Opsens Inc.

NOTICE TO READER

January 28, 2022

VIA SEDAR

Autorité des marchés financiers (Québec)

Re : OpSens Inc. – Re-filing of the Consolidated Financial Statements for the year ended August 31, 2021

Please be advised that the audited consolidated financial statements of OpSens Inc. for the year ended August 31, 2021 are being refiled to include, in the independent auditor’s report, the specific paragraphs on key audit matters, which were initially not included in the independent auditor’s report on the consolidated financial statements originally filed on November 23, 2021 on SEDAR. No other changes were made to the audited consolidated financial statements and the foregoing correction does not affect the accompanying management discussion and analysis.

Yours very truly

(s) Robin Villeneuve

_______ Robin Villeneuve Chief Financial Officer OpSens Inc.

Consolidated Financial Statements

Years ended August 31, 2021 and 2020

OpSens Inc. Years ended August 31, 2021 and 2020

Independent Auditor’s Report ............................................................................................................................ 1-3 Consolidated Statements of Loss and Comprehensive Loss ................................................................................ 4 Consolidated Statements of Changes in Equity ................................................................................................. 5-6 Consolidated Statements of Financial Position ..................................................................................................... 7 Consolidated Statements of Cash Flows .............................................................................................................. 8 Notes to the Consolidated Financial Statements ............................................................................................. 9-43

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, 2021 and 2020, 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, 2021 and 2020, and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards (“IFRS”).

Basis for Opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards (“Canadian GAAS”). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements for the year ended August 31, 2021. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

We have determined that there are no key audit matters to communicate in our auditor’s report.

Other Information

Management is responsible for the other information. The other information comprises:

Management’s Discussion and Analysis
The information, other than the financial statements and our auditor’s report thereon, in the Annual Report.

Our opinion on the financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

We obtained Management’s Discussion and Analysis prior to the date of this auditor’s report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact in this auditor’s report. We have nothing to report in this regard.

The Annual Report is expected to be made available to us after the date of the auditor’s report. If, based on the work we will perform on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact to those charged with governance.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian GAAS will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with Canadian GAAS, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in this independent auditor’s report is Sophie Fortin.

/s/ Deloitte LLP[1]

Quebec City, Canada November 22, 2021

1CPA auditor, CA, public accountancy permit No. A124208

OpSens Inc.

Consolidated Statements of Loss and Comprehensive Loss Years ended August 31, 2021 and 2020

(in Canadian dollars)

2021	2020
$ Revenues Sales 34,347,899 Other 115,921	$ 29,453,350 -
34,463,820 Cost ofsales 15,783,458	29,453,350 13,833,858
Grossmargin 18,680,362	15,619,492
Operating expenses(Note 22) Administrative 6,472,857 Sales and marketing 7,649,336 Research and development 5,509,825	5,040,700 8,780,110 5,441,027
19,632,018 Other income (Note 17) (740,162 ) Financialexpenses (Note23) 917,748	19,261,837 (1,682,608 ) 684,067
Loss before income taxes (1,129,242)	(2,643,804)
Current income taxes expense 21,186	-
Net loss (1,150,428)	(2,643,804)
Other comprehensive income Items that may be reclassified subsequently to net loss Net changes in unrealizedgain on translation of foreign operations 8,662	-
Comprehensive loss (1,141,766)	(2,643,804)
Basic and diluted net lossper share(Note 14) (0.01)	(0.03)
The accompanying notes are an integral part of the consolidated financial statements.

OpSens Inc.

Consolidated Statement of Changes in Equity Year ended August 31, 2021

(in Canadian dollars)

				Accumulated
				other
				comprehensive
				income – Foreign
			Reserve – Stock	operations
	Common shares	Share capital	optionplan	translation	Deficit	Total
	(number)	$	$	$	$	$
Balance as at August 31, 2020	90,280,317	54,768,369	3,823,514	-	(43,245,021 )	15,346,862
Common shares issued in connection with a
public bought deal offering (Note 13a)	15,972,222	26,624,000	-	-	-	26,624,000
Common shares issued pursuant to the stock
option plan (Note 13a)	904,500	1,502,433	(460,077 )	-	-	1,042,356
Stock-based compensation costs (Note 13b)	-	-	458,543	-	-	458,543
Other comprehensive income – Net changes in
unrealized gain on translation of foreign
operations	-	-	-	8,662	-	8,662
Net loss	-	-	-	-	(1,150,428)	(1,150,428)
Balance as at August 31, 2021	107,157,039	82,894,802	3,821,980	8,662	(44,395,449 )	42,329,995

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

OpSens Inc. Consolidated Statement of Changes in Equity Year ended August 31, 2020

(in Canadian dollars)

	Common shares Total Share capital Reserve – Stock option plan Issued Subscribed	Deficit Total
Balance as at August 31, 2019 Impact of adopting IFRS 16 (Note 4) Shares issued pursuant to the stock option plan (Note 13a) Stock-based compensation costs (Note 13b) Net loss and comprehensive loss	(number) (number) (number) $ $ 90,180,317 51,149 90,231,466 54,709,401 3,409,390 - - - - - 100,000 (51,149 ) 48,851 58,968 (24,171 ) - - - - 438,295 - - - - -	$ $ (40,678,055 ) 17,440,736 76,838 76,838 - 34,797 - 438,295 (2,643,804) (2,643,804)

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

OpSens Inc.

Consolidated Statements of Financial Position

(in Canadian dollars)

	As at	As at
	August 31,	August 31,
	2021	2020
	$	$
Assets
Current
Cash and cash equivalents (Note 15)	38,563,271	10,884,019
Trade and other receivables (Note 5)	4,135,446	4,041,080
Government assistance receivable (Note 17)	-	428,601
Tax credits receivable (Note 19)	320,000	105,677
Inventories (Note 6)	6,115,091	6,505,094
Prepaid expenses	648,884	578,893
	49,782,692	22,543,364
Property, plant and equipment (Note 7)	2,731,508	3,229,787
Intangible assets (Note 8)	1,676,597	1,622,310
Right-of-use assets (Note12)	4,321,608	4,512,978
	58,512,405	31,908,439
Liabilities
Current
Accounts payable and accrued liabilities (Note 10)	3,842,871	3,545,323
Warranty provision (Note 16)	83,803	153,138
Deferred revenues	120,710	48,951
Current income taxes payable	19,895	-
Current portion of long-term debt (Note 11)	2,802,223	1,460,654
Current portionof leaseliabilities (Note12)	525,494	447,169
	7,394,996	5,655,235
Long-term debt (Note 11)	4,594,594	6,607,911
Leaseliabilities (Note12)	4,192,820	4,298,431
	16,182,410	16,561,577
Shareholders’ equity
Share capital (Note 13a)	82,894,802	54,768,369
Reserve – Stock option plan (Note 13b)	3,821,980	3,823,514
Accumulated other comprehensive income	8,662	-
Deficit	(44,395,449)	(43,245,021	)
	42,329,995	15,346,862
	58,512,405	31,908,439

