Annual
Report
Experience and
a bright future
2020
Mission
Contribute to health with a unique expertise
in innovative medical products.
OpSens focuses primarily on interventional cardiology. The
Company offers the OptoWire, a pressure measurement
guidewire instrumented with Fidela,TM its second-generation
optical sensor designed to deliver the lowest drift in the
industry. Its unique design allows access to the most difficult
lesions to offer a very accurate diagnosis, aiming to improve
the clinical outcomes of patients in the treatment of coronary
artery stenosis. OpSens has announced its entry in the aortic
stenosis market with the development of a guidewire for
the transcatheter replacement of the aortic valve (TAVR)
in the treatment of aortic stenosis, the fastest growing
market in structural cardiology. OpSens is also engaged in
industrial activities.
Cardiology – Cornerstone of OpSens’ Growth
› Product performance is recognized by
opinion leaders around the world
› Company engaged in growing markets, supported
by clinical evidence and aging population
• Accumulation of clinical experience –
100,000 cases with the OptoWire
• New agreement with major U.S. group purchasing organization
› Development, innovation, and continuous improvement
• New generation of products for the treatment
of coronary artery stenosis
• Upcoming aortic valve stenosis products, using
our 3,000 monitor-base already installed in
catheterization laboratories around the world
• Fidela,TM precise measurement technology can
be integrated into various applications opening
the door to valuable business partnerships
• Optimization of production costs.
OpSens Revenues
Millions $*
35
30
25
20
15
10
5
0
2016
2017
2018
2019
2020
Medical - non FFR
FFR
Medical total
Revenues (excluding licensing)
*The graph does not include licensing revenues
1. January 15, 2009 N Engl J Med 2009; 360:213-224DOI: 10.1056/NEJMoa0807611
Diagnosis and Treatment of Coronary Artery Stenosis
OpSens has designed its first product for cardiology: the OptoWire, a
pressure measurement guidewire for the diagnosis and treatment of
coronary artery stenosis. The OptoWire has been used in the diagnosis and
treatment of 100,000 patients worldwide in a procedure that is becoming
the model of excellence in treatment.
The FAME1 study showed that when a patient’s lesions are assessed by FFR,
major cardiac events were reduced. Today, the market continues to be
fueled by studies that demonstrate the clinical and economic benefits of
using coronary pressure guidewires. Cardiologists, insurance companies
and hospitals are increasing the demand for such products. OpSens is
committed to developing innovative products that address the limitations
of aging, competing technologies.
Benefits of coronary pressure guidewires:
› Facilitate decision-making before performing invasive procedures;
› Improve the health of patients in general; and,
› Avoid unnecessary medical procedures.
After new criteria extended the evaluation of blockages to the use of
pressure measurements without the injection of heart-stimulating drugs,
OpSens developed a product that met the request of cardiologists and
commercialized its diastolic pressure algorithm called dPR to perform
this measurement.
Treatment of Aortic Valve Stenosis by Transcatheter
Valve Replacement
Recently, Rolling Stones’ front man, Mick Jagger, made
medical news, putting the TAVR procedure into
the spotlight. At 75, his highly calcified
aortic valve prevented a good flow of
blood from the heart to the aorta and
thus good oxygenation of his organs.
He underwent the TAVR procedure.
A new aortic valve was inserted into
his heart through an artery from his
groin. Avoiding general anesthesia
and open-heart surgery with the
minimally
invasive procedure, the
singer was able to return quickly to his
normal life.
To capitalize on the expertise acquired in the
development of its first product for cardiology,
OpSens plans to launch a product for the TAVR
procedure in 2022, a pressure guidewire to help in valve
positioning. This is the fastest growing segment in structural
cardiology, driven by an aging population, superior clinical outcomes,
and openness to new evidence that people of all health conditions benefit
from this minimally invasive treatment.
Business Partnerships
OpSens’ sensor technology can be adapted to a variety of applications,
enabling business partnerships in valuable medical markets.
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.
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.
Letter to Shareholders
OpSens’ mission is to contribute to health through unique expertise in innovative medical products. In 2021, OpSens is confident it can
resume revenue growth, improve the health of patients with heart disease, and offer new medical applications to position itself as a leader in
cardiology to create value for shareholders.
In fiscal year 2020, OpSens continued its activities
with a vision to become a world leader in optical
measurement in medical instrumentation and
contribute to health through its unique expertise.
OpSens’ success is based on three development
poles in the medical field. These poles were
better defined after the launch of the OptoWire,
a guidewire for the diagnosis and treatment of
coronary artery stenosis. OpSens has capitalized
on
its technology and developed valuable
medical partnerships, such as the one with
Abiomed for ventricular assistance. OpSens is
now targeting the fastest growing segment in
cardiology, the treatment of aortic stenosis by
transcatheter valve replacement (TAVR).
OpSens ended 2020 by matching last year’s
sales of $29.5 million, the sales record reached
in 2019. The Company has put a lot of effort
into optimizing its business, a commitment
reflected in the increased profit margin. Among
other things, with over 100,000 uses of the
OptoWire, the launch of the third version of its
flagship product has allowed OpSens to continue
to evolve towards operational excellence to
improve competitiveness, reduce production
costs and elevate margins. We are confident
revenues will return to growth in 2021.
Fiscal 2020 saw a healthy progression of Opsens’
OptoWire in the U.S. coronary artery stenosis
market with continued commendable physicians’
feedback on the OptoWire’s performance.
Progress in the U.S. market –
Contract with a Major American
Group Purchasing Organization
To accelerate penetration in the U.S., OpSens
announced a three-year contract with one of the
largest American group purchasing organizations.
This contract, which provides access to the
OptoWire to all their members across the U.S., is a
recognition of the OptoWire’s ability to improve
efficiency and reduce costs in the diagnosis and
treatment of coronary artery stenosis and aligns
with our new group purchasing organization
partner’s mission to better treat patients.
Collaborations like these are key in OpSens’
expansion. The Company aims to sign new
agreements in the near future.
Advances in the Development of
OpSens’ Product for the Treatment of
Aortic Stenosis, The Fastest Growing
Segment in Structural Cardiology
The TAVR procedure is growing rapidly, driven
by an aging population, interest in less invasive
procedures and convincing clinical evidence
demonstrating the benefit of extending this
procedure to all patients.
Last year, OpSens announced it had identified
an application, where a pressure measurement
guidewire could simplify the TAVR procedure and
make it easier for cardiologists to contribute to
patient health.
OpSens has made great strides in developing this
application, which will position the Company
as a leader in this segment of cardiology. This
guidewire will provide continuous hemodynamic
measurement before, during and after the TAVR
procedure. The concept has been well received
and is expected by a panel of international
experts looking forward to using it. OpSens
expects to market this product as early as 2022.
OpSens will have a major advantage
in
commercialization: this product connects to the
OptoMonitor already installed and used in several
thousand catheterization
laboratories around
the world.
Fidela,TM a Technology that Opens
Doors in the Development of
Products and Partnerships
OpSens’ products are gaining recognition in
cardiology and in other medical fields through
continued growth in the number of uses and
the publication of data demonstrating the value
and benefits of working with the OptoWire in
clinical situations.
the OptoWire,
OpSens’ success is based, notably on Fidela,TM
that
the second-generation optical sensor
instruments
the
currently
Company’s flagship product. This sensor is also at
the heart of OpSens’ product for TAVR and is the
key element that has enabled OpSens to develop
high-value partnerships, such as the one with
Abiomed in cardiology and Monteris in neurology.
These partnerships highlight the superiority of
the technology, the quality of the sensor, and
place OpSens in an excellent position for value-
bearing agreements.
Portrait of 2020 – How OpSens
Navigated the Pandemic
Since its founding, OpSens has shown resilience
and demonstrated a boundless will to achieve
its mission and meet the expectations of
shareholders, employees,
and
business partners. The COVID-19 pandemic has
once again highlighted this resilience.
customers,
As an essential company, according
to
government criteria, OpSens put in place plans
to ensure that activities continue. Production
was maintained, without
interruption, with
the implementation of measures to ensure the
health and safety of employees.
Already accustomed to the strictest cleanroom
protocols, employees complied with the new
requirements guaranteeing their health and safety.
Research and development, and administration
employees, were energized by exchanges
facilitated by remote working technologies. To
support clients, OpSens developed equipment and
tools for physicians to respect access limitations
imposed by hospitals and catheterization
laboratories. These virtual support instruments
will remain relevant in the future.
Despite COVID-19, patients with cardiovascular
problems continued to need treatment. OpSens
made sure to maintain a constant, high-quality
supply to physicians providing care.
With these actions, OpSens maintained its ability
to meet the expectations of patients, physicians,
and hospitals and
impacts on the
financial position. The Company’s technologies
and expertise continued to gain recognition.
limited
In the end, results were maintained despite
the context. We are convinced that in a normal
situation, the revenues would have been positively
different, and we are confident to resume growth
in 2021, once the pandemic has subsided.
The Company will be stronger, more organized,
with a more mature sales network and in a better
position to cover current and new markets.
Industrial
is now focusing on
The
industrial sector
aeronautics, nuclear, and
semiconductors.
Revenues were stable for OpSens Solutions,
OpSens’ wholly-owned subsidiary. We expect
growth to resume in 2021 given our multiple
discussions for high-potential opportunities.
Perspective
In 2021, our priority is to increase the impact
of our products in cardiology, commercially,
clinically, and financially. OpSens anticipates a
resumption of revenue growth for products for
the treatment of coronary artery stenosis, other
medical incomes, as well as industrial revenues,
as we move beyond the pandemic. The start of
the regulatory phase for the TAVR product should
lay the foundation for a successful future.
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 virtually this year – where we will outline
the Company’s progress and prospects.
Louis Laflamme
President and CEO
2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS FOR THE YEAR ENDED AUGUST 31, 2020
The following comments are intended to provide a review and analysis of the results of operations, financial conditions,
and cash flows of OpSens Inc. for the year ended August 31, 2020, in comparison with the corresponding period ended
August 31, 2019. 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, 2020 and 2019,
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 18, 2020. 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 18, 2020, 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.
COVID-19
The global economy has significantly changed during the past few months. The spread of COVID-19 virus, declared
on March 11, 2020, as a pandemic by the World Health Organization (WHO), has led many governments to adopt
exceptional measures to slow the advancement of COVID-19. These events cause significant uncertainties that could
damage the Company’s activities. At the current time, it is not possible to reliably estimate the duration and impact
that these events may have on the Company’s future financial results because of the uncertainties about future
developments. Thus far, the Company has had minimal manufacturing, supply chain, or distribution disruptions and
has continued to fulfill orders to customers. However, the Company has had limited access to the cath labs and has
adjusted its sales force consequently.
