficit and not to restate prior years.
The application of this new standard had no impact on deficit.
The following table illustrates the classification and measurement of financial instrument under IFRS 9 and IAS 39 at
the date of the initial application:
Cash and cash equivalents
Trade and other receivables
Accounts payable and accrued liabilities
Long-term debt
IAS 39 –
Original measurement
category
Loans and Receivables
Loans and Receivables
Amortised Cost
Amortised Cost
IFRS 9 –
New measurement category
Amortised Cost
Amortised Cost
Amortised Cost
Amortised Cost
22 IFRS 15, Revenue from Contracts with Customers
Effective September 1, 2018, the Company has adopted IFRS 15 Revenue from Contracts with Customers (IFRS 15).
This new standard was applied using a modified retrospective approach. The adoption of IFRS 15 resulted in changes
in accounting policies. However, it did not have impact on the timing or measurement of the Company’s revenue of
applying IAS 18 or IFRS 15 and no adjustment to the opening balance of deficit as at September 1, 2018 has been
recorded as result of adopting IFRS 15.
New and amended standards issued but not yet effective
IFRS 16, Lease
On January 13, 2016, the IASB released IFRS 16, Leases, which replace IAS 17, Leases, and the related interpretations
on leases such as IFRIC 4, Determining whether an arrangement contains a lease, SIC 15, Operating leases – Incentives
and SIC 27, Evaluating the substance of transactions in the legal form of a lease. This new standard specifies how to
recognize, measure, present and disclose leases. It also provides a single lessee accounting model, requiring lessees to
recognize assets and liabilities for all leases unless lease term is 12 months or less or the underlying asset has a small
value. Accounting for the lessor remains substantially unchanged. The standard is effective for periods beginning on
or after January 1, 2019, with earlier application permitted for companies that also apply IFRS 15, Revenue from
Contracts with Customers.
The Company has chosen the retrospective application of IFRS 16 with the cumulative effect of initially applying the
Standard recognised at the date of initial application. Consequently, the Company will not restate the comparative
information. The approach allows for two transition options to measure the right-of-use asset at transition. The
Company has chosen that the right-of-use asset will be equal to the lease liability at the date of initial application.
At the time of adoption of the standard on September 1, 2019, the Company anticipates the recognition of a right-of-
use asset and a lease liability for a value between $5,000,000 and $5,600,000, based on current rates, and an adjustment
of $77,000 will be recorded as a reduction of the deficit at the same time.
IFRIC 23, Uncertainty Over Income Tax Treatments
On June 7, 2017, the IASB issued IFRIC 23, Uncertainty Over Income Tax Treatments (the interpretation). The
interpretation provides guidance on the accounting for current and deferred tax liabilities and assets in circumstances
in which there is uncertainty over income tax treatments. The interpretation is effective for annual periods beginning
on or after January 1, 2019. Earlier application is permitted. The interpretation requires an entity to:
- contemplate whether uncertain tax treatments should be considered separately, or together as a group, based on
which approach provides better predictions of the resolution;
- reflect an uncertainty in the amount of income tax payable (recoverable) if it is probable that it will pay (or
recover) an amount for the uncertainty; and
- measure a tax uncertainty based on the most likely amount or expected value depending on whichever method
better predicts the amount payable (recoverable).
The Company completed the analysis of this interpretation and concluded that it will not have a significant impact on
its consolidated financial statements.
23 DISCLOSURE CONTROLS AND PROCEDURES
In accordance with the requirements of National Instrument 52-109 – Certification of Disclosure in Issuers’ Annual
and Interim Filings (NI 52-109), the Company’s management, including the Chief Executive Officer (CEO) and the
Chief Financial Officer (CFO), have evaluated the effectiveness of the Company’s disclosure controls and procedures
(DC&P). Based upon the results of the evaluation, the Company’s CEO and CFO have concluded that as at August 31,
2019, the Company’s disclosure controls and procedures to provide reasonable assurance that the information required
to be disclosed by the Company in reports it files is recorded, processed, summarized and reported within the
appropriate time periods and forms were effective.
INTERNAL CONTROL OVER FINANCIAL REPORTING
Internal control over financial reporting (ICFR) is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of consolidated financial statements for external purposes in
accordance with applicable IFRS. Internal control over financial reporting should include those policies and procedures
that establish the following:
maintenance of records in reasonable detail, that accurately and fairly reflect the transactions and disposals
of assets;
reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated
financial statements in accordance with applicable IFRS;
receipts and expenditures are only being made in accordance with authorizations of management or the Board
of Directors; and
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposal of
the Company’s assets that could have a material effect on the financial instruments.
An evaluation was carried out, under the supervision of the CEO and the CFO, of the design and effectiveness of our
internal controls over financial reporting. Based on this evaluation, the CEO and the CFO concluded that the internal
controls over financial reporting are effective as at August 31, 2019.
RISK FACTORS
The Company operates in an industry that contains various risks and uncertainties. Additional risks and uncertainties
not presently known by the Company, or which the Company deems to be currently insignificant, may impede the
Company’s performance. The materialization of one of the risks could harm the Company’s activities and have
significant negative impacts on its financial situation and its operating results. In that case, the Company’s stock price
could be affected.
There are important risks which management believes could impact the Company’s business. For information on risks
and uncertainties, please also refer to the “Risk Factors” section of our most recent Annual Information Form.
OFF-BALANCE SHEET ARRANGEMENTS
As of August 31, 2019, the Company was not the primary beneficiary in Special Purpose Entities and there were no
off-balance sheet arrangements.
24 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 Corporate Secretary
(s) Robin Villeneuve, CPA, CA
_______________
November 13, 2019
25 26 Consolidated Financial Statements
Opsens Inc.
Years ended August 31, 2019 and 2018
27 Opsens Inc.
Years ended August 31, 2019 and 2018
Table of contents
Independent Auditor’s Report ............................................................................................................................... 29
Consolidated Statements of Loss and Comprehensive Loss ................................................................................ 31
Consolidated Statements of Changes in Equity .................................................................................................... 32
Consolidated Statements of Financial Position ..................................................................................................... 34
Consolidated Statements of Cash Flows ............................................................................................................ 35
Notes to the Consolidated Financial Statements ................................................................................................. 36
28 Deloitte LLP
801 Grande Allee West
Suite 350
Quebec QC G1S 4Z4
Canada
Tel: 418-624-3333
Fax: 418-624-0414
www.deloitte.ca
Independent Auditor’s Report
To the shareholders and the Board of Directors of Opsens Inc.
Opinion
We have audited the consolidated financial statements of Opsens Inc. (the “Company”), which comprise the
consolidated statements of financial position as at August 31, 2019 and 2018, and the consolidated statements
of loss and comprehensive loss, changes in equity and cash flows for the years then ended, and notes to the
consolidated financial statements, including a summary of significant accounting policies (collectively referred to
as the “financial statements”).
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position
of the Company as at August 31, 2019 and 2018, and its financial performance and its cash flows for the years
then ended in accordance with International Financial Reporting Standards (“IFRS”).
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards (“Canadian GAAS”).
Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of
the Financial Statements section of our report. We are independent of the Company in accordance with the
ethical requirements that are relevant to our audit of the financial statements in Canada, and we have fulfilled
our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we
have obtained is sufficient and appropriate to provide a basis for our opinion.
Other Information
Management is responsible for the other information. The other information comprises:
● Management’s Discussion and Analysis
●
The information, other than the financial statements and our auditor’s report thereon, in the Annual Report.
Our opinion on the financial statements does not cover the other information and we do not and will not express
any form of assurance conclusion thereon. In connection with our audit of the financial statements, our
responsibility is to read the other information identified above and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or
otherwise appears to be materially misstated.
We obtained Management’s Discussion and Analysis prior to the date of this auditor’s report. If, based on the
work we have performed on this other information, we conclude that there is a material misstatement of this other
information, we are required to report that fact in this auditor’s report. We have nothing to report in this regard.
The Annual Report is expected to be made available to us after the date of the auditor’s report. If, based on the
work we will perform on this other information, we conclude that there is a material misstatement of this other
information, we are required to report that fact to those charged with governance.
Responsibilities of Management and Those Charged with Governance for the Financial
Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance
with IFRS, and for such internal control as management determines is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company’s ability to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis
of accounting unless management either intends to liquidate the Company or to cease operations, or has no
realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting process.
29 Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Canadian GAAS will always detect a material misstatement when it exists. Misstatements can
arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably
be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with Canadian GAAS, we exercise professional judgment and maintain
professional skepticism throughout the audit. We also:
●
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or
error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
● Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of
the Company’s internal control.
● Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates
and related disclosures made by management.
● Conclude on the appropriateness of management’s use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions
that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude
that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related
disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However,
future events or conditions may cause the Company to cease to continue as a going concern.
● Evaluate the overall presentation, structure and content of the financial statements, including the
disclosures, and whether the financial statements represent the underlying transactions and events in a
manner that achieves fair presentation.
● Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Company to express an opinion on the financial statements. We are responsible for the
direction, supervision and performance of the group audit. We remain solely responsible for our audit
opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters that
may reasonably be thought to bear on our independence, and where applicable, related safeguards.
The engagement partner on the audit resulting in this independent auditor’s report is Sophie Fortin.
