Form 6-K - Report of foreign issuer [Rules 13a-16 and 15d-16]

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of August, 2023

Commission File Number: 001-40712

Cardiol Therapeutics Inc.
(Translation of registrant's name into English)

602-2265 Upper Middle Road East, Oakville, Ontario, Canada L6H 0G5
(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

x Form 20-F ¨ Form 40-F

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ¨

SUBMITTED HEREWITH

Exhibits

	99.1	Condensed Interim Consolidated Financial Statements for the Three and Six Months Ended June 30, 2023
	99.2	Management’s Discussion and Analysis for the Three and Six Months Ended June 30, 2023
	99.3	Form 52-109F2 Certification of Interim Filings - CEO
	99.4	Form 52-109F2 Certification of Interim Filings - CFO

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	CARDIOL THERAPEUTICS INC.
	(Registrant)

Date: August 10, 2023	By:	/s/ Chris Waddick
		Name:	Chris Waddick
		Title:	Chief Financial Officer

Exhibit 99.1

CARDIOL THERAPEUTICS INC.

CONDENSED INTERIM CONSOLIDATED

FINANCIAL STATEMENTS

THREE AND SIX MONTHS ENDED

JUNE 30, 2023

(EXPRESSED IN CANADIAN DOLLARS)

(UNAUDITED)

Cardiol Therapeutics Inc.
Condensed Interim Consolidated Statements of Financial Position
(Expressed in Canadian Dollars)
Unaudited

	As at June 30, 2023			As at December 31, 2022
ASSETS

Current assets
Cash and cash equivalents (note 3)	$	44,942,286		$	59,469,868
Accounts receivable		188,344			209,923
Other receivables		116,725			270,274
Prepaid expenses (note 14)		1,400,049			1,487,913
Total current assets		46,647,404			61,437,978

Non-current assets
Property and equipment (note 4)		269,288			295,738
Intangible assets (note 5)		252,580			294,802
Total assets	$	47,169,272		$	62,028,518

EQUITY AND LIABILITIES

Current liabilities
Accounts payable and accrued liabilities (note 14)	$	7,168,195		$	9,334,158
Current portion of lease liability (note 6)		48,194			50,447
Derivative liability (note 7)		1,202,713			419,901
Total current liabilities		8,419,102			9,804,506

Non-current liabilities
Lease liability (note 6)		-			22,424
Total liabilities		8,419,102			9,826,930

Equity
Share capital (note 8)		147,674,648			147,545,399
Warrants (note 10)		3,517,867			3,517,867
Contributed surplus		16,567,255			15,586,832
Deficit		(129,009,600	)		(114,448,510	)
Total equity		38,750,170			52,201,588
Total equity and liabilities	$	47,169,272		$	62,028,518

The accompanying notes to the unaudited condensed interim consolidated financial statements are an integral part of these consolidated financial statements.

Commitments (notes 5 and 12)

Subsequent event (note 9(c))

Approved on behalf of the Board:

"David Elsley", Director

"Guillermo Torre-Amione", Director

- 1 -

Cardiol Therapeutics Inc.
Condensed Interim Consolidated Statements of Loss and Comprehensive Loss
(Expressed in Canadian Dollars)
Unaudited

	Three Months Ended			Three Months Ended			Six Months Ended			Six Months Ended
	June 30,			June 30,			June 30,			June 30,
	2023			2022			2023			2022
Operating expenses (notes 9, 13, 14)
General and administration	$	2,835,264		$	4,825,039		$	6,493,704		$	10,765,990
Research and development		3,479,385			4,407,182			7,607,081			8,254,709
Loss before other income		(6,314,649	)		(9,232,221	)		(14,100,785	)		(19,020,699	)
Interest income		528,697			191,336			1,074,624			263,647
Gain (loss) on foreign exchange		(828,909	)		1,689,797			(752,117	)		319,353
Change in derivative liability (note 7)		(856,893	)		861,600			(782,812	)		2,994,117
Net loss and comprehensive loss for the period	$	(7,471,754	)	$	(6,489,488	)	$	(14,561,090	)	$	(15,443,582	)

Basic and diluted net loss per share (note 11)	$	(0.12	)	$	(0.10	)	$	(0.23	)	$	(0.25	)
Weighted average number of common shares outstanding		64,105,448			61,932,362			64,098,586			61,928,811

The accompanying notes to the unaudited condensed interim consolidated financial statements are an integral part of these consolidated financial statements.

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Cardiol Therapeutics Inc.
Condensed Interim Consolidated Statements of Cash Flows
(Expressed in Canadian Dollars)
Unaudited

	Six Months			Six Months
	Ended			Ended
	June 30,			June 30,
	2023			2022
Operating activities
Net loss and comprehensive loss for the period	$	(14,561,090	)	$	(15,443,582	)
Adjustments for:
Depreciation of property and equipment		74,479			65,177
Amortization of intangible assets		42,222			42,222
Share-based compensation		1,093,223			484,157
Change in derivative liability		782,812			(2,994,117	)
Unrealized foreign exchange gain on cash		(849,290	)		419,969
Accretion on lease liability		3,011			5,071
Shares for services		16,449			217,268
Research and development expenses settled through warrant exercise		-			1,355,775
Changes in non-cash working capital items:
Accounts receivable		21,579			(59,641	)
Other receivables		153,549			63,145
Prepaid expenses		87,864			72,671
Accounts payable and accrued liabilities		(2,165,963	)		2,790,514
Net cash used in operating activities		(15,301,155	)		(12,981,371	)

Investing activities
Purchase of property and equipment		(48,029	)		(17,591	)
Net cash used in investing activities		(48,029	)		(17,591	)

Financing activities
Payment of lease liability		(27,688	)		(26,246	)
Net cash used in financing activities		(27,688	)		(26,246	)
Net change in cash and cash equivalents		(15,376,872	)		(13,025,208	)
Cash and cash equivalents, beginning of period		59,469,868			83,899,070
Impact of foreign exchange on cash and cash equivalents		849,290			(419,969	)
Cash and cash equivalents, end of period	$	44,942,286		$	70,453,893

The accompanying notes to the unaudited condensed interim consolidated financial statements are an integral part of these consolidated financial statements.

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Cardiol Therapeutics Inc.

Condensed Interim Consolidated Statements of Changes in Equity

(Expressed in Canadian Dollars)

Unaudited

	Share capital					Contributed
	Number	Amount		Warrants		surplus			Deficit			Total
Balance, December 31, 2021	61,922,999	$	142,918,829	$	4,176,780	$	12,660,329		$	(83,517,863	)	$	76,238,075
Shares for services	17,000		217,268		-		-			-			217,268
Share-based compensation (note 9)	-		-		-		484,157			-			484,157
Fair value of warrants earned	-		-		1,355,775		-			-			1,355,775
Net loss and comprehensive loss for the period	-		-		-		-			(15,443,582	)		(15,443,582	)
Balance, June 30, 2022	61,939,999	$	143,136,097	$	5,532,555	$	13,144,486		$	(98,961,445	)	$	62,851,693

Balance, December 31, 2022	64,042,536	$	147,545,399	$	3,517,867	$	15,586,832		$	(114,448,510	)	$	52,201,588
Restricted share units exercised	80,000		112,800		-		(112,800	)		-			-
Shares for services	5,000		16,449		-		-			-			16,449
Share-based compensation (note 9)	-		-		-		1,093,223			-			1,093,223
Net loss and comprehensive loss for the period	-		-		-		-			(14,561,090	)		(14,561,090	)
Balance, June 30, 2023	64,127,536	$	147,674,648	$	3,517,867	$	16,567,255		$	(129,009,600	)	$	38,750,170

The accompanying notes to the unaudited condensed interim consolidated financial statements are an integral part of these consolidated financial statements.

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Cardiol Therapeutics Inc.

Notes to Condensed Interim Consolidated Financial Statements

Three and Six Months Ended June 30, 2023

(Expressed in Canadian Dollars)

Unaudited

Nature of operations

Cardiol Therapeutics Inc. (the "Corporation") was incorporated under the laws of the Province of Ontario on January 19, 2017. The Corporation's registered and legal office is located at 2265 Upper Middle Rd. E., Suite 602, Oakville, Ontario, L6H 0G5, Canada.

On December 20, 2018, the Corporation completed its initial public offering on the Toronto Stock Exchange (the "TSX"). As a result, the Corporation's common shares commenced trading on that date on the TSX under the symbol "CRDL", and on May 12, 2021, warrants commenced trading under the symbol "CRDL.WT.A". On August 10, 2021, the Corporation's common shares commenced trading on The Nasdaq Capital Market ("Nasdaq") under the symbol "CRDL".

Significant accounting policies

Statement of compliance

The Corporation applies International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations issued by the International Financial Reporting Interpretations Committee (“IFRIC”). These unaudited condensed interim financial statements have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting. Accordingly, they do not include all of the information required for full annual financial statements required by IFRS as issued by IASB and interpretations issued by IFRIC.

The policies applied in these unaudited condensed interim consolidated financial statements are based on IFRSs issued and outstanding as of August 9, 2023, the date the Board of Directors approved the statements. The same accounting policies and methods of computation are followed in these unaudited condensed interim consolidated financial statements as compared with the most recent annual consolidated financial statements as at and for the year ended December 31, 2022.

Any subsequent changes to IFRS that are given effect in the Corporation’s annual consolidated financial statements for the year ending December 31, 2023, could result in restatement of these unaudited condensed interim consolidated financial statements.

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Cardiol Therapeutics Inc.

Notes to Condensed Interim Consolidated Financial Statements

Three and Six Months Ended June 30, 2023

(Expressed in Canadian Dollars)

Unaudited

Cash and cash equivalents

Interest earned on cash and cash equivalents for the three and six months ended June 30, 2023 amounted to $528,697 and $1,074,624 (three and six months ended June 30, 2022 - $191,336 and $263,647). As at December 31, 2022, Cash and cash equivalents included a cashable Guaranteed Investment Certificate totaling $61,875 earning interest of 0.5% per annum and maturing on December 4, 2023. The Guaranteed Investment Certificate was redeemed prior to maturity without penalty during the six months ended June 30, 2023.

4.	Property and equipment

Cost	Right-of- use asset		Equipment		Leasehold improvements		Office equipment		Computer equipment		Total
Balance, December 31, 2021	$	200,319	$	130,770	$	237,248	$	65,716	$	79,823	$	713,876
Additions		-		41,094		-		1,148		32,467		74,709
Balance, December 31, 2022		200,319		171,864		237,248	$	66,864	$	112,290	$	788,585
Additions		-		48,029		-		-		-		48,029
Balance, June 30, 2023	$	200,319	$	219,893	$	237,248	$	66,864	$	112,290	$	836,614

Accumulated Depreciation	Right-of- use asset		Equipment		Leasehold improvements		Office equipment		Computer equipment		Total
Balance, December 31, 2021	$	103,509	$	75,211	$	105,872	$	25,659	$	47,132	$	357,383
Depreciation for the year		40,068		19,750		50,840		8,069		16,737		135,464
Balance, December 31, 2022	$	143,577	$	94,961	$	156,712	$	33,728	$	63,869	$	492,847
Depreciation for the period		20,034		18,238		25,420		3,314		7,473		74,479
Balance, June 30, 2023	$	163,611	$	113,199	$	182,132	$	37,042	$	71,342	$	567,326

Carrying value	Right-of- use asset		Equipment		Leasehold improvements		Office equipment		Computer equipment		Total
Balance, December 31, 2022	$	56,742	$	76,903	$	80,536	$	33,136	$	48,421	$	295,738
Balance, June 30, 2023	$	36,708	$	106,694	$	55,116	$	29,822	$	40,948	$	269,288

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Cardiol Therapeutics Inc.