Subsequent events (Note 25)

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

Approved by the Board

Signed [Jean Lavigueur] , director

Signed [Louis Laflamme] , director

OpSens Inc. Consolidated Statements of Cash Flows Years ended August 31, 2021 and 2020

(in Canadian dollars)

	2021	2020
	$	$
Operating activities
Net loss	(1,150,428 )	(2,643,804 )
Adjustments for:
Depreciation of property, plant and equipment and right-of-use assets
(Notes 7 and 12)	1,544,198	1,547,713
Amortisation of intangible assets (Note 8)	229,899	119,780
Loss on disposal of property, plant and equipment	267,562	80,381
Stock-based compensation costs (Note 13b)	458,543	438,295
Interest expense	568,130	616,472
Unrealized foreign exchange loss	106,757	10,565
Changesin non-cashoperatingworking capital items (Note15)	814,833	(1,154,458 )
	2,839,494	(985,056 )
Investing activities
Acquisition of property, plant and equipment (Notes 7 and 15)	(746,837 )	(1,220,582 )
Additions to intangible assets (Notes 8 and 15)	(288,150 )	(689,896 )
Interestreceived	97,529	145,228
	(937,458 )	(1,765,250 )
Financing activities
Increase in long-term debt, net of transaction costs	842,180	244,206
Reimbursement of long-term debt	(1,550,736 )	(372,391 )
Payment of lease liabilities	(453,686 )	(409,788 )
Proceeds from issuance of shares (Note 13a)	29,792,356	34,797
Transaction costs attributable to the issuance of common shares
(Note 13a)	(2,126,000 )	-
Interest paid	(628,851 )	(707,916 )
	25,875,263	(1,211,092)
Effect of foreignexchangerate changes oncashand cashequivalents	(98,047)	(10,565 )
Increase (decrease) in cash and cash equivalents	27,679,252	(3,971,963 )
Cashand cashequivalents– Beginning ofyear	10,884,019	14,855,982
Cash and cash equivalents – End ofyear	38,563,271	10,884,019

Additional information on the consolidated statements of cash flows is presented in Note 15.

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

OpSens Inc. Notes to the Consolidated Financial Statements Years ended August 31, 2021 and 2020

(in Canadian dollars)

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 Diastolic Pressure Ratio (dPR) in the coronary artery disease 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 disease. OpSens is also involved in industrial activities through its wholly-owned subsidiary OpSens Solutions Inc. (“Solutions”). Solutions develops, manufactures and installs innovative fibre optic sensing solutions for critical and demanding industrial applications. The Company’s head office is located at 750, 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.

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 subsidiaries. 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.

OpSens Inc. Notes to the Consolidated Financial Statements Years ended August 31, 2021 and 2020 (in Canadian dollars)

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 revenues are recognized over the agreement residual terms at the point in time when it is highly probable that the respective milestone event criteria are met, and the risk of reversal of revenue recognition is remote. These revenues are classified as Other in the consolidated statements of loss and comprehensive loss.

Reporting Currency and Foreign Currency

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

Foreign Currency Transactions

Foreign currency transactions are translated into functional currency 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 as Financial expenses in consolidated statements of loss and comprehensive loss in the period in which they arise.

Foreign Operations Translation

Each subsidiary determines its own functional currency. The items included in its financial statements are therefore measured in this functional currency. For entities that have a functional currency that differs from the Company, their financial statements are translated in Canadian dollars as follows: assets and liabilities are translated at the end-of-period exchange rate and revenues and expenses are translated at the monthly average exchange rates in effect during the period. If exchange rates fluctuate significantly, revenues and expenses are instead translated using the exchange rates at the dates of the transactions. All resulting exchange differences are recognised in other comprehensive income as Net changes in unrealized gain on translation of foreign operations .

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.

(in Canadian dollars)

OpSens Inc. Notes to the Consolidated Financial Statements Years ended August 31, 2021 and 2020

2. Summary of Significant Accounting Policies (continued)

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 received 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 attributable to the issuance of shares are deducted from share capital.

Share-based Compensation

The Company offers a stock option plan described in note 13b), 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.

OpSens Inc. Notes to the Consolidated Financial Statements Years ended August 31, 2021 and 2020 (in Canadian dollars)

2. Summary of Significant Accounting Policies (continued)

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, an allocation of fixed production overheads based on the normal capacity of the production, including applicable depreciation of property, plant and equipment and right-of-use assets, and an allocation of variable production overheads based on the actual use of the production facilities.

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.

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	10 years
Production equipment	7 years
Research and development equipment	7 years
Diagnostic and demonstration equipment	3 to 5 years
Research and development computer equipment	3 years
Computer equipment	3 years
Leasehold improvements	Remaining lease terms
	of five and three years

Depreciation methods, residual values and useful life of property, plant and equipment are reviewed annually. Any change is accounted for prospectively as a change in accounting estimates.

Gains and losses on disposal of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount and are recognized in the consolidated statements of loss and comprehensive loss.

(in Canadian dollars)

OpSens Inc. Notes to the Consolidated Financial Statements Years ended August 31, 2021 and 2020

2. Summary of Significant Accounting Policies (continued)

Intangible Assets

Intangible assets with finite useful life consist of patents and software, including internally software development costs. Intangible assets acquired separately are recorded at cost. The amount initially recognized 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:

Patents	Term of underlying patent - 20 years
Software	3 to 15 years
Internally generated software	5 years

The Company’s indefinite-life intangible assets consist of trademarks and are not amortised.

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.

OpSens Inc. Notes to the Consolidated Financial Statements Years ended August 31, 2021 and 2020 (in Canadian dollars)

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. The leases term is one year for hosting servers and ranges from three to ten years for buildings. 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.

OpSens Inc. Notes to the Consolidated Financial Statements Years ended August 31, 2021 and 2020

(in Canadian dollars)

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 generates 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.

OpSens Inc. Notes to the Consolidated Financial Statements Years ended August 31, 2021 and 2020 (in Canadian dollars)

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 income in the period in which they arise without subsequent reclassification to net loss 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.

Financial liabilities at amortised cost: These financial liabilities are initially recognized at fair value and are subsequently measured at amortized cost using the effective interest method.

The Company’s financial instruments are classified as follows:

Financial instruments	IFRS 9 – Measurement category
Cash and cash equivalents	Amortised cost
Trade and other receivables	Amortised cost
Accounts payable and accrued liabilities	Amortised cost
Long-term debt	Amortised cost

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. The Company has chosen the simplified approach which requires to measure the loss allowance at an amount equal to lifetime expected credit losses that is the maximum contractual period over which the entity is exposed to credit risk. The net change in expected credit losses is recognized to the net loss.