Quebec City, Canada
November 13, 2019
________________
1 CPA auditor, CA, public accountancy permit No. A124208
30 Opsens Inc.
Consolidated Statements of Loss and Comprehensive Loss
Years ended August 31, 2019 and 2018
Revenues
Sales
Licensing (Note 11)
Cost of sales
Gross margin
Expenses (revenues) (Note 24)
Administrative
Sales and marketing
Research and development
Financial expenses (revenues) (Note 25)
Change in fair value of embedded derivative (Note 13)
2019
$
2018
$
29,449,124
22,112,019
3,302,394
1,957,712
32,751,518
24,069,731
14,036,385
11,330,319
18,715,133
12,739,412
4,593,182
11,116,277
4,800,939
156,543
-
3,868,655
9,272,717
3,696,378
(50,104 )
501,250
20,666,941
17,288,896
Net loss and comprehensive loss
(1,951,808 )
(4,549,484 )
Basic and diluted net loss per share (Note 15)
(0.02 )
(0.05 )
The accompanying notes are an integral part of the consolidated financial statements.
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33
Opsens Inc.
Consolidated Statements of Financial Position
Assets
Current
Cash and cash equivalents (Note 16)
Trade and other receivables (Note 5)
Tax credits receivable (Note 21)
Inventories (Note 6)
Prepaid expenses
Property, plant and equipment (Note 7)
Intangible assets (Note 8)
Liabilities
Current
Accounts payable and accrued liabilities (Note 10)
Warranty provision (Note 18)
Deferred revenues (Note 11)
Current portion of long-term debt (Note 12)
Long-term debt (Note 12)
Deferred lease inducements
Shareholders’ equity
Share capital (Note 14a))
Reserve – Stock option plan (Note 14b))
Reserve – Warrants (Note 14c))
Deficit
As at August 31,
2019
$
As at August 31,
2018
$
14,855,982
5,115,249
297,391
5,133,051
697,345
26,099,018
2,962,270
1,027,195
30,088,483
4,293,483
134,460
-
359,305
4,787,248
7,135,020
725,479
12,647,747
10,886,788
2,816,285
354,788
5,219,960
507,336
19,785,157
3,174,849
625,890
23,585,896
2,719,690
137,420
41,669
539,439
3,438,218
653,673
821,042
4,912,933
54,709,401
3,409,390
-
(40,678,055 )
17,440,736
30,088,483
54,341,014
3,058,196
2,899,294
(41,625,541 )
18,672,963
23,585,896
Commitments (Note 17)
The accompanying notes are an integral part of the consolidated financial statements.
Approved by the Board
Signed [Jean Lavigueur]
Director
Signed [Louis Laflamme]
Director
34
Opsens Inc.
Consolidated Statements of Cash Flows
Years ended August 31, 2019 and 2018
Operating activities
Net loss
Adjustments for:
Depreciation of property, plant and equipment (Note 7)
Amortisation of intangible assets (Note 8)
Loss on disposal of property, plant and equipment
Write-off of intangible assets
Stock-based compensation costs (Note 14b))
Change in fair value of embedded derivative
Interest expense (revenue)
Unrealized foreign exchange loss
Changes in non-cash operating
working capital items (Note 16)
Investing activities
Acquisition of property, plant and equipment
Income tax credit on property, plant and equipment
Additions to intangible assets
Proceeds from disposal of property, plant and equipment
Interest received
Financing activities
Increase in long-term debt, net of transaction costs
Reimbursement of long-term debt
Proceeds from issuance of shares (Note 14a))
Interest paid
Effect of foreign exchange rate changes on cash
and cash equivalents
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents – Beginning of year
Cash and cash equivalents – End of year
2019
$
2018
$
(1,951,808 )
(4,549,484 )
802,149
91,284
75,585
7,988
489,179
-
87,300
23,936
800,595
97,688
66,076
24,338
618,050
501,250
(59,153 )
26,399
(872,786 )
1,421,813
(1,247,173 )
(1,052,428 )
(704,768 )
-
(499,244 )
-
199,694
(1,004,318 )
6,912,532
(663,381 )
230,402
(234,932 )
6,244,621
(757,076 )
161,138
(103,041 )
2,600
166,281
(530,098 )
213,840
(519,716 )
196,070
(38,546 )
(148,352 )
(23,936 )
47,367
3,969,194
10,886,788
14,855,982
(1,683,511 )
12,570,299
10,886,788
Additional information on the consolidated statements of cash flows is presented in Note 16.
The accompanying notes are an integral part of the consolidated financial statements.
35 Opsens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2019 and 2018
1.
Incorporation and Description of Business
Opsens Inc. (Opsens or the Company) is incorporated under the Business Corporations Act (Quebec). Opsens
focuses mainly on physiological measurement such as Fractional Flow Reserve (FFR) and dPR in interventional
cardiology but also supplies a wide range of miniature optical sensors to measure pressure and temperature to
be used in a wide range of applications that can be integrated in other medical devices. Opsens offers an
advanced optical-based pressure guidewire (OptoWire) that aims at improving the clinical outcome of patients
with coronary artery disease. Opsens is also involved in industrial activities through its wholly-owned subsidiary
Opsens Solutions Inc. (Solutions). Solutions develops, manufactures and installs innovative fibre optic sensing
solutions for critical and demanding industrial applications. The Company’s head office is located at 750
Boulevard du Parc-Technologique, Quebec City, Quebec, Canada, G1P 4S3.
2.
Summary of Significant Accounting Policies
The significant accounting policies used in the preparation of the consolidated financial statements are as follows:
Basis of Measurement
The consolidated financial statements have been prepared on the historical cost basis.
Basis of Preparation
The consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards (IFRS), as issued by the International Accounting Standards Board (IASB). The Company has
consistently applied the accounting policies throughout all years presented.
The preparation of consolidated financial statements in accordance with IFRS requires the use of certain critical
accounting estimates. It also requires management to exercise its judgment in applying the Company's
accounting policies. The areas with a higher degree of judgment or complexity, or areas where assumptions and
estimates are significant to the consolidated financial statements are disclosed in Note 3.
Basis of Consolidation
The consolidated financial statements include the accounts of the Company and those of its wholly-owned
subsidiary, Opsens Solutions Inc. All intra-group transactions, balances, revenues and expenses are fully
eliminated upon consolidation until they are realized with a third party.
Subsidiary
A subsidiary is an entity over which the Company has control. The Company controls an entity when it is exposed
to, or has rights to variable returns from its involvement with the entity and has the ability to affect those returns
through its power over the entity. A subsidiary is fully consolidated from the date control is obtained and they are
no longer consolidated at the date control ceases.
Changes in the parent company’s ownership interest in a subsidiary that do not result in a loss of control are
accounted for as equity transactions.
36 Opsens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2019 and 2018
2.
Summary of Significant Accounting Policies (continued)
Revenue Recognition
The Company sells products through a direct sales force and to distributors. The Company recognizes sales
revenues for both medical and industrial segments upon shipment of products to customers, when the control
has been transferred to the buyer, there is no continuing management involvement with the products, the
recovery of the consideration is probable and the amount of revenue can be measured reliably. Sales are
measured at the fair value of the consideration to which the Company is entitled to receive in exchange for
transferring the promised products, net of any trade and volume discounts.
Milestone
Milestone income is recognized over the agreement residual terms at the point in time when it is highly probable
that the respective milestone event criteria is met, and the risk of reversal of revenue recognition is remote.
Reporting 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 that
are denominated in foreign currencies are translated at the exchange rate in effect at the date of the consolidated
statements of financial position, non-monetary assets and liabilities that are denominated in foreign currencies
are translated at historical rates, revenues and expenses are translated at the exchange rates in effect at the
time of the transaction and exchange differences are recognized in profit or loss in the period in which they arise.
Research and Development Costs
Research costs are expensed as incurred. Development costs are expensed as incurred except for those which
meet generally accepted criteria for deferral, in which case, the costs are capitalized and amortised to operations
over the estimated period of benefit. No development costs have been capitalized during any of the years
presented.
Research and Development Refundable Tax Credits and Government Grant
Refundable research and development (R&D) tax credits and government assistance are accounted for using
the cost reduction method. Accordingly, refundable R&D tax credits and government assistance are recorded as
a reduction of the related expenses or capital expenditures in the period in which the expenses are incurred,
provided that the Company has reasonable assurance the refundable R&D tax credits or government assistance
will comply with the conditions attaching to them and that the grants will be received.
Shareholders’ Equity
Share capital represents the value of shares that have been issued. Any transaction costs associated with the
issuance of shares are deducted from share capital.
From time to time, the Company issues units consisting of common shares and warrants to purchase common
shares. The Company estimates the fair value of warrants using the Black-Scholes option pricing model. The
difference between the unit price and the fair value of each warrant represents the fair value attributable to each
common share. Any transaction costs associated with the issuance of units are apportioned between the common
shares and warrants based on their relative fair values.
37 Opsens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2019 and 2018
2.
Summary of Significant Accounting Policies (continued)
Share-based Compensation
The Company offers a stock option plan described in Note 14b), which is determined as an equity-settled plan.
The Company uses the fair value-based method to measure the fair value of stock options as at their grant date.
The fair value is determined using the Black-Scholes option pricing model and is recognized in the consolidated
statements of loss and comprehensive loss as a compensation expense and credited to the stock option plan
reserve, using a graded vesting schedule over the vesting period, based on the Company’s estimate of the
number of shares that will eventually vest. At the end of each reporting period, the Company revises its estimate
of the number of equity instruments expected to vest. The impact of the revision of original estimates, if any, is
recognized in the consolidated statements of loss and comprehensive loss such that the cumulative
compensation expense reflects the revised estimate, with a corresponding adjustment to the stock option plan
reserve.
