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ERGORESEARCH ERGORESEARCH ERGORESEARCH ERGORESEARCH LTDLTDLTDLTD 2015 annual REPORT2015 annual REPORT2015 annual REPORT2015 annual REPORT ....

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ERGORESEARCH LTD ANNUAL REPORT JUNE 30, 2015 SCOPE OF ANALYSIS The following management discussion and analysis (“MD&A”) dated October 23, 2015 is intended to assist readers in understanding the business environment, strategies, performance and risk factors of Ergoresearch Ltd. This MD&A provides the reader with a view and analysis, from the perspective of management, of the Corporation’s financial results for the fourth quarter and the fiscal year ended JUNE 30, 2015. Throughout this document, the terms “we”, “us”, “Corporation”, and “Ergoresearch” refer to Ergoresearch Ltd. The MD&A has been prepared in accordance with National Instrument 51-102, Continuous Disclosure Requirements, and should be read in conjunction with the Corporation’s consolidated fiscal year-end financial statements, and their accompanying notes. The consolidated financial statements and the MD&A have been reviewed by the Ergoresearch Audit Committee and approved by its Board of Directors. The following information takes into account all material events that took place up until October 23, 2015, the date on which the Corporation’s Board of Directors approved this MD&A. Unless otherwise indicated, the functional and reporting currency is the Canadian dollar. Reporting Periods All references to “Fiscal 2014” are to the Corporation’s fiscal year ended June 30, 2014 while “Fiscal 2015” refers to the Corporation’s fiscal year ended June 30, 2015. Compliance with International Financial Reporting Standards The Corporation’s financial statements have been prepared in accordance with IFRS. However, the Corporation uses non-IFRS such as EBITDA and adjusted EBITDA for analysis purposes to measure its financial performance. EBITDA means earnings before interest, income taxes, depreciation and amortization (“EBITDA”) while adjusted EBITDA means earnings before interest, income taxes, depreciation and amortization deducting other elements for the year ended June 2015 and deducting royalties from the monetization of sleep apnea technology for the year ended June 2014. Although management, investors and analysts use these measures to evaluate the Corporation’s financial and operating performance, they have no standardized definition in accordance with IFRS and should not be Management’s Report regarded as an alternative to financial information prepared in accordance with IFRS. These measures may therefore not be comparable to similar measures reported by other companies. ADDITIONAL INFORMATION The following management discussion and analysis and its financial statements are available at all times on the Corporation’s website at www.ergoresearch.com. All


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documents are published separately and are available on the SEDAR website (www.sedar.com). Ergorersearch shares are listed on the TSX Venture Exchange under the TSX-V Symbol: ERG. The number of common shares outstanding on October 23, 2015 was 76,322,673 with 1,591,667 stock options outstanding.


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MESSAGE FROM THE PRESIDENT In recent years, sales at Ergoresearch have seen a significant increase. Between 2005 and 2014, the Company increased its sales by 1,931%, thereby confirming its status as Quebec's leading manufacturer of "intelligent" custom orthotics and speciality orthotics. Efforts in 2015 were dedicated to consolidating gains and developing the ERP-Health platform, which will support future growth. As a consequence, financial results are down this year. Revenues reached $15,498,000 this year, a decrease of 13% from last year. Last year's results included the non-recurring revenue generated by the monetization of the sleep apnea technology, in the amount of $589,948. Revenues for the period ending June 30, 2015, were negatively affected by the closure of two orthopaedic labs in Laval. Non-recurring charges, in the amount of $339,912, also affected the current year's earnings. As for the financial position, Ergoresearch still has a cash equivalent of more than $10 million that the Company plans to use over the next few years. However, given the recent decline in activities, the absence of cash flow investment to fuel growth in 2015 and within the IFRS’ regulations, management has decided to revise the amount of deferred income taxes and tax credits appearing as assets, by an amount of $6,401,319. This readjustment has no impact on cash flow, and the Company still benefits from the same fiscal attributes as shown in the 2015 Consolidated Financial Statements, Note 19. The amount of the said fiscal attributes appearing as assets will be reviewed periodically. The net income and comprehensive income for the period ending June 30, 2015, therefore amounted to $(7,023,218) compared to $1,230,153 for the period ending June 30, 2014. The adjusted EBITDA amounted to $665,601 in 2015, compared to $2,247,785 for the period ending June 30, 2014. Cash provided by operations decreased from $1,774,141 in 2014 to $1,335,207 for the period ending June 30, 2015. This past year was dedicated to consolidating our gains and laying out the foundations for future growth. We have simplified the corporate structure by merging eight legal entities. We also bought out our minority partner, Orthoconcept (now merged into Laboratoire Victhom Inc.), and have completed three major initiatives:

1. We finalized the implementation of our ERP¹- Health platform. a. Far from the usual ERP—we have designed a software ecosystem in the

health sector. We have developed and added a point-of-sale module on the basic modules, as well as a calendar module, which is linked to the electronic patient file, and a monitoring module for our manufacturing units; we have also integrated our proprietary platforms such as the pressure sensor pad and 3D scanner.

b. By integrating tools for measurement, analysis and medical imaging into patient files, we have facilitated multidisciplinary practices, sharing of information, all while optimizing the efficiency and effectiveness of patient services. In the context in which having access to a physician remains a challenge, this tool could become a key development factor in years to come.

1 Enterprise Resource Planning Software


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2. The Company finished rolling out its new corporate banner, reuniting its various clinical divisions under one brand name "Équilibre". As a result, since October 2014, Orthoconcept, Laboratoire Podotech, Laboratoire Langelier and Clinique du Pied Équilibre have all operated under this same banner. Given the nature of our activities (by medical prescription), transitioning to a single banner is complex and requires an adjustment period. Nevertheless, management sees many advantages to this amalgamation, from a marketing standpoint as well as from the perspectives of medical representation and patient communication.

Prior to the transition, the Company had three laboratories in the Laval area. The restructuring led to the closure of two laboratories. The redirection and transfer of patient files was seamless, but it negatively impacted a portion of this year's revenues.

3. Despite implementation of the consolidation strategy, the Company intensified its

R&D efforts. Today, the Company holds eight families of patents in more than twelve countries, in orthotics, prosthetics, medical technologies and human bionics.

a. Our R&D team is currently working on four projects. The National Research Council of Canada (NRC) and the Natural Sciences and Engineering Research Council (NSERC) have agreed to contribute funding for these projects, and it appears that once these efforts come through, new patents could be applied for.

b. Also, work continued on clinical studies confirming the OdrA's effectiveness, and we expect to release the results soon.

Development and perspectives Our current priorities and development plans include the following:

• Strengthened by our cash position, reactivate the exploration of potential acquisitions in Quebec and across Canada.

• Developing a multidisciplinary approach that unites "Équilibre" with dedicated orthopaedic health professionals under one roof.

• Continuing to market the OdrA brace. • Turning a profit from investment in our ERP-Health platform by increasing the

group's efficiency and effectiveness. • Continuing our investments in Research and Development (R&D)

I would like to thank all of our employees for their dedication and their ongoing desire to improve. The development and deployment of our ERP-Health platform required involvement at every level. Such a success is remarkable given the relatively small size of the group but the platform's potential is huge. Progress and commitment are values we all share and they have allowed us to make great achievements this year.


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I would also like to acknowledge the work of our senior management; my gratitude toward the Corporation’s Board of Directors for their advice and guidance and finally to thank our shareholders for their confidence.

We are all confident that Ergoresearch will reach higher levels in 2016 and will continue to grow for years to come.