Notes to Condensed Interim Consolidated Financial Statements

Three and Six Months Ended June 30, 2023

(Expressed in Canadian Dollars)

Unaudited

Intangible assets

Cost	Exclusive global license agreement
Balance, December 31, 2021, December 31, 2022, and June 30, 2023	$	767,228

Accumulated Amortization	Exclusive global license agreement
Balance, December 31, 2021	$	387,982
Amortization for the year		84,444
Balance, December 31, 2022	$	472,426
Amortization for the period		42,222
Balance, June 30, 2023	$	514,648

Carrying Value	Exclusive global license agreement
Balance, December 31, 2022	$	294,802
Balance, June 30, 2023	$	252,580

Exclusive global agreement ("Meros License Agreement")

In 2017, the Corporation was granted by Meros Polymers Inc. (“Meros”) the sole, exclusive, irrevocable license to patented nanotechnologies for use with any drugs to diagnose, or treat, cardiovascular disease, cardiopulmonary disease, and cardiac arrhythmias. Meros is focused on the advancement of nanotechnologies developed at the University of Alberta.

Under the Meros License Agreement, Cardiol agreed to certain milestones and milestone payments, including the following: (i) payment of $100,000 upon enrolling the first patient in a Phase IIB clinical trial designed to investigate the safety and indications of efficacy of one of the licensed technologies; (ii) payment of $500,000 upon enrolling the first patient in a Pivotal Phase III clinical trial designed to investigate the safety and efficacy of one of the licensed technologies; (iii) $1,000,000 upon receiving regulatory approval from the FDA for any therapeutic and/or prophylactic treatment incorporating the licensed technologies. Cardiol also agreed to pay Meros the following royalties:

(a) 5% of worldwide proceeds of net sales of the licensed technologies containing cannabinoids, excluding non-royalty sub-license income in (b) below, that Cardiol receives from human and animal disease indications and derivatives as outlined in the Meros License Agreement;

(b) 7% of any non-royalty sub-license income that Cardiol receives from human and animal disease indications and derivatives for licensed technologies containing cannabinoids as outlined in the Meros License Agreement;

(c) 3.7% of worldwide proceeds of net sales that Cardiol receives from the licensed technology in relation to human and animal cardiovascular and/or cardiopulmonary disease, heart failure, and/or cardiac arrhythmia diagnosis and/or treatments using the drugs, excluding cannabinoids included in (a) above, outlined in the Meros License Agreement; and

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Cardiol Therapeutics Inc.

Notes to Condensed Interim Consolidated Financial Statements

Three and Six Months Ended June 30, 2023

(Expressed in Canadian Dollars)

Unaudited

Intangible assets (continued)

(d) 5% of any non-royalty sub-license income that Cardiol receives in relation to any human and animal heart disease, heart failure and/or arrhythmias indications, excluding cannabinoids included in (b) above, as outlined in the Meros License Agreement.

In addition, as part of the consideration under the Meros License Agreement, Cardiol (i) issued to Meros 1,020,000 common shares; and (ii) issued to Meros 1,020,000 special warrants convertible automatically into common shares for no additional consideration upon the first patient being enrolled in a Phase 1 clinical trial using the licensed technologies as described in the Meros License Agreement.

Lease liability

	Carrying Value
Balance, December 31, 2021	$	117,579
Repayments		(53,934	)
Accretion		9,226
Balance, December 31, 2022	$	72,871
Repayments		(27,688	)
Accretion		3,011
Balance, June 30, 2023	$	48,194
Current portion		48,194
Long-term portion	$	-

(i) When measuring the lease liability for the property lease that was classified as an operating lease, the Corporation discounted the lease payments using its incremental borrowing rate. The property lease expires on May 31, 2024, and the lease payments were discounted with a 9% interest rate.

Derivative liability

On November 5, 2021, the Corporation issued 8,175,000 warrants as part of a unit financing. Each warrant is exercisable into one common share at the price of USD$3.75 per share for a period of three years from closing. The original estimated fair value of $11,577,426 was assigned to the 8,175,000 warrants issued by using a fair value market technique incorporating the Black-Scholes option pricing model, with the following assumptions: a risk-free interest rate of 1.01%; an expected volatility factor of 81%; an expected dividend yield of 0%; and an expected life of 3 years. The only significant unobservable input is the volatility, which could cause an increase or decrease in fair value. The warrants have been classified as a derivative liability on the statement of financial position and are re-valued at each reporting date, as the warrants were issued in a currency other than the Corporation's functional currency. As at June 30, 2023, the fair value of the derivative liability was $1,202,713 (December 31, 2022 - $419,901), resulting in an increase in the value of the derivative liability for the three and six months ended June 30, 2023 of $856,893 and $782,812 (three and six months ended June 30, 2022 - decrease in fair value of $861,600 and $2,994,117).

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Cardiol Therapeutics Inc.

Notes to Condensed Interim Consolidated Financial Statements

Three and Six Months Ended June 30, 2023

(Expressed in Canadian Dollars)

Unaudited

Derivative liability (continued)

Significant assumptions used in determining the fair value of the derivative warrant liabilities are as follows:

	Six Months Ended			Six Months Ended
	June 30, 2023			June 30, 2022
Share price	USD$	0.89		USD$	1.32
Exercise price	USD$	3.75		USD$	3.75
Risk-free interest rate		4.54	%		3.14	%
Expected volatility		101	%		88	%
Expected life in years		1.35			2.35
Expected dividend yield		Nil			Nil

8.	Share capital

a) Authorized share capital

The authorized share capital consists of an unlimited number of common shares. The common shares do not have a par value. All issued shares are fully paid.

b) Common shares issued

	Number of
	common shares	Amount
Balance, December 31, 2021	61,922,999	$	142,918,829
Shares for services (i)	17,000		217,268
Balance, June 30, 2022	61,939,999	$	143,136,097

Balance, December 31, 2022	64,042,536	$	147,545,399
Shares for services (ii)	5,000		16,449
Restricted share units exercised (note 9)	80,000		112,800
Balance, June 30, 2023	64,127,536	$	147,674,648

(i) During the six months ended June 30, 2022, the Corporation issued 17,000 common shares with a fair value of$ 28,348. The fair value of the shares was determined to be equal to the value of the services rendered. Included in shares for services is $188,920 related to vesting of previously issued shares.

(ii) During the six months ended June 30, 2023, the Corporation issued 5,000 common shares with a fair value of$ 3,550. The fair value of the shares was determined to be equal to the value of the services rendered. Included in shares for services is $12,899 related to vesting of previously issued shares.

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Cardiol Therapeutics Inc.

Notes to Condensed Interim Consolidated Financial Statements

Three and Six Months Ended June 30, 2023

(Expressed in Canadian Dollars)

Unaudited

Share capital (continued)

c) 2022 At-The-Market ("ATM") Program

In June 2022, the Corporation announced it entered into an equity distribution agreement with Canaccord Genuity LLC and Cantor Fitzgerald & Co. (the "Sales Agents") acting as co-agents in connection with the 2022 at-the-market offering program (the "2022 ATM Program"). Under the terms of the 2022 ATM Program, the Corporation may, from time to time, sell common shares having an aggregate value of USD$50,000,000 through the Sales Agents on the Nasdaq Capital Market. As at June 30, 2023 and the date of these consolidated financial statements, the Corporation has not issued any shares under the 2022 ATM Program.

The timing and extent of the use of the 2022 ATM Program will be at the discretion of the Corporation and the Corporation has no obligation to sell any shares pursuant to the 2022 ATM Program. Accordingly, total gross proceeds from offerings under the 2022 ATM Program could be less than US$50 million. The 2022 ATM Program will be effective until the earlier of the issuance and sale of all of the Offered Shares issuable pursuant to the 2022 ATM Program and March 8, 2024, unless terminated prior to such date by the Corporation or the Sales Agents.

Share-based payments

The Corporation has adopted an Omnibus Equity Incentive Plan in accordance with the policies of the TSX, which permits the grant or issuance of options, Restricted Share Units ("RSUs"), Performance Share Units ("PSUs") and Deferred Share Units ("DSUs"), as well as other share-based payment arrangements. The maximum number of shares that may be issued upon the exercise or settlement of awards granted under the plan may not exceed 15% of the Corporation's issued and outstanding shares from time to time. The Board of Directors determines the price per common share and the number of common shares which may be allotted to directors, officers, employees, and consultants, and all other terms and conditions of the option, subject to the rules of the TSX.

During the three and six months ended June 30, 2023, the total expenses related to share-based compensation amounted to $666,400 and $1,093,223 (three and six months ended June 30, 2022 - $(528,237) and $484,157).

(a) Stock Options

	Number of		Weighted average
	stock options		exercise price ($)
Balance, December 31, 2021	4,301,800		$	4.16
Issued	395,000			1.95
Expired	(403,334	)		4.34
Balance, June 30, 2022	4,293,466		$	3.94

Balance, December 31, 2022	1,968,476		$	3.52
Issued	500,000			1.20
Expired	(780,976	)		4.65
Balance, June 30, 2023	1,687,500		$	2.32

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Cardiol Therapeutics Inc.

Notes to Condensed Interim Consolidated Financial Statements

Three and Six Months Ended June 30, 2023

(Expressed in Canadian Dollars)

Unaudited

Share-based payments (continued)

At the grant date, the fair value stock options issued was estimated using the Black-Scholes option pricing model based on the following weighted average assumptions:

	Six Months Ended			Six Months Ended
	June 30,			June 30,
	2023			2022
Fair value of stock options at grant date	$	0.65		$	1.39
Share price	$	1.00		$	1.86
Exercise price	$	1.20		$	1.95
Risk-free interest rate		3.74	%		1.95	%
Expected volatility		89	%		100	%
Expected life in years		4.40			5.00
Expected dividend yield		Nil			Nil

The following table reflects the actual stock options issued and outstanding as of June 30, 2023:

Expiry date	Exercise price ($)	Weighted average remaining contractual life (years)	Number of options outstanding	Number of options vested (exercisable)
February 23, 2025	3.54	1.65	20,000	20,000
April 10, 2025	0.75	1.78	100,000	-
August 19, 2025	2.12	2.14	100,000	66,667
August 30, 2025	5.00	2.17	80,000	80,000
April 1, 2026	5.77	2.76	60,000	60,000
December 8, 2026	3.59	3.44	325,000	108,333
January 11, 2027	2.18	3.54	220,000	73,333
March 14, 2027	2.07	3.71	60,000	20,000
May 12, 2027	1.46	3.87	115,000	38,334
September 12, 2027	1.61	4.21	207,500	-
June 25, 2028	1.33	4.99	400,000	-
	2.32	3.67	1,687,500	466,667

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Cardiol Therapeutics Inc.

Notes to Condensed Interim Consolidated Financial Statements

Three and Six Months Ended June 30, 2023

(Expressed in Canadian Dollars)

Unaudited

Share-based payments (continued)

(b)

Performance Share Units

The Corporation has 600,000 outstanding PSUs as at June 30, 2023 (December 31, 2022 - 600,000). Grants of PSUs require completion of certain performance criteria specific to each grant. These PSUs have an expiry date of December 31, 2023.

During the six months ended June 30, 2022, 1,200,000 PSUs granted to certain consultants of the Corporation expired. Upon expiry, $1,121,400 of previously recognized share-based compensation was reversed through general and administration.

