Exhibit 99.1



CARDIOL THERAPEUTICS INC.



Annual Information Form



For the year ended December 31,
2021



March 23, 2022













TABLE OF CONTENTS



|                                                                                   |  | Page
|---------------------------------------------------------------------------------- |  | ----
|GLOSSARY OF TERMS                                                                  |  | 1   
|MEANINGS OF CERTAIN REFERENCES                                                     |  | 6   
|FORWARD-LOOKING INformation                                                        |  | 6   
|DATE OF INFORMATION                                                                |  | 8   
|PRESENTATION OF FINANCIAL INFORMATION                                              |  | 8   
|THIRD-PARTY INFORMATION                                                            |  | 8   
|CORPORATE STRUCTURE                                                                |  | 9   
|BUSINESS OF CARDIOL                                                                |  | 9   
|REGULATORY OVERVIEW                                                                |  | 36  
|RISK FACTORS                                                                       |  | 48  
|DIVIDENDS                                                                          |  | 70  
|CAPITAL STRUCTURE                                                                  |  | 70  
|MARKET FOR SECURITIES                                                              |  | 82  
|ESCROWED SECURITIES AND SECURITIES SUBJECT TO CONTRACTUAL RESTRICTIONS ON TRANSFER |  | 83  
|DIRECTORS AND MANAGEMENT                                                           |  | 83  
|AUDIT COMMITTEE INFORMATION                                                        |  | 89  
|PROMOTERS                                                                          |  | 90  
|LEGAL PROCEEDINGS AND REGULATORY ACTIONS                                           |  | 90  
|INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS                         |  | 91  
|TRANSFER AGENT AND REGISTRAR                                                       |  | 91  
|MATERIAL CONTRACTS                                                                 |  | 91  
|INTERESTS OF EXPERTS                                                               |  | 91  
|ADDITIONAL INFORMATION                                                             |  | 91  
|AUDIT COMMITTEE CHARTER                                                            |  | A-1 








- 1 -




GLOSSARY
OF TERMS



“2020 Compensation Warrants” has the meaning set
out under the heading “Business of Cardiol – Corporate History - Year Ended December 31, 2020”.



“2020 Underwriters” has the meaning set out under
the heading “Business of Cardiol – Corporate History - Year Ended December 31, 2020”.



“ACC” means the American College of Cardiology.



“ACE” means Angiotensin Converting Enzyme.“



Annual Information Form”
or “AIF” means this annual information form.



“ANDA” means abbreviated new drug application.



“APIs” means active pharmaceutical ingredients.



“ARBs” means
Angiotensin Receptor Blockers.



“Audit Committee” means the Corporation’s
Audit Committee.



“BDO” means the auditors
of the Corporation, BDO Canada LLP, Chartered Professional Accountants, of1000 De La Gauchetière Street West, Suite 200,
Montréal, Québec  H3B 4W5



“Bioavailability” means the proportion of a drug
or other substance that enters systemic circulation when introduced into the body.



“BNP” means B-type Natriuretic Peptide.



“Board of Directors” or “Board”
means the board of directors of the Corporation and “Director” means each director of the Corporation.



“Cannabis Act” means Cannabis Act(Canada),
which came into force on October 17, 2018 and was amended on October 17, 2019 and October 17, 2020.



“Cannabis Regulations” means regulations issued
pursuant to the Cannabis Act.



“Cardiol” or the “Corporation”
means Cardiol Therapeutics Inc.



“CARO” means the Instituto Tecnológico y
de Estudios Superiores de Monterrey’s Clinical Academic Research Organization, S.A. de C.V.



“CARO Compensation Warrants” has the meaning set
out under the heading “Business of Cardiol – Commercialization Relationships – TecSalud (CARO Development Agreement)”.



“CARO Compensation Warrant Share” has the meaning
set out under the heading “Business of Cardiol – Commercialization Relationships – TecSalud (CARO Development Agreement)”.



“CARO Development Activities” has the meaning set
out under the heading “Business of Cardiol – Commercialization Relationships – TecSalud (CARO Development Agreement)”.



“CARO Development Agreement” has the meaning set
out under the heading “Business of Cardiol – Commercialization Relationships – TecSalud (CARO Development Agreement)”.








- 2 -




“CARO Development Plan” has the meaning set out
under the heading “Business of Cardiol – Commercialization Relationships – TecSalud (CARO Development Agreement)”.



“CBD” means cannabidiol.



“CCA” has the meaning set out under the heading
 “Regulatory Overview – Regulatory Framework in Canada for Cannabis – Provincial and Territorial Regulatory Regimes”.



“CCLA” has the meaning set out under the heading
 “Regulatory Overview – Regulatory Framework in Canada for Cannabis – Provincial and Territorial Regulatory Regimes”.



“CDN” means Canadian dollars.



“CDS” means CDS Clearing and Depository Services
Inc.



“CDSA” means the Controlled Drugs and Substances
Act, SC 1996, c 19, a Canadian federal act containing restrictions in use of controlled substances.



“CEC” means Clinical Endpoint Committee.



“CEO” means Chief Executive Officer.



“CFO” means Chief Financial Officer.



“COO” means Chief Operating Officer



“CG&C Committee” means the Corporate Governance
and Compensation Committee.



“cGMP” means the FDA’s Continuing Good Manufacturing
Practice regulations.



“CHMP” means the Committee for Medicinal Products
for Human Use.



“CIPO” means the Canadian Intellectual Property
Office.



“CIRT” means the Cardiovascular Inflammation Reduction
Trial.



“CMOs” means contract manufacturing organizations.



“Common Shares” means the Class A common shares
in the capital of the Corporation.



“Computershare Trust” means Computershare Trust
Company of Canada, the Warrant agent.



“COVID-19” means a disease caused by the SARS-CoV-2



“CRO” means contract research organizations.



“CSA” means the U.S. Controlled Substances Act.



“CTA” means clinical trial application.



“CVD” means
cardiovascular disease.



“Dalton” means Dalton Chemical Laboratories, Inc.,
operating as Dalton Pharma Services.








- 3 -




“Dalton Services Agreement” has the meaning set
out under the heading “Business of Cardiol – Commercialization Relationships – Dalton”.



“DSMC” means the Data Safety Monitoring Committee.



“DEA” means the Drug Enforcement Agency.



“DOX” means doxorubicin.



“EMA” means European Medicines Agency.



“EPR” means enhanced permeability and retention.



“FDA”means the U.S Food and Drug Administration.



“FDCA” means the U.S. Federal Food, Drug, and Cosmetic
Act.



“Founders” means the founders of Cardiol; namely,
David Elsley, Dr. Eldon Smith, and Dr. Anthony Bolton.



“Free Drug” means an amount or concentration of
a drug that is not encapsulated or delivered by a drug delivery system.



“GCP” means Good Clinical Practices.



“Health Canada” means the department of the government
of Canada with responsibility for national public health.



“HF” means heart failure.



“HFpEF” means heart failure with preserved ejection
fraction.



“HTN” means hypertension.



“ICFR” means internal controls over financial reporting.



“IFRS” means International Financial Reporting Standards.



“IND” means an FDA investigational new drug.



“IPO” means the initial public offering of the Corporation.



“IRB” means Institutional Review Boards.



“IT” means information technology.



“LANCER” means the Corporation’s
Phase II/III, double-blind, placebo-controlled clinical trial evaluating the efficacy and safety of its lead product, CardiolRx, in
hospitalized COVID-19 patients with a prior history of, or risk factors for, CVD.



“Legacy Equity Compensation Plan” means the stock
option plan the Board of Directors has adopted whereby options and shares may be granted to the Corporation’s Directors, officers,
employees, and consultants. This plan was replaced by the Omnibus Equity Incentive Plan.








- 4 -




“MAA” means marketing authorization application.



“Management” means the management of the Corporation.



“May 2021 Underwriters” has the meaning set
out under the heading “Business of Cardiol – Corporate History - Year Ended December 31, 2021”.



“May 2021Warrant
Indenture” has the meaning set out under the heading “Capital Structure - Share Purchase Warrants”.



“Meros” means Meros Polymers Inc.



“Meros Escrow Shares” has the meaning set out under
the heading “Business of Cardiol - Commercialization Relationships – Meros”.



“Meros License Agreement” has the meaning set out
under the heading “Business of Cardiol - Commercialization Relationships – Meros”.



“Meros Milestone” has the meaning set out under
the heading “Business of Cardiol - Commercialization Relationships – Meros”.



“Meros Special
Warrants” has the meaning set out under the heading “Business of Cardiol - Commercialization Relationships –
Meros”.



“nanoparticles” means particles of nano-scale – i.e., <100 nanometres in size.



“nanotherapeutics” means therapeutic drugs encapsulated
within nanoparticles – i.e., particles that are <100 nanometres in diameter.



“Nasdaq” means the Nasdaq Stock Market LLC.



“NDA” means a new drug application under the FDA.



“NDS” means New Drug Submission.



“NI 52-110” means National Instrument 52-110 –
Audit Committees.



“NLC” has the meaning set out under the heading
 “Regulatory Overview – Regulatory Framework in Canada for Cannabis – Provincial and Territorial Regulatory Regimes”.



“NOC” means Notice of Compliance.



“NON” means Notice of Noncompliance.



“Noramco” means Noramco, Inc.



“November 2021 Underwriters” has the meaning
set out under the heading “Business of Cardiol – Corporate History - Year Ended December 31, 2021”.



“November 2021Warrant
Indenture” has the meaning set out under the heading “Capital Structure - Share Purchase Warrants”.



“Omnibus Equity IncentivePlan” means the equity compensation plan the Board of Directors has adopted whereby options, shares, and other share awards
may be granted to the Corporation’s Directors, officers, employees, and consultants.








- 5 -




“Option” means an option under the Legacy Equity
Compensation Plan or Omnibus Equity Incentive Plan.



“Orphan Indication” means a disease affecting fewer
than 200,000 citizens in the U.S. or 5 per 10,000 citizens in Europe. An orphan-designated therapeutic targeting such an indication benefits
from 7 years’ market exclusivity in the U.S and 10 years’ market exclusivity in the EU.



“PCL” means polycaprolactone.



“PEG” means polyethylene glycol.



“pharmacokinetics” or “PK” means
the fate of a drug once administered, for e.g., concentration and duration retained in circulation.



“ppm” means parts-per-million.



“Purisys” means Purisys, LLC.



“Purisys Exclusive Supply Agreement”
has the meaning set out under the heading “Business of Cardiol - Commercialization Relationships –Purisys”.



“Regulations” has the meaning ascribed thereto under
 “Regulatory Overview – Regulatory Framework in Canada for Cannabis”.



“SARS-CoV-2" means severe acute respiratory syndrome
coronavirus 2.



“Share Awards” means shares, performance share units,
restricted share units, and deferred share units.



“Shareholder” means a shareholder of the Corporation.



“SC” means subcutaneous.



“Task Force” means the Task Force on Cannabis Legalization
and regulation.



“TecSalud” means TecSalud del Tecnológico
de Monterrey, Mexico.



“THC” means Tetrahydrocannabinol.



“TMZ” means temozolomide.



“TLR” means Toll Like Receptor.



“TSX” means the Toronto Stock Exchange.



“U.S.” means the United States of America.



“USD” means U.S. dollars.



“Warrant Indenture” has the meaning set out under
the heading “Capital Structure - Share Purchase Warrants”.








- 6 -




MEANINGS
OF CERTAIN REFERENCES



In this annual information form (“Annual
Information Form” or “AIF”), references to the “Corporation”, “Cardiol”, “we”, “us”
or “its” are references to Cardiol Therapeutics Inc. References to “management” in this AIF mean the persons acting
in the capacities of Cardiol’s President and Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, and Chief
Medical Officer. Any statements in this AIF made by or on behalf of management are made in such persons’ capacities as officers
of Cardiol and not in their personal capacities.



FORWARD-LOOKING
INformation



This AIF 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”, “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 oral cannabidiol
                                                                                                                                                     formulations for commercialization;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | our ability to develop new formulations of cannabidiol, including subcutaneous formulations for commercialization;
| | - | ------------------------------------------------------------------------------------------------------------------



| | • | the successful development and commercialization
of our current product candidates and the addition of future products;
| | - | -----------------------------------------------------------------------------------------------------------------------



| | • | our
                                            intention to build a pharmaceutical brand and cannabidiol products focused on addressing
                                            fibrosis and inflammation in heart disease, with a particular focus on acute myocarditis
                                            and chronic heart failure;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | the ability for our drug delivery technologies to deliver cannabinoids and other anti-inflammatory drugs to inflamed tissue in the heart;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------



| | • | the expected medical benefits, viability, safety,
efficacy, and dosing of cannabidiol;
| | - | --------------------------------------------------------------------------------------



| | • | patents and intellectual property, including, but not limited to, our (a) ability to procure, defend, and/or enforce our intellectual
property relating to our drugs, drug formulations, drug candidates, and associated uses, methods, and/or processes, and (b) freedom to
operate;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | our competitive position and the regulatory environment
in which we operate;
| | - | ----------------------------------------------------------------------------



| | • | our financial position; our business strategy;
our growth strategies; our operations; our financial results; our dividends 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 it believes are appropriate and are subject to risks and
uncertainties. 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 purchasers of Securities 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;
| | - | ------------------------------------------------



| | • | our requirement for additional financing;
| | - | -----------------------------------------








- 7 -




| | • | our negative cash flow from operations;
| | - | ---------------------------------------



| | • | our history of losses;
| | - | ----------------------



| | • | dependence on 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,
and complete clinical trials, including the high cost, uncertainty, and delay of clinical trials and additional costs associated with
any failed clinical trials;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | potential 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, for our drugs and drug candidates;
| | - | ------------------------------------------------------------------------------------------------------------------------------------



| | • | delays in achievement of projected development
goals;
| | - | -----------------------------------------------------



| | • | management of additional regulatory burdens;
| | - | --------------------------------------------



| | • | volatility in the market price for the Securities;
| | - | --------------------------------------------------



| | • | failure to protect and maintain and the consequential
loss of intellectual property rights;
| | - | -------------------------------------------------------------------------------------------



| | • | third-party claims relating to misappropriation
by our employees 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 current early-stage research
regarding the medical benefits, viability, safety, efficacy, and dosing of cannabinoids;
| | - | -------------------------------------------------------------------------------------------------------------------------------------



| | • | claims for personal injury or death arising from
the use of products and product candidates produced by us;
| | - | -----------------------------------------------------------------------------------------------------------



| | • | uncertainty relating to market acceptance of
our product candidates;
| | - | --------------------------------------------------------------------



| | • | our lack of experience in commercializing any
products;
| | - | -------------------------------------------------------



| | • | the level of pricing and reimbursement for our
products and product candidates, if approved;
| | - | --------------------------------------------------------------------------------------------



| | • | our dependence on Dalton and other contract manufacturers;
| | - | ----------------------------------------------------------



| | • | unsuccessful collaborations with third parties;
| | - | -----------------------------------------------



| | • | business disruptions affecting third party suppliers
and manufacturers;
| | - | -----------------------------------------------------------------------



| | • | lack of control in future prices of our product
candidates;
| | - | -----------------------------------------------------------



| | • | our lack of experience in selling, marketing,
or distributing our products;
| | - | ---------------------------------------------------------------------------



| | • | 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 cannabidiol;
| | - | -----------------------------------------------------------------








- 8 -




| | • | 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 products;
| | - | -----------------------------------------------------------



| | • | operating risk and insurance coverage;
| | - | --------------------------------------



| | • | our inability to manage growth;
| | - | -------------------------------



| | • | conflicts of interest among our officers and
directors;
| | - | -------------------------------------------------------



| | • | 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 May 2021
Warrants by existing shareholders causing the market price for the Common Shares and May 2021 Warrants to fall;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | the issuance of Common Shares in the future causing
dilution; and
| | - | -----------------------------------------------------------------



| | • | the impact of the recent novel coronavirus (COVID-19)
pandemic on our operations, including clinical trials.
| | - | ------------------------------------------------------------------------------------------------------------



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 AIF is provided as of the date of this AIF, and the Corporation disclaims 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.



DATE
OF INFORMATION



The information in this AIF is presented as of
December 31, 2021, unless otherwise indicated.



PRESENTATION
OF FINANCIAL INFORMATION



Unless otherwise indicated, all references to
 “$” or “dollars” are to Canadian dollars, which is Cardiol’s functional currency. The fiscal year end of
all entities within the corporate structure of Cardiol is December 31. Cardiol’s financial statements are prepared in accordance
with International Financial Reporting Standards (“IFRS”). References to H1 refer to the six-month period ending June 30
of the relevant fiscal year, and references to H2 refer to the six-month period ending December 31 of the relevant fiscal year.



THIRD-PARTY
INFORMATION



Unless otherwise indicated, information contained
in this AIF concerning our industry and the markets in which we operate, including our general expectations and market position, market
opportunities and market share, is based on information from independent industry organizations, other third-party sources (including
industry publications, surveys, and forecasts), and management studies and estimates.



Unless otherwise indicated, our estimates are
derived from publicly available information released by independent industry analysts and third-party sources, as well as data from our
internal research, and include assumptions made by us which we believe to be reasonable based on our knowledge of our industry and markets.
Although Cardiol believes these sources to be generally reliable, market and industry data are subject to interpretation and cannot be
verified with complete certainty due to limits on the availability and reliability of raw data, the voluntary nature of the data gathering
process, and other limitations and uncertainties inherent in any statistical survey. Our internal research and assumptions have not been
verified by any independent source, and we have not independently verified any third-party information. While we believe the market position,
market opportunity, and market share information included in this AIF are generally reliable, such information is inherently imprecise.
In addition, projections, assumptions, and estimates of our future performance and the future performance of the industry and markets
in which we operate are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described
under the heading “Forward-Looking Statements” and “Risk Factors”.








- 9 -




CORPORATE
STRUCTURE



The Corporation was incorporated under the Business
Corporations Act (Ontario) on January 19, 2017. The Corporation has no subsidiaries.



The head and registered office of the Corporation
is located at Suite 602 – 2265 Upper Middle Road East, Oakville, Ontario L6H 0G5, Canada.



On August 14, 2018, the Board of Directors
of the Corporation approved an amendment and restatement of By-law No. 1 of the Corporation to: (i) amend the by-law to change
the number of shares required to be represented at a meeting from a majority of such shares to twenty-five percent (25%) of such shares
(the “By-Law Quorum Amendment”); and (ii) adopt by-laws requiring advance notice of director nominees from Shareholders
(the “Advance Notice By-Law Amendment” and, together with the By-Law Quorum Amendment, the “By-Law Amendment”).
The purpose of the By-law Quorum Amendment is to ensure that if the Corporation’s shares become widely held, a quorum for meetings
of Shareholders will be more easily obtained. The purpose of the Advance Notice By-Law Amendment is to ensure that an orderly nomination
process is observed, that Shareholders are well-informed about the identity, intentions, and credentials of director nominees, and that
Shareholders vote in an informed manner after having been afforded reasonable time for appropriate deliberation. The By-Law Amendment
was confirmed by an ordinary resolution of Shareholders of the Corporation on August 28, 2018.The Articles of the Corporation were
amended on February 13, 2017 to provide that its authorized capital consists of an unlimited number of Common Shares and make certain
amendments of a “housekeeping” nature. The Articles of the Corporation were amended on August 29, 2018 to remove certain
share transfer restrictions and to split each issued and outstanding Common Share into two Common Shares. All current and comparative
references to the number of shares have been restated to give effect to the stock split, unless otherwise noted.



See “Capital Structure”.



BUSINESS
OF CARDIOL



Corporation’s Overview



The Corporation is a clinical-stage
life sciences company focused on the research and clinical development of cannabidiol as an anti-fibrotic and anti-inflammatory therapy for the treatment of cardiovascular disease ("CVD"). The Corporations lead
product candidate, CardiolRx, is a pharmaceutically produced oral cannabidiol formulation that is being clinically developed for
use in cardiovascular medicine. Extensive pre-clinical investigations in models of CVD have demonstrated anti-fibrotic activity
of cannabidiol, as well as anti-inflammatory, anti-ischemic and anti-arrhythmic actions. In experimental models of heart failure and cardiac
injury, cannabidiol has also been shown to be cardioprotective by reducing cardiac hypertrophy, fibrosis, and the production  markers
of cardiac re-modelling.



CardiolRx is currently
being evaluated in a Phase II/III multi-national, randomized, double-blind, placebo-controlled study (the LANCER trial). LANCER is
designed to evaluate the efficacy and safety of CardiolRx as a cardioprotective therapy to reduce major cardiovascular and respiratory
events in patients hospitalized with COVID-19 who have a prior history of, or risk factors for, CVD, and to investigate the influence
CardiolRx has on key biomarkers associated with heart disease. It is now recognized that the impact of SARS-CoV-2 infection that
causes COVID-19 is not limited to the pulmonary system. People who have had COVID-19 have an increased risk and burden for adverse cardiovascular
outcomes (such as acute myocardial infarction, dysrhythmias, pulmonary embolism, pericarditis, myocarditis, stroke, and heart failure)
up to one year following their COVID-19 diagnosis.








