1.DESCRIPTION OF BUSINESS

Nature of Operations:

Titan Medical Inc.’s (“Titan” or the “Company”) business is in the research and development stage and is focused on the continued research and development of robotic assisted technologies for application in single access surgery, including the development of the EnosTM robotic single access surgical system (the “Enos system”). In the near term, the Company plans to continue efforts to complete product development and proceed to pre-clinical and confirmatory human studies and satisfaction of appropriate regulatory requirements. Upon receipt of regulatory approvals, the Company will transition from the research and development stage to the commercialization stage. The completion of the later stage will be subject to the Company receiving additional funding in the future.

The Company is incorporated in Ontario, Canada in accordance with the Business Corporations Act. The address of the Company’s corporate office and its principal place of business is Toronto, Canada.

On May 29, 2020, the Company established a wholly owned subsidiary, Titan Medical USA Inc. (“Titan USA” or “Subsidiary”), a corporation that is duly organized and existing under the laws of Delaware.

Basis of Presentation:

(a)Statement of Compliance

These unaudited condensed interim consolidated financial statements (the “Interim Financial Statements”) for the three months ended March 31, 2021, and March 31, 2020, have been prepared in accordance with International Accounting Standards 34 – Interim Financial Reporting (“IAS 34” or “IAS 34 – Interim Financial Reporting”). The unaudited condensed consolidated interim financial statements should be read in conjunction with the annual audited consolidated financial statements for the years ended December 31, 2020.

The Interim Financial Statements were authorized for issue by the Board of Directors on May 15, 2021.

(b)Basis of Presentation

During the quarter, the Company changed the presentation of the condensed interim consolidated statements of shareholders’ equity (deficit) to present separately the warrant reserve previously included in share capital. The Company further changed the presentation of condensed interim consolidated statements of net and comprehensive loss to present expenses by function. Certain comparative figures have been reclassified to conform with the current period presentation.

(c)Presentation Currency

These Interim Financial Statements are presented in United States dollars (“US”), which is the Company’s functional and presentation currency, and are rounded to the nearest thousands of dollars.

(d)Restricted Share Units

Pursuant to the Company’s share unit plan (“SU Plan”), the Company issued restricted share units (“RSU”) to certain employees and directors in Q1, 2021. Under the SU Plan, each RSU, once vested, is exchangeable for one common share in the capital of the Company (each a “Common Share”).

1.DESCRIPTION OF BUSINESS (continued)

(e)COVID-19

Since December 31, 2019, the outbreak of a novel strain of coronavirus, specifically identified as “COVID-19”, has resulted in governments worldwide enacting emergency measures to combat the spread of the virus. These measures, which include the implementation of travel bans, quarantine periods and social distancing protocol, along with the uncertainty around the disease itself, have caused material disruption to businesses globally, resulting in an economic slowdown. Global equity markets have experienced significant volatility. Governments and central banks have reacted with significant monetary and fiscal interventions designed to stabilize economic conditions. The duration and impact of the COVID-19 outbreak is unknown at this time, as is the efficacy of the government and central bank interventions. It is not possible to reliably estimate the length and severity of these developments and the impact on the financial results and condition of the Company in future periods. Due to the uncertainty caused by the COVID-19 outbreak, the Company is experiencing a longer recruitment cycle for recruiting technical personnel, and travel restrictions have slowed its ability to select and qualify suppliers for certain of its products. Furthermore, contractors and suppliers engaged by the Company may also be impacted by COVID-19 and there is a risk they could fail to meet their obligations to the Company. The effects of these impediments on the Company’s ability to achieve its milestones, including the timeline for completion, is unknown at this time.

2.NEW STANDARDS, INTERPRETATIONS AND AMENDMENTS ADOPTED BY THE COMPANY

The significant accounting policies used in preparing these Interim Financial Statements are consistent with the accounting policies and computation methods applied in the audited consolidated financial statements for the year ended December 31, 2020.

Other new and amended standards and interpretations issued by the IASB applicable for periods within the current annual reporting year are not expected to impact Titan as they are either not relevant to Titan’s activities or apply to accounting standards which are consistent with Titan’s current accounting policies.