3
OVERVIEW
The Company’s primary focus is physiological measurement such as Fractional Flow Reserve (“FFR”) and the
diastolic pressure algorithm (“dPR”) in the coronary artery stenosis market. Physiological measurement could be used
in other areas of cardiology. OpSens offers an optical guidewire (OptoWire) to measure pressure to diagnose and treat
to improve clinical outcomes in patients with coronary heart disease. OpSens also operates in the Industrial segment
through its wholly-owned subsidiary OpSens Solutions Inc. (“Solutions”). Solutions develops, manufactures and
installs innovative measurement solutions using fibre optic sensors for critical and demanding industrial applications.
OpSens owns ten patents and has nine pending patents to protect its technologies in the Medical and Industrial
sectors.
SECTORS OF ACTIVITY
In the Medical sector, OpSens markets OptoWire and OptoMonitor to diagnose and treat coronary artery disease.
OptoWire provides 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 (including the Middle East), Japan and Canada. Furthermore, the need to
diagnose coronary disease without hyperemia induced by the injection of heart-stimulating drugs has emerged. OpSens
has developed its proprietary diastolic pressure ratio to meet this need. Non-Hyperemic Pressure Resting indices
(“NHPR”), such as OpSens’ dPR, are beneficial for some patients as they reduce procedure time, costs and discomfort.
This product is available through the OptoMonitor and works in combination with the OptoWire. OpSens’ dPR is
already being marketed in Japan, the United States, Canada and Europe.
OpSens has established a direct sales force in the United States 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
aeronautic, 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.
As an example, fibre optic sensors perform well in the presence of electromagnetic fields, radio frequencies, micro-
waves, high-intensity magnetic waves (MR) or high temperatures, elements that typically disrupt results with
conventional sensors. Customers’ needs are wide-ranging and require measuring various parameters like pressure,
temperature, strain, and others.
The Company focuses on business opportunities with the highest returns and has developed new products to fulfill
their specific needs. Amongst others, the new OPP-GD fibre optic differential pressure sensor and the new OEC fibre
optic extensometer sensors have grabbed the attention of many industries such as aeronautic and energy.
4
MARKET OVERVIEW
In the Medical sector, particularly in the coronary artery stenosis, coronary physiology measurement represents 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 increase in the use of coronary artery stenosis measurement 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 an expansion in the 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 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 coronary artery stenosis measurement (FFR and
dPR) market. According to management and industry source estimates(1), this market exceeds US$500 million
worldwide in 2020 and is expected to exceed US$1 billion annually in the medium term (2025).
In the Industrial sector, under this reportable segment, the Corporation’s technology, expertise, and products can
serve several markets including aeronautic, geotechnical, infrastructures, nuclear, mining, military, and others. The
Company focuses mainly on the following markets:
- Nuclear market: the opportunities in this market are related principally to new nuclear technologies to
produce energy. The new and recently patented fibre optic differential pressure sensor is the main solution
for that market;
- Aeronautic market: the opportunities in this market are principally related to fuel monitoring systems for
aircraft. New industrial version of the absolute pressure sensor and the recent addition of a differential
pressure sensor are the main products for these applications; and
- Traditional Niche Applications Market: they include niche applications in which the Company is currently
engaged, such as electro-pyrotechnic devices.
COMPETITION
In the Medical sector, the market for coronary artery stenosis measurement has five competitors and is currently
dominated by two major players who commercialize standard electrical technology. Competition is based on
technological advantages, brand recognition, customer service, marketing support and price.
In the Industrial sector, there is a significant number of competitors. Competition is based primarily on technological
advantages. Our direct competition is made up of both opened and closed-ended companies with a global presence.
(1) OpSens FFR Market Calculations based on GRAND VIEW RESEARCH (Feb. 2019).
5
CORPORATE GROWTH STRATEGY
OpSens’ growth strategy is to become a key player in the Medical sector, particularly in the field of coronary artery
stenosis, focusing on the diagnosis and treatment through physiological measurement, 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 an:
-
Increase of its market shares in the fast-growing coronary artery stenosis measurement market.
To achieve this, management has set up the following sales forces:
Direct Sales Force: OpSens has established a sales team, hiring a seasoned staff with solid expertise in
coronary artery stenosis. This sales force has been implemented to increase OpSens’ market and
commercialization penetration in the United States and Canada. In the context of COVID-19, the
Company has adjusted its methods and the number of representatives using remote approaches rather
than in-person visits to catheterization laboratories. In the short term, this approach better aligns to
customers wishing to limit the number of in-person visitors to hospitals. OpSens also targets agreements
with group purchasing organizations to accelerate penetration, particularly in the United States. Two
agreements have been signed already and additional agreements will possibly be added; and
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 with the heart 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, essential to cardiologists’ decision-
making in the diagnosis and treatment of coronary artery stenosis; and
Better connectivity as OptoWire is insensitive to blood contamination. It can be easily
reconnected without compromising measurement accuracy.
- Clinical data
Major clinical studies had been suspended due to the COVID-19 pandemic, however, they have recently resumed.
-
Innovation
In this ever-evolving and state-of-the-art market, OpSens plans to leverage its expertise in fibre-optic sensing
medical devices to create new coronary artery stenosis measurement products and develop new fibre 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 transaortic valve replacement procedures (TAVR). This innovation is a structural heart pressure guidewire
that measures and displays critical hemodynamics information in real time during valve replacement procedures.
Also, OpSens received approval for the commercialization of the newest version of its coronary pressure
guidewire, OptoWire III, for the United States, Japan, and Canada thus far.
6
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 devices.
The Company aims to partner with key players in the industry. The partnership with Abiomed Inc. (“Abiomed”),
for the use of its miniature sensors and technology, is an example of the type of partnership the Company targets.
In the Industrial sector, the Company’s business strategy is achieved by:
• Target Market: Solutions’ target markets are aeronautic, geotechnical, infrastructures, nuclear, mining,
military and others. These are markets where OpSens’ products offer unique advantages over its competitors;
and
•
Innovation: Solutions continually invest in innovations for its products, so they can offer unique advantages
over competitors. For example, the Company’s optical strain and pressure sensors have received the attention
of major players in the aeronautic 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, Amortization, 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 (income), depreciation and amortization, 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 it 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 EARNINGS (LOSS)
(In thousands of Canadian dollars)
Net loss
Financial expenses (income)
Depreciation of property, plant and equipment and
right-of-use assets
Amortization of intangible assets
Change in fair value of embedded derivative
EBITDAC
Stock-based compensation costs
EBITDACO
Year ended
August 31,
2020
$
Year ended
August 31,
2019(2)
$
Year ended
August 31,
2018(2)
$
(2,644)
684
(1,952)
157
1,548
120
-
(292)
438
146
802
91
-
(902)
489
(413)
(4,550)
(50)
801
98
501
(3,200)
618
(2,582)
The positive variance of EBITDACO for the year ended August 31, 2020, is mainly explained by the fact that we
reduced significantly our sales and marketing expenses following the adjustment of the size of our direct sales force in
the United States and by a grant related to the Canada Emergency Wage Subsidy (“CEWS”) of $1,683,000. This was
partially offset by the licensing revenue that we received last year. Also, the adoption on September 1, 2019, of
IFRS 16, Leases, contributed to increase by $715,000 the EBITDACO for the year ended August 31, 2020.
(2) Comparative figures have not been adjusted to reflect the adoption of IFRS 16, Leases, as set out in the accounting policy.
7
SELECTED CONSOLIDATED FINANCIAL DATA
(In thousands of Canadian dollars, except for
information per share)
Year ended
August 31,
2020
$
Year ended
August 31,
2019(2)
$
Year ended
August 31,
2018(2)
$
Revenues
Sales
Medical
Industrial
Licensing agreement
Cost of sales
Gross margin
Gross margin percentage
Operating expenses
Administrative
Sales and marketing
Research and development
Other income
Financial expenses (income)
Change in fair value of embedded derivative
Net loss and comprehensive loss
Basic and diluted net loss per share
Revenues
26,996
2,457
29,453
-
29,453
13,834
15,619
53%
5,041
8,780
5,441
19,262
(1,683)
684
-
(2,644)
(0.03)
27,032
2,418
29,450
3,302
32,752
14,037
18,715
57%
4,593
11,116
4,801
20,510
-
157
-
(1,952)
(0.02)
19,991
2,121
22,112
1,958
24,070
11,330
12,740
53%
3,869
9,273
3,697
16,839
-
(50)
501
(4,550)
(0.05)
The Company reported revenues of $29,453,000 for the year ended August 31, 2020, compared to revenues of
$32,752,000 for the corresponding period in 2019, a decrease of $3,299,000 or 10%.
Sales in the Medical segment totalled $26,996,000 for the year ended August 31, 2020, compared to sales of
$27,032,000 for the same period in 2019. The slight decrease in Medical segment revenues is explained by lower sales
in the coronary artery stenosis measurement line of business (FFR and dPR) due to the COVID-19 pandemic. Coronary
artery stenosis measurement sales decreased by 7% or $1,365,000 compared with the same period in 2019. This
decrease is partly offset by higher original equipment manufacturer (“OEM”) medical sales of $1,330,000 compared
to the same period last year.
Sales in the Industrial segment totalled $2,457,000 for the year ended August 31, 2020, compared to sales of
$2,417,000 for the same period in 2019. The slight increase is mostly explained by a higher volume of orders compared
to the same period last year despite COVID-19.
The decrease in revenues is also explained by the recognition last year of a nonrecurring revenue of $3,302,000 for the
achievement of the last technical milestones of the licensing agreement.
For the years ended August 31, 2020 and 2019, pricing fluctuations did not have a significant impact on revenues.
(2) Comparative figures have not been adjusted to reflect the adoption of IFRS 16, Leases, as set out in the accounting policy.
8
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 loss. For the year ended August 31, 2020, revenues were positively affected
by $348,000 compared to the same period last year (sales were positively impacted by $771,000 for the year ended
August 31, 2019).
As at August 31, 2020, OpSens’ total backlog of orders amounted to $11,129,000 ($5,642,000 as at August 31, 2019).
Gross Margin
Information and analysis in this section do not take into consideration licensing revenues (nil for the year ended
August 31, 2020, and $3,302,000 for the year ended August 31, 2019, respectively).
Gross margin was $15,619,000 for the year ended August 31, 2020, compared to $15,413,000 for the same period last
year. The gross margin percentage slightly increase from 52% for the year ended August 31, 2019, to 53% for the year
ended August 31, 2020. The adoption of IFRS 16, Leases, resulted in an increase of the gross margin of $58,000 for
the year ended August 31, 2020.
Administrative Expenses
Administrative expenses were $5,041,000 and $4,593,000, respectively, for the years ended August 31, 2020 and
2019. The increase is mainly explained by higher headcount, professional fees and insurance. This is partly offset by
lower communication, travelling expenses and by the fact that we received a final settlement payment from an
industrial client that was written off last year. The adoption of IFRS 16, Leases, resulted in a non-significant impact
for the year ended August 31, 2020.