Any consideration received by the Company upon the exercise of stock options is credited to share capital, and
the stock option plan reserve component resulting from stock-based compensation is transferred to share capital
upon the issuance of the shares.
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
Inventories are valued at the lower of cost and net realizable value. Cost is essentially determined using the
weighted average cost. The cost of work in progress and finished goods comprises the cost of raw materials,
direct labour costs and an allocation of fixed and variable manufacturing overhead, including applicable
depreciation of property, plant and equipment based on normal production capability.
Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of
completion and selling expenses. Inventories are written down to net realizable value when the cost of inventories
is determined not to be recoverable. When the circumstances that previously caused the inventories to be written
down below cost no longer exist or when there is clear evidence of an increase in net realizable value because
of a change in economic circumstances, the amount of the write-down is reversed. The reversal is limited to the
amount of the original write-down.
38 Opsens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2019 and 2018
2.
Summary of Significant Accounting Policies (continued)
Property, Plant and Equipment
Property, plant and equipment are recorded at cost, less accumulated depreciation and accumulated impairment
losses, if any. The cost of property, plant and equipment includes the purchase price and the directly attributable
costs of acquisition.
Depreciation is recorded using the straight-line method over the estimated useful life, taking into account any
residual value, as follows:
Office furniture and equipment
Production equipment
Research and development equipment
Diagnostic and demonstration equipment
Research and development computer equipment
Computer equipment
Leasehold improvements
10 years
7 years
7 years
3 to 5 years
3 years
3 years
Remaining lease terms
of seven and two years
Depreciation methods, residual values and useful life of property, plant and equipment are reviewed annually.
Any change is accounted for prospectively as a change in accounting estimates.
Gains and losses on disposal of property, plant and equipment are determined by comparing the proceeds from
disposal with the carrying amount and are recognized in the consolidated statements of loss and comprehensive
loss.
Intangible Assets
Intangible assets with finite useful life consist of patents and software, including software development costs.
for
Intangible assets acquired separately are recorded at cost. The amount
internally‑generated intangible assets is the sum of the expenditure incurred from the date when the intangible
asset first meets the recognition criteria, and comprises all directly attributable costs necessary to create,
produce, and prepare the asset to be capable of operating in the manner intended by management. Subsequent
to initial recognition, intangible assets are reported at cost less accumulated amortisation and accumulated
impairment losses. Amortisation is recorded using the straight-line method over the estimated useful life taking
into account any residual value, as follows:
initially recognized
Patents
Software
Software development in progress
Term of underlying
patent - 20 years
3-15 years
5 years
The Company’s indefinite-life intangible assets consist of trademarks resulting from a business combination and
are not amortised.
39 Opsens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2019 and 2018
2.
Summary of Significant Accounting Policies (continued)
Impairment of Non-Financial Assets
Indefinite-Life Intangible Assets
The carrying values of identifiable intangible assets with indefinite life are tested annually for impairment.
Indefinite-life intangible assets are allocated to cash generating units (CGUs) for the purpose of impairment
testing based on the level at which management monitors it, which is not higher than an operating segment. The
Company has elected to carry its annual impairment test during the last quarter of each year or at any time if an
indicator of impairment exists.
Non-Financial Assets With Finite Useful Life
The carrying values of non-financial assets with finite useful life, such as property, plant and equipment and
intangible assets with finite useful life, are assessed for impairment whenever events or changes in
circumstances indicate that their carrying amounts may not be recoverable. If such an indicator exists, the
recoverable amount of the asset must be determined. Such assets are impaired if their recoverable amount is
lower than their carrying amount. If it is not possible to estimate the recoverable amount of an individual asset,
the recoverable amount of the CGU to which the asset belongs is tested for impairment.
Recognition of Impairment Charge
The recoverable amount is the higher of an asset’s fair value less costs of disposal or its value in use. If the
recoverable amount of an asset or CGU is estimated to be less than its carrying amount, the carrying amount of
the asset or CGU is reduced to its recoverable amount. The resulting impairment charge is recognized in the
consolidated statements of loss and comprehensive loss. Impairment charges recognized in prior periods are
determined at each reporting date for any indications that the impairment charge has decreased or no longer
exists. When an impairment charge is subsequently reversed, the carrying amount of the asset or CGU is
increased to the revised estimate of its recoverable amount so that the increased carrying amount does not
exceed the carrying amount that would have been recorded had no impairment charges been recognized for the
asset or CGU in prior years. An impairment charge recognized for goodwill cannot be reversed.
Leases
Leases are classified as either operating or finance, based on the substance of the transaction at the inception
of the lease. The Company leases certain office premises and equipment in which a significant portion of the
risks and rewards of ownership are retained by the lessor. These are classified as operating leases. Payments
made under these leases are charged to the consolidated statements of loss and comprehensive loss on a
straight-line basis over the period of the lease.
The Company has a facility lease arrangement that includes tenant inducements. Rent expense is recorded
evenly over the term of the lease agreement. The difference between cash rental payments and the rent expense
recorded for accounting purposes is reflected as a deferred lease inducement in the consolidated statements of
financial position.
Finance leases, which transfer to the Company substantially all the risks and benefits of ownership of the asset
are capitalized at the inception of the lease at the fair value of the leased asset or at the present value of the
minimum lease payments. Finance expenses are charged to the consolidated statements of loss and
comprehensive loss over the period of the agreement. Obligations under finance leases are included in financial
liabilities, net of finance costs allocated to future periods. Assets are depreciated over the shorter of their
estimated useful life or the lease term.
40 Opsens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2019 and 2018
2.
Summary of Significant Accounting Policies (continued)
Warranty Provision
The Company offers a standard 12-month warranty excluding consumables and accessories. Provision for the
expected cost of warranty obligations are recognized at the date of sale of the relevant products, at the
management’s best estimate of the expenditure required to settle the warranty obligation.
Income Taxes
Income tax expenses comprise current and deferred income taxes. Income taxes are recognized in the
consolidated statements of loss and comprehensive loss except to the extent that it relates to items recognized
directly in equity, in which case the income taxes are also recognized directly in equity.
Current Income Taxes
The current income tax assets and liabilities for the current and prior periods are measured at the amount
expected to be paid to or received by the taxation authorities. The income tax rates used to calculate the amount
are those that are enacted or substantively enacted at the date of the consolidated statements of financial position
in the tax jurisdiction where the Company and its subsidiary generate taxable income/loss.
Deferred Income Taxes
The Company follows the liability method of accounting for deferred income taxes. Under this method, deferred
income tax assets and liabilities are determined based on deductible or taxable temporary differences between
carrying values and tax values of assets and liabilities as well as the carryforward of unused tax losses and
deductions, using enacted or substantively enacted income tax rates expected to apply to taxable income in the
years in which the assets are expected to be realized or the liabilities settled.
Deferred income tax assets are recognized only to the extent that it is probable that taxable profits will be available
against which the deductible temporary differences can be utilized. The carrying amount of deferred tax assets
is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable
profits will be available to allow all or part of the assets to be recovered.
Deferred tax liabilities are generally recognized for all taxable temporary differences and for taxable temporary
differences arising on investments in subsidiaries, except where the reversal of the temporary differences can be
controlled and it is probable that the differences will not reverse in the foreseeable future. However, deferred tax
is not recognized if it arises from the initial recognition of goodwill or the initial recognition of an asset or liability
in a transaction other than a business combination that, at the time of the transaction, affects neither accounting
nor taxable profit or loss.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets
against current tax liabilities and when the deferred tax assets and liabilities relate to income taxes levied by the
same taxation authority on either the same taxable entity or to different taxable entities that intend to settle the
balances on a net basis.
41 Opsens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2019 and 2018
2.
Summary of Significant Accounting Policies (continued)
Loss per Share
Basic net loss per share is calculated by dividing the net loss for the year attributable to shareholders of the
Company by the weighted-average number of common shares outstanding during the year.
Diluted net loss per share is calculated by dividing the net loss for the year attributable to shareholders of the
Company adjusted for the interests on the convertible debenture, net of the related income taxes, the unrealized
foreign exchange gain or loss, net of the related income taxes, and for the change in fair value of embedded
derivative, net of the related income taxes, by the weighted average number of common shares outstanding
during the year, plus the effects of dilutive common share equivalents. This method requires that diluted net loss
per share be calculated using the treasury stock method, as if all dilutive potential common share equivalents
had been exercised at the beginning of the reporting period, or period of issuance, as the case may be, and that
the funds obtained thereby be used to purchase common shares of the Company at the fair value of the common
shares during the period.
Financial Instruments
Financial assets at fair value through profit and loss (FVTPL): Financial assets carried at FVTPL are initially
recorded at fair value and transaction costs are expensed in the consolidated statements of loss and
comprehensive loss. Realized and unrealized gains and losses arising from changes in the fair value of the
financial assets held at FVTPL are included in the consolidated statements of loss and comprehensive loss in
the period in which they arise.
Financial liabilities at FVTPL: These financial liabilities are initially recognized at fair value, and transaction costs
directly attributable to issuing the financial liabilities are expensed in the consolidated statements of loss and
comprehensive loss. Financial liabilities that are required to be measured at FVTPL have all fair value
movements, including those related to changes in the credit risk of the liability, recognized in the consolidated
statements of loss and comprehensive loss.