(c)

Restricted Share Units

The total outstanding RSUs at June 30, 2023 is 3,357,963 (December 31, 2022 - 2,312,963). Of the outstanding RSUs, 1,305,984 have fully vested as of June 30, 2023 (December 31, 2022 - 1,355,984).

During the three and six months ended June 30, 2023, the Corporation granted 1,125,000 RSUs carrying a value of $1,083,000 (June 30, 2022 - nil carrying a value of nil, and nil carrying a value of nil). These RSUs will vest one-fifth on each of September 30, 2023, October 31, 2023, November 30, 2023, December 31, 2023, and January 31, 2024.

Subsequent to June 30, 2023, the Corporation granted 875,000 RSUs to certain consultants of the Corporation, vesting 20% on each of September 30, 2023, October 31, 2023, November 30, 2023, December 31, 2023 and January 31, 2024. The Corporation granted an additional 100,000 RSUs to certain consultants that vest on September 2, 2023.

10.

Warrants

	Number of warrants	Amount
Balance, December 31, 2021	12,452,178	$	4,176,780
Earned (i)	-		1,355,775
Balance, June 30, 2022	12,452,178	$	5,532,555

Balance, December 31, 2022 and June 30, 2023	11,628,178	$	3,517,867

(i) During the six months ended June 30, 2022, 338,943 warrants with a fair value of $1,355,775 were earned pursuant to the Caro Development Agreement (see note 12 (iii)).

The following table reflects the actual warrants issued and outstanding as of June 30, 2023, excluding 1,020,000 special warrants convertible automatically into common shares for no additional consideration in accordance with the original escrow release terms as described in the Meros License Agreement (see note 5):

- 12 -

Cardiol Therapeutics Inc.

Notes to Condensed Interim Consolidated Financial Statements

Three and Six Months Ended June 30, 2023

(Expressed in Canadian Dollars)

Unaudited

10.

Warrants (continued)

Expiry date	Exercise price ($)	Remaining contractual life (years)	Warrants exercisable
May 12, 2024	4.60	0.87	3,453,178
November 5, 2024⁽¹⁾	4.97	1.35	8,175,000
	4.86	1.21	11,628,178

(1) Warrants carry an exercise price of USD$3.75. This amount was translated to CAD for presentation purposes at the June 30, 2023 rate of 1.33. These warrants are classified as a derivative liability on the statement of financial position (see note 7).

11.

Loss per share

For the three and six months ended June 30, 2023, basic and diluted loss per share has been calculated based on the loss attributable to common shareholders of $7,471,754 and $14,561,090, respectively (three and six months ended June 30, 2022 - $6,489,488 and $15,443,582, respectively) and the weighted average number of common shares outstanding of 64,105,448 and 64,098,586, respectively (three and six months ended June 30, 2022 - 61,932,362 and 61,928,811, respectively). Diluted loss per share did not include the effect of stock options, PSUs, RSUs, and warrants as they are anti-dilutive.

12.

Commitments

(i) The Corporation has leased premises with third parties. The minimum committed lease payments, which include the lease liability payments shown as base rent, are approximately as follows:

	Base rent		Variable rent		Total
2023	$	27,688	$	25,923	$	53,611
2024		23,074		21,602		44,676
	$	50,762	$	47,525	$	98,287

(ii) The Corporation has signed various agreements with consultants to provide services. Under the agreements, the Corporation has the following remaining commitments.

2023

289,597

(iii) Cardiol entered into a development agreement (the “Caro Development Agreement”) with the Clinical Academic Research Organization, S.A. DE C.V. (“Caro”) dated August 28, 2018, for the further research and development of proprietary drug formulations for the treatment of heart failure. Caro is a Mexican corporation dedicated to providing clinical and scientific experimentation and consulting, as well as performing development activities by itself or through third-party providers.

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Cardiol Therapeutics Inc.

Notes to Condensed Interim Consolidated Financial Statements

Three and Six Months Ended June 30, 2023

(Expressed in Canadian Dollars)

Unaudited

12.

Commitments (continued)

(iii) (continued) Pursuant to the terms of the Caro Development Agreement, Caro will provide scientific experimentation, research activities, medical drug development activities, and medical drug formulation and discovery to Cardiol (the “Development Activities”), as set out in a development plan (the “Development Plan”). Under the Caro Development Agreement, Caro may also engage third-party providers of development activities in support of the Development Plan, which is anticipated to be limited to third-party vendors of materials.

Pursuant to the terms of the Caro Development Agreement, Cardiol upon execution of the Caro Development Agreement allotted and set aside 824,000 Common Shares of Cardiol, and issued to Caro 824,000 warrants (the “Caro Compensation Warrants”), each warrant having the following qualifications: (i) an expiry date of August 31, 2022, or such earlier date as may be specified by a relevant stock exchange; (ii) an exercise price of $4 per share (to be settled through the issuance of invoices by Caro); and (iii) each of the Caro Compensation Warrants entitles Caro to purchase one Common Share of Cardiol for the exercise price. The Compensation Warrants were earned and became exercisable as the Development Activities were completed. Cardiol also further agreed to pay Caro US$400,000 in cash (paid). The unexercised warrants expired on August 31, 2022. Prior to that, 503,672 warrants that were earned were exercised into common shares, carrying a value of $2,014,688.

Pursuant to the terms of the Caro Development Agreement, both Cardiol and Caro may terminate the Caro Development Agreement if either party believes in good faith that the continued performance of the Development Activities may be commercially unwise, jeopardize safety, or otherwise be unethical or illegal. However, if Caro terminates the Caro Development Agreement for any reason except breach of contract by Cardiol, or terminates the development activities under the contract prior to achievement of all milestones in the Development Plan, then any unexercised Caro Compensation Warrants that are not related to Development Activities and milestones in the Development Plan that have been attained up to the time of termination of the Caro Development Agreement shall be deemed terminated as of the time of termination of the Caro Development Agreement.

Further, if Cardiol terminates the Caro Development Agreement for any reason (including breach of contract by Caro), or requires Caro to terminate the Development Activities prior to achievement of all milestones in the Development Plan, then the Caro Compensation Warrants issued to Caro that can be invoiced for the CARO Development Activities completed up to the time of termination shall be considered to have been earned notwithstanding such termination.

(iv) Cardiol entered into an exclusive supply agreement (the "Exclusive Supply Agreement”) with Noramco, Inc. (“Noramco”) dated September 28, 2018, as amended on December 7, 2018, December 11, 2018, July 2, 2019, September 11, 2019, and November 12, 2019, pursuant to which Noramco will be the exclusive supplier of pharmaceutical cannabidiol for Cardiol, provided Noramco is able to meet Cardiol’s supply requirements.

During 2020, the Exclusive Supply Agreement was assigned to Purisys, LLC ("Purisys"), an affiliate of Noramco headquartered in Athens, Georgia. This assignment had no impact on Cardiol’s rights under the Exclusive Supply Agreement.

Purisys shall not sell pharmaceutical cannabidiol to any third party for use in the production of products sold to retail pharmacies in Canada and Mexico, such as Shoppers Drug Mart Inc. Notwithstanding this restriction, Purisys shall have the right to sell pharmaceutical cannabidiol to third parties outside Canada for use in products that are approved as prescription medicines by the Therapeutic Products Directorate of Health Canada for delivery into Canada.

The Exclusive Supply Agreement expires on December 31, 2038, subject to certain renewal provisions.

(v) Pursuant to the terms of agreements with various other contract research organizations, the Corporation is committed for contract research services for 2023 at a cost of approximately $576,053.

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Cardiol Therapeutics Inc.

Notes to Condensed Interim Consolidated Financial Statements

Three and Six Months Ended June 30, 2023

(Expressed in Canadian Dollars)

Unaudited

13.

Other expenses and adjustments

The following details highlight certain components of the research and development and general and administration expenses classified by nature. Remaining research and development and operating expenses include personnel costs and expenses paid to third parties:

	Three Months Ended		Three Months Ended			Six Months Ended		Six Months Ended
	June 30,		June 30,			June 30,		June 30,
	2023 ($)		2022 ($)			2023 ($)		2022 ($)
Research and development expenses
Non-cash share-based compensation		98,487		91,347			195,892		263,184

General and administration expenses
Depreciation of property and equipment		37,385		33,510			74,479		65,177
Amortization of intangible assets		21,111		21,111			42,222		42,222
Non-cash share-based compensation		567,913		(673,584	)		897,331		220,973

14.

Related party transactions

(a)

The Corporation entered into the following transactions with related parties:

(i) Included in research and development expense is $109,129 and $737,809 for the three and six months ended June 30, 2023 (three and six months ended June 30, 2022 - $362,053 and $702,532) paid to a company related to a director. As at June 30, 2023, $490,261 (December 31, 2022 - $985,022) was owed to this company and this amount was included in accounts payable and accrued liabilities, and $nil (December 31, 2022 - $9,413) was paid to this company and was included in prepaid expenses.

(b) Key management personnel are those persons having authority and responsibility for planning, directing, and controlling the activities of the Corporation directly or indirectly, including any directors (executive and non-executive) of the Corporation. Remuneration of directors and key management personnel of the Corporation, except as noted in (a) above, was as follows:

	Three Months Ended		Three Months Ended		Six Months Ended		Six Months Ended
	June 30,		June 30,		June 30,		June 30,
	2023		2022		2023		2022
Salaries and benefits	$	534,446	$	507,290	$	1,704,476	$	1,369,618
Share-based payments		262,128		366,498		531,010		847,779
	$	796,574	$	873,788	$	2,235,486	$	2,217,397

As at June 30, 2023, $nil (December 31, 2022 - $nil) was owed to key management personnel and this amount was included in accounts payable and accrued liabilities.

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Exhibit 99.2

CARDIOL THERAPEUTICS INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

THREE AND SIX MONTHS ENDED

JUNE 30, 2023

MANAGEMENT'S DISCUSSION AND ANALYSIS

Introduction

The following management’s discussion and analysis (“MD&A”) of the financial condition and results of the operations of Cardiol Therapeutics Inc. (the “Corporation” or “Cardiol”) constitutes management of the Corporation's ("Management") review of the factors that affected the Corporation’s financial and operating performance for the three and six months ended June 30, 2023 (the “2023 Fiscal Period”). This discussion should be read in conjunction with the consolidated financial statements for the years ended December 31, 2022, 2021, and 2020 and the unaudited condensed interim consolidated financial statements for the three and six months ended June 30, 2023 (“Financial Statements”), together with the respective notes thereto. Results are reported in Canadian dollars, unless otherwise noted. The Financial Statements and the financial information contained in this MD&A are derived from the Financial Statements prepared in accordance with International Accounting Standard 34, Interim Financial Reporting. Accordingly, they do not include all of the information required for full annual financial statements required by International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations issued by the International Financial Reporting Interpretations Committee (“IFRIC”). In the opinion of Management, all adjustments (which consist only of normal recurring adjustments) considered necessary for a fair presentation have been included.

This MD&A is dated August 9, 2023. All dollar amounts in this MD&A are reported in Canadian dollars, unless otherwise stated. Unless otherwise noted or the context indicates otherwise, the terms “we”, “us”, “our”, “Cardiol”, the "Company" or the “Corporation” refer to Cardiol Therapeutics Inc.