OpSens Inc. Notes to the Consolidated Financial Statements Years ended August 31, 2021 and 2020

(in Canadian dollars)

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.

Assessment of COVID-19 Impact

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 judgments 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. 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 judgments prospectively over the next periods. Management continues to monitor and evaluate the situation and its impact on the Company’s activities.

Thus far, the Company has had no manufacturing, supply chain, or distribution disruptions caused by the spread of COVID-19 virus 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, 2021, management stated that the useful life represents the expected utility of the assets to the Company. The carrying amounts are presented in notes 7 and 8. Actual results, however, may vary due to technical obsolescence or changes in the market, particularly for computer equipment and software.

Impairment of Non-Financial Assets

When the Company performs an impairment test for its non-financial assets, the recoverable amount of the asset or the CGU must be determined. For that purpose, the Company evaluates 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.

OpSens Inc. Notes to the Consolidated Financial Statements Years ended August 31, 2021 and 2020

(in Canadian dollars)

3. Critical Accounting Estimates, Assumptions and Judgments (continued)

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.

Loss Allowance for Expected Credit Losses

The Company evaluates the expected credit losses on financial assets that are measured at amortised cost using a provision matrix based on the historical credit losses, the time value of money and past events, current conditions and forecasts of future economic conditions. The particularities of each debtor are taken into account in this analysis.

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.

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. For the milestone revenues, the Company estimates to probability that the respective milestone event criteria are met.

Functional Currency

The functional currency for the Company and its subsidiaries is the currency of the primary economic environment in which each operates. 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.

OpSens Inc. Notes to the Consolidated Financial Statements Years ended August 31, 2021 and 2020

(in Canadian dollars)

3. Critical Accounting Estimates, Assumptions and Judgments (continued)

Income Taxes

Management estimates income taxes based on the tax laws applicable in the jurisdictions where the Company operates.

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 standard adopted by the Company during the previous year

IFRS 16, Leases

On September 1, 2019, the Company adopted the standard IFRS 16, Leases . This new standard specifies how to recognize, measure, present and disclose leases. 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. 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. Moreover, 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:

	September 1,2019
	$
Right-of-use assets	5,272,723
Lease liabilities	5,272,723
Adjustment recognized in deficit	76,838

OpSens Inc.

Notes to the Consolidated Financial Statements Years ended August 31, 2021 and 2020

(in Canadian dollars)

5. Trade and Other Receivables

Trade and Other Receivables
	As at August 31, As at August 31, 2021 2020
Trade Allowance for expected credit losses Sales taxes receivable Other receivables	$ $ 4,204,946 3,922,452 (213,353 ) - 102,919 99,902 40,934 18,726
Total	4,135,446 4,041,080
Allowance for Expected Credit Losses	Years ended August 31,
	2021 2020
Balance – Beginning of year Additional provision recognized Amount recovered duringtheyear	$ $ - - (213,353 ) - - -
Balance – End ofyear	(213,353) -
Inventories	As at August 31, As at August 31, 2021 2020
Raw materials Work in progress Finished goods	$ $ 3,107,546 2,695,700 1,580,270 1,153,315 1,427,275 2,656,079
Total	6,115,091 6,505,094

6. Inventories

For the year ended August 31, 2021, $12,393,833 of inventories were expensed in the consolidated statements of loss and comprehensive loss as Cost of sales ($8,493,824 for the year ended August 31, 2020).

Write-downs of inventories amounting to $114,680 ($122,945 for the year ended August 31, 2020) were included under cost of sales.

OpSens Inc.

Notes to the Consolidated Financial Statements Years ended August 31, 2021 and 2020

(in Canadian dollars)

7. Property, Plant and Equipment

	Office			Research and
	furniture			development
	and			equipment, net
	equipment,	Production		of income tax				Leasehold
	net of	equipment,		credits and		Research and		improvements,
	income tax	net of income	Diagnostic and	government		development		net of income tax
	credits of	tax credits of	demonstration	assistance of		computer	Computer	credits of
	$3,420	$103,160	equipment	$55,303		equipment	equipment	$44,823	Total
	$	$	$	$		$	$	$	$
Cost
Balance as at August 31, 2020	562,164	3,855,483	650,257	1,568,067		125,467	597,685	1,300,504	8,659,627
Additions	16,724	147,252	275,414	30,460		25,347	133,694	66,868	695,759
Disposals	(76,248 )	(203,983 )	(524,801 )	(976,238	)	(60,063 )	(394,571 )	(338,820 )	(2,574,724 )
Transfers	-	70,713	-	(70,713	)	-	-	-	-
Effect of foreign exchange
differences	-	-	-	-		-	(6 )	-	(6 )
Balance as atAugust 31,2021	502,640	3,869,465	400,870	551,576		90,751	336,802	1,028,552	6,780,656
Accumulated depreciation
Balance as at August 31, 2020	282,514	2,216,244	258,464	1,285,821		90,094	522,241	774,462	5,429,840
Disposals	(76,248 )	(203,983 )	(257,239 )	(976,238	)	(60,063 )	(394,571 )	(338,820 )	(2,307,162 )
Depreciation	49,358	472,292	123,701	69,422		25,331	64,492	121,832	926,428
Transfers	-	65,896	-	(65,896	)	-	-	-	-
Effect of foreign exchange
differences	-	-	-	-		-	42	-	42
Balance as at August 31,2021	255,624	2,550,449	124,926	313,109		55,362	192,204	557,474	4,049,148
Net book value
as at August 31, 2021	247,016	1,319,016	275,944	238,467		35,389	144,598	471,078	2,731,508

OpSens Inc.

Notes to the Consolidated Financial Statements Years ended August 31, 2021 and 2020

(in Canadian dollars)

7. Property, Plant and Equipment (continued)

	Office			Research and
	furniture and			development	Research and
	equipment,	Production		equipment, net of	development
	net of	equipment,		income tax credits	computer		Leasehold
	income tax	net of income	Diagnostic and	and government	equipment, net of		improvements, net
	credits of	tax credits of	demonstration	assistance of	income tax credits	Computer	of income tax
	$3,420	$103,160	equipment	$55,303	of$3,078	equipment	credits of$44,823	Total
	$	$	$	$	$	$	$	$
Cost
Balance as at August 31, 2019	545,066	3,157,367	543,313	1,485,462	98,963	536,013	1,213,471	7,579,655
Additions	17,098	698,116	280,173	82,605	26,504	61,672	87,033	1,253,201
Disposals	-	-	(173,229 )	-	-	-	-	(173,229 )
Balance as atAugust 31,2020	562,164	3,855,483	650,257	1,568,067	125,467	597,685	1,300,504	8,659,627
Accumulated depreciation
Balance as at August 31, 2019	235,028	1,766,112	216,748	1,199,856	73,648	470,829	655,164	4,617,385
Disposals	-	-	(92,848 )	-	-	-	-	(92,848 )
Depreciation	47,486	450,132	134,564	85,965	16,446	51,412	119,298	905,303
Balance as at August 31,2020	282,514	2,216,244	258,464	1,285,821	90,094	522,241	774,462	5,429,840
Net book value
as at August 31, 2020	279,650	1,639,239	391,793	282,246	35,373	75,444	526,042	3,229,787