- 10 -




Cardiol 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. This disease remains an important cause of acute and fulminant heart
failure and is a leading cause of sudden cardiac death in people less than 35 years of age. Although viral causes of myocarditis are the
most common, myocarditis can result from a broad range of infections and can be caused by certain drugs, including chemo-therapeutic
agents used to treat several common cancers.  Myocarditis can also manifest as post-acute sequelae of SARS-CoV-2 infection and, more
recently, has been reported as a rare complication associated with certain vaccines for COVID-19. Cardiol believes there is a significant
opportunity to develop  CardiolRx as an orphan drug for the treatment of acute myocarditis, for which there is
currently no accepted standard of care.



In addition, Cardiol is developing
a subcutaneous formulation of CardiolRx for the treatment of fibrosis and inflammation in the heart that is associated with the
development and progression of heart failure. Heart failure affects 26 million people in the developed world and remains a leading cause
of death and hospitalization, with associated annual healthcare costs in the U.S. alone exceeding $30 billion1.



Corporate History



For over 25 years, the Founders – David
Elsley, Dr. Eldon Smith, and Dr. Anthony Bolton – have had an active interest in the role that inflammation plays in a
number of serious medical conditions, including heart failure. Prior to the formation of Cardiol, the Founders pursued scientific and
clinical research in this area and were successful in securing funding to support the development of a novel therapeutic from concept through
to completion of Phase III multi-center and multi-national clinical trials. Based on an extensive review of the scientific literature
conducted in late 2014, the Founders identified cannabidiol as a molecule of interest to investigate in heart failure pathology due to
its anti-inflammatory, anti-fibrotic, and cardioprotective properties.



Cardiol was incorporated on January 19, 2017
and in June 2017, the Corporation entered into an exclusive manufacturing supply agreement with Dalton to support the Corporation’s
research programs. Dalton is a Health Canada approved and FDA registered cGMP manufacturer of over 200 Active Pharmaceutical Ingredients
(APIs), including pharmaceutical cannabinoids, with manufacturing capability scalable to support all stages of the regulatory process
(Phase I, II, III or commercial). During August and September 2018, the Corporation initiated a comprehensive USD
$3 million research and development collaboration with TecSalud and Nano4heart, both of the Instituto Tecnológico y de Estudios
Superiores de Monterrey, Mexico, combining the significant research capability of TecSalud, with the nanotechnology expertise of Nano4heart
and the research and clinical development expertise of Cardiol, for the purpose of working towards a common goal of advancing the treatment
of heart failure.



Following is a description of Cardiol’s
development over its last three completed financial years.



Year Ended December 31, 2019



In January 2019, the remaining outstanding
8% Convertible Debenture, with a face value of $400,000, was converted into 2,700,000 Common Shares.



In January 2019, the Corporation granted
150,000 stock options to a certain officer of the Corporation. Each stock option allows the holder to acquire one Common Shares at an
exercise price of $4.30 and expires on January 2, 2026. The options vested on grant.



In January 2019, the Corporation granted
285,000 stock options to certain employees and consultants of the Corporation. Each stock option allows the holder to acquire one Common
Shares at an exercise price of $5.34: 125,000 stock options vest 25% every three months from the grant date and expire July 24, 2020.
100,000 stock options vest 25% every three months from the grant date and expire January 24, 2024. 60,000 stock options vest 1/3
each on the first, second, and third anniversaries of the grant date and expire January 24, 2026.












1
Cook, C., Cole, G., Asaria, P., Jabbour, R. & Francis, D.P. The annual global economic burden of heart failure. International Journal
of Cardiology 171, 368-376 (2014)








- 11 -




In January 2019, an additional 374,544 common
shares at $4.62 per share for gross proceeds of $1,730,393 were granted under the over-allotment option. As a result, an additional 22,472
compensation warrants were issued.



In March 2019, the Corporation announced
the appointment of Thomas (Tom) Moffatt, BBA, as Chief Commercial Officer.



In March 2019, the Corporation cancelled
40,000 stock options exercisable at $5.00 and originally set to expire August 30, 2025.



In April 2019, the Corporation granted 140,000
stock options to certain officers and consultants of the Corporation. Each stock option allows the holder to acquire one Common Share
of the Corporation at an exercise price of $5.77 and expires on April 1, 2026. The options vest 1/3 each on the first, second, and
third anniversaries of the grant date.



In April 2019,the Corporation granted 60,000 stock options to a certain officer of the Corporation. Each stock option allows the holder to acquire
one Common Share of the Corporation at an exercise price of $5.42 and expires on April 4, 2026. The options vest 1/3 each on the
first, second, and third anniversaries of the grant date.



In June 2019, the Corporation announced it
is planning a clinical trial in acute myocarditis utilizing its CardiolRx CBD formulation. See “Business of Cardiol – Overview
of Business – Phase II study – Acute myocarditis”.



In October 2019, the Corporation completed
the manufacturing scale-up for commercialization of its CBD formulation.



In October 2019, the Corporation granted
160,000 stock options to certain employees of the Corporation. Each stock option allows the holder to acquire one Common Share of the
Corporation at an exercise price of $3.23 and expires on October 15, 2024. The options vest 1/3 each on the first, second and third
anniversaries of the grant date.



In October 2019, the Corporation granted
90,000 stock options to certain consultants of the Corporation. Each stock option allows the holder to acquire one Common Share of the
Corporation at an exercise price of $3.28 and expires on October 29, 2021. The options vest 25% every three months from the grant
date.



In November 2019, the Corporation granted
50,000 stock options to a consultant of the Corporation. Each stock option allows the holder to acquire one Common Share of the Corporation
at an exercise price of $3.34 and expires on November 24, 2021. The options vest 50% immediately and 50% six months from the grant
date.



In December 2019, the Corporation
announced the appointment of Mr. Colin Stott to its Board of Directors. Mr. Terry Lynch stepped down from the Board of
Directors to accommodate Mr. Stott’s appointment.



In December 2019, the Corporation granted
60,000 stock options to a director of the Corporation. Each stock option allows the holder to acquire one Common Share of the Corporation
at an exercise price of $4.08 and expires on December 2, 2024. The options vest 1/3 each on the first, second, and third anniversaries
of the grant date.



In December 2019, the Corporation announced
it had appointed Michael J. Willner, Esq. as a Business Advisor to the Corporation.



In December 2019, the Corporation granted
60,000 stock options to a consultant of the Corporation. Each stock option allows the holder to acquire one Common Share of the Corporation
at an exercise price of $3.69 and expires on December 5, 2024. The options vest 25% every six months from the grant date.








- 12 -




In December 2019, the Corporation’s
exclusive manufacturing partner, Dalton, received a three-year renewal and license amendment of its Cannabis Act Processing License from
Health Canada. The renewal and amendment permits scaled commercial production of Cardiol’s high concentration pharmaceutical cannabidiol
formulations and their sale to other license holders.



Year Ended December 31, 2020



In February 2020, the Corporation granted
109,300 stock options to certain employees and consultants of the Corporation. Each stock option allows the holder to acquire one Common
Share of the Corporation at an exercise price of $3.54 and expires on February 23, 2025. The options vest 50% on grant and 50% twelve
months from the grant date.



In March 2020,
the Corporation announced itreceived a No Objection Letter from Health Canada to conduct a Phase I study of the Corporation’s
pharmaceutically produced high concentration, pure cannabidiol formulation.



In March 2020, the Corporation announced
that it signed a supplier agreement to become a medical cannabidiol supplier to Shoppers Drug Mart Inc. (“Shoppers”).



In April 2020, the Corporation announced
that data submitted by its international research collaborators were accepted for presentation at the ACC’s 69th Annual Scientific
Session & Expo together with the World Congress of Cardiology, held virtually from March 28 – 30.



The effects of Cardiol’s pharmaceutically
produced cannabidiol formulation were assessed in a model of non-ischemic heart failure. Heart failure was induced by four weeks of infusion
of angiotensin II, a substance that produces hypertension, cardiac enlargement, and subsequent heart failure. Two dosages of Cardiol’s
cannabidiol formulation (or placebo) were administered by subcutaneous injection every three days for four weeks. In addition, the effects
of CBD on angiotensin-induced hypertrophy (cell enlargement) and expression of BNP in a cardiac cell line (H9c2) were assessed. BNP is
a substance released from stretched heart cells which is a widely used clinical indicator of the severity of heart failure.



The study found that Cardiol’s cannabidiol
formulation significantly reduced hypertrophy and produced a dose-dependent reduction of key inflammation markers, decreases in fibrosis,
and lower BNP expression. These findings confirm the anti-inflammatory and anti-fibrotic activity of Cardiol’s cannabidiol formulation
in a model of heart failure. Moreover, the data show that cannabidiol reduced the amount of BNP released, thereby confirming the role
of Cardiol’s cannabidiol formulation as a cardioprotective therapy.



In April 2020, the Corporation announced
that data describing Cardiol’s nanotechnology approach to drug delivery were submitted by the Corporation’s international
research collaborators and accepted for presentation at the ACC’s 69th Annual Scientific Session & Expo together with the
World Congress of Cardiology, held virtually from March 28 – 30.



Results from this study, conducted at the Houston
Methodist DeBakey Heart & Vascular Center, showed that there was a greater than 100-fold increase in uptake of Cardiol’s
nanoparticles in heart failure hearts compared with control hearts in a pre-clinical model of non-ischemic heart failure. The nanoparticles
localized within the diseased hearts, predominantly in areas of fibrosis. Fibrosis is an important component of the pathology of heart
failure and is primarily responsible for the stiffening and reduced function of the heart muscle. Moreover, the nanoparticles accumulated
within the cytoplasm of the cultured fibroblasts. This evidence of Cardiol’s nanoparticles preferentially accumulating intracellularly
in fibroblasts shows potential for the successful delivery of anti-fibrotic drugs, such as cannabidiol, to the diseased region of the
heart.



Cardiol’s proprietary nanotechnology is
designed to enable the distribution of water insoluble drugs within the blood (aqueous) circulation, improve pharmacokinetics, and facilitate
drug accumulation in the failing heart. Cardiol’s nanoparticles are based on a patented family of biocompatible and biodegradable
amphiphilic block co-polymers made from PEG and PCL. Both PEG and PCL have a long history of safe use in humans.








- 13 -






In May 2020, the Corporation announced the
filing of a new patent application covering the use of CBD to improve the outcome of patients with COVID-19.



In June 2020, the Corporation announced the
completion of its short form prospectus offering by issuing 6,900,000 Common Share units at $2.50 per unit for gross proceeds of $17,250,000.
Each unit consisted of one Common Share and one-half of one Common Share purchase warrant. Each whole warrant was exercisable into one
Common Share at the price of $3.25 per share for a period of two years from closing, subject to accelerated expiry if, at any time, the
volume weighted average trading price of the Common Shares is equal to or greater than $4.50 for any ten consecutive trading day period
see “Corporate History – Year Ended December 31, 2021”.



The offering was conducted through a syndicate
of underwriters (the "2020 Underwriters"). The 2020 Underwriters were paid cash fees of $735,000 and 294,000 compensation warrants
(the “2020 Compensation Warrants”). Each 2020 Compensation Warrant entitles the holder to acquire one Common Share unit at
a price of $2.50 for a period of 24 months from the date of closing.



In June 2020, the Corporation announced that
it appointed Steven Grasso as Business Advisor to the Corporation.



In October 2020, Cardiol announced the commercial
introduction of Cortalex.



In December 2020,
Cardiol announced the appointment ofCRO Worldwide Clinical Trials (“Worldwide”) for its Phase II/III trial in high-risk
patients hospitalized with COVID-19. The double-blind, placebo-controlled clinical trial is designed to evaluate the efficacy and safety
of CardiolRx in 422 hospitalized COVID-19 patients with a prior history of, or risk factors for, cardiovascular disease. This patient
population is at significant risk of developing cardiovascular complications, which are frequently fatal, during their illness. Worldwide
has been the CRO for several international COVID-19 clinical programs and has extensive experience in conducting clinical research focused
on cardiovascular disease. With a global footprint, Worldwide provides drug development expertise from early phase to late-stage clinical
development, post-approval, and real-world evidence studies; delivering high quality clinical programs designed to support regulatory
approvals in multiple jurisdictions. Employing more than 1,900 professionals, Worldwide provides drug development support services in
over 60 countries with offices in North and South America, Europe, and Asia.



In December 2020,
the Corporation announced the completion of the Phase I clinical study of CardiolRx.Cardiol’s
Phase I double-blind, placebo-controlled, randomized study was designed to assess safety, tolerability, and pharmacokinetics of single,
followed by multiple day ascending doses of CardiolRx administered orally to 52 healthy adult subjects, both in the fasting and fed states.
The therapy was shown to be generally well tolerated with no serious adverse events reported in the study and 51 subjects completed all
requirements of the study protocol. By measuring standard safety parameters and the pharmacokinetics of CardiolRx, including the degree
of drug absorption and resulting blood levels at escalating doses, the Phase I study will provide important information to optimize dosing
levels.



Year Ended December 31, 2021



In January 2021, the Corporation announced the
formation of the DSMC and the CEC for the Corporations Phase II/III trial in high-risk patients hospitalized with COVID-19 (See below
 – “Phase II/III trial in high-risk patients hospitalized with COVID-19”).



In February 2021, the Corporation granted
1,146,666 stock options to certain consultants of the Corporation. Each option allows the holder to acquire one common share of the Corporation
at an exercise price ranging from $3.16 to $4.80 and expires between January 31, 2023 and February 22, 2023. 696,666 of the
options vest immediately, while the remainder vest 25% per quarter from the grant date.








- 14 -




In February 2021, the Corporation received proceeds
of $7,879,820 on the exercise of 2,424,560 warrants with an exercise price of $3.25, and $503,068 on the exercise of 201,227 warrants
with an exercise price of $2.50. In addition, there were a total of 916,666 stock option exercises, resulting in cumulative proceeds of
$2,604,648.



In March 2021,
the Corporation announced that it had submitted an application to list the Corporation’s common shares on the Nasdaq.



In March 2021, the Corporation announced
that Dr. Andrew Hamer joined the Corporation as Chief Medical Officer (“CMO”). Dr. Hamer leads the research and
development of the Corporation’s clinical-stage products and also guides the development of additional novel therapeutics in the
Corporation’s pipeline.



Dr. Andrew Hamer brings 30 years of experience
in the global life sciences industry, medical affairs, and cardiology practice to the Corporation. Most recently he served as Executive
Director, Global Development-Cardiometabolic at California-based Amgen Inc., where he led the Global Development group for Repatha®,
the LDL cholesterol lowering PCSK9 inhibitor evolocumab, which generated revenues of almost USD $900 million in 2020. As development lead,
Dr. Hamer headed the Repatha® global evidence generation team collaborating with safety, regulatory, health economics,
observational research, scientific communications, publications, medical affairs, and clinical operations teams to design and execute
several multi-center clinical trials in support of FDA and international regulatory filings. Prior to his five-year tenure with Amgen,
Dr. Hamer served for two years as VP Medical Affairs at Capricor Therapeutics Inc., where he was responsible for the development
of novel therapeutics for heart disease and for the supervision of the clinical operations of the company, including clinical trial design
and execution.



Prior to joining the life sciences industry,
Dr. Hamer practiced cardiology and internal medicine in New Zealand for 19 years. His distinguished career in cardiology culminated
as Chief Cardiologist at Nelson Hospital, Nelson Marlborough District Health Board, Nelson, while concurrently leading cardiac services
nationally in New Zealand. Dr. Hamer graduated with a medical degree (MB, ChB) from the University of Otago, New Zealand, an internationally
recognized medical school which recently ranked among the top twenty universities in the world in several medical subject categories.
His clinical research training took place at various centres in New Zealand and London, UK, followed by a cardiology fellowship at Deaconess
Hospital, Harvard Medical School, Boston. Dr. Hamer has co-authored many high-quality peer-reviewed scientific publications reflecting
his considerable experience as a clinical trialist, having served as a principal or co-investigator for 40 multi-centre clinical trials
in therapies for acute coronary syndrome, heart failure, hypertension, cholesterol disorders, atrial fibrillation, and diabetes.



In May 2021, the Corporation completed a
short form base shelf prospectus offering of units of the Corporation for aggregate gross proceeds of $22,003,200. Under the offering,
the Corporation sold a total of 6,112,000 units at a price of $3.60. Each unit is comprised of one common share of the Corporation and
one-half purchase warrant of the Corporation (the “May 2021 Warrants”). Each full warrant entitles the holder thereof
to acquire one common share at a price of $4.60 for a period of 36 months from issuance. The warrants are listed for trading on the TSX
under the symbol "CRDL.WT.A".



The Offering was
conducted through a syndicate of underwriters (the "May 2021 Underwriters"). The May 2021 Underwriters were paid cash
fees of $1,025,590.Concurrent with the closing, the May 2021 Underwriters purchased an additional 433,400 warrants for gross
proceeds $8,668, pursuant to the over-allotment option.



In June 2021, the Corporation adopted an
Omnibus Equity Incentive Plan which permits the grant or issuance of stock options, Restricted Share Units, Performance Share Units, and
Deferred Share Units, as well as other share-based awards to participants.



In July 2021, the Corporation announced that
its Board of Directors appointed Dr. Guillermo Torre-Amione as the new Chairman. Dr. Torre-Amione has been an independent director
of Cardiol since August 2018 and has taken over from Dr. Eldon Smith, the founding Chairman of Cardiol and who has now retired
from the Board.








- 15 -




In August 2021, the Corporation's common
shares commenced trading on the Nasdaq under the symbol "CRDL". Concurrent with the listing on the Nasdaq, the common shares
ceased to be quoted on the OTCQX.



In August 2021, the Corporation announced
that the FDA provided clearance to proceed with the Corporation's IND application to commence a Phase II, multi-center, double-blind,
randomized, placebo-controlled trial designed to study the safety and tolerability of CardiolRx, as well as its impact on myocardial recovery
in patients presenting with acute myocarditis.



In September 2021, the Corporation announced
the appointment of Michael J. Willner, Esq. to its Board of Directors.



Michael J. Willner has practiced as both an Attorney
and a Certified Public Accountant. He graduated from Emory University Law School as a member of the Emory Law Review. Subsequently, he
practiced real estate and corporate law with New York City-based Milbank, Tweed, Hadley & McCloy, one of the nation’s most
prominent international law firms. Prior to his legal career, Mr. Willner was employed by the former Arthur Andersen & Company,
a national accounting firm, where he practiced in Arthur Andersen’s tax department.



Mr. Willner has been a very active and successful
opportunistic investor for over forty years and is the founder of Willner Capital, Inc., an investment company specializing in public
and private equities, as well as debt instruments. Willner Capital primarily uses fundamental analysis as an evaluation method and event-driven
strategies. Over the past ten years, Willner Capital has made significant investments in both the biotechnology and pharmaceutical cannabinoid
industries, focusing primarily on clinical-stage companies that seek to address significant unmet medical needs. Mr. Willner has
been quoted in the New York Times business section and has served as a moderator and participant on numerous panel discussions and advisory
boards regarding his investments in the pharmaceutical side of the cannabinoid industry.



In September 2021, the Corporation announced
the acceleration of the expiry date of all outstanding common share purchase warrants of the Corporation that were issued on June 4,
2020, to October 12, 2021, from the original expiry date of June 4, 2022.



In October 2021, the Corporation announced
that it is expanding its LANCER trial to include several hospital centers in Brazil and Mexico.



In October 2021, the Corporation announced
that it is received approval from Health Canada to proceed with the Corporation's Phase II, multi-center, double-blind, randomized, placebo-controlled
trial designed to study the safety and tolerability of CardiolRx as well as its impact on myocardial recovery in patients presenting with
acute myocarditis.



In November 2021, the Corporation granted
1,200,000 performance share units to certain consultants. Each performance share unit allows the holder to acquire one common share. Vesting
of the performance share units is based on specific performance metrics that must be achieved prior to the expiry date of June 30, 2022 (see “Corporate History – Subsequent to Year Ended December 31, 2021”).



In November 2021, the Corporation completed
a short form base shelf prospectus offering of units of the Corporation for aggregate gross proceeds of USD$50,194,500. Under the offering,
the Corporation sold a total of 16,350,000 units at a price of USD$3.07. Each unit is comprised of one common share of the Corporation
and one-half purchase warrant of the Corporation (the “November 2021 Warrants”). Each full warrant entitles the holder
thereof to acquire one common share at a price of USD$3.75 for a period of 36 months from issuance.