Sylvain Boucher President and CEO Ergoresearch Ltd

PRICES and RECOGNITION

• The CEO of the Company, Mr. Sylvain Boucher, was named one of three finalistsfor the award for CEO of the Year Investissement Québec – Quebec TechnologyAssociation. (February 2015)

• The Company was designated during the last year, NATIONAL WINNER in thecategory " Innovation and Productivity - Medium Enterprises " PRIXENTRENEURS DESJARDINS 2014

• Ranked on PROFIT 500; the prestigious list of companies with the highest five-year growth in Canada by PROFIT magazine.(2011, 2012, 2013, 2014 and 2015)

• Ranked on L’Actualité magazine, the list of Quebec companies showingstrongest growth. (2012 and 2014)

SUBSEQUENT EVENTS TO THE FINANCIAL STATEMENTS

• On October 19, 2015, a refund of $500,000 was applied against a term loan underthe credit agreement providing for a right of early redemption.

• On September 21, 2015, the magazine "Canadian Business" and "PROFIT"Ergoresearch ranked at 251st place in the annual ranking "PROFIT 500," theprestigious list of fastest growing companies in Canada. Ergoresearch is part ofthe charts "PROFIT 500" for the fifth consecutive year, thanks to its five-yeargrowth of 236 %.


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Organization Chart June 30, 2015

ERGORESEARCH LTD TSX-V: ERG

Laboratoire Victhom inc 100% subsidiary

Division Head for:

• Clinique du Pied Équilibre • Laboratoire Langelier • LL custom • Ergorecherche • Victhom human bionics • Orthoconcept (2008) inc. • Laboratoire Podotech


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SELECTED CONSOLIDATED FINANCIAL INFORMATION

Selected consolidated financial information on June 30, 2015 and June 30, 2014 were derived from our audited consolidated financial statements and related notes. Audited consolidated financial statements were prepared in accordance with the IFRS. The financial information for the 3-month periods ended June 30, 2015 and June 30, 2014 is unaudited. BUSINESS PROFILE

Ergoresearch operates in the healthcare sector, a market that is in full expansion owing to aging populations. It develops innovative orthopedic solutions and products with high ranging effect on pain that are affordable and often reimbursed by third party payers. Non-invasive and non-toxic, these biomechanical devices feature patient benefits that are supported by extensive clinical proof and convincing scientific data.

Ergoresearch had developed the largest network of orthotics professionals in Quebec with twelve laboratories and over seventy satellite offices now known « EQUILIBRE, orthèses et biomécanique ». The Corporation that operated until September 2014 under Clinique du pied Equilibre, Orthoconcept and Laboratoire Langelier, proceeded with the consolidation of these entities under one single trademark : EQUILIBRE.

www.equilibre.net

The leading manufacturer of "intelligent" foot and specialty orthotics, including the OdrA (www.odra.ca), the Corporation is a trend-setter in creating durable medical equipment and software for the orthopedics market. The Corporation holds a portfolio of patents in bionics, including intellectual property on the Power Knee, the world’s only motorized prosthesis with artificial intelligence designed for above-knee amputees.

Ergoresearch Ltd is listed on the TSX Venture Exchange (TSXV) under the symbol ERG.

PRODUCT OVERVIEW PRODUCTS - Proprietary Technologies Expert-fit Technology - The Corporation was notably the first to develop and market the Expert-Fit™ technology on a large scale. Patented and exclusive to Ergoresearch, it comprises an expert clinical software, a manufacturing software, a podo-barometric sensor pad system (proprietary technology) and an optical scanning system. This technology also allows the mass production of custom fit 3D orthotics by using numerically controlled machine tools, and computer assisted manufacturing and design software.


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Expert-Fit™ technology has several advantages ‒ it is fast, and it offers a top quality, precision-cut finished product with minimal re-makes and adjustments. In addition, owing to the fact that it is mobile and linked to a robotized manufacturing plant, it generates additional revenues and interesting savings on labour costs.

Scanner technology:

More accurate than traditional cast-making methods that rely on plaster bandaging, this technology means orthotists will no longer resort to plaster when applying casts.

This developed technology is easy to use and very safe. Now any body part can be scanned in both 3D and in real time. Scanned files are transferred by Internet to Ergoresearch’s computing platforms, where the data is used to manufacture custom fit medical orthotics. FINANCIAL ADVANTAGES OF THE NEW SCANNING TECHNOLOGY If practical, ecological and clinical benefits are obvious, financial benefits are major. Scanners generate substantial savings:

• Plaster costs • Shipping costs • Increased productivity


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OdrA - Orthotic distraction device that relieves pain associated with knee osteoarthritis:

Ergoresearch exclusively launched the OdrA orthotic device on the Canadian market. The OdrA is the first distraction orthotic device of its kind. World-patented and developed in collaboration with Proteor – an Ergoresearch partner and France’s leading orthopedics provider – the OdrA’s Distraction and Rotation mechanism for Knee osteo-arthritis (OdrA) improves knee mobility and lessens intra-articular pressure that provokes pain. This condition affects close to 300,000 Quebecers/1.2 million Canadians. Manufacturing Ergoresearch assembles and manufactures its foot and specialty orthotics at two manufacturing plants located in Laval and Beloeil, QC. To craft its custom foot orthotics, Ergoresearch uses numerical control machine tools (NC or CNC) requiring no human intervention other than at the finishing stage. Operations are carried out via a series of coded instructions received by computer, using computer assisted design and manufacturing software (CAD/CAM). Machine tool cut, they deliver premium quality orthotic devices with remarkable precision and reproducibility.


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LICENSED TECHNOLOGIES AND ROYALTIES POWER KNEE - Worldwide license granted to Ossur

The Power Knee is the world’s first motorized prosthetic device destined for above-knee amputees. The Corporation has a licensing agreement with Össur pertaining to the Power Knee’s marketing and promotion; it is already paying out royalties on product sales. NEURO-STIMULATION : Sleep apnea component (license granted to a non-disclosed manufacturing in June 2014) :

The technology, based on the neurostimulation platform developed by Victhom, a business that Ergoresearch acquired in 2013, is an implantable medical device for recording and stimulation of peripheral nerves for treatment of obstructive sleep apnea. It can detect sleep apnea and deliver therapy only when necessary. According to the National Sleep foundation, Sleep apnea affects 18 million Americans. Sleep apnea has severe consequences on Quality of life, being strongly associated with high blood


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pressure, heart failure, diabetes and stroke. The Gold Standard Therapy, CPAP¹, is often rejected by patients.²

The monetization transaction which was completed in collaboration with its German partner, Otto Bock Healthcare, represents a strong validation of the potential of the sleep apnea technology. Under the confidentiality agreement executed, the sleep apnea technology could eventually generate additional royalties on future sales should this technology be commercialized.

¹ CPAP: Continuous Positive Air Pressure ² Weaver and Grunstein, 2008

TARGET MARKET Ergoresearch is focused on healthcare, with a vested interest in orthopedics and the musculoskeletal system. In coming years, the orthopedics sector will be in full effervescence owing to the following factors: • An aging population and its related joint problems; • High incidence of diabetes (foot); • High incidence of obesity (increased joint pressure).

