Document:

Exhibit 4.3, Exhibit 4.6

  

ITEM
5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

 

A. Operating Results

 

The following discussion and analysis
of our financial condition and results of operations should be read in conjunction with our interim unaudited financial statements
as at and for the three and six months ended June 30, 2019 and 2018 and our audited financial statements as at and for the fiscal
years ended December 31, 2018, 2017 and 2016 in each case, together with the notes thereto. The financial information contained
in this Registration Statement is derived from the financial statements prepared in accordance with IFRS.

 

    1 

     

    

 

Overview

 

We are an early commercial-stage medical
device company focused on the development and marketing of customizable, incision-free therapeutic systems for the ablation of
diseased tissue using our platform technology. Our leading approved product is our TULSA-PRO system, which in August 2019 received
FDA clearance as a Class II device in the United States for thermal ablation of prescribed prostate tissue, benign and malignant,
using transurethral ultrasound ablation (“TULSA”) based on our TACT Pivotal Clinical Trial, and is also CE marked
in the European Union for ablation of targeted prostate tissue (benign or malignant). In addition, our Sonalleve system is CE marked
in the EU for the treatment of uterine fibroids and palliative pain relief associated with metastases in bone, and is also approved
in China for the treatment of non-invasive treatment of uterine fibroids. Our systems are designed to be used with MRI scanners
and are currently compatible with MRI scanners manufactured by Philips and Siemens. To date, we have primarily generated revenues
from our limited commercialization of our systems in the EU (principally in Germany) and Asia. We intend to commence commercialization
of the TULSA-PRO system in the United States in the near term following our recent FDA clearance. We also continue to pursue additional
regulatory approvals, research and development, clinical studies and acquisitions in order to expand the applications of our platform
technology and expand our commercial footprint.

 

Our financial strategy to date has been
to raise sufficient funds through securities offerings and bank financings in order to fund specific programs within a focused
budget, and following FDA clearance of our TULSA-PRO system that we received in August 2019, commercialization in the United States.
As our commercialization efforts increase and/or further program development costs increase, we may need to raise additional capital.
See Item 3.D, “Risk Factors” and Item 5.B, “Liquidity and Capital Resources” for more information.

 

Trend Information and Outlook

 

We believe the following significant trends
and uncertainties are likely to influence our results of operations, cash flows and/or financial condition in the future:

 

		·	We have recently obtained FDA clearance for the TULSA-PRO system in the United States, and expect
to commence commercialization in the United States in the near team.

 

		·	We plan to increase our in-house sales and marketing capabilities to commercialize the TULSA-PRO
system in the United States, which we expect will increase our expenses in the near term.

 

		·	We are pursuing increased compatibility of our systems, including the TULSA-PRO system, with additional
MRI scanners, and we may also pursue additional distribution relationships to facilitate our U.S. commercialization efforts; these
efforts may require significant management time and could result in increased expenses.

 

		·	We are also pursuing reimbursement coverage for the TULSA-PRO system by third-party payers, such
as private insurance plans offered by medical insurance companies; the amount of such coverage or reimbursement, however, is uncertain,
as we may be required to conduct additional research and clinical trials.

 

		·	We estimate that our general and administrative expenses will increase in the near term, primarily
due to the continued expansion of our management team as well as compliance costs associated with becoming subject to reporting
and other requirements under applicable U.S. securities laws and Nasdaq rules.

 

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		·	We also estimate that the costs for further developing our products and future product candidates
based on our platform technology may increase in future years.

 

Our ability to achieve our commercialization
goals, continue our growth and achieve profitability depends, in part, on the level of market acceptance of our products (in particular,
the TULSA-PRO system in the United States), as well as the success of our efforts to increase our U.S. sales and marketing capabilities,
increase compatibility of our systems with additional MRI scanners and procure reimbursement coverage, and also depends on changes
in trends in the standard of care for the patient populations in which our products are indicated for use. In addition, our results
may be adversely affected if, among other things, there is an economic slowdown or future clinical trial results are adverse.

 

While we believe that some of the trends
and plans described above will present significant opportunities for us, they also pose significant challenges, uncertainties and
risks, including those described under Item 3.D, “Risk Factors” above.

 

Results of Operations

 

The following selected financial information
as at and for the three and six month periods ended June 30, 2019 and 2018, and selected financial information as at and for the
years ended December 31, 2018, 2017 and 2016, have been derived from the interim unaudited financial statements and from the annual
audited financial statements, respectively, included elsewhere in this Registration Statement, and should be read in conjunction
with those respective financial statements and the related notes thereto.

 

	 	 	Three Months
 Ended June
    30,	 	 	Six Months
 Ended June
    30,	 	 	Year Ended
 December
    31,	 
	 	 	2019	 	 	2018	 	 	2019	 	 	2018	 	 	2018	 	 	2017	 	 	2016	 
	 	 	C$	 	 	C$	 	 	C$	 	 	C$	 	 	C$	 
	Revenue	 	 	574,109	 	 	 	213,343	 	 	 	2,049,897	 	 	 	589,678	 	 	 	2,602,278	 	 	 	4,904,550	 	 	 	-	 
	Cost of sales	 	 	224,066	 	 	 	126,259	 	 	 	777,422	 	 	 	357,334	 	 	 	1,778,501	 	 	 	3,032,208	 	 	 	-	 
	Gross profit	 	 	330,043	 	 	 	87,084	 	 	 	1,272,475	 	 	 	232,344	 	 	 	823,777	 	 	 	1,872,342	 	 	 	-	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Operating Expenses	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Research and development - net of investment
    tax credits	 	 	3,186,355	 	 	 	2,347,909	 	 	 	5,864,101	 	 	 	4,864,690	 	 	 	10,265,388	 	 	 	9,638,190	 	 	 	9,988,693	 
	General and administrative	 	 	1,586,323	 	 	 	2,236,529	 	 	 	3,100,436	 	 	 	3,539,733	 	 	 	6,656,723	 	 	 	5,935,215	 	 	 	4,369,288	 
	Selling and distribution	 	 	1,154,869	 	 	 	1,113,225	 	 	 	625,524	 	 	 	2,060,127	 	 	 	4,091,347	 	 	 	3,925,804	 	 	 	1,282,433	 
	Total operating expenses	 	 	5,927,547	 	 	 	5,697,663	 	 	 	9,590,061	 	 	 	10,464,550	 	 	 	21,013,458	 	 	 	19,499,209	 	 	 	15,640,414	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Finance costs	 	 	337,220	 	 	 	313,606	 	 	 	651,905	 	 	 	633,569	 	 	 	826,312	 	 	 	1,249,084	 	 	 	829,899	 
	Finance income	 	 	(110,790	)	 	 	(117,357	)	 	 	(252,671	)	 	 	(157,161	)	 	 	(483,788	)	 	 	(127,732	)	 	 	(157,598	)
	Net finance costs	 	 	226,430	 	 	 	196,249	 	 	 	399,234	 	 	 	476,408	 	 	 	342,524	 	 	 	1,121,352	 	 	 	672,301	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Loss before income taxes	 	 	5,823,934	 	 	 	5,806,828	 	 	 	8,716,820	 	 	 	10,708,614	 	 	 	20,532,205	 	 	 	18,748,219	 	 	 	16,312,715	 
	Income tax expense	 	 	20,200	 	 	 	24,200	 	 	 	54,000	 	 	 	60,600	 	 	 	230,784	 	 	 	74,123	 	 	 	14,054	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Net loss attributable to shareholders for the period	 	 	5,844,134	 	 	 	5,831,028	 	 	 	8,770,820	 	 	 	10,769,214	 	 	 	20,762,989	 	 	 	18,822,342	 	 	 	16,326,769	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Other comprehensive loss	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Item that may be reclassified to profit or loss	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Foreign currency translation adjustment - net
    of tax	 	 	(11,843	)	 	 	57,943	 	 	 	(58,232	)	 	 	14,695	 	 	 	29,226	 	 	 	(69,245	)	 	 	11,316	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Net loss and comprehensive loss for the period	 	 	5,832,291	 	 	 	5,888,971	 	 	 	8,712,588	 	 	 	10,783,909	 	 	 	20,792,215	 	 	 	18,753,097	 	 	 	16,338,085	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Basic and diluted net loss per common share	 	 	0.05	 	 	 	0.05	 	 	 	0.08	 	 	 	0.12	 	 	 	0.21	 	 	 	0.31	 	 	 	0.39	 

 

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Financial Overview

 

Revenue

 

For the TULSA-PRO system, we generate revenue
from the sale of the capital equipment, procedure-related sales of disposable single-use components of the system (which are sold
on a per patient basis), and service revenue for ongoing maintenance of the systems. Sales of Sonalleve systems are primarily a
one-time capital sale with limited recurring service revenue.

 

For the historical financial periods presented
herein, we have generated revenues primarily from sales of our systems and disposables through our partnerships with Siemens and
Philips in the EU and Asia. In August 2019, we received FDA clearance for our TULSA-PRO system in the United States, and accordingly
we anticipate generating future revenues in the U.S. market. As we expand our commercialization efforts, we anticipate generating
revenues through our in-house sales and marketing efforts, as well as from our collaborative partnerships.

 

In addition, because we have been in our
pilot sales launch phase, our revenues for the historical periods presented herein have fluctuated significantly on a quarter-over-quarter
and year-over-year basis. We expect that our revenues will likewise fluctuate from period-to-period in the near term as we pursue
our commercialization strategy.

 

Cost of Sales

 

Cost of sales include cost of finished
goods, inventory provisions, warranties, freight and direct overhead expenses. We expect cost of sales to increase or decrease
corresponding with fluctuations in our revenues.

 

Operating Expenses

 

Our operating expenses consist of three
components: research and development (“R&D”), general and administrative (“G&A”)
and selling, marketing and distribution expenses. Historically, our R&D expenses have exceeded our selling, marketing and distribution
expenses; however, in the future we expect our selling, marketing and distribution expenses to increase as we commercialize the
TULSA-PRO system in the United States.

 

R&D Expenses

 

Our R&D expenses are comprised of costs
incurred in performing R&D activities, including new product development, continuous product improvement, investment in clinical
trials and related clinical manufacturing costs, materials and supplies, salaries and benefits, contract research costs, patent
procurement costs, and occupancy costs related to R&D activity.

 

G&A Expenses

 

Our G&A expenses are comprised of management
costs, including salaries and benefits, various management and administrative support functions, insurance and other operating
and occupancy costs related to G&A activity.

 

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Selling, Marketing and
Distribution Expenses

 

Our selling, marketing and distribution
expenses are comprised of business development costs related to the market development activities and commercialization of our
systems, including salaries and benefits, marketing support functions, marketing-related occupancy costs and other miscellaneous
marketing costs.

 

Finance Costs

 

Finance costs are primarily comprised of
interest and accretion expenses, among others, historically relating to the following: (i) the Federal Economic Development Agency
Loan accreting to the principal amount repayable; (ii) the Health Technology Exchange Loan accreting to the principal amount repayable
and its related interest expense; (iii) the Knight Loan accreting to the principal amount repayable and its related interest expense;
(iv) the 0.5% royalty liability to Knight accreting to the estimated amount payable; (v) the change in fair value of the contingent
consideration payable to Philips under the Philips Share Purchase Agreement; (vi) the CIBC Loan accreting to the principal amount
repayable and its related interest expense; (vii) the change in the fair value of the derivative liability warrants; (viii) the
lease liability interest expense related to the adoption of IFRS 16 and (ix) foreign exchange gains or losses. We repaid the Health
Technology Exchange Loan on March 31, 2019 and each of the Federal Economic Development Agency Loan and the Knight Loan on July
25, 2018, and the Knight royalty terminated on May 20, 2019.

 

Comparison of the Three and Six Months
Ended June 30, 2019 to the Three and Six Months Ended June 30, 2018

 

Revenue

 

For the three months ended June 30, 2019,
we recorded revenue totaling C$574,109 with C$465,840 from the sale of products and C$108,269 from installation and training services
related to the commercial sales of the systems and disposables, primarily in the European Union. For the three months ended June
30, 2018, we recorded revenue totaling C$213,343, with C$170,931 from sale of products and C$42,412 from installation and training
services. The increase in revenue in the second quarter of 2019 over the second quarter of 2018 was the result of increased system
and disposable sales as well as increased service contracts. However, our revenues in the second
quarter of 2019 were lower than in the first quarter of 2019 and the fourth quarter of 2018 because of decreased system and disposable
sales due to fluctuating revenues in our early pilot launch phase. See “—Quarterly Results of Operations” below.

 

For the six months ended June 30, 2019,
we recorded revenue totaling C$2,049,897, with C$1,813,621 from the sale of products and C$236,276 from installation and training
services related to the commercial sales of the systems and disposables, primarily in the European Union. For the six months ended
June 30, 2018, we recorded revenue totaling C$589,678, with C$543,425 from the sale of products and C$46,253 from installation
and training services. The increase in revenue in the six months ended June 30, 2019 was the result of increased system and disposable
sales as well as increased service contracts.

 

Cost of Sales

 

For the three months ended June 30, 2019,
we recorded a cost of sales of C$244,066 related to the sale of systems and disposables, which reflects a 58% gross margin. For
the three months ended June 30, 2018, we recorded a cost of sales of C$126,259 related to the commercial sale of systems and disposables,
which reflects a 41% gross margin. The gross margin was higher in the second quarter of 2019 due to increased disposable and service
revenue, which have higher margins.

 

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For the six months ended June 30, 2019,
we recorded a cost of sales of C$777,422 related to the commercial sale of the systems and disposables, which reflects a 62% gross
margin. For the six months ended June 30, 2018, we recorded a cost of sales of C$357,334 related to the commercial sale of systems
and disposables, which reflects a 39% gross margin. The gross margin was higher in the six months ended June 30, 2019 due to increased
disposable and service revenue, which have higher margins.

 

Operating Expenses

 

R&D Expenses

 

For the three months ended June 30, 2019,
R&D expenses were higher by C$838,446 compared to the three months ended June 30, 2018. Clinical trial costs, materials, share
based compensation and salaries and benefits increased period-over-period by C$219,569, C$294,225, C$33,986, and C$244,263, respectively.
These increases were due to increased spending and testing for R&D and activity related to pursuing U.S. regulatory approvals,
analysis of TACT clinical data, options awarded to employees, increased R&D personnel and investment tax credits decreasing
by C$60,000 because of lower eligibility for refundable tax credits. Offsetting these amounts were decreases in rent of C$57,456,
due to the adoption of IFRS 16 resulting in the recognition of lower rental costs. Depreciation expenses increased by C$26,762
due to the adoption of IFRS 16 with the depreciation of the right-of-use assets.

 

For the six months ended June 30, 2019,
R&D expenses were higher by C$999,411 compared to the six months ended June 30, 2018. Materials, share based compensation,
salaries and benefits and other expenses increased by C$777,683, C$51,238, C$214,155 and C$61,277, respectively. These costs were
higher compared to the six months ended June 30, 2018, due to increased spending and testing on R&D and US regulatory projects,
options awarded to employees, increased R&D personnel and investment tax credits decreasing by C$120,000 because of lower eligibility
for refundable tax credits. Offsetting these amounts was a decrease in clinical trial costs, consulting fees and rent by C$107,052,
C$67,474 and C$95,486, respectively, resulting from the completion of the TACT Pivotal Clinical Trial enrollment initiatives, insourcing
manufacturing and regulatory projects and the adoption of IFRS 16 resulting in the recognition of lower rental costs. Depreciation
expenses increased by C$54,929 due to the adoption of IFRS 16 with the depreciation of the right-of-use assets.

 

G&A Expenses

 

G&A expenses for the three months ended
June 30, 2019 decreased by C$650,206 compared to the three months ended June 30, 2018. Salaries and benefits, consulting fees and
travel decreased by C$386,996, C$386,594 and C$24,337, respectively due to no bonuses awarded to management this quarter, lower
legal costs and decreased travel to customer sites. In addition, the second quarter of 2018 was affected by increased management
compensation due to the hiring of key management personnel. These costs were offset by an increase in share based compensation
of C$111,871 in the second quarter of 2019, due to options awarded to various employees. Depreciation expenses increased by C$59,759
due to the adoption of IFRS 16 with the depreciation of the right-of-use assets.

 

G&A expenses for the six months ended
June 30, 2019 were lower by C$439,297 compared to the six months ended June 30, 2018. Salaries and benefits, consulting fees, rent
and travel decreased by C$191,845, C$400,874, C$31,289 and C$17,609, respectively, due to no bonuses awarded to management, lower
legal costs, adoption of IFRS 16 resulting in the recognition of lower rental costs and decreased travel to customer sites. Depreciation
expenses increased by C$121,191 due to the adoption of IFRS 16 with the depreciation of the right-of-use assets.

 

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Selling, Marketing and Distribution
Expenses

 

Selling, marketing and distribution expenses
for the three months ended June 30, 2019 were higher by C$41,644 compared to the three months ended June 30, 2018. Consulting fees
increased by C$247,992 related to the additional consultants hired in various countries to help market and promote our approved
products. Marketing and salaries and benefits expenses decreased by C$49,351 and C$128,834, respectively, due to decreased tradeshow
attendance, marketing initiatives in the second quarter of 2019 a regional re-alignment of marketing personnel.

 

Selling, marketing and distribution expenses
for the six months ended June 30, 2019 were lower by C$1,434,603 compared to the six months ended June 30, 2018. Salaries and benefits,
share based compensation, marketing and travel expenses decreased by C$164,123, C$182,320, C$125,469 and C$32,220, respectively,
due to a regional re-alignment of marketing personnel, employee forfeiture of options, decreased trade show attendance, product
branding development and decreased travel. In addition, in the first quarter of 2019, our revenue share obligation decreased by
C$1,209,205 related to the replacement of the Original Siemens Agreement with the New Siemens Agreement whereby all prior financial
commitments and obligations owed to Siemens were released, resulting in a recovery of expenses recorded in the six months ended
June 30, 2019. These costs were offset by an increase in consulting fees of C$296,803 due to consultants hired in various countries
to help market and promote our approved products.

 

Finance Costs

 

Finance costs for the three months ended
June 30, 2019 were higher by C$30,181 compared to the three months ended June 30, 2018. During the three months ended June 30,
2019, we recognized C$26,298 of foreign exchange loss and a C$25,072 gain on the change in fair value to the contingent consideration
under the Philips Share Purchase Agreement and a C$3,251 gain on the change in fair value of the derivative liability warrants,
respectively. We recognized CIBC Loan interest of C$312,050 and lease liability interest expense of C$33,556.

 

Finance costs for the six months ended
June 30, 2019 were lower by C$77,174 compared to the six months ended June 30, 2018. During the six months ended June 30, 2019,
we recognized C$34,786 of foreign exchange gain, a C$48,787 gain on the change in fair value to the contingent consideration and
a C$54,220 loss on the change in fair value of the derivative liability warrants, respectively. We recognized CIBC Loan interest
of C$617,559 and lease liability interest expense of C$67,149.

 

Income Tax Expense

 

During the three and six months ended June
30, 2019, we recorded an income tax expense of C$20,200 and C$54,000, respectively, compared to C$24,200 and C$60,600 for the three
and six months ended June 30, 2018, which primarily related to taxes in certain foreign jurisdictions.

 

Net Loss

 

Net loss for the three months ended June
30, 2019 was C$5,844,134 or C$0.05 per Common Share, compared to a net loss of C$5,831,028 or C$0.05 per Common Share for the three
months ended June 30, 2018. The increase in net loss was primarily attributed to an increase in R&D expenses of C$838,446,
an increase in selling and distribution expenses of C$41,644 and an increase in net finance costs of C$30,181. This was offset
by a decrease in G&A expenses of C$650,206 and an increase in gross profits of C$242,959. However,
our net loss in the second quarter of 2019 was greater than in the first quarter of 2019. See “—Quarterly Results of
Operations” below.

 

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Net loss for the six months ended June
30, 2019 was C$8,770,820 or C$0.08 per common share, compared to a net loss of C$10,769,214 or C$0.12 per common share for the
six months ended June 30, 2018. The decrease in net loss was primarily attributed to a decrease in G&A expenses of C$439,297,
a decrease in selling and distribution expenses of C$1,434,603, a decrease in net finance costs of C$77,174 and an increase in
gross profit of C$1,040,131. This was offset by an increase in R&D expenses of C$999,411.