Sales and Marketing Expenses
Sales and marketing expenses totalled $8,780,000 for the year ended August 31, 2020, a decrease of $2,336,000 over
the $11,116,000 reported during the same period in 2019. The decrease is largely explained by lower headcount,
commissions, trade shows, travelling expenses and subcontractors’ fees when compared to last year related to the
adjustment of the size of our direct sales force in the United States due to COVID-19. The adoption of IFRS 16, Leases,
resulted in a non-significant impact for the year ended August 31, 2020.
Research and Development Expenses
Research and development expenses totalled $5,441,000 for the year ended August 31, 2020, an increase of $640,000
over the $4,801,000 reported during the same period in 2019. The increase is mainly explained by higher headcount,
supplies and subcontractors’ fees for our development activities related to OW3, OM3 and the new structural heart
project and by lower R&D tax credits. This is partially offset by higher grants related to the IRAP program for the new
structural heart project. The adoption of IFRS 16, Leases, resulted in a non-significant impact for the year ended August
31, 2020.
Other Income
Other income was $1,683,000 and nil, respectively, for the years ended August 31, 2020 and 2019. The increase is
explained by the recognition of a non-refundable contribution under the CEWS program for an amount of $1,683,000.
Financial Expenses
Financial expenses totalled $684,000 for the year ended August 31, 2020, compared to $157,000 for the same period
in 2019. The increase in financial expenses is mainly explained by higher interest expenses of $194,000 related to the
long-term debt, by $290,000 related to the implementation of IFRS 16, Leases, and by lower interest income of
$52,000.
9
Net Loss
As a result of the foregoing, net loss for the year ended August 31, 2020, was $2,644,000 compared to $1,952,000 for
the same period in 2019.
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,
2020
$
As at
August 31,
2019
$
As at
August 31,
2018
$
22,543
31,908
5,655
10,906
15,347
26,099
30,089
4,787
7,861
17,441
19,785
23,586
3,438
1,475
18,673
Total assets as at August 31, 2020, were $31,908,000 compared to $30,089,000 as at August 31, 2019. The increase is
mainly related to the accounting of a right-of-use asset of $4,513,000 related to the implementation of IFRS 16, by a
higher inventory of $1,372,000 and by a higher intangible asset of $595,000 for our medical activities. This is partly
offset by lower cash and cash equivalents of $3,972,000.
Current liabilities totalled $5,655,000 as at August 31, 2020, compared to $4,787,000 as at August 31, 2019.
The increase is mainly explained by a higher current portion of long-term debt of $1,101,000 and by a higher current
portion of lease liabilities of $447,000 related to the implementation of IFRS 16. This is partly offset by lower account
payable and accrued liabilities of $748,000.
Long-term liabilities totalled $10,906,000 as at August 31, 2020, compared to $7,861,000 as at August 31, 2019, an
increase of $3,045,000. The increase is mainly explained by a long-term lease liability of $4,298,000 following the
implementation of IFRS 16. This is offset by lower deferred lease inducement of $725,000 and by lower long-term
debt of $527,000.
10
SUMMARY OF CONSOLIDATED QUARTERLY RESULTS
The summary below presents the periods in which OpSens published unaudited consolidated interim financial
statements.
(Unaudited, in thousands of Canadian dollars,
except for information per share)
Three-month
period ended
August 31,
2020
$
Three-month
period ended
May 31,
2020
$
Three-month
period ended
February 29,
2020
$
Three-month
period ended
November 30,
2019
$
Revenues
Net earnings (loss) for the period
7,576
557
Basic and diluted net earnings (loss) per share
0.01
6,630
52
0.00
8,258
(1,382)
6,989
(1,871)
(0.02)
(0.02)
(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
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’ coronary artery stenosis measurement (FFR and dPR) business showed
growth despite the usual seasonal impact.
During the second semester of the year ended August 31, 2020, activities were slower due to the COVID-19 situation.
LIQUIDITY AND CAPITAL RESOURCES
As at August 31, 2020, the Company had cash and cash equivalents of $10,884,000 compared to $14,856,000 as at
August 31, 2019. Of this amount as at August 31, 2020, $7,633,000 were invested in highly-liquid, safe investments.
As at August 31, 2020, OpSens had a working capital of $16,888,000, compared to $21,312,000 as at August 31, 2019.
The decrease in working capital is mainly related to lower cash and cash equivalents and by a higher current portion
of long-term debt.
Under a loan agreement with Investissement Québec (IQ), the Company may receive a maximum amount of $519,750,
net of transaction costs of $5,250. The loan bears interest at the prime rate plus 0.25% and is repayable in monthly
instalments of $10,938 and will mature in September 2024. The loan has a moratorium period without capital payment
for a period of 12 months following the date of the first disbursement of the loan. It is secured by a movable hypothec
on the universality of the property, tangible and intangible, present, and future of the Company. On October 4, 2019,
the Company received $249,000 of this loan. Under this loan agreement, the Company is required to maintain certain
financial ratios. As of the date of this MD&A, the financial ratios were all met.
On February 27, 2019, OpSens announced that it has entered into a $8,000,000 credit agreement (the “Agreement”)
with a Canadian financial institution. 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
11
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 include 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.
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 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.
SUMMARY OF CASH FLOWS
(In thousands of Canadian dollars)
Operating activities
Investing activities
Financing activities
Effect of foreign exchange rate changes on cash
and cash equivalents
Net change in cash and cash equivalents
Operating Activities
Year ended
August 31,
2020
$
Year ended
August 31,
2019
$
(985)
(1,765)
(1,211)
(11)
(3,972)
(1,247)
(1,005)
6,245
(24)
3,969
For the year ended August 31, 2020, cash flows used by our operating activities were $985,000 compared to $1,247,000
for the same period last year. The decrease in cash flows used by our operating activities is mainly explained by a
positive variance of EBITDACO, as explained previously, partially offset by a negative variance in changes in
non-cash operating working capital items of $282,000 mainly related to our medical activities.
Investing Activities
For the year ended August 31, 2020, cash flows used by our investing activities reached $1,765,000 compared to
$1,005,000 for the same period in 2019. The increase in cash flows used is mainly explained by a higher acquisition
of intangible assets and property, plant, and equipment for the Medical sector.
Financing Activities
For the year ended August 31, 2020, cash flows used by financing activities reached $1,211,000 compared to cash
flows generated of $6,245,000 for the same period in 2019. The variation is mainly explained by the fact that we signed
a credit agreement last year and the disbursement occurred on March 1, 2019. The adoption of IFRS 16, Leases,
resulted in an increase of cash flows used for our financing activities of $410,000 for the year ended August 31, 2020.
12
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 FFR and dPR in the
coronary artery stenosis 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 revenues 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.
Medical
Industrial
$
$
Years ended August 31,
2020
Total
$
Medical
Industrial
$
$
2019
Total
$
26,996,184
-
14,179,616
2,457,166
29,453,350
96,090
96,090
1,439,876
15,619,492
30,334,061
-
17,350,499
2,417,457
32,751,518
66,040
66,040
1,364,634
18,715,133
1,298,636
249,077
1,547,713
748,728
53,421
802,149
108,845
1,383,939
10,935
119,780
75,660
15,624
91,284
298,669
1,682,608
-
-
-
340,946
343,121
684,067
(138,855 )
295,398
156,543
(2,647,823 )
4,019
(2,643,804 )
(1,630,315 )
(321,493 )
(1,951,808 )
1,224,453
28,748
1,253,201
619,766
45,389
665,155
676,967
29,777,672
16,070,310
37,928
714,895
2,130,767
491,267
31,908,439
16,561,577
487,301
28,506,354
12,357,132
13,276
500,577
1,582,129
290,615
30,088,483
12,647,747
External sales
Internal sales
Gross margin
Depreciation of property,
plant and equipment
and right-of-use assets
Amortization of intangible
assets
Other income
Financial expenses
(income)
Net (loss) earnings
Acquisition of property,
plant and equipment
Additions to intangible
assets
Segment assets
Segment liabilities
13
Information by geographic segment
Revenue by geographic segment
United States
Japan
Canada
Others*
Years ended August 31,
2020
$
2019
$
11,408,452
6,313,784
2,644,881
9,086,233
29,453,350
14,016,549
10,068,564
2,744,248
5,922,157
32,751,518
* 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. Non-current assets, which include
property, plant and equipment, intangible assets and right-of-use assets, are mainly located in Canada, but also in other
countries for which amounts are individually not significant.
For the year ended August 31, 2020, revenues from two clients from the Medical’s reportable segment represented
individually more than 10% of the total revenues of the Company (i.e. 24% and 21%).
For the year ended August 31, 2019, revenues from two clients from the Medical’s reportable segment represented
individually more than 10% of the total revenues of the Company (i.e. 31% and 27%).
Medical Segment
Information and analysis in this section for revenue and gross margin do not take into consideration licensing revenues
(nil for the year ended August 31, 2020, and $3,302,000 for the year ended August 31, 2019).
For the year ended August 31, 2020, sales from the Medical segment were $26,996,000 compared to $27,032,000 for
the year ended August 31, 2019, a decrease of $36,000. The decrease is explained by lower coronary artery stenosis
measurement (FFR and dPR) sales of $1,365,000 following the COVID-19 pandemic situation. This is partly offset
by higher OEM medical sales of $1,330,000.
Gross margin was $14,180,000 for the year ended August 31, 2020, compared to $14,048,000 for the year ended
August 31, 2019, an increase of $132,000. The gross margin percentage slightly increased at 53% for the year ended
August 31, 2020, compared to 52% for the year ended August 31, 2019. The adoption of IFRS 16, Leases, resulted in
an increase in the gross margin of $48,000 for the year ended August 31, 2020.
Net loss for the Medical segment was $2,648,000 for the year ended August 31, 2020, compared to $1,629,000 for the
same period last year. The increase in net loss is mainly explained by a licensing revenue of $3,302,000 accounted last
year, partially offset by a reduction in sales and marketing expenses and by the CEWS grant.
Working capital for the Medical segment as at August 31, 2020, was $15,495,000 compared to $20,192,000 as at
August 31, 2019. The decrease of $4,697,000 is mainly explained by lower cash and cash equivalents of $4,480,000,
by a higher current portion of long-term debt of $1,101,000 and by a higher current portion of lease liabilities of
$322,000. This is partly offset by a higher inventory of $1,374,000 and by lower accounts payable and accrued
liabilities of $760,000.
14
Industrial Segment
For the year ended August 31, 2020, external sales from the Industrial segment were $2,457,000 compared to
$2,417,000 for the year ended August 31, 2019, an increase of $40,000 mostly explained by a higher volume of orders
compared to the same period last year.