The High Stakes of Healthcare - Fast Facts

• Healthcare costs in Canada soared from $37B in 1984, to over $192B in 2010. The public sector pays close to 70% of expenses;

• Retiring baby-boomers, higher life expectancy rates and the addition of new services, products and technologies have caused healthcare costs to soar nationwide. In turn, the public system is burdened with enormous economic pressure;

• Rapid increase in pathologies linked to aging; • Referring physicians and specialists request conclusive data before prescribing new

devices or treatment plans to their patients; • Technology is key to market differentiation and to implementing new expertise to the

benefit of patients. Orthopedic Laboratories and Foot Orthotics Markets

Markets serving these fields of activities are highly fragmented. This is partially due to the current assessment protocols and artisan manufacturing practices of the vast majority of laboratories. Without more objective assessment, manufacturing and measurement tools, a consolidation is near to impossible. Developing and integrating these technologies and protocols are the raison d’être for the Research and Development Department at Ergoresearch. The North-American foot orthotics market is estimated at US$1B+ per annum. Add to this another US$1B, if one takes into consideration orthopedic footwear and other foot care products: • $2.7B is currently spent on absenteeism, decreased productivity, insurance refunds;


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• $1.3B is currently spent on over-the-counter | mail-order foot product purchases. The Osteoarthritis Market

Osteoarthritis is the most common form of arthritis, and one of the leading causes of functional impairment. This disease can occur at any age – aging however being one of its leading risk factors. The occurrence of osteoarthritis (OA) generally appears around age 50, and its prevalence increases with time. All current treatments aim to slow the progression of the disease and relieve pain, but no cure has been put forward to date. For the time being, surgery alone has provided good results. It is nevertheless very expensive (over $40,000), invasive and rehabilitation is often quite lengthy. Orthopedic surgeons generally recommend surgery only when mechanical and metabolic treatments (anti-inflammatories, corticosteroids, etc.) no longer offer functional improvement or pain relief. An arsenal of non-pharmacological treatments is nevertheless available: Physiotherapy, weight loss, viscosupplementation, walking aids, foot and knee orthotics. Despite the thirty or so available treatments, not one provides results above the 0.8 mark – the threshold beyond which pain relief is rated as significant. Consequences are tragic for patients who must turn to a number of healthcare professionals for additional advice and treatment. Steps are complex, long and generally inconclusive – and further aggravate an already taxed healthcare system. To properly assess sales potential on the osteoarthritis market, please read a few fast facts about OA: • 30 million+ OA sufferers in the United States; • 3 million+ adult OA sufferers in Canada (10%); • Economic impact of OA per annum: US$65B; • 50% of individuals 65+ are occasional sufferers; 80% of individuals 75+ are confirmed

sufferers; • Total knee replacement surgery is estimated to cost over $40,000. With a 2.25 result,

surgery has been the only method to date to present a decrease in average pain intensity, scoring well above the 0.8 pain relief threshold.

Our exclusive orthotic, featuring unique Ergoresearch design enjoys a clear advantage over the spectrum of other efficient treatments available today. Growth Strategy

Ergoresearch has established a growth strategy that rests on three principal pillars: Innovation, conquering the Canadian market via acquisitions and deployment at an international level by way of partnerships, licences or manufacturing agencies.

• Innovation at every level – products, services and marketing – is the driving force behind the Ergoresearch strategy. It is also the basis for quality relationships with clients, be they orthopedic professionals or patients. The Ergoresearch approach is unique: vested in innovation and research, it stays at the cutting edge of orthopedics. It is to the firm’s advantage to develop its own technologies in a rigorous clinical environment where patient benefits remain the core concern of every one of our team members.

• Our growth strategy is chiefly built around acquisitions or partnerships.


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RESULTS OF OPERATIONS Comparison between Fiscal 2015 and Fiscal 2014 Revenues Total revenues for the year ended June 30, 2015 decreased 13.2%, going from $17,862,341 to $15,498,000. The decrease in revenues amounts to $2,364,341 and is mainly due to the following:

• The Company recorded in 2014 non-recurring income related to the monetization of its sleep apnea technology in the amount of $589,948

• The closure of two laboratories (laboratory Langelier Laval and laboratory Podotech Laval) has negatively affected the sales of the last year.

• The evolution of the market, the organization of care and increased competition has negatively affected our products last year.

• Cosmetic imitations of ODRA brace appeared on the market this year and have led to some confusion in the medical community and a decline in sales of this product.

OPERATING EXPENSES Costs of Goods Sold, Selling and Operating Expenses went from $15,762,300 (88.2% of revenues) in 2014 to $15,615,511 (100.7% of revenues) in Fiscal 2015. The decline in operating margins was due to lower revenue and the following changes:

Costs of Goods Sold, selling and operating expenses

These expenses went from $11,879,464 or 66.5% of revenues in 2014 to $11,718,512 or 75.6% of revenues in Fiscal 2015. Although these charges have decreased compared to 2014, the percentage compared to revenues has increased because of the following:

• Costs related to the deployment of new brand (brand building, advertising

materials and website are not capitalized under IFRS). • Staff training costs related to the integration of the ERP platform - Health. • Laboratoire Langelier Laval and Podotech Laval closing costs were entirely

included in the operating costs.

Administrative Expenses

Administrative expenses totaled $3,533,259 (22.8% of revenues) for Fiscal 2015 compared to $3,682,794 (or 20.6% of revenues) for Fiscal 2014. This decrease is mainly due to:

• Lower wages in particular due to the closure of branches and the integration of the

ERP system to all branches which helped to restructure a part of the organization.


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Research and Development Costs, net of tax credits

Research and Development costs amounted to $360,740 in the past year or 2.3% of revenues, as compared to $200,042 or 1.1% of revenues in 2014 an increase of $160,698 representing a growth of 80.3%. Related tax credits provisioned for this year are $55,959.

Other Elements Other items that can be found only in 2015 amounted to $339,912 (2.2% of revenues) and are explained by the two elements:

• The Quebec government in its interpretation of the laws on consumer taxes, issued contribution projects for all companies facing the GST - QST on orthopedic shoes with a medical prescription. Given the asymmetrical application in Canada and jurisprudence, government authorities have decided not to demand payment for a moratorium period of indefinite duration. Management considers it more likely that the government authorities will move forward with its new interpretation. Therefore, management has provisioned the entire amounts that totaled $170,393.

o The company has since ordered our laboratories to charge consumption taxes on footwear products despite the presence of medical prescription.

• During the acquisition of Victhom Human Bionics in 2013, tax credit receivables of year end 2008 were still on the balance sheet of the acquired company. These tax credits (R & D) were, since then, the subject of a refusal by the government and the Company will incur costs to challenge the decision. In this context, management decided to reverse this entire asset amounting to $169,519.

Products and Financial Expenses Interest and bank charges amounted to $222,125 (or 1.4% of revenues) for Fiscal 2015 compared to $250,083 (or 1.4% of revenues) in 2014. Interest on long-term debt/Interest income for their part went from $197,329 in 2014 to $(14,399) in 2015. This improvement is attributable to interest income of $130,544 generated during the exercise by short-term investments Net loss The Corporation’s net loss amounted to $(7,023,218) this year. The balance is explained by the following non - recurring items:

• The two elements that are found in the section "Other Elements" listed above totaling $339,912.

• The write-off of $6,401,319 of deferred income taxes and tax credits related to the periodic review of financial projections in the context of IFRS and allowing for the future use of tax credits. In the context where the financial results are down, that the Company has not put its cash to propel future growth, Management has had


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to revise projections and thus write off an amount of $6,401,319 of deferred income tax assets and deferred tax credit. It is important to note that the Company still has capital losses, tax credits for investment and research and development expenses, which are not registered in the balance sheet. The portion of unregistered capital losses and research and development expenditure totaled $52,673,117 at the federal and $36,437,851 at the provincial. Deferred tax credits non-registered at federal totaled $3,712,203. The maturities of the non-capital losses and federal tax credits range between 2023 and 2033. Research and development expenses have no maturity dates. The future income tax assets on the balance sheet and Note 19 to the Financial Statements will be reviewed periodically.

Operational other items also impacted net income for the year ended 30 June 2015 amounting to $314,000. Among these include:

• Expenses related to the implementation of the new trade brand Équilibre. • The non- capitalized costs for the completion of the implementation of the new

ERP – health systems. • Cancellation of a raw materials supplier in the prepaid account. • The costs for branch closures (Podotech and Langelier Laval).