3.RIGHT-OF-USE ASSETS AND LEASE LIABILITIES

4.PATENT RIGHTS

5.ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

The balance of accounts payable and accrued liabilities at March 31, 2021 is $3,022 (December 31, 2020 - $4,528). The majority of the payables and accrued liabilities of $1,245 relate to amounts owed to the Company’s product development suppliers, an amount of $ 653 relates to legal and audit and the balance relates to regular business operations (December 31, 2020 - $3,733 and $446 respectively).

6.NOTE PAYABLE

In 2020, the Company entered into an agreement with Medtronic for a note payable (the “Note”). In connection with the Note, the Company executed and delivered a security agreement in favour of Medtronic. Under the Note agreement, the Company received $1.5 million in cash and owes an additional $507 related to certain legal, transaction and intellectual property related expenses incurred by Medtronic pursuant to the Medtronic agreements and will bear interest at the rate of 8% per annum. The unpaid principal balance owing under the

Note, together with any accrued and unpaid interest and all other unpaid obligations under the Note, shall be due and payable in full on the earliest to occur of: (i) June 3, 2023, (ii) a Change of Control (as defined in the Note), or (iii) the completion of the last milestone under the Development Agreement. For the quarter ended March 31, 2021, the Note has accrued interest of $37.

7.WARRANT DERIVATIVE LIABILITY

8.SHARE CAPITAL

(a) Authorized: unlimited number of common shares, no par value

Issued: 109,527,690 (December 31, 2020: 83,184,843)

Exercise prices of units, warrants, options and RSUs, are presented in US dollars unless otherwise noted.

January 2021 Equity Offering

On January 26, 2021, the Company closed an offering of 7,419,354 units of the Company sold on a “bought deal” basis, at price of $1.55 per January 2021 Unit for aggregate gross proceeds of $11,500 ($10,231 net of share issuance costs). Each January 2021 Unit consists of one Common Share and one half (1/2) of one Common Share purchase warrant (each whole warrant, a “January 2021 Warrant”). Each January 2021 Warrant is exercisable to acquire one Common Share at an exercise price of $2.00 per share until January 26, 2026. In connection with the January 2021 Offering, the Company issued 518,234 broker warrants exercisable at $1.9375 until January 26, 2023 treated as share issuance costs. January 2021 Warrants and broker warrants associated with this raise qualified as equity classification – see Note 8(c).

February 2021 Equity Offering

On February 24, 2021, the Company closed an offering of 9,585,250 units of the Company (“February 2021 Units”) at price of $2.40 per February 2021 Unit for aggregate gross proceeds of $23,005 ($21,093 net of share issuance costs). Each February 2021 Unit consists of one common share in the capital of the Company (each a “Common Share”) and one half (1/2) of one Common Share purchase warrant (each whole warrant, a “February 2021 Warrant”). Each February 2021 Warrant is exercisable to acquire one Common Share at an exercise price of $3.00 per share until February 24, 2023. In connection with the February 2021 Offering, the Company issued 670,967 broker warrants exercisable at $3.00 until February 24, 2023 treated as share issuance costs. February 2021 Warrants and broker warrants associated with this raise qualified as equity classification – see Note 8(c).

(b)Stock-Based Compensation

8.SHARE CAPITAL (continued)

(i)Options

On February 17, 2021, 19,568 Common Shares were issued upon the exercise of options for gross proceeds of $14.

8.SHARE CAPITAL (continued)

The weighted average exercise price of Canadian dollar denominated options outstanding is CDN $4.22 and CDN $4.21 for options that are exercisable. The weighted average exercise price of US dollar denominated options outstanding is $1.64 and $2.41 for options that are exercisable.

Inputs for Measurement of Grant Date Fair Values for Options

(ii)Restricted Share Units

The RSU grants were fair valued using the closing share price of the trading date prior to the February 24, 2021 grant date.

8.SHARE CAPITAL (continued)

(c)Equity Warrants

9.BASIC AND DILUTED LOSS PER SHARE

Basic loss per common share is calculated by dividing net loss by the weighted average number of common shares outstanding.

10.COMMITMENTS

As part of its program of research and development of the Enos system, the Company has outsourced certain aspects of the research and development to third party technology and development companies. At March 31, 2021, $5,369 in purchase orders remain outstanding (December 31, 2020: $10,694).