 

Comparison of the Year Ended December
31, 2018 to the Year Ended December 31, 2017

 

Revenue

 

For the year ended December 31, 2018, we
recorded revenue totaling C$2,602,278, with C$2,421,331 from the sale of products and C$180,947 from installation and training
services, related to the commercial sales of the systems and disposables, primarily in the EU. For the year ended December 31,
2017, we recorded revenue totaling C$4,904,550, with C$4,663,986 from sale of products and C$240,564 from installation and training
services. The decrease in revenue was the result of fewer new system and disposable sales in 2018 due to fluctuating revenues in
our early pilot launch phase.

 

Cost of Sales

 

For the year ended December 31, 2018, we
recorded a cost of sales of C$1,778,501, related to the sale of the systems and disposables, which reflects a 32% gross margin.
For the year ended December 31, 2017, we recorded a cost of sales of C$3,032,208, related to the commercial sale of systems and
disposables, which reflects a 38% gross margin. The gross margin was lower in 2018 due to changes in the product mix as a result
of the Sonalleve Transaction and lower gross margin on disposables compared to the systems based on initial low volumes.

 

Operating Expenses

 

R&D Expenses

 

For the year ended December 31, 2018, R&D
expenses were higher by C$627,198 compared to the year ended December 31, 2017. Overall, the increase in R&D spending was attributed
to the Sonalleve Transaction, which occurred in the third quarter of 2017. Materials, rent, salaries and benefits and other expenses
increased by C$125,035, C$110,756, C$1,224,691 and C$177,625, respectively. These costs were higher compared to the year ended
December 31, 2017, due to a higher number of R&D personnel, new initiatives with our Sonalleve system and a new facility in
Finland. Offsetting these amounts was a decrease in clinical trial costs, travel and share based compensation by C$1,544,191, C$26,194
and C$67,403, respectively, resulting from the completion of the TACT Pivotal Clinical Trial enrollment initiatives and the forfeiture
of certain share options. Amortization of intangible assets increased by C$626,593 due to the Sonalleve Transaction which represented
12 months amortization in 2018 versus 5 months amortization in 2017.

 

G&A Expenses

 

G&A expenses for the year ended December
31, 2018 were higher by C$721,508 compared to the year ended December 31, 2017. Salaries and benefits, travel and office and other
increased by C$885,846, C$60,982 and C$28,879, respectively, due to increased number of G&A personnel and board members, bonus
payments, salary increases, including as a result of the Sonalleve Transaction, and increased insurance expenses and travel to
customer sites. These costs were offset by a decrease in share-based compensation expense and occupancy costs (resulting in lower
utility bills and repairs to the facilities) by C$326,501 and C$106,427, respectively. Depreciation expense increased by C$167,970
primarily due to leasehold improvements for the new facility that was constructed in the latter part of 2017.

 

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Selling, Marketing and Distribution
Expenses

 

Selling, marketing and distribution expenses
for the year ended December 31, 2018 were higher by C$165,543 compared to the year ended December 31, 2017. Salaries and benefits,
consulting fees, travel, marketing and share based compensation increased by C$400,470, C$175,152, C$77,295, C$138,644 and C$145,229,
respectively, due to additional direct sales force personnel, awards issued to new employees, increased marketing-related efforts,
product branding development and conference attendance. These costs were offset by a reduced revenue share obligation expense of
C$787,858 related to the Siemens revenue share payments compared to the minimum amounts contractually stipulated.

 

Finance Costs

 

Finance costs for the year ended December
31, 2018 were lower by C$422,772 compared to the year ended December 31, 2017. During the year ended December 31, 2018, we recognized
C$214,226 of foreign exchange loss, a C$325,253 and C$96,619 gain on the change in fair value to the contingent consideration under
the Philips Share Purchase Agreement and the change in fair value of the derivative liability warrants, respectively. We recognized
a decrease in the Health Technology Exchange Loan and Federal Economic Development Agency Loan and Knight Loan interest and accretion
expense of C$57,149 and C$752,358, respectively and an increase in CIBC Loan interest and accretion expense of C$517,409.

 

Income Tax Expense

 

During the year ended December 31, 2018,
we recorded an income tax expense of C$230,784, compared to C$74,123 for the year ended December 31, 2017 which primarily related
to taxes in certain foreign jurisdictions. The increase was a direct result of increased commercial efforts.

 

Net Loss

 

Net loss for the year ended December 31,
2018 was C$20,762,989 or C$0.21 per Common Share, compared to a net loss of C$18,822,342 or C$0.31 per Common Share for the year
ended December 31, 2017. The increase in net loss was primarily attributed to an increase in R&D expenses of C$627,198, an
increase in G&A expenses of C$721,508, an increase selling and distribution expenses of C$165,543, and a decrease in gross
profit of C$1,048,565. These were offset by a decrease in net finance costs of C$778,828.

 

Comparison of the Year Ended December
31, 2017 to the Year Ended December 31, 2016

 

Revenue

 

For the year ended December 31, 2017, we
recorded revenues totaling C$4,904,550, with C$4,663,986 from sale of products and C$240,564 from installation and training services,
related to the commercial sales of the systems and disposables, primarily in the EU. In 2016, we had no revenues as we were in
the pre-commercial stage of our development.

 

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Cost of Sales

 

For the year ended December 31, 2017, we
recorded cost of sales of C$3,032,208, related to the sales of the systems and disposables. In 2016, we had no revenues or related
cost of sales as we were in the pre-commercial stage of our development.

 

Operating Expenses

 

R&D Expenses

 

For the year ended December 31, 2017, R&D
expenses were lower by C$350,503 compared to the year ended December 31, 2016. Overall, the decrease in R&D spending reflected
the advanced stages of development of our products and the ramp-up of commercial operations in approved jurisdictions. Materials,
contractors and other expenses were lower by C$2,523,608, C$136,386 and C$204,711, respectively due to lower material costs and
R&D initiatives associated with our TACT Pivotal Clinical Trials. Offsetting this amount was an increase in clinical trial
costs, salaries and benefits, amortization of intangible assets, consulting fees and travel by C$1,311,878, C$562,626, C$458,980,
C$80,763 and C$66,248, respectively, resulting from ongoing activities related to the initiation of clinical site visits, enrollment
initiatives, patient treatment and workforce costs.

 

G&A Expenses

 

G&A expenses for the year ended December
31, 2017 were higher by C$1,565,927 compared to the year ended December 31, 2016. Salaries and benefit expenses increased by C$88,190,
primarily related to a separation payment to a former executive officer and the addition of key executives. In addition, professional
and consulting fees increased by C$976,380 due to legal fees associated with the Sonalleve Transaction and the inclusion of Sonalleve-related
operations. Share-based compensation and rent increased by C$289,689 and C$20,364, respectively, due to new options issued to executive
officers while rent was due to relocation to a larger facility in July 2016. Depreciation expense increased by C$195,218 primarily
due to the new property and equipment for the new facility.

 

Selling, Marketing and Distribution
Expenses

 

Selling and distribution expenses for the
year ended December 31, 2017 were higher by C$2,643,371 compared to the year ended December 31, 2016. The increase is largely attributable
to recognizing commissions payable on commercial sales of C$73,046 and a provision of C$953,429 related to the estimated shortfall
of revenue share payments compared to the minimum amounts contractually required. In addition, shared based compensation and salaries
and benefits increased by C$32,820 and C$650,391, respectively, resulting from additional direct sales force personnel. Professional
and consulting fees, marketing, office and other and travel expenses increased by C$353,974, C$257,074, C$90,676 and C$231,961,
respectively. These increases relate directly to marketing-related efforts and an increased direct sales force.

 

Finance Costs

 

Finance costs for the year ended December
31, 2017 were higher by C$419,185 compared to the year ended December 31, 2016. During the year ended December 31, 2017, we revised
the fair value of the royalty payable to Knight, using future revenue forecasts for the term of the Knight Loan and recognized
an interest accretion recovery of C$36,438. As part of the Sonalleve Transaction, we were required to repay the Knight Loan at
an accelerated rate and therefore recognized C$333,997 of accelerated accretion expense. During the year, we revised the fair value
of the contingent consideration under the Philips Share Purchase Agreement and recognized a change in fair value of C$82,578.

 

    10 

     

    

 

Income Tax Expense

 

During the year ended December 31, 2017,
we recorded an income tax expense C$74,123, compared to the year ended December 31, 2016 of C$14,054 with the increase primarily
related to the Sonalleve Transaction.

 

Net Loss

 

Net loss for the year ended December 31,
2017 was C$18,822,342 or C$0.31 per common share, compared to a net loss of C$16,326,769 or C$0.39 per Common Share for the year
ended December 31, 2016. The increase in net loss was primarily attributed to an increase in selling and distribution expenses
of C$2,643,371, G&A expenses of C$1,565,927 and an increase in financing costs of C$419,185. These increases were offset by
a gross profit of C$1,872,342.

 

Quarterly Results of Operations

 

The following table summarizes selected
unaudited consolidated financial data for each of the last eight quarters. The summary financial information provided below is
derived from our interim financial statements for each of the last eight quarters that are prepared under IFRS in Canadian dollars.
These quarterly operating results are not necessarily indicative of our operating results for a full year or any future period.

 

	 	 	2019	 	 	2018	 	 	2017	 
	 	 	Q2	 	 	Q1	 	 	Q4	 	 	Q3	 	 	Q2	 	 	Q1	 	 	Q4	 	 	Q3(1)
	 
	 	 	C$	 	 	C$	 	 	C$	 	 	C$	 	 	C$	 	 	C$	 	 	C$	 	 	C$	 
	Revenue(3)	 	 	574,109	 	 	 	1,475,788	 	 	 	1,708,936	 	 	 	303,664	 	 	 	213,343	 	 	 	376,335	 	 	 	1,890,482	 	 	 	1,465,412	 
	Cost of Sales	 	 	244,066	 	 	 	533,356	 	 	 	1,180,481	 	 	 	240,686	 	 	 	126,259	 	 	 	231,075	 	 	 	1,063,950	 	 	 	1,185,674	 
	Gross profit	 	 	330,043	 	 	 	942,432	 	 	 	528,455	 	 	 	62,978	 	 	 	87,084	 	 	 	145,260	 	 	 	826,532	 	 	 	279,738	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Operating expenses	 	 	5,927,547	 	 	 	3,662,514	 	 	 	5,309,931	 	 	 	5,238,977	 	 	 	5,697,663	 	 	 	4,766,887	 	 	 	5,155,423	 	 	 	5,148,434	 
	Net finance costs(2)	 	 	226,430	 	 	 	172,804	 	 	 	(60,151	)	 	 	(73,733	)	 	 	196,249	 	 	 	280,159	 	 	 	130,632	 	 	 	651,378	 
	Loss before income taxes	 	 	5,823,934	 	 	 	2,892,886	 	 	 	4,721,325	 	 	 	5,102,266	 	 	 	5,806,828	 	 	 	4,901,786	 	 	 	4,459,523	 	 	 	5,520,074	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Income taxes	 	 	20,200	 	 	 	33,800	 	 	 	136,884	 	 	 	32,700	 	 	 	24,200	 	 	 	36,400	 	 	 	69,470	 	 	 	-	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Net loss for the period	 	 	5,844,134	 	 	 	2,926,686	 	 	 	4,858,809	 	 	 	5,134,966	 	 	 	5,831,028	 	 	 	4,938,186	 	 	 	4,528,993	 	 	 	5,520,074	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Loss per common share	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Basic and diluted	 	 	0.05	 	 	 	0.03	 	 	 	0.04	 	 	 	0.05	 	 	 	0.05	 	 	 	0.06	 	 	 	0.06	 	 	 	0.09	 

 

		(1)	The fourth quarter of 2018 was impacted by increased commercial sales of systems primarily in Germany and Asia, resulting in
increased revenues.

 

		(2)	The third and fourth quarters of 2018 net finance costs were lower due to a gain on the change in fair value of contingent
consideration under the Philips Share Purchase Agreement and share warrants being recognized.

 

Recently Issued Accounting Pronouncements

 

In conjunction with the transition to the
new IFRS 16, Leases and IFRIC 23, Uncertainty over Income Tax Treatments, we have determined that the adoption of these new accounting
standards did not have a significant impact on our control environment.

 

    11 

     

    

 

 

The preparation of financial statements
in conformity with IFRS requires management to make estimates and judgements that affect the reported amounts of assets and liabilities
at the date of the financial statements, and the reported amounts of revenue and expenses during the period. Actual results could
differ from these estimates. As additional information becomes available or actual amounts are determinable, the recorded estimates
are revised and reflected in operating results in the period in which they are determined.

 

Critical Accounting Policies and Estimates

 

Revenue

 

To determine revenue recognition for arrangements
we performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in
the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the
contract; and (v) recognize revenue when (or as) we satisfy a performance obligation. We only apply the five-step model to contracts
when it is probable that we will collect the consideration it is entitled to in exchange for the goods or services it transfers
to the customer.

 

Revenue is recognized when a contractual
promise to a customer (performance obligation) has been fulfilled by transferring control over the promised goods or services,
generally at the point in time of shipment to or receipt of the products by the customer or when the services are performed. When
contracts contain customer acceptance provisions, revenue is recognized on the satisfaction of the specific acceptance criteria.

 

The amount of revenue to be recognized
is based on the consideration we expect to receive in exchange for its goods and services. For contracts that contain multiple
performance obligations, we allocate the consideration to which we expect to be entitled to each performance obligation based on
relative standalone selling prices and we recognize the related revenue when or as control of each individual performance obligation
is transferred to customers.

 

Service revenue related to installation
and training is recognized over the period in which the services are performed. Service revenue related to extended warranty service
is deferred and recognized on a straight-line basis over the extended warranty period covered by the respective customer contract.

 

Under the terms of certain of our partnership
agreements with Philips and Siemens, we retain a percentage of all amounts earned with the remaining percentage due to the partner.
Accordingly, associated revenue is recognized net of the consideration due to the partner.

 

Complex financial instruments and provisions

 

We make various judgments when determining
the accounting for certain complex financial instruments. We have concluded that the contingent consideration in a business combination
represents a financial liability measured at fair value through profit or loss.

 

    12 

     

    

 

 

Accounts receivable and allowance for credit losses

 

Accounts receivable are generally non-interest
bearing, unsecured obligations due from customers. We make a provision to allow for potentially uncollectible amounts owed from
customers. The allowance is reviewed by management periodically based on an analysis of the age of the outstanding accounts receivable.
The balance of accounts receivable after the allowance for credit losses represents management’s estimate of the net realizable
value of receivables after discounts and contractual adjustments.

 

Impairment of goodwill and long-lived assets

 

Management tests at least annually whether
goodwill suffered any impairment. Property and equipment are reviewed for impairment whenever events or changes in circumstances
indicate the carrying amount may not be recoverable. An impairment loss is recognized as the amount by which the asset’s
carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs
to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are
separately identifiable cash flows.

 

Management makes key assumptions and estimates
in determining the recoverable amount of our cash generating units (“CGUs”) or groups of CGUs, including future
cash flows based on historical and budgeted operating results, growth rates, tax rates and appropriate after-tax discount rates.

 

We evaluate our long-lived assets (property
and equipment) and intangible assets, other than goodwill, for impairment whenever indicators of impairment exist. The accounting
standards require that if the sum of the undiscounted expected future cash flows from a long-lived asset or definite-lived intangible
asset is less than the carrying value of that asset, an asset impairment charge must be recognized. The amount of the impairment
charge is calculated as the excess of the asset’s carrying value over its fair value, which generally represents the discounted
future cash flows from that asset.

 

Impairment of non-financial assets

 

We review amortized non-financial assets
for impairment whenever events or changes in circumstances indicate the carrying amount of the assets may be impaired. We also
review goodwill annually for impairment. If the recoverable amount of the respective non-financial asset is less than our carrying
amount, it is considered to be impaired. In the process of measuring the recoverable amount, management makes assumptions about
future events and circumstances. The actual results may vary and may cause significant adjustments.

 

Accounting for acquisitions and contingent consideration

 

Areas of estimation include the determination
and fair value measurement of the contingent consideration, which include us developing our best estimate of projected revenue,
the probability of the contingency being achieved and the discount rate. Management is also required to make estimates of the fair
value of assets acquired and liabilities assumed.

 

Clinical trial expenses

 

Clinical trial expenses are accrued based
on the services received and efforts expended pursuant to agreements with clinical trial sites and other vendors. In the normal
course of business we contract third parties to perform various clinical trial activities. The financial terms of these agreements
vary from contract to contract, are subject to negotiation and may result in uneven payment flows. Payments under the contracts
depend on factors such as the achievement of certain events, the successful enrollment of patients or the completion of certain
portions of a clinical trial. We determine the accrual by reviewing contracts, vendor agreements and through discussions with internal
personnel and external clinical trial sites as to the progress or stage of completion of the clinical trial and the agreed-upon
fees to be paid for such services. Actual costs and timing of the clinical trial is uncertain, subject to risks and may change
depending on a number of factors.

 

    13 

     

    

 

 

JOBS Act

 

As a company with less than US$1.07 billion
in revenue during the last fiscal year, we qualify as an “emerging growth company” pursuant to the JOBS Act. An emerging
growth company may take advantage of specified exemptions from various requirements that are otherwise applicable generally to
public companies in the United States.

 

The JOBS Act also permits an emerging growth
company such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable
to public companies. We will not take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities
Act for complying with new or revised accounting standards. This election is irrevocable. We will remain an emerging growth company
until the earliest of:

 

		·	the last day of our fiscal year during which we have total annual gross revenues of at least US$1.07
billion;

 

		·	the last day of our fiscal year following the fifth anniversary of the completion of an initial
public offering;

 

		·	the date on which we have, during the previous three-year period, issued more than US$1 billion
in non-convertible debt securities; or

 

		·	the date on which we are deemed to be a “large accelerated filer” under the Exchange
Act, which would occur if the market value of our Common Shares that are held by non-affiliates exceeds US$700 million as of the
last business day of our most recently completed second fiscal quarter.

 

As a result of our status as an emerging
growth company, the information that we provide shareholders may be less comprehensive than what you might receive from other public
companies that are not emerging growth companies. When we are no longer deemed to be an emerging growth company, we will not be
entitled to the exemptions provided in the JOBS Act.

 

B. Liquidity and
Capital Resources

 

Overview

 

Our primary sources of capital to date
have been from securities offerings and bank financings, including the Bought Deals and CIBC Loan as described below. At June 30,
2019, we had cash of C$20,493,470 compared to C$30,687,183 at December 31, 2018. Following FDA clearance of our TULSA-PRO system
in August 2019, we paid a C$250,000 milestone payment to Sunnybrook under the Sunnybrook License. See Item 4.B, “Business
Overview—Intellectual Property—Licenses”. As of June 30, 2019, our total borrowings were C$12,500,000, related
to the CIBC Loan described below. Our funding and treasury activities are conducted within corporate practices to maximize investment
returns while maintaining appropriate liquidity for both our short and long-term needs. Cash is held primarily in Canadian dollars.

 

For the six months ended June 30, 2019
and for the year ended December 31, 2018, we had no capital expenditures, compared to C$430,569 for the year ended December 31,
2017 and C$863,991 for the year ended December 31, 2016, most of which were used for the purchase of production and research and
development equipment, office furniture and equipment and computers and self-manufactured equipment.

 

    14 

     

    

 

 

Our working capital has decreased by C$9,825,322
with a surplus of C$20,215,107 at June 30, 2019 compared to the surplus of C$30,040,429 at December 31, 2018. For a calculation
of working capital, see “Working Capital” below. The change in working capital was due to a decrease in current assets
of C$10,239,005, which was primarily the result of the decreased cash balance of C$20,493,470 resulting from general working capital
payments. We believe that our working capital is sufficient for our present requirements.