Here is the operational non-recurring item for the year ended June 2014:

• $(589,948): Royalties from the monetization of sleep apnea technology, net of fees.

Here is other operational element for the year ended June 2014:

• $205,231: Write-off of stock. The Company has launched a new generation of the podo-barometric sensor pad - making obsolete the old sensor technology and also conducted a write-off of obsolete shoes.

The Corporation’s adjusted EBITDA excluding unusual elements amounted to $979,601 for 2015 fiscal year compared to $2,453,016 for the period ended June 30, 2014. Non-controlling interest amounted to $(41,763) in 2015, compared to $(5,297) in 2014. Tax expenses were $6,380,581 of which $(20,738) has been recorded as recovered tax. Ergoresearch’s statutory tax rate is 26.90%.


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ADJUSTED EBITDA2

Adjusted EBITDA of the Company amounted to $665,601 in 2015 compared to $2,247,785 for the year ended June 30, 2014.

2 Earnings before interest, taxes and depreciation (EBITDA) is a performance measure that is not established according to generally accepted accounting principles (“GAAP”) in Canada, and is not a substitute for net profit. Because the EBITDA may not be calculated the same manner by every corporation, it may well be that the Company’s results cannot be directly compared to similar measures used by other firms.


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SUMMARY OF QUARTERLY RESULTS

Analysis of Fourth Quarter Results Fiscal 2015 Revenues Revenues in the fourth quarter went from $5,321,918 to $3,965,783, down by 25.5% in relation to last year. Decline occurring in this quarter is mainly attributed due to the following:

• The Company recorded in fourth quarter 2014 a non-recurring income related tothe monetization of its sleep apnea technology in the amount of $589,948.

• The closure of two laboratories (laboratory Podotech and laboratory Langelier Laval) has negatively affected the sales of the fourth quarter.

• The evolution of the market, the organization of care and increased competition has negatively affected our products last year.

• Cosmetic imitations of ODRA brace appeared on the market this year and have led to some confusion in the medical community.


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OPERATIONAL CHARGES The operational charges went from $4,506,145 (84.7% of revenues) in the fourth quarter of 2014 to $4,264,649 or 107.5% of revenues for this quarter. The decline in operating margins was due to lower revenue and can be attributed to the following:

Costs of Goods Sold, Selling and Operating Expenses

Cost of goods sold, selling and operating expenses decreased in the fourth quarter of 2015 to $3,240,905 or 81.7% of revenues, compared to $3,391,343 or 63.7% of revenues for the same period last year. Although these charges have decreased compared to 2014, the percentage compared to revenues has increased because of the following:

• Maintaining our clinical staff and our sales force, despite lower revenues largely

explain this decline. • Products with high marginal contributions are down this year, also affecting the

"mixed" product and causing an overall increase in costs of goods sold.

Administrative Costs

Ergoresearch Ltd’s administrative costs went from $952,961 (or 17.9% of revenues) in 2014 to $854,624 (or 21.5% of revenues) in the fourth quarter of Fiscal 2015. This decrease is mainly due to the integration of the ERP system at all branches that helped restructure a part of our organization.

Research and Development Costs, net of tax credits

Research and Development costs amounted to $147,510 for fourth quarter (3.7% of revenues), compared to $140,939 (2.6% of revenues) for the same quarter last year.

Other Elements Other items that can be found only in the last quarter of 2015 amounted to $339,912 (8.6% of revenues) and are explained by the two following:

• The Quebec government in its interpretation of the laws on consumer taxes, issued contribution notice for all companies facing the GST - QST on orthopedic shoes under medical prescription. Given the asymmetrical application in Canada and jurisprudence, government authorities have decided not to demand payment for a moratorium period of indefinite duration. Management considers it more likely that the government authorities will move forward with the said interpretation and therefore Management has provisioned the entire amounts that totaled $170,393.

• During the acquisition of Victhom Human Bionics in 2013, tax credit receivables of year end 2008 were still on the balance sheet of the acquired company. These tax credits (R & D) were, since then, the subject of a refusal by the government and the Company will incur costs to challenge the decision. In this context, management decided to reverse this entire asset amounting to $169,519.


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Financial Income and Expenses Financial expenses were $54,099 (or 1.4% of revenues) in the fourth quarter of Fiscal 2015, compared to $63,092 (or 1.2% of revenues) in 2014. Financing income and expenses were $(8,855) in the fourth quarter of Fiscal 2015, compared to $42,214 in 2014. This improvement is due to the prepayment of debt of $500,000 made in July 2014 and interest income of $32,299 generated in the last quarter of 2015 by short-term investments. Net Profit In the fourth quarter of Fiscal 2015, the Corporation’s net loss totaled $(7,053,108) compare to a net profit of $652,612 for the same quarter last year. These are non-recurring items that explain some of this decline:

• The two elements that can be found under "other elements " totaling $339,912

• The reversal of deferred income taxes and tax credits in the amount of $6,387,319.

Operational other items also impacted net income for the latest quarter ending June 30th, 2015 for an amount of $ 169,000 which detail as follows:

• Expenses related to the implementation of the new trade brand Équilibre, • Deletion of a supplier of raw materials account prepaid.

Here the operational non-recurring item for the fourth quarter of 2014:

• $(589,948): Monetization of sleep apnea technology, net of related costs. Here the other operational element for the last quarter of 2014:

• $205,231 Stock write-off. The Company launched a new generation of sensor - carpet making obsolete the old technology and proceeded to radiation of certain stocks of obsolete shoes.

The share of non-controlling interest is $16,267 in the fourth quarter of Fiscal 2015 compared to $(32,942) in 2014.

CASH POSITION AND FINANCING ACTIVITIES

Cash and short-term investment at the end of this period amounted to $10,003,923 down by $502,783 over last year. Cash Flows from Operating Activities

Cash flows from operating activities were $1,335,207 in Fiscal 2015, compared to $1,774,141 in Fiscal 2014. This variation is mainly explained by the decrease in net income excluding the deferred tax charge. This decrease was offset by an improvement in non-cash working capital items including, among other things, a decrease in trade and other receivables.


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Cash Flows - Investment Activities

Cash flows related to investing activities in Fiscal 2015 totalled $383,676 compared to $8,538,018 in Fiscal 2014. This decrease stems from the fact that in 2014, an acquisition of temporary investments of $7,811,604 had been made. Purchases of tangible and intangible assets meanwhile, totaled $266,372 compared to $715,553 for fiscal 2014. Cash Flows - Financing Activities

Cash flows related for financing activities in Fiscal 2015 totaled $1,571,618 compared to $2,780,394 in Fiscal 2014. A 500,000 share issuance was held in consideration for the acquisition of 49% of common shares of Orthoconcept (2008) inc.therefore not generating any cash this year compared to $4,769,682 in 2014. Finally the Company repaid its long- term debt in the amount of $1,579,118 in 2015 against $2,076,288 in fiscal 2014 At 30 June 2015, Ergoresearch Ltd enjoyed a cash amount of $2,075,015 in addition to the short-term investments of $7,928,908 Liquidities will be sufficient to meet the Corporation’s obligations, to pursue its marketing efforts, to maintain its technologies current and to maintain its internal growth after June 30, 2015. COMMITMENTS

Future minimum payments due under leases for company premises and for an advertising contract are as follows:

2015 2014

Under 1 year $1,108,498 $1,102,545 Over 1 year + under 5 years 2,593,575 2,486,708 Five years+ 412,907 1,473,732

$4,114,980 $5,062,985

Rental expense for the period ended June 30, 2015 were $1,349,073 ($1,402,662 in 2014).