OpSens Inc. Notes to the Consolidated Financial Statements Years ended August 31, 2021 and 2020

(in Canadian dollars)

8. Intangible Assets

		Finite life –		Finite life –
		Internally		Internally
	Indefinite life –	generated	Finite life –	developed
	Trademarks	software	Software	patents	Total
	$	$	$	$	$
Cost
Balance as at August 31, 2020	45,673	584,264	349,791	1,398,335	2,378,063
Additions	12,606	49,633	117,746	150,477	330,462
Grant recorded against
intangible
assets (Note 17)	-	(46,276 )	-	-	(46,276 )
Disposals	-	-	(156,480)	-	(156,480)
Balance as atAugust 31,2021	58,279	587,621	311,057	1,548,812	2,505,769
Accumulated amortisation
Balance as at August 31, 2020	-	-	221,184	534,569	755,753
Amortisation	-	109,534	34,000	86,365	229,899
Disposals	-	-	(156,480 )	-	(156,480 )
Balance as atAugust 31,2021	-	109,534	98,704	620,934	829,172
Net book value
as at August 31, 2021	58,279	478,087	212,353	927,878	1,676,597
			Finite life –
		Finite life –	Software,	Finite life –
		Internally	net of income	Internally
	Indefinite life –	generated	tax credits of	developed
	Trademarks	software	$1,518	patents	Total
	$	$	$	$	$
Cost
Balance as at August 31, 2019	25,982	188,965	322,702	1,125,519	1,663,168
Additions	19,691	521,827	27,089	272,816	841,423
Grant recorded against
intangible
assets (Note 17)	-	(126,528 )	-	-	(126,528 )
Disposals	-	-	-	-	-
Balance as at August 31,2020	45,673	584,264	349,791	1,398,335	2,378,063
Accumulated amortisation
Balance as at August 31, 2019	-	-	204,099	431,874	635,973
Amortisation	-	-	17,085	102,695	119,780
Disposals	-	-	-	-	-
Balance as atAugust 31,2020	-	-	221,184	534,569	755,753
Net book value
as at August 31, 2020	45,673	584,264	128,607	863,766	1,622,310

The Company has considered indicators of impairment as at August 31, 2021, to determinate if an impairment loss was necessary in particular because of patent requests that have not been pursued. No impairment loss was recognized for the years ended August 31, 2021 and 2020.

OpSens Inc. Notes to the Consolidated Financial Statements Years ended August 31, 2021 and 2020 (in Canadian dollars)

9. Authorized Line of Credit

The Company has a revolving operating credit facility for a maximum of $1,000,000 (the credit limit). The available revolving operating credit is limited to the 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 1.00% 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, 2021 and 2020.

The Company also has credit cards for a maximum of $100,000 to finance its current operations. The balance used on these credit cards bears interest at a rate of 19.99%.

10. Accounts Payable and Accrued Liabilities

	As at	As at
	August 31,	August 31,
	2021	2020
	$	$
Suppliers	877,729	1,421,986
Salaries, employee benefits and other	1,877,880	1,284,450
Other liabilities	1,087,262	838,887
Total	3,842,871	3,545,323

OpSens Inc. Notes to the Consolidated Financial Statements Years ended August 31, 2021 and 2020

(in Canadian dollars)

11. Long-term Debt

	As at	As at
	August 31,	August 31,
	2021	2020
	$	$
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, maturing in April 2021 without payment
from April to December 2020 inclusive due to a nine-month moratorium.
Debt balance	-	30,000
Imputedinterest	-	(400 )
	-	29,600
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, maturing in
July 2024 without payment from April to December 2020 inclusive due to
a nine-month moratorium.
Debt balance	116,675	143,339
Imputedinterest	(11,622)	(20,513 )
	105,053	122,826
Term loan, bearing interest at prime rate plus 0.25%, secured by a movable
hypothec on the universality of the Company’s present and future
property, plant and equipment and intangible assets, payable in 48
monthly instalments of $18,750, maturing in November 2020 without
principal payment from March to August 2020 inclusive due to a six-month
moratorium. Amountsreceived arenet oftransactioncosts of$9,000.	-	56,236
Term loan, bearing interest at prime rate plus 0.25%, secured by a movable
hypothec on the universality of the Company’s present and future
property, plant and equipment and intangible assets, payable in 48
monthly instalments of $4,500, maturing in August 2022 without principal
payment from March to August 2020 inclusive due to a six-month
moratorium. Amountsreceived arenet oftransactioncosts of$2,160.	53,900	107,624
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 without principal payment for a 24-month period following
the signature of an agreement in March 2019. The principal is payable in
36 monthly instalments of $194,444. Amounts received are net of
transactioncosts of$87,468.	5,804,813	6,947,412
Amounts to be carriedforward	5,963,766	7,263,698

OpSens Inc. Notes to the Consolidated Financial Statements Years ended August 31, 2021 and 2020

(in Canadian dollars)

11. Long-term Debt (continued)

	As at	As at
	August 31,	August 31,
	2021	2020
	$	$
Amounts carried over	5,963,766	7,263,698
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
June 2024 without principal payment for a 12-month period following the
receipt of the first tranche of the loan in October 2019. The second and
last tranche of the loan for $242,180 has been received in January 2021.
The principal is payable in 44 monthly instalments of $10,938 and a final
payment of $10,386. Amounts received are net of transaction costs of
$5,250.	369,507	245,704
Term loan bearing interest at 6.66% payable in 111 monthly instalments of
$8,070,maturinginSeptember 2025.	463,544	559,163
Term loan, bearing interest at prime rate plus 1.00%, secured by a movable
hypothec on the universality of the Company’s present and future
property, plant and equipment and intangible assets, maturing in
October 2024 without principal payment for a 9-month period following
the receipt of the loan in February 2021. The principal is payable in 36
monthlyinstalments of$16,667.	600,000	-
	7,396,817	8,068,565
Current portion	2,802,223	1,460,654
	4,594,594	6,607,911

The following table presents changes in long-term debt for the Company for the years ended August 31, 2021 and 2020:

The following table presents changes in long-term debt for the Company for and 2020:	the years ended August 31, 2021
	Years ended August 31,
	2021 2020
Balance – Beginning of year Impact of adopting IFRS 16 – Reclassification of the deferred lease inducement related to financing activity Increase in long-term debt Transaction costs Reimbursement of long-term debt Amortization of transaction costs	$ $ 8,068,565 7,494,325 - 648,641 842,180 249,456 - (5,250 ) (1,550,736 ) (372,391 ) 36,808 53,784
Balance – End ofyear	7,396,817 8,068,565

OpSens Inc. Notes to the Consolidated Financial Statements Years ended August 31, 2021 and 2020 (in Canadian dollars)

11. Long-term Debt (continued)

The annual principal instalments due on the long-term debt are:

	As at	As at
	August 31,	August 31,
	2021	2020
	$	$
Less than 1 year	2,802,223	1,460,654
1 to 2 years	2,800,058	2,566,429
2 to 3 years	1,625,731	2,531,305
3 to 4 years	158,035	1,369,586
4 to 5 years	10,770	129,821
More than 5years	-	10,770
	7,396,817	8,068,565

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, 2021 and 2020, these financial ratios were met by the Company.

