Mr. Paul Cataford reports

TITAN ANNOUNCES MERGER AGREEMENT WITH CONAVI

Titan Medical Inc. has entered into a definitive amalgamation agreement dated March 17, 2024, with Conavi Medical Inc. to combine the companies in an all-stock transaction. The combined company will focus on continuing to commercialize Conavi's Novasight hybrid system designed to guide common minimally invasive coronary procedures.

Under the terms of the agreement, Titan will acquire all of the issued and outstanding shares of Conavi and, in exchange, Conavi shareholders will be issued common shares of Titan. This transaction will constitute a reverse takeover of Titan and will be carried out subject to the terms and conditions outlined herein.

In connection with the transaction, Titan expects to delist its common shares from the Toronto Stock Exchange and apply to have them listed instead on the TSX Venture Exchange. The transaction is anticipated to close on or around July 15, 2024.

Conavi is focused on designing, manufacturing and marketing imaging technologies to guide common minimally invasive cardiovascular procedures. Its patented Novasight hybrid system is the first system to combine both intravascular ultrasound (IVUS) and optical coherence tomography (OCT) to enable simultaneous and co-registered imaging of coronary arteries. The Novasight hybrid system has 510(k) clearance from the U.S. Food and Drug Administration and regulatory approval for clinical use from Health Canada, China's National Medical Products Administration, and Japan's Ministry of Health, Labour and Welfare. Conavi is organized under the Business Corporations Act (Ontario) and headquartered in Toronto, Ont.

"This planned merger comes at a pivotal moment in the evolution of our company as we continue to advance the Novasight hybrid system, which provides simultaneous and complementary data with which to better inform patient care, while offering providers a more cost- and space-effective option when purchasing intravascular imaging equipment," said Thomas Looby, Conavi's chief executive officer. "Gaining access to the public capital markets will enhance our financial strength and fuel our growth strategy, enabling us to unlock the full potential of our hybrid imaging technology in the United States and globally."

"This merger is the result of a thoughtful and careful review of strategic options and reflects the continued commitment of our management team and board of directors to deliver value to shareholders," commented Paul Cataford, Titan's interim chief executive officer and board chair. "Conavi is an exciting commercial-stage company with groundbreaking technology and an accomplished management team. We are confident in their ability to continue to drive adoption of the Novasight hybrid system."

Transaction highlights

Provided the transaction is completed in accordance with the provisions of the amalgamation agreement, the following benefits are anticipated for the combined entity:

• Strong balance sheet (as a result of a concurrent financing) with institutional investor support;
• Established product development and manufacturing capability;
• Proven product being commercialized in the coronary imaging space;
• A large and diverse market opportunity addressed with a proprietary product offering that provides patient benefit and a sustainable economic value proposition to users;
• Increasing market traction and key opinion leader engagement.

Amalgamation agreement background

The journey to this announcement started over 15 months ago, when Titan announced the commencement of a strategic review process and the engagement of Raymond James Ltd. as financial adviser. With limited cash resources and limited access to new capital, Titan announced a series of cost-cutting measures to extend the runway for the strategic review process. After outreach to over 40 potential counterparties and concerns expressed by potential counterparties on Titan's stage of development, financial circumstances and time to commercialization, Titan announced a further cost reduction and a halt to all expenditures related to the development of its ENOS single-access robotic-assisted surgery (RAS) system in February, 2023. To generate cash and avert the possibility of insolvency, Titan also announced a strategic pivot to asset sales and licensing of its IP (intellectual property). This pivot has proved successful as Titan announced non-exclusive licensing and intellectual property sales agreements with established players in the RAS industry in May, June and August, 2023. Throughout 2023, it was made clear to Titan that a merger with another RAS company was not a viable option and Titan broadened its search for a merger partner beyond RAS. This expanded search resulted in a number of proposals, and, after careful evaluation, Titan's management and board of directors decided on a merger with Conavi. The Titan board is unanimous in its decision to execute the amalgamation agreement and to recommend this transaction to its shareholders.

Transaction terms

Under the terms of the agreement, Titan will effect a consolidation of the Titan shares based on a ratio of preconsolidation shares to postconsolidation shares to be mutually agreed upon.

As a condition to the completion of the transaction, Conavi will complete a concurrent financing of subscription receipts, the terms of which will be announced at a later date, for minimum gross proceeds of $15-million (U.S.) up to a maximum of $20-million (U.S.). The subscription receipts are expected to convert into Conavi shares immediately prior to completion of the transaction.