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OFF-BALANCE-SHEET TRANSACTIONS

The Corporation has no commitments that are not disclosed in its consolidated financials, other than business rental contracts regarding leaseholds, as described in the above chart under “Commitments ”.

SHARES ISSUED

The Corporation issued 500,000 common shares to buy the 49% of non-controlling interest of Orthoconcept (2008) inc. on April 28, 2015. No cash consideration was received by the Company. The shares issued will be in escrow for a period of four (4) years, of which half will be released after twenty-four (24) months.

Also the Corporation issued 50,000 common shares resulting from the exercise of stock options for a gross amount of $7,500 in Fiscal year 2015.

RELATED PARTY TRANSACTIONS - FISCAL 2015

The following is a list of expenses which the Corporation incurred with shareholders or their holding companies during the fiscal year:

Consultant Fees: $80,000

These fees represent compensation for officers, directors and/or corporations affiliated with Ergoresearch.

$60,000: Fees allocated in past 12 months ($60,000 over 12 months in 2014) to Mr. Sylvain Boucher’s holding company under a signed mandate. Mr. Boucher is President and Chief Executive Officer of the Corporation and its subsidiaries. A salary of $85,000 was also paid out to him in Fiscal 2015.

$20,000: Fees allocated over past 12 months ($20,000 over 12 months in 2014) to Mrs. Danielle Boucher’s holding company. Mrs. Boucher is a Director of the Corporation and she provides clinical services, training, and advice to the Corporation and its subsidiaries. Mrs. Boucher also earned a salary in the amount of $70,315.

Other Transactions between Related Parties

$331,136: Purchase transactions with an entity having a common shareholder (raw material).

$87,543: Payable to an entity having a common shareholder.

$6,704: Transaction in the form of royalty products, with an entity having a common shareholder.


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FINANCIAL POSITION Assets

Cash and short term investments amounted to $10,003,923 for Fiscal year ended June 30, 2015 compared to $10,506,706 on June 30, 2014. Trade and accounts receivables decreased by $684,669 2015 compared to $1,641,817 on June 30, 2014. The decrease of $957,148 is mainly due to the collection of royalties $(694,057) that receivables on June 30, 2014. The royalties were cashed in July 2014. Income taxes receivable amounted to $27,424 and are recorded in current assets Inventories totaled $2,237,581 compared to $2,266,327 on June 30, 2014. Investment tax credits receivables for Fiscal 2014 have not been yet received due to an audit process by both levels of government. Investment tax credits for Fiscal 2015 were recorded. The short term investment tax credits receivable amount to $120,158. Property, plant and equipment were adjusted based on acquisitions of equipment assets, net of depreciation for the Fiscal year 2015. They amounted to $127,086 during Fiscal 2015. This increase is due, among other things, the capitalization of the technology of podo-barometric sensor pads, and the cost of changing the signs of the new trade brand Équilibre. Intangible assets include a number of elements (patient’s file, software, license and patents, non-compete clause, etc...) of which intangible assets from:

• Orthoconcept, acquired in October 2008 • Clinique du pied Équilibre inc., acquired in 2005 • Laboratoire Podotech, acquired in 2012 • Laboratoire Langelier, acquired in 2013 • Victhom Human Bionics, acquired in 2013

Intangible assets were adjusted in relationship to the acquisition of intangible assets in Fiscal 2015. The acquisition of intangible assets amounted to $139,286 and follows suit to acquisitions and the customization of the new ERP-health software that took place during the year. Goodwill recorded in the balance sheet comes from

• the acquisition of Clinique du pied .Équilibre (March 2005) $545,912 • the acquisition of Laboratoire Podotech (October 2012) $169,946 • the acquisition of Laboratoire Langelier (January 2013) : $1,976,509

The Goodwill recorded on the balance sheet is justified by the overall cashflow generated by the different divisions. The change in deferred taxes and tax credits is mainly due to the partial derecognition of tax attributes acquired in the acquisition of Victhom Human Bionics inc.


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Liabilities The Corporation and its subsidiaries have a line of credit in the approximate amount of $550,000. On June 30, 2015 the Corporation was not using this line of credit. Trade and other payables went from $1,550,664 on June 30, 2014 to $1,663,403 on June 30, 2015. This increase comes from the important acquisition of commodities at the end of the year.

Deferred revenues decreased by $130,452. These deferred revenues are mostly deposits made by patients with regard to the purchase of customized products as well as deferred revenues associated to our customer loyalty program. Long-term debt due within next year amounts to $1,031,213. Long-term debt amounted to $1,871,868 in 2014 and $840,653 on June 30, 2015. In July 2014, the Corporation proceeded with a payment in the amount of $500,000 on a long term debt without penalties. Deferred lease obligations consist of free rent periods granted by landlords to the Corporation and subsidiaries. All payments due during the term of the leases were consolidated and are amortized on a straight line basis over the term of the respective leases. On June 30, 2015, deferred lease obligations amounted to $74,281 down by $4,865 compared to last year. INFORMATION ON SHAREHOLDER’S EQUITY Information on the outstanding capital stock as of June 30, 2015 for Ergoresearch Ltd

The authorized share capital of the Company consists of the following:

An unlimited number of common shares, voting and participating, without par value An unlimited number of preferred shares, issuable in series, rights, privileges and conditions to be determined when issued, without par value

Ordinary shares issued and outstanding are as follows:

Number Dollars

Balance at June, 30 2014 75,722,673 $14,692,692 Issued, 500,000 225,000


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Exercise of stock option 50,000 13,495

Balance at June, 30 2015 76,272,673 $14,931,187

The Company announced April 28, 2015, an issue of the treasury of 500,000 common shares at a price of $0.45 per common share for total proceeds of $225,000 related to the acquisition of the 49 common shares Orthoconcept 2008 inc. held by non-controlling interest. No cash consideration was received by the Company. The shares issued will be in escrow for a period of four (4) years, of which half will be released after twenty-four (24) months.

Stock options outstanding as of June 30, 2015 – 1,641,667 at an average exercise price per share of $0.20.

50,000 stock options were exercised in Fiscal 2015, for a cash consideration of $7,500

500 000 shares of the capital stock of the Corporation are under escrow.

LEGAL AFFAIRS The Corporation is facing no significant litigation at present time. SIGNIFICANT ACCOUNTING POLICIES

The accounting policies set out below were consistently applied to all the periods presented in these consolidated financial statements unless otherwise noted.

(a) Statement of compliance:

The consolidated financial statements for the year ended June 30, 2015 and 2014 have been prepared in accordance with Canadian generally accepted accounting principles, as they are set out in Part 1 of the CPA Canada Handbook, which includes the International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

(b) Basis of measurement:

The consolidated financial statements have been prepared on a historical cost basis except for the share-based compensation which is measured at fair value at the date of grant. The consolidated financial statements have been prepared on a going concern basis.

(c) Functional and presentation currency:

The items of the financial statements of each entity of the Company are measured by using the currency of the primary economic environment in which the entity operates (the "functional currency").

The consolidated financial statements are presented in Canadian dollars, the functional currency of Ergoresearch Ltd. All subsidiaries of the Company also use the Canadian


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dollar as their functional currency. All financial information presented in Canadian dollars has been rounded to the nearest dollar, except for per share data.

(d) Approval of consolidated financial statements:

The consolidated financial statements were approved on October 23, 2015 by the Board of Directors who also approved their publication.

(e) New accounting standards policies and interpretations:

New accounting standards and amendments were applied when preparing the consolidated financial statements for the year in June 30, 2015. These changes did not have any significant impact on the consolidated financial statements.