 

We may require additional capital to fund
our commercialization efforts in the United States and future clinical trials and/or R&D activities. Potential sources of capital
could include equity and/or debt financings, development agreements or marketing agreements, the collection of revenue resulting
from future commercialization activities and/or new strategic partnership agreements to fund some or all costs of development.
There can be no assurance that we will be able to obtain the capital sufficient to meet any or all of our needs. The availability
of equity or debt financing will be affected by, among other things, the success of our commercialization efforts, the follow-up
results of our clinical trials and our future R&D activity, our ability to obtain additional regulatory approvals, the state
of the capital markets generally, strategic alliance agreements and other relevant considerations. See Item 3.D., “Risk Factors”
elsewhere in this Registration Statement. In addition, if we raise additional funds by issuing equity securities, existing security
holders will likely experience dilution, and any additional incurrence of indebtedness would result in increased debt service obligations
and could require us to agree to additional operating and financial covenants that could further restrict our operations. Any failure
to raise additional funds on terms favorable to us or at all may require us to significantly change or curtail our current or planned
operations in order to conserve cash until such time, if ever, that sufficient proceeds from operations are generated, and could
result in us not being in a position to advance our commercialization strategy or take advantage of business opportunities, and
may results in the termination or delay of clinical trial results for our products or future clinical trials for other product
candidates, in the curtailment of product development programs designed to improve our existing products or identify new product
candidates, in the sale or assignment of rights to our intellectual property, and/or cause us to delay or suspend applications
for regulatory approvals at all or in time to competitively market our products and future product candidates.

 

Recent Sources and Uses of Financing

 

Bought Deals

 

On March 20, 2018, we closed a bought deal
financing, resulting in the issuance of 34,500,000 units at a price of C$1.00 per unit, for gross proceeds of C$34,500,000 (C$32,027,502,
net of cash transaction costs) (the “2018 Bought Deal”). Each unit consisted of one Common Share and one-half
of one Common Share purchase warrant, resulting in the issuance of 34,500,000 Common Shares and 17,250,000 warrants. Each whole
warrant has a five-year term and entitles the holder thereof to acquire one Common Share at an exercise price of C$1.40 per Common
Share.

 

We have allocated the net proceeds of the
2018 Bought Deal to (i) support certain costs and expenses of other clinical trial support and the ongoing TACT Pivotal Clinical
Trial follow-up and finalization; (ii) ongoing expansion of infrastructure to execute on global sales and marketing plans with
respect to the TULSA-PRO system and the Sonalleve system; (iii) support ongoing research and development and continue to invest
in additional research and development and acquisitions in order to expand the applications for current and future platforms; (iv)
scheduled repayment under the Knight Loan and other indebtedness; and (v) other general corporate purposes.

 

    15 

     

    

 

 

On September 20, 2017, we closed a bought
deal financing, resulting in the issuance of 10,000,000 units at a price of C$1.00 per unit, for gross proceeds of C$10,000,000
(C$8,913,868, net of cash transaction costs) (the “2017 Bought Deal”). Each unit consisted of one Common Share
and one-half of one Common Share purchase warrant, resulting in the issuance of 10,000,000 Common Shares and 5,000,000 warrants.
Each whole warrant has a three-year term and entitles the holder thereof to acquire one Common Share at a price of C$1.40 per Common
Share.

 

On November 14, 2016, we closed a bought
deal financing, resulting in the issuance of 15,820,000 Common Shares at a price of C$1.10 per Common Share for gross proceeds
of C$17,402,000 (C$16,182,997, net of cash transaction costs) (the “2016 Bought Deal”).

 

CIBC Loan

 

PMI entered into the CIBC Loan Agreement,
for initial gross proceeds of C$12,500,000, maturing on July 29, 2022, with an interest rate based on prime plus 2.5% (the “CIBC
Loan”). PMI is required to make interest only payments for the first 15 months (until October 31, 2019) and monthly repayments
on the principal of C$378,788 plus accrued interest afterwards for 33 months. All obligations of PMI under the CIBC Loan Agreement
are guaranteed by Profound and certain of its current and future subsidiaries, and are secured by first priority security interests
in the assets of Profound and such subsidiaries. PMI has the ability to draw an additional C$6,250,000 subject to the achievement
of certain financing and FDA approval milestones. The CIBC Loan Agreement also contains a financial covenant that requires our
unrestricted cash to be greater than operating cash expenditures for a trailing three-month period, reportable to CIBC on a monthly
basis. We are currently in compliance with this financial covenant.

 

In connection with the CIBC Loan Agreement,
we also issued 321,714 Common Share purchase warrants to CIBC, with each warrant entitling the holder to acquire one Common Share
at a price of C$0.97 per Common Share until the date that is 60 months from the closing of the CIBC Loan Agreement, with a cashless
exercise feature. The cashless exercise feature causes the conversion ratio to be variable and the warrants are therefore classified
as a financial liability. Gains and losses on the warrants are recorded within finance costs on the consolidated statements of
loss and comprehensive loss. A pricing model with observable market-based inputs was used to estimate the fair value of the warrants
issued. The estimated fair value of the warrants at June 30, 2019 and December 31, 2018 was C$152,423 and C$98,203, respectively.
As at June 30, 2019, the principal balance outstanding on the CIBC Loan Agreement was C$12,500,000.

 

Knight Loan

 

In August 2015, Knight provided us with
a secured loan of C$4,000,000 bearing interest at 15% per annum (the “Knight Loan”) under the Knight Loan Agreement.
On July 25, 2018, the full amount of the Knight Loan, including prepayment fees, was repaid for a total payment of C$3,188,023.

 

We also granted Knight a 0.5% royalty on
global net sales of our products until the original maturity date of the Knight Loan on May 20, 2019. The royalty was initially
recorded at fair value and subsequently carried at amortized cost using the effective interest rate method. The initial fair value
of the royalty was determined using future revenue forecasts for the term of the Knight Loan and a discount rate of 18%. During
the three and six months ended June 30, 2019, we revised the fair value of the royalty to reflect that the royalty had expired
during the period.

 

In connection with the Knight Loan Agreement,
in April 2015 we also entered into a distribution, license and supply agreement with Knight pursuant to which Knight will act as
our exclusive distributor in Canada for an initial 10-year term, renewable for successive 10-year terms by either party. In connection
with these arrangements in April 2015, we issued Knight a total of 1,717,450 Common Shares.

 

    16 

     

    

 

Federal Economic Development Agency Loan

 

Pursuant to a loan agreement dated December
16, 2011, the Federal Economic Development Agency provided us with an unsecured and non-interest bearing loan of $867,000 (the
 “Federal Economic Development Agency Loan”) with the final repayment of $563,550 made on July 25, 2018.

 

Health Technology Exchange Loan

 

Pursuant to a loan agreement dated May
25, 2011, as amended April 1, 2012, and a loan agreement dated May 31, 2014, the Health Technology Exchange provided us with an
unsecured loan of $1,500,000 bearing interest at 4.5% per annum (the “Health Technology Exchange Loan”). The
final payment of $1,094,698 including accrued interest was made on March 31, 2018.

 

Cash Flows

 

We manage liquidity risk by monitoring
actual and projected cash flows. A cash flow forecast is performed regularly to ensure that we have sufficient cash to meet operational
needs while maintaining sufficient liquidity. We do not use any financial instruments for hedging currencies.

 

Our cash flows for the three and six months
ended June 30, 2019 and 2018 are summarized in the table below.

 

	 	 	Three months ended	 	 	Six months ended	 
	 	 	June 30,	 	 	June 30,	 	 	June 30,	 	 	June 30,	 
	 	 	2019	 	 	2018	 	 	2019	 	 	2018	 
	 	 	C$	 	 	C$	 	 	C$	 	 	C$	 
	Cash provided by (used in) operating activities	 	 	(6,286,215	)	 	 	(5,414,430	)	 	 	(9,504,257	)	 	 	(9,135,773	)
	Cash provided by (used in) investing activities	 	 	–	 	 	 	–	 	 	 	–	 	 	 	–	 
	Cash provided by (used in) financing activities	 	 	(269,152	)	 	 	(604,614	)	 	 	(689,456	)	 	 	30,028,469	 
	Net increase (decrease) in cash	 	 	(6,555,367	)	 	 	(6,019,044	)	 	 	(10,193,713	)	 	 	20,892,696	 

 

Net cash provided by (used in) operating
activities for the three months ended June 30, 2019 was C$(6,286,215) versus C$(5,414,430) for the three months ended June 30,
2018. The principal use of the operating cash flows during this period related to increased workforce costs and expenses associated
with seeking U.S. regulatory approval for the TULSA-PRO system.

 

Net cash provided by (used in) operating
activities for the six months ended June 30, 2019 was C$(9,504,257) versus C$(9,135,773) for the six months ended June 30, 2018.
The principal uses of the operating cash flows during this period related to additional costs associated with increased workforce
and seeking U.S. regulatory approval for the TULSA-PRO system and consultant costs.

 

Net cash provided by (used in) financing
activities for the three months ended June 30, 2019 were C$(269,152) versus C$(604,614) for the three months ended June 30, 2018.
These cash flows related to the CIBC Loan interest payments in 2019 which had a lower interest rate versus the Health Technology
Exchange Loan, and the Knight Loan interest payments in 2018 which had a higher cost of borrowing.

 

Net cash provided by (used in) financing
activities for the six months ended June 30, 2019 were C$(689,456) versus C$30,028,469 for the six months ended June 30, 2018.
These cash flows related to the CIBC Loan interest payments in 2019 versus the Health Technology Exchange Loan, and the Knight
Loan and gross proceeds from the 2018 Bought Deal, less cash transactions costs paid.

 

    17 

     

    

 

Our cash flows for the years ended December
31, 2018, 2017 and 2016 are summarized in the table below.

 

	 	 	Year ended	 
	 	 	December 31,	 	 	December 31,	 	 	December 31	 
	 	 	2018	 	 	2017	 	 	2016	 
	 	 	C$	 	 	C$	 	 	C$	 
	Cash provided by (used in) operating activities	 	 	(18,294,637	)	 	 	(15,571,227	)	 	 	(14,502,266	)
	Cash provided by (used in) investing activities	 	 	-	 	 	 	(280,661	)	 	 	8,912,835	 
	Cash provided by (used in) financing activities	 	 	37,878,597	 	 	 	6,122,050	 	 	 	15,899,972	 
	Net increase (decrease) in cash	 	 	19,583,960	 	 	 	(9,729,838	)	 	 	10,310,541	 

 

Net cash provided by (used in) operating
activities for the year ended December 31, 2018 was C$(18,294,637) versus C$(15,571,227) for the year ended December 31, 2017 and
C$(14,502,266) for the year ended December 31, 2016. The principal uses of the operating cash flows during 2018 related to additional
costs associated with Sonalleve that were only present for 5 months in 2017, increased TACT expenses and increased workforce costs,.
In the year ended December 31, 2016, the principal uses of operating cash flows were related to the preparations for the IDE submission
and the TACT Pivotal Trial in 14 clinical sites, designed to support the 510(k) submission in the United States to provide a pathway
for Class II classification for the TULSA-PRO system and increased employee headcount.

 

Net cash provided by (used in) investing
activities for the year ended December 31, 2018 was C$nil versus C$(280,661) for the year ended December 31, 2017 and C$8,912,835
for the year ended December 31, 2016. The change in the year ended December 31, 2018 compared to the year ended December 31, 2017
related to no purchases of property and equipment and intangible assets during the year ended December 31, 2018 compared to the
year ended December 31, 2017. The change in the year ended December 31, 2017 compared to the year ended December 31, 2016 related
to the redemption of short term investments, offset by cash outflows related to purchase of enterprise resource planning implementation
and leasehold improvements at the new office building.

 

Net cash provided by (used in) financing
activities for the year ended December 31, 2018 were C$37,878,597 versus C$6,122,050 for the year ended December 31, 2017 and C$15,899,972
for the year ended December 31, 2016. These cash flows in 2018 related to the CIBC Loan, 2018 Bought Deal proceeds less cash transactions
costs paid and debt repayments of the Health Technology Exchange Loan, Federal Economic Development Agency Loan and the Knight
Loan. Cash flows provided by financing activities in 2017 related to 2017 Bought Deal proceeds and were offset by the repayment
of long term debt. Cash flows provided by financing activities in 2016 related to 2016 Bought Deal proceeds and were offset by
the repayment of long term debt.

 

Working Capital

 

Our working capital as at June 30, 2019
and December 31, 2018, with reconciliations to current assets are set forth in the table below.

 

	 	 	As of
 June 30,
	 	 	As of
 December 31,
	 
	 	 	2019	 	 	2018	 
	 	 	C$	 	 	C$	 
	Current assets	 	 	27,680,784	 	 	 	37,919,789	 
	Less: Current liabilities	 	 	7,465,677	 	 	 	7,879,360	 
	Working capital	 	 	20,215,107	 	 	 	30,040,429	 

 

    18 

     

    

 

 

C. Research and
Development, Patents and Licenses, etc.

 

Research and Development

 

Our R&D expenses are comprised of costs
incurred in performing R&D activities, including new product development, continuous product improvement, investment in clinical
trials and related clinical manufacturing costs, materials and supplies, salaries and benefits, contract research costs, patent
procurement costs, and R&D-related occupancy costs. Since January 1, 2016, the majority of these expenses have related to the
TACT Pivotal Clinical Trial and development costs of our systems, primarily our TULSA-PRO system.

 

For information regarding our intellectual
property, see Item 4.B, “Business Overview—Intellectual Property”.

 

F. Tabular Disclosure
of Contractual Obligations

 

The following table summarizes our significant
contractual obligations as of December 31, 2018:

 

	 	 	Total	 	 	Less than 1 Year	 	 	Between
 1 year and
 5 years	 	 	Greater than 

5 years	 
	 	 	C$	 	 	C$	 	 	C$	 	 	C$	 
	Accounts payables and accrued liabilities	 	 	3,912,350	 	 	 	3,912,350	 	 	 	-	 	 	 	-	 
	Long-term debt(1)	 	 	14,497,042	 	 	 	1,936,455	 	 	 	12,560,587	 	 	 	-	 
	Other liabilities(2)	 	 	1,365,217	 	 	 	429,426	 	 	 	935,791	 	 	 	-	 
	Total(3)	 	 	19,774,609	 	 	 	6,278,231	 	 	 	13,496,378	 	 	 	-	 

 

		(1)	Represents the CIBC Loan. Carrying amount: C$11,955,245. See Item 5.B, “Liquidity and Capital Resources—Recent
Sources and Uses of Financing—CIBC Loan” and note 10 to our audited annual financial statements included in this Registration
Statement.

 

		(2)	Represents contingent consideration under the Philips Share Purchase Agreement, which is valued based on estimated projected
net sales, the likelihood of certain levels being reached and a discount rate of 15%, and warranty liability relating to warrants
issued in the 2017 Bought Deal and 2018 Bought Deal, and to CIBC in connection with the CIBC Loan. Carrying amount: C$1,275,394.
For information regarding the Philips Share Purchase Agreement and our recorded contingent consideration thereunder, see Item 4.B,
 “Business Overview—Alliances and Partnerships—Philips” and note 4 to our audited annual financial statements
included in this Registration Statement. For information regarding the warrants and warranty liability, see Item 5.B, “Liquidity
and Capital Resources—Recent Sources and Uses of Financing” and note 12 to our audited annual financial statements
included in this Registration Statement.

 

		(3)	Carrying amount: C$17,142,989. In addition, following FDA clearance of our TULSA-PRO system in August 2019, we were required
to pay a C$250,000 milestone payment to Sunnybrook under the Sunnybrook License, which we have paid as of the date of this Registration
Statement. See Item 4.B, “Business Overview—Intellectual Property—Licenses”.

 

    19Exhibit 4.4

 

 

 

PROFOUND MEDICAL CORP.

 

 

 

 

NOTICE OF ANNUAL AND SPECIAL MEETING
OF SHAREHOLDERS TO BE

HELD ON JUNE 13, 2019

 

AND

 

MANAGEMENT INFORMATION CIRCULAR

 

 

 

 

 

 

 

DATED AS OF MAY 6, 2019

 

     

     

     

PROFOUND MEDICAL CORP.

 

NOTICE OF ANNUAL AND SPECIAL MEETING
OF SHAREHOLDERS

 

NOTICE IS HEREBY GIVEN THAT an annual
and special meeting (the “Meeting”) of the holders (the “Shareholders”) of common shares
(“Common Shares”) in the capital of Profound Medical Corp. (the “Corporation”) will be held
at 2400 Skymark Avenue, Unit 6, Mississauga, Ontario, L4W 5K5, on Thursday, June 13, 2019 at 10:00 a.m. (Toronto time) for the
following purposes:

 

	 	1.	to receive the audited financial statements of the Corporation for the financial year ended December 31, 2018 and the accompanying report of the auditors thereon;

 

	 	2.	to elect the directors of the Corporation for the ensuing year;

 

	 	3.	to consider and, if deemed fit, approve an ordinary resolution approving all unallocated options under the Corporation’s share option plan;

 

	 	4.	to consider and, if deemed fit, approve a special resolution authorizing the board of directors of the Corporation to amend the articles of the Corporation to effect a consolidation of all of the issued and outstanding Common Shares, such that the trading price of the post consolidation Common Shares is in the range of US$12.00 to US$20.00 per post-consolidation Common Share (or such other consolidation ratio that will permit the Corporation to qualify for a potential secondary listing on the NASDAQ Stock Market LLC);

 

	 	5.	to appoint the auditors of the Corporation for the ensuing year and to authorize the directors of the Corporation to fix the auditors’ remuneration;

 

	 	6.	to transact such other business as may be properly brought before the Meeting or any postponement or adjournment thereof.

 

Shareholders should refer to the accompanying
management information circular for more detailed information with respect to the matters to be considered at the Meeting.

 

Only Shareholders of record as of May 7,
2019 are entitled to notice of the Meeting and to vote at the Meeting and at any postponement or adjournment thereof.

 

If you are a registered Shareholder
and are unable to attend the Meeting in person, please date and execute the accompanying form of proxy and return it to TSX
Trust Company either in person, or by mail or courier, to 100 Adelaide Street West, Suite 301, Toronto, Ontario, M5H 4H1 or via
the internet at www.voteproxyonline.com by no later than by 10:00 a.m. on Tuesday, June 11, 2019, or if the Meeting is adjourned
or postponed, at least 48 hours, excluding Saturdays, Sundays and holidays, prior to any such adjournment or postponement. If you
receive more than one form of proxy because you own Common Shares registered in different names or addresses, each form of proxy
should be completed and returned.

 

If you are not a registered Shareholder
and receive these materials through your broker or through another intermediary, please complete and return the accompanying
voting instruction form in accordance with the instructions provided to you by your broker or by the other intermediary.

 

BY ORDER OF THE BOARD OF DIRECTORS

 

(Signed) “Arun Menawat”

 

Arun Menawat

Director and Chief Executive Officer

May 6, 2019

 

     i

     

     

PROFOUND MEDICAL CORP.

 

MANAGEMENT INFORMATION CIRCULAR

 

SOLICITATION OF PROXIES

 

This management information circular
(this “Circular”) is provided in connection with the solicitation of proxies by the management of Profound Medical
Corp. (the “Corporation” or “Profound”) for use at the annual and special meeting (the “Meeting”)
of the holders (the “Shareholders”) of common shares (“Common Shares”) in the capital of the Corporation.
The Meeting will be held on Thursday, June 13, 2019 at 10:00 a.m. (Toronto time) at 2400 Skymark Avenue, Unit 6, Mississauga,
Ontario, L4W 5K5, or at such other time or place to which the Meeting may be adjourned, for the purposes set forth in the notice
of annual and special meeting accompanying this Circular (the “Notice”). Although it is expected that the solicitation
of proxies will be primarily by mail, proxies may also be solicited personally or by telephone, facsimile or other means of electronic
communication. In accordance with National Instrument 54-101 - Communication with Beneficial Owners of Securities of a Reporting
Issuer (“NI 54-101”), arrangements have been made with brokerage houses and other intermediaries, clearing
agencies, custodians, nominees and fiduciaries to forward solicitation materials to the beneficial owners of the Common Shares
held of record by such persons and the Corporation may reimburse such persons for reasonable fees and disbursements incurred by
them in doing so. The costs thereof will be borne by the Corporation.

 

These securityholder materials are being
sent to both registered and non-registered (beneficial) owners of the securities. If you are a non-registered owner and the Corporation
or its agent has sent these materials directly to you, your name and address and information about your holdings or securities
have been obtained in accordance with applicable securities regulatory requirements from the intermediary holding on your behalf.

 

Accompanying this Circular (and filed with
applicable securities regulatory authorities) is a form of proxy for use at the Meeting. Each Shareholder who is entitled to attend
the Meeting is encouraged to participate in the Meeting and Shareholders are urged to vote on matters to be considered in person
or by proxy.

 

Unless otherwise stated, the information
contained in this Circular is given as of May 6, 2019. All time references in this Circular are references to Toronto time. All
amounts referred to in this Circular are presented in Canadian dollars, unless otherwise stated.