Financial assets at fair value through other comprehensive income (FVTOCI): Investments in equity and debt
instruments at FVTOCI are initially recognized at fair value plus transaction costs. Subsequently they are
measured at fair value, with gains and losses arising from changes in fair value recognized in other
comprehensive loss and comprehensive loss in the period in which they arise without subsequent reclassification
to net income in the case of equity instruments.
Financial assets at amortised cost: A financial asset is measured at amortised cost if the objective of the business
model is to hold the financial asset for the collection of contractual cash flows, and the asset's contractual cash
flows are comprised solely of payments of principal and interest. They are classified as current assets or non-
current assets based on their maturity date and are initially recognized at fair value and subsequently carried at
amortised cost less any impairment.
Impairment of financial assets at amortised cost: The Company recognizes a loss allowance for expected credit
losses on financial assets that are measured at amortised cost. As at August 31, 2019, the loss allowance was
nil.
3.
Critical Accounting Estimates, Assumptions and Judgments
The preparation of the Company’s consolidated financial statements requires management to make judgments,
estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and
the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in a
material adjustment to the carrying value of the related asset or related liability.
For all these items, relevant accounting policies are discussed in Note 2 of these consolidated financial
statements.
42 Opsens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2019 and 2018
3.
Critical Accounting Estimates, Assumptions and Judgments (continued)
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates
are recognized 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.
The following critical estimates, judgments and assumptions have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next financial year:
Inventories
The Company measures its inventories at the lower of cost, determined with the weighted average cost basis
method, and net realizable value, and provides reserves for excess and obsolete inventories. The Company
determines its reserves for excess and obsolete inventories based on the quantities on hand at the reporting
dates, compared to foreseeable needs over the next twelve months, taking into account changes in demand,
technology or market.
Useful Life of Depreciable Assets
Management reviews the useful life of depreciable assets at each reporting date. As at August 31, 2019,
management stated that the useful life represents the expected utility of the assets to the Company. The carrying
amounts are presented in Notes 7 and 8. Actual results, however, may vary due to technical obsolescence or
changes in the market, particularly for computer equipment and software.
Government Assistance and R&D Tax Credits
Government assistance and R&D tax credits are recorded in the consolidated 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 government assistance and R&D tax credits.
Warranty Provision
The Company estimated warranty provision based on the history of defective products and the probability that
these defects will arise, as well as 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 rates, as well as the estimated
number of options that will ultimately vest.
Functional Currency
The functional currency for the Company and its subsidiary is the currency of the primary economic environment
in which each operates. The Company has determined that the functional currency for the Company and its
subsidiary is the Canadian dollar. The determination of functional currency may require certain judgments to
determine the primary economic environment. The Company reconsiders the functional currency used when
there is a change in events and conditions which determined the primary economic environment.
43 Opsens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2019 and 2018
3.
Critical Accounting Estimates, Assumptions and Judgments (continued)
Deferred Income Tax Asset
A deferred income tax asset will be recognized in the consolidated financial statements only when the Company
concludes that these tax assets will probably be materialized by shielding profits from taxes or otherwise. The
tax asset amount will be recorded based on the enacted and substantively enacted income tax rates for the year
in which the differences are expected to reverse.
4.
Changes in Accounting Policies
New standards adopted by the Company during the year
IFRS 9, Financial Instruments
IFRS 9 Financial Instruments (IFRS 9) replaces the provisions of IAS 39 Financial Instruments: Recognition and
Measurement (IAS 39) that relate to the recognition, classification and measurement of financial assets and
financial liabilities, derecognition of financial instruments, impairment of financial assets and hedge accounting.
The adoption of IFRS 9 on September 1, 2018 resulted in changes in accounting policies disclosed in Note 2,
however there were no adjustments to the amounts recognized in these condensed consolidated interim financial
statements.
The impairment of financial assets, including trade and other receivables, is now assessed using an expected
credit loss model: previously, the incurred loss model was used. The impact of applying the expected credit loss
model was not material.
The Company applied the modified retrospective method upon adoption of IFRS 9 on September 1, 2018. This
method requires the recognition of the cumulative effect of initially applying IFRS 9 to deficit and not to restate
prior years. The application of this new standard had no impact on deficit.
The following table illustrates the classification and measurement of financial instruments under IFRS 9 and
IAS 39 at the date of the initial application:
IAS 39 –
IFRS 9 –
Original measurement
category
Loans and Receivables
Loans and Receivables
Amortised Cost
Amortised Cost
New measurement
category
Amortised Cost
Amortised Cost
Amortised Cost
Amortised Cost
Cash and cash equivalents
Trade and other receivables
Accounts payable and accrued liabilities
Long-term debt
IFRS 15, Revenue from Contracts with Customers
Effective September 1, 2018, the Company has adopted IFRS 15 Revenue from Contracts with Customers (IFRS
15). This new standard was applied using a modified retrospective approach. The adoption of IFRS 15 resulted
in changes in accounting policies disclosed in Note 2. However, it did not have impact on the timing or
measurement of the Company’s revenue of applying IAS 18 or IFRS 15 and no adjustment to the opening balance
of deficit as at September 1, 2018 has been recorded as result of adopting IFRS 15.
44 Opsens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2019 and 2018
4.
Changes in Accounting Policies (continued)
New and amended standards issued but not yet effective
IFRS 16, Lease
On January 13, 2016, the IASB released IFRS 16, Leases, which replace IAS 17, Leases, and the related
interpretations on leases such as IFRIC 4, Determining whether an arrangement contains a lease, SIC 15,
Operating leases – Incentives and SIC 27, Evaluating the substance of transactions in the legal form of a lease.
This new standard specifies how to recognize, measure, present and disclose leases. It also provides a single
lessee accounting model, requiring lessees to recognize assets and liabilities for all leases unless lease term is
12 months or less or the underlying asset has a small value. Accounting for the lessor remains substantially
unchanged. The standard is effective for periods beginning on or after January 1, 2019, with earlier application
permitted for companies that also apply IFRS 15, Revenue from Contracts with Customers.
The Company has chosen the retrospective application of IFRS 16 with the cumulative effect of initially applying
the standard recognized at the date of initial application. Consequently, the Company will not restate the
comparative information. The approach allows for two transition options to measure the right-of-use asset at
transition. The Company has chosen that the right-of-use asset will be equal to the lease liability at the date of
initial application.
At the time of adoption of the standard on September 1, 2019, the Company anticipates the recognition of a right-
of-use asset and a lease liability for a value between $5,000,000 and $5,600,000, based on current rates, and
an adjustment of $77,000 will be recorded as a reduction of the deficit at the same time.
IFRIC 23, Uncertainty Over Income Tax Treatments
On June 7, 2017, the IASB issued IFRIC 23, Uncertainty Over Income Tax Treatments (the interpretation). The
interpretation provides guidance on the accounting for current and deferred tax liabilities and assets in
circumstances in which there is uncertainty over income tax treatments. The interpretation is effective for annual
periods beginning on or after January 1, 2019. Earlier application is permitted. The interpretation requires an
entity to:
- contemplate whether uncertain tax treatments should be considered separately, or together as a group, based
on which approach provides better predictions of the resolution;
- reflect an uncertainty in the amount of income tax payable (recoverable) if it is probable that it will pay (or
recover) an amount for the uncertainty; and
- measure a tax uncertainty based on the most likely amount or expected value depending on whichever method
better predicts the amount payable (recoverable).
The Company completed the analysis of this interpretation and concluded that it will not have a significant impact
on its consolidated financial statements.
45 Opsens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2019 and 2018
5.
Trade and Other Receivables
Trade
Loss allowance
Sales taxes receivable
Other receivables
Total
Loss allowance
Balance, beginning of year
Additional provisions recognized
Amounts recovered during the year
Unused amounts reversed during the year
Foreign exchange variance
Balance, end of year
6.
Inventories
Raw materials
Work in progress
Finished goods
Total
As at
August 31,
2019
$
4,619,148
-
441,189
54,912
5,115,249
As at
August 31,
2018
$
3,358,916
(817,823 )
171,624
103,568
2,816,285
Years ended August 31,
2019
$
(817,823 )
(2,347 )
18,568
796,240
5,362
-
As at
August 31,
2019
$
2,534,907
1,831,171
766,973
5,133,051
2018
$
(940,429 )
-
128 519
-
(5 913 )
(817,823 )
As at
August 31,
2018
$
2,134,634
1,404,518
1,680,808
5,219,960
For the year ended August 31, 2019, $9,369,472 of inventories were expensed in the consolidated statements
of loss and comprehensive loss and presented in cost of sales ($7,044,171 for the year ended August 31, 2018).
Write-downs of inventories amounting to $131,530 (nil for the year ended August 31, 2018) were included under
cost of sales.
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Opsens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2019 and 2018
8.