Amendments to IAS 32 - Offsetting Financial Assets and Financial Liabilities

In December 2011 the IASB published Offsetting Financial Assets and Financial Liabilities. These amendments to IAS 32 are to be applied retrospectively.

The amendments to IAS 32 clarify that an entity currently has a legally enforceable right to set off if that right is:

• not contingent on a future event; and

• enforceable both in the normal course of business and in the event of default, insolvency or bankruptcy of the entity and all counterparties.

The amendments to IAS 32 also clarify when a settlement mechanism provides for net settlement or gross settlement that is equivalent to net settlement.

IFRIC 21 – Levies

In May 2013, the IASB issued IFRIC 21, Levies. IFRIC 21 is to be applied retrospectively.

IFRIC 21 provides guidance on accounting for levies in accordance with the requirements of IAS 37, Provisions, Contingent Liabilities and Contingent Assets. The interpretation defines a levy as an outflow from an entity imposed by a government in accordance with legislation. It also notes that levies do not arise from executory contracts or other contractual arrangements. The interpretation also confirms that an entity recognizes a liability for a levy only when the triggering event specified in the legislation occurs.

(f) New accounting standards and interpretations not yet adopted:

Annual Improvements to IFRS 2012-2014 Cycle

On September 25, 2014 the IASB issued narrow-scope amendments to a total of four standards as part of its annual improvements process. The amendments will apply for annual periods beginning on or after January 1, 2016. Earlier application is permitted, in which case, the related consequential amendments to other IFRS would also apply. Each of the amendments has its own specific transition requirements.

Amendments were made to clarify the following in their respective standards:

• Changes in method for disposal under IFRS 5, Non-current Assets Held for Sale and Discontinued Operations;


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• "Continuing involvement" for servicing contracts and offsetting-related disclosures in condensed interim financial statements under IFRS 7, Financial Instruments:

Disclosures;

• Discount rate in a regional market sharing the same currency under IAS 19, Employee Benefits;

• Disclosure of information "elsewhere in the interim financial report" under IAS 34, Interim Financial Reporting.

The Company intends to adopt these amendments in its financial statements for the annual period beginning on July, 2016. The extent of the impact of adoption of the standard has not yet been determined.

Disclosure Initiative: Amendment to IAS 1

On December 18, 2014 the IASB issued amendments to IAS 1, Presentation of Financial

Statements, as part of its major initiative to improve presentation and disclosure in financial report (the Disclosure Initiative). The amendments are effective for annual periods beginning on or after January 1, 2016. Early adoption is permitted.

The amendments will not require any significant change to current practice, but should facilitate improved financial statement disclosures.


IFRS 15, Revenue from Contracts with Customers

On May 28, 2014 the IASB issued IFRS 15, Revenue from Contracts with Customers. The new standard is effective for annual periods beginning on or after January 1, 2018. Earlier application is permitted. IFRS 15 will replace IAS 11, Construction Contracts, IAS 18, Revenue, IFRIC 13, Customer Loyalty Programs, IFRIC 15, Agreements for the

Construction of Real Estate, IFRIC 18, Transfer of Assets from Customers, and SIC 31, Revenue- Barter Transactions Involving Advertising Services.

The standard contains a single model that applies to contracts with customers and two approaches to recognising revenue: at a point in time or over time. The model features a contract-based five-step analysis of transactions to determine whether, how much and when revenue is recognized. New estimates and judgmental thresholds have been introduced, which may affect the amount and/or timing of revenue recognized.

The new standard applies to contracts with customers. It does not apply to insurance contracts, financial instruments or lease contracts, which fall in the scope of other IFRS.


IFRS 9 - Financial Instruments

On July 24, 2014, the IASB issued the complete IFRS 9 (IFRS 9 (2014))


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The mandatory effective date of IFRS 9 is for annual periods beginning on or after January 1, 2018 and must be applied retrospectively with some exemptions. Early adoption is permitted. The restatement of prior periods is not required and is only permitted if information is available without the use of hindsight.

IFRS (2014) introduces new requirements for the classification and measurement of financial assets. Under IFRS 9 (2014), financial assets are classified and measured based on the business model in which they are held and the characteristics of their contractual cash flows.

The standard introduces additional changes relating to financial liabilities.

It also amends the impairment model by introducing a new "expected credit loss" model for calculating impairment.

IFRS 9 (2014) also includes a new general hedge accounting standard which aligns hedge accounting more closely with risk management. This new standard does not fundamentally change the types of hedging relationships or the requirement to measure and recognize ineffectiveness; however, it will provide more hedging strategies that are used for risk management to qualify for hedge accounting and introduce more judgement to assess the effectiveness of a hedging relationship.

Special transitional requirements have been set for the application of the new general hedging model.

The Company intends to adopt IFRS 9 (2014) in its financial statements for the annual period beginning on July, 2018. The extent of the impact of adoption of the standard has not yet been determined.

Clarification of Acceptable Methods of Depreciation and Amortization (Amendments to

IAS 16 and IAS 18)

In May 2014, the IASB issued amendments to IAS 16 Property, Plant and Equipment and

IAS 38 Intangible Assets. The amendments made to IAS 16 explicitly state that revenue-based method of depreciation cannot be used for property, plant and equipment. This is because such methods reflect factors other than the consumption of economic benefits embodied in the asset. The amendments in IAS 38 introduce a rebuttable presumption that the use of revenue-based amortization methods for intangible assets is inappropriate. This presumption could be overcome only when revenue and consumption of the economic benefits of the intangible asset are "highly correlated" or when the intangible asset is expressed as a measure of revenue. The amendments will apply prospectively for annual periods beginning on or after January 1, 2016. Early adoption is permitted.

The Corporation intends the amendments to IAS 16 and IAS 18 in its financial statements for the annual period beginning on July, 2016. The Corporation does not expect the amendments to have a material impact on the financial statements.


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MANAGEMENT’S KEY SOURCES OF ESTIMATION UNCERTAINTY AND CRITICAL

ACCOUNTING JUDGMENTS:

The preparation of the consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. The amounts and disclosures in the notes reflect the best estimate of management as to the overall economic conditions and the most likely guidelines of the Company. The estimates are reviewed periodically and adjustments are made as necessary to the net income of the period in which they become known. Information about critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements are as follows:

Goodwill recoverability Goodwill is not subject to amortization and is tested for impairment annually or more frequently if events or circumstances indicate that these assets have suffered an impairment loss. Impairment is assessed by comparing the recoverable amount of the CGU group to which goodwill is allocated and its carrying amount. If the carrying value of the CGU exceeds its recoverable amount, an impairment loss is recognized in the consolidated statement of comprehensive income. For the purposes of impairment testing, the goodwill is allocated to a single cash generating unit, being the Company as a whole, which represents the lowest level at which the goodwill is monitored for internal management purposes. The recoverable amount of the CGU group is established by calculating the fair value less costs to sell. This value is determined using the price of the shares on the active market. The fair value of the CGU group is classified as Level 3 in the fair value hierarchy.

Impairment tests were performed on June 30, 2015 and June 30, 2014 by comparing the carrying amount of goodwill the recoverable amount of the CGU group to which goodwill has been allocated. Management has determined that no impairment loss had occurred. In addition, at June 30, 2015, no events or circumstances suggest that those assets have suffered an impairment loss. Income tax The Company recognizes tax expenses according to the deferred tax asset and liabilities method. Deferred tax assets and liabilities are determined in respect to the difference between the tax bases of the assets and liabilities and their carrying amounts. Deferred tax assets also include non-refundable deferred tax credits related to business acquisitions that can only be claimed against future income taxes payable. Any change in the net amount of deferred tax assets and liabilities is recorded in net income. Deferred tax assets and liabilities are determined using tax rates and laws that have been enacted or substantively enacted and are expected to apply to taxable income in the years in which the assets and liabilities will be recovered or settled. Deferred tax assets are recognized to the extent that their realization is probable.