This MD&A is presented current to August 9, 2023 unless otherwise stated. The financial information presented in this MD&A is derived from the Financial Statements. This MD&A contains forward-looking statements that involve risks, uncertainties, and assumptions, including statements regarding anticipated developments in future financial periods and our plans and objectives. There can be no assurance that such information will prove to be accurate, and readers are cautioned not to place undue reliance on such forward-looking statements. See “Forward-Looking Statements” and “Risk Factors”.

Forward-Looking Information

This MD&A contains forward-looking information that relates to the Corporation’s current expectations and views of future events. In some cases, this forward-looking information can be identified by words or phrases such as “may”, “might”, "could", “will”, “expect”, “anticipate”, “estimate”, “intend”, “plan”, “indicate”, “seek”, “believe”, “predict”, or “likely”, or the negative of these terms, or other similar expressions intended to identify forward-looking information. Statements containing forward-looking information are not historical facts. The Corporation has based this forward-looking information on its current expectations and projections about future events and financial trends that it believes might affect its financial condition, results of operations, business strategy, and financial needs. The forward-looking information includes, among other things, statements relating to:

	•	our anticipated cash needs, and the need for additional financing;
	•	our development of our product candidates for use in basic research, clinical studies and commercialization;
	•	our ability to develop new routes of administration of our product candidates, including parenteral, for use in basic research, clinical studies, and commercialization;
	•	our ability to develop new formulations of our product candidates for commercialization;
	•	the successful development and commercialization of our current product candidates and the addition of future products and product candidates;
	•	the ability for our product delivery technologies to deliver our product candidates to inflamed and/or fibrotic tissue;
	•	our intention to build a pharmaceutical brand and our products focused on addressing inflammation and fibrosis in heart disease, including acute myocarditis, recurrent pericarditis, and heart failure;
	•	the expected medical benefits, viability, safety, efficacy, effectiveness, and dosing of our product candidates;
	•	patents and intellectual property, including, but not limited to, our (a) ability to procure, defend, and/or enforce our intellectual property relating to our products, product formulations, routes of administration, product candidates, and associated uses, methods, and/or processes, and (b) freedom to operate;
	•	our competitive position and the regulatory environment in which we operate;

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	•	the molecular targets and mechanism of action of our product candidates;
	•	our financial position; our business strategy; our growth strategies; our operations; our financial results; our dividend policy; our plans and objectives; and
	•	expectations of future results, performance, achievements, prospects, opportunities, or the market in which we operate.

In addition, any statements that refer to expectations, intentions, projections, or other characterizations of future events or circumstances contain forward-looking information. Forward-looking information is based on certain assumptions and analyses made by the Corporation in light of the experience and perception of historical trends, current conditions, and expected future developments and other factors we believe are appropriate and are subject to risks and uncertainties. The preceding list is not intended to be an exhaustive list of all of our forward-looking statements. The forward-looking statements are based on our beliefs, assumptions and expectations of future performance, taking into account the information currently available to us. These statements are only predictions based upon our current expectations and projections about future events. Although we believe that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and we cannot assure that actual results will be consistent with this forward-looking information. Given these risks, uncertainties, and assumptions, prospective investors should not place undue reliance on this forward-looking information. Whether actual results, performance, or achievements will conform to the Corporation’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions, and other factors, including those listed under “Risk Factors”, which include:

	•	the inherent uncertainty of product development including basic research and clinical trials;
	•	our requirement for additional financing;
	•	our negative cash flow from operations;
	•	our history of losses;
	•	dependence on the success of our early-stage product candidates which may not generate revenue;
	•	reliance on Management, loss of members of Management or other key personnel, or an inability to attract new Management team members;
	•	our ability to successfully design, initiate, execute, and complete clinical trials, including the high cost, uncertainty, and delay of clinical trials and additional costs associated with any failed clinical trials;
	•	the uncertainty our investigational products will have a therapeutic benefit in the clinical indications we are pursuing;
	•	potential equivocal or negative results from clinical trials and their adverse impacts on our future commercialization efforts;
	•	our ability to receive and maintain regulatory exclusivities, including Orphan Drug Designations/Approvals, for our products and product candidates;
	•	delays in achievement of projected development goals;
	•	management of additional regulatory burdens;
	•	volatility in the market price for our securities;
	•	failure to protect and maintain and the consequential loss of intellectual property rights;
	•	third-party claims relating to misappropriation by the Corporation of their intellectual property;
	•	reliance on third parties to conduct and monitor our pre-clinical studies and clinical trials;
	•	our product candidates being subject to controlled substance laws which may vary from jurisdiction to jurisdiction;
	•	changes in laws, regulations, and guidelines relating to our business, including tax and accounting requirements;
	•	our reliance on early-stage research regarding the medical benefits, viability, safety, efficacy, and dosing of our product candidates;
	•	claims for personal injury or death arising from the use of our products and product candidates;
	•	uncertainty relating to market acceptance of our product candidates;
	•	our lack of experience in commercializing any products, including selling, marketing, or distributing our products;
	•	securing third-party payor reimbursement for our products and product candidates;
	•	the level of pricing and reimbursement for our products and product candidates, if approved;
	•	our dependence on contract manufacturers;
	•	unsuccessful collaborations with third parties;
	•	business disruptions affecting third-party suppliers and manufacturers;
	•	lack of control in future production and selling prices of our product candidates;
	•	competition in our industry;
	•	our inability to develop new technologies and products and the obsolescence of existing technologies and products;
	•	unfavorable publicity or consumer perception towards our products;

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	•	product liability claims and product recalls;
	•	expansion of our business to other jurisdictions;
	•	fraudulent activities of employees, contractors, and consultants;
	•	our reliance on key inputs and their related costs;
	•	difficulty associated with forecasting demand for our products;
	•	operating risk and insurance coverage;
	•	our inability to manage growth;
	•	conflicts of interest among the officers and directors ("Director") of the Corporation;
	•	managing damage to our reputation and third-party reputational risks;
	•	relationships with customers and third-party payors and consequential exposure to applicable anti-kickback, fraud, and abuse and other healthcare laws;
	•	exposure to information systems security threats;
	•	no dividends for the foreseeable future;
	•	future sales of common shares and warrants by existing shareholders causing the market price for the common shares and warrants to fluctuate;
	•	the issuance of common shares in the future causing dilution;
	•	our operations could be adversely affected by events outside of our control;
	•	global geo-political events, including the Russian invasion of Ukraine and the responses of governments having a significant effect on the world economy; and
	•	failure to meet regulatory or ethical expectations on environmental impact, including climate change.

If any of these risks or uncertainties materialize, or if assumptions underlying the forward-looking information prove incorrect, actual results may vary materially from those anticipated in the forward-looking information.

Information contained in forward-looking information in this MD&A is provided as of August 9, 2023, and we disclaim any obligation to update any forward-looking information, whether as a result of new information or future events or results, except to the extent required by applicable securities laws. Accordingly, potential investors should not place undue reliance on forward-looking information.

Overview

On December 20, 2018, the Corporation completed its initial public offering on the Toronto Stock Exchange (the "TSX"). As a result, the common shares commenced trading on the TSX under the symbol "CRDL". On May 12, 2021, warrants arising from a "bought deal" short form prospectus offering that closed on the same date, commenced trading on the TSX. These warrants trade under the symbol "CRDL.WT.A". On August 10, 2021, the Corporation's common shares commenced trading on The Nasdaq Capital Market ("Nasdaq") under the symbol "CRDL".

The Corporation is a clinical-stage life sciences company focused on the research and clinical development of anti-inflammatory and anti-fibrotic therapies for the treatment of heart diseases. The Corporation's lead drug candidate, CardiolRx™ (cannabidiol) oral solution, is pharmaceutically manufactured and is currently in clinical development for use in the treatment of two heart diseases. It is recognized that cannabidiol inhibits activation of the inflammasome pathway, an intracellular process known to play an important role in the development and progression of inflammation and fibrosis associated with myocarditis, pericarditis, and heart failure.

The Corporation has received Investigational New Drug Application ("IND") application authorization from the United States ("U.S.") Food and Drug Administration ("FDA") to conduct a Phase II open-label pilot study designed to evaluate the tolerance, safety, and efficacy of CardiolRx in patients with recurrent pericarditis. The study will also assess the improvement in objective measures of disease, and during an extension period, assess the feasibility of weaning concomitant background therapy including corticosteroids, while taking CardiolRx. Pericarditis refers to inflammation of the pericardium (the membrane or sac that surrounds the heart) that follows an initial episode (frequently resulting from a viral infection). Patients may have multiple recurrences. Symptoms include debilitating chest pain, shortness of breath, and fatigue, resulting in physical limitations, reduced quality of life, emergency department visits, and hospitalizations. The only FDA-approved therapy for recurrent pericarditis, launched in 2021, is extraordinarily costly and is primarily used as a third-line intervention. The number of cases of patients seeking and receiving treatment for recurrent pericarditis annually in the U.S. is estimated at 38,000. Hospitalization due to recurrent pericarditis is often associated with a 6-8-day length of stay and cost per stay is estimated to range between US$20,000 and US$30,000 in the U.S.

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The Corporation has also received IND authorization from the FDA to conduct a Phase II multi-national, randomized, double-blind, placebo-controlled trial designed to evaluate the efficacy and safety of CardiolRx in acute myocarditis (the "ARCHER" trial). Myocarditis is an acute inflammatory condition of the heart muscle (myocardium) characterized by chest pain, impaired cardiac function, atrial and ventricular arrhythmias, and conduction disturbances. Although the symptoms are often mild, myocarditis remains an important cause of acute and fulminant heart failure and is a leading cause of sudden cardiac death in people under 35 years of age. Although viral infection is the most common cause of myocarditis, the condition can also result from administration of therapies used to treat several common cancers, including chemo-therapeutic agents and immune checkpoint inhibitors. There are no FDA-approved therapies for acute myocarditis which affects an estimated 46,000 people in the U.S. per year. Patients hospitalized with acute myocarditis experience an average seven day length of stay and a 4-6% risk of in-hospital mortality, with average hospital charge per stay estimated at US$110,000 in the U.S. Severe cases frequently require ventricular assist devices or extracorporeal oxygenation and may necessitate heart transplantation.

The Corporation is planning to pursue the development of CardiolRx as an Orphan Drug for the treatment of recurrent pericarditis and acute myocarditis. The U.S. Orphan Drug Designation program was created to provide the sponsor of a drug or biologic significant incentives, including seven-year marketing exclusivity and exemptions from certain FDA fees, to develop treatments for diseases that affect fewer than 200,000 people in the U.S. Products with Orphan Drug Designation also frequently qualify for accelerated regulatory review. The program was successfully utilized to support the first FDA approval of an oral cannabidiol solution for the treatment of seizures associated with rare pediatric epilepsy syndromes. The European Commission's European Medicines Agency ("EMA") has a similar orphan medicine product program for rare diseases.

In addition, the Corporation is developing a novel subcutaneously administered drug formulation of cannabidiol intended for use in heart failure – a leading cause of death and hospitalization in the developed world, with associated healthcare costs in the United States exceeding $30 billion annually.

Operations Highlights

During the 2023 Fiscal Period

(i) In January 2023, the Corporation announced the first patient has been enrolled in the Company-sponsored Phase II open-label pilot study (NCT05494788) investigating the tolerance, safety, and efficacy of CardiolRx™ in patients with recurrent pericarditis. In addition to standard safety assessments, the study is designed to evaluate improvement in objective measures of disease, and during an extension period, assess the feasibility of weaning concomitant background therapy including corticosteroids, while taking CardiolRx.