Gross margin was $1,440,000 for the year ended August 31, 2020, compared to $1,365,000 for the same period in
2019, an increase of $75,000. The gross margin percentage slightly increased from 55% for the year ended August
31, 2019, to 56% for the year ended August 31, 2020. The adoption of IFRS 16, Leases, resulted in an increase of the
gross margin of $10,000 for the year ended August 31, 2020.
Net earnings for the Industrial segment was $4,000 for the year ended August 31, 2020, compared to a net loss of
$321,000 for the year ended August 31, 2019. The increase in net earnings is mainly explained by the recognition of a
government assistance related to the CEWS program of $299,000.
Working capital for the Industrial segment as at August 31, 2020, was $1,393,000 compared to $1,119,000 as at August
31, 2019. The increase is mainly explained by higher cash and cash equivalents of $508,000. This is partly offset by
lower tax credits receivable of $86,000 and by a higher current portion of lease liabilities of $125,000 related to the
implementation of IFRS 16.
FOURTH QUARTER 2020
Revenues
Revenues totalled $7,576,000 for the quarter ended August 31, 2020, compared to revenues of $7,867,000 for the
corresponding period in 2019, a decrease of $291,000 or 4%. The decrease is explained by lower sales in coronary
artery stenosis measurement segment (FFR, dPR) of $511,000 and by lower industrial sales of $230,000. This is partly
offset by higher OEM sales of $450,000.
Gross Margin
Gross margin was $3,816,000 for the quarter ended August 31, 2020, compared to $3,993,000 for the same period last
year. The gross margin percentage was stable at 51% for the quarters ended August 31, 2020 and 2019. The adoption
of IFRS 16, Leases, resulted in a non-significant impact for the quarter ended August 31, 2020.
Administrative Expenses
Administrative expenses were $1,015,000 and $1,160,000, respectively, for the quarters ended August 31, 2020 and
2019. The decrease is mainly explained by the fact that we received a final settlement payment from an industrial client
that was written off last year. The adoption of IFRS 16, Leases, resulted in a non-significant impact for the quarter
ended August 31, 2020.
Sales and Marketing Expenses
Sales and marketing expenses totalled $1,458,000 for the quarter ended August 31, 2020, a decrease of $1,656,000
over the $3,175,000 reported during the same period in 2019. The decrease is largely explained by lower headcounts,
commissions, trade shows, travelling and subcontractors’ expenses when compared to last year related to the
adjustment of the size of our direct sales force in the United States due to COVID-19. The adoption of IFRS 16, Leases,
resulted in a non-significant impact for the quarter ended August 31, 2020.
Research and Development Expenses
Research and development expenses totalled $1,312,000 for the quarter ended August 31, 2020, an increase of
$192,000 over the $1,116,000 reported during the same period in 2019. The increase is mainly explained by higher
supplies and subcontractors’ fees for our development activities related to the new structural heart project and by lower
15
R&D tax credit. The adoption of IFRS 16, Leases, resulted in a non-significant impact for the quarter ended August
31, 2020.
Other Income
Other income was $882,000 and nil, respectively, for the quarters ended August 31, 2020 and 2019. The increase is
explained by the recognition a non-refundable contribution under the CEWS program for an amount of $882,000.
Financial Expenses
Financial expenses totalled $356,000 for the quarter ended August 31, 2020, compared to $160,000 for the same period
in 2019. The increase in financial expenses is mainly explained by higher interest expenses of $69,000 related to the
implementation of IFRS 16, Leases, by lower interest revenues of $57,000 and by a higher foreign exchange loss of
$77,000.
Net Earnings (Loss)
As a result of the foregoing, net earnings for the quarter ended August 31, 2020, was $557,000 compared to a net loss
of 1,617,000 for the same period in 2019.
INFORMATION ON SHARE CAPITAL
For the year ended August 31, 2020, the Company granted to some employees and directors a total of 1,400,000 stock
options with an average exercise price of $0.75, cancelled 1,239,750 stock options with an exercise price of $0.94,
whereas 100,000 stock options with an average exercise price of $0.72 were exercised, and 467,875 stock options with
an exercise price of $0.95 expired.
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.
As at November 18, 2020, the following components of shareholders’ equity are outstanding:
Common shares
Stock options
Securities on a fully diluted basis
90,280,317
7,018,625
97,298,942
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 and the
President of OpSens Solutions Inc. Compensation of key management personnel and directors for the years ended
August 31, 2020 and 2019, were as follows:
16
Short-term salaries and other benefits
Option-based awards
Years ended August 31,
2020
$
1,109,901
153,867
1,263,768
2019
$
923,554
131,177
1,054,731
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
17
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 31.72% of the Company’s total accounts receivable as at August 31, 2020 (50.03% as at August 31, 2019).
As at August 31, 2020, 0.38% (2.59% as at August 31, 2019) of the accounts receivable were of more than 90 days
whereas 34.51% (59.31% as at August 31, 2019) 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, 2020 and 2019, the allowance for
doubtful accounts was nil.
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 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, 2020 and 2019:
As at August 31, 2020
Carrying
amount
Cash flows
$
$
0 to 12
months
$
Accounts payable and accrued
liabilities
Long-term debt
Total
3,545,323
3,545,323
3,545,323
8,068,565
8,079,330
1,497,590
2,586,536
11,613,888
11,624,653
5,042,913
2,586,536
3,995,204
3,995,204
As at 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
$
-
$
-
12 to 24
After
months
24 months
$
-
$
-
18
Interest Rate Risk
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 fixed 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, 2020, the
Company was holding more than 70% (91% as at August 31, 2019) 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 $74,220 on net
loss and comprehensive loss for the year ended August 31, 2020 ($40,176 for the year ended August 31, 2019).
Financial Expenses (Revenues)
Interest and bank charges
Interest on long-term debt
Interest on lease liabilities
Loss on foreign currency translation
Interest income
Concentration Risk
Years ended August 31,
2020
$
71,262
472,298
289,510
90
(149,093 )
684,067
2019
$
79,522
267,096
-
10,578
(200,653 )
156,543
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, 2020 and 2019, 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 mainly of raw materials, 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, 2020, 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 $205,000 higher ($1,036,000 higher for the
year ended August 31, 2019). Conversely, if the Canadian dollar had weakened 10% against the U.S. dollar with all
19
other variables held constant, net loss and comprehensive loss would have been $205,000 lower for the year ended
August 31, 2020 ($1,036,000 lower for the year ended August 31, 2019).
For the year ended August 31, 2020, if the Canadian dollar had strengthened 10% against the euro with all other
variables held constant, net loss and comprehensive loss would have been $530,000 higher ($284,000 higher for the
year ended August 31, 2019). 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 $530,000 lower for the year ended
August 31, 2020 ($284,000 lower for the year ended August 31, 2019).
For the year ended August 31, 2020, 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 $36,000 higher ($26,000 higher for
the year ended August 31, 2019). 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 $36,000 lower for the year ended
August 31, 2020 ($26,000 lower for the year ended August 31, 2019).
20
As at August 31, 2020 and 2019, the risk to which the Company was exposed is established as follows:
Cash and cash equivalents (US$1,516,591;
US$616,438 as at August 31, 2019)
Cash and cash equivalents (€228,611;
€68,066 as at August 31, 2019)
Cash and cash equivalents (£36,258;
£54,329 as at August 31, 2019)
Trade and other receivables (US$1,913,967;
US$2,506,505 as at August 31, 2019)
Trade and other receivables (€613,597;
€495,207 as at August 31, 2019)
Trade and other receivables (£69,040;
£49,060 as at August 31, 2019)
Accounts payable and accrued liabilities (US$692,710;
US$1,044,681 as at August 31, 2019)
Accounts payable and accrued liabilities (€41,569;
€2,300 as at August 31, 2019)
Accounts payable and accrued liabilities (£9,520;
£37,712 as at August 31, 2019)
Total
CAPITAL MANAGEMENT
As at
August 31,
2020
$
As at
August 31,
2019
$
1,977,938
819,554
356,016
63,169
99,574
87,931
2,496,196
3,332,399
955,554
724,438
120,282
79,404
(903,432 )
(1,388,903 )
(64,736 )
(3,365 )
(16,585 )
4,984,402
(61,037 )
3,689,995
The Company’s objective in managing capital, primarily composed of shareholders’ equity, long-term debt and lease
liabilities, is to ensure sufficient liquidity to fund production and R&D activities, 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, government assistance, R&D tax credits, interest income and to liquidity through dilutive sources as
public equity offerings.
As at August 31, 2020, the Company’s working capital amounted to $16,888,129 ($21,311,770 as at August 31, 2019),
including cash and cash equivalents of $10,884,019 ($14,855,982 as at August 31, 2019). The accumulated deficit at
the same date was $43,245,021 ($40,678,055 as at August 31, 2019). 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,
2020.
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 adjusts it in light of changes in economic conditions and the risk
characteristics of the underlying assets. Capital management objectives, policies and procedures have broadly
remained unchanged since the last fiscal year.
For the years ended August 31, 2020 and 2019, the Company has not been in default on any of its obligations regarding
long-term debt and lease liabilities.
21
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 United States and Europe, the
Company is confident in its capacity to recruit qualified human resources in a timely fashion.
Regarding the strategy on corporate executive compensation, it is oriented toward 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 STANDARD
New Standards Adopted By the Company During the Year
IFRS 16, Leases
On January 13, 2016, the IASB released IFRS 16, Leases, which replace IAS 17, Leases, and the related interpretations
of 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 involving 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 twelve 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 did not restate the comparative
information. The approach allows for two transition options to measure the right-of-use assets at transition. The
Company has chosen that the right-of-use assets will be equal to the lease liabilities at the date of the initial application.
Under IFRS 16, the Company recognizes right-of-use assets and lease liabilities in the consolidated statement of
financial position for its leases that were considered operating leases under IAS 17. A depreciation expense on the
right-of-use assets and an interest expense on the lease liabilities replace the straight-line operating lease expense under
IAS 17. As at August 31, 2019, under IAS 17, the Company’s leases were classified as operating leases as they did not
transfer substantially all the risks and rewards of ownership to the Company. Consequently, lease payments related to
the Company’s operating leases were recognized as rent expense on a straight-line basis over the period of the lease.
The lease inducements were classified as Deferred lease inducements in the consolidated statement of financial
position.
