Exhibit 99.1







NOTE TO READER:







|This corrected Annual Information Form
        has been filed by IMRIS Inc. (“IMRIS”) for the purpose of correcting the following of the Annual Information
        Form dated March 5, 2012 (the “IMRIS AIF”):
        
        ● in Section 2.1 (“Fiscal 2012”),
        the number of systems sold as at December 31, 2012 was 58 and not 59. Similarly, IMRIS had sold seven systems in Canada and not eight;
        ● in Section 2.1 (“Fiscal
        2011”)         the number of systems sold as at December 31, 2011 was 49 but rather than four of those being in
        Europe/the Middle East, the number         has been corrected to read three and rather than six being in the Asia Pacific
        region, the number has been corrected to read seven;
        ● in Section 3.2 (“Risks Related
        to our Business”), as at December 31, 2011 IMRIS had 13 outstanding purchase orders as opposed to 14; and
        ● in Section 7.1
        (“Directors and Officers”), footnote (3) was updated to reflect Mr. Batista’s current role in the capacity
        of head of Special Projects and Mr. Manrice Holloman’s current role in the capacity of Executive Vice President Operations.
        
        Other than as described herein, the IMRIS AIF remains unchanged
        as at March 5, 2013.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



















IMRIS Inc.



Annual
Information Form



For
the Year Ended



December
31, 2012



MARCH 5, 2013



1







TABLE OF CONTENTS





|TABLE OF CONTENTS                    | 2                                                         
|------------------------------------ | ----------------------------------------------------------
|FORWARD-LOOKING AND OTHER STATEMENTS | 3                                                         
|GENERAL MATTERS                      | 5                                                         
|1.                                   | CORPORATE STRUCTURE                                       
|2.                                   | GENERAL DEVELOPMENT OF THE BUSINESS                       
|3.                                   | NARRATIVE DESCRIPTION OF THE BUSINESS                     
|4.                                   | DIVIDENDS                                                 
|5.                                   | CAPITAL STRUCTURE                                         
|6.                                   | MARKET FOR SECURITIES                                     
|7.                                   | DIRECTORS AND OFFICERS                                    
|8.                                   | LEGAL PROCEEDINGS AND REGULATORY ACTIONS                  
|9.                                   | INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS
|10.                                  | TRANSFER AGENT AND REGISTRAR                              
|11.                                  | MATERIAL CONTRACTS                                        
|12.                                  | INTERESTS OF EXPERTS                                      
|13.                                  | ADDITIONAL INFORMATION                                    
|APPENDIX “A”                         | 45                                                        
|APPENDIX “B”                         | 52                                                        



2







FORWARD-LOOKING AND OTHER STATEMENTS



This Annual Information Form (“AIF”) contains forward-looking statements. These statements relate to future events
or future performance and reflect our expectations and assumptions regarding our growth, results of operations, performance and
business prospects and opportunities. Such forward-looking statements reflect our current beliefs and are based on information
currently available to us. In some cases, forward- looking statements can be identified by terminology such as “may”,
“would”, “could”, “will”, “should”, “expect”, “plan”,
“intend”, “anticipate”, “believe”, “estimate”, “predict”, “potential”,
“continue” or the negative of these terms or other similar expressions concerning matters that are not historical
facts. The forward-looking statements in this AIF include, among others, statements regarding our future operating results, economic
performance and product development efforts, and statements in respect of:



| | • | our expected future losses
                                                                   and accumulated deficit levels;
| | - | -----------------------------------------------------------------------------------------------------------------------------



| | • | our ability to recognize revenues
                                                                   from sales of our products when expected or at all;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | our backlog;
| | - | ------------



| | • | our expected growth in revenues;
| | - | --------------------------------



| | • | our gross profit percentage;
| | - | ----------------------------



| | • | our ability to derive future
                                                                   revenues from a limited number of new customers;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------



| | • | our ability to satisfy customer
                                                                   demand for our products;
| | - | ---------------------------------------------------------------------------------------------------------------------------



| | • | our ability to maintain the
                                                                   relationships needed for the support and maintenance of our products;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | our ability to obtain a sufficient
                                                                   supply of the components needed for our systems;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | our strategy with respect to
                                                                   the protection of our intellectual property;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------



| | • | our strategy for developing
                                                                   new products and modifications to existing products;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------



| | • | our requirement for, and our
                                                                   ability to obtain, future funding on favorable terms or at all;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | our potential sources of funding;
| | - | ---------------------------------



| | • | the effect of litigation on
                                                                   our business;
| | - | ------------------------------------------------------------------------------------------------------------



| | • | the benefits of our products
                                                                   and services;
| | - | -------------------------------------------------------------------------------------------------------------



| | • | our expected conversion of
                                                                   backlog to product deliveries;
| | - | ----------------------------------------------------------------------------------------------------------------------------



| | • | capital expenditures;
| | - | ---------------------



| | • | cash flow estimates and the
                                                                   sufficiency thereof;
| | - | -------------------------------------------------------------------------------------------------------------------



| | • | our operating expenses;
| | - | -----------------------



| | • | our plans to invest in research
                                                                   and development (“R&D”);
| | - | ---------------------------------------------------------------------------------------------------------------------------



| | • | our business strategy;
| | - | ----------------------



| | • | our plans for the growth of
                                                                   our business domestically and internationally;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------



3







| | • | our intentions with respect
                                                                   to developing strategic partnerships for the design, development
                                                                   and marketing of existing and future products;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | our assessment of the benefits
                                                                   of our products to patients, clinicians and hospitals;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | our plans for new applications
                                                                   of our core technology;
| | - | -------------------------------------------------------------------------------------------------------------------------



| | • | our development plans in conjunction
                                                                   with Varian Medical Systems (“Varian”) and the
                                                                   success thereof;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | our ability to successfully
                                                                   commercialize and deploy our surgical robotic system;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------



| | • | our intentions with respect
                                                                   to creating long-term customer relationships; and
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------



| | • | our plans to seek and maintain
                                                                   regulatory clearance for our products.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------



A number of factors could cause actual
events, performance or results, including those in respect of the foregoing items, to differ materially from the events, performance
and results discussed in the forward-looking statements. Factors that could cause actual events, performance or results to differ
materially from those set forth in the forward-looking statements include, but are not limited to:



| | • | the extent of our future losses;
| | - | --------------------------------



| | • | deferrals of customer orders
                                                                   or delays in manufacturing, delivering and/or installation
                                                                   of a product;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | loss of suppliers or increases
                                                                   to the cost of the components of our products;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------



| | • | our ability to attract and
                                                                   retain strategic partners and key personnel;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------



| | • | damage to our manufacturing
                                                                   facility or its failure to accommodate future sales growth;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | market competition and technological
                                                                   advances of competitive products and treatments;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | our ability to obtain and protect
                                                                   our intellectual property rights to existing and future products
                                                                   and, when required, to license third party intellectual property
                                                                   on commercially reasonable terms;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | the expense and potential harm
                                                                   to our business of intellectual property litigation;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | the failure to obtain, delay
                                                                   in or withdrawal of necessary government regulatory approvals
                                                                   for existing products or future products or modifications;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | our ability to develop new
                                                                   products and manage growth;
| | - | -------------------------------------------------------------------------------------------------------------------------



| | • | our ability to obtain future
                                                                   financing and on commercially reasonable terms;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------



| | • | the ability of our customers
                                                                   to obtain adequate reimbursement from third party payers for
                                                                   the use of our products;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | the impact of future legislative
                                                                   or regulatory changes;
| | - | --------------------------------------------------------------------------------------------------------------------------



| | • | the impact of product liability
                                                                   or warranty claims;
| | - | ----------------------------------------------------------------------------------------------------------------------



| | • | foreign currency fluctuations;
| | - | ------------------------------



| | • | our exposure to risks resulting
                                                                   from our international sales and operations, including the
                                                                   requirement to comply with export control and economic sanctions laws;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | changes in economic conditions;
| | - | -------------------------------



4







| | • | stock market volatility;
| | - | ------------------------



| | • | our exposure to credit risk
                                                                   for accounts receivable;
| | - | -----------------------------------------------------------------------------------------------------------------------



| | • | our ability to convert any
                                                                   letter of intent or nonbinding memorandum of understanding
                                                                   into a binding agreement; and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | additional risks and uncertainties,
                                                                   many of which are beyond our control, referred to under “Risks
                                                                   Related to our Business” and elsewhere in this AIF.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Although the forward-looking statements
contained in this AIF are based on what we consider to be reasonable assumptions
based on information currently available to us, there can be no assurance that actual events, performance or results will be consistent
with these forward-looking statements, and our assumptions may prove to be incorrect. These forward-looking statements are made
as of the date of this AIF.



Forward-looking statements made in this AIF are made as of the date of the original document and have not been updated by us except
as expressly provided for in this AIF. Except as required under applicable securities legislation, we undertake no obligation
to publicly update or revise forward-looking statements, whether as a result of new information, future events or otherwise.



GENERAL MATTERS



Unless otherwise noted or the context
otherwise indicates, in this AIF the terms “IMRIS”, “we”, “us”, “our” or the “Corporation”
refer to IMRIS Inc. and the wholly-owned subsidiaries through which it conducts business. Our trademarks are “IMRIS”
and “VISIUS Surgical Theatre”. This AIF contains company names, product names, trade names, trademarks and service
marks of other organizations, all of which are the property of their respective owners.



This AIF may include market share
information and industry data and forecasts obtained from independent industry publications and surveys. References to research reports, surveys or articles should not be construed as depicting the complete findings of the entire
referenced report, survey or article. The information in any such report, survey or article is not incorporated by reference
into this AIF. Although we believe these sources are reliable, we have not independently verified any of the data nor
ascertained the underlying economic assumptions relied upon in such reports, surveys or articles. Some data is also based on
our estimates, which are derived from our review of our internal surveys, as well as independent sources. We cannot and
do not provide any assurance as to the accuracy or completeness of such information. Market forecasts, in particular, are
likely to be inaccurate, especially in respect of emerging markets, such as those for our products, or over long periods
of time.



You should not assume that the information
contained herein is accurate as of any date other than the date on the front of this AIF, unless otherwise noted or as required
by law. It should be assumed that the information appearing in this AIF are accurate
only as of their respective dates. Our business, financial condition, results of operations or prospects may have changed since
those dates.



Certain terms and phrases used in this
AIF are defined in the “Glossary of Certain Terms”.



In this AIF, unless otherwise specified
or the context otherwise requires, all dollar amounts are expressed in United States dollars. All references to “dollars”,
“$” or “US$” are United States dollars.



5







GLOSSARY OF CERTAIN TERMS



“510(k) clearance”
is an FDA submission where the applicant seeks to demonstrate that a medical device is at least as safe and effective, or substantially
equivalent, to a device that has previously been approved.



“angiography”
is a fluoroscopic technique in which a contrast agent is injected into a patient’s vasculature in order to allow imaging
of the vessels or other structures.



“bi-plane
angiography” involves the use of two simultaneous angiographic views, often at right angles, to provide a three-dimensional
view of the anatomy of interest.



“cardiovascular conditions”are medical conditions or diseases that affect the heart or the vasculature of the heart.



“CE”as in “CE Mark” is an acronym for Conformité Européene, an organization that certifies
that a product has met European Union health, safety, and environmental requirements and represents compliance with the applicable
Medical Device Directives of the European Union.



“cerebrovascular conditions”are conditions pertaining to the brain and its major blood vessels.



“chemotherapy”
is the treatment of illness by chemical means; it is used primarily to refer to the chemical treatment of cancer.



“Class I Device”is a medical device that the FDA believes presents a very low risk to the consumer and which is substantially equivalent
to other products already on the market. These devices are subject only to general controls.



“Class II Device”is a medical device for which general controls alone are insufficient to assure safety and effectiveness, but in respect
of which additional existing methods are available to provide such assurances. Therefore, Class II devices are subject to
special controls in addition to the general controls of Class I devices.



“Class III Device”is the most stringent category for a medical device for which insufficient information exists to assure safety and effectiveness
solely through general or special controls. Class III devices are usually those that support or sustain human life, are of
substantial importance in preventing impairment of human health, or which present a potential, unreasonable risk of illness or injury.



“contrast agent”
is a fluid that is injected into the bloodstream of a patient and provides a darker image than its surrounded structure when viewed
using x-rays.



“core” is the
part of the brain tissue that has died during a stroke.



“CT” is computed
tomography, where a computer is used to assemble a series of x-ray images in order to create a three-dimensional image of the
anatomy of interest.



“DICOM” means
the Digital Imaging and Communications in Medicine technical protocols.



“fluoroscopy”is an imaging technique that projects real-time x-ray images onto a monitor located in the interventional suite.



“image-guided therapy system”
or “image-guided therapy system solution” is an integrated suite of products and technologies that permit
imaging during a surgical or interventional procedure.



“imaging coils”
are devices that are used in conjunction with an MR scanner to receive signals from the anatomy of the patient.



“imaging modalities”are different approaches to the imaging of patient anatomy using different technologies, such as ultrasound, CT, fluoroscopy
and MR.



“International Electrotechnical
Commission” is a global organization that prepares and publishes international standards for all electrical, electronic
and related technologies.



6







“interventional suite”is any suite where a minimally invasive procedure is completed.



“ionizing radiation”is radiation that has the ability to ionize matter.



“ischemic stroke”
occurs when a clot of material becomes lodged in a sensitive cerebral artery, resulting in a significant reduction in the flow
of blood, and its nutrients and oxygen, to the area of the brain supplied by the artery.



“ISO 13485 certification”is the certification given by the International Organization for Standardization, which is a non-governmental organization
that publishes international industrial and commercial standards.



“Medical Device Directives”covers the regulatory requirements for the European Union for Medical Devices.



“microsurgery”
dissection of tiny structures under the microscope with the use of extremely small instruments.



“MR” is magnetic
resonance, which is the physical phenomena underlying the imaging ability of an MR scanner.



“MR imaging”
produces high resolution images of a patient’s anatomy by measuring the unique manner in which certain molecules in the
body react to radio frequency signals in the presence of a magnetic field generated by a superconducting magnet.



“MR scanner”
is a medical device that uses MR imaging to provide images of anatomy.



“MR transport system”is our proprietary, computer-controlled transport system that allows for the movement of the MR scanner and its associated
equipment from one imaging location to another.



“neurosurgical
applications” are surgical or interventional procedures that have to do with the brain and the nervous system of
the brain.



“neurosurgical procedure”is surgery performed on the nervous system or the brain.



“radiation
therapy” is the treatment of disease, usually cancer, by ionizing radiation in order to deliver an optimal dose
of either particulate or electromagnetic radiation to a particular area of the body with minimal damage to normal tissues.



“radio-frequency shielding
systems” are copper shields installed in the walls around an MR scanner, which are required to protect an MR scanner
from radio interference.



“single
plane angiography” is the use of a single plane view of angiography, providing a two-dimensional view of the anatomy
of interest.



“Tesla” is the
unit of measurement for the strength of a magnetic field generated by a magnet, including that inside an MR scanner.



“ultrasound”is a diagnostic imaging technique used to visualize body structures using sound waves.



“vasculature”
is any part of the circulatory system.



| | 1. | CORPORATE STRUCTURE
| | -- | -------------------



IMRIS was incorporated under the Canada
Business Corporations Act on May 18, 2005. On May 20, 2005, we acquired all of the assets and assumed all of the
liabilities of Innovative Magnetic Resonance Imaging Systems Inc., which we refer to in this AIF as “Innovative”.
On November 18, 2005, we acquired control of Innovative and we amalgamated with Innovative on December 31, 2005. On
October 26, 2007, our articles of amalgamation were amended to, among other things; create a class of preferred shares, unlimited
in number and which may be issued from time to time in one or more series. Consequently, we are authorized to issue an unlimited
number of Common Shares and an unlimited number of preferred shares. On February 5, 2010, we acquired all of the shares of NeuroArm
Surgical Limited (“NASL”).



7







We own, directly or indirectly, all of
the outstanding shares of our subsidiaries: IMRIS, Inc. (incorporated under the laws of Delaware, USA); IMRIS (Europe) SPRL,
(incorporated in Belgium); IMRIS Germany GMBH (incorporated in Germany); IMRIS India Private Limited (incorporated in India);
IMRIS KK (incorporated in Japan); and NASL (incorporated under the laws of Alberta, Canada and continued under the federal laws
of Canada in April 2010).



Our principal office is located at 100 - 1370
Sony Place, Winnipeg, Manitoba, R3T 1N5.



| | 2. | GENERAL DEVELOPMENT OF THE BUSINESS
| | -- | -----------------------------------



| | 2.1 | Three-Year History
| | --- | ------------------



Fiscal 2012



We substantially completed the installation
of seven IMRIS systems during 2012, bringing to 45 the number of units installed at December 31, 2012 and we continued our global
expansion in 2012 with further sales of VISIUS Surgical Theatre’s in the United States, China and the Middle East.



We had 10 new orders in 2012,
contributing to a backlog of $122.5 million at December 31, 2012 versus $95.0 million at December 31, 2011. As at December
31, 2012, we had sold 58 systems. Of these, 38 are located in the United States, nine are in the Asia Pacific region,  seven
are in Canada and four are in Europe/the Middle East.



We continued to build our product portfolio
throughout the year with a number of enhancements designed to increase utility of the VISIUS Surgical Theatre and we advanced
development of our SYMBIS Surgical System (as defined below) and image guided radiation therapy products toward commercialization.



We announced plans for the relocation of our operations from
Winnipeg, Manitoba to Minnesota.



At the end of 2012, we had 168 employees at various locations
around the world including Canada, the United States, Japan, Europe, India, Australia and China.



Fiscal 2011



We substantially completed the installation
of six IMRIS systems during 2011, bringing to 38 the number of units installed at December 31, 2011 and we continued our global
expansion in 2011 with our first sale of a VISIUS Surgical Theatre in Japan as well as sales in the United States and China.



We had five new orders in 2011,
contributing to a backlog of $95.0 million at December 31, 2011 versus $117.1 million at December 31, 2010. As at December
31, 2011, we had sold 49 systems. Of these, 31 are in the United States, eight are in Canada,  three are in Europe/the Middle
East and seven are in the Asia Pacific region.



We rebranded our IMRISneuro, IMRIScardio
and IMRISNV products to VISIUS Surgical Theatresto highlight the value, scope and flexibility of IMRIS’s image guided
therapy suites across a range of clinical applications.



We continued to build our product portfolio
throughout the year with a number of enhancements designed to increase utility of the VISIUS Surgical Theatre including the introduction
of an intraoperative CT offering.



In September 2011, we entered into an
agreement with Macdonald, Dettweiler and Associates Ltd. for the final phases of collaborative development of IMRIS’s MR
guided surgical robot, building on the development work the two companies have completed to date.



8







At the end of 2011, we had 169 employees at locations around
the world including Canada, the United States, Japan, Europe, India, Australia and China.



Fiscal 2010



We substantially completed the installation
of 13 IMRIS systems during 2010, bringing to 32 the number of units installed at December 31, 2010.



We received purchase orders for ten new
systems in 2010, contributing to a backlog of $117.1 million at December 31, 2010 versus $109.1 million at December 31, 2009.
As at December 31, 2010 we had sold 45 systems. Of these, 28 are in the United States, eight are in Canada, four are in Europe/the
Middle East and five are in the Asia Pacific region.



We continued our global expansion in 2010
with the sales in the United States, Canada, Europe, the Middle East and Australia. We received regulatory approvals in Korea
for the 1.5 Tesla and 3.0 Tesla versions of IMRISneuro and regulatory clearance for IMRISNV and IMRIScardio in Australia.



We completed an equity financing with
the issuance of 11,100,000 Common Shares for net proceeds of $50.0 million and listed our Common Shares on the NASDAQ Global Market
exchange.



At the end of 2010, we had 154 employees
at locations around the world including Canada, the United States, Japan, Europe, India and China.



In February 2010, we entered into a definitive
agreement to acquire NASL, a privately held company based in Calgary, Alberta, and its magnetic resonance-compatible neurosurgical
robot. In conjunction with the acquisition, we also entered into a memorandum of understanding with MacDonald Dettwiler and Associates
Limited to create the next generation of the technology. As consideration for the acquisition of NASL including its technology,
patents, and associated intellectual property, 1.6 million IMRIS Common Shares were issued from treasury.

In October 2010 we announced a co-development
agreement with Varian to create an innovative new MR-guided radiation therapy system for use in treating a variety of cancers.
Under the terms of the agreement, our two companies plan to develop a solution that combines IMRIS’ proprietary MR imaging
technology with Varian’s TrueBeamTM system.



| | 3. | NARRATIVE DESCRIPTION OF THE BUSINESS
| | -- | -------------------------------------



| | 3.1 | General Description of the Business
| | --- | -----------------------------------



The Company operates as one business segment
that designs, manufactures and sells image-guided therapy solutions that provide surgeons with the ability to obtain information
during the course of a procedure that allows a surgeon to make decisions that may improve outcomes for patients. These solutions
are a combination of an imaging modality, a therapeutic action or product, all integrated into an application-specific system.
We believe that providing real time or near real time information in the form of imaging and visualization enhances the ability
of clinicians to make decisions that can lead to improved outcomes for patients.







9







Our patented technologies enable clinicians
to use various types of image-guided solutions during a surgical or interventional procedure without needing to move the patient
to a separate location to perform a scan. This ability results in a solution that, we believe, is safer for the patient and minimizes
disruption to clinical workflow. The system also provides value to hospital administrators by allowing the image-guided solution
to be used for standard diagnostic procedures when it is not being used during surgery or interventional procedures.



| | 3.1.1 | Our Product Family for Image Guided
                                                             Therapy
| | ----- | --------------------------------------------------------------------------------------------------------



Our image-guided therapy product family
consists of the VISIUS Surgical Theatre, which is currently being sold around the world, an MR-guided Radiation Therapy system,
which is currently in development, and an Image Guided Surgical Robotic System, which is also currently in development.