 

APPOINTMENT AND REVOCATION OF PROXIES

 

Registered Shareholders

 

Appointment of Proxies

 

Those Shareholders who wish to be represented
at the Meeting by proxy must complete and deliver a proper form of proxy to TSX Trust Company (the “Transfer Agent”)
either in person, or by mail or courier, to 100 Adelaide Street West, Suite 301, Toronto, Ontario, M5H 4H1 or via the internet
at www.voteproxyonline.com.

 

The persons named as proxyholders in the
form of proxy accompanying this Circular are designated by management of the Corporation and are representatives of the Corporation’s
management for the Meeting. A Shareholder who wishes to appoint some other person (who need not be a Shareholder) to attend
and act for and on such Shareholder’s behalf at the Meeting other than the management nominees designated in the form of
proxy may do so by either: (i) crossing out the names of the management nominees AND legibly printing the other person’s
name in the blank space provided in the accompanying form of proxy; or (ii) completing another valid form of proxy. In either
case, the completed form of proxy must be delivered to the Transfer Agent at the place and within the time specified herein for
the deposit of proxies. A Shareholder who appoints a proxy who is someone other than the management representatives named in the
form of proxy should notify the nominee of the appointment, obtain the nominee’s consent to act as proxy and provide instructions
on how the Common Shares are to be voted. The nominee should bring personal identification to the Meeting. In any case, the form
of proxy should be dated and executed by the Shareholder or an attorney authorized in writing, with proof of such authorization
attached (where an attorney executed the proxy form).

 

    1

    

     

In order to validly appoint a proxy, the form of proxy must
be received by the Transfer Agent (the address is stated above or in the form of proxy) by 10:00 a.m. (Toronto time) on Tuesday,
June 11, 2019, or if the Meeting is adjourned or postponed, at least 48 hours, excluding Saturdays, Sundays and holidays, prior
to any such adjournment or postponement. After such time, the Chair of the Meeting may accept or reject a form of proxy delivered
to him in his discretion but is under no obligation to accept or reject any particular late form of proxy.

 

Revocation of a Proxy

 

A Shareholder who has validly given a proxy
may revoke it for any matter upon which a vote has not already been cast by the proxyholder appointed therein. In addition to revocation
in any other manner permitted by law, a proxy may be revoked with an instrument in writing signed and delivered to either the registered
office of the Corporation or the Transfer Agent, 100 Adelaide Street West, Suite 301, Toronto, Ontario, M5H 4H1, at any time up
to and including the last business day preceding the date of the Meeting, or any postponement or adjournment thereof at which the
proxy is to be used, or deposited with the Chair of such Meeting on the day of the Meeting, or any adjournment or postponement
thereof. The document used to revoke a proxy must be in writing and completed and signed by the Shareholder or his or her attorney
authorized in writing or, if the Shareholder is a corporation, under its corporate seal or by an officer or attorney thereof duly
authorized.

 

Signature on Proxies

 

The form of proxy must be executed by the
Shareholder or his or her duly appointed attorney authorized in writing or, if the Shareholder is a corporation, by a duly authorized
officer whose title must be indicated. A form of proxy signed by a person acting as attorney or in some other representative capacity
should indicate that person’s capacity (following his or her signature) and should be accompanied by the appropriate instrument
evidencing qualification and authority to act (unless such instrument has been previously filed with the Corporation).

 

Voting of Proxies

 

Each Shareholder may instruct his, her
or its proxy how to vote his, her or its Common Shares by completing the blanks on the form of proxy.

 

The Common Shares represented by the
enclosed form of proxy will be voted or withheld from voting on any motion, by ballot or otherwise, in accordance with any indicated
instructions. If a Shareholder specifies a choice with respect to any matter to be acted upon, the Common Shares will be voted
accordingly. In the absence of such direction, such Common Shares will be voted FOR the resolutions described in the form of proxy
and below.

 

The accompanying form of proxy confers
discretionary authority upon the persons named therein to vote on any amendments or variations to matters identified in the Notice
and with respect to such other business or matters which may properly come before the Meeting or any adjournment or postponement
thereof. As of the date hereof, management of the Corporation knew of no such amendments or variations or other matters to come
before the Meeting.

 

Beneficial (Non-Registered) Shareholders

 

The information set forth in this section
is of importance to many Shareholders, as a substantial number of Shareholders do not hold Common Shares in their own name. Shareholders
who hold their Common Shares through depositories (e.g. CDS & Co., the registration name for CDS Clearing and Depository Services
Inc.), brokers, intermediaries, trustees or other persons, or who otherwise do not hold their Common Shares in their own name (referred
to in this Circular as “Beneficial Shareholders”) should note that only proxies deposited by Shareholders who
are registered Shareholders (that is, shareholders whose names appear on the records maintained by the Transfer Agent as registered
holders of Common Shares) will be recognized and acted upon at the Meeting.

 

Without specific instructions, brokers
(or their agents and nominees) are prohibited from voting shares for the broker’s clients. Subject to the following discussion
in relation to NOBOs (as defined herein), the Corporation does not know for whose benefit the Common Shares registered in the name
of CDS & Co., a broker or another nominee, are held.

 

There are two categories of Beneficial
Shareholders for the purposes of applicable securities regulatory policy in relation to the mechanism of dissemination to Beneficial
Shareholders of proxy-related materials and other securityholder materials and to request voting instructions from such Beneficial
Shareholders. Non-objecting beneficial owners (“NOBOs”) are Beneficial Shareholders who have advised their intermediary
(such as brokers or other nominees) that they do not object to their intermediary disclosing ownership information to the Corporation,
consisting of their name, address, e-mail address, securities holdings and preferred language of communication. Securities legislation
restricts the use of that information to matters strictly relating to the affairs of the Corporation. Objecting beneficial
owners (“OBOs”) are Beneficial Shareholders who have advised their intermediary that they object to their intermediary
disclosing such ownership information to the Corporation.

 

    2

    

     

In accordance with the requirements of
NI 54-101, the Corporation is sending the Notice, this Circular and a voting instruction form or a form of proxy, as applicable
(collectively, the “Meeting Materials”), directly to NOBOs and indirectly, through intermediaries, to OBOs.
NI 54-101 permits the Corporation, in its discretion, to obtain a list of its NOBOs from intermediaries and use such NOBO list
for the purpose of distributing the Meeting Materials directly to, and seeking voting instructions directly from, such NOBOs. As
a result, the Corporation is entitled to deliver Meeting Materials to Beneficial Shareholders in two manners: (a) directly to NOBOs
and indirectly through intermediaries to OBOs; or (b) indirectly to all Beneficial Shareholders through intermediaries. In accordance
with the requirements of NI 54-101, the Corporation is sending the Meeting Materials directly to NOBOs and indirectly, through
intermediaries, to OBOs. The Corporation will pay the fees and expenses of intermediaries for their services in delivering Meeting
Materials to OBOs in accordance with NI 54-101.

 

The Corporation has used a NOBO list to
send the Meeting Materials directly to those NOBOs whose names appear on that list. If the Corporation has sent these materials
directly to a NOBO, such NOBO’s name and address and information about its holdings of Common Shares have been obtained from
the intermediary holding such shares on the NOBO’s behalf in accordance with applicable securities regulatory requirements.
As a result, any NOBO of the Corporation can expect to receive a voting instruction form from the Transfer Agent. NOBOs should
complete and return the voting instruction form to the Transfer Agent in the envelope provided. The Transfer Agent will tabulate
the results of voting instruction forms received from NOBOs and will provide appropriate instructions at the Meeting with respect
to the shares represented by such voting instruction forms.

 

Applicable securities regulatory policy
requires intermediaries, on receipt of Meeting Materials that seek voting instructions from Beneficial Shareholders indirectly,
to seek voting instructions from Beneficial Shareholders in advance of shareholders’ meetings on Form 54-101F7 – Request
for Voting Instructions Made by Intermediary (“Form 54-101F7”). Every intermediary has its own mailing procedures
and provides its own return instructions, which should be carefully followed by Beneficial Shareholders in order to ensure that
their Common Shares are voted at the Meeting or any adjournment or postponement thereof. Often, the form of proxy supplied to a
Beneficial Shareholder by its broker is identical to the form of proxy provided to registered Shareholders; however, its purpose
is limited to instructing the registered Shareholder how to vote on behalf of the Beneficial Shareholder. Beneficial Shareholders
who wish to appear in person and vote at the Meeting should be appointed as their own representatives at the Meeting in accordance
with the directions of their intermediaries and Form 54-101F7. Beneficial Shareholders can also write the name of someone else
whom they wish to attend at the Meeting and vote on their behalf. Unless prohibited by law, the person whose name is written in
the space provided in Form 54-101F7 will have full authority to present matters to the Meeting and vote on all matters that are
presented at the Meeting, even if those matters are not set out in Form 54-101F7 or this Circular.

 

The majority of brokers now delegate responsibility
for obtaining instructions from clients to Broadridge Financial Solutions, Inc. (“Broadridge”). Broadridge typically
mails a voting instruction form in lieu of the form of proxy. Beneficial Shareholders are requested to complete and return the
voting instruction form to Broadridge by mail or facsimile. Broadridge will then provide aggregate voting instructions to the Transfer
Agent, which tabulates the results and provides appropriate instructions respecting the voting of shares to be represented at the
Meeting or any adjournment or postponement thereof. By choosing to send the Meeting Materials to NOBOs directly, the Corporation
(and not the intermediary holding Common Shares on your behalf) has assumed responsibility for (i) delivering these materials to
you; and (ii) executing your proper voting instructions. Please return your voting instructions as specified in the request for
voting instructions.

 

All references to Shareholders in this
Circular and the accompanying form of proxy and Notice are to registered Shareholders unless specifically stated otherwise.

 

    3

    

     

VOTING SECURITIES AND PRINCIPAL HOLDERS
OF VOTING SECURITIES

 

Shareholders of record as of May 7, 2019
are entitled to receive notice of and to attend and vote at the Meeting. As at the date hereof, the Corporation had 108,054,939
issued and outstanding Common Shares. Each Common Share entitles the holder to one vote in respect of any matter that may come
before the Meeting.

 

Pursuant to the by-laws of the Corporation,
a quorum is present at the Meeting if two or more voting persons are present in person and authorized to cast in the aggregate
not less than 10% of the total number of votes attaching to all Common Shares.

 

To the knowledge of the directors and officers
of the Corporation, as at the date hereof, no person or corporation beneficially owns, directly or indirectly, or exercises control
or direction over, more than 10% of the issued and outstanding Common Shares other than:

 

	Name	 	Number of Common Shares
 Owned or Controlled	 	 	Percent of Outstanding
 Common Shares	 
	BDC Capital Inc. (“BDC Capital”)	 	 	13,441,792	 	 	 	12.4	%
	Genesys Ventures II LP (“Genesys”)	 	 	13,328,144	 	 	 	12.3	%
	Gagnon Securities LLC	 	 	11,305,534	 	 	 	10.46	%

 

INDEBTEDNESS OF DIRECTORS AND OFFICERS

 

No directors or officers of the Corporation,
nor any proposed nominee for election as a director of the Corporation, nor any associate or affiliate of any one of them, is or
was indebted, directly or indirectly, to the Corporation or its subsidiaries at any time since the beginning of the last completed
financial year of the Corporation.

 

INTEREST OF INFORMED PERSONS IN MATERIAL
TRANSACTIONS

 

Except as disclosed in this Circular, no
director or officer of the Corporation, nor any proposed nominee for election as a director of the Corporation, nor any other insider
of the Corporation, nor any associate or affiliate of any one of them, has or has had, at any time since the beginning of the last
completed financial year of the Corporation, any material interest, direct or indirect, in any transaction or proposed transaction
that has materially affected or would materially affect the Corporation.

 

On March 20, 2018, Genesys, of which entity
Mr. Lamb is an officer, purchased 1,500,000 units (“Units”) of the Corporation at a price of $1.00 per Unit
for total consideration of $1,500,000 pursuant to a bought deal financing. Each Unit consisted of one Common Share and one-half
of one warrant, with each whole warrant entitling the holder to acquire one Common Share at a price of $1.40 per Common Share until
the date that is 60 months from the closing of the bought deal financing. Genesys acquired the Units for investment purposes.

 

MATTERS TO BE CONSIDERED AT THE MEETING

 

Financial Statements

 

The audited financial statements of the
Corporation and the auditors’ report thereon as at and for the financial year ended December 31, 2018 (the “Financial
Statements”) will be placed before the Shareholders at the Meeting, but no vote by the Shareholders with respect thereto
is required or proposed to be taken in respect of the Financial Statements. The Financial Statements were audited by PricewaterhouseCoopers
LLP of Toronto, Ontario and are available under the Corporation’s profile on SEDAR, online at www.sedar.com.

 

Election of Directors

 

At the Meeting, Shareholders are required
to elect the directors of the Corporation to hold office until the next annual meeting of Shareholders or until the successors
of such directors are elected or appointed. Shareholders will be asked to vote on the election of six directors at the Meeting,
as further described below.

 

    4

    

     

The persons designated as proxyholders
in the accompanying form of proxy (absent contrary directions) intend to vote FOR the election of the directors as set forth above.
The Corporation does not contemplate that any of such nominees will be unable to serve as directors; however, if for any reason
any of the proposed nominees do not stand for election or are unable to serve as such, proxies held by the persons designated as
proxyholders in the accompanying form of proxy will be voted for another nominee in their discretion unless the Shareholder has
specified in his or her form of proxy that his or her Common Shares are to be withheld from voting in the election of directors.

 

The board of directors of the Corporation
(the “Board”) has adopted a policy that entitles each Shareholder to vote for each nominee on an individual
basis. In addition, the Board has adopted a policy stipulating that if the votes in favour of the election of a director nominee
at the Meeting represent less than a majority (50% + 1 vote) of the Common Shares voted and withheld, the nominee shall, immediately
following the Meeting, submit his or her resignation to the Board for consideration. The Human Resources and Corporate Governance
Committee shall consider and recommend to the Board whether or not to accept the resignation. The Board will accept the resignation
absent exceptional circumstances which would warrant the applicable director continuing to serve on the Board. The Board will determine
whether or not to accept the resignation within 90 days following the applicable annual meeting. A press release disclosing the
Board’s determination (and the reasons for rejecting the resignation, if applicable) shall be issued promptly following such
determination. The nominee will not participate in any Human Resources and Corporate Governance Committee or Board deliberations
on the resignation offer. The policy does not apply in circumstances involving contested elections.

 

The following table sets forth the name
of each of the persons proposed to be nominated for election as a director of the Corporation, all positions and offices in the
Corporation presently held by such nominees, the nominees’ municipality, province or state and country of residence, principal
occupation within the five preceding years, the period during which the nominees have served as directors, and the number and percentage
of Common Shares and Options (as defined herein) beneficially owned by the nominees, directly or indirectly, or over which control
or direction is exercised. Mr. Damian Lamb, Mr. William Curran and Ms. Samira Sakhia are not standing for re-election to the Board.

 

	 	 	 	Number and	Number and
	 	 	 	Percentage of	Percentage of
	 	Positions with the	 	Common	Options
	 	Corporation and	 	Shares	Beneficially
	 	Date First	 	Beneficially	Owned or
	 	Appointed to the	 	Owned or	Controlled
	Name, Age and Residence	Board	Principal Occupation	Controlled	 
	
        Jean-François Pariseau(3)

        Age: 49

        Montréal, Québec, Canada
	
        Director

        June 4, 2015
	Co-Founder and Partner at Amplitude Ventures (since July 2018); Partner, BDC Capital Healthcare Fund, a venture capital company (since July 2001 to June 2018).	
        13,441,792(1)

        12.4%
	 
	
        Arun Menawat

        Age: 64

        Oakville, Ontario, Canada
	
        Chief Executive

        Officer and

        Director

        June 4, 2015
	Chief Executive Officer and Director of the Corporation (since August 2016); President and Chief Executive Officer of Novadaq Technologies Inc. (from 2003 to 2016).	
        968,000

        0.82%
	
        2,765,279

        2.35%

	
        Kenneth Galbraith(2)(4)

        Age: 56

        Vancouver, British

        Columbia, Canada
	
        Director

        January 17, 2017
	Founder of Five Corners Capital, a venture capital management company (since 2013).	 	
        49,500

        0.04%

	
        Arthur Rosenthal(3)(5)

        Age: 72

        Oro Valley, Arizona, USA
	
        Director

        June 14, 2018
	Professor of Practice in the Biomedical Engineering Department at Boston University (since 2010); Chief Executive Officer of gEyeCue, Ltd., a medical technology company (since 2011).	 	
        33,000

        0.03%

	Brian Ellacott(2)

                                                                                                                                                                     Age: 62

                                                                                Sanibel Island, Florida, USA
	Director

                                                                                June 14, 2018  
	Chief Executive Officer Belmont Instrument Corporation, a medical device company (since 2017); President and Chief Executive Officer Laborie Medical Technologies, a medical device company (from 2013 to 2017).	   	33,000

                                                                                0.03%

	
        Linda Maxwell

        Age: 44

        Toronto, Ontario, Canada
	
        Director

        October 9, 2018
	
        Executive Director Ryerson University

        (since June 2015); Technology Transfer

        Manager University of Oxford (from

        June 2013 to July 2014)
	 	
        33,000

        0.03%

 

 

 

    5

    

     

Notes:

 

(1)       The Common Shares
are controlled and held by BDC Capital.

(2)       Member of the Audit
Committee.

(3)       Member of the Human
Resources and Corporate Governance Committee.

(4)       Chair of the Audit
Committee.

(5)       Chair of the Human
Resources and Corporate Governance Committee.

 

Director Biographies

 

Jean-François Pariseau –
Director – Mr. Pariseau is co-founder and Partner at Amplitude Ventures. Amplitude Ventures is a capital catalyst for highly
innovative companies at the point of value acceleration. Amplitude Ventures works with Canada’s most promising healthcare
companies, with a shared vision of bringing groundbreaking technologies to patients. Amplitude Ventures is focused on building
world-class Canadian companies in precision medicine and next-generation medical devices. Before co-founding Amplitude Ventures,
Jean-Francois was Partner at the Healthcare Fund of BDC Capital and an investment manager with CDP Capital Technology Ventures,
a $2 billion global fund investing in healthcare, information technology and advanced technologies, where he was responsible for
healthcare investments in Canada and the United States. Prior to joining the investment world, Jean-Francois was CEO of a consulting
company specializing in regulatory affairs, and VP, R&D for a pharmaceutical-product distribution company, both of which he
founded. Mr. Pariseau holds a Bachelor of Science in Biotechnology from Université de Sherbrooke, a Master of Science in
Biomedical Sciences from Université de Montréal, and an MBA from HEC Montréal.

 

Arun Menawat – Chief Executive
Officer and Director – Dr. Menawat has an accomplished history of executive leadership success in the healthcare industry.
Prior to joining Profound, he served as the Chairman, President and CEO of Novadaq Technologies Inc., a TSX and NASDAQ listed company
that marketed medical imaging and therapeutic devices for use in the operating room, since April 2003. Previously, he was President
and Chief Operating Officer and Director of another publicly listed medical imaging software company, Cedara Software. His educational
background includes a Bachelor of Science in Biology, University of District of Columbia, Washington, District of Columbia, and
a Ph.D. in Chemical Engineering, from the University of Maryland, College Park, MD, including graduate research in Biomedical Engineering
from the National Institute of Health, Bethesda, MD. He also earned an Executive MBA from the J.L. Kellogg School of Management,
Northwestern University, Evanston, Illinois.

 

Kenneth Galbraith – Director
 – Mr. Galbraith is an accomplished life sciences industry veteran with over 25 years of experience acting as an executive,
director, investor and advisor to companies in the biotechnology, medical device, pharmaceutical and healthcare sectors. Mr. Galbraith
joined Ventures West as a General Partner in 2007 and led the firm’s biotechnology practice prior to founding Five Corners
Capital in 2013 to continue management of the Ventures West investment portfolio. Previously, he served as the Chairman and Interim
CEO of AnorMED until its sale to Genzyme Corp. in a cash transaction worth almost US$600 million. Starting his career in the life
sciences sector in 1987, Mr. Galbraith spent 13 years in senior management with QLT Inc., retiring in 2000 from his position as
Executive VP and CFO when QLT Inc.’s market capitalization exceeded US$5 billion. He has served on the board of directors
of several public and private companies, including Angiotech Pharmaceuticals, Arbutus Biopharma and Cardiome Pharma. Mr. Galbraith
currently serves on the board of directors of Macrogenics and Prometic Life Sciences. Mr. Galbraith earned a Bachelor of Commerce
(Honors) degree from the University of British Columbia in 1985 and was appointed a Fellow of the Chartered Accountants of British
Columbia in 2013.