Intangible Assets
Indefinite
life –
Trademarks
$
Finite
life –
Software in
progress
$
Finite life –
Software,
net of
income tax
credits of
$1,518
$
Internally
developed
Finite
life –
Patents
$
Total
$
22,317
3,665
-
-
25,982
-
217,965
(29 000 )
-
188,965
-
-
-
-
-
-
-
-
210,655
112,047
-
-
322,702
177,936
26,163
-
204,099
941,909 1,174,881
529,577
195,900
-
(12,290 )
(29 000 )
(12,290 )
1,125,519 1,663,168
371,055
65,121
(4,302 )
431,874
548,991
91,284
(4,302 )
635,973
Cost
Balance as at August 31, 2018
Additions
Grant recorded against intangible
assets (Note 19)
Disposals
Balance as at August 31, 2019
Accumulated amortisation
Balance as at August 31, 2018
Amortisation
Disposals
Balance as at August 31, 2019
Net book value
as at August 31, 2019
25,982
188,965
118,603
693,645 1,027,195
Finite life –
Software,
net of
income tax
credits of
$1,518
$
Internally
developed
Finite
life –
Patents
$
Total
$
210,655
-
-
210,655
141,613
36,323
-
177,936
842,758 1,109,710
100,231
(35,060 )
941,909 1,174,881
99,151
-
311,442
59,613
-
371,055
462,025
97,688
(10,722 )
548,991
Finite
life –
Patents
$
35,060
-
(35,060 )
-
8,970
1,752
(10,722 )
-
Indefinite
life –
Trademarks
$
21,237
1,080
-
22,317
-
-
-
-
Cost
Balance as at August 31, 2017
Additions
Disposals
Balance as at August 31, 2018
Accumulated amortisation
Balance as at August 31, 2017
Amortisation
Disposals
Balance as at August 31, 2018
Net book value
as at August 31, 2018
22,317
-
32,719
570,854
625,890
The Company has considered indicators of impairment as at August 31, 2019 and recorded an impairment loss
of $7,988 attributable to patent requests that have not been pursued ($24,338 for year ended August 31, 2018).
49
Opsens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2019 and 2018
9.
Authorized Line of Credit
The Company has a revolving operating credit facility for a maximum of $1,000,000 (the credit limit). The available
revolving operating credit is limited to the credit limit and 75% of eligible accounts receivable, plus 50% of eligible
inventory, minus priority claims. The aggregate outstanding amount under the revolver may not at any time
exceed the credit limit. This revolving operating credit bears interest at the prime rate plus 1% and is repayable
on the first anniversary of the date of the agreement. The Company is also allowed to prepay this facility in whole
or in part at any time without penalty. It is secured by a first-rank movable hypothec on the universality of
receivables and inventories. The credit line was not used as at August 31, 2019 and 2018.
The Company also has credit cards for a maximum of $100,000 to finance its current operations. The balance
used on these credit cards bears interest at a rate of 19.99%.
10. Accounts Payable and Accrued Liabilities
Suppliers
Salaries, employee benefits and other
Other liabilities
Total
11. Deferred Revenues
Licensing Agreement
As at
As at
August 31,
August 31,
2019
$
2,159,323
798,411
1,335,749
4,293,483
2018
$
1,022,843
632,449
1,064,398
2,719,690
On April 15, 2014, the Company announced it had entered into an agreement with Abiomed, Inc. (Abiomed) in
connection with its miniature optical pressure sensor technology for applications in circulatory assisted devices.
The Company has granted Abiomed an exclusive worldwide license to integrate its miniature pressure sensor in
connection with Abiomed’s circulatory assisted devices. Under the agreement, Abiomed will pay Opsens an
aggregate amount of US$6,000,000. An amount of $1,647,000 (US$1,500,000) has been paid on closing, while
the balance will be disbursed based on the achievement of certain milestones. As at August 31, 2019, Opsens
completed all its obligations regarding this agreement.
For the year ended August 31, 2019, the Company achieved the last technical milestones related to the
agreement with Abiomed and consequently, it allows the Company to record, in the consolidated statements of
loss and comprehensive loss as licensing revenues an amount of $3,260,725 (US$2,500,000) ($1,591,300
(US$1,250,000) for the year ended August 31, 2018).
50 Opsens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2019 and 2018
12. Long-term Debt
Contributions repayable to Ministère des Finances et de l’Économie
(MFE), without interest (effective rate of 9%), repayable in 5 equal and
consecutive annual instalments of $82,718, maturing in February
2020.
Debt balance
Imputed interest
Contributions repayable to Canada Economic Development, without
interest (effective rate of 13.5%), repayable in 20 equal and
consecutive quarterly
in
August 2020.
Debt balance
Imputed interest
instalments of $15,000, maturing
Contributions repayable to Canada Economic Development, without
interest (effective rate of 12%), repayable in 59 equal and consecutive
monthly instalments of $3,333 and a final payment of $3,353, maturing
in October 2023. The difference between amounts received and
estimated fair value is recognized as government grants.
Debt balance
Imputed interest
Term loan, bearing interest at prime rate plus 0.25%, secured by a
movable hypothec on the universality of the Company’s present and
future property, plant and equipment and intangible assets, payable in
48 monthly instalments of $18,750, maturing in May 2020. Amounts
received are net of transaction costs of $9,000.
Term loan, bearing interest at prime rate plus 0.25%, secured by a
movable hypothec on the universality of the Company’s present and
future property, plant and equipment and intangible assets, payable in
48 monthly instalments of $4,500, maturing in February 2022.
Amounts received are net of transaction costs of $2,160.
Amounts to be carried forward
As at
August 31,
2019
$
As at
August 31,
2018
$
82,718
(3,618 )
79,100
165,436
(13,999 )
151,437
60,000
(4,531 )
55,469
120,000
(15,660 )
104,340
166,670
(33,199 )
133,471
200,000
(49,473 )
150,527
168,336
391,630
134,147
187,376
570,523
985,310
51
Opsens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2019 and 2018
12. Long-term Debt (continued)
As at
August 31,
2019
$
As at
August 31,
2018
$
Amounts to be carried forward
570,523
985,310
Term loan, bearing interest at prime rate plus 2%, secured by a movable
hypothec on the universality of the Company’s present and future
property, plant and equipment and intangible assets, maturing in
February 2024 with no principal payment for a 24-month period
following the signature of the agreement. The principal is payable in
36 monthly instalments of $194,444. Amounts received are net of
transaction costs of $87,468.
Reimbursed during the year
Current portion
6,923,802
-
7,494,325
359,305
7,135,020
-
207,802
1,193,112
539,439
653,673
The annual principal instalments due on the long-term debt are $359,305 in 2020, $1,226,054 in 2021,
$2,376,009 in 2022, $2,361,417 in 2023 and $1,171,540 in 2024.
Under the terms and conditions of the agreements on long-term debt with its lenders, the Company is subject to
certain covenants with respect to maintaining minimum financial ratios. As at August 31, 2019 and 2018, these
financial ratios were met by the Company.
13. Convertible Debenture
On November 19, 2012, the Company issued a US$2,000,000 ($2,002,000) subordinated secured convertible
debenture maturing November 19, 2017. The convertible debenture bore interest at a rate of 2.0% per annum,
payable at maturity. At the holder’s option, the convertible debenture could have been converted into common
shares of the Company at any time up to the maturity date, at a conversion price representing the market price
of the shares. However, the conversion price was subject to a minimum of $0.50 and a maximum of $0.75 per
common share (the “conversion price”).
The convertible debenture was also convertible at the Company’s option at the conversion price if the
volume-weighted average closing price per common share for the twenty trading days immediately preceding
the fifth trading day before such conversion date had been at least $1.20 and if a minimum of 50,000 common
shares had been traded on the TSX Exchange during each of the twenty trading days taken into account in the
calculation of the conversion price.
As noted above, the convertible debenture contained a conversion option that will result in an obligation to deliver
a fixed amount of equity in exchange of a variable amount of convertible debenture when translated in the
functional currency of the Company. Consequently, under IAS 32, Financial Instruments: Presentation, the
convertible debenture was accounted for as a compound instrument with a debt component and a separate
embedded derivative representing the conversion option. Both the debt and embedded derivative components
of this compound financial instrument are measured at fair value on initial recognition. The debt component was
subsequently accounted for at amortised cost using the effective interest rate method. The embedded derivative
was subsequently measured at fair value at each reporting date, with gains and losses in fair value recognized
through profit or loss.
52 Opsens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2019 and 2018
13. Convertible Debenture (continued)
On November 16, 2017, the Company received a notice of conversion from the holder of the convertible
debenture. At that date, the debt component was at $2,816,548 including accrued interest of $267,545. The debt
component was converted into 3,413,333 common shares of the Company at a price of $0.75 per share and
accrued interest was converted into 263,918 common shares of the Company at a price of $0.97 per share. The
embedded derivative had a value of $1,626,455. These two components were credited to share capital.
14. Shareholders’ equity
a) Share capital
During the year ended August 31, 2019, following the exercise of stock options, the Company issued 311,500
common shares (650,750 common shares for the year ended August 31, 2018) for a cash consideration of
$230,402 ($196,070 for the year ended August 31, 2018). As a result, an amount of $137,985 was reallocated
from “Reserve – Stock option plan” to “Share capital” in shareholders’ equity ($120,437 for the year ended
August 31, 2018). Also, 51,149 common shares were subscribed but not issued (nil for the year ended
August 31, 2018).
b) Stock options
The shareholders approved the stock option plan on January 24, 2017 because, according to the policies of
the TSX Exchange, the stock option plan must be approved by the Company’s shareholders every three
years. 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
subjected to the price restrictions and other requirements imposed by the TSX Exchange. The exercise period
cannot exceed five years, beginning on the grant date. These options generally vest over a four-year period,
except for 1,000,000 stock options (800,000 stock options granted as at August 31, 2018), which were
completely vested at grant date. The exercise price of the options is the closing price of the shares of the
Company on the TSX Exchange on the trading day immediately preceding the date of grant.
The compensation expense in regards to the stock option plan for the year ended August 31, 2019 is
$489,179 ($618,050 for the year ended August 31, 2018).