VISIUS Surgical Theatres and Traditional
Surgical Procedures



VISIUS Surgical Theatres deliver detailed
visual information to clinicians during the course of traditional surgical procedures. The VISIUS Surgical Theatre can be configured
for numerous procedures using intraoperative imaging including MRI, x-ray angiography and CT, alone or in multimodal combinations.
VISIUS Surgical Theatres are multi-purpose surgical suites that incorporate combinations of MR imaging, fluoroscopy and CT. These
suites are designed to address multiple medical applications. VISIUS Surgical Theatres are currently being sold globally, with
59 systems sold to date.



VISIUS Surgical Theatres are currently
available for the following surgical applications:



| | · | Neurological
| | - | ------------

| | · | Cardiovascular
| | - | --------------

| | · | Cerebrovascular
| | - | ---------------

| | · | Interventional
| | - | --------------



| | · | Spine
| | - | -----



The VISIUS Surgical Theatre for neurosurgery
was first introduced in the fall of 2005. Since its initial launch it has rapidly become the leading MR-guided imaging system
for neurosurgery and is currently being used for a wide range of neurological applications such as tumor resection, skull base
procedures and guided stereotactic procedures.



Published clinical data shows the benefits
of how VISIUS Surgical Theatres can make a difference in using iMRI in neurosurgical procedures.



| | · | In
                                                                                                              40% of all cases,
                                                                                                              the surgeon modified
                                                                                                              the neurosurgical
                                                                                                              procedure based
                                                                                                              upon the findings
                                                                                                              of intraoperative
                                                                                                              MR (iMRI)
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | In
                                                                                                              55% of glioma cases
                                                                                                              (i.e. tumor resection),
                                                                                                              the surgeon resected
                                                                                                              additional tumor
                                                                                                              after an iMRI
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



10







| | · | 85%
                                                                                                              of gross total tumor
                                                                                                              resectionwas
                                                                                                              achieved using iMRI
                                                                                                              versus 56% without
                                                                                                              iMRI
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In late 2009, we expanded our product portfolio by introducing VISIUS Surgical Theatres
for cerebrovascular and cardiovascular applications. VISIUS Surgical Theatre for cerebrovascular applications offers interventional
clinicians an imaging solution for the rapid evaluation, resolution and post-procedure assessment of cerebrovascular conditions
including ischemic stroke, where the ability to transition quickly from imaging to intervention can save precious time and may
make a significant difference in patient outcomes. VISIUS Surgical Theatre for cardiovascular applications uses fluoroscopy and
MR imaging to provide clinicians with timely and accurate images and other physiological data regarding the patient’s cardiovascular
structures before, during and after an intervention.



Both these applications leverage our core
technology to sequentially employ MR and fluoroscopy in one integrated Theatre. These Theatres permit the patient to be transitioned
quickly and seamlessly between assessment, using MR imaging, and intervention, using fluoroscopy, without the need to transport
the patient between imaging modalities. The images supplied by these two Theatres provide interventional clinicians with the information
needed for the timely assessment, intervention and post procedure evaluation of cerebrovascular and cardiovascular conditions.
In addition, these Theatres can be used for standard diagnostic procedures.



The VISIUS Surgical Theatre is also available
with a CT imaging system that provides the ability to image dense tissue such as bone and can be used in vascular imaging with
the aid of appropriate contrast agents. This system may have specific application to spinal procedures and provide an integrated
suite for hardware placement or other therapeutic procedures.



In addition to providing the components
and systems that make up our product offering, we offer our customers extensive design services in connection with their acquisition
of a VISIUS Surgical Theatre. These services extend throughout the system sales cycle, from room configuration and architectural
design to project management of suite construction at our customer sites in compliance with applicable construction codes and
other regulatory requirements. The installation of a VISIUS Surgical Theatre is a complex engineering and construction undertaking,
so our provision of these design services represents important added value to our customers.



VISIUS Surgical Theatre and theTrueBeamTMSystem for Radiosurgery (Currently under Development)



We are currently working with Varian
under a co-development agreement signed in October 2010 to develop an MR-guided radiation therapy system that combines
IMRIS’ proprietary MR imaging technology with Varian’s TrueBeamTM radiation therapy system to enable the use
of MR imaging during radiotherapy treatments for cancer. We expect that the solution we are developing with Varian will
permit a high-field MR scanner to move in and out of the radiation therapy room on demand. This will provide MR imaging to
very precisely confirm a tumor’s location prior to treatment and as needed during the treatment session, all without
having to move the patient from the treatment couch or transport the patient to and from another room, as would be required
today. This ability to image the patient in place may reduce the variability in tumor position caused by patient movement and
may result in an increase in treatment accuracy. By integrating the exquisite detail of MR imaging with the extensive
treatment delivery capabilities of Varian’s TrueBeamTM system, the two companies are working to enhance the
effectiveness of radiation therapy, potentially decreasing the time and cost hospitals incur for each procedure.



We believe that integrating MR imaging
with radiation treatment will allow us to better adapt radiation therapy to the individual patient and will open new avenues of
research to further improve the effectiveness of radiation therapy. This may improve radiation therapies by more accurately targeting
tumors, which may reduce side effects and collateral damage to healthy tissue and may reduce the number of radiation treatments
required to treat a tumor.



This
design of the system is in its final stages of development which includes the expected completion of our first clinical site and
Princess Margaret Hospital in Toronto, Canada. This first clinical site
for our MR-guided radiation therapy system will be used to conduct research at the hospital in order to clinically validate the
system and further develop the system’s commercial capabilities. Based on the current development path we expect submit
our application for final regulatory clearance in 2013.



VISIUS Surgical Theatre and the
SYMBIS Surgical System (Currently under Development)



We are developing the SYMBIS Surgical
System, a surgeon controlled robot capable of performing microsurgery and other stereotactic procedures under real time image
guidance. We believe that the addition of real-time MR imaging to surgical robotics may contribute
to improved surgical procedures and patient outcomes.



11







In 2010, we acquired NASL and its MR-compatible
neurosurgical robotic system and related intellectual property. The NASL technology combines the detailed imaging of MR with the
precision of surgical robotics. The system features two robotic arms that can manipulate MR-compatible tools at the microscopic
level from a remote workstation. The surgeon sees detailed three-dimensional images of the brain and the surgical tools, and uses
hand controllers equipped with enhanced touch sensation that allow the surgeon to ‘feel’ very small features of the
anatomy through the robotic arms and surgical tools.



Version 1 of the system is currently in a single site clinical trial with a cohort of 120 neurosurgical
patients and from that we submitted a 510(k) clearance application for the SYMBIS Surgical System in August 2012. The 510(k) process
is underway and we continue to work with the FDA to address any concerns. We believe that we will be required to provide more clinical
trial data for evaluation in addition to what we have already submitted. We are working with the FDA to determine the scope and
size of the additional patient data that will satisfy the needs of the evaluators and provide us with clarity and a timeline to
completion.



We intend to focus our development
efforts of the system for use in neurosurgical applications; however, this technology may also be applied to other clinical
procedures. Overall, we believe this product has the potential to deepen our portfolio of image-guided therapy solutions and
may add to our overall customer value proposition.



| | 3.1.2 | Our Principal Markets
| | ----- | ---------------------



Our Existing Market



Our image-guided therapy solutions are
designed to allow for the acquisition and presentation of imaging data to a clinical team during the course of a surgical procedure.



VISIUS Surgical Theatres



The market for VISIUS Surgical Theatres
is predominantly hospitals around the world that deliver clinical services to patients in the neurosurgical, interventional cerebrovascular
and interventional cardiovascular areas. Recent clinical data has been published showing the benefits of using iMRI to perform
neurosurgical procedures versus other traditional methods of performing neurosurgical procedures. According to AANS National Neurosurgical
Procedure Statistics, in 2006 there were approximately 142,000 neurological procedures performed in the United States. We believe
that additional clinical data supporting the benefits of neurological applications and other applications of the VISIUS Surgical
Theatre could lead to more patients demanding this product for their procedures, resulting in increased demand from hospitals.



Our Market for New Products



MR-guided Radiation Therapy



There are currently more than 10 million
new cancer cases each year worldwide, and that number is increasing. Radiation therapy is one of the primary forms of cancer treatment.
The process for delivering radiotherapy typically includes planning the treatment using images provided by either MR imaging or
CT or both. The imaging information is used to simulate and verify the treatment plan before delivery of the treatment. While
CT images are the standard for planning and simulation purposes, the greater resolution of MR for soft tissue imaging is increasing
the use of MR as a complement to CT in the target tumor definition procedure. Clinical studies have shown that MR can replace
CT during all steps of the treatment workflow, reducing the radiation exposure to the patient, removing any systematic registration
errors that may occur when combining MR and CT, and decreasing time and cost for CT investigation. The positive data supporting
the use of MR for soft tissue procedures provides a market for our MR-guided radiation therapy, which integrates MR with radiation
therapy.



Image-guided Robotics



We are currently focusing our development
of the image-guided robotic therapy solution for use in neurosurgical procedures.
The market for this product will potentially include hospitals that perform significant numbers of neurosurgical applications
each year. We anticipate that the market for this technology could expand as it is developed for other applications.



| | 3.1.3 | Distribution Methods
| | ----- | --------------------



The purchase and installation of a VISIUS
Surgical Theatre represents a significant capital project for our customers. The cost of an integrated VISIUS Surgical Theatre
to a hospital can range from approximately $4 million to $12 million depending on the product selected, the room configuration
and the level of integration services requested. The installation generally involves additional capital expenditures by the customer
for room construction and ancillary operating room equipment. In addition to the initial installation costs, most of our customers
also enter into long-term service contracts with us for maintenance and support of their VISIUS Surgical Theatre. We currently
do not provide leasing, deferred payment, profit sharing or other financing arrangements to our customers in connection with the
purchase of our systems.



12







Our sales process requires that we engage
with a number of different stakeholders within and outside the hospital to assist in making a strong clinical and business case
for the VISIUS Surgical Theatre. While clinicians are generally the lead stakeholders of the hospital responsible for supporting
a VISIUS Surgical Theatre acquisition, the sales process requires the involvement of radiologists, facilities managers, hospital
administrators and other hospital staff at various stages. In certain cases, we also engage as needed with hospital funding sources,
including private donors, government entities and financial institutions. As a result, our sales cycle is both complex and lengthy,
typically lasting more than 12 months from initial customer engagement to our receipt of a purchase order.



We also have distribution agreements in
place with medical equipment distributors to address emerging market opportunities in Southeast Asia, India, the Middle East and Korea.
In support of our sales staff, we have regional market managers who are responsible for the development and delivery of territory-specific
marketing programs to create awareness and generate sales interest. Also supporting sales are specialists in program management,
customer engineering, customer support and training who serve all of the sales regions. Our product marketing group is responsible
for working with our sales staff, regional market managers and customers to identify potential new products and upgrades to be
developed in conjunction with our research and development group.



| | 3.1.4 | Primary Components
| | ----- | ------------------



The following are the key components of
our products:



•      MR Transport System:VISIUS Surgical Theatres for neurosurgical, cerebrovascular and cardiovascular applications incorporate a proprietary, computer-controlled
transport system that allows for the movement of the MR scanner and its associated equipment from one imaging location to another.
The movement of the MR scanner is achieved using a patented approach but also relies upon our substantial body of unpublished
proprietary technical knowledge relating to, among other things, the calibration of the MR scanner to enable imaging at multiple
scanning locations.



•      Large Aperture
Superconducting 1.5 Tesla or 3.0 Tesla Magnet:All of our systems incorporate a superconducting magnet. We offer
a choice of two magnet strengths. We use a large aperture superconducting 1.5 Tesla-strength magnet that provides high-resolution
MR images for medical use. The 1.5 Tesla MR scanner has been the industry standard for MR imaging for a number of years.
During 2008, we introduced a second version of our system using a 3.0 Tesla MR scanner. The higher field strength of the
3.0 Tesla system provides for shorter scan times and enhanced image quality. Both the 1.5 Tesla and 3.0 Tesla MR
scanners are supplied with a wide range of specialized diagnostic and surgical software used to image specific patient anatomy
and physiology. Both scanners have a larger bore opening than is typically available on the market, which accommodates a wider
range of patient positions for multiple types of surgical procedures.



•      Angiography Systems:In addition to the superconducting magnets used for MR imaging, our VISIUS Surgical Theatres for cerebrovascular and cardiovascular
applications utilize angiography equipment for fluoroscopic imaging. Theatres designed for cerebrovascular applications are typically
configured with a bi-plane system that permits the clinician to obtain simultaneous angiographic images from two planes, which
permits the visualization of the complex three-dimensional path of the cerebrovascular system. Theatres configured for cardiovascular
applications typically utilize a single plane or bi-plane angiography system, depending on the needs of the customer.



•      CT Scanner and
Transport System:VISIUS Surgical Theatres for cranial and spinal neurosurgery, incorporate a multi-slice CT scanner that
travels to the patient on demand and provide intraoperative images that improve the surgeons ability to see the target clearly,
and enhance treatment precision. The 20-, 40- or 64-slice CT scanner enters and exits the operating room traveling on floor rails
without compromising image quality or exam speed. A unique rail cover minimizes tripping hazards, eases cleaning and minimizes
liquid ingress.



13







•      Neurosurgical Patient
Handling Systems:VISIUS Surgical Theatres designed for neurosurgical procedures provide a neurosurgical table that is MR-compatible
but may also be used as a fully functional operating room table for most other procedures, regardless of whether MR imaging is
required for them or not. The table is designed to allow the MR scanner to pass over a stationary patient during a surgical procedure.



•      Angiographic Patient
Handling Systems:VISIUS Surgical Theatres for cerebrovascular and cardiovascular applications include patient tables that
are MR-compatible tables that are also x-ray compatible, so that they can be used for real-time fluoroscopic procedures. The tables
can be tilted forward and reverse, rolled laterally, rotated and moved horizontally for optimum positioning for imaging and intervention.
For MR imaging, the table is rotated 90 degrees and fully extended toward the MR scanner to allow the MR scanner to pass
over the patient without interference and without ever moving the patient from the tabletop.



•      Multi-element Surgical
Coils and Head Fixation Device:All VISIUS Surgical Theatres equipped with an MR scanner include proprietary surgical coils.
Imaging coils are used in conjunction with an MR scanner and act as the receiving antenna to pick up the signal transmitted by
the scanner to the anatomy of interest. We design coils for specific use in the applications that our systems serve. Our coils
are a key technology component of our imaging systems and enable high-resolution images of the anatomy of interest. The VISIUS
Surgical Theatres for neurosurgical applications also include a head fixation device that attaches directly to the table so that
the patient’s head position is fixed and calibrated with the MR scanner.





•      Data-Management System:All VISIUS Surgical Theatres provide hospitals with the ability to fully integrate video, voice
and data within our surgical suite. The system allows surgical teams to collect, display and share patient information in real
time within the surgical theatre or with others outside the surgical theatre, including students or consulting clinicians. Our
integrated data-management capabilities are comprised of both hardware and software that function together seamlessly through
an intuitive touch-screen user interface. Our data-management system is DICOM compliant and interfaces with standard patient archival
and communications systems (PACS).





| | 3.1.5 | Competitive Conditions
| | ----- | ----------------------



The market for image-guided therapy systems
is highly competitive, with a number of companies providing competing solutions. Our competitors tend to be large medical systems
suppliers, such as General Electric Company, Siemens AG(“Siemens”), Koninklijke Philips Electronics N.V.
and Medtronic, Inc. We also compete with BrainLab AG, a systems integrator that markets its image guidance software, integrated
data-management systems and integration services in collaboration with these suppliers. Notwithstanding that many of these competitors
are larger and better capitalized than we are and have greater resources than we do; we believe that we are well positioned to
compete with them.



MR imaging competes with other surgical
imaging technologies such as CT, fluoroscopy and ultrasound for market share in the overall image-guided therapy market. MR imaging,
however, has been widely recognized as the imaging modality of choice for neurosurgery, and therefore we consider the main competitors
of the VISIUS Surgical Theatre for neurosurgical applications to be other providers of neurosurgical MR-imaging systems.



Recently, the benefits of combining the
imaging modalities of MR and fluoroscopy for the treatment of cerebrovascular or cardiovascular applications has been gaining
acceptance, however, the market for these systems is in its early stages of development.



The spine market has tended to utilize
portable CT or fluoroscopy for medical screw placement. We believe our recent entry into the CT market, will enhance these types
of procedures as we can provide real-time imaging without moving the patient.



Most competitive image-guided therapy
systems on the market today that include MR imaging involve moving the patient from the operating room or interventional suite
on a detachable table top to an MR scanner in an adjacent MR diagnostic room. We believe that the benefits for patients, clinicians
and hospitals that result from our patent-protected ability to move a high-field MR scanner to the patient, our unique ability
to combine both MR and fluoroscopy in one fully integrated suite, and our proprietary know-how, position us to compete in the
market for image-guided therapy systems.



14







| | 3.1.6 | Intellectual Property
| | ----- | ---------------------



The protection of our products, product
components, processes and know-how is integral to our business. We regularly seek patent protection for our products, components
and other technologies in Canada, the United States and other countries where available and appropriate in order to maintain
our competitive advantage. We also rely on trade secrets, know-how and continuing innovation to develop and maintain our competitive
position. All of our employees and contractors are required to sign agreements committing them to hold our intellectual property
in confidence and assigning to IMRIS all rights in the technology that they help us to develop.



As of December 31, 2012, we had 50 patents
either issued or pending on various aspects of our technology. Our initial patent covers an apparatus that includes an MR scanner
that is moved along its axis over an operating room table to perform patient imaging while a medical procedure is in process and,
after imaging is completed, is moved away from the table to allow the procedure to continue without interference from the MR scanner.
Our initial United States patent expires in March 2016 and will expire in March 2017 in other jurisdictions. Another related patent
was issued in the United States in 2011, covering the control systems that adjust the parameters of the MR scanner when it is
moved to an imaging position. This new patent fortifies our existing initial patent protection related to moving an MR scanner
and extends to February 2030. The new patent is currently pending in Canada, Europe and Japan. We have a number of inventions
currently in development which may lead to the filing of further patent applications in the near future. We cannot be assured
that any of these pending patent applications will issue with commercially useful claims or that the inventions when built will
perform as required or that the patents granted to us will be useful commercially.



To date we have registered or applied
for registrations of the following trademarks in Canada and the United States: “IMRIS” with its logo, “VISIUS
Surgical Theatre”. We also claim common law trademarks over the foregoing names and marks.



| | 3.1.7 | Employees and Facilities
| | ----- | ------------------------



Employees





As of December 31, 2012, we had 168 employees,
of which 32 were in sales and marketing, 58 were in customer support and operations, 48 were in research and development,
and 30 were in administration. Our employees have specialized knowledge in areas such as the surgical environment, image guidance,
MR imaging, manufacturing and telecommunications technology.



We have never experienced a work stoppage
or other labor disturbance. To our knowledge, none of our employees belong to, or are represented by, a labor union.



On November 9, 2012, we announced
that we plan to relocate our research and development, customer service, manufacturing and administration functions to
Minnesota. The move will be completed by the end of the third quarter of 2013.



Manufacturing and Support



The assembly and installation of a VISIUS
Surgical Theatre is a complex engineering undertaking that we manage with our customers from the initial stages of customer engagement.
Our sales, engineering and manufacturing teams work together with our customers and third-party suppliers to seamlessly ensure
that specific customer requirements are met on time.



Our role in the manufacturing process
for VISIUS Surgical Theatres is to act as the systems integrator for hardware and software components from various sources, including
our own proprietary components and those of third parties. Some components of the VISIUS Surgical Theatre are manufactured for
us by third parties and then assembled by us at our Winnipeg facility, while other components are purchased from outside vendors
and either integrated and installed at our Winnipeg facility directly or at the customer site. Some of these components are custom-made
to our proprietary specifications, while others are off-the-shelf products. Our role as an integrator and our expertise in supply
chain management permit us to both meet the unique and variable requirements of our customers and to scale our production capacity
quickly to meet customer demand without substantial capital expenditure.



15







Our customer support team is responsible
for the full system life cycle, including the installation, training and ongoing maintenance associated with each VISIUS Surgical
Theatre sold. The customized elements of each system can range from the inclusion of selected brands of operating room equipment
to the implementation of structural and MR system modifications that are required to permit the system to operate properly at
the customer location.



The delivery cycle and installation process
for a VISIUS Surgical Theatre typically ranges from 6 to 12 months or longer depending, in part, on the configuration of
the system. It also depends upon the amount of additional construction work that may be required to be completed by the customer.
In certain cases, the purchase and installation of our systems may be part of a larger hospital construction project and our delivery
cycle may be considerably longer. Our delivery cycle includes a phase for the initial design and receipt of building and similar
permits, structural site construction activities carried out by the hospital and our sub-contractors, installation of our overhead
rail system, the delivery and installation of the imaging equipment and the remaining system components and final testing and
integration of the system.



The delivery cycle typically involves
the following steps:



|Step                                                            |  | Responsibility      
|--------------------------------------------------------------- |  | --------------------
|Site preparation and installation of structural
    steel       |  | Customer            
|Installation of rail system                                     |  | IMRIS               
|Installation of RF shield                                       |  | IMRIS sub-contractor
|Room finishes and mechanical systems                            |  | Customer            
|Delivery, installation and integration of
    system components |  | IMRIS               
|Final test and acceptance procedures, customer
    training     |  | IMRIS/Customer      



Our program managers work in close collaboration
with each customer’s internal project team, to ensure that all aspects of the VISIUS Surgical Theatre are operating safely
and are effectively integrated within the customer facility. Once the system is installed, we have IMRIS specialists on staff
who train nurses, surgeons, interventionists, radiologists, bio-medical engineering staff and other hospital personnel in the
operation of the VISIUS Surgical Theatre.