At transition on September 1, 2019, the Company recognized right-of-use assets for leases. Right-of-use assets were
measured for an amount equal to the lease liabilities. Lease liabilities were measured at the present value of the
remaining lease payments on a discounted basis, using the incremental borrowing rate. As a practical expedient, the
deferred lease inducements related to free rents have been derecognized as an adjustment to the deficit and the deferred
lease inducement related to financing activity, which does not represent a locative component, have been reclassified
as a long-term debt for the Company as at September 1, 2019. The following table summarizes the impacts of adopting
IFRS 16:
22
Right-of-use assets
Lease liabilities
Adjustment recognized in deficit
September 1, 2019
$
5,272,723
5,272,723
76,838
To measure the lease liabilities, the Company used the present value of the remaining lease payments on a discounted
basis, using the incremental borrowing rate applied as at September 1, 2019, which was 5.95%. The lease liabilities
recognized can be reconciled to the lease commitments as at August 31, 2019, as follows:
Lease commitments as at August 31, 2019
Effect of discounting
Lease commitments relating to low-value assets
Renewal options reasonably certain to be exercised
Lease liabilities recognized as at September 1, 2019
IFRIC 23, Uncertainty over Income Tax Treatments
September 1, 2019
$
4,147,840
(1,827,981 )
(24,573 )
2,977,437
5,272,723
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.
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 taxes 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 adoption of the interpretation did not have an impact on the Company’s consolidated financial statements.
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, 2020, 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.
23
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, 2020.
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.
An outbreak of infectious disease, a pandemic or a similar public health threat, such as the recent outbreak of the novel
coronavirus known as COVID-19, or a fear of any of the foregoing, could adversely impact the Company by decreasing
short-term market for its products by delaying the execution of elective interventional cardiology procedures and by
causing operating, supply chain and project development delays and disruptions, labour shortages, reduced product
demand, travel disruption and shutdowns (including as a result of government regulation and prevention measures),
and increased costs to the Company.
There are other 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, 2020, the Company was not the primary beneficiary in Special Purpose Entities and there were no
off-balance sheet arrangements.
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 18, 2020
24
25 26 Consolidated Financial Statements
OpSens Inc.
Years ended August 31, 2020 and 2019
27 OpSens Inc.
Years ended August 31, 2020 and 2019
Table of contents
Independent Auditor’s Report .......................................................................................................................... 29-31
Consolidated Statements of Loss and Comprehensive Loss ................................................................................ 32
Consolidated Statements of Changes in Equity ............................................................................................... 33-34
Consolidated Statements of Financial Position ..................................................................................................... 35
Consolidated Statements of Cash Flows .............................................................................................................. 36
Notes to the Consolidated Financial Statements ............................................................................................. 37-70
28
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, 2020 and 2019, 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, 2020 and 2019, 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.
29 In preparing the financial statements, management is responsible for assessing the Company’s ability
to continue as a going concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless management either intends to liquidate the Company or
to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting
process.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report
that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with Canadian GAAS will always detect a material misstatement when
it exists. Misstatements can arise from fraud or error and are considered material if, individually 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.
30 The engagement partner on the audit resulting in this independent auditor’s report is Sophie Fortin.
Quebec City, Canada
November 18, 2020
__________________
1 CPA auditor, CA, public accountancy permit No. A124208
31 OpSens Inc.
Consolidated Statements of Loss and Comprehensive Loss
Years ended August 31, 2020 and 2019
Revenues
Sales
Licensing (Note 5)
Cost of sales
Gross margin
Operating expenses (Note 24)
Administrative
Sales and marketing
Research and development
Other income (Note 19)
Financial expenses (Note 25)
2020
$
2019
$
29,453,350
29,449,124
-
3,302,394
29,453,350
32,751,518
13,833,858
14,036,385
15,619,492
18,715,133
5,040,700
4,593,182
8,780,110
11,116,277
5,441,027
4,800,939
19,261,837
20,510,398
(1,682,608 )
-
684,067
156,543
Net loss and comprehensive loss
(2,643,804 )
(1,951,808 )
Basic and diluted net loss per share (Note 16)
(0.03 )
(0.02 )
The accompanying notes are an integral part of the consolidated financial statements.
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OpSens Inc.
Consolidated Statements of Financial Position
Assets
Current
Cash and cash equivalents (Note 17)
Trade and other receivables (Note 6)
Government assistance receivable (Note 19)
Tax credits receivable (Note 21)
Inventories (Note 7)
Prepaid expenses
Property, plant and equipment (Note 8)
Intangible assets (Note 9)
Right-of-use assets (Notes 4 and 14)
Liabilities
Current
Accounts payable and accrued liabilities (Note 12)
Warranty provision (Note 18)
Deferred revenues
Current portion of long-term debt (Note 13)
Current portion of lease liabilities (Notes 4 and 14)
Long-term debt (Note 13)
Lease liabilities (Notes 4 and 14)
Deferred lease inducements (Note 4)
Shareholders’ equity
Share capital (Note 15a)
Reserve – Stock option plan (Note 15b)
Deficit
As at
August 31,
2020
$
As at
August 31,
2019
$
10,884,019
4,041,080
428,601
105,677
6,505,094
578,893
22,543,364
3,229,787
1,622,310
4,512,978
31,908,439
3,545,323
153,138
48,951
1,460,654
447,169
5,655,235
6,607,911
4,298,431
-
16,561,577
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
54,768,369
3,823,514
(43,245,021 )
15,346,862
31,908,439
54,709,401
3,409,390
(40,678,055 )
17,440,736
30,088,483
The accompanying notes are an integral part of the consolidated financial statements.
Approved by the Board
Signed [Jean Lavigueur] , director
Signed [Louis Laflamme]
, director
35 OpSens Inc.
Consolidated Statements of Cash Flows
Years ended August 31, 2020 and 2019
Operating activities
Net loss
Adjustments for:
Depreciation of property, plant and equipment and right-of-use assets
(Notes 8 and 14)
Amortisation of intangible assets (Note 9)
Loss on disposal of property, plant and equipment
Write-off of intangible assets
Stock-based compensation costs (Note 15b)
Interest expense
Unrealized foreign exchange loss
2020
$
2019
$
(2,643,804 )
(1,951,808 )
1,547,713
119,780
80,381
-
438,295
616,472
10,565
802,149
91,284
75,585
7,988
489,179
87,300
23,936
Changes in non-cash operating working capital items (Note 17)
(1,154,458 )
(872,786 )
Investing activities
Acquisition of property, plant and equipment (Notes 8 and 17)
Additions to intangible assets (Notes 9 and 17)
Interest received
Financing activities
Increase in long-term debt, net of transaction costs
Reimbursed of long-term debt
Payment of lease liabilities
Proceeds from issuance of shares (Note 15a)
Interest paid
(985,056 )
(1,247,173 )
(1,220,582 )
(689,896 )
145,228
(1,765,250 )
244,206
(372,391 )
(409,788 )
34,797
(707,916 )
(1,211,092 )
(704,768 )
(499,244 )
199,694
(1,004,318 )
6,912,532
(663,381 )
-
230,402
(234,932 )
6,244,621
Effect of foreign exchange rate changes on cash and cash equivalents
(10,565 )
(23,936 )
(Decrease) increase in cash and cash equivalents
Cash and cash equivalents – Beginning of year
Cash and cash equivalents – End of year
(3,971,963 )
14,855,982
10,884,019
3,969,194
10,886,788
14,855,982
Additional information on the consolidated statements of cash flows is presented in Note 17.
The accompanying notes are an integral part of the consolidated financial statements.
36
OpSens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2020 and 2019
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 the coronary
artery stenosis market and 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 stenosis. 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,
du Parc-Technologique Blvd., 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, except for the changes in accounting
policies as disclosed in note 4.
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.
37 OpSens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2020 and 2019
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 consolidated statements of loss and
comprehensive 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.
Refundable Research and Development Tax Credits and Government Assistance
Refundable research and development (R&D) tax credits and government assistance, except for the Canada
Emergence Wage Subsidy (CEWS), 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.
The Company receive a non-refundable contribution for admissible salaries related to its workforce according to
the CEWS program. This contribution is classified as Other income in the consolidated statements of loss and
comprehensive loss. The contribution receivable regarding the CEWS is classified as Government assistance
receivable in the consolidated statements of financial position
Refundable R&D tax credits and government assistance are accounted when the Company has reasonable
assurance that it 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.
38 OpSens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2020 and 2019
2.
Summary of Significant Accounting Policies (continued)
Share-based Compensation
The Company offers a stock option plan described in note 15b, 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 and right-of-use assets 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.
39 OpSens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2020 and 2019
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, considering 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 six years and one year
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.
Intangible assets acquired separately are
for
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. After 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 considering any residual
value, as follows:
recorded at cost. The amount
recognized
initially
Patents
Software
Software development in progress
Term of underlying patent - 20 years
3 to 15 years
5 years
The Company’s indefinite-life intangible assets consist of trademarks and are not amortised.
40 OpSens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2020 and 2019
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, intangible
assets with finite useful life and right-of-use assets, 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.
41 OpSens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2020 and 2019
2.
Summary of Significant Accounting Policies (continued)
Leases
At inception of a contract, the Company assesses whether the contract is, or contains, a lease. A contract is, or
contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in
exchange for consideration. All leases are recognized on the statements of financial position with right-of-use
assets and lease liabilities, except for short-term leases and leases for which the underlying asset is of low value.
For these, the Company decided to recognize lease payments as expenses on a straight-line basis over the
period of the lease.
Right-of-Use Assets
The Company recognizes right-of-use assets and lease liabilities at the start date of the contract. Right-of-use
assets are measured at cost less any accumulated depreciation and any accumulated impairment losses and
adjusted for any remeasurement of the lease liabilities. The cost of the right-of-use asset comprises the amount
of the initial measurement of the lease liability, any initial direct costs, any lease payments made at or before the
commencement date, less any lease incentives received and the costs to be incurred to dismantle and remove
the underlying asset. Right-of-use assets are depreciated using the straight-line method over the period from the
commencement date to the earlier of the end of the useful life of the right-of-use assets or the end of the leases
term. The leases term includes the non-cancellable period and the renewal options reasonably certain to be
exercised. Depreciation methods and useful lives are reviewed annually.
Lease Liabilities
At the commencement date of the lease, the lease liabilities are measured at the present value of the lease
payments to be made over the period of the lease. The present value is determined using the incremental
borrowing rate of the Company at the start date of the contract if the implicit interest rate cannot be readily
determined. The lease payments include fixed payments and variable lease payments that depend on an index
or a rate. Variable lease payments that do not depend on an index or a rate are not included in the measurement
of lease liabilities but instead are recognized as expenses when the payment occurs. After the commencement
date, the carrying amount of lease liabilities is then increased to reflect interest on the lease liabilities and reduced
to reflect the lease payments made. The carrying amount of lease liabilities is remeasured when there is a change
in future lease payments, in renewal options or in the periods of the lease. The remeasurement amount of the
lease liabilities is recognized as an adjustment to the right-of-use assets, or in the consolidated statements of
loss and comprehensive loss when the carrying amount of the right-of-use assets is reduced to zero.