(ii) In March 2023, the Corporation announced study results from one of its international collaborating research centers demonstrating that its pharmaceutically manufactured cannabidiol significantly prevents cardiac dysfunction and the development of fibrosis and cardiomyocyte hypertrophy in a pre-clinical model of heart failure and reduces expression of key inflammatory and fibrotic markers. Cannabidiol is the active pharmaceutical ingredient in CardiolRx, the Corporation’s lead investigational oral drug candidate currently in Phase II clinical trials for recurrent pericarditis and acute myocarditis, and in its novel subcutaneously administered drug formulation intended for use in heart failure and currently in pre-clinical development.

The studies were presented by researchers from Instituto Tecnológico y de Estudios Superiores de Monterrey, Mexico (“TecSalud”) at the American College of Cardiology's 72nd Annual Scientific Session together with World Congress of Cardiology (“ACC.23/WCC”). TecSalud is one of the Corporation’s international collaborating research centers working towards the common goal of developing therapies to advance the treatment of heart diseases.

The poster entitled “Cannabidiol Therapy for Chronic Heart Failure Prevents Cardiac Pathological Remodeling in a Non- ischemic Cardiomyopathy Murine Model” was presented on March 4th within the “Heart Failure and Cardiomyopathies:

Basic and Translational Science 1” session of ACC.2023/WCC. This work builds upon existing knowledge by confirming cannabidiol’s cardioprotective properties and, in this model, its ability to reduce inflammation and prevent hypertrophy and fibrosis in heart tissue. This work also furthers the understanding of cannabidiol’s ability to improve cardiac function and, in isolated cardiomyocytes, improve calcium handling and mitochondrial health.

A second poster entitled “Abnormal Mitochondrial Calcium Content in Angiotensin-Induced Hypertrophy is Ameliorated by Cannabidiol Mimicking PPAR-y Activation” was presented on March 5th within the “Heart Failure and Cardiomyopathies: Basic and Translational Science 8” session of ACC.2023/WCC. This poster presented data related to the role of cannabidiol in mitochondrial calcium dynamics in hypertrophic cells. Cannabidiol was able to prevent hypertrophy-induced mitochondrial calcium overload and prevent hypertrophy-induced increase of several mitochondrial function markers such as reactive oxygen species and calcium uptake. In addition, this work suggests that cannabidiol’s effects may rely on PPAR-y activation, which in turn can inhibit NF-kB, a transcription factor that regulates pro- inflammatory and pro-hypertrophic genes. Together, these findings further clarify cannabidiol’s mode of action in combatting cardiac hypertrophy.

(iii) During the 2023 Fiscal Period, the Corporation granted 500,000 stock options to certain consultants of the Corporation. Each option allows the holder to acquire one common share of the Corporation at exercise prices between $0.75 and US$1.00 with expiry dates between April 10, 2025 and June 25, 2028. Of the options granted 100,000 vest one-fourth every three months from the grant date, while the remaining 400,000 vest one-fifth on each of September 30, 2023, October 31, 2023, November 30, 2023, December 31, 2023 and January 31, 2024. During the 2023 Fiscal Period, the Corporation granted 1,125,000 restricted share units ("RSUs") to certain consultants of the Corporation. These RSUs vest one-fifth on each of September 30, 2023, October 31, 2023, November 30, 2023, December 31, 2023 and January 31, 2024.

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Subsequent to June 30, 2023

(i) Subsequent to June 30, 2023, the Corporation granted 875,000 RSUs to certain consultants of the Corporation, vesting 20% on each of September 30, 2023, October 31, 2023, November 30, 2023, December 31, 2023 and January 31, 2024. The Corporation granted an additional 100,000 RSUs to certain consultants that vest on September 2, 2023.

(ii) Subsequent to June 30, 2023, the Corporation announced that it received notice on August 7, 2023 from The Nasdaq Stock Market LLC stating the Corporation has regained compliance with the minimum bid price requirement under Nasdaq Listing Rule 5550(a)(2) for continued listing on The Nasdaq Capital Market. Accordingly, the Corporation is now in compliance with all applicable listing standards.

Phase II Open Label Pilot Study – Recurrent Pericarditis

Pericarditis refers to inflammation of the pericardium (the membrane or sac that surrounds the heart) that follows an initial episode (frequently resulting from a viral infection). Patients may have multiple recurrences. Symptoms include debilitating chest pain, shortness of breath, and fatigue, resulting in physical limitations, reduced quality of life, emergency department visits, and hospitalizations. Causes of pericarditis can include infection (e.g., tuberculosis), systemic disorders such as autoimmune and inflammatory diseases, cancer, and post-cardiac injury syndromes. Based on time of presentation, acute pericarditis is a symptomatic event lasting less than four to six weeks, the diagnosis of which is based on meeting two of four criteria: chest pain; pericardial friction rub; electrocardiogram changes; and new or worsening pericardial swelling. Elevation of inflammatory markers such as C-reactive protein ("CRP"), and evidence of pericardial inflammation by an imaging technique (computed tomography scan or cardiac magnetic resonance) may help the diagnosis and the monitoring of disease activity. Although generally self-limited and not life threatening, acute pericarditis is diagnosed in 0.2% of all cardiovascular in-hospital admissions and is responsible for 5% of emergency room admissions for chest pain in North America and Western Europe.

Recurrent pericarditis is the reappearance of symptoms after a symptom-free period of at least 4 – 6 weeks following an episode of acute pericarditis. These recurrences appear in 15% to 30% of acute cases and usually within 18 months. Furthermore, up to 50% of patients with a recurrent episode of pericarditis experience more recurrences. Standard first-line medical therapy consists of non-steroidal anti-inflammatory drugs or aspirin with or without colchicine. Corticosteroids such as prednisone are second-line therapy in patients with continued recurrence and inadequate response to conventional therapy. The only FDA-approved therapy for recurrent pericarditis, launched in 2021, is a costly and potent subcutaneously injected interleukin-1 inhibitor with immunosuppressive effects. It is generally used as a third-line intervention in patients with a third or fourth recurrence.

The number of cases of patients seeking and receiving treatment for recurrent pericarditis annually in the U.S. is estimated at 38,000. Hospitalization due to recurrent pericarditis is often associated with a 6-8-day length of stay and cost per stay is estimated to range between US$20,000 and US$30,000 in the U.S.

In May 2022, the Corporation announced the FDA has authorized the Corporation's IND to commence a Phase II open-label pilot study designed to evaluate the tolerance, safety, and efficacy of CardiolRx in patients with recurrent pericarditis. The study will also assess the improvement in objective measures of disease, and during an extension period, assess the feasibility of weaning concomitant background therapy including corticosteroids, while taking CardiolRx. Recurrent pericarditis is a rare disease in the U.S., thereby making CardiolRx eligible for orphan drug status under the FDA's Orphan Drug Designation program.

Cardiol's study is expected to enroll 25 patients at major clinical centers in the U.S. specializing in pericarditis. The study protocol has been designed in collaboration with thought leaders in pericardial disease. The trial's primary efficacy endpoint is the change, from baseline to eight weeks, in patient-reported pericarditis pain using an 11-point numeric rating scale ("NRS"). The NRS is a validated clinical tool used across multiple conditions with acute and chronic pain, including previous studies of recurrent pericarditis. Secondary endpoints include the pain score after 26 weeks of treatment, and changes in high sensitivity CRP.

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The Phase II open-label recurrent pericarditis study was designed with the support of an independent Advisory Committee and key trial investigators, consisting of international thought leaders in cardiovascular disease, including:

	•	Study Chair: Allan Klein, MD, CM – Director, Center for the Diagnosis and Treatment of Pericardial Diseases, and Professor of Medicine, Heart, Vascular and Thoracic Institute, Cleveland Clinic;
	•	Antonio Abbate, MD – Ruth C. Heede Professor of Cardiology, School of Medicine, and Department of Medicine, Division of Cardiovascular Medicine - Heart and Vascular Center, University of Virginia;
	•	Allen Luis, MBBS, PhD – Co-Director of the Pericardial Diseases Clinic, Associate Professor of Medicine, Department of Cardiovascular Medicine, at Mayo Clinic Rochester Minnesota;
	•	Paul Cremer, MD – Department of Cardiovascular Imaging, Center for the Diagnosis and Treatment of Pericardial Diseases, Heart, Vascular and Thoracic Institute, Cleveland Clinic;
	•	Stephen Nicholls – Program Director, Victorian Heart Hospital, Director, Monash Victorian Heart Institute, and Professor of Cardiology, Monash University, Melbourne; and
	•	Stefano Toldo, PhD – Associate Professor of Medicine, Department of Medicine, Cardiovascular Medicine at University of Virginia.

It is estimated that patient recruitment will be completed approximately one year following the initiation of all clinical research centers. Cardiol has budgeted additional costs to complete this study to be approximately $3 million. If Cardiol determines that the Phase II study meets its objectives, it currently expects to undertake the next steps of its clinical development program, which would consist of a larger clinical study, the details of which will be determined in conjunction with regulatory agencies. The total cost and timeline to complete this clinical development program cannot be determined at this stage as this will depend on a variety of factors. The Corporation may involve a commercial partner from the pharmaceutical industry, to fund the late-stage clinical development and commercialization of CardiolRx for the treatment of recurrent pericarditis.

Phase II study – Acute myocarditis (ARCHER)

Myocarditis is an acute inflammatory condition of the heart muscle (myocardium) characterized by chest pain, impaired cardiac function, atrial and ventricular arrhythmias, and conduction disturbances. Although the symptoms are often mild, myocarditis remains an important cause of acute and fulminant heart failure and is a leading cause of sudden cardiac death in people under 35 years of age. Although viral infection is the most common cause of myocarditis, the condition can also result from administration of therapies used to treat several common cancers, including chemo-therapeutic agents and immune checkpoint inhibitors.

In a proportion of patients, the inflammation in the heart persists and causes decreased heart function with symptoms and signs of heart failure, and as such treatment is based on standard-of-care recommendations for heart failure. This includes diuretics, ACE inhibitors, angiotensin receptors blockers, beta blockers, and aldosterone inhibitors. For those with a fulminant presentation, intensive care is often required, with the use of inotropic medications (to increase the force of the heart muscle contraction). Severe cases frequently require ventricular assist devices or extracorporeal oxygenation and may necessitate heart transplantation. There are no FDA-approved therapies for acute myocarditis. Patients hospitalized with acute myocarditis experience an average 7-day length of stay and a 4-6% risk of in-hospital mortality, with average hospital charge per stay estimated at US$110,000 in the U.S.

Data from multiple sources, including the ‘Global Burden of Disease Study’, reports that the number of cases per year of myocarditis range from approximately 10 to 22/100,000 persons (estimated U.S. patient population of 33,000 to 73,000), qualifying the condition as a rare disease in the U.S. and in Europe. Cardiol believes that there is a significant opportunity to develop a therapy for acute myocarditis that may be eligible for designation as an orphan drug under the FDA's Orphan Drug Designation and the European Medicines Agency programs.

In August 2021, Cardiol received IND authorization from the FDA to conduct a Phase II clinical trial of CardiolRx in acute myocarditis - the ARCHER trial. ARCHER has also received regulatory clearance in other jurisdictions, and is expected to enroll 100 patients at major cardiac centers in North America, Europe, and Israel. The trial has been designed in collaboration with an independent steering committee comprising distinguished thought leaders in heart failure and myocarditis from international centers of excellence. The primary endpoints of the trial, which will be evaluated after 12 weeks of double-blind therapy, consist of the following cardiac magnetic resonance imaging measures: left ventricular function (global longitudinal strain) and myocardial edema/fibrosis (extra-cellular volume), each of which has been shown to predict long-term prognosis of patients with acute myocarditis.