12. Leases

Right-of-Use Assets

The following tables present changes in right-of-use assets for the Company for the years ended August 31, 2021 and 2020:

	Year ended August 31, 2021
	Buildings Hosting servers Total
Balance as at August 31, 2020 New leases / leases modifications Depreciation of right-of-use assets	$ $ $ 4,462,365 50,613 4,512,978 430,537 (4,137 ) 426,400 (585,682 ) (32,088 ) (617,770 )
Balance as at August 31, 2021	4,307,220 14,388 4,321,608

	Year ended August 31, 2020
	Buildings Hosting servers Total
Opening balance as at September 1, 2019 New leases / leases modifications Depreciation of right-of-use assets	$ $ $ 5,190,001 82,722 5,272,723 (118,424 ) 1,089 (117,335 ) (609,212 ) (33,198 ) (642,410 )
Balance as at August 31, 2020	4,462,365 50,613 4,512,978

OpSens Inc. Notes to the Consolidated Financial Statements Years ended August 31, 2021 and 2020 (in Canadian dollars)

12. Leases (continued)

Lease Liabilities

The following tables present changes in lease liabilities for the Company for the years ended August 31, 2021 and 2020:

	Year ended August 31, 2021
	Buildings Hosting servers Total
Balance as at August 31, 2020 New leases / leases modifications Payment of lease liabilities Sublease income from right-of-use assets Interest expense on lease liabilities	$ $ $ 4,692,531 53,069 4,745,600 430,537 (4,137 ) 426,400 (709,871 ) (35,314 ) (745,185 ) 23,942 - 23,942 265,450 2,107 267,557
Balance as at August 31, 2021 Current portion	4,702,589 15,725 4,718,314 509,769 15,725 525,494
Long-term lease liabilities as at August 31, 2021	4,192,820 - 4,192,820

	Year ended August 31, 2020
	Buildings Hosting servers Total
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	$ $ $ 5,190,001 82,722 5,272,723 (118,424 ) 1,089 (117,335 ) (688,874 ) (34,725 ) (723,599 ) 24,301 - 24,301 285,527 3,983 289,510
Balance as at August 31, 2020 Current portion	4,692,531 53,069 4,745,600 411,290 35,879 447,169
Long-term lease liabilities as at August 31, 2020	4,281,241 17,190 4,298,431

OpSens Inc. Notes to the Consolidated Financial Statements Years ended August 31, 2021 and 2020 (in Canadian dollars)

12. Leases (continued)

The lease payments, based on the expected undiscounted contractual cash flows, are as follows over the period of the leases:

	As at	As at
	August 31,	August 31,
	2021	2020
	$	$
Less than 1 year	765,549	703,578
1 to 2 years	769,175	568,676
2 to 3 years	726,938	564,999
3 to 4 years	576,257	579,124
4 to 5 years	587,782	593,602
More than 5years	2,524,166	3,254,251
	5,949,867	6,264,230

For the years ended August 31, 2021 and 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.

13. Shareholders’ Equity

a) Share Capital

On February 25, 2021, the Company completed a public bought deal offering for aggregate gross proceeds of $28,750,000. In connection with the offering, the Company issued a total of 15,972,222 common shares at a price of $1.80 per common share.

Transaction costs of the offering include underwriting fees of $1,725,000 and other professional fees and miscellaneous fees of $401,000 for total transactions costs of $2,126,000.

During the year ended August 31, 2021, following the exercise of stock options, the Company issued 904,500 common shares (48,851 common shares for the year ended August 31, 2020) for a cash consideration of $1,042,356 ($34,797 for the year ended August 31, 2020). As a result, an amount of $460,077 was reallocated from Reserve – Stock option plan to Share capital in shareholders’ equity ($24,171 for the year ended August 31, 2020). Also, 51,149 common shares subscribed during the year ended August 31, 2019 have been issued during the year ended August 31, 2020. This situation did not occur during the year ended August 31, 2021.

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.

OpSens Inc. Notes to the Consolidated Financial Statements Years ended August 31, 2021 and 2020 (in Canadian dollars)

13. Shareholders’ Equity (continued)

b) Stock Options (continued)

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 1,020,000 stock options (1,070,000 stock options granted as at August 31, 2020), 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 regard to the stock option plan for the year ended August 31, 2021 is $458,543 ($438,295 for the year ended August 31, 2020).

The fair value of options granted issued was estimated using the Black-Scholes option pricing model using 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, 2021 2020 Between 0.17% and 0.84% Between 0.24% and 1.67% Between 55.81% and 73.20%Between 46.43% and 66.51% Nil Nil 0 to 5 years 0 to 5 years $1.71 $0.75 $0.75 $0.27

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, 2019 and August 31, 2021 are as follows:

		Weighted-
	Number of	average
	options	exercise price
		$
Outstanding as at August 31, 2019	7,004,000	1.04
Options granted	1,400,000	0.75
Options exercised	(100,000 )	0.72
Options expired	(467,875 )	0.95
Options cancelled	(1,239,750 )	0.94
Outstanding as at August 31, 2020	6,596,375	1.01
Options granted	2,342,500	1.71
Options exercised	(904,500 )	1.15
Options expired	(327,500 )	1.21
Options cancelled	(566,625 )	1.10
Outstandingas at August 31,2021	7,140,250	1.20
Options exercisable as at August 31,2021	3,551,844	1.09

OpSens Inc. Notes to the Consolidated Financial Statements Years ended August 31, 2021 and 2020 (in Canadian dollars)

13. Shareholders’ Equity (continued)

b) Stock Options (continued)

The table below provides information on the outstanding stock options as at August 31, 2021:

						Weighted average
		Number of outstanding		Number of exercisable		remaining contractual life
Exercise	price	stockoptions		stockoptions		(years)
	$
0.51 –	0.75		397,125		136,781	3.64
0.76 –	1.00		3,308,375		1,935,906	2.56
1.01 –	1.25		557,250		189,156	3.02
1.26 –	1.50		898,750		595,000	1.98
1.51 –	1.75		1,268,750		695,000	2.62
1.76 –	2.00		-		-	-
2.01 –	2.25		467,500		-	4.86
2.26 –	2.50		-		-	-
2.51 –	2.75		242,500		-	4.99
1.20			7,140,250		3,551,844	2.83

14. Net Loss per Share

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

	Years ended August 31,
	2021 2020
Net loss attributable to shareholders Basic and diluted	$ $ (1,150,428 ) (2,643,804 )
Number of shares Basic and diluted weighted average number of shares outstanding	98,806,987 90,276,765
Amount per share Basic and diluted net lossper share	(0.01) (0.03)

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:

	Years ended August 31,
	2021 2020
Stockoptions	1,733,750 6,023,936

For the years ended August 31, 2021 and 2020, 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.