The Offering was conducted through a syndicate
of underwriters (the "November 2021 Underwriters"). The November 2021 Underwriters were paid cash fees of USD$3,011,670.








- 16 -




Subsequent to Year Ended December 31, 2021



Subsequent to December 31, 2021, the Corporation
granted 220,000 stock options to certain consultants of the Corporation. Each option allows the holder to acquire one common share of
the Corporation at an exercise price of $2.18 and expires on January 11, 2027. These options vest 1/3 on each anniversary date.



Subsequent to December 31, 2021, the Corporation
announced the appointment of the Scientific Advisory Board ("SAB"). For biographies of members, see “Scientific Advisory
Board”.



Subsequent to December 31, 2021, the Corporation
extended the life of 1,200,000 performance share units issued in November 2021 to expire on June 30, 2022.



Subsequent to December 31, 2021, the Corporation
announced the appointment of Jennifer M. Chao to its Board of Directors. Ms. Chao has also been appointed Chair of the Corporate
Governance and Compensation Committee. Iain Chalmers has stepped down from the Board of Directors to accommodate Ms. Chao's appointment.



Phase II/III study – COVID-19 (LANCER)



In September 2020, the FDA issued clearance
for the Corporation’s Investigational New Drug application to commence a Phase II/III, double-blind, placebo-controlled clinical
trial investigating the efficacy and safety of CardiolRx, an oral cannabidiol formulation that is pharmaceutically manufactured under
cGMP, in 422 hospitalized COVID-19 patients with a prior history of, or risk factors for CVD.



In December 2020, Cardiol announced the appointment
of contract research organization (the "CRO"), Worldwide Clinical Trials ("Worldwide"), for its Phase II/III trial
in high-risk patients hospitalized with COVID-19. Worldwide has been the CRO for multiple international COVID-19 clinical programs and
has extensive experience in conducting clinical research focused on cardiovascular disease. With a global footprint, Worldwide provides
drug development expertise from early phase to late-stage clinical development, post-approval, and real-world evidence studies; delivering
high quality clinical programs designed to support regulatory approvals in multiple jurisdictions. Employing more than 1,900 professionals,
Worldwide provides drug development support services in over 60 countries with offices in North and South America, Europe, and Asia.



Cardiol’s Phase II/III trial has
been designed to evaluate the efficacy and safety, of CardiolRx as a cardioprotective therapy to reduce major cardiovascular and respiratory
events in patients hospitalized within the previous 48 hours, with a confirmed diagnosis of COVID-19, and who have pre-existing CVD and/or
significant risk factors for CVD, and to investigate the influence CardiolRx has on key biomarkers associated with heart disease. The
composite primary efficacy endpoint will be the difference between the active and placebo groups in the percentage of patients who develop,
during the first twenty-eight days following randomization and first dose of study medication,  one
or more of several common outcomes in this patient population, including all-cause mortality, requirement for ICU admission and/or ventilatory
support, as well as cardiovascular complications, including the development of heart failure, acute myocardial infarction, myocarditis,
stroke, or new sustained or symptomatic arrhythmia.



Patients with COVID-19 primarily present
with respiratory symptoms which can progress to bilateral pneumonia and serious pulmonary complications. It is now recognized that the
impact of COVID-19 is not limited to the pulmonary system. Individuals with pre-existing CVD or who have risk factors for CVD (such as
diabetes, hypertension, obesity, abnormal serum lipids, or age greater than 64) are at significantly greater risk of developing serious
disease from COVID-19 and experience greater morbidity. Moreover, such COVID-19 patients are at significant risk of developing cardiovascular
complications (such as acute myocardial infarction, cardiac arrhythmias, myocarditis, stroke, and heart failure) during the course of
their illness. Cardiol believes a therapeutic strategy that limits the number or severity of both pulmonary and cardiovascular complications
will improve the socioeconomic burden of this disease.



In March 2022, the Corporation announced
it received clearance from the FDA and regulatory agencies in Brazil and Mexico to modify the inclusion criteria for the LANCER
trial to allow the eligible patient pool to include the following: (i) vaccinated patients; (ii) use of therapies approved
for treatment of COVID-19 under emergency use authorization label; and (iii) a prior history of smoking or obesity, both CVD risk
factors prevalent in younger patients. Corporation also announced plans to expand the clinical trial infrastructure to include up to
an additional 20 clinical research centers.








- 17 -




The rationale for using cannabidiol to treat patients with COVID-19 is based on pre-clinical investigations conducted by Cardiol and others
in models of cardiovascular disease which have demonstrated anti-fibrotic activity of cannabidiol, as well as anti-inflammatory, anti-ischemic
and anti-arrhythmic actions. In experimental models of heart failure and cardiac injury, cannabidiol has also been shown to be cardioprotective
by reducing cardiac hypertrophy, fibrosis, and the production markers of cardiac re-modelling.



The LANCER study was designed and will
be overseen by an independent Steering Committee, consisting of international thought leaders in cardiovascular disease. Members
of the Steering Committee include:



Dennis M. McNamara, MD (Chair)



Dr. Dennis McNamara is a Professor of Medicine
at the University of Pittsburgh. He is also the Director of the Center for Heart Failure Research at the University of Pittsburgh Medical
Center. Dr. McNamara received his undergraduate/graduate education at Yale University, New Haven, Connecticut, and Harvard Medical
School, Boston, Massachusetts, respectively. He completed his internship, residency, and cardiology fellowship at Massachusetts General
Hospital in Boston. McNamara’s current research interests include etiology and pathogenesis of dilated cardiomyopathies; inflammatory
syndromes of cardiovascular disease; myocardial recovery in recent onset non- ischemic primary cardiomyopathy; etiology and management
of peripartum cardiomyopathy; and genetic modulation of outcomes in cardiovascular disease.



Leslie T. Cooper, Jr., MD (Co-Chair)



Dr. Leslie T. Cooper, Jr., is a 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. Dr. Cooper’s clinical interests and research focus on clinical and translational
studies of rare and undiagnosed cardiomyopathies, myocarditis, and inflammatory cardiac and vascular diseases, such as giant cell myocarditis,
cardiac sarcoidosis, eosinophilic myocarditis, and Takayasu’s arteritis. He has published over 130 original peer- reviewed papers,
as well as contributing to and editing books on myocarditis. In addition to his clinical and research work, Dr. Cooper is a fellow
of the American College of Cardiology, the American Heart Association, the European Society of Cardiology Heart Failure Association, the
International Society for Heart and Lung Transplantation, and the Society for Vascular Medicine and Biology. He is also the founder and
former president of the Myocarditis Foundation and continues to serve on its Board of Directors.



Arvind Bhimaraj, MD



Dr. Arvind Bhimaraj is a specialist in Heart
Failure and Transplantation Cardiology and is Assistant Professor of Cardiology, Institute for Academic Medicine, at Houston Methodist
and at Weill Cornell Medical College, NYC. He has been Co-Director of the Heart Failure Research Laboratory at Houston Methodist since
2016. His area of focus is anti- fibrotic mechanisms and how to promote recovery of a damaged heart. Dr. Bhimaraj was a Heart Failure
Fellow at the Cleveland Clinic from July 2010 to September 2011. Dr. Bhimaraj also specializes in Interventional Cardiology,
is board certified in cardiovascular disease, and the author of numerous cardiovascular publications.



Barry Trachtenberg, MD



Dr. Barry H. Trachtenberg is a cardiologist
specializing in heart failure and cardiac transplantation. He is also the director of the Michael DeBakey Cardiology Associates Cardio-Oncology
program, an evolving field devoted to prevention and management of cardiovascular complications of cancer therapies such as chemotherapy
and radiation. His clinical experience includes heart failure and heart transplantation, mechanical support pumps, and cardio- oncology.
He has contributed to multiple publications related to advanced heart failure, cardiac transplantation, regenerative therapies, and ventricular
assist devices. Dr. Trachtenberg is a member of the American Heart Association, the International Society for Heart and Lung Transplantation,
the Heart Failure Society of America, and the International CardiOncology Society of North America.








- 18 -




Wai Hong Wilson Tang, MD



Dr. Wai Hong Wilson Tang is the 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.
He attended and graduated from Harvard Medical School in 1996, having over 23 years of diverse experience, especially in Advanced Heart
Failure and Transplant Cardiology. Dr. Tang is affiliated with many hospitals including the Cleveland Clinic and cooperates with
other doctors and physicians in medical groups including The Cleveland Clinic Foundation.



Peter Liu, MD



Dr. Peter Liu is the 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. He was the former Scientific Director of the Institute of Circulatory and Respiratory Health at the
Canadian Institutes of Health Research, the major federal funding agency for health research in Canada. Prior to that role, he was the
inaugural Director of the Heart & Stroke/Lewar Centre of Excellence in Cardiovascular Research at University of Toronto. Dr. Liu
received his MD from the University of Toronto, and postgraduate training at Harvard University. His laboratory investigates the causes
and treatments of heart failure, the role of inflammation, and the identification of novel biomarkers and interventions in cardiovascular
disease. Dr. Liu has published over 300 peer-reviewed articles in high impact journals and received numerous awards in recognition
of his research and scientific accomplishments.



Carsten Tschöpe, MD



Dr. Carsten Tschöpe is Professor of
Medicine and Cardiology. Vice Director of the Department of Internal Medicine and Cardiology, Charité Hospital, Freie Universität
Berlin. He received his doctorate in medicine in 1993 and has over 140 peer - reviewed publications, including overview and book articles,
and 120 international original articles. His research interests include inflammatory cardiomyopathy, diabetic cardiopathy, and ischemic
cardiopathy. He also includes diastolic dysfunction, endothelial dysfunction, peptide systems, and experimental and clinical studies in
cardiology and stem cells in his research studies. For his outstanding research work, Dr. Tschöpe was awarded the prestigious
Arthur Weber Prize by the German Cardiac Society – Cardiovascular Research.



Matthias Friedrich, MD



Dr. Matthias Friedrich is Full Professor
with the Departments of Medicine and Diagnostic Radiology at the McGill University in Montreal and Chief, Cardiovascular Imaging at the
McGill University Health Centre. He is also Professor of Medicine at Heidelberg University in Germany. Dr. Friedrich earned his MD
at the Friedrich-Alexander-University Erlangen-Nürnberg, Germany. He completed his training as an internist and cardiologist at the
Charité University Medicine Center, Humboldt University in Berlin. Dr. Friedrich founded one of the first large Cardiovascular
Magnetic Resonance centers in Germany at the Charité Hospital in Berlin. After his move to Canada, from 2004 to 2011, he was Director
of the Stephenson Cardiovascular MR Centre at the Libin Cardiovascular Institute of Alberta and Professor of Medicine within the Departments
of Cardiac Sciences and Radiology at the University of Calgary, Canada. From 2011 to 2015, he directed the Philippa and Marvin Carsley
Cardiovascular MR Centre at the Montreal Heart Institute and was Michel and Renata Hornstein Chair in Cardiac Imaging at the Université
de Montréal.








- 19 -




Guilherme Oliveira, MD, MBA



Dr. Guilherme Oliveira is a Professor of
Medicine and Chairman of Cardiovascular Sciences at the University of South Florida Health Morsani College of Medicine. He is also the
Executive Director of the Tampa General Hospital Heart and Vascular Institute, located in Tampa, Florida. Dr. Oliveira received his
Doctor of Medicine from Universidade Federal do Rio De Janeiro, Rio De Janeiro, Brazil and completed the Internal Medicine Residency Program
at the Mayo Graduate School, Rochester, Minnesota. He served a Fellowship at the Baylor College of Medicine, Houston, Texas, and earned
an MBA at the Massachusetts Institute of Technology, Cambridge, Massachusetts. Dr. Oliveira’s areas of expertise include advanced
heart failure; left ventricular assist devices; onco-cardiology; heart transplantation; and mechanical circulatory support. For his outstanding
work, Dr. Oliveira was granted admission into the Fellowship of the American College of Cardiology.



Paolo Caramori, MD, PhD, FSCAI



Dr. Paolo Caramori is currently head of the
Division of Cardiovascular Medicine and the Center for Diagnosis and Interventional Treatment at Hospital São Lucas at PUCRS and
coordinator of Cardiarte. He also works at Hospital Mãe de Deus and Hospital Moinhos de Vento, in Porto Alegre (RS). He
has intense scientific activity, publishing several articles that, to date, have received more than 3,100 international citations. He
has supervised nine doctoral theses and 12 master's dissertations. Dr. Caramori graduated in Medicine from the Federal University
of Rio Grande do Sul (UFRGS) in 1988. He completed his residency in Internal Medicine and then in Cardiology at Hospital de Clínicas
de Porto Alegre, linked to UFRGS, from 1989 to 1992. He obtained his Master's degree in Cardiology from UFRGS in 1995. Afterwards, he
resided for three years in Toronto (Canada), where he held a Clinical Fellowship in Interventional Cardiology at the Toronto General Hospital,
at the University of Toronto. In 1999, he received the title of Doctor of Cardiology and Cardiovascular Sciences.



In January 2021, the Corporation announced
the formation of the Data Safety Monitoring Committee (the "DSMC") and the Clinical Endpoint Committee (the "CEC").
The DSMC comprises independent experts who will assess the patient safety data, and, if needed, critical efficacy endpoints of the trial.
In order to do so, the DSMC may review unblinded study information (on a patient level or treatment group level) during the conduct of
the trial. After each data review, the DSMC will advise the study Steering Committee with recommendations for protocol modifications,
if concerns over safety have developed, or that the study should continue according to the protocol if no concerns are identified. The
DSMC will also perform an interim analysis after 200 patients have completed the study, to be certain that the investigational drug is
not exposing trial patients to undo risk. Study management will also perform a blinded analysis at this time to determine if the expected
number of endpoints have occurred or if the sample size for the study needs to be adjusted so that enough patients will be enrolled to
achieve statistical significance.



The DSMC currently consists of three members:



|• | Chair: Dr. Jean Lucien Rouleau–
Professor and Former Dean, University of Montreal and Cardiologist, Montreal Heart Institute. Dr. Rouleau has an international reputation
in cardiovascular research, particularly in basic mechanisms and improving the clinical care of patients with heart failure. His publication
list includes more than 475 articles and seven book chapters;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | Statistician:
                                                                                                                                                             Dr. George Wells– Professor, School of Epidemiology, Public Health and Preventive Medicine, University of Ottawa and
                                                                                                                                                             Director, Cardiovascular Research Methods Centre, University of Ottawa Heart Institute. Dr. Wells has worked extensively with
                                                                                                                                                             governments and non-government research organizations, as well as private pharmaceutical and biotechnology companies. He has been an
                                                                                                                                                             Investigator in over 240 research projects with research funding exceeding $120 million. Dr. Wells is the author or co-author
                                                                                                                                                             of over 400 published articles; and
|• | Dr. John Teerlink– Professor
of Medicine, University of California, San Francisco and Director of Heart Failure and the Echocardiographic Laboratory at the San Francisco
Veterans Affairs Center. Dr. Teerlink is actively involved in many acute and chronic heart failure clinical trials, serving on endpoint,
data safety monitoring and steering committees for numerous international cardiovascular studies. He currently serves on the Acute Heart
Failure Committee of the European Society of Cardiology Heart Failure Association and has served on the National Committee on Heart Failure
and Transplantation of the American Heart Association. Dr. Teerlink was profiled in The Lancetas an internationally recognized
leader in heart failure.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         








- 20 -




The CEC comprises clinical experts in cardiology
and Intensive Care and has been established to ensure accurate and consistent assessment of the trial endpoints and/or serious adverse
events. In order to ensure an unbiased endpoint assessment, members of the CEC are blinded to treatment assignment. The goal of the CEC
is to standardize endpoints and optimize data quality.



The CEC currently consists of three members:



|• | Chair: Dr. Brent Mitchell–
Professor of Cardiac Sciences and Former Director of the Libin Cardiovascular Institute, University of Calgary. Dr. Mitchell completed
a Fellowship in Clinical Cardiology at Dalhousie University in Halifax, and a Fellowship in clinical electrophysiology at Stanford University
Medical Centre, California. Dr. Mitchell’s clinical practice and research interests are in the area of cardiac electrophysiology,
particularly in the diagnosis and management of tachyarrhythmias. Dr. Mitchell has published several sentinel papers in the diagnosis
and management of serious cardiac arrhythmias;
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | Dr. Maria Rosa Costanzo– Professor,
Rush Medical College and Cardiologist, Advocate Health, Naperville, IL. Dr. Costanzo is Board Certified in Advanced Heart Failure
and Cardiac Transplantation. Dr. Costanzo is currently the Medical Director of the Midwest Heart Specialists – Advocate Medical
Group Heart Failure and Pulmonary Arterial Hypertension Programs, and Medical Director of the Edward Hospital Center for Advanced Heart
Failure. Dr. Costanzo has published nearly 200 peer-reviewed manuscripts and is the author of numerous review papers, monographs,
and book chapters; and                                
|• | Dr. Courtney Bennett– Cardiologist
and Intensive Care Physician, Director of Quality Improvement in the Cardiac Intensive Care Unit, Mayo Clinic, Rochester, MN. Dr. Bennett
is a board-certified cardiologist and is board-eligible in critical care medicine. Her clinical interests include cardiac critical care
and contrast echocardiography. Dr. Bennett is Mayo Quality Academy gold-certified and serves as the Director of Quality Improvement
in the Cardiac Intensive Care Unit.                                                                                                                                          



In April 2021, Cardiol announced first
patient enrolled in the Phase II/III study. Subject to how the pandemic evolves, the Corporation expects to complete patient
enrollment  during H2, 2022. Top-line data from the study is expected during H1, 2023. Cardiol has budgeted additional costs of
approximately USD $11.3 million for study execution and $1.3 million for potential post study analysis.



Subject to study outcomes, management intends
to review the findings from the LANCER study with the FDA to determine what additional studies may be required to support an NDA
for CardiolRx. Cardiol may also review study outcomes with prospective development and commercialization partners from the pharmaceutical
industry.



Phase I study



In April 2021,
the Corporation announced results from a Phase I single and multiple ascending dose clinical trial of CardiolRx.



The Phase I trial was a randomized, placebo-controlled,
double-blind study designed to evaluate the safety, tolerability, and pharmacokinetic (PK) profile of CardiolRx at various dose levels.
The study randomized 52 subjects (age range 25 to 60 years) to one of two groups. In Group A, there were three sub-groups, each involving
12 subjects (nine active and three placebo), with each subject receiving a single dose of 5 mg/kg or 15 mg/kg of CardiolRx, in either
the fed or fasted state. In Group B, there were two sub-groups, each involving eight subjects (six active and two placebo) with each subject
receiving 5 mg/kg or 15 mg/kg twice daily for six days. Serial blood samples were taken to measure the level of cannabidiol and its two
main metabolites.








- 21 -






Results indicated that CardiolRx was
safe and generally well tolerated at all dose levels, with no serious adverse events reported in the study. Fifty-one of the 52 enrolled
subjects completed all requirements of the protocol. Each subject had repeated standard measures of safety including physical examination
(with vital signs), electrocardiogram (ECG) to monitor cardiac time intervals (particularly, the QTc interval, which is an important measure
of the risk for abnormal heart rhythms), as well as     biochemical and coagulation laboratory tests. Despite the relatively high
doses of CardiolRx administered during the study, there were no ECG or abnormal laboratory findings after six days of dosing and
no elevation of liver enzymes or QTc changes were detected. The recorded adverse events were all mild or moderate in severity and were
primarily related to the gastro-intestinal tract.



The results of the study formed an integral part
of the Corporation’s IND application with the FDA for an international Phase II clinical trial in acute myocarditis.



Phase II study – Acute myocarditis



In August 2021, Cardiol received clearance
from the FDA for its IND application for a Phase II clinical trial of CardiolRx in acute myocarditis. Cardiol's acute myocarditis program
has been designed by an independent Steering Committee comprised of thought leaders in cardiology from North America and Europe. The study
is expected to commence in H1 2022, with patient recruitment estimated to take 12 to 18 months. Cardiol has budgeted additional costs
to complete this study to be approximately $13.4 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 discussions with regulatory
agencies. The Corporation expects the completion of this clinical development program, if undertaken, to take at least until 2025
and may involve a commercial partner from the pharmaceutical industry, with research, development, and commercialization costs
potentially being shared with its commercial partner. Cardiol relies on CROs, clinical data management organizations, and
consultants to assist with the design, conduct, supervision, and monitoring of pre-clinical and clinical studies. The total costs to
 complete the clinical development program cannot be determined at this stage as they will depend on a variety of factors.



Acute myocarditis is characterized by inflammation
in the heart muscle (myocardium). It has many causes but the most common is a viral infection. In a proportion of patients, the inflammation
in the heart persists and causes decreased heart function with symptoms and signs of heart failure. In some cases, this becomes progressive
and leads to a chronic dilated cardiomyopathy, which is the most common reason for heart transplantation.