Upon completion of installation, we typically
provide our customers with a one-year material and workmanship warranty on their VISIUS Surgical Theatre. Additionally, we offer
our customers multi-year extended maintenance plans that provide comprehensive labor and material coverage during the plan period.
Our long-term maintenance plans typically extend for either a four- or five-year period from expiration of the warranty period.
Our business arrangement with Siemens also provides our customers with worldwide access to the Siemens support services group
for the Siemens equipment in the VISIUS Surgical Theatre. Most of our customers enter into long-term service plans with us, providing
us with an important source of recurring revenue. Our revenue from long-term service plans for the year ended December 31,
2012 was $5.1 million and for the year ended December 31, 2011 was $3.3 million.



Approximately 33,000 square feet
of our Winnipeg facility is presently dedicated to assembly and testing of the mechanical, electronic and electrical subsystems
of our products, including the integrated magnet transport system, operating room table with its associated controls and our specialized
surgical imaging coils.



We believe that our existing facilities
are adequate for our current needs and that suitable additional or alternative space will be available on commercially reasonable
terms to meet our future needs.



Suppliers



We purchase certain components of our
system from outside vendors, including the MR scanner (with its associated software, diagnostic coils and controls), the CT scanner,
the angiography system, radio-frequency shielding systems (which are required to protect the MR scanner from radio interference),
certain hardware components for our integrated data-management system, operating room booms and surgical lighting.



16







We attempt to establish dual sourcing
for most components of our system, although we currently purchase our imaging systems only from Siemens under a non-exclusive
OEM resale agreement. The agreement sets out the general terms of supply by Siemens. We pay Siemens for all scanners and systems
on standard payment terms, and there are no on-going payment or royalty obligations. The OEM agreement was entered into as of
November 2009 for a five-year term with automatic renewal thereafter for further two-year periods, subject to six months’
advance written notice of termination by either party prior to the end of the initial term or any two-year renewal term.



For the majority of our VISIUS Surgical
Theatre components, we do not have long-term supply contracts with suppliers. We believe that we would be able to establish alternative
sources for these components, subject to any regulatory clearance that may be required. It is possible that a disruption of the
supply of key components could result in increased costs and delays in deliveries of VISIUS Surgical Theatres, which could adversely
affect our reputation and results of operations.



Facilities



Our principal office and production and
assembly facility is located in Winnipeg, Manitoba, where we lease 90,000 square feet of space in a building. Approximately
33,000 square feet of our main facility is currently devoted to manufacturing, with the balance of the space dedicated
to research and development, sales and marketing, and administration. The lease for our main facility has a two-year term expiring
in 2013.



In November, 2012, we announced that we
plan to relocate our research and development, customer service, manufacturing and administration functions currently located
in our Winnipeg facility to Minnesota in order to gain access to a larger pool of talented personnel
and access to a qualified ecosystem of suppliers. On December 28, 2012 we entered into a lease for a 170,000 square foot
facility in Minnesota. Approximately 99,000 square feet of this facility will be devoted to manufacturing, with the
balance of the space dedicated to research and development, sales and marketing, and administration. This lease has a ten-year
term expiring in 2023 with a possibility of renewal at our option for a period of three or five years. Our annual rent obligation
ranges from $1,040 to $1,300 per year.



In addition we lease office space for
our regional employees in one location in each of the United States, China, Japan and Germany.



We believe that our existing facilities
are adequate for our current needs and that suitable additional or alternative space will be available on commercially reasonable
terms to meet our future needs.



Strategic Partners



We work with a number of our customers
and suppliers in designing, developing and marketing our systems. For example, in early 2009, we began working with the University
Health Network in Toronto on a research initiative to develop and build the first pre-clinical system for MR-guided radiation
therapy. In October 2010 we entered into a co-development agreement with Varian to develop an MR-guided radiation therapy
system by combining IMRIS’ proprietary MR imaging technology with Varian’s TrueBeamTM system that would enable
the use of MR imaging during radiotherapy treatments for cancer.



Following our acquisition of NASL and
its MR-guided microsurgical robot solution in February 2010, we entered into an agreement with the University of Calgary
to leverage its clinical setting at the Foothills Medical Centre in Calgary and related data through development of the next generation
of the robotic technology. We have also entered into a development agreement with MacDonald, Dettwiler and Associates Ltd.,
(“MDA”) pursuant to which MDA is working with us to design and develop the next generation of the MR-guided surgical robot.



Since 2005 we have had an OEM agreement
with Siemens for the supply of imaging components for our systems, and we collaborate with other customers, suppliers and clinicians,
although most of these relationships are based on mutually beneficial goals and not contractual relationships. We also work with
a number of customers who provide input in the product development cycle and who act as demonstration sites for other potential
customers.



| | 3.1.8 | Regulatory Matters
| | ----- | ------------------



VISIUS Surgical Theatres for neurosurgical,
cerebrovascular and cardiovascular applications are classified as medical devices and are subject to governmental regulation in
various jurisdictions. These regulations typically govern the research, testing, development, manufacture, promotion and marketing
of the system. Once approved, medical devices are usually subject to continuing regulation, which typically includes record-keeping
requirements, adverse event reporting, good manufacturing requirements and post-market surveillance and, in certain jurisdictions,
the requirement to maintain ISO 13485 certification and to undergo periodic audits/inspections. Non-compliance with the applicable
regulatory requirements will jeopardize our ability to market our products as such non-compliance can result in the failure to
secure regulatory approval for the device, withdrawal or suspension of the regulatory approval, fines, injunctions, civil penalties,
recalls or seizures of the device and, in certain jurisdictions, criminal prosecution.



17







We have received regulatory clearance
in the United States, Canada, Europe, China, Australia, South Korea and Japan to market and sell all five room configurations
of our VISIUS Surgical Theatre 1.5 Tesla system product line for neurosurgical applications into these jurisdictions. We have
also received regulatory clearance for our 3.0 Tesla system in the United States, Canada, Europe, China, Australia, South Korea
and Japan. No regulatory approval is required for the marketing and sale of our systems in India.



We have received regulatory clearance
in the United States, Canada, Australia and Europe to market and sell our VISIUS Surgical Theatre for cerebrovascular and cardiovascular
systems.



In addition, some of our products must
conform to standards set by the International Electrotechnical Commission, Underwriters Laboratories Inc. (“UL”),
a privately owned and operated product safety testing and certification organization and TÜV SÜD, a globally recognized
testing, inspection and certification organization. In the United States, we obtain UL or TÜV SÜD certification for
each system on site during the installation process. We are working to have our products UL marked at the manufacturing stage,
which will remove the requirement to have on-site inspections. In 2011, certain components of our products received UL certification.



We intend to seek regulatory approval
of the VISIUS Surgical Theatre for cerebrovascular and cardiovascular applications in other jurisdictions in which we currently
have, or have sought, approval for our VISIUS Surgical Theatre for neurovascular applications. While we expect that the approval
process in each jurisdiction will be similar to that used to obtain approval of the VISIUS Surgical Theatre for neurosurgical
applications, there can be no assurance that we will receive market clearance for the VISIUS Surgical Theatre for cerebrovascular
and cardiovascular applications in these other jurisdictions.



United States



In the United States, medical devices
are regulated primarily by the U.S. Food and Drug Administration (the “FDA”). The FDA classifies medical devices into
one of three regulatory classes, referred to as Class I, Class II or Class III, depending on the level of control and review necessary
to ensure the safety and effectiveness of the device, which in turn is based on the level of risk to the patient. As the risk
level increases, additional data is required to demonstrate the safety and effectiveness of the device. The products we currently
market are Class I and Class II medical devices.



There are two review procedures
by which medical devices can receive FDA clearance or approval for marketing in the United States: (i) a pre-market
notification (or a “510(k) notification”), or (ii) submission and approval of a pre-market approval
application (“PMA”). Most Class I devices and a few Class II devices are exempt from the 510(k) notification
requirements, subject to the limitations on exemptions. A 510(k) notification must be submitted for certain Class I devices
as well as for the majority of Class II and certain Class III devices. The 510(k) application must establish that the medical
device, in comparison with an existing legally marketed product (a “predicate device”): (i) is substantially
equivalent, and (ii) is as safe and effective and does not raise different questions of safety or effectiveness. A PMA
application must be filed if a proposed device is not substantially equivalent to a predicate device or if the device is a
type that poses a significant risk of illness or injury. A PMA application must be supported by extensive data including, but not
limited to, technical, preclinical, clinical trials, manufacturing and labeling to demonstrate to the FDA's satisfaction the
safety and effectiveness of the device for its intended use. Moreover, the FDA has recently announced that it is making
changes to its 510(k) clearance pathway that will likely require the submission of more clinical and pre-clinical data than
has previously been required to obtain clearance for medical devices. After a device receives 510(k) clearance, any
modification that could significantly affect its safety or effectiveness, or that would constitute a major change in its
intended use, requires a new 510(k) clearance or could require PMA approval. The FDA requires each manufacturer to make this
determination in the first instance, but the agency can review any such decision. If the FDA disagrees with a manufacturer's
decision not to seek a new 510(k) clearance, the agency may retroactively require the manufacturer to seek 510(k) clearance
or PMA approval. The FDA also can require the manufacturer to cease marketing and/or recall the modified device until
510(k) clearance or PMA approval is obtained. Also, the manufacturer may be subject to significant regulatory fines
or penalties.



18







Marketing a medical device that is subject
to a 510(k) notification may begin upon the FDA issuing a clearance letter finding substantial equivalence to the predicate device.
The FDA issued a clearance letter with respect to certain room configurations for the VISIUS Surgical Theatre 1.5 Tesla system
in August 2006 and the VISIUS Surgical Theatre 3.0 Tesla system in December 2008. The FDA issued a clearance letter with respect
to our VISIUS Surgical Theatre for cerebrovascular and cardiovascular applications in September 2009.



The Oncology package, IMRIS’ first
MR Guided Radiation Therapy product, was cleared by the FDA in August 2012. We expect the MR Guided Radiation Therapy and Image
Guided Robotics products currently under development will be subject to 510(k) clearance as Class II devices. We obtain the advice
of FDA regulatory consultants in order to confirm which type of submission is required for a given product. Generally, a 510(k)
clearance submission requires three months for approval and a special 510(k) clearance requires one month for approval, although
delays are common and the granting of clearance is never guaranteed. However, the FDA may determine that our MR Guided Radiation
Therapy and/or Image Guided Robotics products are not substantially equivalent and therefore not subject to 510(k) notification
or may require further information, including clinical data, to make a determination regarding substantial equivalence.



Any such determination or request
for additional information would delay market introduction of the product that is the subject of the 510(k) notification. If
FDA requires a PMA application, the period for review and additional expense and time can be substantial. By statute, the FDA
has 180 days to review the "accepted application", although, generally, review of the application can take between
one and three years and it may take significantly longer. During this review period, the FDA may request additional
information or clarification of information already provided. Typically, the FDA will convene an advisory panel meeting to
seek review of the data presented in the PMA for novel devices. The panel's recommendation is given great weight, but is not
dispositive of the agency's decision. Prior to approving the PMA, the FDA will conduct an inspection of the manufacturing
facilities and may conduct an inspection of a number of the clinical sites where the supporting study was conducted. The
facility inspection evaluates the company's compliance with the Quality System Regulation, or QSR, which imposes elaborate
testing, control, documentation and other quality assurance procedures in the manufacturing process.



Clinical trials are generally required
to support a PMA application and are sometimes required for 510(k) clearance. Such trials, if conducted in the United States,
generally require an investigational device exemption application, or IDE, approved in advance by the FDA for a specified number
of patients and study sites, unless the product is deemed a non-significant risk device eligible for more abbreviated IDE requirements.
Clinical trials are subject to extensive monitoring, recordkeeping and reporting requirements. Clinical trials must be conducted
under the oversight of an institutional review board, or IRB, for the relevant clinical trial sites and must comply with FDA regulations,
including but not limited to those relating to good clinical practices. To conduct a clinical trial, we also are required to obtain
the patients' informed consent that complies with FDA requirements, state and federal privacy regulations and human subject protection
regulations. We, the FDA or the IRB could suspend a clinical trial at any time for various reasons, including a belief that the
risks to study subjects outweigh the anticipated benefits. Even if a trial is completed, the results of clinical testing may not
adequately demonstrate the safety and efficacy of the device or may otherwise not be sufficient to obtain FDA clearance or approval
to market the product in the U.S. Following completion of a study, we would need to collect, analyze and present the data in an
appropriate submission to the FDA, either a 510(k) premarket notification or a PMA. Even if a study is completed and submitted
to the FDA, the results of our clinical testing may not demonstrate the safety and efficacy of the device, or may be equivocal
or otherwise not be sufficient to obtain approval of our product.



Canada



In Canada, medical devices are regulated
by Health Canada and are divided into one of four regulatory classes, Class I to Class IV, depending upon the risk the medical
device presents to the patient. Except for Class I devices, all medical devices are required to have a device license before they
can be sold in Canada. As the risk level increases, additional data is required to demonstrate the safety and effectiveness of
the medical device before a device license is issued by Health Canada. Manufacturers of Class II, III and IV medical devices are
also required to submit to Health Canada a valid ISO 13485 quality management systems certificate issued to the manufacturer by
a third- party organization recognized and accredited by Health Canada. We obtained a Class II device license for our 1.5 Tesla
VISIUS Surgical Theatre for neurosurgical applications in 2006, our 3.0 Tesla VISIUS Surgical Theatre for neurosurgical applications
in 2008, and a Class III device license for our VISIUS Surgical Theatre for cerebrovascular and cardiovascular applications in
2009.



19







International Regulations



International sales of medical devices
are subject to foreign governmental regulations that vary substantially from country to country. The primary regulatory environment
in Europe is that of the European Union. As in the United States, medical devices are classified depending upon the risk the medical
device presents to the patient, although otherwise the current regulatory requirements in the European Union differ significantly
from those in the United States. Medical devices in Europe are required to carry a CE Mark, which represents compliance with the
applicable Medical Device Directives. Typically, in order to obtain the CE Mark, Class I (sterile), Class IIa, Class IIb and Class
III medical devices in Europe require quality systems certification by a third-party assessment agency known as a Notified Body.



The VISIUS Surgical Theatre for neurosurgical
applications is a European Class IIa medical device and the VISIUS Surgical Theatre for cerebrovascular and cardiovascular applications
are Class IIb medical devices and fall under the Medical Devices Directive (93/42/EEC) (“MDD”). SGS (UK) Limited Systems
and Services is our Notified Body for Europe. We are required to prepare a technical file with evidence of compliance with the
MDD and applicable standards. We received the appropriate CE Mark for our 1.5 Tesla VISIUS Surgical Theatre for neurosurgical
applications in 2006 and for our 3.0 Tesla VISIUS Surgical Theatre for cerebrovascular and cardiovascular applications in 2009.



In China, regulation of medical devices
is administered by the State Food and Drug Administration (“SFDA”). This organization was established in 2003 to form
a single regulatory body for all the Chinese provinces, simplifying the regulatory process for companies that want to do business
in China. The SFDA has adopted the FDA’s model for registration and a tiered classification approach similar to Canada to
determine the regulatory requirements. In Japan, regulation of medical devices is administered by the Ministry of Health under
the Pharmaceutical Affairs Law (“PAL”). Language and complex registration processes make Japan a challenging regulatory
environment; however, there are a number of third party consulting firms that can assist companies with the process. Japan uses
a classification approach whereby regulatory requirements increase based on the class level. Japan has specific review requirements;
however, these requirements are similar to EU, U.S. and Canadian requirements, which can help reduce the process for international
companies.



In the Middle East, the regulatory requirements
imposed on the local manufacturers and importers vary among the Middle East countries; however, many either follow the major principles
of the U.S. or the EU regulations or have no specific regulations, so hospitals will default to these requirements. This fragmented
process complicates regulatory approval.



| | 3.1.9 | Relocation
| | ----- | ----------



On November 9, 2012, the Company announced
that it plans to relocate its research and development, customer service, manufacturing and administration functions currently
located in the Winnipeg facility to Minnesota in order to gain access to a larger pool of talented
personnel and access to a qualified ecosystem of suppliers. The move will be completed by the end of the third quarter
of 2013. The operating segments will remain unchanged.



| | 3.2 | Risks Related to Our Business
| | --- | -----------------------------



The risks and uncertainties described
below are not the only ones we face. Additional risks and uncertainties, that we are not aware of or focused on, or that we currently
deem to be immaterial, may also impair our business operations and cause the trading price of our securities to decline.



Risks Related to Our Business



Due to our limited operating history
and accumulated deficit, as well as our expected future losses, we might not achieve or maintain profitability.



We were founded in 2005. Accordingly,
we have a limited operating history. We have a large accumulated deficit, we expect future losses, and we might not achieve sustained
profitability. If the time required to generate significant revenues and achieve sustained profitability is longer than anticipated,
we may not be able to continue our operations without additional capital, which may not be available at all or on commercially
reasonable terms. Our prospects must be considered in light of the risks and uncertainties encountered by an early-stage company
in the continuously-evolving image-guided therapy market. If we cannot successfully address these risks, we will not be able to
achieve or maintain profitability and our business and financial condition would suffer.



20







The decision to buy our products
by a hospital may be hampered by the high unit price of the VISIUS Surgical Theatre.



The VISIUS Surgical Theatre has unit prices
that range between $4 million to $12 million dollars. Given these products are premium-priced due to their greater functionality
as compared to traditional products, the decision to purchase one of our VISIUS Surgical Theatres may consume a significant portion
of a hospital’s annual capital budget. Where capital budgets are limited, we often are competing with systems that offer
lesser functionality of our products or other capital requirement needs within the hospital system which may force a customer
to choose between two or more items of capital equipment. These factors may limit our ability to compete if we are unable to market
VISIUS Surgical Theatres more effectively than lower priced competitive products, and limit our ability to grow the business.



Our products are characterized by
a long sales cycle, high unit prices and limited quarterly installations, which may contribute to substantial fluctuations in
our order bookings and revenues recognized on delivery, installation and acceptance of our products.



The purchase and installation of a VISIUS
Surgical Theatre represents a significant capital project for our customers. Due to the size and complexity of these projects,
our sales process requires that we engage with a number of different stakeholders within and outside the hospital, including surgeons,
interventionists, radiologists, facilities managers, hospital administrators and other hospital staff. As a result, the sales
cycle associated with the marketing of our VISIUS Surgical Theatres is both complex and lengthy, with an average sales cycle of
more than 12 months from initial customer engagement to our receipt of a purchase order. Further, once a hospital purchases
a VISIUS Surgical Theatre, the time for manufacture, delivery and installation of the Theatre may exceed 12 months, which
delays our ability to recognize revenue. In addition, because payment of a substantial portion of the purchase price for our products
is not due from the customer until the system has been delivered, installed and accepted by the customer, delays in manufacturing,
delivering and installing a completed system may have a negative effect on our cash flow.



Because of the high unit price of the
VISIUS Surgical Theatre and the limited number of units installed each quarter, each installation currently represents a significant
component of our revenue for a particular quarter. If we lose a customer order or if customers defer installation of a VISIUS
Surgical Theatre for even a short period of time, a significant amount of revenue may be lost or deferred to a subsequent period.
We expect that revenues from a limited number of new customers will continue to account for a large percentage of our future revenues.



The key factors affecting our revenue
and results, many of which are outside of our control, include:



| | • | competitive conditions in our
                                                                   industry, including strategic initiatives by us or our competitors,
                                                                   new products or services, product or service announcements
                                                                   and changes in pricing policy by us or our competitors;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | market acceptance of our products and services;
| | - | -----------------------------------------------



| | • | varying size, timing and contractual
                                                                   terms of orders for our products, which may delay the recognition
                                                                   of revenue;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | the project based nature of deployments of our products;
| | - | --------------------------------------------------------



| | • | the discretionary nature of
                                                                   purchase and budget cycles of our customers and changes in
                                                                   their budgets for, and timing of, equipment purchases;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | strategic decisions by us or
                                                                   our competitors, such as acquisitions, divestitures, spin-offs,
                                                                   joint ventures, strategic investments or changes in business
                                                                   strategy;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | general weakening of the economy
                                                                   resulting in a decrease in the overall demand for medical devices
                                                                   and services or otherwise affecting the capital investment
                                                                   levels of hospitals;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | timing of product development and new product initiatives;
| | - | ----------------------------------------------------------



| | • | technology changes or variations from our suppliers that
change or impact our product offering; and
| | - | ---------------------------------------------------------------------------------------------------



21







| | • | the length and variability of the sales cycles for our
products.
| | - | ----------------------------------------------------------------



In addition, while we believe that our
backlog provides a more meaningful measure at any particular point in time of the long-term prospects of our business; investors
may attribute significant weight to our quarterly revenues and operating results, which may result in substantial fluctuations
in our share price. Furthermore, our backlog may not be recognized as revenue if we experience issues with the supply of components
for our products, if any service contracts are terminated early for any reason, if customers experience credit problems or for
other reasons beyond our control, which would adversely affect our operating results.



A large portion of our operating
costs do not vary with revenue, which may have a negative impact on our operating results if we have significant fluctuations
in our revenues.



A large portion of our operating costs
are relatively fixed, such as our investment in human resources, research activities and regulatory compliance. These investments
form a certain baseline of our costs, which do not fluctuate from period to period. If we are unable to recognize revenue in a
particular quarter, these investments may adversely affect our financial results in that quarter or year.



A significant portion of these fixed operating
costs are allocated to research and development of new technologies. These investments often require large capital commitments
over long development timeframes. We have some ability to eliminate or delay certain costs; however, delaying or halting these
activities because of varying revenue levels from quarter to quarter could have a long-term impact on the completion and commercialization
of new products, further limiting our ability to grow the business.



If we are unable to increase sales
of our newer VISIUS Surgical Theatre applications, we may be unable to generate sufficient revenue to support our business.