OpSens Inc. Notes to the Consolidated Financial Statements Years ended August 31, 2021 and 2020

(in Canadian dollars)

15. Additional Information on the Consolidated Statements of Cash Flows

	Years ended August 31,
	2021 2020
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 Currentincome taxes payable	$ $ (94,366 ) 1,045,169 428,601 (428,601 ) (214,323 ) 191,714 390,003 (1,372,043 ) (69,991 ) 118,452 352,590 (776,778 ) (69,335 ) 18,678 71,759 48,951 19,895 -
	814,833 (1,154,458)
Supplementary information Unpaid acquisition of property, plant and equipment Unpaid additions to intangible assets	32,427 83,505 25,503 29,467
	As at August 31, 2021 As at August 31, 2020
Cash and cash equivalents Cash Short-term investments	$ $ 2,700,529 3,251,374 35,862,742 7,632,645
	38,563,271 10,884,019

OpSens Inc. Notes to the Consolidated Financial Statements Years ended August 31, 2021 and 2020 (in Canadian dollars)

16. 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:

changes in warranty provision:
	Years ended August 31,
	2021 2020
Balance – Beginning of year Additional provision recognized Unused amount reversed during the year Amount used during the year Effect of foreign exchange differences	$ $ 153,138 134,460 73,982 80,500 (46,515 ) - (96,573 ) (61,822 ) (229 ) -
Balance – End ofyear	83,803 153,138

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.

17. Government assistance

Because of the spread of COVID-19 virus, the Government of Canada implemented the Canada Emergency Wage Subsidy (CEWS). For the year ended August 31, 2021, the Company recorded, as Other income , a non-refundable contribution under the CEWS program for an amount of $740,162 for admissible salaries related to its workforce ($1,682,608 for the year ended August 31, 2020).

Under agreements 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 and a non-refundable contribution for a maximum amount of $500,000 to cover some of its incurred costs to develop an optical-based fuel monitoring system for aerospace applications. For the year ended August 31, 2021, the Company recorded contributions totalling $323,084 ($187,590 for the year ended August 31, 2020) which were accounted for against research and development expenses.

Under agreements 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 $405,934 to cover some of its incurred costs to develop a new product for the structural heart market. For the year ended August 31, 2021, the Company recorded contributions totalling $211,990 ($94,007 for the year ended August 31, 2020) 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 some of its incurred costs related to the development of a software and sales and marketing expenses. For the year ended August 31, 2021, the Company didn’t receive any contribution under this agreement ($180,000 for the year ended August 31, 2020 which were accounted for against internally generated software 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 $92,804 to cover some of its incurred costs related to the development of a software. For the year ended August 31, 2021, the Company recorded contributions totalling $46,276 ($46,528 for the year ended August 31, 2020) which were accounted for against internally generated software.

OpSens Inc. Notes to the Consolidated Financial Statements Years ended August 31, 2021 and 2020 (in Canadian dollars)

18. 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:

	Years ended August 31,
	2021 2020
Income tax payable using the combined federal and provincial statutory tax rate (26.5%; 26.5% in 2020) Effect of different tax rates of subsidiaries in other jurisdictions Non-deductible expenses and other Deductible financing fees Non-taxable income tax credits Losses carried forward	$ $ (299,249 ) (701,489 ) (2,573 ) - 823,431 739,747 (180,924 ) (106,145 ) (84,800 ) (28,040 ) (234,699) 95,927
Income tax usingeffective income tax rate	21,186 -
As at August 31, 2021, the Company has tax losses of approximately $26,035,000 for federal purposes and $26,954,000 for provincial purposes that can be used to reduce future taxable income. These losses expire as follows: Federal Provincial $ $ 2024 347,000 343,000 2025 42,000 40,000 2027 1,552,000 1,509,000 2028 641,000 617,000 2029 463,000 273,000 2031 2,024,000 2,068,000 2032 1,286,000 1,280,000 2033 237,000 239,000 2034 1,091,000 1,125,000 2035 2,513,000 2,510,000 2036 5,759,000 5,493,000 2037 5,447,000 5,427,000 2038 2,912,000 4,308,000 2039 271,000 325,000 2040 1,282,000 1,278,000 2041 168,000 119,000 26,035,000 26,954,000

As at August 31, 2021, the Company has tax losses of approximately $26,035,000 for federal purposes and $26,954,000 for provincial purposes that can be used to reduce future taxable income. These losses expire as follows:

OpSens Inc. Notes to the Consolidated Financial Statements Years ended August 31, 2021 and 2020 (in Canadian dollars)

18. Income Taxes (continued)

The Company also has undeducted research and development expenses of $12,489,000 ($11,719,000 as at August 31, 2020) for federal purposes and $15,642,000 ($14,814,000 as at August 31, 2020) 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 $16,080,000 ($15,043,000 as at August 31, 2020) were not recognized due to the uncertainty about the Company’s ability to generate taxable income. In addition, deferred tax liabilities of approximately $940,000 ($878,000 as at August 31, 2020) related to federal investment tax credits on research and development expenses were recognized and offset by a deferred income tax asset.

19. R&D Tax Credits

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

	Years ended August 31,
	2021 2020
Federal Provincial	$ $ 1,116,000 598,000 1,173,000 633,000

These expenses have enabled the Company to become eligible for R&D tax credits reimbursable for the following amounts:

	Years ended August 31,
	2021 2020
Federal Provincial	$ $ - - 320,000 105,677
	320,000 105,677

These credits were accounted for against 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, 2021 and 2020, 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, 2021, are about $3,549,000 ($3,314,000 for the year ended August 31, 2020) and expire over a period of 2 to 20 years beginning in 2021.

OpSens Inc. Notes to the Consolidated Financial Statements Years ended August 31, 2021 and 2020 (in Canadian dollars)

20. 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 disease 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 other 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.