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Members of the Steering Committee include:

	•	Chair: Dennis M. McNamara, MD – Professor of Medicine at the University of Pittsburgh. He is also the Director of the Heart Failure/Transplantation Program at the University of Pittsburgh Medical Center;
	•	Co-Chair: Leslie T. Cooper, Jr., MD – General cardiologist and the Chair of the Mayo Clinic Enterprise Department of Cardiovascular Medicine, as well as chair of the Department of Cardiovascular Medicine at the Mayo Clinic in Florida;
	•	Arvind Bhimaraj, MD – Specialist in Heart Failure and Transplantation Cardiology and Associate Professor of Cardiology, Institute for Academic Medicine at Houston Methodist and at Weill Cornell Medical College, NYC;
	•	Wai Hong Wilson Tang, MD – Advanced Heart Failure and Transplant Cardiology specialist at the Cleveland Clinic in Cleveland, Ohio. Dr. Tang is also the Director of the Cleveland Clinic's Center for Clinical Genomics; Research Director, and staff cardiologist in the Section of Heart Failure and Cardiac Transplantation Medicine in the Sydell and Arnold Miller Family Heart & Vascular Institute at the Cleveland Clinic;
	•	Peter Liu, MD – Chief Scientific Officer and Vice President, Research, of the University of Ottawa Heart Institute, and Professor of Medicine and Physiology at the University of Toronto and University of Ottawa;
	•	Carsten Tschöpe, MD – Professor of Medicine and Cardiology and Vice Director of the Department of Internal Medicine and Cardiology, University Medicine Berlin;
	•	Matthias Friedrich, MD – Full Professor within the Departments of Medicine and Diagnostic Radiology at McGill University in Montreal, and Chief, Cardiovascular Imaging at the McGill University Health Centre;
	•	Yaron Arbel, MD – Cardiologist and Director of the CardioVascular Research Center (CVRC) at the Tel Aviv "Sourasky" Medical Center;
	•	Edimar Bocchi, MD – Serves as the Head of Heart Failure Clinics and Heart Failure Team at Heart Institute (Incor) of Hospital das Clinicas of São Paulo University Medical School, Associate Professor of São University Medical School, São Paulo, Brazil; and
	•	Mathieu Kerneis, MD, PhD – Interventional cardiologist at Pitié Salpêtrière Hospital (Sorbonne University).

The first patient was enrolled in the study in August 2022, and it is expected that patient recruitment will take 12 to 18 months to complete following the initiation of all clinical research centers. Cardiol has budgeted additional costs to complete this study to be approximately $8 million. If Cardiol determines that the Phase II study meets its objectives, it currently expects to undertake the next steps of its clinical development program, which would consist of a larger clinical study, the details of which will be determined in consultation with regulatory agencies. The total cost and timeline to complete this clinical development program cannot be determined at this stage as this will depend on a variety of factors. The Corporation may involve a commercial partner from the pharmaceutical industry, to fund the late-stage clinical development and commercialization of CardiolRx for the treatment of acute myocarditis.

Scientific Advisory Board

The Corporation has established a Scientific Advisory Board comprised of distinguished thought leaders in cardiovascular medicine. These individuals will lend their expertise in cardiovascular research and provide invaluable guidance to the Corporation's research and clinical programs. The Scientific Advisory Board members include:

Paul M. Ridker, MD, MPH

Dr. Ridker is director of the Center for Cardiovascular Disease Prevention, a translational research unit at Brigham and Women’s Hospital (BWH), Boston. A cardiovascular medicine specialist, he is also the Eugene Braunwald Professor of Medicine at Harvard School of Medicine (HMS). Dr. Ridker received his medical degree from HMS and then completed an internal medicine residency and a cardiology fellowship at BWH. Dr. Ridker is board certified in internal medicine. His clinical interests include coronary artery disease and the underlying causes and prevention of atherosclerotic disease. Dr. Ridker is the author of over 900 peer-reviewed publications and reviews, 64 book chapters, and six textbooks related to cardiovascular medicine. His primary research focus has involved inflammatory mediators of heart disease and the molecular and genetic epidemiology of hemostasis and thrombosis, with particular interests in biomarkers for coronary disease, “predictive” medicine, and the underlying causes and prevention of atherosclerotic disease. Notably, Dr. Ridker has been the Principal Investigator or Study Chairman of several large international trials that have demonstrated the role of inflammation in the genesis and management of coronary artery disease. He was included in TIME magazine’s list of 100 most influential people of 2004, and between the years 2000 and 2010, Dr. Ridker was among the ten most often cited researchers in cardiovascular medicine worldwide. Amongst many other honors, he received the American Heart Association Distinguished Scientist Award in 2013, gave the Braunwald Lecture of the American College of Cardiology in 2019, was awarded the Gotto Prize for Atherosclerosis Research from the International Atherosclerosis Society in 2021, and is an elected Member of the National Academy of Medicine (USA).

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Bruce McManus, PhD, MD

Dr. McManus is Professor Emeritus, Department of Pathology and Laboratory Medicine, the University of British Columbia. He has served as CEO, Centre of Excellence for Prevention of Organ Failure (PROOF Centre), Director, UBC Centre for Heart Lung Innovation, and Scientific Director, Institute of Circulatory and Respiratory Health, CIHR. Dr. McManus received BA and MD degrees (University of Saskatchewan), an MSc (Pennsylvania State University), and a PhD (University of Toledo). He pursued post-doctoral fellowships at the University of California, Santa Barbara (Environmental Physiology) and at the National Heart, Lung, and Blood Institute, Bethesda, MD (Cardiovascular & Pulmonary Pathology), and residency training at the Peter Bent Brigham Hospital, Harvard University (Internal Medicine and Pathology). Dr. McManus’ investigative passion relates to mechanisms, consequences, detection and prevention of injury and aberrant repair in inflammatory diseases of the heart and blood vessels. He has had a longstanding interest in the diagnosis and management of acute viral myocarditis. His life’s scholarship is reflected in more than 400 original peer-reviewed publications, over 60 chapters, and several books. He is an extraordinary mentor. Dr. McManus has been widely appreciated for his research, mentoring, and leadership contributions to the health sciences. Amongst many awards and honors, Dr. McManus received the prestigious Max Planck Research Award in 1991, was elected a Fellow of the Royal Society of Canada in 2002, was appointed a Member of the Order of Canada in 2018, and to the Order of British Columbia the following year.

Joseph A. Hill, MD, PhD

Dr. Hill is Professor of Internal Medicine and Molecular Biology, Chief of Cardiology at UT Southwestern Medical Center, Dallas, TX, and Director of the Harry S. Moss Heart Center. Dr. Hill holds both the James T. Willerson, MD, Distinguished Chair in Cardiovascular Diseases, and the Frank M. Ryburn Jr. Chair in Heart Research. He graduated from Duke University with MD and PhD degrees in 1987. His PhD dissertation research was in the field of cardiac ion channel biophysics. Dr. Hill then worked for five years as a postdoctoral fellow at the Institut Pasteur in Paris studying central and peripheral nicotinic receptors. He next completed an internal medicine internship and residency, as well as a clinical cardiology fellowship, at the Brigham and Women’s Hospital, Harvard Medical School. He served on faculty at the University of Iowa for five years before moving in 2002 to the UT Southwestern. Dr. Hill’s research examines molecular mechanisms of structural, functional, metabolic, and electrophysiological remodeling in cardiac hypertrophy and heart failure. He has served on many NIH panels and committees and delivered numerous invited lectures in the

U.S. and around the world. Dr. Hill has received many recognitions and awards, including election to the Association of American Professors and the 2018 Research Achievement Award from the International Society for Heart Research. For the past six years, Dr. Hill has been the Editor-in-Chief of the prestigious American Heart Association journal Circulation.

Outlook

During the next 12 - 24 months, the Corporation expects to achieve the following corporate milestones:

	•	Complete Phase II open-label pilot study in recurrent pericarditis with CardiolRx;
	•	Complete Phase II ARCHER trial in acute myocarditis with CardiolRx;
	•	Advance development of a subcutaneously administered formulation;

The timelines for reaching these milestones may be adversely impacted by COVID-19 or other factors.

The Corporation expects that the June 30, 2023, working capital of $38,228,302 will be sufficient to fund operations and capital requirements, associated with achieving these corporate milestones, into 2026.

Use of Offering Proceeds

The Corporation may reallocate the net offering proceeds that it obtained from the April 2021 and November 2021 Offerings (as defined below) from time to time depending upon our growth strategy relative to market and other conditions in effect at the time. Until we expend the net offering proceeds, we will hold them in cash and/or invest them in short-term, interest-bearing, investment-grade securities.

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A comparison between the projected use of proceeds for the two-year period subsequent to closing the April 2021 Offering, as disclosed in the Corporation’s prospectus dated April 30, 2021 (the "April 2021 Offering"), and spending from May 12, 2021 (offering closing date) to May 12, 2023 is as follows:

Use of Proceeds	Amount		Spent		Remaining
Phase II/III Clinical Trials in Acute Myocarditis		6,500,000		6,500,000		-
Pre-clinical studies		1,500,000		1,500,000		-
Research and Development of Subcutaneous Formulation		4,000,000		729,040		3,270,960

A comparison between the projected use of proceeds for the two-year period subsequent to closing the November 2021 Offering, as disclosed in the Corporation’s prospectus dated November 3, 2021 (the "November 2021 Offering"), and spending from November 5, 2021 (offering closing date) to June 30, 2023 is as follows (figures in the below "Amount" column are translated to CAD from USD at a rate of 1.33):

Use of Proceeds	Amount		Spent		Remaining
LANCER Study		5,303,400		5,303,400		-
Phase II Clinical Trials in Acute Myocarditis		4,242,720		779,577		3,463,143
Subcutaneous Development		3,182,040		491,204		2,690,836
Development of Additional Orphan Program		4,242,720		1,664,947		2,577,773
Discovery Research		10,606,800		891,447		9,715,353

Summary of Quarterly Results

The Corporation’s quarterly information in the table below is prepared in accordance with IFRS.

	Total	Profit or (Loss)							Total
Three Months Ended	Revenue ($)		Total ($)			Per Share⁽⁹⁾ ($)			Assets ($)
June 30, 2023⁽¹⁾	nil			(7,471,754	)		(0.12	)		47,169,272
March 31, 2023⁽²⁾	nil			(7,089,336	)		(0.11	)		52,685,268
December 31, 2022⁽³⁾	nil			(7,515,018	)		(0.12	)		62,028,518
September 30, 2022⁽⁴⁾	nil			(7,972,047	)		(0.13	)		68,358,729
June 30, 2022⁽⁵⁾	nil			(6,489,488	)		(0.10	)		74,264,968
March 31, 2022⁽⁶⁾	nil			(8,954,095	)		(0.14	)		79,432,326
December 31, 2021⁽⁷⁾	nil			(6,257,462	)		(0.11	)		87,876,128
September 30, 2021⁽⁸⁾	nil			(9,909,991	)		(0.23	)		31,731,649

Note:

Net loss of $7,471,754 included research and development of $3,479,385, general and administration of $2,835,264, change in derivative liability of $856,893, and loss on foreign exchange of $828,909. This is partially offset by interest income of $528,697.

Net loss of $7,089,336 included research and development of $4,127,696 and general and administration of $3,658,440. This is partially offset by interest income of $545,927.