We currently generate the substantial
majority of our revenue from sales of the VISIUS Surgical Theatre for neurosurgical applications and multi-year service plans
for these Theatres. We have introduced new capabilities that extend the VISIUS Surgical Theatre to cerebrovascular and cardiovascular
applications, and added intraoperative CT capabilities to the VISIUS Surgical Theatre for cranial and spine procedures. To date
we have experienced limited sales of these products. The image-guided therapy market, which all of our products are designed to
address, is an emerging market with limited data and there is no guarantee that the assumptions that we have made about the size
of the market, the need for our products, the ability of our products to meet this perceived demand or the willingness and ability
of our potential customers to pay the high prices of our VISIUS Surgical Theatres will be realized. If we are unable to sustain
or increase sales of these products, we may not generate sufficient revenue to support our business.



22







We may not be able to achieve commercialization
of our products on the timetable we anticipate, or at all.



We cannot guarantee that we will be able
to develop our robotics, Magnetic Resonance guided Radiation Therapy (MRgRT) or inter-operative Computed Tomography (iCT) programs
into commercially viable products on the timetable we anticipate, or at all. The commercialization of these products requires
substantial technological advances to improve the durability, reliability and performance of these products, and to develop commercial
volume manufacturing processes for these products.



To date, we have limited experience manufacturing
some of our products on a commercial basis. We cannot be sure that we will be able to develop efficient, low cost, high volume
processes that will enable us to meet our cost goals and delivered and installed revenue projections. While we currently have
sufficient production capacity to fulfill customer orders in the near term, we expect that we will increase our production capacity
based on market demand. We cannot be sure that we will be able to achieve any planned increases in production capacity or that
unforeseen problems relating to our manufacturing processes will not occur. Even if we are successful in developing high volume
processes and achieving planned increases in production capacity, we cannot be sure that we will do so in time to meet our product
commercialization schedule or to satisfy customer demand. If our business does not grow as quickly as anticipated, our existing
and planned manufacturing facilities would, in part, represent excess capacity for which we may not recover the cost, in which
case our revenues may be inadequate to support our committed costs and planned growth, and our gross margins and business strategy
would be adversely affected. Any of these factors could have a material adverse effect on our business, results of operations
and financial performance.



We may not be able to accurately
predict how our customer pipeline will convert to order bookings.



We periodically forecast information about
the rate we will be able to convert potential customers in our order pipeline into actual bookings we expect to achieve in future
periods. The actual bookings we achieve in a period may vary from the bookings we forecast in public disclosure documents, presentations
or other public information and these variations could be material and adverse. Our forecasts reflect numerous assumptions concerning
our expected performance, as well as other factors, which may not be accurate. Actual bookings rely on the occurrence of numerous
factors beyond our control such as a customer’s capital budget, their patient requirements and timing. If actual bookings
vary from our announced guidance, the price of our Common Shares may decline, and such a decline could be substantial.



New product introductions may adversely
affect our financial results



We introduce new products with enhanced
features and extended capabilities from time to time. Our products are subject to various regulatory processes, and we must obtain
and maintain regulatory approvals in order to sell our new products. If a potential purchaser believes that we plan to introduce
a new product in the near future or if a potential purchaser is located in a country where a new product that we have introduced
has not yet received regulatory approval, planned purchases may be deferred or delayed. As a result, new product introductions
may adversely affect our financial results.



If we are unable to fulfill our
current purchase orders on a timely basis or at all, our ability to generate revenue could be impaired, market acceptance of our
products could be adversely affected and hospitals may instead purchase our competitors’ products.



As of December 31, 2012, we had 13 outstanding
purchase orders for our VISIUS Surgical Theatres at various stages of completion, payment and revenue recognition. Orders may
be revised, modified or cancelled, by their express terms, as a result of negotiations or by project changes or delays. If we
experience any failures or delays in completing the installation of our products, our reputation would suffer and we may not be
able to sell additional products. Substantial delays in the installation process also increase the risk that a customer would
attempt to cancel a purchase order, which would have a negative effect on our financial condition and results of operations.



Our backlog might not result in
future net sales.



Our backlog at any particular date may
not be indicative of recognized revenues in our financial statements in subsequent periods. We evaluate each customer order to
determine qualification for inclusion in backlog; however, there can be no assurance that amounts included in backlog will ultimately
result in recognition of revenue or occur in any particular financial reporting period. In addition, in any given period, we can
reduce backlog due to factors such as a cancellation of an order, lack of confidence in the customer proceeding with the order,
changes in the financial condition at a customer, changes in government or third party funding for customers, and changes in installation
schedules. Our experience is that orders typically convert into revenues over 12 to 18 months on average. As of December 31, 2012,
we had one order in backlog valued at approximately $9.6 million, which has not proceeded at our expectations. The order continues
to meet our defined criteria for inclusion in order backlog and the customer has not informed us of any change in their plans,
but we are continuing to monitor the order for inclusion in our backlog. Changes to backlog during any particular period, or the
failure of our backlog to result in future sales, could harm our business, financial condition, results of operations and cash
flows.



23







We depend upon Siemens for the supply
of key components of our products and the support and maintenance of our products.



We depend upon Siemens to supply the MR
scanner, CT scanner and angiography systems for our products. Our OEM agreement with Siemens was entered into as of November 2009
for a five-year term with automatic renewal thereafter for further two-year periods, subject to six months’ advance written
notice of termination by either party prior to the end of the initial term or any two-year renewal term. The agreement may also
be terminated earlier in the event of default or in the event of insolvency or equivalent proceedings against either party or
in the event of a change of control or similar sale transaction affecting us where the buyer or controlling shareholder is a direct
competitor to Siemens. Siemens also directly and indirectly competes with us in the sale of image-guided therapy systems. If,
for any reason, we could not obtain imaging equipment from Siemens on a timely basis or at all, there is no certainty that we
could find another vendor willing to supply this equipment and a change would require a redesign of the products, which could
take a year or more to implement. We also depend upon Siemens to provide support and maintenance services to our customers. If
Siemens’ services became unavailable on a timely basis or at all, any resulting service issues could disrupt our customer
relationships and cause damage to our reputation.



We rely upon a limited number of
suppliers of components for our products. The loss of any of these relationships may increase our costs, damage our reputation
and harm our ability to generate revenue.



We purchase other critical components
of our products from outside vendors, including radio-frequency shielding systems (which are required to protect the MR scanner
from radio interference), certain hardware components for our data-management system, and operating room booms and lights. For
the majority of these system components, we do not have long-term supply contracts with the suppliers. A disruption of the supply
of key components could result in increased costs and delays in deliveries, which could adversely affect our reputation and results
of operations. Any transition to alternate manufacturers or suppliers would likely result in operational problems and increased
expenses and could delay the shipment of, or limit our ability to provide, our products. For example, we will need to verify that
any new manufacturer meets our technical specifications and maintains facilities, procedures and operations that comply with our
quality requirements.



We will also have to assess any new manufacturer’s
compliance with all applicable regulations and guidelines, which could further impede our ability to manufacture our products
in a timely manner. If the change in manufacturer results in a significant change to the product, a new 510(k) clearance from
the FDA, or similar foreign clearance may be necessary, which would likely cause substantial delays. Furthermore, we cannot assure
you that we would be able to enter into agreements on a timely basis with new manufacturers or suppliers on commercially reasonable
terms, or at all. As a result, we may be unable to meet the demand for our products, or face increased costs and delays in deliveries
of our products, either of which could harm our ability to generate revenue and damage our reputation. In addition, any delay
in receiving components might cause us to have insufficient spare parts to service existing customers, which could lead to customer
dissatisfaction and a breach by us of our service obligations to our customers.



We believe it may be necessary to find
alternative manufacturers for key components over time as our quantity and quality demands evolve, but we may not be able to identify
alternative manufacturers in a timely fashion. Any transition to alternate manufacturers or suppliers would likely result in operational
problems and increased expenses and could delay the shipment of, or limit our ability to provide, our products.



We utilize distributors for a portion
of our sales, which subjects us to a number of risks that could harm our business.



We have strategic relationships with distributors
for sales and service of our products in certain foreign countries. If these strategic relationships are terminated and not replaced,
our revenues and/or ability to service our products in the territories serviced by these distributors could be adversely affected.
In addition, we may be named as a defendant in lawsuits against our distributors related to sales or service of our products performed
by them.



24







Natural or other disasters could
disrupt our business and result in loss of revenue or in higher expenses.





Natural disasters, terrorist activities
and other business disruptions in any of our major markets could have a material adverse effect on our operations. In addition,
any damage to our sole in-house manufacturing operation in Winnipeg, Manitoba being utilized in the first half of 2013 or our
Minnesota facility which will be utilized during the second half of 2013 could cause substantial delays in operations, damage
or destroy equipment or inventory and cause us to incur additional expenses. The insurance we maintain against natural disasters
may not be adequate to cover our losses in any particular case. With or without insurance, damage to our manufacturing facility
or our other property, or to any of our suppliers, due to a natural disaster or casualty event may have a material adverse effect
on our business, financial condition and results of operations. Furthermore, any unanticipated business disruption caused
by Internet security threats, damage to global communication networks or similar events could have a material adverse effect on
our business, financial condition and operating results.



Disruption of critical information
systems or material breaches in the security of our systems could harm our business, customer relations and financial condition.



Information technology helps us operate
efficiently, interface with customers, maintain financial accuracy and efficiency and accurately produce our financial statements.
If we do not allocate and effectively manage the resources necessary to build and sustain the proper technology infrastructure,
we could be subject to transaction errors, processing inefficiencies, the loss of customers, business disruptions or the loss
of or damage to intellectual property through security breach. If our data management systems do not effectively collect, store,
process and report relevant data for the operation of our business, whether due to equipment malfunction or constraints, software
deficiencies or human error, our ability to effectively plan, forecast and execute our business plan and comply with applicable
laws and regulations will be impaired, perhaps materially. Any such impairment could materially and adversely affect our financial
condition, results of operations, cash flows and the timeliness with which we report our internal and external operating results.



We rely upon certain key personnel
and our ability to successfully grow our business would be adversely affected by their departure from our company.



We depend upon certain of our key employees.
In particular, we are highly dependent upon the members of our senior management, operations and research and development staff.
The loss of one or more of these individuals could adversely affect our business. Recruiting and retaining key personnel in the
future will be critical to our success. We believe there are only a limited number of individuals with the requisite skills to
serve in many of our key positions, and we compete for key personnel with other medical equipment and software manufacturers and
technology companies, as well as universities and research institutions. Although we have done so in the past and expect to be
able to do so in the future, we cannot assure you that we will be able to attract and retain skilled and experienced personnel.
Competition for qualified personnel in the medical device industry is intense and recruiting and retaining qualified personnel
with experience in our industry is very difficult. A significant portion of our compensation to our key employees is in the form
of stock option grants. A prolonged decline in our share price could make it difficult for us to retain our employees and recruit
additional qualified personnel. We do not maintain, and do not intend to obtain, key employee life insurance on any of our personnel.
If we fail to hire and retain personnel in key positions, we may be unable to maintain or grow our business successfully.



Relocating our research and development,
customer service, manufacturing and administration functions currently located in our Winnipeg facility to Minnesota will cause
a disruption of our business.



On November 9, 2012, we announced that
we plan to relocate our research and development, customer service, manufacturing and administration functions currently located
in our Winnipeg facility to Minnesota in order to gain access to a larger pool of talented personnel
and access to a qualified ecosystem of suppliers. The move will be completed by the end of the third quarter of 2013. If
we are not able to timely recruit individuals with the requisite skills, or timely gain access to a qualified ecosystem of suppliers,
the delay could materially and adversely affect our financial condition, results of operations, and cash flows.



25







We may lose our Canadian issuer status in the future,
which could result in significant additional costs and expenses to us.



In order to maintain our current status as a foreign private
issuer, a majority of our Common Shares must be either directly or indirectly owned by non-residents of the United States, unless
we also satisfy one of the additional requirements necessary to preserve this status. We may in the future lose our foreign private
issuer status if a majority of our Common Shares are held in the United States and we fail to meet the additional requirements
necessary to avoid loss of foreign private issuer status. The regulatory and compliance costs to us under U.S. federal securities
laws as a U.S. domestic issuer may be significantly more than the costs we incur as a Canadian issuer eligible to use the multi-jurisdictional
disclosure system adopted by the United States and Canada. If we are not a Canadian issuer, we would not be eligible to use the
MJDS (as defined below) or other foreign issuer forms and would be required to file periodic and current reports and registration
statements on U.S. domestic issuer forms with the United States Securities and Exchange Commission, which are more detailed and
extensive than the forms available to a Canadian issuer. In addition, we may lose the ability to rely upon exemptions from NASDAQ
corporate governance requirements that are available to foreign private issuers.



There is limited clinical data to support the safety
and clinical efficacy of our products, which could affect the rate of adoption of our products and subject our products to future
challenges.



Although we have collected and published
clinical data to support the effectiveness of neurosurgical procedures performed using VISIUS Surgical Theatres, the clinical
data is still not extensive and the medical community has not yet developed a large body of peer-reviewed literature that supports
the safety and efficacy of our systems. In addition, the clinical data in other applications such as cardiovascular, cerebrovascular
and spine for VISIUS Surgical Theatres is still in the development stages. Because the limited VISIUS Surgical Theatre clinical
data published to date is relatively new, we may not have sufficient clinical data demonstrating the advantages of our products
over our competitors’ products. The lack of such may affect the rate at which hospitals and clinicians adopt our products.
In addition, if future studies call into question the safety or efficacy of our products, our business, financial condition or
results of operations could be adversely affected.



Market competition and technological
advances of other products and treatments could reduce the attractiveness of our products or render them obsolete.



The medical device industry in general
and the field of image-guided therapy in particular, is subject to intense and increasing competition and rapidly evolving technologies.
Radiation therapy, chemotherapy and other drugs offer alternative means of treating the diseases that are dealt with using image-guided
therapy. In addition, many government, academic and business entities are investing substantial resources in research and development
of treatments and new products that may render image-guided therapy obsolete, including new drug treatments and gene therapy.
Successful developments that result in new approaches for treatments could reduce the attractiveness of our products or render
them obsolete. Because our products often have long development and government approval cycles, we must anticipate changes
in the marketplace and the direction of technological innovation and customer demands. To compete successfully, we will need to
demonstrate the advantages of our products and technologies over alternative procedures, products and technologies, and convince
surgeons, interventionists, radiologists, facilities managers, hospital administrators and other hospital staff and other healthcare
decision makers of the advantages of our products and technologies.



Our current competitors or other companies
are likely to develop new imaging solutions. If we are unable to develop products that compete effectively against the products
of existing or future competitors, our revenue may not grow and could decline. Some of our competitors may compete by changing
their pricing model or by lowering the price of their imaging solutions or ancillary supplies. If these competitors’ pricing
strategies are effective, it could result in downward pressure on the price of our products. If we are unable to maintain or increase
our selling prices in the face of competition, our gross margins may decline.



Moreover, many of our competitors are
large medical systems suppliers and have considerably greater resources at their disposal than we do in terms of technology, manufacturing,
product development, marketing, distribution, sales, commercialization, capital resources and human resources and have established
relationships with hospitals. Many competitors also have more experience in obtaining domestic and foreign regulatory approvals.
Therefore, we cannot assure you that we can successfully compete with present or potential competitors or that such intense competition
will not have a materially adverse effect on our business, financial condition or results of operations.



26







We may have additional financing
requirements in the future and we cannot be certain of our ability to obtain such financing at all or on commercially reasonable
terms.



If our estimates of revenue, expenses,
or capital or liquidity requirements change or are inaccurate, or if cash generated from operations is insufficient to satisfy
our liquidity requirements, we may require additional financing. In the future, we may also seek to arrange financings to give
us financial flexibility to pursue attractive acquisition or investment opportunities that may arise, although we currently do
not have any acquisitions or investments planned. We may pursue future financings through various means, including equity investments,
issuance of debt, joint venture projects, licensing arrangements or other means. We cannot be certain that we will be able to
obtain additional financing on commercially reasonable terms or at all. Our ability to obtain additional financing may be impaired
by such factors as the state of the capital markets, both generally and specifically in the medical device industry, and the fact
that we are a relatively new enterprise without a proven operating history. If the amount of capital we are able to raise from
financing activities, together with our cash flow from operations, is not sufficient to satisfy our capital needs, we may not
be able to develop or enhance our products, execute our business and growth plans, take advantage of future opportunities, or
respond to competitive pressures or unanticipated customer requirements. If any of these events occurs, it would adversely affect
our business, financial condition and results of operations.



We may be unable to successfully
manage future growth in our business, which would impede our ability to successfully develop, manufacture, market and sell our products.



Our future financial performance, our
ability to increase sales of our products and our ability to compete effectively will depend, in part, upon our ability to manage
future growth effectively. Our ability to manage growth will require us to continue to implement and improve our administrative,
accounting and management systems and to recruit, integrate and train new employees, including additional management, administrative,
distribution, sales and marketing personnel. Our manufacturing, assembly and installation process is complex and we must effectively
scale this entire process to satisfy customer expectations and changes in demand. We cannot be certain that our personnel, systems,
procedures and internal controls will be adequate to support our future operations. Any failure to effectively manage our growth
could impede our ability to successfully develop, market and sell our products and harm our business.



Our products are complex, and require
the integration of a number of components from several sources of supply. We must manufacture and assemble these products in commercial
quantities in compliance with regulatory requirements and at an acceptable cost. We believe that our manufacturing facility is
adequate for our expected growth for the foreseeable future, but in order to meet our anticipated long-term market demand we will
need to increase our manufacturing capacity. Increasing the manufacturing capacity of our facilities will require the investment
of additional funds and the hiring and retaining of additional management and technical personnel who have the necessary manufacturing
experience. We may not successfully complete any required increase in manufacturing capacity on a timely basis or at all. If our
manufacturing capacity does not keep pace with product demand, we will not be able to fulfill orders in a timely manner which
in turn may have a negative effect on our financial results and overall business. Conversely, if demand for our products decreases,
the fixed costs associated with excess manufacturing capacity may adversely affect our financial results.



If our customers are unable to obtain
adequate reimbursement from third-party payers for the use of our products, our ability to commercialize our products will be
adversely affected.



Medical institutions typically bill the
services performed with our products to various third-party payers, such as government health administration authorities, private
health coverage insurers and other organizations. Our ability to commercialize products successfully will depend in part upon
the extent to which reimbursement for the cost of such services will be available. Third-party payers are increasingly challenging
the price of medical products and services and instituting cost containment measures to control or significantly influence the
purchase of medical products and services.



Significant uncertainty exists as to the
reimbursement status of newly approved healthcare products and we cannot assure you that adequate third-party coverage will be
available to establish price levels sufficient for us to realize an appropriate return on our investment in product development.
In the event that our customers are unable to obtain adequate reimbursement for the use of VISIUS Surgical Theatres or other products
we may develop, market acceptance of our products would be adversely affected.



We operate in an industry where
there is the potential for substantial product liability claims, which would cause us to incur significant costs, create adverse
publicity and/or prevent us from commercializing our products.



Medical products involve an inherent risk
of product liability claims and associated adverse publicity. We currently maintain liability insurance coverage in the aggregate
amount of $15 million. There is no guarantee that future claims based on product liability will not exceed such amounts.
In addition, should it prove impossible to obtain this type of insurance at reasonable rates or to otherwise protect us against
potential liability proceedings, we could be required to cease the commercialization of products that we have developed or be
prevented from beginning the commercialization of new products. Our obligation to pay indemnities or to withdraw a product following
complaints could materially and adversely affect our financial condition and results of operations.



27







We may face substantial warranty
claims arising from the nature of our business, which would substantially increase our costs and damage our reputation.



Our costs could substantially increase
if we receive a significant number of warranty claims. We typically provide our customers with a one-year material and workmanship
warranty on their purchase of a VISIUS Surgical Theatre. We have only a limited history of commercial placements from which to
judge our rate of warranty claims. If product returns or warranty claims increase, we could incur unanticipated additional expenditures
for parts and service.



In addition, if we were to receive a significant
number of warranty claims, our reputation and goodwill in the image-guided therapy market could be damaged. While we have established
reserves for liability associated with product warranties, unforeseen warranty exposure in excess of those reserves could materially
and adversely affect our financial condition and results of operations.



Our financial results can be adversely
affected by foreign exchange fluctuations.



While we generate a significant portion
of our sales in U.S. dollars, we also have sales in other foreign currencies and many of our expenses are denominated in
Canadian dollars. In addition, any assets and liabilities not denominated in our reporting currency can give rise to foreign exchange
gains or losses on translation into our reporting currency. To date, we have not used forward exchange contracts to hedge exposures
denominated in other currencies or any other derivative instrument for trading, hedging or speculative purposes. As such, we are
exposed to fluctuations in the exchange rate between our reporting currency and other currencies.



We may incur losses associated with currency fluctuation
and may not be able to effectively hedge our exposure.



Our operating results
are subject to fluctuations in foreign currency exchange rates. We attempt to mitigate a portion of these risks through foreign
currency hedging, based on our judgment of the appropriate trade-offs among risk, opportunity and expense. We have established
a hedging program to partially hedge our exposure to foreign currency exchange rate fluctuations, primarily for the Canadian dollar.
We regularly review our hedging program and make adjustments as necessary based on our assessment of the relevant risks, opportunities
and expenses. Nevertheless, if our hedging activities do not fully offset the adverse financial impact resulting from unfavorable
movement in foreign currency exchange rates, our financial condition and results of operations would be adversely affected.



We rely upon certain strategic relationships
for the design, development and marketing of our existing and future products. Our revenues would suffer if these partnerships
were to end or if our partners fail to perform in the manner we require.