 

    6

    

     

Arthur L. Rosenthal – Director
 – Dr. Rosenthal is director and Chair of Compensation Committee for LivaNova PLC, a UK global medical technology company.
Prior, Dr. Rosenthal served on the Cyberonics board of directors as a non-executive director and Chair of the Compensation Committee
from January 2007 to October 2015. Since June 2010, Dr. Rosenthal has served as Professor of Practice in the Biomedical Engineering
Department at Boston University. Since December 2011, Dr. Rosenthal has also served as CEO of gEyeCue, Ltd., which he co-founded,
a development stage medical device company working on a guided biopsy for lower and upper gastrointestinal cancer screening. From
June 2011 until July 2012, Dr. Rosenthal served as executive vice chairman of Cappella Medical Devices Ltd. (now ArraVasc Ltd.),
a development-stage company focused on novel device solutions for coronary artery disease. From June 2009 until June 2011, Dr.
Rosenthal served as President and CEO of Cappella, Inc. Dr. Rosenthal served as chairman, from January 2002, and CEO, commencing
in January 2005, of Labcoat, Ltd. until its acquisition by Boston Scientific Corporation in December 2008. From January 1994 to
May 2000, Dr. Rosenthal was a Senior Vice President, Corporate Officer, and Chief Development Officer of Boston Scientific, and
from May 2000 until his retirement in January 2005, he was a Senior Vice President, Chief Scientific Officer, and Executive Committee
Member of Boston Scientific. From 2000 until 2010, Dr. Rosenthal served as a non-executive director, and from 2006 through 2009,
as chairman of the Remuneration Committee, of Renovo, Ltd., a U.K. based pharmaceutical company that became publicly traded in
2006. In July 2009, Dr. Rosenthal joined the board of Interface Biologics, Inc., a Toronto-based development stage company focused
on drug delivery devices, as a non-executive director. In April 2011, Dr. Rosenthal was elected Chairman at Interface Biologics,
Inc. From April 2013 to May 2015, Dr. Rosenthal served as non-executive director and Member of the Compensation Committee of Arch
Technologies, Inc. and is currently and member of Arch’s Clinical Advisory Board. In 2015, Dr. Rosenthal was appointed to
the Industrial Advisory Committee, CURAM (National University in Galway, Ireland). Dr. Rosenthal is a Fellow of the American Institute
of Medical and Biological Engineering since 2003.

 

Brian Ellacott – Director
 – Mr. Ellacott is an experienced global medical device executive. Mr. Ellacott joined Belmont Instrument as Chief Executive
Officer in December 2017. Belmont Instrument is a Boston based private equity owned medical device company with a leading global
position in fluid warming and infusion systems. Prior to Belmont Instrument, Mr. Ellacott was the President and CEO of Laborie
Medical Technologies (“Laborie”). Laborie is a Urology and Gastroenterology medical device company based in Toronto
with manufacturing facilities in Toronto, Montreal, Enschede NL, Attikon Switzerland and Portsmouth New Hampshire. Mr. Ellacott
joined private equity owned Laborie as President and CEO in July 2013 and in four years completed 14 global acquisitions tripling
Laborie’s revenue and increasing EBITDA eight fold. The company was ranked as one of the fastest growing and most profitable
medical device companies in the world. Prior to joining Laborie, Mr. Ellacott served as Executive Vice President and General Manager
of Invacare’s (NYSE:IVC) $1 billion North and South American homecare and rehabilitation business. Mr. Ellacott has also
held executive positions with Baxter International and American Hospital Supply, with assignments in Canada, Australia and the
United States. Mr. Ellacott serves on the board of Belmont and is the past Chairman of the board of the Canadian Assistive Devices
Association. Mr. Ellacott holds a Bachelor of Business Administration Degree from Laurier University, Waterloo, Ontario, Canada
and is a dual United States and Canadian citizen.

 

Linda Maxwell – Director –
Dr. Maxwell, a seasoned surgeon and entrepreneur, is the Founding and Executive Director of the Biomedical Zone, a business incubator
for emerging health technology companies. It is an innovative strategic partnership between St. Michael’s Hospital and Ryerson
University. Under Dr. Maxwell’s stewardship, the Biomedical Zone has gone from concept to creation to going concern, supporting
Toronto’s leading health technology businesses and driving disruption and innovation adoption in the clinical setting. Dr.
Maxwell’s breadth of experience and scope of expertise is founded on over a decade and a half as an accomplished head and
neck/facial plastic surgeon. Her academic medical career is distinguished by university appointments as a clinical instructor,
medical school faculty member, and published scientific author. A frequent public speaker and panelist, Dr. Maxwell has addressed
national and international communities on scientific research, innovation, and entrepreneurship. Additionally, Dr. Maxwell has
worked internationally as a senior tech transfer manager and partnership leader for innovation and commercialization for the National
Health Service and University of Oxford. She also worked for Medtronic on business strategy for South America (Brazil) and continues
to consult to Medtronic on international clinical trials as an external medical monitor. In addition to her professional endeavors,
Dr. Maxwell is a member of the Institute of Corporate Directors. She serves as a director for Profound Medical, MedicAlert Foundation
Canada and the Economic Club of Canada. She serves as an innovation and health technology subject matter expert for the Federal
government’s Canadian Space Agency, Canadian Medical Association, and the Ontario Chief Innovation Strategist. Dr. Maxwell
earned a Bachelor’s degree with honors from Harvard University (Biology, cum laude), M.D. from Yale University, and
M.B.A. from University of Oxford. She completed six years of residency and fellowship training in surgery at the University of
Toronto. Additionally, Dr. Maxwell successfully completed the Royal College of Canada, American College of Surgery, and American
Board of Facial Plastic Reconstructive Surgery certifications.

 

    7

    

     

Cease Trade Orders, Bankruptcies and Penalties

 

No proposed director is, or has been, within the 10 years prior
to the date hereof, a director, chief executive officer or chief financial officer of any company that:

 

	(a)	was the subject of a cease trade or similar order, or an order that denied such company access to any exemptions under applicable securities legislation for a period of more than 30 consecutive days that was issued while the proposed director was acting as director, chief executive officer or chief financial officer; or

 

	(b)	was the subject of a cease trade or similar order, or an order that denied such company access to any exemptions under applicable securities legislation for a period of more than 30 consecutive days that was issued after the proposed director ceased to be a director, chief executive officer or chief financial officer and which resulted from an event that occurred while that person was acting in the capacity as director, chief executive officer or chief financial officer.

 

No proposed director is, or has been within
the 10 years prior to the date hereof a director or executive officer of any other issuer that, while that person was acting in
that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation
relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors
or had a receiver, receiver manager or trustee appointed to hold the assets of that person.

 

No proposed director has, within the 10
years prior to the date hereof, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or
become subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or
trustee appointed to hold the assets of that person.

 

No proposed director has been subject to
any penalties or sanctions imposed by a court relating to securities legislation or by any securities regulatory authority or has
entered into a settlement agreement with a securities regulatory authority or has been subject to any other penalties or sanctions
imposed by a court or regulatory body that would be likely to be considered important to a reasonable securityholder in deciding
whether to vote for the proposed director.

 

Approval of Unallocated Options

 

General

 

Section 613(a) of the TSX Company Manual
provides that every three years after the institution of a security based compensation arrangement, all unallocated rights, options
or other entitlements under such arrangement which does not have a fixed maximum number of securities issuable thereunder, must
be approved by a majority of the issuer’s directors and by the issuer’s security holders. As the Corporation’s
amended and restated share option plan (the “Share Option Plan”) is considered to be a security based compensation
arrangement and as the maximum number of Common Shares issuable pursuant to the Share Option Plan is not a fixed number, but is
instead equal to 13% of the outstanding Common Shares, approval is being sought at the Meeting to approve the grant of unallocated
options (“Options”) under the Share Option Plan. Options are considered to be “allocated” under
the Share Option Plan when issued and Options which remain available for grant under the Share Option Plan are referred to as “unallocated”.

 

As at the date of this Circular, there
were 5,409,779 Options issued and outstanding, representing approximately 5.0% of the outstanding Common Shares. Accordingly, 8,637,363
Options remain unallocated and available for grant under the Share Option Plan, representing approximately 7.99% of the outstanding
Common Shares. The terms of the Share Option Plan are fully described in this Circular under the heading “Statement of Executive
Compensation – Share Option Plan”.

 

    8

    

     

Shareholder Approval

 

At the Meeting, Shareholders will be asked to pass the following
ordinary resolution approving the unallocated Options issuable pursuant to the Share Option Plan:

 

“BE IT RESOLVED THAT:

 

	 	1.	all unallocated options under the share option plan of the Corporation are hereby approved;

 

	 	2.	the Corporation shall have the ability to continue granting options under the share option plan of the Corporation until June 13, 2022, being the date that is three years from the date hereof; and

 

	 	3.	any one director or officer of the Corporation is hereby authorized and directed for and in the name of and on behalf of the Corporation to execute or cause to be executed and to deliver or cause to be delivered all such documents, and to do or cause to be done all such acts and things, as in the opinion of such director or officer may be necessary or desirable in order to carry out the terms of this resolution, such determination to be conclusively evidenced by the execution and delivery of such documents or the doing of any such act or thing.”

 

If approval is obtained at the Meeting,
the Corporation will not be required to seek further approval of the grant of unallocated Options under the Share Option Plan until
June 13, 2022. If approval is not obtained at the Meeting, Options which have not been allocated as of June 13, 2019, and Options
which are outstanding as of June 13, 2019, and which are subsequently cancelled, terminated or exercised, will not be available
for a new grant of Options under the Share Option Plan. Previously allocated Options will continue to be unaffected by the approval
or disapproval of the resolution. If approval is not obtained at the Meeting, the Board will have to consider alternate forms of
performance based compensation, including additional cash bonuses, a share appreciation plan or other means in order to attract
and retain qualified personnel.

 

Recommendation of the Board

 

The Board unanimously recommends that Shareholders vote FOR
the foregoing resolution.

 

The persons designated as proxyholders in the accompanying
form of proxy (absent contrary directions) intend to vote FOR the foregoing resolution.

 

Approval of Consolidation

 

General

 

The Board, in collaboration with the management,
has been studying the potential benefits of a secondary listing on the NASDAQ Stock Market LLC (“NASDAQ”). Based
on the stage of development of the Corporation, management’s observations regarding the market for peers of the Corporation
whose securities are listed on a stock exchange in the United States and discussions with both United States-based financial advisers,
the Corporation believes that there are potential benefits of a NASDAQ listing, including: (i) a greater average daily trading
volume; (ii) additional coverage of Profound from United States analysts; (iii) the interest of a greater number of United States
retail and institutional investors; and (iv) a potential increase in valuation.

 

To be accepted for listing on NASDAQ, the
Corporation must meet a variety of requirements, one of which requires a minimum trading price of US$2.00, US$3.00 or US$4.00 per
Common Share depending on a number of other listing requirements required to be met by the Corporation. In order to meet this minimum
trading price requirement, the Corporation is contemplating a possible consolidation of the Common Shares (the “Consolidation”)
in coordination with a NASDAQ listing. In evaluating the Consolidation ratio, the Board will also take into consideration the expectations
of investors for a company with a market capitalization and maturity similar to Profound.

 

Accordingly, at the Meeting, Shareholders
will be asked to consider a special resolution authorizing the Board to amend the articles of the Corporation to effect a consolidation
of all of the issued and outstanding Common Shares, such that the trading price of the post-Consolidation Common Shares is in the
range of US$12.00 to US$20.00 per post-Consolidation Common Share (or such other Consolidation ratio that will permit the Corporation
to qualify for a potential secondary listing on the NASDAQ).

 

    9

    

     

For illustrative purposes, should the trading
price of the Common Shares prior to the Consolidation be US$0.62 (being the U.S. dollar equivalent of a price of $0.83 per Common
Share, converted on the basis of an exchange rate of US$1.00 for $1.33), in order to attain a share price of US$12.00 per post-Consolidation
Common Share, the Consolidation would need to be effected at a consolidation ratio of 19.36 for 1.

 

Although Shareholder approval for the Consolidation
is being sought at the Meeting, the Consolidation would become effective at a date in the future to be determined by the Board
if and when it is considered to be in the best interest of the Corporation to implement the Consolidation to enable a NASDAQ listing.
The Board may determine not to implement the Consolidation at any time after the Meeting without further action on the part of
or notice to the Shareholders.

 

Principal Effects of the Consolidation

 

The principal effects of the Consolidation include the following:

 

	(a)	the fair market value of each Common Share may increase and will, in part, form the basis upon which further Common Shares or other securities of the Corporation will be issued;

 

	(b)	the number of issued and outstanding Common Shares will be significantly reduced from 108,054,939 pre-Consolidation Common Shares to approximately 5,581,350 and 3,349,709 post-Consolidation Common Shares, depending on the ratio selected by the Board;

 

	(c)	the exercise prices and the number of Common Shares issuable upon the exercise or deemed exercise of any warrants of the Corporation will be automatically adjusted based on the Consolidation ratio selected by the Board;

 

	(d)	the exercise prices and the number of Common Shares issuable upon the exercise of any Options will be automatically adjusted based on the Consolidation ratio selected by the Board in order to preserve proportionately the rights and obligations of the optionees; and

 

	(e)	as the Corporation currently has an unlimited number of Common Shares authorized for issuance, the Consolidation will not have any effect on the number of Common Shares of the Corporation available for issuance.

 

Risks Associated with the Consolidation

 

There can be no assurance that the market
price of the post-Consolidation Common Shares will increase as a result of the Consolidation. The marketability and trading liquidity
of the post-Consolidation Common Shares may not improve. The Consolidation may result in some Shareholders owning “odd lots”
of less than 100 Common Shares which may be more difficult for such Shareholders to sell or which may require greater transaction
costs per Common Share to sell. Furthermore, there can be no assurance that a NASDAQ listing will be pursued by the Corporation
and, if pursued, whether the Corporation will be accepted for listing, and if accepted for listing, whether the Corporation will
realize the aforementioned potential benefits of a NASDAQ listing.

 

Effect on Fractional Share

 

No fractional Common Shares will be issued
in connection with the Consolidation and, in the event that a Shareholder would otherwise be entitled to receive a fractional Common
Share upon the Consolidation, the number of Common Shares to be received by such Shareholder will be rounded to the nearest whole
number of Common Shares such that fractions equal to or greater than 0.5 will be rounded up, and if the fractional entitlement
is less than 0.5, will be rounded down.

 

    10

    

     

Effect on Share Certificate

 

If the Consolidation is implemented by
the Board, following the announcement by the Corporation of the effective date of the Consolidation, registered Shareholders will
be sent a letter of transmittal by the Transfer Agent containing instructions on how to exchange their share certificates representing
pre-Consolidation Common Shares for new share certificates representing post-Consolidation Common Shares. Beneficial Shareholders
holding Common Shares through a bank, broker or other nominee should note that such banks, brokers or other nominees may have different
procedures for processing the Consolidation than those that will be put in place by the Corporation for the registered Shareholders.

 

To be effective, the Business Corporations
Act (Ontario) requires that the Consolidation be approved by a special resolution of the Shareholders, being a majority of
not less than two-thirds (2/3) of the votes cast by Shareholders present in person or by proxy at the Meeting. In addition to the
approval of the Shareholders, the Consolidation requires regulatory approvals, including the approval of the Toronto Stock Exchange
(“TSX”).

 

Shareholder Approval

 

At the Meeting, Shareholders will be asked to pass the following
special resolution approving the proposed Consolidation:

 

“BE IT RESOLVED THAT:

 

	 	1.	pursuant to the Business Corporations Act (Ontario) (the “OBCA”), the articles of Profound Medical Corp. (the “Corporation”) be amended to consolidate all of the issued and outstanding common shares (the “Common Shares”), on the basis of a consolidation ratio to be selected by the board of directors of the Corporation (the “Board”), in its sole discretion, provided that the trading price of the post-consolidation Common Shares is in the range of US$12.00 to US$20.00 per post-consolidation Common Share (or such other consolidation ratio that will permit the Corporation to qualify for a potential secondary listing on the NASDAQ Stock Market LLC), effective as at the discretion of the Board;

 

	 	2.	the Board be and is hereby authorized to revoke, without further approval of the shareholders, this special resolution at any time prior to the completion thereof, notwithstanding the approval by the shareholders of same, if determined, in the Board’s sole discretion to be in the best interest of the Corporation; and

 

	 	3.	any director or officer of the Corporation is hereby authorized to execute or cause to be executed and to deliver or cause to be delivered, all such certificates, instruments, agreements, notices and other documents and to do or cause to be done all such other acts and things as such director or officer may determine to be necessary or desirable in order to carry out the intent of this resolution, including but not limited to, the filing of articles of amendment under the OBCA, such determination to be conclusively evidenced by the execution and delivery of such documents and other instruments or the doing of any such act or thing.”

 

Recommendation of the Board

 

The Board unanimously recommends that Shareholders vote FOR
the foregoing resolution.

 

The persons designated as proxyholders
in the accompanying form of proxy (absent contrary directions) intend to vote FOR the foregoing resolution.

 

Appointment of Auditor

 

At the Meeting, the Shareholders are required
to appoint the auditors of the Corporation. Shareholders will be asked to vote on the appointment of PricewaterhouseCoopers LLP
and to authorize the Board to fix their remuneration. PricewaterhouseCoopers LLP was first appointed as the auditors of the Corporation
on June 22, 2015.

 

    11

    

     

The persons designated as proxyholders
in the accompanying form of proxy (absent contrary directions) intend to vote FOR the appointment of the auditors as set forth
above.

 

STATEMENT OF EXECUTIVE COMPENSATION

 

Compensation Discussion and Analysis

 

Objectives

 

Profound has relied on the experience of
the Board and the Human Resources and Corporate Governance Committee in setting executive compensation. In considering compensation
awards, the Human Resources and Corporate Governance Committee has considered the skill level of its executives as well as comparable
levels of compensation for individuals with similar capabilities and experience. In regard to Profound’s current executive
compensation arrangements, the Human Resources and Corporate Governance Committee has considered such factors as Profound’s
current financial situation, the estimated financial situation of Profound in the mid-term and the need to attract and retain the
key executives necessary for Profound’s long term success. The Human Resources and Corporate Governance Committee has determined
that at this stage of Profound it is appropriate that compensation be in the form of base salary, Options, a potential bonus award
and certain benefits plans.

 

Profound has established a Human Resources
and Corporate Governance Committee, comprised of four independent directors, which oversees the Corporation’s remuneration
policies and practices. The principal responsibilities of the Human Resources and Corporate Governance Committee include:

 

	(a)	with respect to human resources: (i) assist the Board in ensuring that the necessary policies and processes are in place by which all employees of the Corporation, with special attention to the executive group, will be fairly and competitively compensated; and (ii) produce a report on executive compensation for inclusion in the Corporation’s proxy statement as required by applicable rules and regulations; and

 

	(b)	with respect to corporate governance: (i) identify individuals qualified to become Board members, and recommend that the Board select the director nominees for the next annual meeting of shareholders; and (ii) develop and recommend to the Board the corporate governance guidelines and processes applicable to the Corporation, review these guidelines and processes at least annually and recommend changes to the Board.

 

Compensation Philosophy and Objectives of Compensation
Programs

 

The executive compensation program adopted by Profound and applied
to its executive officers is designed to:

 

	(a)	attract and retain qualified and experienced executives who have international business and operations experience and will contribute to the success of Profound;

 

	(b)	ensure that the compensation of the executive officers provides a competitive base compensation package, with additional compensation to reward success and create a strong link between corporate performance and compensation; and

 

	(c)	motivate executive officers to enhance long term shareholder value, with current compensation being weighted toward at-risk long term incentives in the form of Options and other security based incentives so as to foster alignment with the interests of the Shareholders.

 

The goals of the compensation program are
to attract and retain the most qualified people with relevant experience, to motivate and reward such individuals on a short term
and long term basis, and to create alignment between corporate performance and compensation. The Human Resources and Corporate
Governance Committee and the Board intend that the total cash components of compensation (base salary plus discretionary cash bonus)
target the median of a benchmark group in comparable industries with similar market capitalization (the “Compensation
Peer Group”).