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
Current income taxes
expense
Net income (loss)
Acquisition of property,
plant and equipment
Additions to intangible
assets
Segment assets
Segment liabilities

Years ended August 31,
2021
2020
Medical
Industrial
Total
Medical
Industrial
Total
$
$
$
$ $ $ 31,101,209
3,362,611
34,463,820
26,996,184
2,457,166
29,453,350
111,695
381,797
493,492
-
96,090
96,090
16,457,466
2,222,896
18,680,362
14,179,616
1,439,876
15,619,492
1,362,247
181,951
1,544,198
1,298,636
249,077
1,547,713
218,255
11,644
229,899
108,845
10,935
119,780
445,506
294,656
740,162
1,383,939
298,669
1,682,608
540,010
377,738
917,748
340,946
343,121
684,067
21,186
-
21,186
-
-
-
(1,969,256 )
818,828
(1,150,428 )(2,647,823 )
4,019
(2,643,804 )
651,109
44,650
695,759
1,224,453
28,748
1,253,201
264,398
19,788
284,186
676,967
37,928
714,895
56,212,182
2,300,223
58,512,405
29,777,672
2,130,767
31,908,439
15,246,157
936,253
16,182,410
16,070,310
491,267
16,561,577

OpSens Inc. Notes to the Consolidated Financial Statements Years ended August 31, 2021 and 2020 (in Canadian dollars)

20. Segmented Information (continued)

Information by geographic segment

	Years ended August 31,
	2021 2020
Revenue by geographic segment United States Japan Canada Other*	$ $ 12,862,452 11,408,452 7,277,326 6,313,784 3,270,982 2,644,881 11,053,060 9,086,233
	34,463,820 29,453,350

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. Non-current assets located in other countries are not significant.

For the year ended August 31, 2021, revenues from two clients from the Medical’s reportable segment represented individually more than 10% of the total revenues of the Company, i.e. 21% and 19% (24% and 21% for the year ended August 31, 2020).

21. Related Party Transactions

Key management personnel, having authority and responsibility for planning, directing and controlling the activities of the Company, comprise the Executive Chairman, the Chief Executive Officer, the Chief Financial Officer and the President of OpSens Solutions Inc. Compensation of key management personnel and directors for the years ended August 31, 2021 and 2020 were as follows:

	Years ended August 31,
	2021 2020
Short-term salaries and other benefits Option-based awards	$ $ 1,219,527 1,109,901 119,303 153,867
	1,338,830 1,263,768

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

OpSens Inc. Notes to the Consolidated Financial Statements Years ended August 31, 2021 and 2020

(in Canadian dollars)

22. Additional Information to the Consolidated Statements of Loss and Comprehensive Loss

Expenses (revenues) byfunction	Years ended August 31,
	2021 2020
Salaries and Other Benefits Cost of sales Administrative Sales and marketing Research and development	$ $ 14,652,074 13,254,678
Depreciation of Property, Plant and Equipment and Righ-of-Use Assets Cost of sales Administrative Sales and marketing Research and development	1,544,198 1,547,713
Amortisation of Intangible Assets Administrative Research and development	229,899 119,780
Government Assistance Research and development	(535,074 ) (391,797 )
Refundable Research and Development Tax Credits Research and development	(347,185 ) (89,943 )

OpSens Inc. Notes to the Consolidated Financial Statements Years ended August 31, 2021 and 2020 (in Canadian dollars)

23. 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 its customers and establishes an allowance for doubtful accounts when accounts are determined to be uncollectible. Two major customers represented 34.67% of the Company’s total accounts receivable as at August 31, 2021 (31.72% as at August 31, 2020).

As at August 31, 2021, 10.36% (0.38% as at August 31, 2020) of the accounts receivable were of more than 90 days whereas 64.51% (34.51% as at August 31, 2020) 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, 2021, the allowance for doubtful accounts was at $213,353 (nil as at August 31, 2020).

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.

OpSens Inc. Notes to the Consolidated Financial Statements Years ended August 31, 2021 and 2020 (in Canadian dollars)

23. 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, 2021 and 2020:

As at August 31, 2021	Carrying		0 to 12	12 to 24	After
	amount	Cash flows	months	months	24 months
	$	$	$	$	$
Accounts payable and accrued
liabilities	3,842,871	3,842,871	3,842,871	-	-
Long-termdebt	7,396,817	7,370,774	2,822,089	2,801,422	1,747,263
Total	11,239,688	11,213,645	6,664,960	2,801,422	1,747,263
As at August 31, 2020	Carrying		0 to 12	12 to 24	After
	amount	Cash flows	months	months	24 months
	$	$	$	$	$
Accounts payable and accrued
liabilities	3,545,323	3,545,323	3,545,323	-	-
Long-termdebt	8,068,565	8,079,330	1,497,590	2,586,536	3,995,204
Total	11,613,888	11,624,653	5,042,913	2,586,536	3,995,204

Interest Rate Risk

The Company’s exposure to interest rate risk is summarized as follows:

Cash and cash equivalents Fixed and variable interest rates Trade and other receivables Non-interest-bearing Accounts payable and accrued liabilities Non-interest-bearing Long-term debt 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, 2021, the Company was holding more than 93% (70% as at August 31, 2020) 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 $75,939 on net loss and comprehensive loss for the year ended August 31, 2021 ($74,220 for the year ended August 31, 2020).

OpSens Inc. Notes to the Consolidated Financial Statements Years ended August 31, 2021 and 2020 (in Canadian dollars)

23. Financial Instruments (continued)

Risk Management (continued)

Interest Rate Risk (continued)

Financial Expenses (Revenues)

	Years ended August 31,
	2021 2020
Interest and bank charges Interest on long-term debt Interest on lease liabilities Loss on foreign currency translation Interestincome	$ $ 80,498 71,262 398,605 472,298 267,557 289,510 280,624 90 (109,536 ) (149,093 )
	917,748 684,067

Concentration Risk

Concentration risk exists when investments are made with multiple entities that share similar characteristics or when a large investment is made with a single entity. As at August 31, 2021 and 2020, 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

Based on the Company’s foreign exchange risk noted above, varying the foreign exchange rate to reflect a 10% strengthening in the Canadian dollar would have decreased (increased) the net loss as follows, assuming that all other variables remained constant. An assumed 10% weakening of the foreign currency would have had an equal but opposite effect on the basis that all other variables remained constant.