Since people with acute myocarditis have heart
failure, its 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) and, occasionally, heart-lung bypass or
ventricular assist devices. There is otherwise no specific treatment for acute myocarditis. Although some patients have responded to therapy
with immuno-suppressive therapy (azathioprine) added to steroids, the data are not conclusive enough to be the recommended therapy. Immune-modulation
therapy with immune globulin has been trialed but without clear success.



A number of published studies have shown that
cannabidiol has anti-inflammatory activities in a range of experimental inflammatory pathologies. In particular, cannabidiol has been
shown to reduce vascular inflammation and inflammation in the heart in a model of myocarditis. The Corporation’s studies in an experimental
model of heart failure have shown anti-inflammatory activity, as well as a prominent anti-fibrotic action of cannabidiol. Increasing
fibrosis leads to progression of the heart dysfunction. Based upon this evidence, cannabidiol has the potential to offer therapeutic benefits
in the treatment for myocarditis.



Acute myocarditis is a rare disease but is still
a significant cause of acute heart failure   in younger individuals and remains the most common cause of sudden cardiac death
in people under 35 years of age. The most recent data from the ‘Global Burden of Disease Study’ suggests that the prevalence
of myocarditis is approximately 22/100,000 persons (estimated U.S. patient population of 73,000), qualifying the condition as an orphan
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.








- 22 -




The Phase II myocarditis study was designed and
will be overseen by an independent Steering Committee, consisting of international thought leaders in  heart disease. The
following members biographies can be seen under “Phase II/III study – COVID-19 (LANCER)”: Dennis McNamara, Leslie
Cooper, Barry Trachtenberg, Matthias Friedrich, Carsten Tschöpe, Arvind Bhimaraj, Peter Liu and Wai Hong (Wilson) Tang. Other members
of the Steering Committee include:



Yaron Arbel, MD



Dr. Yaron Arbel is an attending interventional
cardiologist and the director of the CardioVascular Research Center (CVRC) at the Tel Aviv Medical Center. Prof. Arbel has been involved
in entrepreneurship for the past 15 years. He has been working as a researcher/advisor/medical director in various fields of medicine:
Heart failure (Corassist- diastolic heart failure), interventional cardiology (Angioslide- preventing distal embolization), myocardial
infarction (LBT-low level laser activation of bone marrow), medical informatics and wearables (CUBX- contactless hemodynamic assessment).
Dr. Arbel graduated from the Faculty of Medicine in Sackler School of Medicine at the Tel Aviv University. He completed his training
in Internal Medicine and Cardiology at the Tel Aviv medical center. He also completed a fellowship in interventional and structural cardiology
at Sunnybrook Medical Centre in Toronto, Canada. He has published over 130 articles and has initiated local, national and international
studies. He is a reviewer/board member in over 40 journals.



Edimar Bocchi, MD



Dr. Edimar Alcides Bocchi trained as a cardiologist
at the Heart Institute (InCor) Of São Paulo University Medical School and obtained his PhD at the São Paulo University Medical
School. Currently, he 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. His areas of clinical and research interest include heart failure, Chagas heart disease,
cardio-oncology, heart transplantation, and exercise in heart failure. He is one of the founders of the Department of Heart Failure of
the Brazilian Society of Cardiology. It is a pioneer in the development of heart transplantation in Chagasic cardiomyopathy; nitric oxide
and phosphodiesterase type 5 inhibitors in heart failure. Dr. Bocchi is an author of more than 500 publications in peer-reviewed
journals, contributed to 70 book chapters, and serves as the national coordinator for several randomized clinical trials, including the
BELIEF, COMMANDER, SHIFT, RAD 2401, VICTORIA, DETERMINE, and EMPEROR Trials. Main investigator of the REMADHE trial and group leader of
the trial CECCY.



Heart Failure



Market Overview



Heart failure is a chronic condition that affects
more than 26 million people globally3. Over six million adults in Canada and the United States suffer from heart
failure4 and it remains a leading cause of death and hospitalization, with associated healthcare costs exceeding $30 billion
annually5 in the U.S. alone. According to the American Heart Association, one in five Americans over the age of 40 will develop
heart failure in their lifetime. Heart failure contributes to one in nine deaths in America, and every minute at least one person is
diagnosed with heart failure. People with heart failure suffer from shortness of breath, rapid heart rate, edema, reduced exercise capacity,
often struggle with simple daily activities, and are frequently hospitalized. For many, these symptoms significantly reduce their quality
of life. Concerning life expectancy after being diagnosed with heart failure, 30% of patients with heart failure die within one year6,
50% within five years7, and up to 90% within ten years of diagnosis8.












3Savarese, G. et al. Global Public Health Burden of Heart Failure. Cardiac Failure Review 03, 7 (2017).

4Blair, J. E. A., Huffman, M. & Shah, S. J. Heart Failure in North America. Current Cardiology Reviews 9, 128–146 (2013).

5Cook, C., Cole, G., Asaria, P., Jabbour, R. & Francis, D. P. The annual global economic burden of heart failure. International Journal
of Cardiology 171, 368–376 (2014).

6Cowie, M. et al. Survival of patients with a new diagnosis of heart failure: a population based study. Heart 83, 505–510 (2000).

7Levy, D. et al. Long-Term Trends in the Incidence of and Survival with Heart Failure. New England Journal of Medicine 347, 1397–1402
(2002).

8Taylor, C. J., Roalfe, A. K., Iles, R. & Hobbs, F. D. R. Ten-year prognosis of heart failure in the community:
follow-up data from the Echocardiographic Heart of England Screening (ECHOES) study. European Journal of Heart Failure 14, 176–184
(2012).








- 23 -




Normal Heart Function



In a healthy heart, the left ventricle (lower
left chamber) relaxes to fill with blood from the atrium (upper left chamber). Once filled, the left ventricle pumps the blood to the
body.



Types of Heart Failure



Heart failure is a condition in which the heart
fails to pump enough blood to supply sufficient oxygen to the tissues of the body.



There are two major types of heart failure:



| | • | Systolic heart failure
| | - | ----------------------



| | • | Diastolic heart failure (Cardiol’s primary
focus)
| | - | -------------------------------------------------



Systolic heart failure, also known as heart failure
with reduced ejection fraction, results from reduced contraction of the left ventricle such that not enough blood is pumped into the circulation.
An estimated 50% of heart failure patients have poor systolic heart function.



In diastolic heart failure, also known as heart
failure with preserved ejection fraction (“HFpEF”), the left ventricle becomes stiff and does not relax normally. As a result,
it cannot fill properly, and pressure begins to increase in the left heart chambers and in the lungs. The increased pressure in the lungs
is the cause for shortness of breath. Approximately 50% of heart failure patients have diastolic dysfunction9.



Diastolic heart failure is commonly associated
with several co-existing conditions including obesity, hypertension, diabetes, and older age. Diastolic heart failure is almost always
associated with thickened LV muscle and increased fibrosis – both of which contribute to the increased stiffness of the ventricle
and impairment to diastolic filling. There is also associated inflammation in the heart muscle; inflammation leads to progressive death
of cardiac cells, increased fibrosis (scarring) and decreased contraction of the heart cells. As the amount of fibrosis increases, the
ability of the heart to contract is diminished, leading to progressive loss of cardiac function.



Treatment of Heart Failure



Heart failure is a chronic disease, usually needing
lifelong management. In some patients, doctors can correct heart failure by treating the underlying cause. For example, repairing a heart
valve or controlling a fast heart rhythm may reverse heart failure. But for most patients, the current treatment of heart failure involves
a balance of the right medications and, in some cases, use of medical devices that help the heart beat and contract more normally.



The goal of treatment for patients with heart
failure is to improve their clinical status, functional capacity, and quality of life, prevent hospital admissions, and ultimately reduce
mortality.












9 Hogg, K., Swedberg, K. &
McMurray, J. Heart failure with preserved left ventricular systolic function: epidemiology, clinical characteristics, and prognosis.
Journal of the American College of Cardiology 43, 317–327 (2004).








- 24 -




Existing Treatments of diastolic heart failure (as described by
2021 European Society of Cardiology Guidelines)



No treatment has yet been convincingly shown to
reduce morbidity or mortality in patients with purely diastolic heart failure with completely normal systolic function (left ventricular ejection fraction > 55%). However, since patients with diastolic heart failure are often
elderly, highly symptomatic, and have a poor quality of life, an important aim of therapy may be to help alleviate symptoms as best as
possible to improve general well-being.



Effect of treatment on symptoms in heart failure with preserved
ejection fraction



Fluid retention is a consistent finding in chronic
heart failure patients. Fluid retention is the abnormal accumulation of fluid in the legs, feet, abdomen, and lungs – where it causes
a chronic cough and shortness of breath. Diuretics, which increase the excretion of salts in the kidney and decrease fluid retention,
can improve symptoms and signs of heart failure. The evidence that diuretics improve symptoms is similar across systolic and diastolic
heart failure. Evidence that beta-blockers and Mineralocorticoid Receptor Antagonists improve symptoms in diastolic heart failure patients
is lacking. There is also inconsistent evidence for an improvement in symptoms in those treated with ARBs and ACE Inhibitors. Nonetheless,
patients with HFpEF often receive one or more of these medications in an attempt to improve quality of life.



Cardiol’s
Approach to the Treatment of Cardiovascular Disease



Cardiol is investigating the potential of using CardiolRx, a pharmaceutically produced oral cannabidiol (CBD) formulation for the treatment
of acute myocarditis, COVID-19 with CVD, and other cardiovascular diseases. Cardiol is developing a subcutaneous formulation of CardiolRx
for the potential treatment of fibrosis and inflammation in the heart that is associated with the development and progression of heart
failure with preserved ejection fraction (HFpEF).



Published third-party research has shown that there is an experimental basis for investigating the efficacy of CBD in cardiovascular disease.
CBD has been shown in pre-clinical models to improve endothelial function by reducing inflammatory activation of the endothelial lining
of blood vessels thus improving endothelial vasorelaxation and blood flow. In COVID-19, viral infection of endothelial cells can be accompanied
by diffuse endothelial inflammation, suggesting that there may be a benefit of CBD in ameliorating some aspects of the pathology of this
viral disease. CBD has also been shown to attenuate a number of other measures of potential importance in the treatment of cardiovascular
disease, including cardiac dysfunction, oxidative stress, fibrosis, and inflammatory and cell death signalling pathways, in models of
diabetes, a common co-morbidity in cardiovascular disease and heart failure patients. Cardiol is currently investigating the effect of
CBD on heart failure induced by hypertension in pre-clinical models.



The rationale for the clinical program of CBD as a therapeutic approach to the treatment of COVID-19 is based upon the reported anti-inflammatory
effect of CBD, specifically by inhibiting the activation of the NLRP3 inflammasome and attenuating TLR activation. In addition, CBD has
been shown to have a cardio-protective effect pre-clinical models and, therefore, it is anticipated that this cannabinoid may prevent
COVID-19 related cardiovascular complications thereby reducing morbidity and mortality. Cardiovascular complications such as myocardial
injury as reflected by elevated serum troponin levels are common in patients with COVID-19, and it has been demonstrated that patients
with myocardial injury suffer a higher rate of mortality. CBD has been shown to reduce elevated serum troponin T and reduce pro-inflammatory
responses in the heart in pre-clinical models. CBD has also been shown to attenuate a number of measures of potential importance in the
treatment of HF, including cardiac dysfunction, oxidative stress, fibrosis, and inflammatory and cell death signaling pathways in pre-clinical
models of diabetes, a common co-morbidity in cardiovascular disease and COVID-19 patients.








- 25 -




The rationale for using cannabidiol to treat patients with cardiovascular disease is based on pre-clinical investigations by Cardiol and
others in models of cardiovascular disease which have demonstrated that CBD has anti-fibrotic and anti-inflammatory activity, as well
as anti-ischemic, and anti-arrhythmic action. In pre-clinical models of cardiac injury, cannabidiol was shown to be cardio-protective
by reducing cardiac hypertrophy, fibrosis, and the production of certain re-modelling markers, such as cardiac BNP, which is typically
elevated in patients with heart failure. Data generated with our collaborators at TecSalud del Tecnológico de Monterrey were accepted
for presentation at the American College of Cardiology's 69th Annual Scientific Session held virtually on March 28 - 30, 2020.



Development of a subcutaneous (SC) CBD formulation



Almost all CBD formulations are administered orally;
however, this route poses a number of limitations with respect the treatment of disease. The challenges of achieving a precise and reproduceable
dose via an oral route of administration should be overcome by SC delivery of CBD. Cardiol has shown pre-clinically that CBD is effective
when administered via the SC route in a heart failure model. The SC approach is practical and widely used in human medicine although the
formulation requires specific characteristics. Currently, Cardiol has investigated a number of preparations, and development is ongoing
into a formulation with the appropriate characteristics.



If Cardiol determines that the formulation development
work meets its objectives, it currently expects to undertake additional pre-clinical studies in a variety of cardiovascular models, and
investigate the safety characteristics of the formulation using pharmacokinetic and toxicity testing. Due to the early stage of development,
the total costs and timing of the development program cannot be determined at this stage as they will depend on a variety of factors.
Cardiol relies on CROs, clinical data management organizations, and consultants to assist with the design, conduct, supervision, and monitoring
of pre-clinical studies of Cardiol’s product candidates.



Nanotechnology for Drug Encapsulation and Delivery



Cardiol’s
nanotechnology is based on a patented family of biocompatible and biodegradable polymers made from PEG and PCL(See “Business
of Cardiol - Commercialization Relationships – Meros”). Both PEG and PCL have a history of safe use in humans and are non-immunogenic
when tested in vitro. PCL lies at the core of the nanoparticles and is lipophilic, allowing the solubilization and encapsulation
of lipophilic drugs such as CBD. PEG forms the surface layer of the nanoparticles and is compatible with water, allowing the nanoparticles
with their encapsulated drug to circulate in the aqueous environment of the blood. Cardiol’s nanoparticles also accumulate within
inflamed and fibrotic tissue and are therefore particularly appropriate for the delivery of anti-fibrotic, as well as anti-inflammatory
drugs – fibrotic stiffening of the heart muscle is a feature of HF pathology. Cardiol’s lead drug delivery technologies have
also been shown to prolong the drug circulation time of lipophilic drugs and comprise a versatile system that supports drug delivery via
parenteral injection routes.



Due to the early stage of development, the total
costs and timing of the development program cannot be determined at this stage as they will depend on a variety of factors. Cardiol relies
on CROs, clinical data management organizations, and consultants to assist with the design, conduct, supervision, and monitoring of pre-clinical
studies of Cardiol’s product candidates.



Research Programs



Cardiol has assembled an international network
of experts in the synthesis, formulation, pharmacology and testing of drugs. Currently Cardiol has four research programs underway or
completed with the following organizations:



| | • | University of Alberta
| | - | ---------------------



| | • | TecSalud del Tecnológico de Monterrey &
Nano4Heart
| | - | --------------------------------------------------



| | • | The Houston Methodist DeBakey Heart &
Vascular Center
| | - | -----------------------------------------------------



| | • | School of Medicine at Trinity College
| | - | -------------------------------------



Due to the early
stage of these research programs, the total costs and timing of these programs beyond the costs previously funded cannot be determined
at this stage as they will depend on a variety of factors. Cardiol relies on CROs, clinical data management organizations, and consultants
to assist with the design, conduct, supervision, and monitoring of these research programs.








- 26 -




University of Alberta



Cardiol’s research program at the University
of Alberta, the current phase of which has recently been completed, was focused on the development of proprietary nanoformulations of
anti-inflammatory drugs designed to enhance the solubility of lipophilic drugs, improve PK, and increase drug concentration at the site
of disease. The Corporation’s research program was being conducted under the direction of Dr. Afsaneh Lavasanifar, Professor
in Pharmaceutical Sciences at the University of Alberta, and a recognized expert in pharmacology, nanomedicines, and drug formulation.
In 2001, the University of Alberta, the National Research Council of Canada, and the Government of Alberta collaborated to create the
National Institute for Nanotechnology, the mission of which is to transform nanoscience ideas into novel, sustainable nanotechnology solutions.



In collaboration with Dr. Lavasanifar and
the Faculty of Pharmaceutical Sciences at the University of Alberta, Cardiol developed and optimized proprietary nanoformulations of drugs
for the treatment of heart failure, including pharmaceutical cannabidiol. CBD nanoformulations developed from this project are currently
being tested in vivo in a model of heart failure at the Houston Methodist DeBakey Heart & Vascular Center as described
below. The research was completed at the end of 2021 showing encouraging results. Based upon these data, further optimization and development
work is expected to support future investigations at Houston Methodist DeBakey Heart & Vascular Center.



TecSalud & Nano4Heart



Cardiol established a USD $3 million research
and development collaboration (See “Commercialization Relationships”) with TecSalud and Nano4Heart, both of the Instituto
Tecnológico y de Estudios Superiores de Monterrey, Mexico, to collaborate on the research and development of proprietary therapeutics
for the treatment of heart failure. This research collaboration combines the significant research capability of TecSalud and Nano4heart’s
extensive experience in preclinical cardiovascular research with Cardiol’s scientific, clinical, and business expertise. By combining
these intellectual resources, Cardiol expects to accelerate the necessary research towards the mutual goal of developing a breakthrough
heart failure treatment.



Nano4heart is an early-stage association specializing
in medicine targeted for cardiovascular diseases, such as heart failure, that has emerged from TecSalud’s Biomedical Research Center
to focus on developing breakthrough medicines to improve the quality of life of patients with heart failure. In collaboration with leading
cardiologists, Nano4Heart is developing formulations designed to treat heart diseases with a goal of improving the efficacy and safety
profile of important medicines.



TecSalud is committed to delivering outstanding
patient care with four state-of-the-art academic medical centers that combine innovative research, clinical services, and education. TecSalud
has collaborative relationships with the Houston Methodist DeBakey Heart & Vascular Center and has established a formal agreement
with the Massachusetts Institute of Technology to promote research and development in Mexico.



The primary objective of this collaboration is
to develop the experimental evidence necessary to support advancing breakthrough medicines for heart failure into clinical development.
Research is currently underway to investigate the therapeutic potential of cannabidiol formulations that target inflammation in a model
of hypertension-induced heart failure. Initial research was completed in 2021 showing encouraging results. Building on these data, we
expect to expand this research program into additional cardiovascular models with the aim of researching the effect of cannabidiol in
a broader range of cardiovascular areas.



Further work is being undertaken to investigate
the anti-inflammatory properties of a new phospholipid nanoparticle formulation, to assess the potential of the formulation as a systemic
anti-inflammatory treatment for inflammatory cardiovascular conditions. Work is underway is a series of in vitro systems to determine
the formulations’ anti-inflammatory activity, and is expected to be expanded into in vivo cardiovascular models.



Houston Methodist DeBakey Heart & Vascular Center



The Houston Methodist DeBakey Heart &
Vascular Center is recognized internationally as a center of excellence for the treatment of heart failure. The center was the birthplace
of cardiovascular bypass surgery in 1964 and currently is ranked the 14th best hospital for care in cardiology and heart surgery out of
5,028 hospitals in the United States by US News.








- 27 -




In January 2018, Cardiol announced that experimental
research performed at the Houston Methodist DeBakey Heart & Vascular Center showed new functionality of the Corporation’s
in-licensed patented nanotherapeutics. Designed to act as a vehicle to target anti-inflammatory drugs to inflamed heart tissue, these
data demonstrated the accumulation of nanoparticles at regions of inflammation and fibrosis in diseased hearts, showing potential for
Cardiol’s proprietary nanotechnology to be used to target drugs directly to areas of inflammation and fibrosis to treat heart failure.



In August 2018, Cardiol entered into a research
contract with the Houston Methodist DeBakey Heart & Vascular Center to build upon the initial research in an experimental model
of heart failure. Encouraging results generated in 2021 showed significant advantages of nanoformulations developed at the University
of Alberta and has laid the foundation for further work to be initiated in 2022. Further work is expected to include detailed investigation
into the behaviour of the nanoformulation, and important experiments into the method of action of cannabidiol in in vitro and in
vivo models to better understand how CBD works.



School of Medicine at Trinity College



Cardiol is investigating ageing and its effects
on inflammation, particularly neuroinflammation, with collaborators at the School of Medicine at Trinity College, Dublin. These investigations
have indicated that increased levels of endocannabinoids in the brain exerts a beneficial effect on synaptic function in animals. CBD
is known to have anti-inflammatory activities, and to enter the brain compartment. Further investigations are being performed into these
CBD related effects.



The research is expected to be completed in 2022
and is not expected to have material expenditures.