Following the consolidation and the concurrent financing, a wholly owned subsidiary of Titan will amalgamate with Conavi, pursuant to which issued and outstanding postconsolidation Titan shares will be issued to holders of Conavi shares (including the subscription receipts shares) on the basis of an exchange ratio to be determined using the premoney valuation of Conavi of $69.84-million (U.S.) (minus the amounts of certain trade payables and Conavi's transaction expenses) and a pretransaction valuation of Titan, including an allocation of $5-million (U.S.) plus the amount of cash held in Titan at the closing of the transaction less certain liabilities of Titan. However, the exchange ratio will be adjusted, if necessary, strictly to the extent required to result in the holders of Titan shares prior to the closing of the transaction holding at least 10 per cent of the combined entity shares following completion of the transaction (including combined entity shares underlying certain options, warrants and RSUs (restricted share units), subscription receipts shares, and combined entity shares issued in exchange for Conavi shares issued in any bridge financing completed by Conavi prior to the completion of the transaction).

In addition, the combined entity will establish a new equity incentive plan for key employees, directors and officers of the combined entity and will issue stock options in exchange for the outstanding Conavi outstanding stock options under the plan.

The parties to the transaction are at arm's length.

Transaction timetable

Titan intends to hold a special and annual meeting of shareholders, at which, among other things, the Titan shareholders will be asked to approve: (i) the change of name from Titan Medical to Conavi Medical Inc. or such other name as Conavi may determine and the Titan board may approve; (ii) the consolidation; (iii) a new equity incentive plan for the combined entity; and (iv) the transaction. Copies of the management information circular of Titan and certain related documents and agreements will be filed with the Canadian securities regulators and will be available on SEDAR+ under Titan's profile at least 21 days prior to the date of the Titan shareholder meeting.

Recommendation by the board of directors and fairness opinion

After consultation with its financial and legal advisers, the Titan board unanimously approved the entering into of the agreement and will recommend that Titan shareholders vote in favour of the transaction at the Titan shareholder meeting. Raymond James provided a fairness opinion to the board of directors of Titan, stating that, as of the date of such opinion and based upon and subject to the assumptions, limitations and qualifications stated in such opinion, the consideration payable pursuant to the transaction is fair, from a financial point of view, to the Titan shareholders.

Conditions to completion of the transaction

The completion of the transaction is subject to the satisfaction of various conditions as are standard for a transaction of this nature, including, but not limited to: (i) receipt of all requisite regulatory, TSX and TSX-V approvals and all government approvals, authorizations or consents; (ii) the absence of any material change or change in a material fact or a new material fact affecting Titan or Conavi; (iii) the approvals of both the Titan shareholders and the Conavi shareholders; (iv) the completion of the concurrent financing for aggregate gross proceeds of at least $15-million; (v) Titan having the net cash balance set forth in the agreement immediately prior to closing the transaction; and (vi) certain other conditions set forth in the agreement. There can be no assurance that the transaction will be completed on the terms proposed herein or at all.

Concurrently with signing the agreement, the directors and officers of Conavi have agreed to support the proposed transaction and have either entered into or are expected to enter into lock-up agreements with Titan to vote in favour of the transaction at the special meeting of Conavi shareholders. All of the directors and officers of Titan have agreed to support the proposed transaction and have each entered into lock-up agreements with Conavi to vote in favour of the transaction at the Titan shareholder meeting.

The combined entity

TSX-V listing

The combined entity is expected to be a Tier 1 technology issuer under the policies of the TSX-V. In connection with the application to list the combined entity shares on the TSX-V, the Titan circular will be prepared using Form 3D1, Information Required in an Information Circular for a Reverse Take-Over, and will be available on SEDAR+ under Titan's profile once finalized.

10-per-cent shareholder

It is anticipated that, immediately following the transaction, the only shareholder that will hold greater than 10 per cent of the issued and outstanding combined entity shares will be Carlyle Services LLC.

Officers and directors of the combined entity

Concurrent with the completion of the transaction, all officers and certain directors of Titan will resign and be replaced by nominees and appointees put forth by Conavi.

Advisers and counsel

In connection with the transaction, Raymond James Ltd. is acting as financial adviser to Titan and Borden Ladner Gervais LLP is acting as legal counsel to Titan. Mintz LLP is acting as legal counsel to Conavi.

About Titan Medical Inc.

Titan Medical, a medical technology company incorporated under the Business Corporations Act (Ontario) and headquartered in Toronto, Ont., has developed an expansive patent portfolio related to the enhancement of robotic-assisted surgery (RAS), including through a single access point, and is currently focused on evaluating new opportunities to further develop and license its intellectual property.

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