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In estimating the probability of realization of deferred tax assets, management considers whether it is more likely than not that a portion or all of the deferred tax assets will be realized. Ultimately, the realization of deferred tax assets depends upon the generation of future taxable income. If the Company determines that it can realize its tax assets, it will adjust the amount and adjust the income for the year in which it comes to this conclusion. At June 30, 2014 and June 30, 2015, the Company recorded respectively $10,853,838 and $4,454,519 in deferred tax assets. Business combinations The determination of fair values associated with identifiable intangible assets following a business combination and the recognition of tax attributes requires management to make assumptions. This is particularly the case when the Company calculates such fair values internally using appropriate valuation techniques which are generally based on a clarification of expected future cash flows. These evaluations are linked closely to the assumptions made by management regarding the future performance of the related assets and the discount rate used. Significant changes to these assumptions may vary significantly fair values associated with identifiable intangible assets following a business combination and the recorded tax attributes. Therefore these changes may result in the recognition of an impairment charge, which is recognized in income in the period in which these changes occur, if applicable.

RISKS AND UNCERTAINTIES Monitoring and improving its operations are constant concerns at the Corporation. In view of this, understanding and managing risks are important parts of the Corporation's strategic planning process. The Board of Directors requires that the Corporation's senior management identify and properly manage the principal risks related to the Corporation's business operations. Ergoresearch is involved in an industry subject to various risks and uncertainties that could have an adverse effect on its business, operating results and financial position. The risks and uncertainties discussed below are significant, but are not the only factors that could have an impact on the Corporation. Insurance coverage for orthopaedic products Orthopaedic products are often covered by insurance plans (personal or governmental). Ergoresearch’s sales would be affected, should this coverage change or be abolished. Difficulty of Integrating Acquired Businesses Management may consider purchasing companies that fit particular niches within Ergoresearch’s overall corporate strategy. These acquisitions involve the commitment of capital and other resources, and large acquisitions will have a major financial impact in


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the year of acquisition and beyond. The speed and effectiveness with which Ergoresearch integrates acquired companies into its existing businesses can have a significant short-term impact on Ergoresearch’s ability to achieve its growth and profitability targets. Ergoresearch may pursue growth through acquisitions. There is no assurance that it will be able to acquire businesses on satisfactory terms, or at all. The successful integration and management of acquired businesses involves numerous risks that could adversely affect Ergoresearch’s growth and profitability, including that: (a) Ergoresearch’s management may not be able to successfully manage the acquired operations and the integration may place significant demands on its management, thereby diverting their attention from existing operations; (b) Ergoresearch’s operational, financial and management systems may be incompatible with or inadequate to integrate effectively and to manage acquired systems; (c) Acquisitions may require substantial financial resources that could otherwise be used in the development of other aspects of the business of Ergoresearch; (d) Acquisitions may result in liabilities and contingencies which could be significant to the operations of Ergoresearch; and (e) Personnel from Ergoresearch’s acquisitions and its existing businesses may not be able to work together successfully, thereby impacting negatively its existing business. There is no assurance that Ergoresearch will be able to successfully integrate its acquisitions and its failure to do so could adversely affect the business, operating results and financial condition of Ergoresearch. Finally, the payment of an acquisition may lead to the depletion of our cash. In addition, there is a risk that our valuation assumptions, our customer loyalty and our related forecasting models related to the acquisition of a product or a company either erroneous or inappropriate due to unforeseen circumstances or not ensuring that we overvalue the acquisition target. There is also a risk that the anticipated benefits of an acquisition may not materialize as planned or within the period or the expected extent. Technological Change and Obsolescence O&P technology is undergoing development and change. New technologies may be developed, or existing technologies refined, which could render Ergoresearch’s existing equipment technologically or economically obsolete. Due to cost factors, competitive considerations or other constraints, there can be no assurance that Ergoresearch will be able to acquire or have access to any new or improved equipment that Ergoresearch may need in order to serve its clients and customers. Any inability of Ergoresearch to provide state-of-the-art technologies may adversely affect Ergoresearch’s ability to attract customers, and, accordingly, its business, financial condition and results of operations. Dependence on Computer Assisted Production Equipment and Information Technology Systems Ergoresearch’s business depends on the continued and uninterrupted performance of Ergoresearch’s information technology systems and computer assisted production equipment. Sustained system failures or interruptions could disrupt Ergoresearch’s ability


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to operate effectively. Ergoresearch’s business, results of operations and financial condition could be adversely affected by a system failure.

Ergoresearch computer systems are exposed to various sources of damage, including telecommunications failures, malicious acts and natural disasters. Furthermore, despite the measures implemented to protect the network, some servers Ergoresearch are potentially vulnerable to break-ins, computer hacking, computer viruses and similar hazards. Despite the precautions taken by the Company, unforeseen problems could cause failure of its information technology systems and insurance coverage may be insufficient to adequately compensate for losses.

Dependence on key personnel

The Corporation relies heavily on its senior officers. The loss of their services would have a material adverse effect on the Corporation’s business. However, these officers are shareholders of the Corporation, which makes their departure unlikely. The Corporation has nonetheless subscribed, and is a beneficiary to, life insurance policies on the lives of Sylvain Boucher and Danielle Boucher to cover the financial risk.

Uncertainty regarding penetration of the target market

The commercial success of the Corporation’s products as compared with those of its competitors depends on their acceptance by potential users and their caregivers, the medical community and distributors. Given that the technology is relatively new, there is no way to accurately assess the total market for Expert-fit, Odra and Power Knee. Acceptance will largely depend on the Corporation’s reputation, its marketing strategy, after sales service and product performance. The Corporation’s success will depend on its ability to maintain and expand its sales network.

Growth management

As a result of the rapid growth of the field in which it operates, there will be significant pressure on the Corporation’s management, operations and technical resources. There can be no assurance that the Corporation will be able to manage the growth of its business. The Corporation’s inability to implement coherent management systems, add economical resources or adequately manage its expansion would have a significant and unforeseeable impact on its operations and operating results.

Risks related to production activities

Production activities are subject to a number of unforeseeable technological problems and delays. Ergoresearch operates two production sites. Any important damage to these sites would have a significant impact on its operations.

Licences, patents and proprietary rights

Ergoresearch’s performance and ability to compete are dependent to a significant degree on its intellectual property (trade secrets and process secrets). Ergoresearch relies on


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trade secrets and process secrets, as well as confidentiality agreements and technical measures to establish and protect its proprietary rights. While Ergoresearch has endeavoured to protect its intellectual property, there can be no assurance that the steps taken by the Corporation will prevent misappropriation of Ergoresearch’s intellectual property or that agreements entered into for that purpose will be enforceable. Ergoresearch’s strategies to deter misappropriation could be inadequate in light of the following risks:

a) Undetected misappropriation of its proprietary information or materials; and b) Development of similar applications by its competitors;