Classification and Presentation
Depreciation charge for right-of-use assets, expenses related to variable lease payments not included in the
measurement of lease liabilities and loss (gain) related to lease modifications are, if applicable, allocated
between the functions presented in the consolidated statements of loss and comprehensive loss. Interests
related to the lease liabilities are rather classified as financial expenses. Lease payments related to the principal
portion of the lease liabilities are classified as Payment of lease liabilities within cash flows from financing
activities. Lease payments related to the interest portion of the lease liabilities are classified as Interest paid
within cash flows from financing activities.
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.
42 OpSens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2020 and 2019
2.
Summary of Significant Accounting Policies (continued)
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 carry forward 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.
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 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.
43 OpSens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2020 and 2019
2.
Summary of Significant Accounting Policies (continued)
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, 2020 and 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.
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.
Because of the economic and business uncertainties caused by the spread of COVID-19 virus, the Company
reviewed all the critical accounting estimates, assumptions and judgements that are made by management during
the preparation of the consolidated financial statements. No significant change is necessary following this review
for these consolidated financial statements. However, because of the uncertain and evolving situation associated
with the spread of COVID-19, new information could emerge after the approval date of the consolidated financial
statements. This could lead to the necessity for the Company to review the critical accounting estimates,
assumptions and judgements prospectively over the next years.
44 OpSens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2020 and 2019
3.
Critical Accounting Estimates, Assumptions and Judgments (continued)
Thus far, the Company has had no manufacturing, supply chain, or distribution disruptions and has continued to
fulfill orders to customers. However, it is not possible to reliably estimate the length, severity and long-term impact
the global pandemic may have on the Company's financial results, business conditions and cash flows because
of the uncertainties about future developments.
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, considering changes in demand, technology
and market.
Useful Life of Depreciable Assets
Management reviews the useful life of depreciable assets at each reporting date. As at August 31, 2020,
management stated that the useful life represents the expected utility of the assets to the Company. The carrying
amounts are presented in notes 8 and 9. Actual results, however, may vary due to technical obsolescence or
changes in the market, particularly for computer equipment and software.
Impairment of Non-Financial Assets
When the Company performs an impairment test for its non-financial assets, the fair value of CGU must be
determined. For that purpose, the Company evaluates the recoverable amount, which is the higher of assets fair
value less costs of disposal and its value in use. This evaluation requires a high degree of judgment and several
estimates including future cash flows, discount rates and other variables.
Leases
Upon the occurrence of either a significant event or a significant change in circumstances, the Company reviews
if it has the reasonable certainty to exercise an extension option of the lease, or not to exercise a termination
option. Future lease payments are also reviewed by management, resulting in a remeasurement of the carrying
amount of right-of-use assets and lease liabilities. To measure lease liabilities at the present value of the
remaining lease payments, the Company must also determine its incremental borrowing rate when the implicit
interest rate of the contract cannot be readily determined.
Government Assistance and Refundable R&D Tax Credits
Government assistance, including the CEWS, and refundable 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 refundable 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.
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.
45 OpSens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2020 and 2019
3.
Critical Accounting Estimates, Assumptions and Judgments (continued)
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 collection is reasonably assured. The Company assesses collection based on several
factors, including past transaction history and the creditworthiness of the customer.
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.
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 16, Leases
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
twelve 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 did not restate the
comparative information. The approach allows for two transition options to measure the right-of-use assets at
transition. The Company has chosen that the right-of-use assets will be equal to the lease liabilities at the date of
initial application.
Under IFRS 16, the Company recognizes right-of-use assets and lease liabilities on the consolidated statements
of financial position for its leases that were considered operating leases under IAS 17. A depreciation expense
on the right-of-use assets and an interest expense on the lease liabilities replace the straight-line operating lease
expense under IAS 17. As at August 31, 2019, under IAS 17, the Company’s leases were classified as operating
leases as they did not transfer substantially all the risks and rewards of ownership to the Company. Consequently,
lease payments related to the Company’s operating leases were recognized as rent expense on a straight-line
basis over the period of the lease. The lease inducements were classified as Deferred lease inducements in the
consolidated statements of financial position.
46 OpSens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2020 and 2019
4.
Changes in Accounting Policies (continued)
New standards adopted by the Company during the year (continued)
At transition on September 1, 2019, the Company recognized right-of-use assets for leases. Right-of-use assets
were measured for an amount equal to the lease liabilities. Lease liabilities were measured at the present value
of the remaining lease payments on a discounted basis, using the incremental borrowing rate. As a practical
expedient, the deferred lease inducements related to free rents have been derecognized as an adjustment to the
deficit and the deferred lease inducement related to financing activity, which does not represent a locative
component, have been reclassified as a long-term debt for the Company as at September 1, 2019. The following
table summarizes the impacts of adopting IFRS 16:
Right-of-use assets
Lease liabilities
Adjustment recognized in deficit
September 1, 2019
$
5,272,723
5,272,723
76,838
To measure the lease liabilities, the Company used the present value of the remaining lease payments on a
discounted basis, using the incremental borrowing rate applied as at September 1, 2019, which was 5.95%. The
lease liabilities recognized can be reconciled to the lease commitments as at August 31, 2019 as follows:
Lease commitments as at August 31, 2019
Effect of discounting
Lease commitments relating to low-value assets
Renewal options reasonably certain to be exercised
Lease liabilities recognized as at September 1, 2019
IFRIC 23, Uncertainty Over Income Tax Treatments
September 1, 2019
$
4,147,840
(1,827,981 )
(24,573 )
2,977,437
5,272,723
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.
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;
- measure a tax uncertainty based on the most likely amount or expected value depending on whichever
method better predicts the amount payable (recoverable).
The adoption of the interpretation did not have an impact on the Company’s consolidated financial statements.
47 OpSens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2020 and 2019
5.
Licensing Agreement
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 had to 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 has been disbursed based on the achievement of certain milestones. For the year ended August 31,
2019, the Company achieved the last technical milestones related to the agreement with Abiomed and
consequently, it allowed 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).
6.
Trade and Other Receivables
Trade
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
7.
Inventories
Raw materials
Work in progress
Finished goods
Total
As at
August 31,
2020
$
As at
August 31,
2019
$
3,922,452
4,619,148
99,902
18,726
441,189
54,912
4,041,080
5,115,249
Years ended August 31,
2020
$
-
-
-
-
-
-
As at
August 31,
2020
$
2,695,700
1,153,315
2,656,079
6,505,094
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
For the year ended August 31, 2020, $8,493,824 of inventories were expensed in the consolidated statements of
loss and comprehensive loss and presented in cost of sales ($9,369,472 for the year ended August 31, 2019).
Write-downs of inventories amounting to $122,945 ($131,530 for the year ended August 31, 2019) were included
under cost of sales.
48
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OpSens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2020 and 2019
9.
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
$
25,982
19,691
-
-
45,673
-
-
-
-
188,965
521,827
322,702
27,089
1,125,519
272,816
1,663,168
841,423
(126,528 )
-
584,264
-
-
-
-
-
-
349,791
204,099
17,085
-
221,184
-
-
1,398,335
(126,528 )
-
2,378,063
431,874
102,695
-
534,569
635,973
119,780
-
755,753
Cost
Balance as at August 31, 2019
Additions
Grant recorded against
intangible
assets (Note 19)
Disposals
Balance as at August 31, 2020
Accumulated amortisation
Balance as at August 31, 2019
Amortisation
Disposals
Balance as at August 31, 2020
Net book value
as at August 31, 2020
45,673
584,264
128,607
863,766
1,622,310
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
210,655
112,047
941,909
195,900
1,174,881
529,577
(29,000 )
-
188,965
-
-
322,702
-
(12,290 )
1,125,519
(29,000 )
(12,290 )
1,663,168
-
-
-
-
177,936
26,163
-
204,099
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
The Company has considered indicators of impairment as at August 31, 2020 and did not record an impairment
loss attributable to patent requests that have not been pursued ($7,988 for the year ended August 31, 2019).
51
OpSens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2020 and 2019
10.
Impairment Testing
The COVID-19 pandemic has resulted in an overall decline in equity markets, as well as ongoing economic
uncertainty, impacted the Company activities and revenues during the year ended August 31, 2020. Management
identified a potential impairment indicator of assets and as a result, has performed an impairment test for the
Medical segment cash-generating unit (CGU). The Company estimated the CGU’s fair value less costs of
disposal to determine the recoverable amount and considers the relationship between its market capitalization
and its book value, among other factors, when assessing for impairment. As at August 31, 2020, the market
capitalization of the Company exceeded the carrying amount of the CGU, indicating no impairment required.
11. 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 lesser of the credit limit and 75% of eligible accounts receivable, plus
50% of eligible inventories, 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, 2020 and 2019.
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%.
12. Accounts Payable and Accrued Liabilities
Suppliers
Salaries, employee benefits and other
Other liabilities
Total
As at
August 31,
2020
$
1,421,986
1,284,450
838,887
3,545,323
As at
August 31,
2019
$
2,159,323
798,411
1,335,749
4,293,483
52 OpSens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2020 and 2019
13. Long-term Debt
Contributions repayable to Ministère des Finances, without interest (effective
rate of 9.00%), 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 (CED), without
interest (effective rate of 13.50%), repayable in 20 equal and consecutive
quarterly instalments of $15,000, initially maturing in August 2020. Since
April 2020, all payments due to CED are deferred for nine months
(revised deadline in May 2021).
Debt balance
Imputed interest
Contributions repayable to Canada Economic Development (CED), without
interest (effective rate of 12.00%), repayable in 59 equal and consecutive
monthly instalments of $3,333 and a final payment of $3,353, initially
maturing in October 2023. The difference between amounts received and
estimated fair value is recognized as government grants. Since April
2020, all payments due to CED are deferred for nine months (revised
deadline in July 2024).
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, initially maturing in May 2020. Amounts
received are net of transaction costs of $9,000. Since March 2020, all
capital payments are deferred for a maximum period of six months
(revised deadline in November 2020).
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, initially maturing in February 2022.
Amounts received are net of transaction costs of $2,160. Since March
2020, all capital payments are deferred for a maximum period of six
months (revised deadline in August 2022).
Amounts to be carried forward
As at
August 31,
2020
$
As at
August 31,
2019
$
-
-
-
82,718
(3,618 )
79,100
30,000
(400 )
29,600
60,000
(4,531 )
55,469
143,339
(20,513 )
122,826
166,670
(33,199 )
133,471
56,236
168,336
107,624
134,147
316,286
570,523
53 OpSens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2020 and 2019
13. Long-term Debt (continued)
Amounts carried over
Term loan, bearing interest at prime rate plus 2.00%, 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 on March 2019. The principal is payable
in 36 monthly instalments of $194,444. Amounts received are net of
transaction costs of $87,468.
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, maturing in
September 2024 with no principal payment for a 12-month period
following the receipt of the loan on October 2019. The principal is payable
in 48 monthly instalments of $5,197. Amounts received are net of
transaction costs of $5,250.