We work with a number of our customers
and suppliers in designing, developing and marketing our products. Currently, our most important relationship is with Siemens,
which supplies the superconducting magnet at the core of our system and with which we work closely in connection with the sales
and marketing of our VISIUS Surgical Theatres. Siemens and certain of our other strategic partners are large, global organizations
with diverse product lines and interests that may diverge from our interests in commercializing our products. In addition we have
a strategic development activity with Varian, as a key partner in the development of our MR-guided radiation therapy product.
Varian is providing key product components and research and development resources that are critical to the potential commercialization
of the MR-guided radiation therapy product. Accordingly, our strategic partners may not devote adequate resources to our product
development, or may experience financial difficulties, change their business strategy or undergo a business combination or similar
change of control transaction that may affect their willingness or ability to fulfill their obligations to us.



The loss or failure of one or more of
our key strategic partners could have a material adverse effect on our financial condition, results of operations and cash flow.
Furthermore, if we are unable to enter into additional partnerships in the future, or if our current or future partnerships fail,
our ability to develop and commercialize products could be affected negatively and our revenues could be adversely affected. There
can be no assurances that we will be able to establish these strategic relationships, or, if established, that the relationships
will be maintained, particularly if members of our management team leave our company.



28











If we fail to overcome the challenges
inherent in international operations, our business and results of operations may be materially adversely affected.



Although most of our sales to date have
been made in North America, we have employees in North America, Europe and Asia. In the future, we expect international sales
of our products to account for a significant portion of our revenue, which exposes us to risks inherent in international operations.
To accommodate our international sales, we have needed and will need to further invest financial and management resources to develop
an international infrastructure that will meet the needs of our customers.



Accordingly, we will face additional risks
resulting from our international operations, including:



| | • | difficulties in enforcing
                                                                    agreements and collecting receivables in a timely manner through
                                                                    the legal systems of many countries outside North America;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | the failure to fulfill foreign
                                                                    regulatory requirements to market our products on a timely
                                                                    basis or at all;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | availability of, and changes
                                                                    in, reimbursement within prevailing foreign healthcare payment
                                                                    systems;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | difficulties in managing foreign
                                                                    relationships and operations, including any relationships
                                                                    that we establish with foreign sales or marketing employees
                                                                    and agents;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | limited
                                                                                      protection for intellectual property rights
                                                                                      in some countries;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | fluctuations
                                                                                      in currency exchange rates;
| | - | ------------------------------------------------------------------------------------------------------------------------------



| | • | the possibility that foreign
                                                                    countries may impose additional withholding taxes or otherwise
                                                                    tax our foreign income, impose tariffs or adopt other restrictions
                                                                    on foreign trade;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | the possibility
                                                                                      of any material shipping delays;
| | - | --------------------------------------------------------------------------------------------------------------------------------------



| | • | significant changes in the
                                                                    political, regulatory, safety or economic conditions in a
                                                                    country or region;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | protectionist
                                                                                      laws and business practices that favor local
                                                                                      competitors; and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | trade restrictions, including
                                                                    U.S. prohibitions and restrictions on exports of certain
                                                                    products and technologies to certain nations, as well as the
                                                                    imposition of, or significant changes to, the level of tariffs,
                                                                    customs duties and export quotas.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



If we fail to overcome the challenges
we encounter in our international operations, our business and results of operations may be materially adversely affected.



A general global economic downturn
may negatively affect our customers and their ability to purchase our products. A downturn may decrease our revenues, increase
our costs and credit risk with our customers, and negatively affect our ability to collect accounts receivable and recognize revenue.



Disruptions in the financial markets have
had and may continue to have an adverse effect on the U.S. and world economy, which has negatively affected and could continue
to negatively affect business spending patterns. Tightening of credit in financial markets could adversely affect the ability
of our customers and suppliers to obtain financing for significant purchases and operations and could result in a decrease in
or cancellation of orders for our products.



Recent financial market conditions and
the extent of the accompanying economic downturn may exacerbate some of the other risks that affect our business, results of operations
and financial condition. A tighter credit market for consumer, business, and service provider spending may have several adverse
effects, including reduced demand for our products, increased price competition or deferment of purchases and orders by our customers.
Additional effects may include increased demand for customer finance, difficulties in collection of accounts receivable and increased
risk of counterparty failures.



29







We may be adversely affected by
credit risk.



We are exposed to credit risk for accounts
receivable in the event that counterparties do not meet their obligations. We attempt to mitigate our credit risk to the extent
possible by performing credit reviews. Both economic and geopolitical uncertainty can influence the ultimate collectability of
these receivable amounts. Failure to collect outstanding receivables could have a material adverse effect on our business, results
of operations and financial condition.



Risks Related to Our Intellectual Property



If we are not able to successfully
protect our key intellectual property and trade secrets, our competitive position, future business prospects and financial performance
will be adversely affected.



Our success depends, in part, on our ability
to maintain or obtain and enforce patent and other intellectual property protections for our processes and technologies, to preserve
our trade secrets and to operate without infringing upon the proprietary rights of third parties. We have obtained patents and
filed applications in the United States, Canada, and internationally and may, in the future, seek additional patents or file
patent applications. Significant aspects of our technology are currently protected as trade secrets, for which we may or may not
file patent applications when appropriate. There can be no assurance that patents owned or licensed by us will be valid, and we
may not be able to successfully obtain and enforce patents and maintain trade secret protection for our technology. We cannot
assure you that any of our pending patent applications will issue with commercially useful claims or that the inventions when
built will perform as required, or that the patents granted to us will be commercially useful. Setbacks in these areas could negatively
affect our ability to compete and materially and adversely affect our business, financial condition and results of operations.



Patents may provide some degree of protection
for our intellectual property; however, patent protection involves complex legal and factual determinations and is therefore uncertain.
We cannot assure you that our patents or patent applications will be valid or will issue over prior art, or that patents will
issue from the patent applications we have filed or will file. Additionally, we cannot assure you that the scope of any claims
granted in any patent will provide us with adequate protection for the processes used by us currently or in the future. We cannot
be certain that the creators of our technology were the first inventors of inventions and processes covered by our patents and
patent applications or that they were the first to file. Accordingly, we cannot assure you that our patents will be valid or will
afford us with protection against competitors with similar technology or processes. Despite our efforts to protect our proprietary
rights, unauthorized parties may attempt to copy or otherwise obtain and use our proprietary information. Monitoring unauthorized
use of our confidential information is difficult and we cannot be certain that the steps we take to prevent unauthorized use of
our confidential information will be effective.



In addition, the laws governing patent
protection continue to evolve and are different from one country to the next, all of which causes further uncertainty in the usefulness
of a patent. Our issued patents or patents licensed to us may be successfully challenged, invalidated, circumvented or unenforceable
so that our patent rights would not create an effective competitive barrier. Moreover, the laws of some countries may not protect
our proprietary rights to the same extent as do the laws of the United States and Canada. Although we have attempted to obtain
patent coverage for our technology where available and appropriate, there are aspects of the technology for which patent coverage
was never sought or never received. There are also countries in which we sell or intend to sell our products, but have no patents
or pending patent applications. Our ability to prevent others from making or selling duplicate or similar technologies will be
impaired in those countries in which we have no patent protection. If we are not able to adequately protect our intellectual property
and proprietary technology, our competitive position, future business prospects and financial performance will be adversely affected.



If we are unable to replace our
patents or obtain patent applications or future intellectual property claims for products under development, our ability to compete
in the market will be harmed



Unpatented trade secrets, technological
innovation and confidential know-how are also important to our success. Although we seek to protect our proprietary information
through confidentiality agreements and other appropriate means, these measures may not effectively prevent disclosure of our proprietary
information, and, in any event, we cannot assure you that others will not independently develop the same or similar information
or gain access to the same or similar information. In view of these factors, our intellectual property positions have a degree
of uncertainty.



30







While we will continue to work to add
to our patent portfolio to protect the intellectual property contained in our products, we believe competitors will emerge in
our current and future markets in image guided therapies. We do not know whether we will have the patent protection we need, or
whether the protection we do have will be found valid and enforceable if challenged.



We also do not know whether we will be
able to develop additional patentable proprietary technologies. If we fail to obtain adequate protection of our intellectual property,
or if any protection we obtain is reduced or eliminated, others could use our intellectual property without compensating us, resulting
in harm to our business.



One of our key initial patents,
which protects our proprietary right to move an MR scanner into and out of a surgical or interventional suite, expires in the
United States in March 2016 and elsewhere in the world in March 2017.



We believe that a part of our value proposition
to our customers and an important competitive advantage for us is our unique ability to move an MR scanner into and out of a surgical
or interventional suite. This ability is currently protected by patents that will expire in our principal market, the United States,
in March 2016 and in other parts of the world in March 2017. If we are not able to protect this proprietary technology
through the addition of new patents, there is a risk of loss of competitive advantage, with the result that our competitive position,
future business prospects and financial performance may be adversely affected.



If we are the subject of intellectual
property litigation we may be required to expend substantial amounts to protect our rights to our technology against infringing
parties, required to develop or obtain alternative technology or prevented from selling our products.



Patents issued or licensed to us may be
infringed by the products or processes of others. The cost of enforcing patent rights against infringers, if such enforcement
is required, could be significant, and the time demands could interfere with our normal operations. There has been substantial
litigation and other proceedings regarding patent and other intellectual property rights in the medical technology industry. We
may become a party to patent litigation and other proceedings. The cost to us of any patent litigation, even if resolved in our
favor, could be substantial. Some of our competitors may be able to sustain the costs of such litigation more effectively than
we can because of their substantially greater financial resources. Litigation may also absorb significant time and could divert
our management’s attention from our core business. Litigation also puts our patents at risk of being invalidated or interpreted
narrowly and our patent applications at risk of not issuing. Additionally, we may provoke third parties to assert claims against us.



In the event that a court was to find
that we were infringing upon a valid patent of a third party, we could be required to pay a substantial damage award, develop
non-infringing technology, enter into royalty-bearing licensing agreements or stop selling our products. We cannot assure you
that we could enter into licensing arrangements at a reasonable cost, or at all, or develop or obtain alternative technology in
respect of patents issued to third parties that incidentally cover our products. Any inability to secure licenses or alternative
technology could result in delays in the introduction of some of our products or even lead to prohibition of the development,
manufacture or sale of certain of our products.



We may be
subject to claims that our employees have wrongfully used or disclosed alleged trade secrets of their former employers. As is
common in the medical device industry, we employ individuals who were previously employed at other medical equipment companies,
including our competitors or potential competitors. Although no claims against us are currently pending, we may become subject
to claims that these employees or we have inadvertently or otherwise used or disclosed trade secrets or other proprietary information
of their former employers. Litigation may be necessary to defend against these claims. Even if we are successful in defending
against these claims, litigation could result in substantial costs and be a distraction to our management.



31







Our products rely on licenses from
third parties for certain research and development programs, and if we lose access to these technologies, our future projected
revenues from these programs could be impacted.



We rely on technology that we license
from others, including technology that is integral to our future products. We have entered into license agreements with several
industry and clinical partners. Any of these agreements may be terminated for breach. If any of these agreements are terminated,
we may be unable to reacquire the necessary license on satisfactory terms, or at all. The loss or failure to maintain these licenses
could prevent or delay further development or commercialization of our products, which would have a material adverse effect on
our results of operations.



If we are unable to obtain licenses
or non-infringement rights to use technologies in products that we are developing for market, it could adversely affect our results
of operations and financial condition.



Certain companies have claimed exclusive
patent, copyright and other intellectual property rights to technologies in the image-guided therapy and surgical robotics industries.
If these technologies relate to our products, we would be obligated to either seek licenses to use this technology or obtain opinions
of invalidity or non-infringement, or appropriately redesign products. In the event that these alternatives are not possible,
we may be precluded from marketing such products, which could adversely affect our results of operations and financial condition.



Risks Related to Our Regulatory Environment



Our products are subject to complex
regulatory approval processes, which are lengthy and uncertain. If we do not obtain the necessary approvals, we will not be able
to market and sell our products in applicable geographic market segments.



Our products are classified as medical
devices intended for diagnostic and therapeutic use for humans. Products intended for this purpose are governed by a wide array
of regulatory authorities in various jurisdictions. These regulations govern the research, testing, development, manufacture,
promotion and eventual marketing of a product and approvals can take a number of years and substantial resources to obtain. There
is no assurance that any of our planned products will be approved by an applicable regulatory authority on a timely basis, or
at all. Any failure or delay in obtaining the applicable regulatory registrations can jeopardize our ability to market our products
and will impact our ability to receive product revenue.



For more information on our regulatory
environment, please consider the information described under the heading “Regulatory” in this AIF.



In addition to approval of our products,
we are also subject to other complex regulatory compliance requirements. Failure to comply could adversely affect our ability
to sell and market our products and/or require us to incur significant costs to comply with such requirements.



In addition to the approval
of products, numerous laws and regulations govern, among other things, the approval of manufacturing facilities,
testing procedures and controlled research, manufacturing practices, marketing, advertising and labeling of products, record
keeping, post-market surveillance and the reporting of adverse events. To date we have occasionally been subject to adverse
event reporting and limited product recalls, which are not uncommon in our industry, and such events may arise again in
the future. In addition, we must comply with U.S. federal and state healthcare anti-kickback laws and other healthcare
fraud and abuse laws that affect the marketing of medical devices. Failure to comply with statutes and regulations could
result in warning letters, fines and other civil penalties, unanticipated expenditures, withdrawal of regulatory approval,
delays in approving or refusing to approve a product, product recall or seizure, interruption of production, operating
restrictions, injunctions, criminal sanctions and exclusion from certain public healthcare programs.



We and our suppliers are also subject
to numerous federal, state, provincial and local laws relating to such matters as safe working conditions, manufacturing practices,
environmental protection, fire hazard control and disposal of hazardous or potentially hazardous substances. In addition, advertising
and promotional materials relating to medical devices are, in certain instances, subject to regulation by the Federal Trade Commission
in the United States, Health Canada and the Competition Bureau in Canada, and equivalent regulators in other jurisdictions.
We and our manufacturers and suppliers may be required to incur significant costs to comply with such laws and regulations in
the future. Our failure or the failure of our manufacturers and suppliers to comply with current or future regulatory requirements
may have a material adverse effect on our business, financial condition or results of operations.



For more information on our regulatory
environment, please consider the information described under the heading “Regulatory” in this AIF.



32







We may fail to identify the most
profitable market opportunities and may divert limited company resources from more profitable market opportunities in order to
pursue the opportunity.



A principal component of our business
strategy is to expand our product offering to exploit the core technologies that we have developed for our VISIUS Surgical Theatres.
As such, our organic growth and long-term success partly depends upon our ability to successfully develop and market new products
which, among other matters, will require us to incur significant research and development expenditures. We have finite financial
and managerial resources and therefore may be required to focus on selected products and applications and to forego efforts with
regard to other products and applications. We may fail to identify the most profitable products or applications or we may fail
to produce viable commercial products and may divert resources from more profitable market opportunities. In that case, the return
on investment in these additional areas will be limited, and this could negatively affect our business and results of operations.



If we are unable to obtain regulatory
approvals for our intellectual property rights to future products, our revenues and financial condition will be adversely affected.



Product development and modification is
subject to regulatory overview and approval. Failure or delays in obtaining regulatory approval for new products or modifications
to existing products would materially and adversely affect our results of operations and financial condition.



Future legislative or regulatory
changes to the healthcare system may affect our business, results of operations and share price.



Even if third-party payers provide adequate
coverage and reimbursement for procedures using our products, adverse changes in third-party payers’ general policies toward
reimbursement could preclude market acceptance for our products and materially harm our sales and revenue growth, which could
cause our share price to decline. Future legislative or policy initiatives directed at reducing costs could be introduced in the
United States, Canada and other countries where we currently market or intend to market our products. We cannot predict the
impact on our business of any legislation or regulations related to the healthcare system that may be enacted or adopted in the future.



On March 30, 2010, President Obama
signed into law the Health Care and Education Reconciliation Act of 2010, which amends the broader Patient Protection and Affordable
Care Act enacted on March 23, 2010 (collectively, the “U.S. Health Care Reform Law”), the core elements
of which are scheduled to take effect in 2014. Among other things, the U.S. Health Care Reform Law will ultimately increase
the overall pool of persons with access to health insurance in the United States. Although such an increase in covered persons
should benefit hospitals, other changes in the U.S. Health Care Reform Law could adversely affect the operations and finances
of hospitals, reducing their ability to purchase medical devices, such as our VISIUS Surgical Theatres. In addition, the U.S. Health
Care Reform Law will impose a 2.3% excise tax on the sale of any taxable human medical devices after December 31, 2012, by
the manufacturer, producer or importer of such devices. To the extent that this excise tax applies to our products, it may increase
the cost of our products for our customers and also reduce our margins on the sales of our products. The U.S. Health Care
Reform Law also encourages hospitals and physicians to work collaboratively through shared savings programs, which may ultimately
result in the reduction of medical device acquisitions by hospital purchasers.



In addition, reimbursement and healthcare
payment systems in international markets vary significantly by country and, within some countries, by region. In many international
markets, payment systems may control reimbursement for procedures performed using new products as well as procurement of these
products. As economies of emerging markets develop, these countries may implement changes in their healthcare delivery and payment
systems. Furthermore, healthcare cost containment efforts similar to those underway in the United States are prevalent in
many of the other countries in which we intend to sell our products and these efforts are expected to continue. Market acceptance
of our products in a particular country may depend on the availability and level of reimbursement in that country.



33







Healthcare reforms, changes in health
policies and changes to third-party coverage and reimbursements may affect demand for our products



The U. S. government and other governments
have in the past considered, are currently considering and may in the future consider, healthcare policies and proposals intended
to curb rising healthcare costs, including those that could significantly affect both private and public reimbursement for healthcare
services. State and local governments, as well as a number of foreign governments, are also considering or have adopted similar
types of policies. Future significant changes in the healthcare systems in the United States or elsewhere, and current uncertainty
about whether and how changes may be implemented, could have a negative impact on the demand for our products. We are unable to
predict whether other healthcare legislation or regulations affecting our business may be proposed or enacted in the future; what
effect any legislation or regulation would have on our business; or the effect ongoing uncertainty about these matters will have
on the purchasing decisions of our customers.



Risks Related to the Securities



Our Common Shares have shown volatility
in their price and trading volumes due to a number of factors, some of which are outside of our control.



The trading price and volume of our Common
Shares has been, and may continue to be, subject to large fluctuations and, therefore, the value of any of our Common Shares may
also fluctuate significantly, which may result in losses to investors. The trading price of our Common Shares may increase or
decrease in response to a number of events and factors, including:



| | • | low trading
                                                                                     volumes;
| | - | ---------------------------------------------------------------------------------------------------------



| | • | actual or
                                                                                     anticipated fluctuations in our results of
                                                                                     operations;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | changes in
                                                                                     estimates of our future results of operations
                                                                                     by us or securities analysts;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | announcement
                                                                                     of technological innovations or new products
                                                                                     or services by us or our competitors;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | future legislative or regulatory
                                                                   changes affecting the medical device industry or healthcare
                                                                   systems; and
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | other events
                                                                                     and factors, including the risk factors identified in this AIF.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



Securities class action litigation often
has been brought against companies following periods of volatility in the market price of their securities. We may in the future
be the target of similar litigation. Securities litigation could result in substantial costs and damages and divert our management’s
attention and resources, which could adversely affect our business. Any adverse determination in litigation against us could also
subject us to significant liabilities.



We do not currently intend to pay
any cash dividends on our Common Shares in the foreseeable future and, therefore, shareholders may not be able to receive a return
on their Common Shares unless they sell them at an amount greater than the price paid to acquire the Common Shares.



We have never declared or paid any cash
dividends on our Common Shares. We currently intend to retain any future earnings to fund the development and growth of our business,
and therefore we do not anticipate declaring or paying any cash dividends in the foreseeable future. Any future determination
to pay dividends will be at the discretion of our board of directors and will depend upon many factors, including our results
of operations, capital requirements and such other factors as the board deems relevant.



Our actual financial results may
vary from our publicly disclosed forecasts, which could depress our stock price.



Our actual financial results and other
measures of future performance, such as backlog, may vary from our publicly disclosed forecasts and these variations could be
material and adverse. We periodically provide guidance on future financial results. Our forecasts reflect numerous assumptions
concerning our expected performance, as well as other factors that are beyond our control and which may not turn out to be correct.
Although we believe that the assumptions underlying our guidance and other forward-looking statements were and are reasonable
when we make such statements, actual results could be materially different. Our financial results are subject to numerous risks
and uncertainties, including those identified throughout these risk factors and elsewhere in this AIF. If our actual results vary negatively from our announced guidance, the price of our Common Shares
may decline, and such a decline could be substantial. Except as required under applicable securities legislation, we do not undertake
to update any guidance or other forward-looking information we may provide, whether as a result of new information, future events
or otherwise.



34







Certain Canadian laws could delay
or deter a change of control and may eliminate or limit strategic opportunities for shareholders to sell their Common Shares.



The Investment Canada Act (Canada)
subjects an acquisition of control of IMRIS by a non-Canadian to government review if the value of our assets as calculated pursuant
to the legislation exceeds a threshold amount. A reviewable acquisition may not proceed unless the relevant Minister is satisfied
that the investment is likely to be a net benefit to Canada. This could prevent or delay a change of control and may eliminate
or limit strategic opportunities for shareholders to sell their Common Shares.



Our significant shareholders have
the ability to approve certain matters requiring shareholder approval and influence the composition of our board of directors
in a way that diverges from the interests of our other shareholders.



Our executive officers, directors and
holders of 10% or more of our Common Shares, as of December 31, 2012, beneficially owned approximately 33% of our Common Shares.
Consequently, these shareholders are able to influence the composition of our board of directors and retain the voting power to
approve some matters requiring shareholder approval. The interests of these shareholders may be different than the interests of
other shareholders on these matters. For example, these shareholders may decide not to enter into a transaction in which our shareholders
would receive consideration for their Common Shares that is much higher than the cost of their investment in our Common Shares
or the then market price of our Common Shares.