 

The Corporation does not believe that its
compensation programs encourage excessive or inappropriate risk taking as: (i) the Corporation’s employees receive both fixed
and variable compensation, and the fixed (salary) portion provides a steady income regardless of Common Share value which allows
employees to focus on the Corporation’s business; and (ii) the Share Option Plan encourages a long term perspective due to
the vesting provisions of the Options. The Corporation believes that its compensation program is appropriately structured and balanced
to motivate its executives and reward the achievement of annual performance goals, as well as the achievement of long term growth
in shareholder value.

 

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Aligning Management and Shareholders

 

The Corporation’s compensation program
seeks to align management interests with Shareholder interests through both short-term and long-term incentives linking compensation
to performance. The short-term incentive is an annual cash bonus which is linked to individual performance and the Corporation’s
performance. Further, long-term incentives of stock option grants comprise a significant portion of overall compensation for the
Corporation’s NEOs (as defined herein). The Human Resources and Corporate Governance Committee believes this is appropriate
because it creates a direct correlation between variations in the Corporation’s share price (which is based in part on the
Corporation’s financial performance) and the compensation of its NEOs, thereby aligning the interests of the Corporation’s
executives and Shareholders.

 

Compensation Peer Group

 

In reviewing and approving the Corporation’s
2018 compensation program, the Human Resources and Corporate Governance Committee considered the recommendations of the CEO, which
were based upon public disclosure information available for the Compensation Peer Group. The Human Resources and Corporate Governance
Committee retained the services of Radford, a business unit of Aon Hewitt in November 2017, as its external independent compensation
advisor to review the Corporation’s current executive compensation program. Radford assembled a benchmark peer group report
to serve as a comparator for compensation purposes. The selection criteria for the comparator companies was based on revenue, market
capitalization, business focus and headcount. The Radford compensation report was incorporated into the 2018 compensation plan
for NEOs and directors. Radford was paid executive compensation related fees of $32,302 for the report. The following table sets
forth the 2018 Compensation Peer Group.

 

	Compensation Peer Group
	 
	BIOLASE	PAVmed Inc.
	Check-Cap Ltd.	Pulse Biosciences
	Cogentix Medical	Restoration Robotics
	Corindus Vascular Robotics	REVA Medical
	Entellus Medical	Stereotaxis
	Invuity	TransEnterix
	Microbot Medical Inc.	ViewRay
	Misonix	Viveve Medical
	Neovasc Inc.	 

 

Base Salary

 

Base salary is intended to reflect an executive officer’s
position within the corporate structure, his or her years of experience and level of responsibility, and salary norms in the sector
and the general marketplace. As such, decisions with respect to base salary levels for executive officers are not based on objective
identifiable performance measures but for the most part are determined by reference to competitive market information for similar
roles and levels of responsibility, as well as more subjective performance factors such as leadership, commitment, accountability,
industry experience and contribution. The Corporation’s view is that a competitive base salary is a necessary element for
retaining qualified executive officers, as it creates a meaningful incentive for individuals to remain at Profound and not be unreasonably
susceptible to recruiting efforts by the Corporation’s competitors.

 

In determining the base salary compensation of the Named Executive
Officers (as defined herein), the Board considered: (i) recruiting and retaining executives critical to the success of Profound
and the enhancement of shareholder value; (ii) providing fair and competitive compensation; (iii) balancing the interests of management
and Shareholders; and (iv) rewarding performance, both on an individual basis and with respect to operations in general.

 

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Long-term Incentives

 

Long-term incentives, in the form of Options, are intended to
align the interests of Profound’s directors and its executive officers with those of the Shareholders, to provide a long
term incentive that rewards these individuals for their contribution to the creation of shareholder value and to reduce the cash
compensation Profound would otherwise have to pay. The Share Option Plan is administered by the Board. In establishing the number
of Options to be granted to any particular executive officer, reference was made to the number of Options granted to officers of
other companies involved in similar businesses. The Board also considers previous grants of Options and the overall number of Options
that are outstanding relative to the number of outstanding Common Shares in determining whether to make any new grants of Options
and the size and terms of any such grants, as well as the level of effort, time, responsibility, ability, experience and level
of commitment of the executive officer in determining the level of incentive stock option compensation.

 

Bonus Awards

 

The Board will consider whether it is appropriate and in the
best interests of the Corporation to award a discretionary cash bonus to executive officers for the most recently completed financial
year and if so, in what amount. A cash bonus may be awarded to reward extraordinary performance that has led to increased value
for Shareholders through property acquisitions or divestitures, the formation of new strategic or joint venture relationships and/or
capital raising efforts.

 

Quantitative performance objectives include the achievement
of the Corporation’s revenue target, departmental and individual goals, which may be quantitative or qualitative in nature.
These have been established for each individual executive officer by the Board with alignment of such corporate/individual goals
with the CEO and include objectives such as research and product development, company productivity, revenue growth and long-term
strategic guidance of the Corporation. These corporate, departmental and individual goals form the basis for the review of the
executive officers and the determination of cash bonuses at the end of each year with the Board. These awards are reviewed yearly
to ensure that corporate performance metrics and individual goals are consistent from year to year.

 

Bonus award payments are based on the following assessment of:

 

	(a)	whether or not the executive officers have successfully met or exceeded the established corporate, departmental and individual performance metrics and goals;

 

	(b)	the executive officers’ decisions and actions and whether or not they are aligned with the Corporation’s long-term growth strategy and have created value for Shareholders;

 

	(c)	whether any near-term goals and objectives were not met because the executive officers made decisions in the best long-term interests of the Corporation or due to factors outside of the executive officers’ control; and/or

 

	(d)	additional initiatives undertaken by the executive officers, which were not contemplated in the initial objectives.

 

The following targets, as a percentage of base salary, were
approved for each NEO for the fiscal year ending December 31, 2018:

 

	Position	Target
	 	 
	CEO	65%
	Other NEOs	20-45%

 

Benefits Plans

 

The Named Executive Officers are entitled to life insurance,
health and dental benefits.

 

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Performance Graph

 

The following graph illustrates the cumulative return to Shareholders
of a $100 investment in Common Shares from June 8, 2015 to December 31, 2018, as compared to the cumulative total return on the
Standard & Poor’s/TSX Index and Standard & Poor’s/TSX Venture Index for the same period, assuming the reinvestment
of cash distributions and/or dividends.

 

	 	 	June 8,	 	 	December 31,	 	 	December 31,	 	 	December 31,	 	 	December 31,	 
	 	 	2015	 	 	2015	 	 	2016	 	 	2017	 	 	2018	 
	Profound Medical	 	$	100.00	 	 	$	53.33	 	 	$	74.67	 	 	$	56.00	 	 	$	36.67	 
	S&P/TSX Composite Index	 	$	100.00	 	 	$	88.25	 	 	$	103.69	 	 	$	109.94	 	 	$	97.14	 
	S&P/TSX Venture Composite Index	 	$	100.00	 	 	$	76.68	 	 	$	111.08	 	 	$	124.05	 	 	$	81.20	 

 

 

 

The trend shown in the above graph does not necessarily correspond
to the Corporation’s trend of compensation for the NEOs (as defined herein) for the period disclosed above. The Corporation
considers a number of factors in connection with its determination of appropriate levels of compensation including, but not limited
to, the demand for and supply of skilled professionals with experience in the medical device industry, individual performance,
the Corporation’s performance (which is not necessarily tied exclusively to the trading price of the Common Shares on the
TSX and other factors discussed under “Compensation Discussion and Analysis” above).

 

Named Executive Officers

 

The following individuals are considered the “Named
Executive Officers” or “NEOs” for the purposes of the disclosure:

 

	(a)	each individual who, during any part of the most recently completed financial year, served as the Corporation’s Chief Executive Officer or CEO, including an individual performing functions similar to a CEO;

 

	(b)	each individual who, during any part of the most recently completed financial year, served as the Corporation’s Chief Financial Officer or CFO, including an individual performing functions similar to a CFO;

 

	(c)	each of the three most highly compensated executive officers of the Corporation, including its subsidiaries, or the three highly compensated officers acting in a similar capacity, other than the CEO and CFO, at the end of the most recently completed financial year whose total compensation was more than $150,000 for the fiscal year ended December 31, 2018; and

 

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	(d)	each individual who would be a Named Executive Officer under paragraph (c) but for the fact the individual was not an executive officer of the Corporation and was not acting in a similar capacity as of December 31, 2018.

 

Summary Compensation Table

 

The following table sets forth information concerning the total
compensation for the three most recently completed financial years paid to the Named Executive Officers as of the most recently
completed financial year. Dr. Menawat is the only officer of the Corporation that also serves as a director of the Corporation.

 

	 	 	 	 	Non-Equity Incentive	 	 	 
	 	 	 	 	Plan Compensation	 	 	 
	 	 	 	 	($)	 	 	 
	 	 	 	Option-	 	Long	 	 	 
	 	 	 	Based	Annual	Term	Pension	All Other	Total
	Name and	 	Salary	Awards	Incentive	Incentive	Value	Compensation(4)	Compensation
	Principal Position	Year	($)	($)	Plan	Plan	($)	($)	($)
	Arun Menawat(1)	2018	647,665	Nil	208,000	Nil	Nil	Nil	855,665
	Chief Executive Officer and Director	2017	331,500	Nil	Nil	Nil	Nil	Nil	331,500
	 	2016	125,370	2,197,221(5)	24,363	Nil	Nil	Nil	2,346,954
	Aaron Davidson(2)	2018	209,446	913,015(6)	Nil	Nil	Nil	Nil	1,122,461
	Chief Financial Officer and Senior Vice-President of Corporate Development	2017

2016	Nil

Nil	Nil

Nil	Nil

Nil	Nil

Nil	Nil

Nil	Nil

Nil	Nil

Nil
	Ian Heynen(3)	2018	200,976	730,412(6)	Nil	Nil	Nil	Nil	931,388
	Senior Vice-President of Sales and Marketing	2017	Nil	Nil	Nil	Nil	Nil	Nil	Nil
	 	2016	Nil	Nil	Nil	Nil	Nil	Nil	Nil
	Rashed Dewan	2018	190,102	-	26,010	Nil	Nil	Nil	216,112
	Vice-President of Finance	2017	184,301	23,598(7)	-	Nil	Nil	Nil	207,899
	 	2016	178,500	124,513(8)	12,888	Nil	Nil	Nil	315,901
	Goldy Singh	2018	209,131	Nil	15,604	Nil	Nil	Nil	224,735
	Voice-president of Quality and Regulatory Affairs	2017	205,020	Nil	-	Nil	Nil	Nil	205,020
	 	2016	204,000	Nil	14,800	Nil	Nil	Nil	218,800

 

Notes:

 

	(1)	Dr. Menawat was appointed Chief Executive Officer on August 15, 2016, as such he no longer receives any Director or Committee fees.
	(2)	Mr. Davidson was hired as Chief Financial Officer and Senior Vice-President of Corporate Development on May 1, 2018.
	(3)	Mr. Heynen was hired as Senior Vice-President Sales & Marketing on April 23, 2018 and resigned on January 7, 2019.
	(4)	Nil indicates that perquisites and other personal benefits did not exceed $50,000 or 10% of the total salary of the NEO for the financial year.
	(5)	Option based awards granted utilize the Black-Scholes model to determine the fair value. The input factors to determine the fair value were volatility 99%, exercise price $1.23, interest rate 1.35% and expected life of 6 years.
	(6)	Option based awards granted utilize the Black-Scholes model to determine the fair value. The input factors to determine the fair value were volatility 82%, exercise price $1.06, interest rate 2.30% and expected life of 6 years.
	(7)	Option based awards granted utilize the Black-Scholes model to determine the fair value. The input factors to determine the fair value were volatility 135%, exercise price $0.85, interest rate 1.90% and expected life of 6 years.
	(8)	Option based awards granted utilize the Black-Scholes model to determine the fair value. The input factors to determine the fair value were volatility 99%, exercise price $1.20, interest rate 0.94% and expected life of 6 years.

 

    16

    

     

Option-Based Awards

 

The following table sets forth information with respect to the
unexercised Options granted under the Share Option Plan to the NEOs that were outstanding as of December 31, 2018.

 

	 	 	Option-Based Awards
	 	 	 	 	Value of
	 	Number of Common	Option Exercise	 	Unexercised In-the-
	Name and	Shares Underlying	Price	Option Expiration	Money Options
	Principal Position	Unexercised Options	($)	Date	($)(6)
	Arun Menawat(1)	33,000	1.50	Nov 12, 2024	Nil
	Chief Executive Officer and Director	934,055	1.46	Aug 22,2026	Nil
	 	16,500	1.35	Sep 15, 2026	Nil
	 	364,141	1.10	Nov 24, 2026	Nil
	 	1,417,583	1.10	Dec 21, 2026	Nil
	Aaron Davidson(2)	 	 	 	 
	Chief Financial Officer and Senior Vice-President of Corporate Development	500,000

500,000	1.19

0.93	May 22, 2028

Aug 23, 2028	Nil

Nil
	Ian Heynen(3)	 	 	 	 
	Senior Vice-President of Sales and Marketing	400,000	1.19	May 22, 2028	Nil
	 	400,000	0.93	Aug 23, 2028	Nil
	Rashed Dewan(4)	30,000	1.50	Sept 8, 2025	Nil
	Vice-President of Finance	50,000	1.35	July 19, 2026	Nil
	 	75,000	1.10	Nov 24, 2026	Nil
	 	45,000	0.85	Nov 16, 2027	Nil
	Goldy Singh(5)	50,000	0.24	Dec 1, 2021	15,500
	Vice-President of Quality and Regulatory Affairs	25,000

300,000	0.24

1.50	Sept 12, 2022

Sept 8, 2025	7,750

Nil

 

Notes:

 

	 	(1)	Dr. Menawat holds 2,765,279 Options, with 1,549,389 of these Options exercisable and the remaining balance vesting over a three year period.

	 	(2)	Mr. Davison holds 1,000,000 Options, all Options remain unvested and will vest over a three year period.

	 	(3)	Mr. Heynen holds 800,000 Options, all Options remain unvested and will vest over a three year period.

	 	(4)	Mr. Dewan holds 200,000 Options, with 110,003 of these Options exercisable and the remaining balance vesting over a three year period.

	 	(5)	Ms. Singh holds 375,000 Options, with 325,000 of these Options exercisable and the remaining balance vesting over a three year period.

	 	(6)	The value shown is the product of the number of Common Shares underlying the Option multiplied by the difference between the Common Share TSX closing price on December 31, 2018 of $0.55 and the exercise price.

 

Incentive Plan Awards ― Value Vested or Earned During
the Year Ended December 31, 2018

 

The following table sets forth information with respect to the
value of Options vested during the year ended December 31, 2018 as well as the cash bonuses granted to the NEOs during the year
ended December 31, 2018.

 

	 	Option-Based Awards Value Vested	Non-Equity Incentive Plan Compensation
	Name and	During Year	Value earned during the year
	Principal Position	($)(1)	($)
	Arun Menawat	 	 
	Chief Executive Officer and Director	Nil	Nil

 

    17

    

     

	 	Option-Based Awards Value Vested	Non-Equity Incentive Plan Compensation
	Name and	During Year	Value earned during the year
	Principal Position	($)(1)	($)
	Aaron Davidson	 	 
	Chief Financial Officer and Senior Vice-President of Corporate Development	Nil	Nil
	Ian Heynen	 	 
	Senior Vice-President of Sales and Marketing	Nil	Nil
	Rashed Dewan	 	 
	Vice-President of Finance	Nil	Nil
	Goldy Singh	 	 
	Vice-President of Quality and Regulatory Affairs	Nil	Nil

 

Note:

 

	(1)	The value shown is the product of the number of Common Shares underlying the Options that vested during the year multiplied by the difference between the Common Share TSX closing price on the day the Options vested and the exercise price of the Options that vested.

 

Termination and Change of Control Benefits

 

Each of Dr. Menawat, Mr. Davidson, Mr.
Dewan and Ms. Singh are a party to an executive employment agreement (the “Executive Employment Agreements”)
with the Corporation. The Executive Employment Agreements have an indefinite term and contain standard confidentiality and non-solicitation
provisions. Profound has agreed pursuant to the Executive Employment Agreements that each of Dr. Menawat, Mr. Davidson, Mr. Dewan
and Ms. Singh will receive base salaries determined by the Board and may receive discretionary bonuses, grants of Options, reimbursement
of expenses, benefits and certain perquisites as set forth in the Executive Employment Agreements, with the amounts paid in 2018
with respect to such matters set forth in the Summary Compensation Table.

 

The following table sets forth information
with respect to the estimated aggregate dollar amount to which each current NEO would have been entitled if the event resulting
in termination of employment occurred on December 31, 2018.

 

	 	 	 	Value of	Value of	 
	 	 	 	Bonus and	Option	 
	Name	Triggering Event	Cash Payment	other Benefits	Awards	Total Payout
	 	Termination with cause/resignation	Nil(1)	Nil	Nil(4)	Nil
	Arun Menawat	Termination without cause	$682,100(2)	$446,472(2)	Nil(4)	$1,128,572(2)
	 	Change of control	$1,364,200(2)	$443,365(2)	Nil	$1,807,565(2)
	 	Termination with cause/resignation	Nil(1)	Nil	Nil(4)	Nil
	Aaron Davidson	Termination without cause	$158,500	$95,100(3)	Nil(4)	$253,600
	 	Change of control	$317,000	$142,650	Nil	$459,650
	 	Termination with cause/resignation	Nil(1)	Nil	Nil(4)	Nil
	Rashed Dewan	Termination without cause	$95,051(6)	$12,966(3)	Nil(4)	$108,017
	 	Change of control	Nil	Nil	Nil	Nil
	 	Termination with cause/resignation	Nil(1)	Nil	$23,250(4)	$23,250
	Goldy Singh	Termination without cause	$114,273(7)	$10,135(3)	$23,250 (4)	$147,658
	 	Change of control	Nil	Nil	$23,250 (5)	$23,250

 

    18 

     

     

Notes:

 

	(1)	In the event of a termination for just cause or resignation, the Corporation shall have no further obligation to Dr. Menawat, Mr. Davidson, Mr. Dewan or Ms. Singh, as applicable, other than the payment of unpaid base salary, any bonus declared but not yet paid, plus all outstanding vacation pay and expense reimbursement.
	(2)	Amounts paid in United States dollars and converted to Canadian dollars for reporting purposes. On December 31, 2018, the exchange rate for United States dollars expressed in Canadian dollars (as reported by the Bank of Canada) was US$1.00 = C$1.3642.
	(3)	The value shown is a multiple of the annual cost of benefits and the average cash bonus paid in respect of the years ended December 31, 2018, 2017 and 2016.
	(4)	The value shown is the product of the number of Common Shares underlying the vested Options multiplied by the difference between the Common Share TSX closing price on December 31, 2018 of $0.55 and the exercise price.
	(5)	The value shown is the product of the number of Common Shares underlying the Options multiplied by the difference between the Common Share TSX closing price on December 31, 2018 of $0.55 and the exercise price.
	(6)	If Mr. Dewan’s employment is terminated without cause, he is entitled to the greater of: (i) six months’ notice; or (ii) the minimum notice (or pay in lieu) and minimum severance, if any, to which he would be entitled under employments standards legislation.
	(7)	If Ms. Singh’s employment is terminated without cause, she is entitled to six months’ notice and minimum severance, if any, to which he would be entitled under employments standards legislation.

 

Director Compensation

 

The directors of the Corporation, other
than the current CEO, Mr. Damian Lamb and Mr. Jean-François Pariseau, were paid in respect of the financial year-ended December
31, 2018, an annual fee of $20,000 for their services. The Chair of the Audit Committee is entitled to $10,000 and the Chair of
the Human Resources and Corporate Governance Committee is entitled to $5,000. Directors of the Corporation are also eligible to
receive Options as an initial grant when joining the Board and on an annual basis. During the financial year 2018, each of Ms.
Samira Sakhia, Mr. Kenneth Galbraith and Mr. William Curran were granted 16,500 Options. Mr. Brian Ellacott, Dr. Arthur Rosenthal
and Dr. Linda Maxwell were granted 33,000 Options for joining the Board. Except as set out below, directors are not eligible to
receive other compensation.