Year ended August 31, 2021	Year ended August 31, 2021
		CA$/US$	CA$/EUR€	CA$/GBP£
		$	$	$
Decrease (increase) of the	10% appreciation in the
net loss	Canadian dollar	(1,000,000 )	(621,000 )	25,000
Decrease (increase) of the	10% depreciation in the
net loss	Canadian dollar	1,000,000	621,000	(25,000)

OpSens Inc. Notes to the Consolidated Financial Statements Years ended August 31, 2021 and 2020 (in Canadian dollars)

23. Financial Instruments (continued)

Risk Management (continued)

Foreign Exchange Risk (continued)

Foreign Currency Sensitivity Analysis (continued)

Year ended August 31, 2020	Year ended August 31, 2020
		CA$/US$	CA$/EUR€	CA$/GBP£
		$	$	$
Decrease (increase) of the	10% appreciation in the
net loss	Canadian dollar	(205,000 )	(530,000 )	(36,000 )
Decrease (increase) of the	10% depreciation in the
net loss	Canadian dollar	205,000	530,000	36,000

As at August 31, 2021 and 2020, the risk to which the Company was exposed is established as follows:

	As at	As at
	August 31,	August 31,
	2021	2020
	$	$
Cash and cash equivalents (US$1,350,764;
US$1,516,591 as at August 31, 2020)	1,704,259	1,977,938
Cash and cash equivalents (€ 233,721;
€ 228,611 as at August 31, 2020)	348,385	356,016
Cash and cash equivalents (£ 3,039;
£ 36,258 as at August 31, 2020)	5,277	63,169
Trade and other receivables (US$1,828,513;
US$1,913,967 as at August 31, 2020)	2,307,035	2,496,196
Trade and other receivables (€ 815,415;
€ 613,597 as at August 31, 2020)	1,215,458	955,554
Trade and other receivables (£ 52,500;
£ 69,040 as at August 31, 2020)	91,166	120,282
Accounts payable and accrued liabilities (US$376,989;
US$692,710 as at August 31, 2020)	(475,647 )	(903,432 )
Accounts payable and accrued liabilities (€ 9,273;
€ 41,569 as at August 31, 2020)	(13,822 )	(64,736 )
Accounts payable and accrued liabilities (£ 6,753;
£ 9,520 as at August 31, 2020)	(11,726)	(16,585)
Total	5,170,385	4,984,402

OpSens Inc. Notes to the Consolidated Financial Statements Years ended August 31, 2021 and 2020 (in Canadian dollars)

24. Capital Management

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, 2021, the Company's working capital amounted to $42,387,696 ($16,888,129 as at August 31, 2020), including cash and cash equivalents of $38,563,271 ($10,884,019 as at August 31, 2020). The accumulated deficit at the same date was $44,395,449 ($43,245,021 as at August 31, 2020). 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, 2021.

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

The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. Capital management objectives, policies and procedures have broadly remained unchanged since the last fiscal year.

For the years ended August 31, 2021 and 2020, the Company has not been in default on any of its obligations regarding long-term debt and lease liabilities.

25. Subsequent Events

On September 9, 2021, the Company signed an amendment to its credit agreement dated February 26, 2019. Pursuant to this amendment, the Company has a non-revolving credit facility of $10,000,000 that can be used for growth and working capital purposes and that is secured by a first-rank movable hypothec on the universality of the Company’s present and future property, plant and equipment and intangible assets. The credit facility shall be available to the Company in two advances to be made by August 31, 2022. Any amount which remains unused shall be automatically and permanently cancelled and terminated. Any amount drawn under this credit facility bears interest at the prime rate plus 1.50%. The Company shall pay a 0.50% annual fee on the unused portion of the credit facility. The used portion of the credit facility is repayable in equal monthly payments from September 2022 until the credit facility maturity in August 2026.

Moreover, in September 2021, the Company prepaid the entire balance of the 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 initially in February 2024. The repayment of $5,833,333 was made from the cash equivalents. This loan had a carrying amount of $5,804,813 as at August 31, 2021, including an amount of $2,315,791 included in the current portion of the long-term debt.

26. Approval of Consolidated Financial Statements

The consolidated financial statements were approved by the Board of Directors and authorized for issue on November 22, 2021.

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Opsens Inc. — Annual Report 2021

45794_rns_2022-01-28_a2cfb89c-acd8-4333-885d-3be20633b6d8.pdf

VIA SEDAR

OpSens Inc.

Table of contents

Independent Auditor’s Report

Opinion

Basis for Opinion

Key Audit Matters

Other Information

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Auditor’s Responsibilities for the Audit of the Financial Statements

/s/ Deloitte LLP[1]

OpSens Inc.

Consolidated Statements of Loss and Comprehensive Loss Years ended August 31, 2021 and 2020

OpSens Inc.

Consolidated Statement of Changes in Equity Year ended August 31, 2021

OpSens Inc. Consolidated Statement of Changes in Equity Year ended August 31, 2020

OpSens Inc.

Consolidated Statements of Financial Position

OpSens Inc. Consolidated Statements of Cash Flows Years ended August 31, 2021 and 2020

OpSens Inc. Notes to the Consolidated Financial Statements Years ended August 31, 2021 and 2020

1. Incorporation and Description of Business

2. Summary of Significant Accounting Policies

Basis of Measurement

Basis of Preparation

Basis of Consolidation

Subsidiary

2. Summary of Significant Accounting Policies (continued)

Revenue Recognition

Reporting Currency and Foreign Currency

Foreign Currency Transactions

Foreign Operations Translation

Research and Development Costs

OpSens Inc. Notes to the Consolidated Financial Statements Years ended August 31, 2021 and 2020

2. Summary of Significant Accounting Policies (continued)

Refundable Research and Development Tax Credits and Government Assistance

Shareholders’ Equity

Share-based Compensation

Cash and Cash Equivalents

2. Summary of Significant Accounting Policies (continued)

Inventories

Property, Plant and Equipment

OpSens Inc. Notes to the Consolidated Financial Statements Years ended August 31, 2021 and 2020

2. Summary of Significant Accounting Policies (continued)

Intangible Assets

Impairment of Non-Financial Assets

Indefinite-Life Intangible Assets

Non-Financial Assets with Finite Useful Life

Recognition of Impairment Charge

2. Summary of Significant Accounting Policies (continued)

Leases

Right-of-Use Assets

Lease Liabilities

Classification and Presentation

Warranty Provision

2. Summary of Significant Accounting Policies (continued)

Income Taxes

Current Income Taxes

Deferred Income Taxes

Loss per Share

2. Summary of Significant Accounting Policies (continued)

Financial Instruments

OpSens Inc. Notes to the Consolidated Financial Statements Years ended August 31, 2021 and 2020

3. Critical Accounting Estimates, Assumptions and Judgments

Assessment of COVID-19 Impact

Inventories

Useful Life of Depreciable Assets

Impairment of Non-Financial Assets

3. Critical Accounting Estimates, Assumptions and Judgments (continued)

Leases

Government Assistance and Refundable R&D Tax Credits

Warranty Provision

Loss Allowance for Expected Credit Losses

Stock-based Compensation

Revenue Recognition

Functional Currency

3. Critical Accounting Estimates, Assumptions and Judgments (continued)

Income Taxes

Opsens Inc. Annual Report 2021