Commercialization Relationships



Dalton



Cardiol entered into an exclusive master services
agreement (the “Dalton Services Agreement”) dated April 17, 2018 and effective as of June 12, 2017 for pharmaceutical
cannabidiol and has subcontracted the manufacturing of its drug product candidates to Dalton. Dalton has the manufacturing capability
for Cardiol’s clinical trial materials, scalable to support all stages of the drug development process (Phase I, II, III,
and commercial). As consideration under the Dalton Services Agreement, Cardiol issued 400,000 Common Shares to Dalton. Cardiol also agreed
to issue to Dalton an additional 400,000 Common Shares if Dalton meets certain performance objectives. The Dalton Services Agreement may
be terminated by Cardiol upon provision of thirty days’ notice of termination.



The services provided by Dalton under the Dalton
Services Agreement are undertaken on a project and product basis. With respect to each project or product, Cardiol and Dalton agree in
writing upon objectives, scope, price, and fees payable, specifications, deliverables, milestones, and timelines in a work order.



Purisys



Cardiol entered into an exclusive supply agreement
(the “Purisys Exclusive Supply Agreement”) with Noramco (Purisys) 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 Purisys will be
the exclusive supplier of pharmaceutical cannabidiol for Cardiol, provided Purisys is able to meet Cardiol’s supply requirements.



In 2020, the agreement was assigned to Purisys,
an affiliate of Noramco headquartered in Athens, Georgia. This assignment had no impact on Cardiol’s rights under the original agreement.



Pursuant to the terms of the Purisys Agreement,
Cardiol paid a non-refundable payment of US$3,000,000 (the “Exclusivity Payment”). The Exclusivity Payment represents a prepayment
for inventory and is being credited towards purchases.








- 28 -






Effective
upon entering into a supply agreement with Shoppers on March 16, 2020 (see “Business of Cardiol – Corporate History
 –Year Ended December 31, 2020), 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. 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
initial term of the Purisys Exclusive Supply Agreement expires on December 31, 2038, and thereafter automatically renews for successive
periods of two calendar years each, unless written notice of termination is given by either party at least 18 months before the expiration
of the initial term or completion of the then-current renewal term.



TecSalud
(CARO Development Agreement)



Cardiol
entered into a development agreement (the “CARO Development Agreement”) with CARO dated August 29, 2018, for 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 its own development activities or through third-party providers.
TecSalud and Nano4heart are third parties through which CARO will provide its consulting and development activities for Cardiol.



Pursuant
to the terms of the CARO Development Agreement, CARO will provide scientific experimentation, research activities, drug development activities,
access to intellectual property, and drug formulation and discovery activities to Cardiol (the “CARO Development Activities”),
as set out in a development plan (the “CARO Development Plan”) through TecSalud and Nano4heart. CARO and Cardiol value the
CARO Development Activities, provided through research, at USD $3,000,000. Under the CARO Development Agreement, CARO may also engage
third-party providers for development activities in support of the CARO Development Plan, which is anticipated to be limited to third-party
vendors of materials.



As
consideration under the CARO Development Agreement, Cardiol issued 824,000 Common Share purchase warrants (the “CARO Compensation
Warrants”) to CARO, with each CARO Compensation Warrant entitling CARO to purchase one Common Share (a “CARO Compensation
Warrant Share”) at an exercise price of CDN $4.00 per CARO Compensation Warrant Share until August 31, 2022. Cardiol also
paid CARO USD $400,000 in cash.



The
CARO Compensation Warrants and the issuance of the CARO Compensation Warrant Shares on the exercise thereof are to constitute full payment
for the CARO Development Activities, both past and future, under the CARO Development Plan. CARO is not to issue invoices for any of
the CARO Development Activities under the CARO Development Plan until such time as CARO, in its discretion, wishes to exercise any of
its CARO Compensation Warrants. If CARO wishes to exercise any of the CARO Compensation Warrants, CARO is to provide Cardiol with one
or more invoices, tied to milestones in the CARO Development Plan, and the aggregate amount of the invoices shall constitute payment
in full of the aggregate exercise prices of the CARO Compensation Warrants being exercised.



Both
Cardiol and CARO may terminate the CARO Development Agreement if the other party commits a material breach of the CARO Development Agreement
and the breaching party fails to remedy the material breach within 60 days following receipt of written notice of the breach. In addition,
either party may terminate the CARO Development Agreement by giving 30 days’ written notice to the other party if, acting reasonably
and in good faith, it determines that the continued performance of the CARO Development Activities would (i) constitute a potential
or actual violation of applicable law or any policy of the terminating party adopted to ensure compliance with applicable law; (ii) constitute
a potential or actual violation of any regulatory, medical or scientific standard of integrity or ethics; or (iii) potentially jeopardize
patient safety, provided that during such 30-day period, the parties discuss in good faith possible changes to the CARO Development Activities.



However,
if CARO terminates the CARO Development Agreement for any reason except breach of contract by Cardiol, or terminates the CARO Development
Activities prior to achievement of all milestones in the CARO Development Plan, then any unexercised CARO Compensation Warrants that
are not related to CARO Development Activities and milestones in the CARO 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.








- 29 -




If
Cardiol terminates the CARO Development Agreement for any reason (including breach of contract by CARO), or requires CARO to terminate
the CARO Development Activities prior to achievement of all milestones in the CARO 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. The CARO Compensation Warrants that cannot be exercised (because invoices for CARO
Development Activities not completed cannot be issued) will be deemed terminated, null and void as of termination.



Meros



Meros
is a privately-held Alberta corporation formed in 2009 to commercialize advanced drug delivery technologies developed within the Faculty
of Pharmacy and Pharmaceutical Sciences, University of Alberta.



Cardiol
entered into a license agreement (the “Meros License Agreement”) with Meros dated January 20, 2017, granting Cardiol
the sole, exclusive, irrevocable, royalty-bearing license, including the right to sublicense, certain patented nanotechnologies for use
with any drugs or classes of drugs currently used or developed in the future to diagnose or treat heart failure and/or any cardiovascular
disease and/or cardiopulmonary disease and/or cardiac arrhythmias. The term of the Meros License Agreement is 20 years or for the life
of the patents of the licensed technologies.



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 on any therapeutic and/or prophylactic treatment incorporating the licensed technologies. Cardiol also agreed to
pay Meros the following royalties: (i) 5% of worldwide proceeds of net sales of the licensed technologies containing cannabinoids
that Cardiol receives from human and animal disease indications and derivatives as outlined in the Meros License Agreement; (ii) 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; (iii) 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 outlined in the Meros License Agreement; and (iv) 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
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;
(ii) issued to Meros an additional 1,020,000 Common Shares to be held in escrow (the “Meros Escrow Shares”) and to be
released upon the first patient being enrolled in a Phase I clinical trial as described in the Meros License Agreement (the “Meros
Milestone”). The 1,020,000 Meros Escrow Shares were subsequently cancelled and replaced with 1,020,000 special warrants (the “Meros
Special Warrants”) convertible automatically into Common Shares for no additional consideration upon the Corporation achieving
the Meros Milestone.



The
Meros License Agreement may be terminated by Meros, if Cardiol breaches any payment provisions, if Cardiol ceases to develop and/or commercialize
the licensed technologies, or if Cardiol ceases any and all attempts to raise capital to support developing and or commercializing the
licensed technologies. Cardiol may terminate the Meros License Agreement if Cardiol determines in its sole discretion that the licensed
technologies are not worthy of development based on research outcomes or commercial viability.








- 30 -




Competitive
Conditions



Cardiol’s
competitors include multinational pharmaceutical companies and specialized biotechnology companies, other medical cannabis licensees,
universities, and other research institutions that are conducting research in cannabinoid products, as well as those focusing on therapies
for heart failure.



More
established companies may have a competitive advantage over Cardiol due to their greater size, capital resources, cash flows, and institutional
experience. Compared to Cardiol, many competitors may have significantly greater financial, technical, and human resources at their disposal.
Due to these factors, competitors may have an advantage in marketing their approved products and may obtain regulatory approval of their
product candidates before Cardiol can, which may limit Cardiol’s ability to develop or commercialize its product candidates. Competitors
may also develop drugs that are safer, more effective, more widely used, and less expensive, and may also be more successful in manufacturing
and marketing their products.



Mergers
and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller
number of Cardiol’s competitors. Smaller and other early-stage companies may also prove to be significant competitors, particularly
through collaborative arrangements with large and established companies. These third parties also compete with Cardiol in recruiting
and retaining qualified scientists, management, and commercial personnel, establishing clinical trial sites and subject registration
for clinical trials, as well as in acquiring technologies complementary to, or necessary for, Cardiol’s programs.



Employees



As
of December 31, 2021, Cardiol had 11 employees and 8 management consultants providing management services to Cardiol.



Intellectual
Property Rights



Cardiol
strives to obtain and protect intellectual property that is important to its business. Such intellectual property includes, or may in
future include, patents, patent applications, regulatory dossiers, manufacturing and process know-how, proprietary unpatented information
including trade secrets, contractual arrangements, and trademarks. Patents and patent applications owned by or licensed to Cardiol cover
compositions of matter, their methods of use, related technology, and other applicable inventions.



Cardiol’s
intellectual property portfolio has been built from in-house technology and product research and development, as well as strategic relationships
with partners, including Dalton, the University of Alberta, the Houston Methodist DeBakey Heart and Vascular Centre, and TecSalud Instituto
Tecnológico y de Estudios Superiores de Monterrey.



Cardiol
has an exclusive in-licensing arrangement with Meros under which Cardiol licenses territorial rights to certain technologies, patents,
and related know-how.



The
Corporation has filed for and/or licensed patents and patent applications in major pharmaceutical markets, including Canada, the U.S.,
Japan, major European countries, Australia, Brazil, and Mexico. Cardiol also relies on proprietary unpatented information, including
trade secrets. Cardiol has entered into contractual arrangements to protect its technology and enhance its competitive position. Furthermore,
Cardiol has registered and applied for trademarks in many, if not all, of the same jurisdictions.



Patent
Portfolio



Cardiol
owns or licenses the following patents and applications:



Patent
Family 1 – Poly (Ethylene Oxide)-Block-Poly (Ester) Block Copolymers (the “Block Copolymer Family”)



Cardiol
currently has a sole, exclusive, worldwide, irrevocable, royalty-bearing license to exploit the Block Copolymer Family for the following
fields of use:








- 31 -




| | (a) | the
                                            delivery of any cannabinoids for any and all human or animal disease indications and any
                                            derivatives thereof; and
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) | the
                                            delivery of any drugs or classes of drugs currently used or developed in the future to diagnose
                                            or treat cardiovascular and/or cardiopulmonary disease, heart failure and/or cardiac arrhythmias
                                            in humans and animals, including Sildenafil, Pirfenidone, Rapamycin, Methotrexate, Amiodarone,
                                            Cannabinoids, blockers of HSP60 activity or inhibitors of production and/or transport of
                                            HSP60 and any derivatives of any of them.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The
Block Copolymer Family consists of the following patents:



|Country        |  | Publication Number |  | Application Date |  | Status 
|-------------- |  | ------------------ |  | ---------------- |  | -------
|Canada         |  | CA2857023C         |  | 21Mar2007        |  | Granted
|Canada         |  | CA2646425C         |  | 21Mar2007        |  | Granted
|France         |  | FR2730604B1        |  | 21Mar2007        |  | Granted
|France         |  | FR1994081B1        |  | 21Mar2007        |  | Granted
|Switzerland    |  | CH2730604B1        |  | 21Mar2007        |  | Granted
|Switzerland    |  | CH1994081B1        |  | 21Mar2007        |  | Granted
|United Kingdom |  | GB2730604B1        |  | 21Mar2007        |  | Granted
|United Kingdom |  | GB1994081B1        |  | 21Mar2007        |  | Granted
|Germany        |  | DE602007056634.7.  |  | 21Mar2007        |  | Granted
|Germany        |  | DE602007036834.0.  |  | 21Mar2007        |  | Granted
|Japan          |  | JP5933889B2        |  | 21Mar2007        |  | Granted
|United States  |  | US9139553B2        |  | 26Sep2012        |  | Granted
|United States  |  | US8309515B2        |  | 21Mar2007        |  | Granted



These
patents cover, broadly, micelle-forming poly (ethylene oxide)-block-poly (ester) block copolymers having reactive groups on the polyester
block therein. The block copolymer compounds are considered to be biodegradable and are effective carriers of a large number of bioactive
agents such as DNA, RNA, oligonucleotides, proteins, peptides, and drugs. Example drugs that can be delivered using this technology include
methotrexate, Cyclosporine A, cannabinoids, and a wide range of other drugs, such as vaccines, DOX, amphotericin B, cisplatin, paclitaxel,
etoposide, PSC833, amiodarone, rapamycine, camptothecin, cholesterol and ergoesterol, dexamethasone, prednisone, cortisol, testosterone,
estrogens, progestins, dromostanolone, testolactone, diethelstilbestrol, ethinyl estradiol, budesonide, beclomethasone, and vitamin D.



Thus,
the Block Copolymer Family is relevant to many product candidates in our product pipeline for delivering drugs to the heart.








- 32 -




Patent
Family 2 – Amphiphilic Block Copolymers, Micelles, And Methods for Treating and/or Preventing Heart Failure



Cardiol
has filed the following patent applications of which the Australian application has matured to patent.



|Country       |  | Application  Number |  | Application Date                                               |  | Status   
|------------- |  | ------------------- |  | -------------------------------------------------------------- |  | ---------
|United States |  | 62/597740           |  | 12 December 2017                                               |  | Completed
|United States |  | 16/772113           |  | 10 December 2018  [national phase entry  date is 11 June 2020] |  | Pending  
|WIPO          |  | PCT/CA2018/051573   |  | 10 December 2018                                               |  | Completed
|Canada        |  | 3076248             |  | 10 December 2018                                               |  | Pending  
|Europe        |  | 18889068.5          |  | 10 December 2018                                               |  | Pending  
|Australia     |  | 2018384096          |  | 10 December 2018                                               |  | Granted  
|New Zealand   |  | 762418              |  | 10 December 2018                                               |  | Pending  
|Mexico        |  | MX/a/2020/006005    |  | 10 December 2018                                               |  | Pending  
|Brazil        |  | 112020006191-3      |  | 10 December 2018                                               |  | Pending  



These
applications are directed towards micelles comprising a cardioactive agent (e.g. cannabidiol) and amphiphilic block copolymer. The micelles
are for use in treating and/or preventing heart failure and, when administered systemically, localize in fibrotic heart tissue. The application
also covers related compositions, methods, and uses for treating or preventing heart failure.



This
patent family is relevant to micellar formulations for treating or preventing heart failure (e.g. micellar CBD formulations), and related
methods



Patent
Family 3 – Stable Medicinal Cannabidiol Compositions



The
Corporation filed International application number PCT/CA2019/051259 on September 9, 2019 which has been nationalized in Canada,
U.S., Mexico, Brazil, Europe, Japan, Australia and South Africa.



The
International Search Report and Written Opinion found all claims to be patentable. The applications are directed towards a stable, oral
CBD oil formulation employing synthetic CBD and beta-caryophyllene (BCP) as active ingredients.



Patent
Family 4 – Parenteral Cannabidiol Compositions for Treating Heart Conditions



Cardiol
filed International application number PCT/CA2020/051405 on October 20, 2020, which claims the benefit of U.S. provisional application
62/926,066 filed on October 25, 2019. This application designated all member states of the Patent Cooperation Treaty (over 150 countries
including all major industrialized nations) and relates to parenteral, e.g. injectable, CBD formulations for use in treating or preventing
heart failure or precursor conditions thereof, e.g. cardiac inflammation, cardiac fibrosis, and cardiac hypertrophy.



Patent
Family 5 – Stable Oral Cannabidiol Compositions



The
Corporation filed International application number PCT/CA2020/051680 on December 7, 2020 designating all member states of the Patent
Cooperation Treaty (over 150 countries including all major industrialized nations).



The
International Search Report and Written Opinion found all claims to be patentable. The application is directed towards a stable, oral
CBD oil formulation employing synthetic and/or botanical CBD and beta-caryophyllene (BCP) as active ingredients.










- 33 -




Patent
Family 6 - Injectable Cannabinoid Formulations



The
Corporation filed International application number PCT/CA2022/050239 on February 18, 2022, which claims the benefit of U.S. provisional
patent application 63/151903 on February 22, 2021. This application covers an injectable CBD composition.



Patent
Family 7 - Cannabidiol For Use In Improving Outcomes In Subjects With Covid-19



Cardiol
filed U.S. provisional application number 63/233,365 on August 16, 2021. This application covers the use of CBD in improving outcomes
in Covid-19 patients who suffer from or are at risk of developing cardiovascular problems.



Future
Filings



Cardiol
plans to file additional patent applications to protect ongoing research and development.



Domain
Names



Cardiol
has registered the domain cardiolrx.com.








- 34 -




Trademarks



|Trademark                                                                                                            | Current
Statement(s) of Goods and/or Services for Canada [foreign applications / registrations have broader statements, in general**]                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | Status
    and Country Coverage                                                                                                                                                                                                                                                                                                                                                                                                                                            | Representative
Application Details                      
|-------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------
|CARDIOL
    
(standard character 
mark)                                                                              | Class
                                                                                                                                                                   5: Pharmaceutical preparations containing cannabidiol (CBD); CBD oil for medicinal and/or nutritional purposes,
                                                                                                                                                                   for use by humans and/or animals
                                                                                                                                                                   
    Class 35:
    Sale of pharmaceuticals and supplements | Pending
    in Canada.                                                                                                                                                                                                                                                                                                                                                                                                                                                     | Canadian
    application 1917764 filed August 31, 2018  
|CARDIOLRX  (standard character
                                                                                mark) | Class 5:
                                                                                                                                                                                        Pharmaceutical preparations containing cannabidiol (CBD); CBD oil
                                                                                l for medicinal and/or nutritional purposes, for use by humans and/or animals                                                                                                                                                                                                                                                                                           | Pending
    in Canada and Brazil. Registered in Australia, Mexico and New Zealand.                                                                                                                                                                                                                                                                                                                                                                                         | Canadian
    Application 1917765 filed August 31, 2018  
|CARDIOL
    THERAPEUTICS (standard character mark)                                                                   | Class 5:
    Pharmaceutical preparations containing
                                                                                                                                                                   cannabidiol (CBD); CBD oil for medicinal and/or nutritional purposes, for use by humans and/or
    animals
                                                                                                                                                                   
    Class 35:
    Sale of pharmaceuticals and supplements                                                                                                                                                            | Pending
    in Canada.                                                                                                                                                                                                                                                                                                                                                                                                                                                     | Canadian
    application 1917766 filed August 31, 2018  
|(design
    mark)                                                                                                    | Class
                                                                                                                                                                   5: Pharmaceutical preparations containing cannabidiol (CBD); CBD oil for medicinal and/or nutritional purposes, for use by humans
                                                                                                                                                                   and/or animals
    Class 35:
    Sale of pharmaceuticals and supplements                                                                                                                                                                     | Pending in
                                                                                Canada.                                                                                                                                                                                                                                                                                                                                                                         | Canadian
    application 1917767 filed August 31, 2018  
|CORTALEX
    (standard character mark)                                                                               | Class 5:
    Therapeutic products, namely, pharmaceutical preparations and natural health products, whether sold- over-the-counter or by
    prescription, and including therapeutic products containing cannabinoids.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | Pending in
                                                                                Canada, Brazil
                                                                                and U.S. Registered in
                                                                                Australia, European Union, Iceland, Mexico, New Zealand,
                                                                                Switzerland, and United Kingdom. | Canadian
    application 2014492 filed February 27, 2020
|(design
    mark)                                                                                                    | Class 5:
    Therapeutic products, namely, pharmaceutical preparations and natural health products, whether sold- over-the-counter or by prescription,
    and including therapeutic products containing cannabinoids.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | Pending
    in Canada.                                                                                                                                                                                                                                                                                                                                                                                                                                                     | Canadian
    application 2019187 filed March 25, 2020   



Most,
if not all, of the foreign registrations are for goods, namely, “therapeutic products, namely, pharmaceutical preparations and
natural health products, whether sold-over-the-counter or by prescription, and including therapeutic products containing cannabinoids.”



Cardiol’s
Intellectual Property Practices



Cardiol’s
intellectual property practices include striving to keep all information relating to proprietary compounds, inventions, improvements,
trade secrets, know-how, and continuing technological innovation confidential.