The fair value of options granted issued was estimated using the Black-Scholes option pricing model using
with the following assumptions:
Years ended August 31,
2019
2018
Risk-free interest rate
Between 1.23% and 2.27%
Between 1.44% and 2.20%
Volatility
Between 45.24% and 56.05%
Between 44.09% and 75.49%
Dividend yield on shares
Expected life
Weighted share price
Weighted fair value per option at the
grant date
Nil
0 to 5 years
$0.82
$0.30
Nil
0 to 5 years
$0.99
$0.40
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.
53 Opsens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2019 and 2018
14. Shareholders’ Equity (continued)
b) Stock Options (continued)
The expected volatility is based on the historical volatility of the underlying share price for a period equivalent
to the expected life of the options.
The table below summarizes the changes to stock options that took place between August 31, 2017 and
August 31, 2019:
Outstanding as at August 31, 2017
Options granted
Options exercised
Options expired
Options cancelled
Outstanding as at August 31, 2018
Options granted
Options exercised
Options expired
Options cancelled
Outstanding as at August 31, 2019
Options exercisable as at
August 31, 2019
Number of
options
5,966,250
2,284,500
(650,750 )
(427,250 )
(1,477,750 )
5,695,000
2,818,500
(311,500 )
(609,750 )
(588,250 )
7,004,000
Weighted-
average
exercise
price
$
1.10
0.99
0.30
1.14
1.24
1.10
0.82
0.62
0.79
1.06
1.04
2,810,813
1.15
The table below provides information on the outstanding stock options as at August 31, 2019:
Exercise price
$
0.51 – 0.75
0.76 – 1.00
1.01 – 1.25
1.26 – 1.50
1.51 – 1.75
1.04
Number of outstanding stock Number of exercisable stock
options
options
Weighted average
remaining contractual life
(years)
240,000
4,504,250
509,000
792,500
958,250
7,004,000
240,000
1,222,063
235,875
446,250
666,625
2,810,813
0.32
3.77
4.82
2.66
2.26
3.26
54
Opsens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2019 and 2018
14. Shareholders’ Equity (continued)
c) Warrants
The situation of the outstanding warrants and the changes that took place between August 31, 2017 and
August 31, 2018 are as follows:
Outstanding as at August 31, 2017
Warrants expired
Outstanding as at August 31, 2018
15. Net Loss per Share
Number of
warrants
2,380,500
(2,380,500 )
-
Weighted
average
exercise
price
$
1.55
1.55
-
The table below presents a reconciliation between the basic net loss and the diluted net loss per share:
Net loss attributable to shareholders
Basic and diluted
Number of shares
Years ended August 31,
2019
$
2018
$
(1,951,808 )
(4,549,484 )
Basic and diluted weighted average number of shares outstanding
90,010,061
88,762,239
Amount per share
Basic and diluted net loss per share
(0.02 )
(0.05 )
Stock options are excluded from the calculation of the diluted weighted average number of shares outstanding
when their exercise price is greater than the average market price of common shares or when their effect is
antidilutive. The number of such stock options excluded from the calculation is presented below:
Stock options
Years ended August 31,
2019
2018
4,663,500
2,433,750
For the years ended August 31, 2019 and 2018, the diluted amount per share was the same amount as the basic
amount per share, since the dilutive effect of stock options was not included in the calculation; otherwise, the
effect would have been antidilutive. Accordingly, the diluted amount per share for these periods was calculated
using the basic weighted average number of shares outstanding.
55 Opsens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2019 and 2018
16. Additional Information on the Consolidated Statements of Cash Flows
Changes in non-cash operating working capital items
Trade and other receivables
Tax credits receivable
Inventories
Prepaid expenses
Accounts payable and accrued liabilities
Warranty provision
Deferred revenues
Deferred lease inducements
Supplementary information
Grant recorded against intangible assets
Unpaid acquisition of property, plant and equipment
Unpaid additions to intangible assets
Cash and cash equivalents
Cash
Short-term investments
Years ended August 31,
2019
$
2018
$
(2,269,964 )
57,397
86,909
(190,009 )
1,583,073
(2,960 )
(41,669 )
(95,563 )
(872,786 )
29,000
50,886
33,468
As at
August 31,
2019
$
1,402,653
400,749
226,548
(53,050 )
(118,650 )
8,510
(366,412 )
(78,535 )
1,421,813
-
90,499
3,135
As at
August 31,
2018
$
1,275,252
13,580,730
14,855,982
1,031,017
9,855,771
10,886,788
56 Opsens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2019 and 2018
17. Commitments
Leases
The Company leases offices in Quebec City under operating leases expiring on May 31, 2021 and September 30,
2025. The main agreement is renewable for an additional five-year period.
Future payments for the leases required in each of the forthcoming years totalling $4,147,840 are as follows:
2020
2021
2022
2023
2024
Thereafter
$
797,056
780,460
622,018
617,088
631,477
699,741
In 2019, the offices lease expense is $725,133 ($775,018 in 2018).
18. Warranty provision
During the normal course of business, the Company replaces defective parts under warranty provision offered at
the sale of the products. The term of the warranty is generally 12 months. During the year ended August 31, 2019,
the Company recognized an expense of $119,502 ($70,000 for the year ended August 31, 2018) for warranty A
provision of $134,460 is recorded for warranty as at August 31, 2019 ($137,420 as at August 31, 2018). The
following table summarizes changes in warranty provision:
Balance, beginning of year
Provisions recognized
Unused amounts reversed during the year
Amounts used during the period
Balance, end of year
Years ended August 31,
2019
$
137,420
119,502
(16,000 )
(106,462 )
134,460
2018
$
128,910
70,000
-
(61,490 )
137,420
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.
19. Government Assistance
Under an agreement reached with the National Research Council Canada with respect to the Industrial Research
Assistance Program (IRAP), the Company may receive a non-refundable contribution for a maximum amount of
$500,000 to cover some of its incurred costs to develop a new product. During the year ended August 31, 2019,
the Company recorded contributions totalling $86,567 (nil for the year ended August 31, 2018) which were
accounted for against research and development expenses.
Under an agreement reached with the Ville de Québec, the Company may receive a non-refundable contribution
for a maximum amount of $350,000 to cover expenses related to development of a software and sales and
marketing expenses. During the year ended August 31, 2019, the Company did not receive any amount (nil for
the year ended August 31, 2018). On September 26, 2019, the Company received a payment of $180,000.
57 Opsens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2019 and 2018
20.
Income Taxes
The reconciliation of the income tax provision calculated using the combined Canadian federal and provincial
statutory income tax rate with the income tax provision in the consolidated financial statements is as follows:
Income tax payable using the combined federal and provincial
statutory tax rate (26.6%; 26.7% in 2018)
Non-deductible expenses and other
Deductible financing fees
Taxable income
Non-taxable income tax credits
Losses carried forward
Income tax using effective income tax rate
Years ended August 31,
2019
$
2018
$
(519,832 )
806,064
(106,265 )
(11,098 )
(79,205 )
(89,664 )
-
(1,216,229 )
864,381
(155,537 )
(97,954 )
(94,847 )
700,186
-
As at August 31, 2019, the Company has tax losses of approximately $26,030,400 for federal purposes and
$26,849,400 for provincial purposes that can be used to reduce future taxable income. These losses expire as
follows:
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
Federal
Provincial
$
$
515,000
42,000
400
463,000
40,000
400
1,552,000
1,509,000
641,000
1,109,000
500,000
2,123,000
1,285,000
237,000
1,091,000
2,513,000
5,759,000
5,447,000
2,912,000
304,000
617,000
918,000
500,000
2,146,000
1,280,000
239,000
1,125,000
2,510,000
5,493,000
5,427,000
4,308,000
274,000
26,030,400
26,849,400
58
Opsens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2019 and 2018
20.
Income Taxes (continued)
The Company also has undeducted research and development expenses of $11,224,000 ($10,204,000 as at
August 31, 2018) for federal purposes and $14,264,000 ($13,249,000 as at August 31, 2018) for provincial
purposes that are deferred over an undetermined period.
Deferred income tax assets related to unclaimed tax losses, financing costs, research and development
expenses and others, as well as non-refundable R&D tax credits totalling approximately $14,586,000
($14,032,000 as at August 31, 2018) were not recognized due to the uncertainty about the Company’s ability to
generate taxable income. In addition, deferred tax liabilities of approximately $841,000 ($771,000 as at
August 31, 2018) related to federal investment tax credits on research and development expenses were
recognized and offset by a deferred income tax asset.
21. R&D Tax Credits
For tax purposes, research and development expenses are detailed as follows:
Federal
Provincial
Years ended August 31,
2019
$
2018
$
1,238,000
1,305,000
1,267,000
1,353,000
These expenses have enabled the Company to become eligible for R&D tax credits reimbursable for the following
amounts:
Federal
Provincial
Years ended August 31,
2019
2018
$
-
$
-
297,391
297,391
354,788
354,788
These credits were recorded in research and development expenses in the consolidated statements of loss and
comprehensive loss.
Reimbursable scientific research and experimental development income tax credits earned for the years ended
August 31, 2019 and 2018 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 for federal R&D tax credits, which were non-refundable and could be used
against Part I Company tax. The accumulated credits as at August 31, 2019 are about $3,172,000 ($2,908,000
for the year ended August 31, 2018) and expire over a period of 5 to 20 years beginning in 2019.