If any of these risks materialize, Ergoresearch could be required to spend significant amounts to defend and protect its rights, and its managerial resources could be diverted. In addition, its proprietary rights may decline in value or not be enforceable; Provisions for Income Taxes may not be Sufficient The computation of the provision for income taxes involves tax interpretations regarding matters such as the deductibility of expenses and the calculation of tax credits. Tax filings are subject to audit by taxation authorities. There is no assurance that the tax filings by Ergoresearch will not be disputed by taxation authorities. Disagreements with applicable taxation authorities could have a material adverse effect on Ergoresearch. See “Risks Relating to the Acquisition of Victhom Human Bionic” below for more specific comments on income tax related risks. Risks Relating to the Acquisition of Victhom Human Bionic Laboratoire Victhom inc. is a corporation resulting from the amalgamation of Ergorecherche inc. and Victhom Human bionic inc.; As such, Laboratoire Victhom inc. may also be responsible for the obligations of Victhom Human bionic existing before the amalgamation. The taxation authorities may also dispute certain tax attributes. Capital needs The Corporation expects its available funds to be sufficient to meet its cash requirements, as it assesses them at this time. Should the Corporation’s plans change, should its assumptions be modified or prove inaccurate or should revenues not allow all of its needs to be met as originally anticipated, additional funding may be required. There is no guarantee that additional funds will be available on terms and conditions that would be acceptable to the Corporation and that would allow for cost-effective marketing of the Corporation’s products. Current global financial situation The current global financial situation is volatile and characterized by increased volatility, while many financial institutions went bankrupt or were taken over by the government authorities. This helped to reduce the liquidity of financial institutions and thus the supply of credit available to them and to the issuers who borrow from them. These factors may affect the Company's ability to obtain equity or debt financing on terms that are favorable to it. Thus, the volatility and increased and ongoing market turbulence may sound on the activities of the Company and affect the price of ordinary shares of the latter.


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Additional financing and dilution The Corporation does not exclude raising additional funds by equity financing. The exercise of warrants and share purchase options, as well as the possibility of new equity financings, represent dilution factors for present and future shareholders. Market Liquidity There is currently limited active trading in the Corporation’s common shares, which could result in a lack of liquidity for those shares. The market price for the common shares of the Corporation could consequently be subject to wide fluctuations. Factors such as the announcement of the signature of important contracts, technological innovations, new commercial products, patents, a change in regulations, quarterly financial results, future sales of common shares by the Corporation or current shareholders, and many other factors could have considerable repercussions on the price of the Corporation’s common shares. In addition, the financial markets may experience significant price and value fluctuations that affect the market prices of equity securities of companies that sometimes are unrelated to the operating performance of these companies. Broad market fluctuations, as well as economic conditions generally may adversely affect the market price of the Corporation’s common shares. Risks Arising From Financial Instruments and Risk Management The Corporation is exposed to a variety of financial risks including credit risk, liquidity risk, and market risk (including foreign exchange and interest rate). The Corporation's overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Corporation's financial performance. Credit Risk Credit risk results from the possibility that a loss may occur from the failure of another party to perform according to the terms of the contract. The Corporation regularly monitors the credit risk exposure and takes steps to mitigate the likelihood of these exposures from resulting in actual loss. The Corporation, in the normal course of business, monitors the financial condition of its customers. As at June 30, 2015, the Corporation has no significant exposure in accounts receivable. The Corporation establishes an allowance for doubtful accounts that corresponds to the credit risk of its specific customers, historical trends and economic circumstances. The Corporation does not believe it is exposed to an unusual level of customer credit risk. In addition, financial instruments that potentially subject the Corporation to significant concentrations of credit risk consist of deposits in the form of cash, cash equivalents, restricted cash and short-term investment. The Corporation invests with major North American financial institutions. The Corporation has investment policies that are designed to provide for the safety and preservation of principal, the Corporation's liquidity needs and yields that are appropriate. The Corporation has no exposure to any asset-backed securities.


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Liquidity Risk Liquidity risk is the risk that the Corporation will not be able to meet its financial obligations as they become due. The Corporation’s approach in managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Corporation’s reputation. The Corporation also manages liquidity risk by continuously monitoring actual and budgeted cash flows. Foreign Exchange Risk The Corporation generates less than 1% of revenues in foreign currency and 21% of its purchases are made in euros. Therefore, the currency fluctuations have no major impact on the Corporation's income. Interest Rate Risk The Corporation is subject to interest rate risk on its cash and short-term investment. The risk that the Corporation will realize a loss as a result of the decline in the fair value of its short-term investment is limited because these investments have short-term maturities and are generally held to maturity. Sensitivity to variation of more or less 1% interest rate would have no effect. FORWARD-LOOKING STATEMENTS AND CAUTION Securities laws encourage Corporations to present forward-looking information to provide investors with a better understanding of the Corporation's future prospects and to help them make informed decisions. The present MD&A of Ergoresearch contains forward-looking statements about the Corporation's objectives, strategies, financial position, results of operations, cash flows and activities, which are based on management's current expectations, estimates and assumptions about the markets in which it operates. Statements based on Management's current expectations contain known and unknown risks and uncertainties. Forward-looking statements may include verbs such as "believe," "anticipate," "estimate," "expect," "target" and "assess" or related expressions. These statements represent Ergoresearch’s intentions, plans, expectations or beliefs and are subject to risks, uncertainties and other factors, many of which are beyond the Corporation's control. Actual results may vary materially from forecasts. The reader is cautioned not to place undue faith in any forward-looking statement. Please note that the forward-looking statements contained in this MD&A describe our expectations as at October 23, 2015. Additional information on the risk factors to which the Corporation is exposed is available in the Risks and uncertainties section in the present MD&A. This section addresses the risks, uncertainties and other factors that could affect financial results. Forward-looking statements do not take into account the effect that transactions or nonrecurring or other special items announced or occurring after the statements are made may have on our activities. We disclaim any intention and assume no obligation to update any forward-looking statements even if new information becomes available as a result of future events or for any other reason unless required to do so by applicable securities regulations.


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DISCLOSURE CONTROLS AND PROCEDURES (“DC&P”) AND INTERNAL CONTROLS OVER FINANCIAL REPORTING (“ICFR”)

Management of the Company is responsible for establishing and maintaining appropriate information systems, procedures and controls to ensure that information used internally and disclosed externally is complete, reliable and timely. Management is also responsible for establishing adequate internal controls over financial reporting to provide sufficient knowledge to support the representations made in this MD&A and the Company’s financial statements for the year ended June 30, 2015 (together the “Annual Filings”). Management of the Company has filed the Venture Issuer Basic Certificate with the Annual Filings on SEDAR at www.sedar.com. In contrast to the certificate required for non-venture issuers under National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings (“NI 52-109”), the venture issuer basic certificate does not include representations relating to the establishment and maintenance of disclosure controls and procedures (“DC&P”) and internal control over financial reporting (“ICFR”), as defined in NI 52-109. Investors should be aware that inherent limitations on the ability of certifying officers of a venture issuer to design and implement on a cost effective basis DC&P and ICFR as defined in NI 52-109 may result in additional risks to the quality, reliability, transparency, and timeliness of interim and annual filings and other reports provided under securities legislation.

2015 annual REPORT2015 annual REPORT2015 annual REPORT2015 annual REPORT ....

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Catherine Chamouton, ca Financial Director, Groupe Proteor

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CORPORATE INFORMATION

Listing: TSX Venture Ticker: ERG

Management

Sylvain Boucher,President & Chief Executive Officer

Danielle Boucher, Vice-President Clinique du pied Équilibre Laboratory Director

Federic Petit Vice-President Exploitation

Louis Desrosiers Vice-President Research and Development

Dominique Boudreau, CPA, CMA, MBA Vice-President Finance

Board of Directors

Michel Pierron, President Groupe Proteor

François Tellier, Consultant V-P Corporate Development at Groupe Forget, audioprothésistes

Gilles Laporte Administrator

Sylvain Boucher Danielle Boucher President & C.E.O. Vice-President Clinique du pied Équilibre

Auditors

KPMG LLP

Investor Relations [email protected]

Notice of Annual Meeting of Shareholders The annual meeting of shareholders will take place on Monday December 21, 2015 at 10am, in the conference room of the ERGO complex located at 2101 boul. Le Carrefour suite 200, Laval (Quebec), H7S 2J7.

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