 

Summary Compensation Table

 

The following table sets forth information concerning compensation
paid to the non-executive directors for the year ended December 31, 2018.

 

	 	 	 	All Other	 
	 	Fees Earned	Option-based awards	Compensation	Total
	Name	($)	($)	($)	($)
	Damian Lamb	Nil	Nil	Nil	Nil
	Jean-François Pariseau	Nil	Nil	Nil	Nil
	William Curran	32,500	11,960(1)	Nil	44,460
	Kenneth Galbraith	35,625	11,960(1)	Nil	47,585
	Samira Sakhia	29,875	11,960(1)	Nil	41,835
	Brian Ellacott	12,250	23,920(1)	Nil	36,170
	Arthur Rosenthal	11,250	23,920(1)	Nil	35,170
	Linda Maxwell	5,000	13,793(2)	Nil	18,793

 

Notes:

 

	(1)	Option based awards granted utilize the Black-Scholes model to determine the fair value. The input factors to determine the fair value were volatility 83%, exercise price $1.02, interest rate 2.19% and expected life of 6 years.
	(2)	Option based awards granted utilize the Black-Scholes model to determine the fair value. The input factors to determine the fair value were volatility 80%, exercise price $0.60, interest rate 2.47% and expected life of 6 years.

 

    19 

     

     

Option-Based Awards

 

The following table sets forth information
with respect to the unexercised Options granted under the Option Plan to the non-executive directors that were outstanding as of
December 31, 2018.

 

	 	 	Option-Based Awards
	 	 	 	 	Value of
	 	Number of Common	Option Exercise	 	Unexercised In-the-
	 	Shares Underlying	Price	Option Expiration	Money Options
	Name	Unexercised Options	($)	Date	($)(7)
	Samira Sakhia(1)	16,500	0.97	Apr 25, 2027	Nil
	 	16,500	1.02	June 15, 2028	Nil
	Kenneth Galbraith(2)	33,000	0.97	Apr 25, 2027	Nil
	 	16,500	1.02	June 15, 2028	Nil
	William Curran(3)	33,000	0.24	Mar 16, 2022	10,230
	 	16,500	1.35	Sep 15, 2026	Nil
	 	16,500	0.97	Apr 24, 2027	Nil
	 	16,500	1.02	June 15, 2028	Nil
	Brian Ellacott(4)	33,000	1.02	June 15, 2028	Nil
	Arthur Rosenthal(5)	33,000	1.02	June 15, 2028	Nil
	Linda Maxwell(6)	33,000	0.60	Nov 19, 2028	Nil
	Damian Lamb	Nil	Nil	Nil	Nil
		Nil	Nil	Nil	Nil
	Jean-François
    ariseau

 

Notes:

 

	(1)	Ms. Sakhia holds 33,000 Options, with 16,500 of these Options exercisable and the remaining balance vesting over a three year period.
	(2)	Mr. Galbraith holds 49,500 Options, with 11,000 of these Options exercisable and the remaining balance vesting over a three year period.
	(3)	Mr. Curran holds 82,500 Options, with 66,000 of these Options exercisable and the remaining balance vesting over a three year period.
	(4)	Mr. Ellacott holds 33,000 Options, all Options remain unvested and will vest over a three year period.
	(5)	Dr. Rosenthal holds 33,000 Options, all Options remain unvested and will vest over a three year period.
	(6)	Dr. Maxwell holds 33,000 Options, all Options remain unvested and will vest over a three year period.
	(7)	The value shown is the product of the number of Common Shares underlying the Option multiplied by the difference between the Common Share TSX closing price on December 31, 2018 of $0.55 and the exercise price.

 

    20 

     

     

Incentive Plan Awards ― Value Vested or Earned During
the Year Ended December 31, 2018

 

The following table sets forth information
with respect to the value of Options vested during the year ended December 31, 2018 as well as the cash bonuses granted to non-executive
directors during the year ended December 31, 2018.

 

	 	Option-Based Awards Value Vested	Non-Equity Incentive Plan Compensation
	 	During Year	Value earned during the year
	Name	($)(1)	($)
	Damian Lamb	Nil	Nil
	Jean-François Pariseau	Nil	Nil
	William Curran	Nil	Nil
	Kenneth Galbraith	Nil	Nil
	Samira Sakhia	Nil	Nil
	Brian Ellacott	Nil	Nil
	Arthur Rosenthal	Nil	Nil
	Linda Maxwell	Nil	Nil

 

Note:

 

	(1)	The value shown is the product of the number of Common Shares underlying the Options that vested during the year multiplied by the difference between the Common Share TSX closing price on the day the Options vested and the exercise price of the Options that vested.

 

Share Option Plan

 

The Share Option Plan is administered by
the Board which may, from time to time, delegate to a committee of the Board, all or any of the powers conferred to the Board under
the Share Option Plan. The Share Option Plan was originally adopted by the Board on June 4, 2015, and then amended and restated
on December 8, 2016 and again on July 13, 2018.

 

The amendments made on July 13, 2018 were
as follows: (i) inclusion of the Insider Participation Limits (as defined herein); (ii) removal of TSXV required participation
limits since the Corporation was no longer listed on the TSXV; (iii) clarification to the share reserve since the Corporation was
listed on the TSX and pursuant to the Share Option Plan, the reserve changed from a fixed number to a fixed percentage as described
below; (iv) inclusion of an additional amendment to the list of amendments that require Shareholder approval (being removing or
exceeding the Insider Participation Limits); and (v) other amendments of a housekeeping nature.

 

The Share Option Plan provides that the
Board may from time to time, in its discretion, grant to directors, officers, employees, consultants and any other person or entity
engaged to provide ongoing services to the Corporation non-transferable Options to purchase Common Shares, provided that the maximum
number of Common Shares reserved for issuance under the Share Option Plan is equal to 13% of the issued and outstanding shares
in the capital of the Corporation at the time of any Option grant. If any Option is exercised, cancelled, expired, surrendered
or otherwise terminated for any reason, the number of Common Shares in respect of which the Option is exercised, cancelled, expired,
surrendered or otherwise terminated, as the case may be, will again be available for purchase pursuant to Options granted under
the plan. As at December 31, 2018, 6,244,779 Options have been granted under the Share Option Plan, which represents 5.8% of the
issued and outstanding shares in the capital of the Corporation as at December 31, 2018. As at December 31, 2018, 7,802,363 Options
are available for grant under the Share Option Plan, which represents 7.2% of the issued and outstanding shares in the capital
of the Corporation as at December 31, 2018.

 

The aggregate number of Common Shares that
may be (i) issued to insiders of the Corporation within any one-year period, or (ii) issuable to insiders of the Corporation at
any time, in each case, under the Share Option Plan alone or when combined with all other security-based compensation arrangements
of the Corporation, cannot exceed 10% of the outstanding Common Shares (the “Insider Participation Limits”).

 

    21 

     

     

The Board shall determine the exercise
price of the Options, provided that, it cannot be less than the Market Price of the Common Shares on the date of grant. For the
purposes of the Share Option Plan, “Market Price” means the volume-weighted average price of the Common Shares on the
stock exchange where the majority of trading volume and value of the Common Shares occurs, for the five trading days immediately
preceding the relevant date on which the Market Price is to be determined.

 

The expiry date for an Option shall not
be later than the 10th anniversary of the date an Option is granted, subject to the expiry date falling with a corporate blackout
period or within 5 business days following the expiry of such a blackout period, in which case the expiry date will be extended
to the 10th business day following the expiry of the blackout period.

 

Unless otherwise specified by the Board,
each Option generally vests and becomes exercisable as to 1/4 on the first anniversary of the date of grant and as to 1/36 on the
first day of each calendar month thereafter. The Board has the discretion to permit accelerated vesting of Options.

 

The Corporation does not provide any financial
assistance to optionees to facilitate the purchase of Common Shares issued pursuant to the exercise of Options under the Share
Option Plan. Options granted under the Share Option Plan are not transferable or assignable (except to an optionee’s estate)
and no Options may be exercised by anyone other than the optionee or his or her legal representative during the lifetime of the
optionee.

 

The Share Option Plan contains the following
provisions regarding the exercise and cancellation of Options following a change in the employment status of an optionee. In the
event of:

 

	(a)	an optionee’s retirement, the optionee will continue to participate in the plan and each Option that has vested or that vests within 12 months following the retirement date continues to be exercisable until the earlier of the Option’s expiry date and the date that is 12 months from the retirement date, and any Options that have not been exercised by such time will immediately expire and be cancelled;

 

	(b)	an optionee’s death or disability, each vested Option is exercisable until the earlier of the Option’s expiry date and 6 months following the date of death or disability, as applicable, and any Options that have not been exercised by such time will immediately expire and be cancelled;

 

	(c)	a termination without cause for an employee optionee, or the termination by the Corporation or an affiliate of a consulting agreement or arrangement (other than for breach) or the death or disability of a consultant, each vested Option is exercisable until the earlier of the Option’s expiry date and 90 days following the date of termination, death or disability, as applicable, and any Options that have not been exercised by such time will immediately expire and be cancelled;

 

	(d)	a termination for cause or resignation of an employee optionee, or the termination by the Corporation or an affiliate of a consulting agreement or arrangement (for breach) or the voluntary termination by the consultant, all Options (whether vested or unvested) terminate on the date of termination or resignation, as applicable; and

 

	(e)	a director (who is not an employee or consultant) ceases to hold office, each vested Option is exercisable until the earlier of the Option’s expiry date and 60 days following the cessation date, and any Options that have not been exercised by such time will immediately expire and be cancelled.

 

The Board may from time to time, without
notice and without Shareholder approval, amend, modify, change, suspend or terminate the Share Option Plan or any Options granted
thereunder as it, in its discretion determines appropriate, provided, however, that no such amendment, modification, change, suspension
or termination of the Share Option Plan or any Option granted thereunder may materially impair any rights of an optionee or materially
increase any obligations of an optionee under the plan without the consent of the optionee, unless the Board determines such adjustment
is required or desirable in order to comply with any applicable securities laws or stock exchange requirements. Amendments that
can be made by the Board without Shareholder approval include, but are not limited to, housekeeping amendments, amendments to comply
with applicable law or stock exchange rules, amendments necessary for Options to qualify for favorable treatment under applicable
tax laws, amendments to the vesting provisions of the Share Option Plan or any Option, amendments to include or modify a cashless
exercise feature, amendments to the termination or early termination provisions of the Share Option Plan or any Option, and amendments
necessary to suspend or terminate the Share Option Plan. Shareholder approval is required for the following amendments to be made
to the Share Option Plan:

 

    22 

     

     

	(a)	increase to the number of Common Shares reserved for issuance under the Share Option Plan, except pursuant to the provisions in the plan that permit the Board to make equitable adjustments in the event of transactions affecting the Corporation or its capital;

 

	(b)	reduce the exercise price of an Option, except pursuant to the provisions in the plan that permit the Board to make equitable adjustments in the event of transactions affecting the Corporation or its capital;

 

	(c)	extend the term of an Option beyond the original expiry date, except where an expiry date would have fallen within a blackout period or within 5 business days following the expiry of such a blackout period;

 

	(d)	permit an Option to be exercisable beyond 10 years from its date of grant, except where an expiry date would have fallen within a blackout period;

 

	(e)	permit Options to be transferred other than for normal estate settlement purposes;

 

	(f)	remove or exceeds the Insider Participation Limits;

 

	(g)	permit awards, other than the Options, to be granted under the Share Option Plan; or

 

	(h)	delete or reduce the range of amendments which require Shareholder approval.

 

As required by section 613 of the TSX Company
Manual, the Corporation’s annual burn rate, which represents the number of Options granted under the Share Option Plan divided
by the weighted average number of Common Shares outstanding as at the end of a fiscal year, was 8.5% in 2016, 7.3% in 2017 and
5.8% in 2018.

 

Securities Authorized for Issuance under Equity Compensation
Plans

 

The following table sets forth the securities
of the Corporation that are authorized for issuance under the Share Option Plan as at the end of the Corporation’s most recently
completed financial year.

 

	 	Number of securities to be	Weighted-average exercise	Number of securities
	 	issued upon exercise of	price of outstanding	remaining available for
	 	outstanding options,	options, warrants and	future issuance under
	Plan Category	warrants and rights	rights	equity compensation plans
	Equity compensation plans approved by securityholders	6,244,779	$1.13 per Common Share	7,802,363
	 
	Equity compensation plans not approved by securityholders	Nil	Nil	Nil
	 
	 
	Total	6,244,779	$1.13 per Common Share	7,802,363

 

CORPORATE GOVERNANCE

 

The Board is committed to a high standard
of corporate governance practices. The Board believes that this commitment is not only in the best interests of the Shareholders
but that it also promotes effective decision making at the Board level. The Board is of the view that its approach to corporate
governance is appropriate and continues to work to align with the recommendations currently in effect and contained in National
Policy 58-201 - Corporate Governance Guidelines which are addressed below.

 

    23 

     

     

Board Mandate

 

The Board has responsibility for the stewardship
of the Corporation. The Board has adopted a written mandate for the Board (the “Mandate”) to confirm and enhance
the Board’s ongoing duty and responsibility for stewardship of the Corporation, a copy of which is available on the Corporation’s
website at www.profoundmedical.com. The Board is ultimately responsible for supervising the management of the business and affairs
of the Corporation and, in doing so, is required to act in the best interests of the Corporation. The Board generally discharges
its responsibilities either directly or through the Audit Committee and the Human Resources and Corporate Governance Committee.
Specific responsibilities of the Board set out in the Mandate include:

 

	 	(a)	Appointing Management – including approval of the Chief Executive Officer, the compensation of the executive officers and the oversight of succession planning programs;

 

	 	(b)	Board Organization – including responding to recommendations received from the Human Resources and Corporate Governance Committee, but the Board retains the responsibility for managing its own affairs;

 

	 	(c)	Strategic Planning – including the review and approval of the Corporation’s business, financial and strategic plans on at least an annual basis;

 

	 	(d)	Monitoring of Financial Performance and Other Financial Reporting Matters – including the review of the Corporation’s ongoing financial performance and results of operations and review and approval of the Corporation’s audited and interim consolidated financial statements and management’s discussion and analysis of financial conditions and results of operations;

 

	 	(e)	Risk Management – including the identification of the Corporation’s principal business risks and the implementation of appropriate systems to effectively monitor and manage such risks;

 

	 	(f)	Policies and Procedures – including the approval and monitoring of all policies and procedures including those related to corporate governance, ethics and confidentiality;

 

	 	(g)	Communication and Reporting – including the oversight of the timely and accurate disclosure of financial reports and other material corporate developments; and

 

	 	(h)	Other Responsibilities – including those related to position descriptions, orientation and continuing education, nomination of directors and Board evaluations and matters in respect of any disposition, material commitment or venture, or significant expenditure in either monetary or business terms.

 

Composition of the Board

 

Director Independence

 

Damian Lamb, Jean-François Pariseau,
Brian Ellacott, William Curran, Arthur Rosenthal, Samira Sakhia, Linda Maxwell and Kenneth Galbraith are all “independent”
as such term is defined by National Instrument 58-101 – Disclosure of Corporate Governance Practices. Arun Menawat is non-independent
as he is the Chief Executive Officer of the Corporation. Each of the independent directors has no direct or indirect material relationship
with the Corporation, including any business or other relationship, which could reasonably be expected to interfere with the director’s
ability to act with a view to the best interests of the Corporation or which could reasonably be expected to interfere with the
exercise of the director’s independent judgment. Mr. Damian Lamb, Mr. William Curran and Ms. Samira Sakhia are not standing
for re-election to the Board.

 

If the Chairman is not independent, the
independent directors may select one of their members to be appointed Lead Director of the Board for such term as the independent
directors may determine. The Lead Director is responsible for chairing regular meetings of the independent directors and seeking
to ensure that the Board is able to carry out its role.

 

Promptly after the Meeting, the Board will
consider whether to appoint Dr. Arun Menawat as Chairman of the Board. Since Dr. Menawat is not independent, the independent directors
will also consider whether to appoint another nominee director as the Lead Director.

 

The table below shows the current Board and committee membership.

 

    24 

     

     

	 	 	Committees
	 	 	 	Human Resources and
	 	 	 	Corporate Governance
	 	Year Appointed	Audit	Committee
	Independent Board Members	 	 	 
	Damian Lamb (Chairman)	2015	 	 
	Jean-François Pariseau	2015	 	Member
	William Curran	2015	Chair	Member
	Kenneth Galbraith	2017	Member	Chair
	Samira Sakhia	2017	 	 
	Arthur Rosenthal	2018	 	Member
	Brian Ellacott	2018	Member	 
	Linda Maxwell	2018	 	 
	Not Independent – Management	 	 	 
	Arun Menawat	2015	 	 

 

Meetings of Independent Directors

 

The entire complement of independent directors
on the Board and each of the committees meet regularly without management present. The Chairman of the Board conducts these sessions
at Board meetings and the Chair of each committee conducts them at committee meetings. During the last financial year ended December
31, 2018, there have been 7 such meetings of the independent directors.

 

Chairman of the Board

 

Promptly after the Meeting, the Board will
consider whether to appoint the Chief Executive Officer, Dr. Arun Menawat, as the Chairman of the Board. Dr. Menawat is being considered
as Chairman of the Board to ensure continuity through the Corporation’s ongoing director renewal process.

 

Dr. Arun Menawat is the Chief Executive
Officer of the Corporation and as a result does not meet the Board’s independence standards. The primary functions of the
Chairman are to facilitate the operations and deliberations of the Board and the satisfaction of the Board’s responsibilities
under its mandate. The Chairman’s key responsibilities include duties relating to providing overall leadership to the Board,
chairing board and Shareholder meetings, acting as a liaison between management, the members of the Board and the Chairs of the
various committees of the Board, and communicating with Shareholders and regulators. The responsibilities of the Chairman are reviewed
by the Human Resources and Corporate Governance Committee and considered by the Board for approval each year.

 

Director Term Limits and Other Mechanics of Board Renewal

 

The Board has not established any term
limits for directors, as the Board takes the view that term limits are an arbitrary mechanism for removing directors which can
result in valuable, experienced directors being forced to leave the Board solely because of length of service. The Board’s
priorities continue to be ensuring the appropriate skill sets are present amongst the Board to optimize the benefit to the Corporation.
The Board conducts annual evaluations of the individual directors, the committees of the Board and the Chairman of the Board, which
are overseen by the Human Resources and Corporate Governance Committee, to ensure these objectives are met. See “Board Assessments”.

 

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Other Reporting Issuer Experience

 

The following table sets out proposed directors
that are presently directors of other issuers that are reporting issuers (or the equivalent) in Canada or a foreign jurisdiction,
the name of such reporting issuers and the name of the exchange or market applicable to such reporting issuers:

 

	Name	Name of Reporting Issuer	Name of Exchange or Market (if applicable)
	William Curran	3D Systems, Inc.	New York Stock Exchange
	Kenneth Galbraith	Macrogenics, Inc., Prometic Life Sciences Inc.	NASDAQ, Toronto Stock Exchange
	Jean-François Pariseau	Clementia Pharmaceuticals	NASDAQ
	Arthur Rosenthal	LivaNova PLC	NASDAQ
	Samira Sakhia	Antibe Therapeutics Inc., Nuvo Pharmaceuticals Inc., Knight Therapeutics Inc. and Crescita Therapeutics Inc.	Toronto Stock Exchange

 

Board Meetings

 

The Board holds a minimum of 1 regular
quarterly meetings and a corporate strategy session each year, as well as additional meetings as required. An in camera session
of the directors is held at each regularly scheduled Board and committee meeting so that the independent members of the Board have
an opportunity to meet without the presence of management members of the Board.

 

Meeting Attendance

 

	 	Board Meetings Attended in 2018	Committee Meetings Attended in 2018
	Name	No.	%	No.	%
	Damian Lamb	7 of 7	100%	-	-
	Jean-François Pariseau	7 of 7	100%	4 of 4(3)	100%
	Arun Menawat	7 of 7	100%	-	-
	William Curran	7 of 7	100%	8 of 8(3) (4)	100%
	Kenneth Galbraith	5 of 7	71%	6 of 8(3) (4)	75%
	Samira Sakhia	4 of 7	57%	1 of 2(4)	50%
	Arthur Rosenthal	5 of 5(1)	100%	2 of 2(3)	100%
	Brian Ellacott	5 of 5(1)	100%	2 of 2(4)	100%
	Linda Maxwell	1 of 2(2)	50%	-	-

 

Notes:

 

	(1)	Dr. Rosenthal and Mr. Ellacott joined the Board on June 14, 2018.
	(2)	Dr. Maxwell joined the Board on October 9, 2018.
	(3)	Human Resources and Compensation Committee.
	(4)	Audit Committee.