Term loan bearing interest at 6.66% payable in 111 monthly instalments of
$8,070, maturing in September 2025.
Current portion
The annual principal instalments due on the long-term debt are:
Less than 1 year
1 to 2 years
2 to 3 years
3 to 4 years
4 to 5 years
More than 5 years
As at
August 31 ,
2020
$
As at
August 31,
2019
$
316,286
570,523
6,947,412
6,923,802
245,704
-
559,163
8,068,565
1,460,654
6,607,911
As at
August 31,
2020
$
1,460,654
2,566,429
2,531,305
1,369,586
129,821
10,770
8,068,565
-
7,494,325
359,305
7,135,020
As at
August 31,
2019
$
359,305
1,226,054
2,376,009
2,361,417
1,171,540
-
7,494,325
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, 2020 and 2019, these
financial ratios were met by the Company.
54 OpSens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2020 and 2019
14. Leases
The Company has leases for buildings and hosting servers.
Right-of-Use Assets
The following table presents the right-of-use assets for the Company as at August 31, 2020:
Opening balance as at September 1, 2019
New leases / leases modifications
Depreciation of right-of-use assets
Net book value as at August 31, 2020
Lease Liabilities
Year ended August 31, 2020
Buildings
$
5,190,001
(118,424 )
(609,212 )
4,462,365
Hosting
servers
$
82,722
1,089
(33,198 )
50,613
Total
$
5,272,723
(117,335 )
(642,410 )
4,512,978
The following table presents the lease liabilities for the Company as at August 31, 2020:
Opening balance as at September 1, 2019
New leases / leases modifications
Payment of lease liabilities
Sublease income from right-of-use assets
Interest expense on lease liabilities
Lease liabilities as at August 31, 2020
Current portion
Long-term lease liabilities as at August 31, 2020
Year ended August 31, 2020
Buildings
$
5,190,001
(118,424 )
(688,874 )
24,301
285,527
4,692,531
411,290
4,281,241
Hosting
servers
$
82,722
1,089
(34,725 )
-
3,983
53,069
35,879
17,190
Total
$
5,272,723
(117,335 )
(723,599 )
24,301
289,510
4,745,600
447,169
4,298,431
55
OpSens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2020 and 2019
14. Leases (continued)
The lease payments, based on the expected undiscounted contractual cash flows, are as follows over the period
of the leases:
Less than 1 year
1 to 2 years
2 to 3 years
3 to 4 years
4 to 5 years
More than 5 years
As at
August 31,
2020
$
703,578
568,676
564,999
579,124
593,602
3,254,251
6,264,230
For the year ended August 31, 2020, expenses relating to short-term leases and leases for which the underlying
asset is of low value were not significant.
The Company is not exposed to a significant liquidity risk regarding its lease liabilities. The Company’s treasury
function oversees lease liabilities.
15. Shareholders’ Equity
a) Share Capital
During the year ended August 31, 2020, following the exercise of stock options, the Company issued 48,851
common shares (311,500 common shares for the year ended August 31, 2019) for a cash consideration of
$34,797 ($230,402 for the year ended August 31, 2019). As a result, an amount of $24,171 was reallocated
from “Reserve – Stock option plan” to “Share capital” in shareholders’ equity ($137,985 for the year ended
August 31, 2019). Also, 51,149 subscribed common shares have been issued (nil for the year ended
August 31, 2019).
b) Stock Options
According to the policies of the TSX Exchange, the stock option plan must be approved by the Company’s
shareholders every three years. So, the shareholders approved the stock option plan on January 21, 2020.
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 1,070,000 stock options (1,000,000 stock options granted as at August 31, 2019), 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, 2020 is $438,295
($489,179 for the year ended August 31, 2019).
56 OpSens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2020 and 2019
15. Shareholders’ Equity (continued)
b) Stock Options (continued)
The fair value of options granted issued was estimated using the Black-Scholes option pricing model using
with the following assumptions:
Risk-free interest rate
Volatility
Dividend yield on shares
Expected life
Weighted share price
Weighted fair value per option at the
grant date
Years ended August 31,
2020
2019
Between 0.24% and 1.67%
Between 1.23% and 2.27%
Between 46.43% and 66.51% Between 45.24% and 56.05%
Nil
0 to 5 years
$0.75
$0.27
Nil
0 to 5 years
$0.82
$0.30
Option valuation models require the input of highly subjective assumptions, including the expected stock price
volatility. Any changes in the subjective input assumptions can affect the fair value estimate.
The 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 changes in the number of stock options granted by the Company and their weighted-average exercise
prices between August 31, 2018 and August 31, 2020 are as follows:
Outstanding as at August 31, 2018
Options granted
Options exercised
Options expired
Options cancelled
Outstanding as at August 31, 2019
Options granted
Options exercised
Options expired
Options cancelled
Outstanding as at August 31, 2020
Options exercisable as at August 31, 2020
Number of
options
5,695,000
2,818,500
(311,500 )
(609,750 )
(588,250 )
7,004,000
1,400,000
(100,000 )
(467,875 )
(1,239,750 )
6,596,375
3,352,844
Weighted-
average
exercise price
$
1.10
0.82
0.62
0.79
1.06
1.04
0.75
0.72
0.95
0.94
1.01
1.15
57 OpSens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2020 and 2019
15. Shareholders’ Equity (continued)
b) Stock Options (continued)
The table below provides information on the outstanding stock options as at August 31, 2020:
Exercise price
$
0.51 – 0.75
0.76 – 1.00
1.01 – 1.25
1.26 – 1.50
1.51 – 1.75
1.01
16. Net Loss per Share
Number of outstanding
stock options
Number of exercisable
stock options
Weighted average
remaining contractual life
(years)
492,500
4,064,250
449,000
719,375
871,250
6,596,375
50,000
1,664,250
308,125
564,531
765,938
3,352,844
4.64
3.32
3.46
1.66
1.25
2.87
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,
2020
$
2019
$
(2,643,804 )
(1,951,808 )
Basic and diluted weighted average number of shares outstanding
90,276,765
90,010,061
Amount per share
Basic and diluted net loss per share
(0.03 )
(0.02 )
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 stock options excluded from the calculation because their exercise price is greater
than the average market price of common shares is presented below:
Stock options
Years ended August 31,
2020
2019
6,023,936
4,663,500
For the years ended August 31, 2020 and 2019, 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.
58 OpSens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2020 and 2019
17. Additional Information on the Consolidated Statements of Cash Flows
Changes in non-cash operating working capital items
Trade and other receivables
Government assistance receivable
Tax credits receivable
Inventories
Prepaid expenses
Accounts payable and accrued liabilities
Warranty provision
Deferred revenues
Deferred lease inducements
Supplementary information
Years ended August 31,
2020
$
2019
$
1,045,169
(428,601 )
191,714
(1,372,043 )
118,452
(776,778 )
18,678
48,951
-
(1,154,458 )
(2,269,964 )
-
57,397
86,909
(190,009 )
1,583,073
(2,960 )
(41,669 )
(95,563 )
(872,786 )
Uncashed grant recorded against intangible assets
Unpaid acquisition of property, plant and equipment
Unpaid additions to intangible assets
-
83,505
29,467
29,000
50,886
33,468
Cash and cash equivalents
Cash
Short-term investments
As at
August 31,
2020
$
As at
August 31,
2019
$
3,251,374
7,632,645
10,884,019
1,275,252
13,580,730
14,855,982
59
OpSens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2020 and 2019
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. The following table summarizes
changes in warranty provision:
Balance – Beginning of year
Additional provision recognized
Unused amount reversed during the year
Amount used during the year
Balance – End of year
Years ended August 31,
2020
$
134,460
80,500
-
(61,822 )
153,138
2019
$
137,420
119,502
(16,000 )
(106,462 )
134,460
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
The global economy has significantly changed with the spread of COVID-19 virus. This situation was declared
on March 11, 2020, as a pandemic by the World Health Organization (WHO) and has led many governments to
adopt exceptional measures like the implementation of the Canada Emergency Wage Subsidy (CEWS). For the
year ended August 31, 2020, the Company recorded, as Other income, a non-refundable contribution under the
CEWS program for an amount of $1,682,608 for admissible salaries related to its workforce (nil for the year
ended August 31, 2019).
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 for the structural heart market. For the
year ended August 31, 2020, the Company recorded contributions totalling $187,590 ($86,567 for the year ended
August 31, 2019) which were accounted for against research and development expenses.
Under an agreement reached with the Ministère de l’Économie et de l’Innovation, through the Centre de
Collaboration MiQro Innovation (C2MI) with respect to the Projet stratégique mobilisateur (PSM), the Company
may receive a non-refundable contribution for a maximum amount of $290,234 to cover some of its costs to
develop a new product for the structural heart market. For the year ended August 31, 2020, the Company
recorded contributions totalling $94,007 (nil for the year ended August 31, 2019) 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. For the year ended August 31, 2020, the Company recorded contributions totalling
$180,000 (nil for the year ended August 31, 2019) which were accounted for against software – development in
progress and sales and marketing expenses.
Under an agreement reached with the Ministère de l’Économie et de l’Innovation, the Company may receive a
non-refundable contribution for a maximum amount of $50,000 to cover expenses related to development of a
software. For the year ended August 31, 2020, the Company recorded contributions totalling $46,528 (nil for the
year ended August 31, 2019) which were accounted for against software – development in progress.
60 OpSens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2020 and 2019
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 (26.5%; 26.6% in 2019)
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,
2020
$
2019
$
(701,489 )
739,747
(106,145 )
-
(28,040 )
95,927
-
(519,832 )
806,064
(106,265 )
(11,098 )
(79,205 )
(89,664 )
-
As at August 31, 2020, the Company has tax losses of approximately $26,789,400 for federal purposes and
$27,657,400 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
2040
Federal
Provincial
$
$
515,000
42,000
400
463,000
40,000
400
1,552,000
1,509,000
641,000
617,000
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
271,000
1,284,000
617,000
426,000
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
325,000
1,249,000
26,789,400
27,657,400
61 OpSens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2020 and 2019
20.
Income Taxes (continued)
The Company also has undeducted research and development expenses of $11,719,000 ($11,224,000 as at
August 31, 2019) for federal purposes and $14,814,000 ($14,264,000 as at August 31, 2019) 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 $15,043,000
($14,586,000 as at August 31, 2019) were not recognized due to the uncertainty about the Company’s ability to
generate taxable income. In addition, deferred tax liabilities of approximately $878,000 ($841,000 as at
August 31, 2019) 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,
2020
$
2019
$
598,000
633,000
1,238,000
1,267,000
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,
2020
2019
$
-
$
-
105,677
105,677
297,391
297,391
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, 2020 and 2019 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, 2020 are about $3,314,000 ($3,172,000
for the year ended August 31, 2019) and expire over a period of 5 to 20 years beginning in 2020.