Net loss of $7,515,018 included research and development of $5,617,948, general and administration of $3,477,065, and a loss on foreign exchange of $528,314. These are partially offset by a change in derivative liability of $1,523,662 and interest income of $584,647.

Net loss of $7,972,047 included general and administration of $8,130,743 and research and development of $5,089,423. These are partially offset by the gain on foreign exchange of $2,970,896, and change in derivative liability of $1,723,442.

Net loss of $6,489,488 included general and administration of $4,825,039 and research and development of $4,407,182. These are partially offset by the gain on foreign exchange of $1,689,797, and change in derivative liability of $861,600.

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Net loss of $8,954,095 included general and administration of $5,940,952, research and development of $3,847,527, and a loss on foreign exchange of $1,370,444. These are partially offset by the gain on the change in derivative liability of $2,132,517.

Net loss of $6,257,462 included general and administration of $9,569,839 and research and development of $3,527,834. These are partially offset by the gain on the change in derivative liability of $4,916,304 and a gain on foreign exchange of $1,876,987.

Net loss of $9,909,991 included general and administration of $7,571,515 and research and development of $2,592,094.

Basic and fully diluted.

Discussion of Operations

Six months ended June 30, 2023, compared to the six months ended June 30, 2022

For the six months ended June 30, 2023, the Corporation’s net loss was $14,561,090, compared to a net loss of $15,443,582 for the six months ended June 30, 2022. The decrease in net loss of $882,492 is a result of the following:

	•	Research and development decreased to $7,607,081 for the six months ended June 30, 2023, compared to $8,254,709 for the six months ended June 30, 2022. During the six months ended June 30, 2023, the Corporation incurred research and development costs related to basic science, pre-clinical studies, and clinical studies, specifically relating to the Phase II acute myocarditis trial and Phase II Open-Label Pilot Study of recurrent pericarditis.

	•	General and administration expenses decreased to $6,493,704 for the six months ended June 30, 2023, compared to $10,765,990 for the six months ended June 30, 2022. The Corporation’s operations increased due to two clinical trials in progress compared to one in 2022. However, this was offset by a reduction in corporate communications spending and share-based compensation, as well as a general re-allocation of resources to focus on research and development activities.

	•	The net loss is increased by the loss on the change in derivative liability, based on the revaluation as at June 30, 2023 of $782,812, compared to the gain on the change in derivative liability on June 30, 2022 of $2,994,117.

	•	The net loss is increased by a loss on foreign exchange during the six months ended June 30, 2023 of $752,117, compared to a gain on foreign exchange during the six months ended June 30, 2022 of $319,353. The increase is mainly based on the revaluation of funds held in USD.

Three months ended June 30, 2023, compared to the three months ended June 30, 2022

For the three months ended June 30, 2023, the Corporation’s net loss was $7,471,754, compared to a net loss of $6,489,488 for the three months ended June 30, 2022. The increase in net loss of $982,266 is a result of the following:

	•	Research and development decreased to $3,479,385 for the three months ended June 30, 2023, compared to $4,407,182 for the three months ended June 30, 2022. During the three months ended June 30, 2023, the Corporation incurred research and development costs related to basic science, pre-clinical studies, and clinical studies, specifically relating to the Phase II acute myocarditis trial and Phase II Open-Label Pilot Study of recurrent pericarditis.

	•	General and administration expense decreased to $2,835,264 for the three months ended June 30, 2023, compared to $4,825,039 for the three months ended June 30, 2022. During the three months ended June 30, 2023, the Corporation’s operations increased due to two clinical trials in progress compared to one in 2022. However, this was offset by a reduction in corporate communications spending and share-based compensation, as well as a general re-allocation of resources to focus on research and development activities.

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	•	The net loss for the three months ended June 30, 2023, is increased by the loss on the change in derivative liability, based on the revaluation as at June 30, 2023, of $856,893, whereas the gain on the change in derivative liability for the three months ended June 30, 2022 was $861,600.

	•	The net loss for the three months ended June 30, 2023, is increased by the loss on foreign exchange, mainly based on the revaluation of funds held in USD. This resulted in a loss during the three months ended June 30, 2023 of $828,909. During the three months ended June 30, 2022, the Corporation incurred a gain on foreign exchange of $1,689,797.

Capital Management

The Corporation manages its capital to ensure sufficient financial flexibility to achieve the ongoing business objectives including research activities, funding of future growth opportunities, and pursuit of acquisitions.

The Corporation monitors its capital structure and makes adjustments according to market conditions in an effort to meet its objectives given the current outlook of the business and industry in general. The Corporation may manage its capital structure by issuing new shares, repurchasing outstanding shares, adjusting capital spending, or disposing of assets. The capital structure is reviewed by Management and the Board of Directors on an ongoing basis.

The Corporation considers its capital to be total equity, comprising share capital, warrants, and contributed surplus, less accumulated deficit, which at June 30, 2023 totaled $38,750,170 (December 31, 2022 – $52,201,588).

The Corporation manages capital through its financial and operational forecasting processes. The Corporation reviews its working capital and forecasts its future cash flows based on operating expenditures, and other investing and financing activities. The forecast is updated based on activities related to its research programs and reviewed with the Board of Directors of the Corporation.

The Corporation is not currently subject to any capital requirements imposed by a lending institution or regulatory body. The Corporation expects that its capital resources will be sufficient to discharge its liabilities as of the current statement of financial position date.

Off-Balance Sheet Arrangements

As of the date of this MD&A, the Corporation does not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on the results of operations or financial condition of the Corporation, including, and without limitation, such considerations as liquidity and capital resources.

Liquidity and Financial Position

At June 30, 2023, Cardiol had $44,942,286 in cash and cash equivalents (December 31, 2022 – $59,469,868).

At June 30, 2023, accounts payable and accrued liabilities were $7,168,195 (December 31, 2022 – $9,334,158). The Corporation’s cash and cash equivalents balances as at June 30, 2023 and December 31, 2022 are sufficient to pay these liabilities.

The Corporation currently has no operating revenues and therefore must utilize its funds from financing transactions to maintain its capacity to meet ongoing operating activities.

As of June 30, 2023, December 31, 2022, and to the date of this MD&A, the cash resources of Cardiol are held with one Canadian chartered bank. The Corporation has no variable interest rate debt and its credit and interest rate risk is minimal. Accounts payable and accrued liabilities are short-term and non-interest bearing.

For the 2023 Fiscal Period

Cash and cash equivalents used in operating activities were $15,301,155 for the six months ended June 30, 2023. Operating activities were affected by a net loss of $14,561,090 and the net change in non-cash working capital balances of $(1,902,971), and partially offset by other non-cash adjustments of $1,162,906. Non-cash adjustments mainly consisted of $1,093,223 for share-based compensation and $782,812 for change in derivative liability. Non-cash working capital was mainly the result of a decrease in accounts payable and accrued liabilities of $2,165,963 and a decrease in prepaid expenses of $87,864.

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Cash and cash equivalents used in investing activities were $48,029 for the six months ended June 30, 2023 as a result of the purchase of property and equipment.

Cash and cash equivalents used in financing activities were $27,688 for the six months ended June 30, 2023, as a result of the payment of lease liability.

Use of Working Capital

As of June 30, 2023, Cardiol’s working capital was $38,228,302. Based on current projections, Cardiol believes that this amount is sufficient to fund operations and capital requirements, associated with achieving corporate milestones, into 2026, described in the “Outlook” section above.

The Corporation has material commitments and obligations for cash resources set out below.

Contractual Obligations

Total
($)

Up to 1 year
($)

1 – 3 years
($)

4 – 5 years
($)

After 5
years
($)

Amounts payable and

7,168,195

Nil

other liabilities Office lease ⁽¹⁾

98,287

Nil

Consulting agreements

289,597

Nil

Contract research

576,053

Nil

Total

8,132,132

Nil

Note:

(1) The Corporation has leased premises from third parties.

Related Party Transactions

The Corporation entered into the following transactions with related parties:

Included in research and development expense is $109,129 and $737,809 for the three and six months ended June 30, 2023 (three and six months ended June 30, 2022 - $362,053 and $702,532) paid to a company, Dalton Chemical Laboratories, Inc. operating as Dalton ("Dalton"), that is related to a Director (Peter Pekos). Mr. Pekos is also the CEO of Dalton. As at June 30, 2023, $490,261 (December 31, 2022 - $985,022) was owed to this company and this amount was included in accounts payable and accrued liabilities and $nil (December 31, 2022 - $9,413) was paid to this company and was included in prepaid expenses. Cardiol entered into an exclusive master services agreement with Dalton for the manufacturing of its pharmaceutical cannabidiol.

Key Management personnel are those persons having authority and responsibility for planning, directing, and controlling the activities of the Corporation directly or indirectly, including any Directors (executive and non- executive) of the Corporation. Remuneration of Directors and key Management personnel, except as noted in (a) above, was as follows:

	Three months ended June 30, 2023 ($)		Three months ended June 30, 2022 ($)		Six months ended June 30, 2023 ($)		Six months ended June 30, 2022 ($)
Salaries and benefits		534,446		507,290		1,704,476		1,369,618
Share-based payments		262,128		366,498		531,010		847,779
		796,574		873,788		2,235,486		2,217,397

As at June 30, 2023, $nil (December 31, 2022 - $nil) was owed to key Management personnel and this amount was included in accounts payable and accrued liabilities.

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Critical Accounting Judgments, Estimates, and Assumptions

The preparation of the Financial Statements requires Management to make certain estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities at the date of the Financial Statements and reported amounts of expenses during the reporting period. Actual outcomes could differ from these estimates. The Financial Statements include estimates that, by their nature, are uncertain. The impacts of such estimates are pervasive throughout the Financial Statements and may require accounting adjustments based on future occurrences. Revisions to accounting estimates are recognized in the period in which the estimate is revised and future periods if the revision affects both current and future periods. These estimates are based on historical experience, current and future economic conditions, and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Critical accounting estimates

Significant assumptions about the future that Management has made that could result in a material adjustment to the carrying amounts of assets and liabilities, in the event that actual results differ from assumptions made, relate to, but are not limited to, the following:

	•	The inputs used in the Black-Scholes valuation model that were based on unobservable assumptions when the Corporation was private at the time of issuance of the equity instruments (share price and volatility) in accounting for share-based payment transactions;
	•	The valuation of the derivative liability;
	•	The estimate of the percentage of completion of certain research and development agreements;
	•	The valuation of the income tax non-current asset would increase if there was virtual certainty that the tax benefit of net operating losses could be applied to future periods’ taxable income; and
	•	Intangible assets are comprised of the exclusive global license. Intangible assets are initially stated at cost, less accumulated amortization and accumulated impairment losses. Intangible assets with finite useful lives are amortized over their estimated useful lives. The exclusive global license’s useful life is nine years.

Critical accounting judgments

	•	Management applied judgment in determining the functional currency of the Corporation as Canadian dollars;
	•	Management applied judgment in determining the Corporation’s ability to continue as a going concern. The Corporation has incurred significant losses since inception. Management determined that a material going concern uncertainty does not exist due to the sufficient working capital to support their planned expenditure levels. Future financing may come from product sales, licensing arrangements, research and commercial development partnerships, government grants, and/or corporate finance arrangements; and
	•	Management’s assessment that no impairment exists for intangible assets, based on the facts and circumstances that existed during the period.