 

Orientation and Continuing Education

 

Pursuant to the Mandate, it is the responsibility
of the Board to provide an orientation program for new directors and ongoing educational opportunities for all directors. New directors
are expected to participate in an initial information session on the Corporation in the presence of its senior executive officers
to learn about, among other things, the business of the Corporation, its financial situation and its strategic planning. All directors
will receive a record of public information about the Corporation, as well as other relevant corporate and business information
including corporate governance practices of the Corporation, the structure of the Board and its standing committees, its corporate
organization, the charters of the Board and its standing committees, the Code (as defined herein) and other relevant corporate
policies.

 

    26

     

     

Continuing education opportunities are
directed at enabling individual directors to maintain or enhance their skills and abilities as directors, as well as ensuring that
their knowledge and understanding of the Corporation’s affairs remains current. Directors are kept informed as to matters
which may impact the Corporation’s operations through regular reports and presentations at Board and committee meetings.

 

Code of Business Conduct and Ethics

 

The Corporation has adopt a written Code
of Business Conduct and Ethics (the “Code”) for directors, officers and employees. The objective of the Code
is to provide guidelines for maintaining the integrity, reputation, honesty, objectivity and impartiality of the Corporation and
its subsidiaries. The Code addresses compliance with laws, conflicts of interest, corporate opportunity, confidentiality, fair
dealing with customers, suppliers, competitors, officers and employees, protection and proper use of company assets and accounting
complaints. The Board has the ultimate responsibility for the stewardship of the Code and is responsible for considering any request
for waivers from the Code. Any waiver of the Code’s provisions is subject to the disclosure and other provisions of applicable
securities laws and the applicable rules of any and all securities exchanges on which the securities of the Corporation are listed
and posted for trading. A copy of the Code is available on the Corporation’s website at www.profoundmedical.com.

 

The Board monitors compliance with the
Code and reviews it on at least an annual basis to determine whether updates are appropriate. Where a director or officer has any
interest in or a perceived conflict involving a contract or business relationship with the Corporation, that director or officer
is excluded from all discussions and deliberations regarding the contract or relationship and such director abstains from voting
in respect thereof. Directors and executive officers have disclosed to the Corporation all directorships held by such member and
the existence and nature of any interests that could result in a conflict situation with the Corporation.

 

The Board has also adopted a Whistleblower
Policy relating to the reporting of inappropriate activity to encourage and promote a culture of ethical business conduct. The
Whistleblower Policy is intended to encourage and facilitate the reporting of questionable accounting, internal accounting controls
or auditing matters.

 

Nomination of Directors

 

The Human Resources and Corporate Governance
Committee has the responsibility for reviewing the composition of the Board by taking into account, among other things, its size
and the particular competencies and skills of its members. The Human Resources and Corporate Governance Committee, in consultation
with the Chairman of the Board and Chief Executive Officer, will then identify potential Board nominees and recommend such nominees
for election as directors based on the competencies and skills each new member possesses in the context of the needs of the Corporation.
The Board as a whole is then responsible for nominating new directors.

 

The Board seeks nominees that have the
following characteristics: (i) a track record in general business management; (ii) special expertise in an area of strategic interest
to the Corporation; (iii) the ability to devote time; and (iv) support for the Corporation’s mission and strategic objectives.

 

While the Corporation has not adopted a
written policy relating to the identification and nomination of women directors, it recognizes that diversity is an economic driver
of competitiveness for companies and it strives to promote an environment and culture conducive to the appointment of well qualified
persons so that there is appropriate diversity to maximize the achievement of corporate goals. Gender of a potential candidate
is one component in the overall list of factors the Human Resources and Corporate Governance Committee considers when selecting
candidates for executive officer and senior manager appointments, and membership on the Board and its committees. The Human Resources
and Corporate Governance Committee is of the opinion that if gender was the overriding factor governing the selection of Board
nominees, it could unduly restrict the Board’s ability to select the most appropriate nominees and candidates. The Corporation
has not adopted targets regarding women on the Board as it does not believe that such targets are necessary at this time given
the size of the Board and that the director nomination process recognizes the benefits of diversity. There are currently two women
on the Board. However, Ms. Samira Sakhia is not standing for re-election to the Board.

 

Director and Executive Compensation

 

The Human Resources and Corporate Governance
Committee oversees the remuneration policies and practices of the Corporation. The principal responsibilities of the Human Resources
and Corporate Governance Committee include:

 

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(i) considering the Corporation’s
overall remuneration strategy and, where information is available, verifying the appropriateness of existing remuneration levels
using external sources for comparison; (ii) comparing the nature and amount of the Corporation’s directors’ and executive
officers’ compensation to performance against goals set for the year while considering relevant comparative information,
independent expert advice and the financial position of the Corporation, and (iii) making recommendations to the Board in respect
of director and executive officer remuneration matters, with the overall objective of ensuring maximum Shareholder benefit from
the retention of high quality board and executive team members.

 

Board Assessments

 

The Board is responsible for ensuring that
there is a process in place for annually evaluating the effectiveness and contribution of the Chief Executive Officer, the Board,
the committees of the Board, the Chairman of the Board and the individual directors based on their applicable terms of reference
or position description.

 

The objective of the assessments is to
ensure the continued effectiveness of the Board in the execution of its responsibilities and to contribute to a process of continuing
improvement. In addition to any other matters the Board deems relevant, the assessments may consider in the case of the Board or
a committee, the applicable terms of reference, the applicable position descriptions, as well as the competencies and skills each
individual director is expected to bring to the Board.

 

The Human Resources and Corporate Governance
Committee annually reviews and makes recommendations to the Board on the method and content of such evaluations and oversees the
evaluation process.

 

Board Committees

 

The Board has two standing committees,
being the Audit Committee and the Human Resources and Corporate Governance Committee. Below is a description of the committees
and their current membership.

 

Audit Committee

 

The Audit Committee oversees the accounting
and financial reporting practices and procedures of the Corporation’s financial statements. The principal responsibilities
of the Audit Committee include: (i) the integrity of the consolidated financial statements of the Corporation; (ii) the Corporation’s
compliance with legal and regulatory requirements; (iii) the public accountants’ qualifications and independence; and (iv)
the performance of the Corporation’s internal audit function and public accountants. The Audit Committee shall oversee the
preparation of and review the report required by the rules of any and all securities regulatory bodies to which the Corporation
is subject to be included in the Corporation’s annual proxy statement. The Audit Committee Charter is attached hereto as
Schedule “A”.

 

Composition of the Audit Committee

 

The following are the current members of the Audit Committee:

 

	Name	Independence	Financial Literacy
	Kenneth Galbraith	Independent	Financially Literate
	William Curran	Independent	Financially Literate
	Brian Ellacott	Independent	Financially Literate

 

Relevant Education and Experience

 

The relevant education and experience of
each member of the Audit Committee, is provided above, under the heading “Election of Directors”. All of the Audit
Committee members are independent of management of the Corporation as required by the TSX and each member is financially literate
in that each has the ability to read and understand a set of financial statements that present a breadth and level of complexity
of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be expected
to be raised by the Corporation’s financial statements.

 

Audit Committee Oversight

 

At no time since the commencement of the
Corporation’s most recently completed financial period was a recommendation of the Audit Committee to nominate or compensate
an external auditor not adopted by the Board.

 

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Pre-Approval Policies and Procedures

 

The Audit Committee has adopted specific
policies and procedures for the engagement of non-audit services as described in Schedule “A” attached hereto.

 

External Auditor Service Fees (By Category)

 

The aggregate fees billed by the Corporation’s external
auditor in the last two fiscal years as follows:

 

	Financial Year Ending	 	Audit Fees(1)	 	 	Audit Related Fees(2)	 	 	Tax Fees(3)	 	 	All Other Fees(4)	 
	December 31, 2018	 	$	365,776	 	 	$	0	 	 	$	61,215	 	 	$	0	 
	December 31, 2017	 	$	313,400	 	 	$	29,700	 	 	$	186,000	 	 	$	0	 

 

Notes:

 

	(1)	Audit fees includes annual audit, quarterly reviews and work performed in relation to the bought deals.
	(2)	Audit related fees includes work performed on acquisitions.
	(3)	Tax fees includes fees related to annual tax returns and scientific research credit return along with tax and transfer pricing advice.
	(4)	All other fees includes services other than those reported under (1), (2) and (3), and consulting services, risk management advisory services and IT reviews not performed in connection with the audit.

 

Human Resources and Corporate Governance Committee

 

The Human Resources and Corporate Governance
Committee is comprised of Jean-François Pariseau, William Curran, Kenneth Galbraith and Arthur Rosenthal. All four members
are independent directors.

 

The key responsibilities of the Human Resources and Corporate
Governance Committee include:

 

	(a)	Annually review and approve corporate goals and objectives relevant to compensation of executive officers for whom compensation is required to be individually reported under applicable securities laws, evaluate the named executive officers’ performance in light of those goals and objectives, and set the named executive officers’ respective compensation levels based on this evaluation.
	 	 
	(b)	Annually review the Chief Executive Officer’s evaluation of the performance of the other officers of the Corporation and such other senior management and key employees of the Corporation or any subsidiary of the Corporation as may be identified to the Committee by the Board (collectively, the “Designated Executives”) and review the Chief Executive Officer’s recommendations with respect to the amount of compensation to be paid to the Designated Executives.
	 	 
	(c)	Annually review, assess the competitiveness and appropriateness of and approve the compensation package of each of the Designated Executives.
	 	 
	(d)	Review and approve any employment contracts or arrangements with each of the Designated Executives, including any retiring allowance arrangements or any similar arrangements to take effect in the event of a termination of employment.
	 	 
	(e)	Review and recommend to the Board compensation policies and processes and in particular, the compensation policies and processes for the Designated Executives.
	 	 
	(f)	In determining the long-term incentive component of the Chief Executive Officer’s compensation and each Designated Executive’s compensation, consider the Corporation’s performance and relative shareholder return, the value of similar incentive awards to executives at comparable companies, and the awards given to Corporation executives in past years.
	 	 
	(g)	Make recommendations to the Board with respect to incentive compensation and equity-based plans, and review and make recommendations with respect to the performance or operating goals for participants in such plans.

 

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	(h)	Have the sole authority to retain and terminate any compensation consultant to be used to assist in the evaluation of director, Chief Executive Officer or senior executive compensation and have sole authority to approve the consultant’s fees and other retention terms.
	 	 
	(i)	Adopt, administer, approve and ratify awards under incentive compensation and stock plans, including amendments to the awards made under any such plans, and review and monitor awards under such plans.
	 	 
	(j)	Review and report to the Board on the appropriateness of the succession planning of the Corporation, including appointing, training and monitoring senior management.
	 	 
	(k)	Review the significant human resources policies, plans and programs of the Corporation to ensure they are supportive of the Corporation’s near and long-term strategies.
	 	 
	(l)	Undertake on behalf of, and in an advisory capacity to, the Board such other initiatives as may be necessary or desirable to assist the Board in discharging its responsibility to ensure that appropriate human resources development, performance evaluation, compensation and management development programs are in place and operating effectively.

 

Position Descriptions

 

The Board has developed written position
descriptions which identify the responsibilities of the Chairman of the Board and the Chief Executive Officer. The Board has not
developed written position descriptions for the Chair of each committee of the Board. The Board believes that the charters of the
Audit Committee and the Human Resources and Corporate Governance Committee adequately delineate the roles of the Chairs of such
committees. Each of the Audit Committee and the Human Resources and Corporate Governance Committee are responsible for reviewing
their respective charters on a regular basis and to recommend to the Board any changes as considered appropriate from time to time.

 

AUDITOR

 

The auditors of the Corporation is PricewaterhouseCoopers
LLP, Chartered Professional Accountants, Licensed Public Accountants, PwC Centre, 354 Davis Road, Suite 600, Oakville, ON L6J 0C5.
PricewaterhouseCoopers LLP has served as the Corporation’s auditor since June 22, 2015.

 

MANAGEMENT CONTRACTS

 

The Corporation does not currently have any management contracts
in place.

 

ADDITIONAL INFORMATION

 

Financial information pertaining to the
Corporation is provided in the Financial Statements and related management’s discussion and analysis. Copies of the Financial
Statements and related management’s discussion and analysis can be obtained by contacting Stephen Kilmer, Investor Relations,
at 2400 Skymark Avenue, Unit 6, Mississauga, Ontario, L4W 5K5. Additional information relating to the Corporation is available
on the SEDAR website at www.sedar.com.

 

DIRECTOR APPROVAL

 

The contents of this Circular and the sending thereof to the
Shareholders, directors and auditor of the Corporation have been approved by the Board.

 

(Signed) “Arun Menawat”

 

Arun Menawat

Director and Chief Executive Officer

May 6, 2019

 

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SCHEDULE “A”

 

PROFOUND MEDICAL CORP.

(the “Company”)

 

AUDIT COMMITTEE CHARTER

 

A.       Purpose

 

The Audit Committee shall be directly responsible
for the appointment, compensation and oversight of the work of the Company’s public accountants. The Audit Committee shall
monitor: (1) the integrity of the consolidated financial statements of the Company; (2) the Company’s compliance with legal
and regulatory requirements; (3) the public accountants’ qualifications and independence; and (4) the performance of the
Company’s internal audit function and public accountants. The Audit Committee shall oversee the preparation of and review
the report required by the rules of any and all securities regulatory bodies to which the Company is subject to be included in
the Company’s annual proxy statement.

 

B.       Committee Membership

 

The Audit Committee shall consist of no
fewer than three members. Each member of the Audit Committee shall be unrelated and independent, and the composition of the Audit
Committee shall satisfy the independence, experience and financial expertise requirements of any and all securities exchange(s)
on which the securities of the Company are listed and posted for trading and all other applicable securities and other laws. The
Board shall appoint the members of the Audit Committee annually, considering the recommendation of the Human Resources and Corporate
Governance Committee, and further considering the views of the Chair of the Board and the Chief Executive Officer, as appropriate.
The members of the Audit Committee shall serve until their successors are appointed.

 

The Board shall have the power at any time
to change the membership of the Audit Committee and to fill vacancies in it, subject to such new member(s) satisfying the independence,
experience and financial expertise requirements referred to above. Except as expressly provided in this Charter or the by-laws
of the Company, or as otherwise provided by law or the rules of the stock exchanges to which the Company is subject, the Audit
Committee shall fix its own rules of procedure.

 

C.       Committee Authority
and Responsibilities

 

The Audit Committee shall have the sole
authority to appoint or replace the public accountants (subject, if applicable, to shareholder ratification), and shall approve
all audit engagement fees and terms and all non-audit engagements with the public accountants. The Audit Committee shall consult
with management but shall not delegate these responsibilities. In its capacity as a committee of the Board, the Audit Committee
shall be directly responsible for the oversight of the work of the public accounting firm (including resolution of disagreements
between management and the public accounting firm regarding financial reporting) for the purpose of preparing or issuing an audit
report or related work, and the public accounting firm shall report directly to the Audit Committee. The Audit Committee shall
have the authority, to the extent it deems necessary or appropriate, to retain and set and pay the compensation for special legal,
accounting or other consultants to advise the committee and carry out its duties, and to conduct or authorize investigations into
any matters within its scope of responsibilities.

 

The Audit Committee may request any officer or employee of the
Company or the Company’s outside counsel or public accountants to attend a meeting of the Audit Committee or to meet with
any members of, or consultants to, the Audit Committee.

 

The Audit Committee shall have the ability to communicate directly
with the public accountants and the Company’s internal auditor, if any.

 

The Audit Committee, or another board committee
comprised solely of independent directors if so designated by the Audit Committee, shall review all related party transactions
on an ongoing basis, including to the extent required by any and all securities exchange(s) on which the securities of the Company
are listed and posted for trading.

 

The Audit Committee shall make regular
reports to the Board. The Audit Committee shall review and reassess the adequacy of this Charter annually and recommend any proposed
changes to the Board for approval. The Audit Committee shall annually review the Audit Committee’s own performance.

 

    A-1

     

     

In performing its functions, the Audit
Committee shall undertake those tasks and responsibilities that, in its judgment, would most effectively contribute and implement
the purposes of the Audit Committee. The following functions are some of the common recurring activities of the Audit Committee
in carrying out its oversight responsibility:

 

	·	Review and discuss with management and the public accountants the Company’s annual audited consolidated financial statements, including disclosures made in Management’s Discussion and Analysis of Financial Condition and Results of Operations and recommend to the Board whether the audited consolidated financial statements should be included in the Company’s annual report.
	 	 
	·	Review and discuss with management and the public accountants the Company’s quarterly financial statements, including disclosures made in Management’s Discussion and Analysis of Financial Condition and Results of Operations or similar disclosures, prior to the filing of its quarterly report.
	 	 
	·	Review and discuss with management and the public accountants the financial information and consolidated financial statements contained in any prospectus, registration statement, annual information form, circular or other material disclosure document of the Company, in each case prior to the filing of such documents.
	 	 
	·	Review and discuss with management and the public accountants, as applicable: (a) major issues regarding accounting principles and consolidated financial statement presentations, including any significant changes in the Company’s selection or application of accounting principles, and major issues as to the adequacy of the Company’s internal controls and any special audit steps adopted in light of material control deficiencies; (b) analyses prepared by management or the public accountants setting forth significant financial reporting issues and judgments made in connection with the preparation of the consolidated financial statements, including analyses of the effects of alternative IFRS methods on the consolidated financial statements; (c) any management letter provided by the public accountants and the Company’s response to that letter; (d) any problems, difficulties or differences encountered in the course of the audit work, including any disagreements with management or restrictions on the scope of the public accountants’ activities or on access to requested information and management’s response thereto; (e) the effect of regulatory and accounting initiatives, as well as off-balance sheet structures, on the consolidated financial statements of the Company; and (f) prior to their release, earnings press releases, as well as financial information and earnings guidance (generally or on a case-by-case basis) provided to analysts and rating agencies.
	 	 
	·	Discuss with management the Company’s major financial risk exposures and the steps management has taken to monitor and control such exposures, including the Company’s risk assessment and risk management policies.
	 	 
	·	Obtain and review a report from the public accountants at least annually regarding: (a) the public accountants’ internal quality control procedures; (b) any material issues raised by the most recent quality control review, or peer review, of the firm, or by any inquiry or investigation by governmental or professional authorities within the preceding five years respecting one or more independent audits carried out by the firm; (c) any steps taken to deal with any such issues; and (d) all relationships between the public accountants and the Company.
	 	 
	·	Evaluate the qualifications, performance and independence of the public accountants, including a review and evaluation of the lead partner of the public accountants and taking into account the opinions of management.
	 	 
	·	Ensure the lead audit partner of the public accountants and the audit partner responsible for reviewing the audit are rotated at least every five years if required by applicable securities laws.
	 	 
	·	Discuss with management and the public accountants any accounting adjustments that were noted or proposed by the public accountants but were passed (as immaterial or otherwise).
	 	 
	·	Establish procedures for: (a) the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters; and (b) the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters.

 

    A-2

     

     

	·	Review disclosures made by the Company’s principal executive officer or officers and principal financial officer or officers regarding compliance with any certification obligations required by applicable laws and the rules promulgated thereunder, including the Company’s disclosure controls and procedures and internal controls for financial reporting and evaluations thereof.
	 	 
	·	Review with management and approve the Company’s investment policies for its securities portfolio and review the portfolio management performance.
	 	 
	·	Review the performances of the Chief Financial Officer and other senior executives involved in the financial reporting process, review financial and accounting personnel succession planning within the Company and, where possible, consult on the appointment of, or departure of, individuals occupying these positions.

 

D.       Limitations of
Audit Committee’s Roles

 

While the Audit Committee has the responsibilities
and powers set forth in this Charter, it is not the duty of the Audit Committee to prepare consolidated financial statements, plan
or conduct audits or to determine that the Company’s consolidated financial statements and disclosures are complete and accurate
and are in accordance with IFRS principles and applicable rules and regulations. These are the responsibilities of management and
the public accountants.

 

    A-3

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