59 Opsens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2019 and 2018
22. Segmented Information
Segmented Information
The Company is organized into two segments: Medical and Industrial.
Medical segment: In this segment, Opsens focuses mainly on physiological measurement such as FFR and dPR
in interventional cardiology but also supplies a wide range of miniature optical sensors to measure pressure and
temperature to be used in a wide range of applications that can be integrated in other medical devices. This also
includes licensing revenue related to its optical sensor technology.
Industrial segment: In this segment, Opsens’ develops, manufactures and installs innovative fibre optic sensing
solutions for critical and demanding industrial applications.
The principal factors employed in the identification of the two segments reflected in this note include the
Company’s organizational structure, the nature of the reporting lines to the President and Chief Executive Officer
and the structure of internal reporting documentation such as management accounts and budgets.
The same accounting policies are used for both reportable segments. Operations are carried out in the normal
course of business and are measured at the exchange amount, which approximates prevailing prices in the
markets.
Years ended August 31,
Medical
Industrial
$
$
2019
Total
$
Medical
Industrial
$
$
2018
Total
$
30,334,061
2,417,457 32,751,518 21,949,230
2,120,501 24,069,731
-
17,350,499
66,040
-
1,364,634 18,715,133 11,416,874
66,040
149,210
149,210
1,322,538 12,739,412
External sales
Internal sales
Gross margin
Depreciation of property,
plant and equipment
748,728
53,421
802,149
728,375
72,220
800,595
Amortisation of
intangible assets
Financial expenses
(revenues)
Change in fair value of
embedded derivative
75,660
15,624
91,284
82,292
15,396
97,688
(138,855 )
295,398
156,543
(320,393 )
270,289
(50,104 )
-
-
-
501,250
-
501,250
Net loss
(1,630,315 )
(321,493 )
(1,951,808 )
(4,240,173 )
(309,311 )
(4,549,484 )
Acquisition of property,
plant and equipment
Additions to
intangible assets
Segment assets
Segment liabilities
619,766
45,389
665,155
642,054
49,624
691,678
487,301
28,506,354
12,357,132
13,276
79,076
1,582,129 30,088,483 21,982,087
500,577
21,155
100,231
1,603,809 23,585,896
290,615 12,647,747
4,651,422
261,511
4,912,933
60
Opsens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2019 and 2018
22. Segmented Information (continued)
Information by geographic segment
Revenue by geographic segment
United States
Japan
Canada
Other*
Years ended August 31,
2019
$
2018
$
14,016,549
10,068,564
2,744,248
5,922,157
10,250,126
6,539,888
1,987,216
5,292,501
32,751,518
24,069,731
* Comprised of revenues generated in countries for which amounts are individually not significant.
Revenues are attributed to the geographic segment 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, 2019, revenues from two clients represented individually more than 10% of
the total revenues of the Company, i.e., 31% (medical’s reportable segment) and 27% (medical’s reportable
segment).
During the year ended August 31, 2018, revenues from two clients represented individually more than 10% of
the total revenues of the Company, i.e., 27% (medical’s reportable segment) and 25% (medical’s reportable
segment).
23. Related Party Transactions
Key management personnel, having authority and responsibility for planning, directing and controlling the
activities of the Company, comprise the Chief Executive Officer, the Executive Chairman, the Chief Financial
Officer, the President of Opsens Solutions Inc., and other vice presidents. Compensation of key management
personnel and directors during the year were as follows:
Short-term salaries and other benefits
Termination benefits
Option-based awards
Years ended August 31,
2019
$
2018
$
923,554
1,239,012
-
131,177
1,054,731
161,098
118,086
1,518,196
The compensation of key executives is determined by the Human Resources and Compensation Committee,
taking into consideration individual performance and market trends.
61 Opsens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2019 and 2018
24. Additional Information to the Consolidated Statements of Loss and Comprehensive Loss
Expenses (revenues) by function
Years ended August 31,
2019
$
2018
$
Salaries and Other Benefits
12,504,035
11,133,453
Cost of sales
Administrative
Sales and marketing
Research and development
Depreciation of Property, Plant and Equipment
802,149
800,595
Cost of sales
Administrative
Sales and marketing
Research and development
Amortisation of Intangible Assets
Administrative
Research and development
Government Assistance
Cost of sales
Administrative
Sales and marketing
Research and development
91,284
97,688
(142,177 )
(63,466)
Income Tax Credits for Research and Development
(316,743 )
(443,651 )
Research and development
25. Financial Instruments
Fair Value
The fair value of cash and cash equivalents, trade and other receivables 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.
62 Opsens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2019 and 2018
25. Financial Instruments (continued)
Fair Value (continued)
Valuation Techniques and Assumptions Applied for the Purposes of Measuring Fair Value
As explained in Note 13, on November 16, 2017, the Company received a notice of conversion from the holder
of the convertible debenture. At the date of the conversion, the embedded derivative must be measured at fair
value with gains and losses in fair value recognized in the consolidated statements of net loss. The price used to
determine the value of the embedded derivative was the difference between the closing price of the shares of
the Company on the TSX Exchange on the trading day immediately preceding the date of the conversion and
the conversion price used to determine the common shares issued.
Risk Management
The main risks arising from the Company’s financial instruments are credit risk, liquidity risk, interest rate risk,
concentration risk and foreign exchange risk. These risks arise from exposures that occur in the normal course
of business and are managed on a consolidated basis.
Credit Risk
Credit risk is the risk of an unexpected loss if a customer or counterparty to a financial instrument fails to meet
its contractual obligations. The Company regularly monitors credit risk exposure and takes steps to mitigate the
likelihood of this exposure resulting in losses. The Company's exposure to credit risk currently relates to cash
and cash equivalents and to trade and other receivables. 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.
The credit risk associated with trade and other receivables is generally considered normal as trade receivables
consist of a large number of customers spread across diverse geographical areas. In general, the Company does
not require collateral or other security from customers for trade accounts receivable; however, credit is extended
following an evaluation of creditworthiness. In addition, the Company performs ongoing credit checks of all its
customers and establishes an allowance for doubtful accounts when accounts are determined to be uncollectible.
Two major customers represented 50% of the Company’s total accounts receivable as at August 31, 2019 (25%
as at August 31, 2018).
As at August 31, 2019, 3% (32% as at August 31, 2018) of the accounts receivable were of more than 90 days
whereas 59% (52% as at August 31, 2018) of those were less than 30 days. The maximum exposure to the risk
of credit for accounts receivable corresponded to their book value. As at August 31, 2019, the allowance for
doubtful accounts was nil ($817,823 as at August 31, 2018).
Liquidity Risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with financial
liabilities that are settled in cash and/or another financial asset. The Company’s approach is to ensure it will have
sufficient liquidity to meet operational, capital and regulatory requirements and obligations, under both normal
and stressed circumstances. Cash flow projections are prepared and reviewed quarterly by the Board of Directors
to ensure a sufficient continuity of funding. The funding strategies used to manage this risk include the Company’s
access to capital markets and debt securities issues.
63 Opsens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2019 and 2018
25. Financial Instruments (continued)
Risk Management (continued)
Liquidity Risk (continued)
The following are the contractual maturities of the financial liabilities (principal and interest, assuming current
interest rates) as at August 31, 2019 and 2018:
August 31, 2019
Carrying
amount Cash flows
$
$
0 to 12
months
$
Accounts payable and
accrued liabilities
4,293,483
4,293,483
4,293,483
12 to 24
After
months
24 months
$
-
$
-
Long-term debt
7,494,325
7,613,137
405,463
1,260,663
5,947,011
Total
11,787,808
11,906,620
4,698,946
1,260,663
5,947,011
August 31, 2018
Carrying
amount
Cash flows
$
$
0 to 12
months
$
Accounts payable and
accrued liabilities
2,719,690
2,719,690
2,719,690
12 to 24
After
months
24 months
$
-
$
-
Long-term debt
Total
Interest Rate Risk
1,193,112
1,276,509
580,052
3,912,802
3,996,199
3,299,742
488,783
488,783
207,674
207,674
The Company’s exposure to interest rate risk is summarized as follows:
Cash and cash equivalents
Trade and other receivables
Accounts payable and accrued liabilities
Long-term debt
Fixed and variable interest rates
Non-interest-bearing
Non-interest-bearing
Non-interest-bearing and variable interest rates
Interest Rate Sensitivity Analysis
Interest rate risk exists when interest rate fluctuations modify the cash flows or the fair value of the Company’s
investments. The Company owns investments with fixed and variable interest rates. As at August 31, 2019, the
Company was holding more than 91% (91% as at August 31, 2018) of its cash and cash equivalents in all-time
redeemable term deposits.
All else being equal, a hypothetical 1% interest rate increase or decrease would have an impact of $40,176 on
net loss and comprehensive loss for the year ended August 31, 2019 (not significant for the year ended
August 31, 2018).
64
Opsens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2019 and 2018
25. Financial Instruments (continued)
Risk Management (continued)
Financial Expenses (Revenues)
Interest and bank charges
Interest on long-term debt
Interest and imputed interest on the convertible debenture (Note 13)
Loss (gain) on foreign currency translation
Interest income
Years ended August 31,
2019
$
79,522
267,096
-
10,578
(200,653 )
156,543
2018
$
68,079
75,505
14,763
(42,170 )
(166,281 )
(50,104 )
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 at August 31, 2019 and 2018, the Company was holding
100% of its cash equivalents portfolio in all-time redeemable term deposits with financial institutions with high
creditworthiness.