Share Capital

Other than as described below, as of the date of this MD&A, there are no equity or voting securities of the Corporation outstanding, and no securities convertible into, or exercisable or exchangeable for, voting or equity securities of the Corporation.

As of the date of this MD&A, the outstanding capital of the Corporation includes 64,627,536 issued and outstanding common shares; 1,020,000 Meros Special Warrants convertible automatically into common shares (upon the Corporation achieving the Meros Milestone) for no additional consideration pursuant to the Meros License Agreement; 400,000 common shares issuable to Dalton if Dalton meets certain performance objectives, and stock options, warrants, performance share units and restricted share units as shown below:

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Warrants

	Exercise		Warrants
Expiry date	price ($)		outstanding
May 12, 2024	4.60		3,453,178
November 5, 2024	3.75	⁽¹⁾	8,175,000
Total			11,628,178

(1) Exercise price denoted in USD.

Stock Options

	Exercise			Options		Options
Expiry date	price ($)			outstanding		exercisable
February 23, 2025		3.54			20,000		20,000
April 10, 2025		0.75			100,000		-
August 19, 2025		2.12			100,000		66,667
August 30, 2025		5.00			80,000		80,000
April 1, 2026		5.77			60,000		60,000
December 8, 2026		3.59			325,000		108,333
January 11, 2027		2.18			220,000		73,333
March 14, 2027		2.07			60,000		20,000
May 12, 2027		1.46			115,000		38,334
September 12, 2027		1.61			207,500		-
June 25, 2028		1.00	⁽¹⁾		400,000		-
Total					1,687,500		466,667

(1) Exercise price denoted in USD.

Performance Share Units

The Corporation has 100,000 outstanding fully vested performance share units ("PSUs").

Restricted Share Units

The Corporation has 4,332,963 outstanding restricted share units ("RSUs") subject to vesting conditions specific to each grant. Of the outstanding RSUs, 1,305,984 have fully vested as of the date of this MD&A.

Financial Instruments Recognition

The Corporation recognizes a financial asset or financial liability on the statement of financial position when it becomes party to the contractual provisions of the financial instrument. Financial assets are initially measured at fair value and are derecognized either when the Corporation has transferred substantially all the risks and rewards of ownership of the financial asset, or when cash flows expire. Financial liabilities are initially measured at fair value and are derecognized when the obligation specified in the contract is discharged, cancelled, or has expired.

A write-off of a financial asset (or a portion thereof) constitutes a derecognition event. A write-off occurs when the Corporation has no reasonable expectations of recovering the contractual cash flows on a financial asset.

Classification and Measurement

The Corporation determines the classification of its financial instruments at initial recognition. Financial assets and financial liabilities are classified according to the following measurement categories:

•	those to be measured subsequently at fair value, either through profit or loss (“FVTPL”) or through other comprehensive income (“FVTOCI”); and,
•	those to be measured subsequently at amortized cost.

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The classification and measurement of financial assets after initial recognition at fair value depends on the business model for managing the financial asset and the contractual terms of the cash flows. Financial assets that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding, are generally measured at amortized cost at each subsequent reporting period. All other financial assets are measured at their fair values at each subsequent reporting period, with any changes recorded through profit or loss or through other comprehensive income (which designation is made as an irrevocable election at the time of recognition).

After initial recognition at fair value, financial liabilities are classified and measured at either:

•	amortized cost;

•	FVTPL, if the Corporation has made an irrevocable election at the time of recognition, or when required (for items such as instruments held for trading or derivatives); or,

•	FVTOCI, when the change in fair value is attributable to changes in the Corporation’s credit risk.

The Corporation reclassifies financial assets when and only when its business model for managing those assets changes. Financial liabilities are not reclassified.

Transaction costs that are directly attributable to the acquisition or issuance of a financial asset or financial liability classified as subsequently measured at amortized cost are included in the fair value of the instrument on initial recognition. Transaction costs for financial assets and financial liabilities classified at fair value through profit or loss are expensed in profit or loss.

The Corporation’s financial asset consists of cash and cash equivalents and accounts receivable, which are classified and measured at amortized cost. The Corporation’s financial liabilities consist of accounts payable and accrued liabilities, and lease liability, which are classified and measured at amortized cost, and derivative liabilities which are classified and measured at FVTPL.

Fair Value

The Corporation provides information about its financial instruments measured at fair value at one of three levels according to the relative reliability of the inputs used to estimate the fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three levels of the fair value hierarchy are as follows:

	•	Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
	•	Level 2: inputs other than quotes prices included in Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and
	•	Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The Corporation's derivative liabilities are measured at fair value Level 3. No other financial instruments are measured at fair value.

Financial Instrument Risks

The Corporation’s activities expose it to a variety of financial risks: credit risk, liquidity risk, and market risk (including interest rate and foreign currency risk). These financial risks are in addition to the risks set out under “Risk Factors”.

Risk management is carried out by the Corporation’s Management team under policies approved by the Board of Directors. The Board of Directors also provides regular guidance for overall risk management.

There were no changes to credit risk, liquidity risk, or market risk for the 2023 Fiscal Period.

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Credit risk

Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The Corporation’s financial instruments that are exposed to concentrations of credit risk relate primarily to cash and cash equivalents and accounts receivable.

The Corporation mitigates its risk by maintaining its funds with large reputable financial institutions, from which Management believes the risk of loss to be minimal. Interest receivable relates to guaranteed investment certificates and cash balances held with large reputable financial institutions as well as receivables. The Corporation’s Management considers that all the above financial assets are of good credit quality.

Liquidity risk

Liquidity risk is the risk that the Corporation encounters difficulty in meeting its obligations associated with financial liabilities. Liquidity risk includes the risk that, as a result of operational liquidity requirements, the Corporation will not have sufficient funds to settle a transaction on the due date; will be forced to sell financial assets at a value which is less than what they are worth; or may be unable to settle or recover a financial asset. Liquidity risk arises from accounts payable and accrued liabilities and commitments. The Corporation limits its exposure to this risk by closely monitoring its cash flow.

Market risk

Market risk is the risk of loss that may arise from changes in market factors, such as interest rates and foreign exchange rates.

(a)

Interest rate risk

The Corporation currently does not have any short-term or long-term debt that is variable interest bearing and, as such, the Corporation’s current exposure to interest rate risk is minimal.

(b)

Foreign currency risk

Foreign exchange risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in the foreign exchange rates. The Corporation enters into foreign currency purchase transactions and has assets that are denominated in foreign currencies and thus is exposed to the financial risk of earnings fluctuations arising from changes in foreign exchange rates and the degree of volatility of these rates. The Corporation does not currently use derivative instruments to reduce its exposure to foreign currency risk.

The Corporation holds balances in U.S. dollars which could give rise to exposure to foreign exchange risk. Sensitivity to a plus or minus 10% change in the foreign exchange rate of the U.S. dollar against the Canadian dollar would affect the reported loss and comprehensive loss by approximately $3,348,000 (December 31, 2022 - $4,414,000).

Commitments and Contingency

(i) The Corporation has leased premises from third parties. The minimum committed lease payments as at June 30, 2023, which include the lease liability payments, are as follows:

Fiscal year
2023		53,611
2024		44,676
Total	$	98,287

(ii) The Corporation has signed various agreements with consultants to provide services. Under the agreements, the Corporation has the following remaining commitments.

Fiscal year
2023		289,597
Total	$	289,597

(iii) Pursuant to the terms of agreements with various other contract research organizations, the Corporation is committed for contract research services for 2023 at a cost of approximately $576,053.

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Breakdown of Expensed Research and Development

	Three months ended		Three months ended		Six months ended		Six months ended
	June 30, 2023 ($)		June 30, 2022 ($)		June 30, 2023 ($)		June 30, 2022 ($)
Contract research		2,411,248		3,276,166		5,652,886		7,140,403
Wages		332,281		322,075		976,007		575,060
Supplies		530,101		15,149		534,172		17,041
Regulatory		107,268		114,374		248,124		259,021
Share-based compensation		98,487		91,347		195,892		263,184
		3,479,385		4,407,182		7,607,081		8,254,709

Breakdown of Intangible Assets

	As at June 30, 2023 ($)			As at December 31, 2022 ($)
Exclusive global license agreement		767,228		767,228
Accumulated amortization		(514,648	)	(472,426	)
Carrying value		252,580		294,802

Internal Controls Over Financial Reporting

In accordance with National Instrument 52-109 – Certification of Disclosure in Issuers’ Annual and Interim Filings, Management is responsible for establishing and maintaining adequate Disclosure Controls and Procedures (“DCP”) and Internal Control Over Financial Reporting (“ICFR”). Management has designed DCP and ICFR based on the 2013 Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), with the objective of providing reasonable assurance that the Corporation’s financial reports and information, including the Corporation’s Financial Statements and MD&A were prepared in accordance with IFRS.

Limitations of Controls and Procedures

The Corporation’s Management, including the CEO and CFO, believes that any DCP or ICFR, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, they cannot provide absolute assurance that all control issues and instances of fraud, if any, within the Corporation have been prevented or detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by unauthorized override of the control. The design of any control system also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Accordingly, because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. There have been no changes in internal controls over financial reporting for the quarter ended June 30, 2023.

Risk Factors

An investment in the securities of the Corporation is highly speculative and involves numerous and significant risks. Such investment should be undertaken only by investors whose financial resources are sufficient to enable them to assume these risks. Prospective investors should carefully consider the risk factors that have affected, and which in the future are reasonably expected to affect, the Corporation and its financial position. Please refer to the section entitled "Risk Factors" in the Corporation's MD&A for the financial year ended December 31, 2022 (available on SEDAR at www.sedar.com and EDGAR at www.sec.gov). The following updated risk factor is also relevant to prospective investors:

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The Corporation is now in compliance with all applicable listing standards of The Nasdaq Capital Market

On August 7, 2023 the Corporation received notice from The Nasdaq Stock Market LLC stating the Corporation has regained compliance with the minimum bid price requirement under Nasdaq Listing Rule 5550(a)(2) for continued listing on The Nasdaq Capital Market. Accordingly, the Corporation is now in compliance with all applicable listing standards.

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Exhibit 99.3

FORM 52-109F2

CERTIFICATION OF INTERIM FILINGS

FULL CERTIFICATE

I, David Elsley, President and Chief Executive Officer of Cardiol Therapeutics Inc., certify the following:

1.	*Review:* I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of Cardiol Therapeutics Inc. (the “issuer”) for the interim period ended June 30, 2023.

No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.

Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.

Responsibility: The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer.

5.	*Design:* Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the end of the period covered by the interim filings

(a)

designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that

(i)

material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and

(ii)

information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and

(b)

designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP.

5.1 Control framework: The control framework the issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is 2013 Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

5.2 N/A

5.3 N/A

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6.	*Reporting changes in ICFR:* The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning April 1, 2023 and ended on June 30, 2023 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.

Date: August 10, 2023

“David Elsley”
David Elsley
President and Chief Executive Officer

Exhibit 99.4

FORM 52-109F2

CERTIFICATION OF INTERIM FILINGS

FULL CERTIFICATE

I, Chris Waddick, Chief Financial Officer of Cardiol Therapeutics Inc., certify the following:

1.	*Review:* I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of Cardiol Therapeutics Inc. (the “issuer”) for the interim period ended June 30, 2023.

5.	*Design:* Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the end of the period covered by the interim filings

(a)

designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that

(i)

material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and

(ii)

(b)

5.2 N/A

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5.3 N/A

6.	*Reporting changes in ICFR:* The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning April 1, 2023 and ended on June 30, 2023 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.