Cardiol
also will, where it deems practicable and commercially reasonable:



| | · | perform
                                            surveillance of third-party patents and patent applications in order to identify any third-party
                                            patent or third-party patent application which, if granted, could be infringed by our activities
                                            or could infringe our patents;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | file
                                            patent applications for any new and patentable invention, development, or improvement in
                                            the United States and in other countries;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | prosecute
                                            all pending patent applications in conformity with applicable patent laws and in a manner
                                            that efficiently covers our activities;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | identify
                                            and protect confidentiality of trade secrets;
| | - | --------------------------------------------------------------------------------------------------








- 35 -




| | · | file
                                            trademark applications in countries of interest for our trademarks;
| | - | --------------------------------------------------------------------------------------------------------------------



| | · | register
                                            domain names whose addresses include our trademark names; and
| | - | ------------------------------------------------------------------------------------------------------------------



| | · | maintain
                                            our intellectual property rights by paying government fees as may be necessary to ensure
                                            such rights remain in force.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Regulatory
Exclusivity



The
regulatory regimes of certain countries, such as the United States, European Union members and Canada, provide market exclusivity for
a pharmaceutical product once approved. Data protection provides a person or entity with protection against third parties who may wish
to commercialize a product similar to an approved product bridging to the data developed for the approved product.



In
the United States, the Drug Price Competition and Patent Term Restoration Act of 1984, also known as the Hatch-Waxman Act, awards, in
certain circumstances, non-patent marketing exclusivities to pioneer drug manufacturers. The Hatch-Waxman Act provides five years of
non-patent marketing exclusivity within the United States to an applicant who gains approval of a new drug application under the FDA
for a “new chemical entity,” a drug with the same active moiety which the FDA has not previously approved. This marketing
exclusivity generally prevents the FDA from approving, in certain circumstances, any abbreviated new drug application (“ANDA”),
for a generic drug or any 505(b)(2) NDA that references data from the pioneer drug product.



In
Canada, the Food and Drug Regulations provide an 8-year market exclusivity period to a Notice of Compliance holder who markets an innovative
drug in Canada. The Patented Medicines (Notice of Compliance) Regulations provide freedom from generic competition for patented drugs
under certain conditions.



In
Europe, when a marketing authorization for a product is issued by the European Medicines Agency (the “EMA”), the approved
product (including a biological product) benefits from ten years of market exclusivity.



Scientific
Advisory Board



To
provide guidance and oversight to the Corporation’s ongoing research programs, Cardiol has constituted a world-class Scientific
Advisory Board comprising thought leaders in cardiovascular medicine. Their combined knowledge and insight will prove to be invaluable
as Cardiol pursues the commercial development of breakthrough therapies for heart failure.



Cardiol’s
Scientific Advisory Board includes:



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).








- 36 -




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.



REGULATORY
OVERVIEW



Drugs
are evaluated for safety, efficacy, and manufacturing quality as a condition of market access, and promotional messages must adhere to
approved product labelling. Drug prices also are regulated in most countries with national health insurance systems. Regulation of market
access and promotion derives from uncertainty about the real-life value of drugs. Real-life product characteristics can only be determined
from accumulated experience over large numbers of patients in carefully designed epidemiological trials or observational studies.



Government
Regulation and Product Approval



As
a biopharmaceutical company that intends to test, register, and commercialize products in Canada and the United States and other jurisdictions,
we are subject to extensive regulation by various regulatory authorities. The primary regulatory agency in the United States is the FDA,
in Canada it is Health Canada, and in Europe it is the EMA. Together with these three, there are other federal, state, and local regulatory
agencies. In the United States, the Federal Food, Drug, and Cosmetic Act (the “FDCA”), and its implementing regulations set
forth, among other things, requirements for the research, testing, development, manufacture, quality control, safety, effectiveness,
approval, labeling, storage, record keeping, reporting, distribution, import, export, and advertising and promotion of our products.
Although the discussion below focuses on regulation in the United States, we anticipate seeking approval for, and marketing of, our products
in other countries.








- 37 -




Generally,
our activities outside the United States will be subject to regulation that is similar in nature and scope as that imposed in the United
States, although there can be important differences. Approval in the United States, Canada, or Europe does not assure approval by other
regulatory agencies, although often test results from one country may be used in applications for regulatory approval in another country.
Additionally, some significant aspects of regulation in Europe are addressed in a centralized way through the EMA, but country-specific
regulation remains essential in many respects. The April 2015 publication titled “Medicinal Products in the European Union,
the legal framework for medicines for human use”10 from the European Parliamentary Research Service gives a general
overview of several aspects of European Union legislation on human medicines. A major difference in Europe, when compared to Canada and
the United States, is with the approval process. In Europe, there are different procedures that can be used to gain marketing authorization.
The first procedure is referred to as the centralized procedure and requires that a single application be submitted to the EMA and, if
approved, allows marketing in all countries of the European Union. The centralized procedure is mandatory for certain types of medicines
and optional for others. The second procedure is the decentralized procedure which requires one member state to act as the reference
member state conducting the review of the application which is simultaneously filed to the reference member state and to selected other
member states. The third procedure is a state by state application.



The
process of obtaining regulatory marketing approvals and the subsequent compliance with appropriate federal, state, local and foreign
statutes and regulations requires the expenditure of substantial time and financial resources and may not be successful. See “Risk
Factors”.



The
Corporation does not engage in any U.S. marijuana-related activities as defined in Canadian Securities Administrators Staff Notice 51-352
- Issuers with U.S. Marijuana-Related Activities. The Corporation has research and/or business relationships with Purisys and the Houston
Methodist DeBakey Heart & Vascular Center, both of which are based in the U.S. and/or are U.S. based companies. The Houston
Methodist DeBakey Heart & Vascular Center provides contract research services investigating the Corporation’s nanotechnology
in experimental models of heart failure. Purisys is a manufacturer of controlled drug substance APIs and is registered with the DEA to
manufacture pharmaceutically produced cannabidiol.



New
Drug Submissions (NDS) – Health Canada



To
obtain approval to market a drug in Canada, a sponsor usually requests a pre-submission meeting with the review division of Health Canada
responsible for the therapeutic field. If the meeting is granted, the sponsor must submit a Pre-Submission Information package to Health
Canada to meet with the review division. This process occurs prior to submitting the NDS application. The purpose of the pre-submission
meeting is to review the evidence (non-clinical and clinical research, quality information, indication) that will be submitted in the
NDS application.



During
the drug development process, the sponsor prepares study reports. Once the sponsor releases the last study required for the submission,
the sponsor completes the NDS application and submits it to Health Canada. Prior to submitting the NDS and if applicable based on the
intended use of the product in the identified patient population, the sponsor may submit in advance a request for priority review status.



After
submitting the NDS application, the file undergoes a screening process prior to being accepted for review. TPD has 45 calendar days from
receipt to complete the screening review process. If granted a priority review, the screening period is reduced to 25 calendar days.



After
a comprehensive review of an NDS application, Health Canada will issue a NOC if the product is approved or a NON if further questions
remain. If a NOC is issued, a Drug Identification Number (DIN) is also issued that is required to be printed on each label of the product,
as well as the final version of the Product Monograph that has been agreed to between Health Canada and the sponsor.










10 https://www.europarl.europa.eu/RegData/etudes/IDAN/2015/554174/EPRS_IDA(2015)554174_EN.pdf








- 38 -




The
average target time for reaching a first decision on an NDS is 300 calendar days, unless the submission has received a priority review
in which case the time is 180 calendar days.



Fees
are levied for a review of an NDS application.



U.S.
Government Regulation



The
FDA is the main regulatory body that controls pharmaceuticals in the United States, and its regulatory authority is based in the FDCA.
Pharmaceutical products are also subject to other federal, state, and local statutes. A failure to comply explicitly with any requirements
during the product development, approval, or post-approval periods, may lead to administrative or judicial sanctions. These sanctions
could include the imposition by the FDA or an Institutional Review Board (“IRB”) of a hold on clinical trials, refusal to
approve pending marketing applications or supplements, withdrawal of approval, warning letters, product recalls, product seizures, total
or partial suspension of production or distribution, injunctions, fines, civil penalties, or criminal prosecution. As presented on the
section of the FDA’s website titled “Drug Review Process: Ensuring Drugs are Safe and Effective11“, the
steps required before a new drug may be marketed in the United States generally include:



| | · | completion
                                            of nonclinical studies, animal studies, and formulation studies in compliance with the FDA’s
                                            Good Laboratory Practice (GLP), regulations;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | submission
                                            to the FDA of an Investigational New Drug (“IND”) application to support human
                                            clinical testing in the United States;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | approval
                                            by an IRB at each clinical site before each trial may be initiated;
| | - | ------------------------------------------------------------------------------------------------------------------------



| | · | performance
                                            of adequate and well-controlled clinical trials in accordance with federal regulations and
                                            with Good Clinical Practices (“GCP”), and regulations to establish the safety
                                            and efficacy of the investigational product candidate for each target indication;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | submission
                                            of an NDA to the FDA;
| | - | ----------------------------------------------------------------------------



| | · | satisfactory
                                            completion of an FDA Advisory Committee review, if applicable;
| | - | -----------------------------------------------------------------------------------------------------------------------



| | · | satisfactory
                                            completion of an FDA inspection of the manufacturing facilities at which the investigational
                                            product candidate is produced to assess compliance with cGMP regulations, and to assure that
                                            the facilities, methods, and controls are adequate; and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | FDA
                                            review and approval of the NDA.
| | - | -------------------------------------------------------------------------------



Clinical
Trials



An
IND is a request for authorization from the FDA to administer an investigational product candidate to humans. This authorization is required
before interstate shipping and administration of any new drug product to humans in the United States that is not the subject of an approved
NDA. A 30-day waiting period after the submission of each IND is required prior to the commencement of clinical testing in humans. If
the FDA has neither commented on nor questioned the IND within this 30-day period, the clinical trial proposed in the IND may begin.
Clinical trials involve the administration of the investigational product candidate to healthy volunteers or patients with the disease
under study, under the supervision of qualified investigators following GCPs, an international standard meant to protect the rights and
health of patients with the disease under study and to define the roles of clinical trial sponsors, administrators, and monitors. Clinical
trials are conducted under protocols that detail the parameters to be used in monitoring safety, and the efficacy criteria to be evaluated.
Each protocol involving testing on patients in the United States and subsequent protocol amendments must be submitted to the FDA as part
of the IND. Cardiol has submitted two INDs on CardiolRx, and have received two “Study May Proceed” letters from the
FDA. The first IND was to study CardiolRx in the prevention of cardiovascular complications due to COVID-19 infections. The second was
to study CardiolRx in the treatment of myocarditis.










11 https://www.fda.gov/Drugs/ResourcesForYou/Consumers/ucm143534.htm








- 39 -




As
set out in the October 8, 2021 publication “ICH E8(R1) Guideline – General Considerations for Clinical Trials12“,
published by the International Conference on Harmonization of Technical Requirements for Registration of Pharmaceuticals for Human Use,
the three phases of clinical investigation are as follows:



| | · | Phase
                                            I. Phase I includes the initial introduction of an investigational product candidate
                                            into humans. Phase I clinical trials may be conducted in patients with the target disease
                                            or condition, or in healthy volunteers. These studies are designed to evaluate the safety,
                                            metabolism, PK, and pharmacologic actions of the investigational product candidate in humans,
                                            the side effects associated with increasing doses, and if possible, to gain early evidence
                                            on effectiveness. During Phase I clinical trials, sufficient information about the investigational
                                            product’s PK and pharmacological effects may be obtained to inform the design of Phase
                                            II clinical trials. The total number of participants included in Phase I clinical trials
                                            varies but is generally in the range of 20 to 80.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | Phase
                                            II. Phase II includes the controlled clinical trials conducted to evaluate the effectiveness
                                            of the investigational product for a particular indication(s) in patients with the disease
                                            or condition under study, to determine dosage tolerance and optimal dosage, and to identify
                                            possible adverse side effects and safety risks associated with the product candidate. Phase
                                            II clinical trials are typically well-controlled, closely monitored, conducted in a limited
                                            subject population, and usually involve no more than several hundred participants                                                                                                                                                                                                                                                                                                                                                                              
| | · | Phase
                                            III. Phase III clinical trials are controlled clinical trials conducted in an expanded
                                            subject population at geographically dispersed clinical trial sites. They are performed after
                                            preliminary evidence suggesting effectiveness of the investigational product has been obtained,
                                            are intended to further evaluate dosage, clinical effectiveness and safety, to establish
                                            the overall benefit-risk relationship of the product candidate, and to provide an adequate
                                            basis for drug approval. Phase III clinical trials usually involve several hundred to several
                                            thousand participants. In most cases, the FDA requires two adequate and well-controlled Phase III
                                            clinical trials to demonstrate the efficacy of the drug.                                                                                                                  



The
decision to terminate development of an investigational product may be made by either a health authority body, such as the FDA or IRB/ethics
committees, or by a company for various reasons. The FDA may order the temporary, or permanent, discontinuation of a clinical trial at
any time, or impose other sanctions, if it believes that the clinical trial either is not being conducted in accordance with FDA requirements
or presents an unacceptable risk to the clinical trial patients. In some cases, clinical trials are overseen by an independent group
of qualified experts organized by the trial sponsor or the clinical monitoring board. This group provides authorization for whether or
not a trial may move forward at designated check points. These decisions are based on the limited access to data from the ongoing trial.
The suspension or termination of development can occur during any phase of clinical trials if it is determined that the participants
or patients are being exposed to an unacceptable health risk. In addition, there are requirements for the registration of ongoing clinical
trials of products on public registries and the disclosure of certain information pertaining to the trials, as well as clinical trial
results after completion.



New
Drug Applications (NDA) – FDA



In
order to obtain approval to market a drug in the United States, a marketing application must be submitted to the FDA that provides data
establishing the safety and effectiveness of the product candidate for the proposed indication. The application includes all relevant
data available from pertinent nonclinical studies and clinical trials, including negative or ambiguous results, as well as positive findings,
together with detailed information relating to the product’s chemistry, manufacturing, controls, and proposed labeling, among other
things. Data can come from company-sponsored clinical trials intended to test the safety and effectiveness of a product, or from a number
of alternative sources, including studies initiated by investigators. To support marketing approval, the data submitted must be sufficient
in quality and quantity to establish the safety and effectiveness of the investigational product candidate to the satisfaction of the
FDA. In most cases, the NDA must be accompanied by a substantial user fee; there may be some instances in which the user fee is waived.
The FDA will initially review the NDA for completeness before it accepts it for filing. The FDA has 60 days from its receipt of an NDA
to determine whether the application will be accepted for filing based on the agency’s threshold determination that it is sufficiently
complete to permit substantive review. After the NDA is accepted for filing, the FDA begins an in-depth review. The FDA has agreed to
certain performance goals in the review of NDAs. Most such applications for standard review products are reviewed within ten to twelve
months. The FDA can extend this review by three months to consider certain late submitted information or information intended to clarify
data already provided in the submission. The FDA reviews the NDA to determine, among other things, whether the proposed product is safe
and effective for its intended use, and whether the product is being manufactured in accordance with cGMP. The FDA may refer applications
for novel products that present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians
and other experts, for review, evaluation, and a recommendation as to whether the application should be approved and under what conditions.
The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.










12 https://database.ich.org/sites/default/files/E8_Guideline.pdf








- 40 -




Before
approving an NDA, the FDA will inspect the facilities at which the product is manufactured. The FDA will not approve the product unless
it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and are adequate to assure consistent
production of the product within required specifications. Additionally, before approving an NDA, the FDA will typically inspect one or
more clinical sites to assure compliance with GCP. After the FDA evaluates the NDA and the manufacturing facilities, it issues either
an approval letter or a complete response letter. A complete response letter generally outlines the deficiencies in the submission and
may require substantial additional testing or information in order for the FDA to reconsider the application. If, or when, those deficiencies
have been addressed to the FDA’s satisfaction in a resubmission of the NDA, the FDA will issue an approval letter. Notwithstanding
the submission of any requested additional information, the FDA ultimately may decide that the application does not satisfy the regulatory
criteria for approval.



An
approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications. Product approval
may require substantial post-approval testing and surveillance to monitor the drug’s safety or efficacy. Once granted, product
approvals may be withdrawn if compliance with regulatory standards is not maintained or problems are identified following initial marketing.



Disclosure
of Clinical Trial Information



Sponsors
of clinical trials of certain FDA-regulated products, including prescription drugs, are required to register and disclose certain clinical
trial information (though not specifically required for Phase I trials) on a public website maintained by the U.S. National Institutes
of Health (“NIH”). Information related to the product, patient population, phase of investigation, study sites and investigator,
and other aspects of the clinical trial is made public as part of the registration. Sponsors are also obligated to disclose the results
of these trials after completion. Disclosure of the results of these trials can be delayed until the product or new indication being
studied has been approved. Competitors may use this publicly available information to gain knowledge regarding the design and progress
of our development programs.



Advertising
and Promotion



As
set out in the FDA`s website discussion13 on the “The Prescription Drug Marketing Act of 1987”, the FDA and
other federal regulatory agencies closely regulate the marketing and promotion of drugs through, among other things, standards and regulations
for direct-to-consumer advertising, communications regarding unapproved uses, industry-sponsored scientific and educational activities,
and promotional activities involving the Internet. A product cannot be commercially promoted before it is approved. After approval, product
promotion can include only those claims relating to safety and effectiveness that are consistent with the labeling (package insert) approved
by the FDA. Healthcare providers are permitted to prescribe drugs for “off-label” uses – that is, uses not approved
by the FDA and, therefore, not described in the drug’s labeling – because the FDA does not regulate the practice of medicine.
However, FDA regulations impose stringent restrictions on manufacturers’ communications regarding off-label uses.










13 https://www.fda.gov/regulatory-information/selected-amendments-fdc-act/prescription-drug-marketing-act-1987








- 41 -




Post-Approval
Regulations



As
set out in the FDA`s website discussion14 on “Post Marketing Requirements and Commitments”, after regulatory
approval of a drug is obtained, a company is required to comply with a number of post-approval requirements. For example, as a condition
of approval of an NDA, the FDA may require post-marketing testing, including Phase IV clinical trials, and surveillance to further
assess and monitor the product’s safety and effectiveness after commercialization. In addition, as a holder of an approved NDA,
a company would be required to report adverse drug reactions and production problems to the FDA, to provide updated safety and efficacy
information, and to comply with requirements concerning advertising and promotional labeling for any of its products. Also, quality control
and manufacturing procedures must continue to conform to cGMP after approval to assure and preserve the long-term stability of the drug
or biological product. The FDA periodically inspects manufacturing facilities to assess compliance with cGMP, which imposes extensive
procedural and substantive record keeping requirements. In addition, changes to the manufacturing process are strictly regulated, and,
depending on the significance of the change, may require prior FDA approval before being implemented. FDA regulations also require investigation
and correction of any deviations from cGMP and impose reporting and documentation requirements upon a company and any third-party manufacturers
that a company may decide to use. Accordingly, manufacturers must continue to expend time, money, and effort in the area of production
and quality control to maintain compliance with cGMP and other aspects of regulatory compliance.



Controlled
Substances



As
described in Brian T. Yeh’s 2012 publication15 “The Controlled Substances Act: Regulatory Requirements”,
the United States federal Controlled Substances Act of 1970 (“CSA”), and its implementing regulations establish a “closed
system” of regulations for controlled substances. The CSA imposes registration, security, recordkeeping and reporting, storage,
manufacturing, distribution, importation, and other requirements under the oversight of the DEA. The DEA is the federal agency responsible
for regulating controlled substances, and requires those individuals or entities that manufacture, import, export, distribute, research,
or dispense controlled substances to comply with the regulatory requirements in order to prevent the diversion of controlled substances
to illicit channels of commerce.



Facilities
that research, manufacture, distribute, import, or export any controlled substance must register annually with the DEA. The DEA registration
is specific to the particular location, activity(ies), and controlled substance schedule(s). For example, separate registrations are
required for importation and manufacturing activities, and each registration authorizes which schedules of controlled substances the
registrant may handle. However, certain coincident activities are permitted without obtaining a separate DEA registration, such as distribution
of controlled substances by the manufacturer that produces them.



The
DEA categorizes controlled substances into one of five schedules – Schedule I, II, III, IV, or V – with varying
qualifications for listing in each schedule. Schedule I substances by definition have a high potential for abuse, have no currently “accepted
medical use” in treatment in the United States, and lack accepted safety for use under medical supervision. They may be used only
in federally-approved research programs and may not be marketed or sold for dispensing to patients in the United States. Pharmaceutical
products having a currently accepted medical use that are otherwise approved for marketing may be listed as Schedule II, III, IV,
or V substances, with Schedule II substances presenting the highest potential for abuse and physical or psychological dependence, and
Schedule V substances presenting the lowest relative potential for abuse and dependence. The regulatory requirements are more restrictive
for Schedule II substances than for Schedule III substances. For example, all Schedule II drug prescriptions must be signed by a physician,
physically presented to a pharmacist in most situations, and cannot be refilled.