62 OpSens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2020 and 2019
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 the coronary artery stenosis market and 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.
Medical
Industrial
$
$
Years ended August 31,
2020
Total
$
Medical
Industrial
$
$
2019
Total
$
26,996,184
2,457,166 29,453,350 30,334,061
2,417,457 32,751,518
-
14,179,616
96,090
-
1,439,876 15,619,492 17,350,499
96,090
66,040
66,040
1,364,634 18,715,133
1,298,636
249,077
1,547,713
748,728
53,421
802,149
108,845
1,383,939
10,935
119,780
75,660
15,624
91,284
298,669
1,682,608
-
-
-
340,946
343,121
684,067
(138,855 )
295,398
156,543
External sales
Internal sales
Gross margin
Depreciation of property,
plant and equipment
and right-of-use assets
Amortisation of intangible
assets
Other income
Financial expenses
(income)
Net (loss) earnings
(2,647,823 )
4,019
(2,643,804 )
(1,630,315 )
(321,493 )
(1,951,808 )
Acquisition of property,
plant and equipment
Additions to intangible
assets
Segment assets
Segment liabilities
1,224,453
28,748
1,253,201
619,766
45,389
665,155
676,967
29,777,672
16,070,310
37,928
487,301
714,895
2,130,767 31,908,439 28,506,354
491,267 16,561,577 12,357,132
13,276
500,577
1,582,129 30,088,483
290,615 12,647,747
63
OpSens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2020 and 2019
22. Segmented Information (continued)
Information by geographic segment
Revenue by geographic segment
United States
Japan
Canada
Other*
Years ended August 31,
2020
$
2019
$
11,408,452
6,313,784
2,644,881
9,086,233
29,453,350
14,016,549
10,068,564
2,744,248
5,922,157
32,751,518
* 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. Non-current assets, which
include property, plant and equipment, intangible assets and right-of-use assets, are mainly located in Canada,
but also in other countries for which amounts are individually not significant.
For the year ended August 31, 2020, revenues from two clients from the Medical’s reportable segment
represented individually more than 10% of the total revenues of the Company, i.e. 24% and 21%.
For the year ended August 31, 2019, revenues from two clients from the Medical’s reportable segment
represented individually more than 10% of the total revenues of the Company, i.e. 31% and 27%.
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 and the President of OpSens Solutions Inc. Compensation of key management personnel and directors
for the years ended August 31, 2020 and 2019 were as follows:
Short-term salaries and other benefits
Option-based awards
Years ended August 31,
2020
$
1,109,901
153,867
1,263,768
2019
$
923,554
131,177
1,054,731
The compensation of key executives is determined by the Human Resources and Compensation Committee,
taking into consideration individual performance and market trends.
64
OpSens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2020 and 2019
24. Additional Information to the Consolidated Statements of Loss and Comprehensive Loss
Expenses (revenues) by function
Years ended August 31,
2020
$
2019
$
Salaries and Other Benefits
13,254,678
12,504,035
Cost of sales
Administrative
Sales and marketing
Research and development
Depreciation of Property, Plant and Equipment and Righ-of-Use
1,547,713
802,149
Assets
Cost of sales
Administrative
Sales and marketing
Research and development
Amortisation of Intangible Assets
119,780
91,284
Administrative
Research and development
Government Assistance
(391,797 )
(142,177 )
Cost of sales
Administrative
Sales and marketing
Research and development
Refundable Research and Development Tax Credits
(89,943 )
(316,743 )
Research and development
65
OpSens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2020 and 2019
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.
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 31.72% of the Company’s total accounts receivable as at August 31, 2020
(50.03% as at August 31, 2019).
As at August 31, 2020, 0.38% (2.59% as at August 31, 2019) of the accounts receivable were of more than 90
days whereas 34.51% (59.31% as at August 31, 2019) 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, 2020 and 2019,
the allowance for doubtful accounts was nil.
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.
66 OpSens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2020 and 2019
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, 2020 and 2019:
As at August 31, 2020
Carrying
amount Cash flows
$
$
0 to 12
months
$
12 to 24
After
months
24 months
$
-
$
-
12 to 24
After
months
24 months
$
-
$
-
Accounts payable and accrued
liabilities
Long-term debt
Total
3,545,323
3,545,323
3,545,323
8,068,565
8,079,330
1,497,590
2,586,536
3,995,204
11,613,888
11,624,653
5,042,913
2,586,536
3,995,204
As at August 31, 2019
Carrying
amount
Cash flows
$
$
0 to 12
months
$
Accounts payable and accrued
liabilities
Long-term debt
Total
Interest Rate Risk
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
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 fixed 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, 2020, the
Company was holding more than 70% (91% as at August 31, 2019) 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 $74,220 on
net loss and comprehensive loss for the year ended August 31, 2020 ($40,176 for the year ended August 31,
2019).
67
OpSens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2020 and 2019
25. Financial Instruments (continued)
Risk Management (continued)
Interest Rate Risk (continued)
Financial Expenses (Revenues)
Interest and bank charges
Interest on long-term debt
Interest on lease liabilities
Loss on foreign currency translation
Interest income
Concentration Risk
Years ended August 31,
2020
$
71,262
472,298
289,510
90
(149,093 )
684,067
2019
$
79,522
267,096
-
10,578
(200,653 )
156,543
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, 2020 and 2019, 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 mainly of raw materials, 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, 2020, 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 $205,000 higher ($1,036,000
higher for the year ended August 31, 2019). 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 $205,000
lower for the year ended August 31, 2020 ($1,036,000 lower for the year ended August 31, 2019).
For the year ended August 31, 2020, if the Canadian dollar had strengthened 10% against the Euro with all other
variables held constant, net loss and comprehensive loss would have been $530,000 higher ($284,000 higher
for the year ended August 31, 2019). 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 $530,000 lower for the
year ended August 31, 2020 ($284,000 lower for the year ended August 31, 2019).
For the year ended August 31, 2020, 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 $36,000 higher ($26,000
higher for the year ended August 31, 2019). 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 $36,000
lower for the year ended August 31, 2020 ($26,000 lower for the year ended August 31, 2019).
68
OpSens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2020 and 2019
25. Financial Instruments (continued)
Risk Management (continued)
Foreign Exchange Risk (continued)
Foreign Currency Sensitivity Analysis (continued)
As at August 31, 2020 and 2019, the risk to which the Company was exposed is established as follows:
Cash and cash equivalents (US$1,516,591;
US$616,438 as at August 31, 2019)
Cash and cash equivalents (€ 228,611;
€ 68,066 as at August 31, 2019)
Cash and cash equivalents (£ 36,258;
£ 54,329 as at August 31, 2019)
Trade and other receivables (US$1,913,967;
US$2,506,505 as at August 31, 2019)
Trade and other receivables (€ 613,597;
€ 495,207 as at August 31, 2019)
Trade and other receivables (£ 69,040;
£ 49,060 as at August 31, 2019)
Accounts payable and accrued liabilities (US$692,710;
US$1,044,681 as at August 31, 2019)
Accounts payable and accrued liabilities (€ 41,569;
€ 2,300 as at August 31, 2019)
Accounts payable and accrued liabilities (£ 9,520;
£ 37,712 as at August 31, 2019)
Total
26. Capital Management
As at
August 31,
2020
$
As at
August 31,
2019
$
1,977,938
819,554
356,016
99,574
63,169
87,931
2,496,196
3,332,399
955,554
724,438
120,282
79,404
(903,432 )
(1,388,903 )
(64,736 )
(3,365 )
(16,585 )
4,984,402
(61,037 )
3,689,995
The Company's objective in managing capital, primarily composed of shareholders' equity, long-term debt and
lease liabilities, is to ensure sufficient liquidity to fund production and R&D activities, 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, government assistance, R&D tax credits, interest income and to liquidity through dilutive
sources as public equity offerings.
As at August 31, 2020, the Company's working capital amounted to $16,888,129 ($21,311,770 as at August 31,
2019), including cash and cash equivalents of $10,884,019 ($14,855,982 as at August 31, 2019). The
accumulated deficit at the same date was $43,245,021 ($40,678,055 as at August 31, 2019). 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, 2020.
The Company believes that its current liquid assets are sufficient to finance its activities in the short-term.
69 OpSens Inc.
Notes to the Consolidated Financial Statements
Years ended August 31, 2020 and 2019
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 broadly remained unchanged since the last fiscal year.
For the years ended August 31, 2020 and 2019, the Company has not been in default on any of its obligations
regarding long-term debt and lease liabilities.
27. Approval of Consolidated Financial Statements
The consolidated financial statements were approved by the Board of Directors and authorized for issue on
November 18, 2020.
70 71 Governance
Directors
Alan Milinazzo
Executive Chairman of the Board of Directors
Louis Laflamme, CPA, CA
President and Chief Executive Officer
Gaétan Duplain
President, OpSens Solutions
Denis Harrington
Director
Jean Lavigueur, CPA, CA
Director
Pat Mackin
Director
Denis M. Sirois
Director
Officers
Louis Laflamme, CPA, CA
President and Chief Executive Officer
Gaétan Duplain
President, OpSens Solutions
Robin Villeneuve, CPA, CA
Chief Financial Officer and Corporate Secretary
Corporate
Information
Head Office
750 Boulevard du Parc-Technologique
Quebec, QC G1P 4S3
Phone: 418.781.0333
Fax: 418.781.0024
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.
Registration
Toronto Stock Exchange – Symbol: OPS
OTCQX – Symbol: OPSSF
Auditors
Deloitte S.E.N.C.R.L./s.r.l, Quebec, QC
Shares in Circulation
90,280,317 (as at August 31, 2020)
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
Annual Meeting of Shareholders
The annual general meeting of shareholders of OpSens Inc. will be
held virtually via live webcast available at https://us02web.zoom.
us/j/89279414696 on January 19, 2021 at 10:00 a.m. (local time).
The Company encourages its shareholders to exercise their right
to vote with AST during the advance voting period that ends
on Friday, January 15, or 48 business hours prior to the event
scheduled for Tuesday, January 19, 2021 at 10:00 a.m.
The instructions are available in the proxy circular included in the
annual documents, by the access button located on the OpSens.
com opening page or by accessing https://us02web.zoom.
us/j/89279414696 on January 19, 2021 at 10:00 a.m. (local time).
OpSens - New Markets
Medical
New Opportunity – TAVR
› OpSens develops a pressure guidewire for the TAVR
procedure (transcatheter aortic valve replacement)
in the 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 2019
showed 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
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 this new sector of 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
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.
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 a variety of industries
750 boulevard du Parc-Technologique
Quebec, QC G1P 4S3
Phone: 418.781.0333
Opsens.com