This concentration of ownership could
also have the effect of delaying or preventing a change in our control or otherwise discouraging a potential acquirer from attempting
to obtain control of us, which in turn could reduce the price of our Common Shares.



Our board of directors may issue,
without shareholder approval, preferred shares that have rights and preferences superior to those of the Common Shares. Such an
issuance may delay or prevent a change of control.



While there are no preferred shares currently
outstanding, our articles allow the issuance of preferred shares in one or more series. Subject to the TSX, NASDAQ and any applicable
regulatory approvals, the board of directors may set the rights and preferences of any series of preferred shares in its sole
discretion without shareholder approval. The rights and preferences of those preferred shares may be superior to those of the
Common Shares. Accordingly, the issuance of preferred shares may adversely affect the rights of holders of Common Shares and could
have the effect of delaying or preventing a change of control, which may deprive our shareholders of a control premium that might
otherwise have been realized in connection with an acquisition of IMRIS.



As a foreign private issuer, we
are subject to different U.S. securities laws and rules than a domestic U.S. issuer, which may limit the information
publicly available to our shareholders.



We are a “foreign private issuer”
under applicable U.S. federal securities laws and, therefore, we are not required to comply with all the periodic disclosure
and current reporting requirements of the United States Securities Exchange Act of 1934, as amended (the “Exchange
Act”), and the related rules and regulations. As a result, we do not file the same reports that a U.S. domestic issuer
would file with the U.S. Securities and Exchange Commission (SEC), although we will be required to file or furnish to the SEC
the continuous disclosure documents that we are required to file in Canada under Canadian securities laws. In addition, our officers,
directors, and principal shareholders are exempt from the reporting and “short swing” profit recovery provisions of
Section 16 of the Exchange Act. Therefore, our shareholders may not know on as timely a basis when our officers, directors
and principal shareholders purchase or sell their Common Shares, as the reporting deadlines under the corresponding Canadian insider
reporting requirements are longer. In addition, as a foreign private issuer we are exempt from the proxy rules under the Exchange Act.



We may lose our foreign private
issuer status in the future, which could result in significant additional costs and expenses to us.



We may in the future lose our foreign
private issuer status if a majority of our Common Shares are held in the U.S. and we fail to meet the additional requirements
necessary to avoid loss of foreign private issuer status. The regulatory and compliance costs to us under U.S. securities
laws as a U.S. domestic issuer may be significantly more than the costs incurred as a Canadian foreign private issuer eligible
to use the multi-jurisdictional disclosure system (“MJDS”) adopted by the U.S. If we are not a foreign private issuer,
we would not be eligible to use the MJDS or other foreign issuer forms and would be required to file periodic and current reports
and registration statements on U.S. domestic issuer forms with the SEC, which are generally more detailed and extensive than
the forms available to a foreign private issuer. In addition, we may lose the ability to rely upon exemptions from NASDAQ corporate
governance requirements that are available to foreign private issuers. Further, if we engage in capital raising activities after
losing foreign private issuer status, there is a higher likelihood that investors may require us to file resale registration statements
with the SEC as a condition to any such financing.



35







Future sales of Common Shares by
our existing shareholders could cause our share price to fall.



If our shareholders sell substantial amounts
of our Common Shares in the public market, the market price of the Common Shares could fall. The perception among investors that
these sales will occur could also produce this effect.



We may require additional capital
in the future and we cannot give any assurance that such capital will be available at all or on terms acceptable to us and, if
it is available, additional capital raised by us may dilute each shareholder’s ownership of our Common Shares.



We may need to raise additional funds
through public or private debt or equity financings in order to:



| | • | fund ongoing operations;
| | - | ------------------------



| | • | take advantage of opportunities,
                                                                   including more rapid expansion of our business or the acquisition
                                                                   of complementary products, technologies or businesses;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | develop new products; or
| | - | ------------------------



| | • | respond to competitive pressures.
| | - | ---------------------------------



Any additional capital raised through
the sale of equity will dilute each shareholder’s percentage ownership of our Common Shares. Capital raised through debt
financing would require us to make periodic interest payments and may impose restrictive covenants on the conduct of our business.
Furthermore, additional financings may not be available on terms favourable to us, or at all. Our failure to obtain acceptable
additional funding could prevent us from making expenditures that may be required to grow our business or maintain our operations,
and could negatively affect our business and results of operations.



Changes to financial
accounting standards may affect our reported results of operations.



A change in accounting standards or practices
can have a significant effect on our reported results and may even affect our reporting of transactions completed before the change
is effective. New accounting pronouncements and varying interpretations of accounting pronouncements have occurred and may occur
in the future. Changes to existing standards or the questioning of current practices may adversely affect our reported financial
results or the way we conduct our business.



We use estimates, make judgments
and apply certain methods in measuring the progress of our business in determining our financial results and in applying our accounting
policies. As these estimates, judgments, and methods change, our assessment of the progress of business and our results of operations
could vary.



The methods, estimates, and judgments
we use in applying our accounting policies have a significant impact on our results of operations. Such methods, estimates, and
judgments are, by their nature, subject to substantial risks, uncertainties and assumptions, and factors may arise over time that
lead us to change our methods, estimates, and judgments. Changes in any of our assumptions may adversely affect our reported financial
results.



We may not maintain effective internal control over financial
reporting, which could negatively affect the trading of our Common Shares.



In the future we may fail to maintain
effective internal control over financial reporting, as such standards are modified, supplemented or amended from time to time,
and as a result our management and our external auditors may not be able to conclude on an on-going basis that we have effective
internal control over financial reporting, which could result in the loss of investor confidence in the reliability of our financial
statements and in turn could harm our business and negatively affect the trading price of our Common Shares. In addition, any
failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm our operating
results or cause us to fail to meet our reporting obligations. Future acquisitions of companies may provide us with challenges
in implementing the required processes, procedures and controls in the acquired operations. Acquired companies may not have disclosure
control and procedures or internal control over financial reporting that are as thorough or effective as those required by securities
laws currently applicable to our company.



36







Our internal
controls and procedures could also be limited by simple errors or faulty judgments. In addition, should we expand in the future,
the challenges involved in implementing appropriate internal control over financial reporting will increase and will require us
to continue to improve our internal control over financial reporting.



| | 4. | DIVIDENDS
| | -- | ---------



We have never declared or paid any dividends
on our Common Shares, other than an increase in the paid up capital of the Common Shares in an amount of $3,384,864 at the time
of our initial public offering in November 2007, which resulted in a deemed non-cash dividend to our shareholders at that
time for tax purposes. We currently intend to retain any future earnings to fund the development and growth of our business, and
therefore we do not anticipate declaring or paying any cash dividends in the foreseeable future. Any future determination to pay
dividends will be at the discretion of our board of directors and will depend upon many factors, including our results of operations,
capital requirements and such other factors as the board deems relevant.



| | 5. | CAPITAL STRUCTURE
| | -- | -----------------



| | 5.1 | General Description
| | --- | -------------------



We are currently authorized to issue an
unlimited number of Common Shares and an unlimited number of preferred shares, issuable in series. As at December 31, 2012 there
were a total of 46,061,211 Common Shares and no preferred shares issued and outstanding on a non-fully diluted basis. In addition
to the outstanding shares, as at December 31, 2012, our current and former directors, executive officers, employees and certain
consultants held options to acquire an aggregate of 4,312,165 Common Shares under the terms of our employee stock option plan.



Common
Shares



The holders of the Common Shares are entitled
to receive notice of and to attend and vote at all annual and special meetings of our shareholders, except a meeting where only
the holders of shares of a class or a particular series are entitled to vote separately. The Common Shares carry one vote per
Common Share and do not have cumulative voting rights. The holders of the Common Shares will be entitled, at the discretion of
our board of directors, to receive out of any or all profits or surplus of IMRIS properly available for the payment of dividends,
any dividend declared by the board of directors and payable by us on the Common Shares, subject to the rights, privileges, restrictions
and conditions of any preferred shares outstanding. The holders of the Common Shares will participate ratably in any distribution
of the remaining property of IMRIS upon our liquidation, dissolution or winding-up or any other return of capital or distribution
of our assets among our shareholders for the purpose of winding up our affairs, subject to the rights, privileges, restrictions
and conditions of any preferred shares outstanding.



Preferred Shares



The preferred shares are issuable, from
time to time, in one or more series, as determined by our board of directors. Our board of directors is authorized to fix the
dividend rights and terms, conversion rights, voting rights, cancellation provisions, redemption rights and terms, liquidation
preferences and any other rights, preferences, privileges and restrictions applicable to each series of preferred shares. The
preferred shares, if issued, rank prior to the Common Shares with respect to the payment of dividends and the distribution of
assets and any special payments the preferred shares may be entitled to receive in the event of our liquidation, dissolution or
winding-up. In addition, no dividends may be declared and paid on the Common Shares until all dividends owing on the preferred
shares are paid. Once preferred shares have been issued, the approval by two-thirds of a majority of the holders of the preferred
shares is required to issue any new shares ranking prior or equal to the outstanding preferred shares or to modify the rights,
restrictions, privileges and conditions of the preferred shares set forth in our articles of incorporation.



37







| | 6. | MARKET FOR SECURITIES
| | -- | ---------------------



| | 6.1 | Trading Price and Volume
| | --- | ------------------------



Our Common Shares are listed on the TSX
under the symbol “IM” and on the NASDAQ Global Market Exchange under the symbol “IMRS”. The volume and
price range of our Common Shares for 2012 are set forth in the following table:



|          |  | Volume (#) |           |  | High Trading Price |  |           | Low Trading Price | 
|--------- |  | ---------- | --------- |  | ------------------ |  | --------- | ----------------- | 
|Month     |  | IM         |           |  | IMRS               |  |           | IM (C$)           | 
|January   |  |            | 367,368   |  |                    |  | 1,060,082 |                   | 
|February  |  |            | 5,646,360 |  |                    |  | 1,232,114 |                   | 
|March     |  |            | 833,366   |  |                    |  | 1,493,018 |                   | 
|April     |  |            | 1,143,234 |  |                    |  | 889,071   |                   | 
|May       |  |            | 827,894   |  |                    |  | 803,991   |                   | 
|June      |  |            | 268,918   |  |                    |  | 320,112   |                   | 
|July      |  |            | 319,692   |  |                    |  | 524,540   |                   | 
|August    |  |            | 656,261   |  |                    |  | 1,434,201 |                   | 
|September |  |            | 744,773   |  |                    |  | 567,461   |                   | 
|October   |  |            | 469,389   |  |                    |  | 846,000   |                   | 
|November  |  |            | 677,689   |  |                    |  | 680,700   |                   | 
|December  |  |            | 378,411   |  |                    |  | 393,400   |                   | 



38







| | 7. | DIRECTORS AND OFFICERS
| | -- | ----------------------



| | 7.1 | Directors and Officers
| | --- | ----------------------



The following table sets forth the names,
municipalities of residence, positions held with us principal occupations of our directors and executive officers and, if a director,
the month and year in which the person became a director. Our directors will hold office until the next annual meeting of our
shareholders.



|Name,
    Province/State and Country of Residence |  | Position
    with IMRIS                                                                  |  | Principal
    Occupation                                                                 |  | Director
    Since
|------------------------------------------------- |  | ---------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------- |  | ------------------
|                                                  |  |                                                                                          |  |                                                                                          |  |                   
|H. David Graves
        Manitoba, Canada          |  | Chairman, Chief Executive Officer and Director                                           |  | Chairman and Chief Executive Officer                                                     |  | May 2005          
|                                                  |  |                                                                                          |  |                                                                                          |  |                   
|Jay Miller
        Minnesota, USA                 |  | President, Chief Operating Officer                                                       |  | President, Chief Operating Officer                                                       |  |                   
|                                                  |  |                                                                                          |  |                                                                                          |  |                   
|Pablo Batista(3)
        Manitoba, Canada         |  | Executive Vice President Operations                                                      |  | Executive Vice President Operations                                                      |  |                   
|                                                  |  |                                                                                          |  |                                                                                          |  |                   
|Meir Dahan
        Manitoba, Canada               |  | Executive Vice President Research and Development                                        |  | Executive Vice President Research and Development                                        |  |                   
|                                                  |  |                                                                                          |  |                                                                                          |  |                   
|Kelly McNeill
        Manitoba, Canada            |  | Executive Vice President Finance & Administration, Chief Financial Officer and Secretary |  | Executive Vice President Finance & Administration, Chief Financial Officer and Secretary |  |                   
|                                                  |  |                                                                                          |  |                                                                                          |  |                   
|Mark Reade
        Manitoba, Canada               |  | Executive Vice President Global Sales                                                    |  | Executive Vice President Global Sales                                                    |  |                   
|                                                  |  |                                                                                          |  |                                                                                          |  |                   
|Denis Sutton
        Manitoba, Canada             |  | Executive Vice President Human Resources                                                 |  | Executive Vice President Human Resources                                                 |  |                   
|                                                  |  |                                                                                          |  |                                                                                          |  |                   
|Amy Boyle
        Minnesota, USA                  |  | Executive Vice President, Marketing                                                      |  | Executive Vice President, Marketing                                                      |  |                   
|                                                  |  |                                                                                          |  |                                                                                          |  |                   
|Robert Courteau(2)
        Ontario, Canada        |  | Director                                                                                 |  | Chief Executive Officer of Altus Group                                                   |  | July 2006         
|                                                  |  |                                                                                          |  |                                                                                          |  |                   
|Carey Diamond(1)(2)
        Ontario, Canada       |  | Director and Chairman of the Compensation Committee                                      |  | President and Chief Executive Officer, Whitecastle Investments Limited                   |  | March 2006        
|                                                  |  |                                                                                          |  |                                                                                          |  |                   
|William Fraser(1)
        Manitoba, Canada        |  | Director                                                                                 |  | Corporate Director                                                                       |  | August 2007       
|                                                  |  |                                                                                          |  |                                                                                          |  |                   
|Blaine Hobson(2)
        Ontario, Canada          |  | Director                                                                                 |  | Managing Partner, Whitecap Venture Partners                                              |  | March 2006        
|                                                  |  |                                                                                          |  |                                                                                          |  |                   
|David Leslie(1)
        Ontario, Canada           |  | Director and Chairman of the Audit and Governance Committee                              |  | Corporate Director                                                                       |  | August 2007       
|                                                  |  |                                                                                          |  |                                                                                          |  |                   
|Robert Burgess
        California, USA            |  | Director                                                                                 |  | Independent Investor                                                                     |  | September 2010    



| | (1) | Member of the Audit and Governance
                                                                 Committee
| | --- | -------------------------------------------------------------------------------------------------------------

| | (2) | Member of the Compensation Committee
| | --- | ------------------------------------

| | (3) | As of the date of this filing
                                                                 Mr. Batista is no longer serving in the capacity of
                                                                 Executive Vice President Operations but is rather head of Special Projects and Mr. Manrice Holloman is serving in the
                                                                 capacity of Executive Vice President Operations
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



39







At December 31, 2012 as a group, our directors
and executive officers beneficially owned, directly or indirectly, or exercised control over 15,250,462 Common Shares which represented
33.1% of the outstanding Common Shares. Additionally, at December 31, 2012, as a group, our directors and executive officers beneficially
owned, directly or indirectly, or exercised control over options to purchase up to 3,497,066 Common Shares.



Except as disclosed below, each of our
directors and executive officers have been engaged for the last 5 years in his present principal occupation or in other capacities
with the company or organization (or predecessor thereof) in which he currently holds his principal occupation. The information
provided below has been provided to us by the individuals themselves and has not been independently verified by us.



| | · | Meir
                                                                                                          Dahan; prior to joining
                                                                                                          IMRIS in January 2008,
                                                                                                          Mr. Dahan held a number
                                                                                                          of positions with Baxter
                                                                                                          Healthcare from 2001
                                                                                                          to 2008, and most recently
                                                                                                          was their Program Leader
                                                                                                          within the Renal division.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Kelly
                                                                                                          McNeill; prior to joining
                                                                                                          IMRIS in September 2009,
                                                                                                          Mr. McNeill was Chief
                                                                                                          Financial Officer of
                                                                                                          Resverlogix Corporation
                                                                                                          from May 2006 to September
                                                                                                          2009 and General Manager
                                                                                                          of Haworth Limited from
                                                                                                          July 2004 to May 2006.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Mark
                                                                                                          Reade; prior to joining
                                                                                                          IMRIS in April 2010,
                                                                                                          Mr. Reade held a number
                                                                                                          of senior sales positions
                                                                                                          with Medtronic Inc.
                                                                                                          from 1999 to 2009; and
                                                                                                          most recently was a
                                                                                                          Vice President within
                                                                                                          their Neuromodulation
                                                                                                          division.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Amy
                                                                                                          Boyle; prior to joining
                                                                                                          IMRIS in July 2010,
                                                                                                          Ms. Boyle was Vice President,
                                                                                                          Corporate Brand and
                                                                                                          Marketing of St. Jude
                                                                                                          Medical Inc. from 2007
                                                                                                          to December 2009 and
                                                                                                          was Vice President of
                                                                                                          Marketing, International
                                                                                                          Division of St. Jude
                                                                                                          Medical, Inc. from 2005
                                                                                                          to 2007.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Robert
                                                                                                          Courteau; Mr. Courteau
                                                                                                          is Chief Executive Officer
                                                                                                          of Altus Group. He was
                                                                                                          previously with SAP
                                                                                                          AG as the President
                                                                                                          for SAP North America
                                                                                                          and before that was
                                                                                                          Chief Operating Officer
                                                                                                          for SAP’s Global
                                                                                                          Customer Operations.
                                                                                                          Mr. Courteau has also
                                                                                                          held executive roles
                                                                                                          with EDS Corporation
                                                                                                          and Xerox.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 7.2 | Cease Trade Orders, Bankruptcies, Penalties or Sanctions
| | --- | --------------------------------------------------------



Except as set forth below, no director
or executive officer of the Corporation and, to the knowledge of the Corporation, no shareholder holding a sufficient number of
securities of the Corporation to materially affect its control is or was, in the 10 years preceding the date of this AIF, a director
or executive officer of any company that was, while that person was acting in that capacity, (a) the subject of a cease trade
or similar order or an order that denied any such company access to any exemption under securities legislation for a period of
more than 30 consecutive days, (b) subject to an event that resulted, after such person ceased to be a director or executive officer,
in such company being the subject of any such order or (c) within a year of such person ceasing to act in that capacity, became
bankrupt, made a proposal under any bankruptcy or insolvency related legislation or was subject to or instituted any proceedings,
arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets.



Mr. Leslie served as a member of the Board
of Directors of Canwest Global Communications Corp. from March 26, 2007 to January 14, 2009. On October 6, 2009, Canwest Global
Communications Corp. voluntarily entered into, and successfully obtained, an Order from the Ontario Superior Court of Justice
(Commercial Division) commencing proceedings under the Companies’ Creditors Arrangement Act.



No director or executive officer of the
Corporation and, to the knowledge of the Corporation, no shareholder holding a sufficient number of securities of the Corporation
to materially affect its control, within the 10 years preceding the date of this AIF, has become bankrupt, made a proposal under
any bankruptcy or insolvency related legislation or was subject to or instituted any proceedings, arrangement or compromise with
creditors or had a receiver, receiver manager or trustee appointed to hold its assets.



40







| | 7.3 | Committees of the Board of Directors
| | --- | ------------------------------------



Our board of directors has two committees:
an Audit and Corporate Governance Committee comprised entirely of independent directors, and a Compensation Committee, comprised
entirely of independent directors.



Audit and Governance Committee



The directors have appointed an Audit
and Governance Committee consisting of three directors; Carey Diamond, William Fraser and David Leslie, all of whom are independent
and financially literate within the meaning of Multilateral Instrument 52-110 (Audit Committees), Rule 10A-3 of the Exchange Act
and NASDAQ Rule 5605 (a)(2).



Relevant Education and Experience of
Members of the Audit Committee



David Leslie,
F.C.A., (Chair) -Mr. Leslie is an independent corporate director.  Mr. Leslie was
formerly the Chairman and Chief Executive Officer of Ernst and Young LLP from 1999 to 2004, and was a partner and held
various senior management positions with the firm from 1977 to 2004.  Mr. Leslie is a director of Enbridge, Inc.;
Enbridge Gas Distribution, Inc.; Sobeys Inc.; Empire Company Ltd, and is a Trustee of the Crombie Real Estate Investment
Trust.  Mr. Leslie is a director of MaRS Innovation, a
non-profit company involved with the commercialization of certain research generated by its non-profit members.  Mr.
Leslie is a Chartered Accountant and was named a Fellow of the Institute of Chartered Accountants in 1991.



William Fraser, F.C.A -
Mr. Fraser serves various companies as an independent corporate director.  Mr. Fraser was the President and Chief Executive
Officer, and a Director of Manitoba Telecom Services Inc. (MTS) from 1994 to 2006, and successfully led the transformation of
the provincial crown corporation to a publicly traded corporation, and the third largest telecommunications company in Canada. 
Mr. Fraser was the Vice President Finance of MTS from 1986 to 1994, and prior to that was the Assistant Deputy Minister, Finance
for the Government of Manitoba (1981-1986).  Mr. Fraser is a Director and Chairman of the Board of Manitoba Hydro and is
the Vice Chair and Chair of the finance committee of the Board of Directors for St. Boniface Hospital Foundation.  Mr. Fraser
has been a director of a number of other corporations and charitable organizations during his career.  Mr. Fraser is a Chartered
Accountant and was named a Fellow of the Institute of Chartered Accountants in 2002.