14
https://www.fda.gov/drugs/guidance-compliance-regulatory-information/postmarket-requirements-and-commitments

15 Yeh, BT. The Controlled Substances Act: Regulatory Requirements. https://www.amazon.com/Controlled-Substances-Act-Regulatory-Requirementsebook/
dp/B00BUBS8FC








- 42 -




The
DEA inspects all manufacturing facilities to review security, record keeping, reporting, and handling prior to issuing a controlled substance
registration. The specific security requirements vary by the type of business activity and the schedule and quantity of controlled substances
handled. The most stringent requirements apply to manufacturers of Schedule I and Schedule II substances. Required security measures
commonly include background checks on employees and physical control of controlled substances through storage in approved vaults, safes,
and cages, and through use of alarm systems and surveillance cameras. Manufacturing facilities must maintain records documenting the
manufacture, receipt, and distribution of all controlled substances. Manufacturers must submit periodic reports to the DEA of the distribution
of Schedule I and II controlled substances, Schedule III narcotic substances, and other designated substances. In addition to an importer
or exporter registration, importers and exporters must obtain a permit for every import or export of a Schedule I and II substance or
Schedule III, IV, and V narcotic, and submit import or export declarations for Schedule III, IV, and V non-narcotics.



For
drugs manufactured in the United States, the DEA establishes annually an aggregate quota for the amount of substances within Schedules
I and II that may be manufactured or produced in the United States based on the DEA’s estimate of the quantity needed to meet legitimate
medical, scientific, research, and industrial needs. The quotas apply equally to the manufacturing of the API, and production of dosage
forms.



The
states also maintain separate controlled substance laws and regulations, including licensing, record keeping, security, distribution,
and dispensing requirements. State Authorities, including Boards of Pharmacy, regulate use of controlled substances in each state. Failure
to maintain compliance with applicable requirements, particularly as manifested in the loss or diversion of controlled substances, can
result in enforcement action that could have a material adverse effect on our business, operations, and financial condition. The DEA
may seek civil penalties, refuse to renew necessary registrations, or initiate proceedings to revoke those registrations. In certain
circumstances, violations could lead to criminal prosecution.



Potential
sources of API for our cannabinoid products are in the United States, Canada, and certain European countries. We may choose to conduct
clinical trials for any of our drug candidates outside the United States subject to regulatory approval. We may decide to develop, manufacture,
or commercialize our product candidates in additional countries. As a result, we may also be subject to controlled substance laws and
regulations from the various other regulatory agencies in other countries where we develop, manufacture, or commercialize our cannabinoid
products in the future.



Marketing
Exclusivity



As
discussed in the May 19, 2015 issue16 of the “FDA/CDER SBIA Chronicles” published by the FDA, upon NDA
approval of a new chemical entity, which for this purpose is defined as a drug that contains no active moiety that has been approved
by the FDA in any other NDA, that drug receives five years of marketing exclusivity during which the FDA cannot approve any abbreviated
new drug application seeking approval of a generic version of that drug. Certain changes to the scope of an approval for a drug, such
as the addition of a new indication to the package insert, are associated with a three-year period of exclusivity during which the FDA
cannot approve an ANDA for a generic drug that includes the change. A Section 505(b)(2) NDA may be eligible for three-year
marketing exclusivity, assuming the NDA includes reports of new clinical studies (other than bioequivalence studies) essential to the
approval of the NDA.



An
ANDA may be submitted one year before marketing exclusivity expires if a Paragraph IV certification is filed. In this case, the 30 months
stay, if applicable, runs from the end of the five-year marketing exclusivity period. If there is no listed patent in the FDA’s
Approved Drug Products with Therapeutic Equivalence Evaluations, commonly known as the Orange Book, there may not be a Paragraph IV certification,
and, thus, no ANDA may be filed before the expiration of the exclusivity period.



Additionally,
six months of marketing exclusivity in the United States is available under Section 505A of the FDCA if, in response to a written
request from the FDA, a sponsor submits and the agency accepts requested information relating to the use of the approved drug in the
pediatric population. This six-month pediatric exclusivity period is not a stand-alone exclusivity period, but rather is added to any
existing patent or non-patent exclusivity period for which the drug product is eligible.










16 SBIA Chronicles. Patents and Exclusivity. May 19, 2015. https://www.fda.gov/downloads/Drugs/DevelopmentApprovalProcess/SmallBusinessAssistance/UCM447307.pdf








- 43 -






Patent Term Extension



As set out in the FDA`s website discussion17
 “Small Business Assistance: Frequently Asked Questions on the Patent Term Restoration Program”, the term of a patent that
covers an FDA-approved drug may be eligible for patent-term extension, which provides patent-term restoration as compensation- for the
patent term lost during the FDA regulatory review process. The United States Federal Drug Price Competition and Patent Term Restoration
Act of 1984 permits a patent-term extension of up to five years beyond the expiration of the patent. The length of the patent-term extension
is related to the length of time the drug is under regulatory review. Patent extension cannot extend the remaining term of a patent beyond
a total of 14 years from the date of product approval and only one patent applicable to an approved drug may be extended. Similar provisions
are available in Canada, Europe, and other foreign jurisdictions to extend the term of a patent that covers an approved drug.



European and Other International Government Regulation



In addition to regulations in the United States
and Canada, we will be subject to a variety of regulations in other jurisdictions governing, among other things, clinical trials and any
commercial sales and distribution of our products. Whether or not we obtain FDA approval for a product, we must obtain the requisite approvals
from regulatory authorities in foreign countries prior to the commencement of clinical trials or marketing of the product in those countries.
Some countries outside of the United States have a similar process that requires the submission of a clinical trial application (“CTA”)
much like the IND prior to the commencement of human clinical trials. In Europe, for example, a CTA must be submitted to each country’s
national health authority and an independent ethics committee, much like the FDA and IRB, respectively. Once the CTA is approved in accordance
with a country’s requirements, clinical trial development may proceed.



To obtain regulatory approval to commercialize
a new drug under European Union regulatory systems, we must submit a marketing authorization application (“MAA”). The MAA
is similar to the NDA, with the exception of, among other things, country-specific document requirements.



For other countries outside of the European Union,
such as countries in Latin America, or Asia, the requirements governing the conduct of clinical trials, product licensing, pricing, and
reimbursement vary from country to country. Internationally, clinical trials are generally required to be conducted in accordance with
GCP, applicable regulatory requirements of each jurisdiction, and the medical ethics principles that have their origin in the Declaration
of Helsinki.



Compliance



During all phases of development (pre- and post-marketing),
failure to comply with applicable regulatory requirements may result in administrative or judicial sanctions. These sanctions could include
the FDA’s imposition of a clinical hold on trials, refusal to approve pending applications, withdrawal of an approval, warning letters,
product recalls, product seizures, total or partial suspension of production or distribution, product detention, or refusal to permit
the import or export of products, injunctions, fines, civil penalties, or criminal prosecution. Any agency or judicial enforcement action
could have a material adverse effect.








17 https://www.fda.gov/drugs/cder-small-business-industry-assistance-sbia/small-business-assistance-frequently-asked-questions-patent-term-restoration-

program








- 44 -




Other Special Regulatory Procedures



Fast Track Designation



According to the discussion18 on
the FDA’s website on “Fast Track”, under the Fast Track program, the sponsor of an IND may request the FDA to designate
the drug candidate as a Fast Track drug if it is intended to treat a serious condition and fulfill an unmet medical need. The FDA must
determine if the drug candidate qualifies for Fast Track designation within 60 days of receipt of the sponsor’s request. Once the
FDA designates a drug as a Fast Track candidate, it is required to facilitate the development and expedite the review of that drug by
providing more frequent communication with and guidance to the sponsor.



In addition to other benefits such as the ability
to use surrogate endpoints and have greater interactions with the FDA, the FDA may initiate review of sections of a Fast Track drug’s
NDA before the application is complete. This rolling review is available if the applicant provides, and the FDA approves, a schedule for
the submission of the remaining information and the applicant pays applicable user fees. However, the FDA’s review period for filing
and reviewing an application does not begin until the last section of the NDA has been submitted. Additionally, the Fast Track designation
may be withdrawn by the FDA if the FDA believes that the designation is no longer supported by data emerging in the clinical trial process.



Breakthrough Therapy Designation



According to discussion19 on the
FDA’s website on “Breakthrough Therapy”, the FDA may provide the Breakthrough Therapy designation to drugs to expedite
the development and review of a candidate that is planned for use to treat a serious or life-threatening disease or condition when preliminary
clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant
endpoints. A Breakthrough Therapy designation includes all of the Fast Track program features, as well as more intensive FDA guidance
on an efficient drug development program. The FDA also has an organizational commitment to involve senior management in such guidance.



Orphan Drug Designation



As set out in the FDA website discussion20
on “Designating an Orphan Product: Drugs and Biological Products”, the FDA may grant Orphan Drug Designation to drugs intended
to treat a rare disease or condition that affects fewer than 200,000 individuals in the United States, or, if the disease or condition
affects more than 200,000 individuals in the United States, if there is no reasonable expectation that the cost of developing and making
the drug would be recovered from sales in the United States. As set out in the EMA’s website discussion21 on “Orphan
Designation”, in the European Union, the EMA’s Committee for Orphan Medicinal Products grants Orphan Drug Designation to promote
the development of products that are intended for the diagnosis, prevention, or treatment of life-threatening or chronically debilitating
conditions affecting not more than five in 10,000 persons in the European Union community. Additionally, the Orphan Drug Designation is
granted for products intended for the diagnosis, prevention, or treatment of a life-threatening, seriously debilitating or serious and
chronic condition and when, without incentives, it is unlikely that sales of the drug in the European Union would be sufficient to justify
the necessary investment in developing the drug.



In the United States, Orphan Drug Designation
entitles a party to financial incentives, such as opportunities for grant funding towards clinical trial costs, tax credits for certain
research, and user fee waivers under certain circumstances. In addition, if a product receives the first FDA approval for the indication
for which it has Orphan Drug Designation, the product is entitled to seven years of market exclusivity, which means the FDA may not approve
any other application for the same drug for the same indication for a period of seven years, except in limited circumstances, such as
a showing of clinical superiority over the product with orphan drug exclusivity. Orphan drug exclusivity does not prevent the FDA from
approving a different drug for the same disease or condition, or the same drug for a different disease or condition. In the European Union,
Orphan Drug Designation also entitles a party to financial incentives such as reduction of fees or fee waivers and ten years of market
exclusivity following drug approval. This period may be reduced to six years if the Orphan Drug Designation criteria are no longer met,
including where it is shown that the product is sufficiently profitable not to justify maintenance of market exclusivity. Orphan Drug
Designation must be requested before submission of an application for marketing approval. Orphan Drug Designation does not convey any
advantage in, or shorten the duration of, the regulatory review and approval process.










18 https://www.fda.gov/ForPatients/Approvals/Fast/ucm405399.htm

19 https://www.fda.gov/ForPatients/Approvals/Fast/ucm405397.htm

20 https://www.fda.gov/industry/developing-products-rare-diseases-conditions/designating-orphan-product-drugs-and-biological-products

21 http://www.ema.europa.eu/ema/index.jsp?curl=pages/regulation/general/general_content_000029.jsp&mid=WC0b01ac0580b18a41








- 45 -




Priority Review (United States) and Accelerated Assessment (European
Union)



Based on results of the Phase III clinical trial(s) submitted
in an NDA, upon the request of an applicant, a priority review designation may be granted to a product by the FDA, which sets the target
date for FDA action on the application at six months from the FDA’s decision on priority review application, or eight months from
the NDA filing. According to the FDA website discussion22 on “Priority Review”, this status is given where preliminary
estimates indicate that a product, if approved, has the potential to provide a safe and effective therapy where no satisfactory alternative
therapy exists, or a significant improvement compared to marketed products is possible. If criteria are not met for priority review, the
standard FDA review period is ten months from the FDA’s decision on priority review application, or 12 months from the NDA filing.
The priority review designation does not change the scientific/medical standard for approval or the quality of evidence necessary to support
approval.



According to the EMA website discussion23
on “Accelerated Assessment”, under the Centralised Procedure in the European Union, the maximum timeframe for the evaluation
of a MAA is 210 days (excluding “clock stops,” when additional written or oral information is to be provided by the applicant
in response to questions asked by the Committee for Medicinal Products for Human Use (“CHMP”). Accelerated evaluation might
be granted by the CHMP in exceptional cases, when a medicinal product is expected to be of a major public health interest, which takes
into consideration: the seriousness of the disease (e.g., heavy-disabling or life-threatening diseases) to be treated; the absence or
insufficiency of an appropriate alternative therapeutic approach; and anticipation of high therapeutic benefit. In this circumstance,
EMA ensures that the opinion of the CHMP is given within 150 days.



Accelerated Approval



As set out in the FDA website discussion24
on “Accelerated Approval”, under the FDA’s accelerated approval regulations, the FDA may approve a drug for a serious
or life-threatening illness that provides meaningful therapeutic benefit to patients over existing treatments based upon a surrogate endpoint
that is reasonably likely to predict clinical benefit. This approval mechanism is provided for under 21CRF314 Subpart H and Subpart E.
In this case, clinical trials are conducted in which a surrogate endpoint is used as the primary outcome for approval. A surrogate endpoint
is reasonably likely to predict clinical benefit, or an effect on a clinical endpoint that can be measured earlier than an effect on irreversible
morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit,
taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. This
surrogate endpoint substitutes for a direct measurement of how a patient feels, functions, or survives and is considered reasonably likely
to predict clinical benefit. Such surrogate endpoints may be measured more easily or more rapidly than clinical endpoints. A drug candidate
approved on this basis is subject to rigorous post-marketing compliance requirements, including the completion of Phase 4 or post-approval
clinical trials to confirm the effect on the clinical endpoint. When the Phase 4 commitment is successfully completed, the biomarker is
deemed to be a surrogate endpoint. Failure to conduct required post-approval studies or confirm a clinical benefit during post-marketing
studies, could lead the FDA to withdraw the drug from the market on an expedited basis. All promotional materials for drug candidates
approved under accelerated regulations are subject to prior review by the FDA.








22 https://www.fda.gov/forpatients/approvals/fast/default.htm

23 http://www.ema.europa.eu/ema/index.jsp?curl=pages/regulation/general/general_content_000955.jsp&mid=WC0b01ac05809f843a

24 https://www.fda.gov/ForPatients/Approvals/Fast/ucm405447.htm








- 46 -




Regulatory Framework in Canada for Cannabis



The production, processing, and sale of the Corporation’s
CardiolRx and Cortalex products are subject to regulation under Canada’s regulatory framework for cannabis.



Cannabis Act and Cannabis Regulations



On December 13, 2016, the Task Force on Cannabis
Legalization and Regulation (the “Task Force”), which was established by the Canadian Federal Government to seek input on
the design of a new system to legalize, regulate and restrict access to cannabis, published its report outlining its recommendations.
On April 13, 2017, the Canadian Federal Government released Bill C 45, an Act respecting cannabis and to amend the Controlled Drugs
and Substances Act, the Criminal Code and other Acts (the “Cannabis Act”), which proposed the enactment of the Cannabis Act
(Canada) to regulate the production, distribution, and sale of cannabis for unqualified adult use. On November 27, 2017, the House
of Commons passed Bill C 45. On June 20, 2018, the Senate approved Bill C 45 and the Act received Royal Assent on June 21, 2018.
The Cannabis Act came into force on October 17, 2018.



On November 22, 2017, Health Canada released
for public consultation its proposed approach to the regulation of cannabis (the “Cannabis Regulations”). The purpose of the
consultation paper was to solicit public feedback on an initial set of regulatory proposals that Health Canada was considering and was
focused on the regulations that would facilitate the coming into force of the proposed Cannabis Act. Health Canada’s consultation
addressed licensing, security requirements for producers and their facilities, product standards, labelling and packaging, and the proposed
cannabis tracking system. It also addressed cannabis for medical purposes and health products containing cannabis. Health Canada proposed
a risk-based approach to regulation, balancing the protection of health and safety of Canadians while enabling a competitive legal industry
made up of large and small enterprises in all regions of Canada producing quality-controlled cannabis. On July 11, 2018, Health Canada
released the regulations of cannabis in Canada Gazette, Part II, Volume 152, Number 14 – SOR/2018 144.



In June 2019, amended Cannabis Regulations
were published outlining changes to the Cannabis Act that came into force October 17, 2019. As of October 17, 2019, The Cannabis
Act grants authorization to licenced organization, to produce and sell “edibles containing cannabis”, “topical cannabis”
and “cannabis concentrates” no earlier than December 17, 2019. The regulations provide for the addition of three product
classes: edibles, extracts and topicals.



The Regulations are divided into the following
seven major categories:



1.            Licenses,
Permits and Authorizations;



2.            Security
Clearances;



3.            Reporting
and Disclosure;



4.            Cannabis
Products;



5.            Packaging
and Labelling;



6.            Access
to Cannabis for Medical Purposes; and



7.            Drugs
Containing Cannabis.



On October 17, 2020, amendments were made
to the Cannabis Act and Regulations including the removal of cannabis oil as a separate product class under Schedule 4 of the Cannabis
Act. Oil products have been reclassified either as cannabis extracts, edibles, or topical products, depending on the intended use. Label
requirements under the Regulations were amended during this period.



On June 19, 2019, Health Canada opened a
consultation on a potential new market classification for cannabis health products (“CHP”) that would not require practitioner
oversight. The contemplated regulatory pathway would allow for specific health claims that would need to be supported by scientific evidence.
Provinces and territories would continue to have the flexibility to authorize CHP sellers operating at any physical location. This could
allow for CHPs for human and veterinary uses to be sold at pharmacies, veterinary clinics, pet stores, or livestock medicine outlets under
strict conditions that respect federal requirements. Strictly controlled online sales would also remain possible. This consultation closed
on September 3, 2019.








- 47 -




On February 27, 2020, the Government of Canada
announced a call for nomination of a new Science Advisory Committee for Health Products Containing Cannabis which will provide independent
scientific and clinical advice to support the Department’s consideration of appropriate safety, efficacy, and quality standards
for health products containing cannabis, including the conditions under which these products would be suitable to be used without practitioner
oversight. Nominations for the Science Advisory Committee were to be made by April 9, 2020. On November 18, 2020, Health Canada
released the membership list and biographies of the science advisory committee on health products containing cannabis. The science advisory
committee met on November 2 and 3, 2020 to review the current regulatory framework for cannabis and potential alternative available
regulatory pathways for prescription drugs, non-prescription drugs, natural health products and veterinary drugs. On November 30,
2020 and December 2, 2020 the committee met to discuss the evidence for cannabis use in humans, adverse reactions of cannabis, potential
products for human use (non-prescription) and veterinary use. Health Canada updated their disclosed Science Advisory Committee meetings
on January 28th, 2022 to include the discussions held January 19, 2021 , March 3, 2021 and June 17, 2021.
The discussions focused on current state of evidence in animals, a review of the Prescription Drug List and how cannabis products currently
sit within Health Canada’s current regulatory framework, the proposed amendments to the Cannabis regulations to regulate non-therapeutic
cannabis research and on defining CBD-containing products on which to focus initial evidence review efforts included purified CBD, CBD
isolates, CBD-rich cannabis extracts and synthetic CBD, which meet certain criteria.



The Cannabis Act, which came into force on October 17,
2018, requires that the Minister of Health initiate a review of the Act by October 17, 2021, three years following the legalization
of recreational cannabis for adult use. As of March 22, 2022, no legislative review has occurred. Health Canada has commented that
preparations are underway for the launch of the legislative review.



The impact of any regulatory changes on the Corporation’s
business is unknown. See “Risk Factors – Changes in laws and regulations”.



Licenses, Permits and Authorizations



The Regulations establish different types of authorizations
based on the activity being undertaken and, in some cases, the scale of the activity. Rules and requirements for different categories
of authorized activities are intended to be proportional to the public health and safety risks posed by each category of activity. The
types of authorizations include: (i) cultivation; (ii) processing; (iii) sale to the public for medical purposes and non-medical
purposes in provinces and territories that have not enacted a retail framework; (iv) analytical testing; (v) import/export;
and (vi) research.



Security Clearances



Select personnel (including individuals occupying
a “key position”, such as directors, officers, large shareholders, and individuals identified by the Minister of Health) associated
with certain licenses issued under the Cannabis Act are obliged to hold a valid security clearance issued by the Minister of Health. The
Regulations enable the Minister of Health to refuse to grant security clearances to individuals with associations to organized crime or
with past convictions for, or an association with, drug trafficking, corruption, or violent offences.



Reporting and Disclosure



Under the Cannabis Act, the Minister of Health
is authorized to establish and maintain a national cannabis tracking system. The purpose of this system is to track cannabis throughout
the supply chain to help prevent diversion of cannabis into, and out of, the legal market. The Regulations provide the Minister of Health
with the authority to make a ministerial order that would require certain persons named in such order to report specific information about
their authorized activities with cannabis, in the form and manner specified by the Minister.