Foreign Exchange Risk
The Company realizes certain sales and purchases and certain supplies and professional services in
U.S. dollars, Euros and British pounds. Therefore, it is exposed to foreign currency fluctuations. The Company
does not actively manage this risk.
Foreign Currency Sensitivity Analysis
For the year ended August 31, 2019, if the Canadian dollar had strengthened 10% against the U.S. dollar with
all other variables held constant, net loss and comprehensive loss would have been $1,036,000 higher ($591,000
higher for the year ended August 31, 2018). Conversely, if the Canadian dollar had weakened 10% against the
U.S. dollar with all other variables held constant, net loss and comprehensive loss would have been $1,036,000
lower for the year ended August 31, 2019 ($591,000 lower for the year ended August 31, 2018).
For the year ended August 31, 2019, if the Canadian dollar had strengthened 10% against the Euro with all other
variables held constant, net loss and comprehensive loss would have been $284,000 higher ($345,000 higher
for the year ended August 31, 2018). Conversely, if the Canadian dollar had weakened 10% against the Euro
with all other variables held constant, net loss and comprehensive loss would have been $284,000 lower for the
year ended August 31, 2019 ($345,000 lower for the year ended August 31, 2018).
For the year ended August 31, 2019, if the Canadian dollar had strengthened 10% against the British pound with
all other variables held constant, net loss and comprehensive loss would have been $26,000 higher (not
significant for the year ended August 31, 2018). Conversely, if the Canadian dollar had weakened 10% against
the British pound with all other variables held constant, net loss and comprehensive loss would have been
$26,000 lower for the year ended August 31, 2019 (not significant for the year ended August 31, 2018).
65 Opsens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2019 and 2018
25. Financial Instruments (continued)
Risk Management (continued)
Foreign Currency Sensitivity Analysis (continued)
As at August 31, 2019 and August 31, 2018, the risk to which the Company was exposed is established as
follows:
Cash and cash equivalents (US$616,438; US$599,807 as at
August 31, 2018)
Cash and cash equivalents (€ 68,066; € 643 as at
August 31, 2018)
Cash and cash equivalents (£ 54,329; £ 11,498 as at August 31,
2018)
Trade and other receivables (US$2,506,505; US$1,502,031 as at
August 31, 2018)
Trade and other receivables (€ 495,207; € 145,249 as at
August 31, 2018)
Trade and other receivables (£ 49,060; £ 131,788 as at
August 31, 2018)
Accounts payable and accrued liabilities (US$1,044,681;
US$526,291 as at August 31, 2018)
Accounts payable and accrued liabilities (€ 2,300;
€ 3,854 as at August 31, 2018)
Accounts payable and accrued liabilities (£ 37,712;
£ 4,537 as at August 31, 2018)
Total
26. Capital Management
As at
August 31,
2019
$
As at
August 31,
2018
$
819,554
783,048
99,574
87,931
975
19,467
3,332,399
1,960,902
724,438
220,270
79,404
223,130
(1,388,903 )
(687,073 )
(3,365 )
(5,845 )
(61,037 )
3,689,995
(7,682 )
2,507,192
The Company's objective in managing capital, primarily composed of shareholders' equity and long-term debt, is
to ensure sufficient liquidity to fund production activities, R&D, general and administrative expenses, sales and
marketing expenses, working capital and capital expenditures.
In the past, the Company has had access to liquidity through non-dilutive sources, including the sale of non-core
assets, long-term debts, investment tax credits and government assistance, interest income and public equity
offerings.
As at August 31, 2019, the Company's working capital amounted to $21,311,770 ($16,346,939 as at August 31,
2018), including cash and cash equivalents of $14,855,982 ($10,886,788 as at August 31, 2018). The
accumulated deficit at the same date was $40,678,055 ($41,625,541 as at August 31, 2018). Based on the
Company's assessment, which takes into account current cash and cash equivalents, as well as its strategic plan
and corresponding budgets and forecasts, the Company believes that it has sufficient liquidity and financial
resources to fund planned expenditures and other working capital needs for at least, but not limited to, the
12-month period after the reporting date of August 31, 2019.
The Company believes that its current liquid assets are sufficient to finance its activities in the short-term.
66
Opsens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2019 and 2018
26. Capital Management (continued)
The Company manages the capital structure and makes adjustments to it in light of changes in economic
conditions and the risk characteristics of the underlying assets. Capital management objectives, policies and
procedures have remained unchanged since the last fiscal year.
For the years ended August 31, 2019 and 2018, the Company has not been in default on any of its obligations
regarding long-term debt.
27. Approval of Consolidated Financial Statements
The consolidated financial statements were approved by the Board of Directors and authorized for issue on
November 13, 2019.
67 GOVERNANCE
DIRECTORS
OFFICERS
Alan Milinazzo
Executive Chairman of the Board of Directors
Louis Laflamme, CPA, CA
President and Chief Executive Officer
Louis Laflamme, CPA, CA
President and Chief Executive Officer
Gaétan Duplain
President, Opsens Solutions
Robin Villeneuve, CPA, CA
Chief Financial Officer and Corporate Secretary
Gaétan Duplain
President, Opsens Solutions
Denis Harrington
Director
Jean Lavigueur, CPA, CA
Director
Pat Mackin
Director
Denis M. Sirois
Director
CORPORATE INFORMATION
HEAD OFFICE
AUDITORS
750 boulevard du Parc-Technologique
Quebec, QC G1P 4S3
T: 418.781.0333
INVESTOR RELATIONS
For additional information or to receive quarterly reports
and press releases, contact Marie-Claude Poitras at the
head office or at marie-claude.poitras@opsens.com.
Deloitte S.E.N.C.R.L./s.r.l, Quebec, QC
SHARES IN CIRCULATION
90,180,317 (at August 31, 2019)
Transfer Agent and Registrar
AST Trust Company (AST) (Canada)
2001 boulevard Robert-Bourassa, suite 1600
Montreal, QC H3A 2A6
T: 514.285.8824 F: 514.285.8846
STOCK EXCHANGE LISTINGS
Toronto Stock Exchange – Symbol: OPS
OTCQX – Symbol: OPSSF
ANNUAL MEETING OF SHAREHOLDERS
Will be held in Pierre Cimon Room
At the offices of Norton Rose Fulbright Canada LLP
Complexe Jules-Dallaire / Tour Norton Rose Fulbright
2828 Laurier Boulevard, Suite 1500,
Quebec, QC, G1V 0B9, Canada
Tuesday, January 21, 2020 – 10:30 a.m.
68 Physiological Measurement in Structural Cardiology
Measuring, a Key Step Towards Better Heart Health
Opsens develops a guidewire for the percutaneous treatment of
aortic stenosis.
Aortic stenosis is a narrowing of the aortic valve, which creates an
obstacle to the ejection of blood, often leading to heart failure.
To solve this problem, cardiologists traditionally performed open-heart
surgery to replace the narrowed valve.
In recent years, the percutaneous replacement of this valve has
gained in popularity. Very minimally invasive, the method was initially
reserved for the most physically compromised patients, those who
could not realistically consider open-heart surgery. Progress has
made this intervention simpler and more efficient. Studies presented
in early 2019 have shown that patients of all conditions could benefit
from the percutaneous treatment, which is less stressful for the
patient and more economical.
The results of these studies and other factors could double
the number of percutaneous replacements by 20231.
Opsens’ innovation aims to optimize the implantation of replacement
aortic valves. This new guidewire will continuously provide hemodynamic
pressure measurements before, during and after the procedure. It will also
simplify the cardiologists’ workflow by minimizing the number of steps and
equipment exchanges to promote safety and speed in the intervention.
Opsens’ product addresses a market that represents an extraordinary
opportunity for the Company and its shareholders. It answers an unmet
need of cardiologists and will create a synergy in the sales network that
will benefit both the OptoWire and the structural cardiology activities. Its
integration will be facilitated by the fact that it works with the OptoMonitor,
which is already installed in thousands of catheterization laboratories
around the world. Opsens possesses the rare skills needed to develop this
advanced technology.
Opsens plans to capitalize on this opportunity through aggressive
development. The recent pioneering experience gained in the development
and marketing of the OptoWire will allow the Company to quickly reach an
efficient marketing of the product.
Industrial –
Growing Markets
Opsens’ versatile technologies
can meet a variety of needs in
valuable markets. There is a positive
sentiment around Opsens’ single-point
measurement technology in leading areas.
This growing interest stems from the fact
that traditional technologies do not perform
as expected under certain conditions, opening
avenues for Opsens’ fiber optic technology.
Opsens capitalizes on its easily adaptable technology
and invests in innovation to create applications for
growing markets, such as semiconductors, aeronautics
and other diverse applications.
Opsens Solutions announced several milestones this year, among
others, an association with Temai Ingenieros for the commissioning
of a monitoring system with a major aircraft manufacturer. Opsens
Solutions also reported a major energy order for the deployment of
systems in a new industrial process for de-watering oil sands.
1 TAVR/TMVR Market Likely to Double by 2023, Daniel Allar | May 10, 2019 | Structural & Congenital Heart Disease
CARDIOLOGY –
PHYSIOLOGICAL MEASUREMENT
Measuring, a key step towards
better heart health.
INDUSTRIAL APPLICATIONS
Innovative fiber optic solutions
for various industries.
750 boulevard du Parc-Technologique
Quebec, QC G1P 4S3
Telephone: 418.781.0333
Opsens.com