Carey Diamond -
Mr. Diamond has held senior management positions at Whitecastle Investments Limited, an investor in venture and later stage private
companies, since 1989, and since 1998 has been its President and Chief Executive Officer.  Since 2002, he has been Managing
Director of Whitecap Venture Partners and since 2004, he has been Managing Director of Whitecastle Private Equity Partners. 
Mr. Diamond has served as a director of multiple public companies, including Globelle Corporation, PC Docs International Inc.,
Wescam Inc. and iMagicTV Inc.  Mr. Diamond has also been an audit committee member for a number of these companies. 
In addition to sitting on the boards of various private companies, Mr. Diamond is a member of the Board of Directors and Vice-Chair
of the Sunnybrook Health Sciences Centre and past Director and Vice Chair of the Baycrest Centre for Geriatric Care. Mr. Diamond
holds a B.A. (Economics) degree from the University of Western Ontario and an LL.B. from Osgoode Hall Law School.  He is
a member of the Law Society of Upper Canada.



The responsibilities and mandate of the
Audit and Governance Committee are set out in an Audit and Governance Committee Charter, a full copy of which is included as Appendix
A hereto. The primary purposes of the Audit and Corporate Governance Committee are to (i) manage, on behalf of IMRIS's shareholders,
the relationship between IMRIS and its external auditor and enhance the independence of the external auditor, (ii) assist the
board in meeting its financial oversight responsibilities, oversee the audit and financial reporting process and increase the
credibility and objectivity of financial reporting, (iii) oversee the design, implementation and ongoing effectiveness of a system
of internal controls, and (iv) oversee the process by which IMRIS assesses and manages risk.



41







The Audit and Governance Committee is
also responsible for (i) establishing procedures for the receipt, retention and treatment of complaints received by IMRIS regarding
accounting practices, financial reporting, internal accounting controls or auditing matters, (ii) establishing procedures for
the confidential, anonymous submission by IMRIS employees of concerns regarding questionable accounting or auditing matters, and
(iii) monitoring compliance with IMRIS's Whistleblower Protection Policy on Financial Matters.



The Audit and Governance Committee also
takes a leadership role in shaping IMRIS's corporate governance practices by overseeing and assessing the functioning of the board
and the committees of the board and developing, implementing and assessing effective corporate governance processes and practices.
It is also responsible for reviewing and recommending the adoption of IMRIS's strategic corporate policies, including its Disclosure
and Confidentiality Policy, Insider Trading Policy, Code of Business Conduct and Ethics, and other relevant policies associated
with ensuring an effective system of corporate governance and for overseeing the investigation of any alleged breach of any of
these policies.



Pre-Approval of Audit and Non-Audit
Services



The Audit and Governance Committee has
implemented policies and procedures that govern the services that may be provided by our auditors, the approval thereof, and the
fees paid to our auditors (see Appendix “B”). Prior to the engagement of our auditors, to perform any audit or non-audit
services, the Audit and Governance Committee, either directly or pursuant to delegated authority, is required to pre-approve the
provision of the services, pursuant to the adopted policy. In making its determinations regarding the approval of non-audit services,
the Audit and Governance Committee considers whether approval of the proposed service would comply with the Audit and Governance
Committee’s approval policy, as well as whether the provision of such non-audit services would impact the independence of
the Company’s auditors. All audit and non-audit fees provided to us by Deloitte LLP (“Deloitte”)
have been pre-approved pursuant to the Audit and Governance Committee’s pre-approval policies and procedures. For the years
ended December 31, 2012 and 2011, the Corporation was billed the following fees:



|                       |  | Fiscal
    2012 |         |  | Fiscal
    2011 |  
|---------------------- |  | --------------- | ------- |  | --------------- | -
|Audit Fees (1)         |  | $               | 313,375 |  |                 | $
|Audit Related Fees (2) |  | $               | 52,028  |  |                 | $
|Tax Fees (3)           |  | $               | 239,471 |  |                 | $
|All Other Fees (4)     |  | $               | Nil     |  |                 | $



| | (1) | “Audit Fees” consist of
                                                           the aggregate fees billed by Deloitte for professional services rendered
                                                           by it for the audit of our annual financial statements, review of quarterly
                                                           financial statements or services that are normally provided by Deloitte
                                                           in connection with statutory and regulatory filings or engagements.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | “Audit Related Fees” consist
                                                           of the aggregate fees billed by Deloitte for assurance and related
                                                           services rendered by them that are reasonably related to the performance
                                                           of the audit or review of our financial statements and are not reported
                                                           as Audit Fees. Services provided include review of complex accounting
                                                           issues and work related to the audit of internal controls.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (3) | “Tax Fees” consist of the
                                                           aggregate fees billed by Deloitte for professional services rendered
                                                           by them for tax compliance, tax advice and tax planning. Tax services
                                                           included advisory services related to commodity taxes and review and
                                                           filing of our annual income tax returns.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (4) | “All Other Fees” consist
                                                           of fees billed by Deloitte for products and services other than fees
                                                           noted above.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



42







Compensation Committee



The board has appointed a Compensation
Committee consisting of three Directors, Carey Diamond, Blaine Hobson and Robert Courteau. All of these directors are considered
independent within the meaning of Multilateral Instrument 52-110 (Audit Committees). The Compensation Committee ensures the independence
of its actions by requiring the presence of a majority of independent directors to convene any meeting of the Compensation Committee.
The responsibilities and mandate of the Compensation Committee are set out in a Compensation Committee Charter. The primary purposes
of the Compensation Committee are to (i) assist the board in discharging the board's oversight responsibilities relating to the
compensation, development, succession and retention of the President and Chief Executive Officer and senior management, (ii) establish
fair and competitive compensation and performance incentive plans, and (iii) identify candidates for director positions.



| | 7.4 | Conflicts of Interest
| | --- | ---------------------



IMRIS leases air travel time from 5343381
Manitoba Ltd., a Corporation controlled by H. David Graves, the Chief Executive Officer and Chairman of the board of directors
of IMRIS as disclosed in Section 10 – Interest in Material Transactions. Mr. Graves has declared his interest and abstains
from any board decisions related to this matter.



| | 8. | LEGAL PROCEEDINGS
                                                          AND REGULATORY ACTIONS
| | -- | --------------------------------------------------------------------------------------------------



It is common in our industry to receive
notices alleging patent infringement arising in the normal course of business. We have set up internal procedures to deal with
such notices, which include assessing the merits of each notice and seeking, where appropriate, a business resolution. Where a
business resolution cannot be reached, litigation may be necessary. The ultimate outcome of any litigation is uncertain and, regardless
of outcome, litigation can have an adverse impact on our business because of defense costs, negative publicity, diversion of management
resources and other factors. Our failure to obtain any necessary license or other rights on commercially reasonable terms, or
otherwise, or litigation arising out of intellectual property claims could materially adversely affect our business. As of the
date of this AIF, we are not party to any litigation and no litigation is contemplated, nor have any penalties or sanctions been
imposed against us by a court or securities regulatory authority related to securities legislation.



| | 9. | INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL
                                                           TRANSACTIONS
| | -- | ---------------------------------------------------------------------------------------------------------------------



H. David Graves, our Chief Executive Officer
and Chairman of our board of directors, exercises control over Norpine Holdings Inc., one of our significant shareholders.
We were incorporated by Mr. Graves in May 2005 to acquire the assets of Innovative, our predecessor company. Other than
Mr. Graves, no director, executive officer or shareholder who beneficially owns, directly or indirectly, or exercises control
or direction over, more than 10% of our outstanding Common Shares or known associate or affiliate of any such person, has or had
any material interest, direct or indirect, in any transaction within the last three years or in any proposed transaction, that
has materially affected or will materially affect us.



We lease air travel time from 5343381 Manitoba Ltd.,
a corporation that is controlled by Mr. Graves. The amount charged to travel expenses during the twelve-month period ended
December 31, 2012, 2011 and 2010, with respect to transactions with this related party totaled $396,000, $357,000 and $298,000,
respectively.. On December 31, 2012, there was no receivable and a payable balance of $118,000 owing to 5343381 Manitoba Ltd
($Nil as of December 31, 2011). On December 31, 2011, there was no receivable or payable balance owing to 5343381 Manitoba Ltd.
We have compared the amounts paid by us for these services against the amounts charged by third parties for similar services and
we have concluded that the rates charged by 5343381 Manitoba Ltd. are competitive with market rates. We intend to continue
to monitor the competitiveness of these rates from time to time and will instead use similar services from a third party should
they become available at lower rates.



43







| | 10. | TRANSFER AGENT AND REGISTRAR
| | --- | ----------------------------



The transfer agent and registrar for the
Common Shares is Computershare Investor Services Inc. at its principal offices in Toronto, Ontario, Canada.



| | 11. | MATERIAL CONTRACTS
| | --- | ------------------



During the 2012 fiscal year, we have not
entered into any material contracts.



| | 12. | INTERESTS OF EXPERTS
| | --- | --------------------



Deloitte are our auditors and are independent
within the meaning of the Rules of Professional Conduct of the Institute of Chartered Accountants of Manitoba.



| | 13. | ADDITIONAL INFORMATION
| | --- | ----------------------



Additional
financial information with respect to IMRIS, including remuneration and indebtedness of directors and officers, principal holders
of our securities and options to purchase securities is contained in our most recent information circular in respect of our annual
meeting of shareholders that involves the election of directors. Additional financial information is contained in our audited
comparative consolidated financial statements and our management discussion and analysis for our most recently completed fiscal
year. Additional information relating to IMRIS may be found on the SEDAR website at www.sedar.comand on the SEC website at www.sec.gov.



44







APPENDIX “A”

IMRIS
INC.



AUDIT
AND GOVERNANCE COMMITTEE

CHARTER



Establishment and Purpose



The Board of Directors (the “Board”)
of IMRIS Inc. (“IMRIS”) has established the Audit and Governance Committee (the “Committee”)
for the purposes of managing the relationship between IMRIS and its external auditors, overseeing the audit and financial reporting
process, ensuring the adequacy and effectiveness of IMRIS’s internal controls and procedures for financial reporting and
ensuring the adequacy and effectiveness of IMRIS’s risk management program. In addition, the Committee is responsible for
identifying candidates to serve as directors of IMRIS, and
for taking a leadership role in shaping IMRIS’s corporate governance practices by overseeing and assessing the functioning
of the Board and the committees of the Board and developing, implementing and assessing effective corporate governance processes
and practices.



Appointment and Removal



The Committee shall consist of at least
three directors (the “Members”) appointed annually by the Board, effective after the election of directors
at the annual meeting of shareholders, provided that any member may be removed or replaced at any time by the Board and shall,
in any event, cease to be a member of the Committee upon ceasing to be a member of the Board. A special Nominating Committee will
recommend for approval to the Board an unrelated Director to act as Chairman of the Committee. The Board shall appoint the Chairman
of the Committee.



The Committee and each Member must meet
the independence and audit committee composition requirements promulgated by all governmental and regulatory bodies exercising
control over IMRIS as may be in effect from time to time, including those of any stock exchange upon which IMRIS’s shares
are listed. To that end, each member of the Committee shall be both an “unrelated” director and an“independent” director (as such terms are defined under the requirements or guidelines for auditcommittee service in applicable securities laws and the rules of any stock exchange on which IMRIS’s securities are
listed for trading). In general, and subject to the specific requirements
and restrictions of applicable securities laws and stock exchange rules,this means that no director who is an officer
or employee of IMRIS (or any related entity (including a parent or
subsidiary)of IMRIS) may be a Member and each Member must be free of any relationship that could or could be reasonably
expected to, in the opinion of the Board, interfere with the exercise of that director’s independent judgment in
carrying out the responsibilitiesas a Member.



All Members of the Committee must also
be “financially literate” (as that term is defined from time to time in Multilateral Instrument 52-110 (Audit Committees)
or any replacement or supplementary instrument or rule or, if it is not defined, as that term is interpreted by the Board), which
generally means that Members must be able to read and understand
fundamental financial statements, including IMRIS’s balance
sheet, income statement and cash flow statement. No Member may have
participated in the preparation of the financial statements of IMRIS or any current subsidiary of IMRIS at any time during the
previous three years. No Member may, other than in his or her capacity as a member of the Audit and Governance Committee, the
Board of Directors, or any other Board committee, accept directly or indirectly any consulting, advisory, or other “compensatory
fee” (as such term is defined under applicable securities laws and stock exchange rules) from, or be an “affiliated
person” (as such term is defined under applicable securities laws and stock exchange rules) of, IMRIS or any subsidiary
of IMRIS. For greater certainty, directors’ fees and fixed amounts of compensation under a retirement plan (including deferred
compensation) for prior service with IMRIS or any subsidiary that are not contingent on continued service should be the only compensation
a Member receives from IMRIS.



At least one Member must have past
employment experience in finance or accounting, requisite professional certification in
accounting, or comparable experience or background that
results in that Member’s financial sophistication.



45







At least one Member of the Committee shall
be an “audit committee financial expert”, as such term is defined in applicable securities laws.



Structure and Reporting



The Committee meets as required, but at
least quarterly, typically on the day of the full Board to allow ample time for discussion. A majority of the Committee shall
constitute quorum. The Executive Vice President Finance & Administrationand Chief Financial Officer is expected to attend all Committee meetings and attendance by the President and theChief Executive Officer is desirable. The audit partner from the external auditors
must meet with the Committee at least twice a year and may request a meeting with the Committee at any time.



The Committee shall report to the Board
on all proceedings, deliberations, decisions and recommendations of the Committee at the first subsequent meeting of the Board,
and at such other times and in such manner as the Board may require or as the Committee may, in its discretion, consider advisable.



Authority



The Committee shall have unrestricted
direct access to IMRIS’s external auditors as well as full access to all IMRIS books, records, facilities, and personnel.
The Committee may require such IMRIS officers, directors and employees as it may see fit from time to time to provide any information
about IMRIS as it may deem appropriate and to attend and assist at meetings of the Committee. The Committee may adopt policies
and procedures for carrying out its responsibilities. The Committee may, in its sole discretion and at IMRIS’s expense,
retain, and agree to compensate, outside advisors (including independent
counsel)to assist with the performance of its duties. The Committee may delegate from time to time to any person, including
any individual member of the Committee orto a subcommittee,
any of the Committee’s responsibilities that lawfully may be delegated.
IMRIS shall provide appropriate funding, as determined by the Committee, for payment of (i) compensation to the external auditor
to prepare and issue an audit report or perform other audit, review or attest services for IMRIS, (ii) compensation to any outside
advisors employed by the Committee, and (iii) ordinary administrative expenses of the Committee that are necessary or appropriate
in carrying out the Committee’s duties.



Responsibilities



In general, the Committee performs a number
of roles, including :(i) managing, on behalf of IMRIS’s shareholders, the relationship between IMRIS and its external auditorsand enhancing the independence of the external auditors,
(ii) assisting directors in meeting their financial oversight responsibilities, overseeing the audit and financial reporting process
and increasing the credibility and objectivity of financial reporting, (iii) overseeing the design, implementation and on-going
effectiveness of a system of internal controls and (iv) overseeing the process by which IMRIS assesses and manages risk. The Committee
will have the specific duties and responsibilities set out below, as well as other such duties that are, in the opinion of the
Board, in line with the purpose of the Committee as stated above.



Relationship with Auditors



The Committee is responsible for managing,
on behalf of IMRIS’s shareholders, the relationship between IMRIS and its external auditors. In furtherance of this responsibility,
as delegated by the Board, the Committee shall:



| | (a) | be directly responsible,
                                                             in the Committee’s capacity as a committee of the Board and
                                                             subject to the rights of shareholders and applicable law, for appointing,
                                                             retaining and determining the compensation of the external
                                                             auditor;
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) | oversee the work of the external
                                                             auditor engaged for the purpose of preparing or issuing an auditor’s
                                                             report or performing other audit, review or attest services for IMRIS,
                                                             including the resolution of disagreements between management and
                                                             the external auditor regarding financial reporting;
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



46







| | (c) | establish procedures to monitor and
                                                             overseethe independence of the external auditor and take
                                                             necessary actions to eliminate all factors that might impair or be
                                                             perceived to impair the independence of the external auditor;
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (d) | annually require the external auditorto identify the relationships that may affect its independence
                                                             and to
                                                             provide a formal written statement delineating all relationships
                                                             between the external auditor and IMRIS, and actively engage in a
                                                             dialogue with the external auditor with respect to any disclosed
                                                             relationships or services that may affect the objectivity and independence
                                                             of the external auditor;
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (e) | if
                                                             desirable,establish policies
                                                             andprocedures for thereview and pre-approval
                                                             of all audit and permitted non-audit services to
                                                             beprovided by external auditorsto IMRIS or its subsidiaries;
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (f) | consider
                                                             and if deemed desirable,pre-approve all audit
                                                             and permittednon-audit services to be provided to IMRIS or
                                                             its subsidiaries by the external auditor, which pre-approval may
                                                             be delegated to one
                                                             or more Memberin accordance with applicable law;
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (g) | ensure
                                                                                                                                thatthe
                                                                                                                                external
                                                                                                                                auditor
                                                                                                                                reports
                                                                                                                                directly
                                                                                                                                to
                                                                                                                                the
                                                                                                                                Committee
                                                                                                                                and
                                                                                                                                meetswith
                                                                                                                                the
                                                                                                                                Committee
                                                                                                                                or
                                                                                                                                the
                                                                                                                                Board
                                                                                                                                without
                                                                                                                                management
                                                                                                                                present
                                                                                                                                at
                                                                                                                                each
                                                                                                                                regularly
                                                                                                                                scheduled
                                                                                                                                meeting
                                                                                                                                of
                                                                                                                                the
                                                                                                                                Committee
                                                                                                                                or
                                                                                                                                the
                                                                                                                                Board;
                                                                                                                                and
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (h) | obtain
                                                             assurance from the external auditor that disclosure to the Committee
                                                             is not required pursuant to the provisions of United States securities
                                                             laws regarding the discovery of illegal acts by the external auditor.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Audit and Financial Reporting



The Committee is responsible for overseeing
the accounting and financial reporting processof IMRIS and the audits of the financial statements of IMRIS. In furtherance of this responsibility, as delegated by the
Board, the Committee shall:



| | (a) | review, establish and monitor each
                                                             annual audit of the external auditor with a written audit plan, including
                                                             scope, fees and schedule;
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) | review with both management and the
                                                             external auditor the appropriateness and acceptability of IMRIS’s
                                                             critical accounting policies and any proposed changes thereto;
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (c) | review with management and the external
                                                             auditor the presentation and impact of significant risks and uncertainties
                                                             associated with IMRIS’s business, all alternative treatments
                                                             of financial information with generally
                                                             accepted accounting principles that have been discussed with
                                                             management, the material assumptions made by management relating
                                                             to them and their effect on IMRIS’s financial statements;
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (d) | question management and the external
                                                             auditor regarding financial reporting issues discussed during the
                                                             fiscal period;
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (e) | review any problems experienced by
                                                             the external auditorin performing audits;
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------



| | (f) | review and discuss the audited annual
                                                             financial statements in conjunction with the external auditor and
                                                             review with management all significant variances between comparative
                                                             reporting periods;
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (g) | review and discuss the external auditor’s
                                                             report with the external auditor and management;
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------



| | (h) | review all material written communications
                                                             between the external auditor and management, including post audit
                                                             or management letters containing recommendations of the external
                                                             auditors, management’s response and follow up with respect
                                                             to the identified weaknesses;
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



47







| | (i) | review with management and with the
                                                             external auditors, as appropriate, IMRIS’s annual and interim
                                                             financial statements, MD&A and earnings press releases prior
                                                             to their public dissemination;
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (j) | satisfy itself that adequate procedures
                                                             are in place for the review of IMRIS’s public disclosure of
                                                             financial information extracted or derived from IMRIS’s financial
                                                             statements(including, without limitation, the use of “pro forma”
                                                             or non-GAAP financial information), other than the public
                                                             dissemination referred to in (i) above, and periodically assess the
                                                             adequacy of those procedures;
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (k) | review with management IMRIS’s
                                                             relationship with the regulators and the quality of its filings with
                                                             the regulators; and
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (l) | review with the Executive Vice President
                                                             Finance
                                                             & Administration and Chief Financial Officer and external
                                                             legal counsel any current or anticipated litigation or legal activity
                                                             that could have a material effect on IMRIS’s financial position.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Internal Controls and Procedures



The Committee is responsible for overseeing
the design, implementation and on-going effectiveness of policies
and procedures for providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles, including those policies and procedures
that: (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions
of the assets of IMRIS; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of IMRIS
are being made only in accordance with authorizations of management and directors of IMRIS; and (iii) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use or disposition of IMRIS’s assets that could have
a material effect on the financial statements (“Internal Controls”). In furtherance of this responsibility,
as delegated by the Board, the Committee shall:



| | (a) | establish (under
                                                             the supervision of IMRIS’s Executive Vice President Finance
                                                             & Administration and Chief Financial Officer, and the Chief Executive
                                                             Officer), monitor and review a system ofInternal Controls;
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) | establish procedures for: (i) the
                                                             receipt, retention and treatment of complaints received by IMRIS
                                                             regarding accountingmatters, internal accounting controls or auditing matters;
                                                             and (ii) the confidential, anonymous submission by IMRIS employees
                                                             of concerns regarding questionable accounting or auditing matters,
                                                             and monitor compliance with IMRIS’s Policy
                                                             for Receipt of Complaints andWhistleblower Protection Policy
                                                             on Financial Matters andoversee, coordinate and review all investigations undertaken
                                                             thereunder;
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (c) | consult with the external auditor
                                                             regarding the adequacy of the Internal Controls and review with the
                                                             external auditor its report on the Internal Controls;
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (d) | review
                                                           with the President and Chief Executive Officer, the Executive Vice
                                                           President Finance & Administration and Chief Financial Officer,
                                                           and the external auditor: (i) all significant deficiencies and material
                                                           weaknesses in the design or operation of IMRIS’s Internal Controls
                                                           that could adversely affect IMRIS’s ability to record, process,
                                                           summarize and report financial information required to be disclosed
                                                           by IMRIS in the reports that it files or submits with applicable securities
                                                           regulators within the required time periods, and (ii) any fraud, whether
                                                           or not material, that involves management of IMRIS or other employees
                                                           who have a significant role in IMRIS’s Internal Controls;
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (e) | address, on a regular basis, any
                                                             perceived shortcomings in the Internal Controls;
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------



| | (f) | review the involvement of officers
                                                             and directors in any matter related to business ethics or potential
                                                             conflict of interest and advise the Board on the appropriate course
                                                             of action;
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (g) | ensure that no individual who is,
                                                             or in the past 3 years has been, affiliated with or employed by a
                                                             present or former auditor of the Company or an affiliate, is hired
                                                             by the Company unless
                                                             permitted by applicable laws,
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



48







| | (h) | prior to IMRIS entering into any
                                                             Related Transaction, review and
                                                             overseethe Related Transactionfor potential conflict of interest situations on an ongoing basis,and recommend theapproval or rejectionor ratification of any Related Transaction by the Board.For the purposes of this Mandate, a “RelatedTransaction” means a business transaction or contract between
                                                             IMRIS and a party in which an IMRIS “related
                                                             party” has a direct or indirect interest. A
                                                             “related party” is a director or officer of IMRIS, or
                                                             an immediate family member of a director or officer of IMRIS (which
                                                             means any child, stepchild, parent, stepparent, spouse, sibling,
                                                             mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law,
                                                             or sister-in-law of such director, executive officer or nominee for
                                                             director, and any person (other than a tenant or employee) sharing
                                                             the household of such director or officer;
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (i) | annually, review any ongoing Related
                                                             Transactions and report to the Board; and
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------



| | (j) | obtain from management adequate assurances
                                                             that all statutory payments and withholdings have been made.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



Risk Management



The Committee is responsible for overseeing
the process by which IMRIS assesses and manages risk, including the
relationship of IMRIS’s compensation policies and practices to risk management. In furtherance of this responsibility,
as delegated by the Board, the Committee shall:



| | (a) | identify risks inherent in IMRIS’s
                                                             business (“Risks”);
| | --- | -------------------------------------------------------------------------------------------------------------------



| | (b) | maintain policies and procedures
                                                             that address the Risks on a reasonable, cost-effective basis;
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| | (c) | in conjunction with management, review,
                                                             on an annual basis, all aspects of IMRIS’s risk management
                                                             program, including all significant policies and procedures relating
                                                             to insurance coverage, foreign exchange exposures and investments
                                                             (including IMRIS’s use of financial risk management instruments);
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (d) | review
                                                           policies and practices with respect to off-balance sheet transactions
                                                           and trading and hedging activities, and consider the results of any
                                                           review of these areas by the external auditor;
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (e) | review
                                                           management’s processes in place to prevent and detect fraud;
| | --- | ------------------------------------------------------------------------------------------------------------------------------



| | (f) | monitor compliance with environmental
                                                             codes of conduct and legislation; and
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------



| | (g) | monitor compliance with safety codes
                                                             of conduct and legislation.
| | --- | -----------------------------------------------------------------------------------------------------------------------------



Other



In furtherance of its duties, the Committee shall:



| | (h) | meet regularly with management to
                                                             discuss any areas of concern to the Committee or management;
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| | (i) | consider whether the quality of employees
                                                             involved in the audit and financial reporting process and the processes
                                                             described herein meets an acceptable standard;
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (j) | recommend to the Board a system of
                                                           corporate governance policies and practices, monitor its implementation
                                                           and co-ordinate an annual corporate governance review by the Board;
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (k) | make recommendations to the Board
                                                             on an ongoing basis concerning corporate governance in general and
                                                             regarding the Board’s stewardship role in the management of
                                                             IMRIS including the roles and responsibilities of directors and the
                                                             recommendation of appropriate policies and procedures to ensure directors
                                                             carry out their duties with due diligence and in compliance with
                                                             all legal requirements;
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (l) | at least annually formally review
                                                             and make recommendations on the composition of the Board and its
                                                             committees, including a review of what competencies and skills the
                                                             Board, as a whole, should possess and currently possesses and a review
                                                             of the appropriate size of the Board in order to facilitate effective
                                                             decision-making;
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



49







| | (m) | monitor outside corporate governance
                                                             regulations and developments, keep the Board sufficiently informed
                                                             and recommend actions as appropriate;
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (n) | ensure that any required corporate
                                                             governance disclosures are duly reported on, and approve the information
                                                             to be disclosed;
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (o) | identify and
                                                             recommend for nomination to the Boardindividuals qualified
                                                             to become new Board and/or committee members, taking into consideration
                                                             the matters
                                                             set forth under the heading “Individual Directors” in
                                                             the Board of Directors Mandate;
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (p) | ensure that newly elected directors
                                                             and committee members receive an effective and comprehensive orientation
                                                             and that all directors are provided continuing education opportunities,
                                                             both to maintain and enhance their skills and abilities as directors
                                                             and, as applicable, committee members and to ensure their knowledge
                                                             and understanding of IMRIS business remains current;
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (q) | ensure that a majority of the directors
                                                             are “independent”according to applicable rules and regulations;
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (r) | develop a review process (the “Process”)
                                                             for periodic assessment of the effectiveness of each director, the
                                                             Board and each of its committees and co-ordinate, supervise and assess
                                                             the Process;
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (s) | establish procedures for effective
                                                             Board meetings and otherwise ensure that processes, procedures and
                                                             structures are in place to ensure that the Board functions independently
                                                             of management and without conflicts of interest;
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (t) | ensure that appropriate processes
                                                             are established by the Board to fulfill its responsibility for (i)
                                                             oversight of strategic direction and development and review of ongoing
                                                             results of operations and (ii) oversight of investor relations and
                                                             public relations activities and procedures for the effective monitoring
                                                             of its shareholder base, receipt of shareholder feedback and responses
                                                             to shareholder concerns;
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (u) | review,recommend the adoption of,
                                                             and monitor compliance with IMRIS’s strategic corporate
                                                             policies, including its Disclosure and Confidentiality Policy, Insider
                                                             Trading Policy, Code of Business Conduct and Ethics, and other relevant
                                                             policies associated with ensuring an effective system of corporate
                                                             governance (the “Policies”);
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (v) | meet
                                                                                                                             with
                                                                                                                             IMRIS’
                                                                                                                             Disclosure
                                                                                                                             Committee
                                                                                                                             on
                                                                                                                             an
                                                                                                                             annual
                                                                                                                             basis
                                                                                                                             to
                                                                                                                             discuss
                                                                                                                             the
                                                                                                                             effectiveness
                                                                                                                             of
                                                                                                                             IMRIS’s
                                                                                                                             Disclosure
                                                                                                                             and
                                                                                                                             Confidentiality
                                                                                                                             Policy;
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (w) | review with legal counsel compliance
                                                             with applicable laws and regulations and inquiries received from
                                                             regulators and governmental agencies;
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (x) | authorize and oversee the investigation
                                                             of any alleged breach of any Policies;
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------



| | (y) | review the mandates of the Board’s
                                                             committees and any recommendations received from such committees
                                                             and recommend appropriate changes;
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (z) | annually evaluate the Committee’s
                                                             performance as compared to the requirements of this Charter; and
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (aa) | annually review and
                                                              reassess the adequacy ofthe Committee’s Charter and
                                                              any other documents used by the Committee in fulfilling its responsibilities;
                                                              and
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (bb) | review,
                                                              monitor and make recommendations regarding the initial orientation
                                                              and education of new Board of Directors members, and the ongoing
                                                              education of directors.
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



50







Chairman



The Chairman’s primary role is to
ensure that the Committee functions properly, meets its obligations and responsibilities, fulfills its purpose and that its organization
and mechanisms are in place and are working effectively. More specifically, the Chairman shall:



| | (a) | chair meetings of the Committee;
| | --- | --------------------------------



| | (b) | in consultation with the Chairman
                                                               of the Board, the Members, the Executive Vice President Finance
                                                               & Administrationand Chief Financial Officer,and Corporate Secretary, set the agendas for the meetings
                                                               of the Committee;
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (c) | in collaboration with the Chairman
                                                               of the Board, the President and Chief Executive Officer, the Executive
                                                               Vice PresidentFinance & Administration and Chief Financial Officer
                                                               and the Corporate Secretary, ensure that agenda items for all Committee
                                                               meetings are ready for presentation and that adequate information
                                                               is distributed to Members in advance of such meetings in order
                                                               that Members may properly inform themselves on matters to be acted
                                                               upon;
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (d) | assign work to Members;
| | --- | -----------------------



| | (e) | act as liaison and maintain communication
                                                               with the Chairman of the Board and the Board to optimize and co-ordinate
                                                               input from directors, and to optimize the effectiveness of the
                                                               Committee; and
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (f) | provide leadership to the Committee
                                                               with respect to its functions as described in this Mandate and
                                                               as otherwise may be appropriate.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



51







APPENDIX “B”



IMRIS INC.



AUDIT AND GOVERNANCE COMMITTEE

AUDITOR SERVICES PRE-APPROVAL POLICY



| | 1. | Purpose of Auditor Services
                                                                Pre-approval Policy
| | -- | ---------------------------------------------------------------------------------------------------------------



The Audit and Governance Committee of
the Board of Trustees (the “Board”) of IMRIS Inc. (the “Corporation”) has adopted this Auditor Services
Pre-Approval Policy (the “Policy”) as part of the
Corporation’s comprehensive Corporate Governance Policy in order to provide to its personnel the policies and procedures
followed by the Audit and Governance Committee in reviewing and pre-approving services to be provided to the Corporation and its
subsidiaries (collectively ,the “Corporation”)
by the Corporation’s independent external auditor (the “External Auditor”), and to disclose those policies and
procedures to the Corporation’s shareholders.



The policies and procedures in this policy
are set forth as guidelines. They do not constitute requirements or create legal obligations. The Audit and Governance Committee
may supplement or modify the policies and procedures as appropriate in its discretion, or it may choose to pre-approve External
Auditor services in other ways that it deems advisable in its business judgment.



| | 2. | Statement of Principle
| | -- | ----------------------



The Audit and Governance Committee should
evaluate all services that are proposed to be performed by the External Auditor of the Corporation, before those services are
commenced, in order to ensure that the provision of the services will not impair the External Auditor’s independent status
under applicable securities laws. Services should not be commenced
by the External Auditor of the Corporation unless and until the specific service has been approved by the Audit and Governance
Committee or its designee.



| | 3. | Delegation of Authority
| | -- | -----------------------



To
the extent a service is not pre-approved by the full Audit and Governance Committee,
the Audit and Governance Committee elects to delegate itspre-approval
authority to the Chair of the Audit and Governance Committee, and delegates the responsibility for coordinating the External Auditor
services to the Chief Financial Officer, within the parameters of this Policy. The Chair of the Audit and Governance Committee
shall report any grantedpre-approvalsto the Audit and Governance Committee at its next scheduled meeting. The Audit and Governance Committee shallnot delegate to management the Audit and Governance Committee’s responsibilities for pre-approving audit and non-audit
services to beperformed by the External Auditor.



| | 4. | Policy and Procedures
| | -- | ---------------------



The Corporation will not engage the External
Auditor to carry out any non-audit services prohibited by applicable law, regulation, rule or accounting or auditing standard.
A list of prohibited services (“Prohibited Services”)is provided in Appendix B1, and may be amended from time to time to add any other services prohibited by applicable law,
regulation, rule or accounting or auditing standard.



The Audit and Governance Committee,
either directly or through delegated authority, will consider the pre-approval of permitted audit
and non-auditservices to be performed by the External Auditor. A non-exclusivelist of permitted services is provided in Appendix B2, and may be amended from time to time to add any other services permitted
by applicable regulators.



52







All pre-approvals granted under this Policy
shall be sufficiently detailed as to the particular services being provided that it will not be necessary for management of the
Corporation to exercise any discretion in determining whether a particular service has been pre-approved hereunder.



For permitted services the following pre-approval
policies will apply:



(a) Audit Services



Annually, the Audit and Governance
Committee will pre-approve all audit services provided by the External Auditor, as submitted jointly by the Chief Financial Officer
and the External Auditor. Any additional requests for pre-approval of audit services should be addressed as described in (c)below.



(b) Pre-Approval
of Audit Related, Tax and Other Non-audit Services



Annually, the Audit and Governance
Committee will pre-approve the audit -related, tax and other
non-audit services to beprovided by the External Auditor that
are recurring or otherwise reasonably expected to be provided, as submitted jointly by the Chief Financial Officer and the External
Auditor. The Audit and Governance Committee shall be subsequently
informed, at least quarterly, of the services for which the External Auditor has been actually engaged. Any additional requests
for pre-approval shall be addressed on a case-by-case specific
engagement basis as described in (c)below.



(c) Approval of Additional
Services



With
respect to services not covered in (a) or (b) above, the employee of the Corporationmaking the pre-approvalrequest shallsubmit the request to the Corporation’s Chief Financial Officer. The request should include a description of the
serviceto be provided, the estimated fee, a statement that
the service is not a Prohibited Service, and the reason the
External Auditor is being engaged.



(i) Services where the aggregate
fees are estimated to be less than or equal to $7,500 (in either U.S. or Canadian dollars).



Recommendations in respect of
each proposedengagementshall be submitted by the Corporation’s Chief Financial Officer to
the Chair of the Audit and Governance Committeefor consideration and approval. If
the engagement is approved by the Chair, the Audit and Governance Committee shallbe informed of the pre-approval at its next scheduledmeeting. The engagement may commence upon approval of the Chair
of the Audit and Governance Committee.



(ii) Services where the aggregate
fees are estimated to be greater than $7,500 and less than or equal to $50,000 (in either U.S. or Canadian dollars).



Recommendations in respect of
each proposedengagement shallbe submitted by the Corporation’s Chief Financial Officer to the Chair of the Audit and Governance Committee for
consideration and approval. If the engagement is approved by the Chair,
the Audit and Governance Committee shall be informed
of the pre-approval at its next scheduledmeeting. The engagement may commence upon approval of the Chair of the Audit and Governance Committee.



53







(iii) Services where the aggregate
fees are estimated to be greater than $50,000 (in either U.S. or Canadian dollars).



Recommendations,in
respect of each engagement shall be submitted by the
Corporation’s Chief Financial Officer to the full Audit and Governance Committee for consideration and
approval, generally at its next meeting or at a special meeting called for the purpose of approving such services. The
engagement may commence upon approval of the full Audit and Governance Committee.



5. De MinimisException



The Audit and Governance Committee recognizes
that applicable laws provide for an exception to the pre-approval
requirements for permitted non-audit services, provided all such services were not recognized at the time of the engagement to
be non-audit services and, once recognized, are promptly brought to the attention of the Audit and Governance Committee and approved
prior to the completion of the audit. The aggregate amount of all services approved in this manner may not constitute more than
five percent of the total fees paid to the External Auditor during the fiscal year in which the services are provided.



6. Disclosure of Pre-Approval Policies
and Procedures



Annually, the Corporation shall publicly
disclose the Audit and Governance Committee’s pre-approval policies and procedures and the fees billed
or, if applicable,paid to the External Auditors, in accordance with regulatory requirements.



54







Appendix B1



Background and Prohibited Services



Background



On January 1, 2004, the Canadian Institute
of Chartered Accountants’ (CICA) revised Rules of Professional Conduct on auditor independence became effective. As they
relate to public companies these new rules are very similar to the revised independence rules of the Securities and Exchange Commission
(SEC) that became effective on May 6, 2003. They include prohibitions or restrictions on services that may be provided by auditors
to their audit clients and require that all services provided to a listed entity audit client, including its subsidiaries, be
pre-approved by the client’s audit committee.



In addition, under Canadian Securities
Administrators (CSA) and SECrules, a public company’s
Audit and Governance Committee shall be responsible for pre-approving
all audit and permittednon-audit services to be provided to
the company or its subsidiaries by the company’s external auditors or the external auditors of the company’s subsidiaries.



Under both Canadianand United States rules, pre-approval of services by
the Audit and Governance Committee may be accomplished either by specific approval of each engagement or by adopting properpre-approval policies and procedures.



Prohibited Services



The rules identify the following ten types
of non-audit services that are deemed inconsistent with an auditors’ independence (“Prohibited Services”):



| | 1. | Bookkeeping or other services
                                                                related to the audit client’s accounting records or financial
                                                                statements.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 2. | Financial information systems
                                                                design and implementation.
| | -- | ------------------------------------------------------------------------------------------------------------------------

| | 3. | Appraisal or valuation services,
                                                                fairness opinions, or contributions-in-kind reports.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------

| | 4. | Actuarial services.
| | -- | -------------------

| | 5. | Internal audit outsourcing services.
| | -- | ------------------------------------

| | 6. | Management functions.
| | -- | ---------------------

| | 7. | Human resources.
| | -- | ----------------

| | 8. | Certain corporate finance and
                                                                other services.
| | -- | -------------------------------------------------------------------------------------------------------------

| | 9. | Legal services.
| | -- | ---------------

| | 10. | Certain expert services unrelated
                                                                 to the audit.
| | --- | ----------------------------------------------------------------------------------------------------------------



The rules provide further details as to
the specific nature of services within these categories that are prohibited.



55







Appendix B2



Permitted Services



Permitted Services



The Audit and Governance Committee will
consider the pre-approval of permitted services to be performed by the External Auditor in each of the following broad categories:



(a) Audit Services:



Include services that are normally provided
by the external auditor in connection with statutory and regulatory filings or engagements. Examples
of such services may include:



| | (i) | Annual audit of consolidated financial
                                                                statements.
| | --- | ------------------------------------------------------------------------------------------------------------------

| | (ii) | Quarterly intermediate review
                                                                 of interim consolidated financial statements.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------

| | (iii) | Other audit and special reports
                                                                  which include among others:
| | ----- | -----------------------------------------------------------------------------------------------------------------------------

| | (iv) | accounting
                                                                                                                                    consultations
                                                                                                                                    and
                                                                                                                                    tax
                                                                                                                                    services
                                                                                                                                    required
                                                                                                                                    to
                                                                                                                                    perform
                                                                                                                                    an
                                                                                                                                    audit;
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (v) | periodic
                                                                                                                                   reports
                                                                                                                                   and
                                                                                                                                   other
                                                                                                                                   documents
                                                                                                                                   filed
                                                                                                                                   with
                                                                                                                                   securities
                                                                                                                                   regulatory
                                                                                                                                   bodies
                                                                                                                                   or
                                                                                                                                   other
                                                                                                                                   documents;
                                                                                                                                   and
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (vi) | reportsissued in connection with securities offerings
| | ---- | -----------------------------------------------------

| | (vii) | Attestation engagementsrelative to applicablesecurities laws.
| | ----- | -------------------------------------------------------------



(b) Audit -Related
Services:



Include services by an external auditor
that are reasonably related to the performance of the audit of the issuer’s financial statements and are not reported as
Audit Services. Examples of such services may include:



| | (i) | Auditsof pension and other benefit plans.
| | --- | -----------------------------------------

| | (ii) | Consultations concerning accounting
                                                                 and financial reporting standards, such as discussion, research
                                                                 consultations and auditing procedures relating to new pronouncements,
                                                                 usual or non-recurring transactions and other technical topics
                                                                 which are generally non-recurring.
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (iii) | Assistance with statutory financial
                                                                  reporting, such as providing technical advice and compliance
                                                                  (preparation) services in connection with required statutory
                                                                  filings.
| | ----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (iv) | Assistance with financial due
                                                                 diligence (non-tax) performed on potential acquisition targets.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (v) | Auditing procedures and special
                                                                reports (as periodically requested).
| | --- | ------------------------------------------------------------------------------------------------------------------------------------

| | (vi) | Internal control reviews and
                                                                 assistance with internal control reporting requirements
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------

| | (vii) | Consultations by the Company's
                                                                  management as to the accounting or disclosure treatment of transactions
                                                                  or events and/or the actual or potential impact of final or
                                                                  proposed rules, standards or interpretations by securities regulators,
                                                                  or other regulatory or standard-setting bodies (Note: Under
                                                                  securities laws,
                                                                  some consultations may be "audit" services rather
                                                                  than "audit-related" services)
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



56







(c) Tax Services:



Include professional services rendered
by an external auditor for tax compliance, tax advice, and tax planning. Examples
of such services may include:



| | (i) | Advice and assistance with regard
                                                                to tax compliance, tax planning and audit defense.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------

| | (ii) | Tax-related due diligence performed
                                                                 on potential acquisition targets.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------

| | (iii) | Reviewof tax returns on a pre-filing basis.
| | ----- | -------------------------------------------

| | (iv) | Consultation on tax technical
                                                                 matters, such as tax basis and earnings and profits computations;
                                                                 evaluating the deductibility of certain expenses and creditability
                                                                 of certain expenses and income items; andadvice on accounting methods, timing issues, compliance
                                                                 matters and characterization issues.
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (v) | Technical and procedural advice
                                                                in connection with examination by various tax jurisdictions.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------



(d) Other Services



Include products and services provided
by the external auditor not included in the previous three categories.Examples of such services may include, if not Prohibited Services:



| | (i) | Valuations.
| | --- | -----------

| | (ii) | Information
                                                                                    technology advisory and risk management.
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------

| | (iii) | Actuarial;
                                                                                     forensic and related services.
| | ----- | ------------------------------------------------------------------------------------------------------------------------------

| | (iv) | Corporate
                                                                                    recovery.
| | ---- | -------------------------------------------------------------------------------------------------------

| | (v) | Transactions.
| | --- | -------------

| | (vi) | Corporate
                                                                                    finance.
| | ---- | ------------------------------------------------------------------------------------------------------

| | (vii) | Project
                                                                   risk management.
| | ----- | -------------------------------------------------------------------------------------------

| | (viii) | Operational
                                                                    advisory and risk management; and
| | ------ | -----------------------------------------------------------------------------------------------------------------

| | (ix) | Regulatory
                                                                                    and compliance.
| | ---- | --------------------------------------------------------------------------------------------------------------



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