- 48 -




Cannabis Products



The Regulations permit the sale to the public
by licensed entities of dried cannabis, cannabis oil, fresh cannabis, cannabis plants, cannabis seeds, edibles containing cannabis, topical
cannabis and cannabis concentrates (extracts). The Regulations acknowledge that a range of product forms should be enabled to help the
legal industry displace the illegal market.



A solution containing 100% pharmaceutically manufactured
cannabidiol (CBD) and no tetrahydrocannabinol (THC) is classified as “Cannabis” under the Cannabis Act. Specifically, Schedule
1 of the Cannabis Act defines “Cannabis” to include “any substance that is identical to any phytocannabinoid produced
by, or found in, such a plant [cannabis], regardless of how the substance was obtained.” Cannabidiol, pharmaceutically manufactured,
is identical to cannabidiol found in the cannabis plant.



Packaging and Labeling



The Regulations set out requirements pertaining
to the packaging and labelling of cannabis products. Such requirements promote informed consumer choice and allow for the safe handling
and transportation of cannabis. The Regulations require all cannabis products to be packaged in a manner that is tamper-evident and child-resistant.



While minor allowances for branding are permitted,
Health Canada has mandated strict limits on the use of colours, graphics, and other special characteristics of packaging, and products
are required to be labelled with specific information about the product, contain mandatory health warnings similar to tobacco products,
and be marked with a clearly recognizable standardized cannabis symbol. All packaging is required to contain a standardized cannabis symbol
for those products containing greater than 10 ppm of THC.



Drugs Containing Cannabis



Health Canada is following a scientific, evidenced-based
approach for the oversight of health products with cannabis that are approved with health claims, including prescription and non-prescription
drugs, natural health products, veterinary drugs and veterinary health products, and medical devices. Health products can only be sold
if they have been approved by Health Canada following a scientific review.



Provincial and Territorial Regulatory Regimes



While the Cannabis Act provides for the regulation
of the commercial production of cannabis for recreational purposes and related matters by the federal government, the Cannabis Act states
that the provinces and territories of Canada have authority to regulate other aspects of recreational cannabis (similar to what is currently
the case for liquor and tobacco products), such as sale and distribution, minimum age requirements, pricing and promotion, places where
cannabis can be consumed, and a range of other matters.



The government of each Canadian province and territory
has in place regulatory regimes for the distribution and sale of cannabis for consumer purposes within those jurisdictions.



RISK
FACTORS



Investing in our Common Shares involves significant
risks. You should carefully consider the risks described below, which are qualified in their entirety by reference to, and must be read
in conjunction with, the detailed information appearing elsewhere in this AIF. The risks and uncertainties described below are those we
currently believe to be material, but they are not the only ones we face. If any of the following risks, or any other risks and uncertainties
that we have not yet identified or that we currently consider not to be material, actually occur, or become material risks, our business,
prospects, financial condition, results of operations, and cash flows could be materially and adversely affected.








- 49 -




The Corporation's prospects depend on the success
of our acute myocarditis and subcutaneous product candidates which are at early stages of development, and the success of our Phase II/III
trial in high-risk patients hospitalized with COVID-19. We do not expect to generate revenue for several years, if at all, from the acute
myocarditis and subcutaneous product candidates.



Given the early stage of development of our acute
myocarditis and subcutaneous product candidates, and the uncertainty inherent in clinical trials, we can make no assurance that our research
and development programs will result in regulatory approval or commercially viable products. To achieve profitable operations, we, alone
or with others, must successfully develop, gain regulatory approval, and market our future product candidates, if approved. We currently
have no products that have been approved by the FDA, Health Canada, or any similar regulatory authority. To obtain regulatory approvals
for our product candidates being developed and to achieve commercial success, if approved, clinical trials must demonstrate that the product
candidates are safe for human use and that they demonstrate efficacy, as determined by the appropriate regulatory agency.



Many product candidates never reach the stage
of clinical testing and even those that do have only a small chance of successfully completing clinical development and gaining regulatory
approval. Product candidates may fail for a number of reasons, including, but not limited to, being unsafe for human use or due to the
failure to provide therapeutic benefits equal to or better than the standard of treatment at the time of testing. Positive results of
early pre-clinical research may not be indicative of the results that will be obtained in later stages of pre-clinical or clinical research.
Interim results of a clinical trial do not necessarily predict final results. Similarly, positive results from early-stage clinical trials
may not be indicative of favorable outcomes in later-stage clinical trials. We can make no assurance that any future studies, if undertaken,
will yield favorable results. The early stage of our acute myocarditis and subcutaneous product development makes it particularly uncertain
whether any of these product development efforts will prove to be successful and meet applicable regulatory requirements, and whether
any of our product candidates will receive the requisite regulatory approvals, be capable of being manufactured at a reasonable cost,
or be successfully marketed, if approved. If we are successful in developing our current and future product candidates into approved
products, we will still experience many potential obstacles such as the need to develop or obtain manufacturing, marketing, and distribution
capabilities. If we are unable to successfully commercialize any of our product candidates, our financial condition and results of operations
may be materially and adversely affected.



The Continued Development of the Corporation
will Require Additional Financing. If we fail to raise such capital, it could result in the delay or indefinite postponement of our current
business strategy, or we could cease to carry on business.



There is no guarantee that the Corporation will
be able to execute on its strategy. The continued development of the Corporation will require additional financing. The failure to raise
needed capital could result in the delay or indefinite postponement of current business strategy or the Corporation ceasing to carry on
business. There can be no assurance that additional capital or other types of financing will be available if needed or that, if available,
the terms of such financing will be favourable to the Corporation. If additional funds are raised through issuances of equity or convertible
debt securities, existing shareholders could suffer significant dilution, and any new equity securities issued could have rights, preferences,
and privileges superior to those of holders of common shares. In addition, from time to time, the Corporation may enter into transactions
to acquire assets or the shares of other Companies. These transactions may be financed wholly or partially with debt, which may temporarily
increase the Corporation's debt levels above industry standards. Any debt financing secured in the future could involve restrictive covenants
relating to capital raising activities and other financial and operational matters, which may make it more difficult for the Corporation
to obtain additional capital and to pursue business opportunities, including potential acquisitions. Debt financings may contain provisions,
which, if breached, may entitle lenders to accelerate repayment of loans and there is no assurance that the Corporation would be able
to repay such loans in such an event or prevent the enforcement of security granted pursuant to such debt financing. The Corporation may
require additional financing to fund its operations to the point where it is generating positive cash flows. Negative cash flow may restrict
the Corporation's ability to pursue its business objectives.



In the event of bankruptcy, liquidation, or reorganization
of Cardiol, holders of its debt and its trade creditors will generally be entitled to payment of their claims from the assets of Cardiol
before any assets are made available for distribution to Cardiol or its shareholders. The common shares are effectively subordinated to
the debt and other obligations of Cardiol.








- 50 -




We intend to expend our limited resources to
pursue our current product candidates, and may fail to capitalize on other product candidates that may be more profitable or for which
there is a greater likelihood of success.



Because we have limited financial and managerial
resources, we are focusing on research programs relating to our current product candidates, which concentrates the risk of product failure
in the event that our current product candidates prove to be unsafe or ineffective or inadequate for clinical development or commercialization.
Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities.
Our spending on proprietary research and development programs relating to our current product candidates may not yield any commercially
viable products.



We have a history of operating losses and may
never achieve or maintain profitability in the future.



Cardiol's net loss for the year ended December 31,
2021 was $31,638,244 and for the year ended December 31, 2020 was $20,640,935. It is possible that we will never have sufficient
product sales revenue to achieve profitability. We expect to continue to incur losses for at least the next several years as we or our
collaborators and licensees pursue clinical trials and research and development efforts. To become profitable, we, either alone or with
our collaborators and licensees, must successfully market our pharmaceutical cannabidiol and develop, manufacture, and market our current
product candidates, as well as continue to identify, develop, manufacture, and market new product candidates. It is possible that we will
never have significant product sales revenue or receive royalties on our licensed product candidates. If funding is insufficient at any
time in the future, we may not be able to develop or commercialize our products, take advantage of business opportunities, or respond
to competitive pressures.



We currently do not earn any revenues from our
drug candidates and are therefore considered to be in the development stage. The continuation of our research and development activities
and the commercialization of the targeted therapeutic products are dependent upon our ability to successfully finance and complete our
research and development programs through a combination of equity financing and payments from strategic partners. We have no current sources
of significant payments from strategic partners.



We rely on Management and need additional key
personnel to grow our business, and the loss of key employees or inability to hire key personnel could harm our business.



The loss of David Elsley, our President and CEO,
or other key members of our staff, could harm us. We also depend on our scientific and clinical collaborators and advisors, all of whom
have outside commitments that may limit their availability to us. In addition, we believe that our future success will depend in large
part upon our ability to attract and retain highly skilled scientific, managerial, medical, clinical, and regulatory personnel, particularly
as we expand our activities and seek regulatory approvals for clinical trials. We routinely enter into consulting agreements with our
scientific and clinical collaborators and advisors, key opinion leaders, and academic partners in the ordinary course of our business.
We also enter into contractual agreements with physicians and institutions who will recruit patients into our clinical trials on our behalf
in the ordinary course of our business. Notwithstanding these arrangements, we face significant competition for these types of personnel
from other companies, research and academic institutions, government entities, and other organizations. We cannot predict our success
in hiring or retaining the personnel we require for continued growth. The loss of the services of any of our executive officers or other
key personnel could potentially harm our business operating results, or financial condition.



Clinical trials for our product candidates
are expensive, time consuming, uncertain, and susceptible to change, delay or termination.



Before obtaining marketing approval from regulatory
authorities for the sale of our product candidates, we must conduct pre-clinical studies in animals and extensive clinical trials in humans
to demonstrate the safety and efficacy of the product candidates. Clinical testing is expensive and difficult to design and implement,
can take many years to complete, and has uncertain outcomes. The outcome of pre-clinical studies and early clinical trials may not predict
the success of later clinical trials and interim results of a clinical trial do not necessarily predict final results.








- 51 -




A number of companies in the pharmaceutical and
biotechnology industries have suffered significant setbacks in advanced clinical trials due to lack of efficacy or unacceptable safety
profiles, notwithstanding promising results in earlier trials. We do not know whether the clinical trials we may conduct will demonstrate
adequate efficacy and safety to result in regulatory approval to market any of our product candidates in any jurisdiction. A product candidate
may fail for safety or efficacy reasons at any stage of the testing process. A major risk we face is the possibility that none of our
product candidates under development will successfully gain market approval from the FDA, Health Canada, or other regulatory authorities,
resulting in us being unable to derive any commercial revenue from them after investing significant amounts of capital in multiple stages
of pre-clinical and clinical testing.



Even if the results of our clinical trials are
favourable, the clinical trials for a number of our product candidates are expected to continue for several years and may take significantly
longer to complete. In addition, we, the FDA, Health Canada or other regulatory authorities, including state and local authorities may
suspend, delay, or terminate our clinical trials at any time, require us to conduct additional clinical trials, require a particular clinical
trial to continue for a longer duration than originally planned, require a change to our development plans such that we conduct clinical
trials or a product candidate in a different order, e.g., in a step-wise fashion rather than running two trials of the same product candidate
in parallel. Any of the foregoing could have a material adverse effect on our business, results of operations, and financial condition.



If we experience delays in clinical testing,
we will be delayed in commercializing our product candidates, if approved, and our business may be substantially harmed.



We cannot predict whether any clinical trials
will begin as planned, will need to be restructured, or will be completed on schedule, or at all. Our product development costs will increase
if we experience delays in clinical testing. Significant clinical trial delays could shorten any periods during which we may have the
exclusive right to commercialize our product candidates or allow our competitors to bring products to market before us, which would impair
our ability to successfully commercialize our product candidates and may harm our financial condition, results of operations, and prospects.
The commencement and completion of clinical trials for our products may be delayed for a number of reasons, including delays related,
but not limited, to:



| | • | failure by regulatory authorities to grant permission to proceed or placing
the clinical trial on hold;
| | - | -------------------------------------------------------------------------------------------------------



| | • | difficulties obtaining institutional review board (“IRB”) or
ethics committee approval to conduct a clinical trial at a prospective site;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------



| | • | import/export and research restrictions for cannabinoid-based pharmaceuticals
delaying or preventing clinical trials in various geographical jurisdictions;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | patients failing to enroll or remain in our trials at the rate we expect;
| | - | -------------------------------------------------------------------------



| | • | suspension or termination of clinical trials by regulators for many reasons,
including concerns about patient safety or failure of our contract manufacturers to comply with cGMP requirements;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | delays or failure to obtain clinical supply from contract manufacturers of
our product candidates necessary to conduct clinical trials;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------



| | • | product candidates demonstrating a lack of safety or efficacy during clinical
trials;
| | - | -------------------------------------------------------------------------------------



| | • | patients choosing an alternative treatment for the indications for which
we are developing any of our product candidates or participating in competing clinical trials and/or scheduling conflicts with participating
clinicians;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | patients failing to complete clinical trials due to dissatisfaction with
the treatment, side effects or other reasons;
| | - | ----------------------------------------------------------------------------------------------------------------------



| | • | reports of clinical testing on similar technologies and products raising
safety and/or efficacy concerns;
| | - | ---------------------------------------------------------------------------------------------------------



| | • | clinical investigators not performing our clinical
trials on their anticipated schedule, dropping out of a trial, or employing methods not consistent with the clinical trial protocol, and
regulatory requirements, or other third parties not performing data collection and analysis in a timely or accurate manner;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | failure of our CROs to satisfy their contractual
duties or meet expected deadlines;
| | - | -----------------------------------------------------------------------------------



| | • | inspections of clinical trial sites by regulatory
authorities or IRBs, or ethics committees finding regulatory violations that require us to undertake corrective action, resulting in suspension
or termination of one or more sites or the imposition of a clinical hold on the entire study;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------








- 52 -




| | • | one or more IRBs or ethics committees rejecting,
suspending, or terminating the study at an investigational site, precluding enrollment of additional subjects, or withdrawing its approval
of the trial; or
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | failure to reach agreement on acceptable terms
with prospective clinical trial sites.
| | - | -------------------------------------------------------------------------------------



In addition, a clinical trial may be suspended
or terminated by us, the FDA, IRBs, ethics committees, data safety monitoring boards, or other foreign regulatory authorities overseeing
the clinical trial at issue or other regulatory authorities due to a number of factors, including, among others:



| | • | failure to conduct the clinical trial in accordance
with regulatory requirements or our clinical trial protocols;
| | - | -----------------------------------------------------------------------------------------------------------------



| | • | inspection of the clinical trial operations or
clinical trial sites by the FDA, the European Medicines Agency, or other foreign regulatory authorities that reveals deficiencies or violations
that require us to undertake corrective action, including the imposition of a clinical hold;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | unforeseen safety issues, including any safety
issues that could be identified in our ongoing pre-clinical studies;
| | - | -------------------------------------------------------------------------------------------------------------------



| | • | adverse side effects or lack of effectiveness;
and
| | - | --------------------------------------------------



| | • | changes in government regulations or administrative
actions.
| | - | ------------------------------------------------------------



Our product development costs will increase if
we experience delays in testing or approval or if we need to perform more or larger clinical trials than planned. Additionally, changes
in regulatory requirements and policies may occur, and we may need to amend study protocols to reflect these changes. Amendments may require
us to resubmit our study protocols to regulatory authorities, IRBs, or ethics committees for re-examination, which may impact the
cost, timing, or successful completion of that trial. Delays or increased product development costs may have a material adverse effect
on our business, financial condition, and prospects.



Negative results from clinical trials or studies
of others and adverse safety events involving the targets of our product candidates may have an adverse impact on our future commercialization
efforts.



From time to time, studies or clinical trials
on various aspects of biopharmaceutical products are conducted by academic researchers, competitors, or others. The results of these studies
or trials, when published, may have a significant effect on the market for the biopharmaceutical product that is the subject of the study.
The publication of negative results of studies or clinical trials or adverse safety events related to our product candidates, or the therapeutic
areas in which our product candidates compete, could adversely affect the price of the securities and our ability to finance future development
of our product candidates, and our business and financial results could be materially and adversely affected.



Our activities are subject to comprehensive
regulation, including under healthcare laws and compliance requirements.



In the United States, our activities are potentially
subject to additional regulation by various federal, state, and local authorities in addition to the FDA, including, among others, the
Centers for Medicare and Medicaid Services, other divisions of Health and Human Services, or HHS, (for example, the Office of Inspector
General), the Department of Justice, and individual United States Attorney offices within the Department of Justice, and state and local
governments.



In Canada, our activities are potentially subject
to additional regulation by various federal and provincial authorities in addition to Health Canada, including among others, and publicly-mandated
organizations given a provincial sales license under the Cannabis Act.



Because of the breadth of these laws and the narrowness
of available statutory and regulatory exemptions, it is possible that some of our business activities could be subject to challenge under
one or more of such laws. If our operations are found to be in violation of any of the federal and state laws described above or any other
governmental regulations that apply to us, we may be subject to penalties, including criminal and significant civil monetary penalties,
damages, fines, imprisonment, exclusion from participation in government programs, injunctions, recall or seizure of products, total or
partial suspension of production, denial or withdrawal of pre-marketing product approvals, private “qui tam” actions brought
by individual whistleblowers in the name of the government, or refusal to allow us to enter into supply contracts, including government
contracts, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business
and our results of operations. To the extent that any of our products are sold in a foreign country, we may be subject to similar foreign
laws and regulations, which may include, for instance, applicable post-marketing requirements, including safety surveillance, anti-fraud
and abuse laws, and implementation of corporate compliance programs and reporting of payments or transfers of value to healthcare professionals.








- 53 -




We may not achieve our projected development
goals in the time frames and cost estimates we announce and expect.



We set goals for, and make public statements regarding,
the expected timing and costs of the accomplishment of objectives material to our success, the commencement and completion of clinical
trials and the expected costs to develop our product candidates. The actual timing and costs of these events can vary dramatically due
to factors within and beyond our control, such as delays or failures in our clinical trials, issues related to the manufacturing of drug
supply, uncertainties inherent in the regulatory approval process, market conditions, and interest by partners in our product candidates
among other things. We may not make regulatory submissions or receive regulatory approvals as planned; our clinical trials may not be
completed; or we may not secure partnerships for any of our product candidates. Any failure to achieve one or more of these milestones
as planned would have a material adverse effect on our business, financial condition, and results of operations.



Unpredictable and volatile market price for
common shares



The market price for common shares may be volatile
and subject to wide fluctuations in response to numerous factors, many of which are beyond our control, including the following:



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



| | • | recommendations by securities research analysts;
| | - | ------------------------------------------------



| | • | changes in the economic performance or market valuations of companies in
the industry in which we operate;
| | - | ----------------------------------------------------------------------------------------------------------



| | • | addition or departure of our executive officers and other key personnel;
| | - | ------------------------------------------------------------------------



| | • | sales or perceived sales of additional common shares;
| | - | -----------------------------------------------------



| | • | significant acquisitions or business combinations, strategic partnerships,
joint ventures, or capital commitments by or involving us or our competitors;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | operating and share price performance of other companies that investors deem
comparable to us
| | - | ---------------------------------------------------------------------------------------------



| | • | fluctuations to the costs of vital production materials and services;
| | - | ---------------------------------------------------------------------



| | • | changes in global financial markets and global economies and general market
conditions, such as interest rates and pharmaceutical product price volatility;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | operating and share price performance of other companies that investors deem
comparable to the Corporation or from a lack of market comparable companies; and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | news reports relating to trends, concerns, technological or competitive developments,
regulatory changes, and other related issues in our industry or target markets.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



Financial markets have recently experienced significant
price and volume fluctuations that have particularly affected the market prices of equity securities of companies and that have often
been unrelated to the operating performance, underlying asset values, or prospects of such companies. Accordingly, the market price of
the common shares may decline even if our operating results, underlying asset values or prospects have not changed. Additionally, these
factors, as well as other related factors, may cause decreases in asset values that are deemed to be other than temporary, which might
result in impairment losses. There can be no assurance that continuing fluctuations in price and volume will not occur. If such increased
levels of volatility and market turmoil continue, our operations could be adversely affected, and the trading price of the common shares
might be materially adversely affected.








- 54 -




Securities or industry analysts may publish
inaccurate or unfavorable research reports, stock price and trading volume could decline.



The trading market for our common shares will
depend in part on the research and reports that securities or industry analysts publish about us or our business. If one or more of the
analysts who cover us downgrade our common shares or publish inaccurate or unfavorable research about our business, our share price would
likely decline. If one or more of these analysts cease coverage of our Corporation or fail to publish reports on us regularly, demand
for our stock could decrease, which might cause our share price and trading volume to decline.



If we fail to adequately protect or enforce
our intellectual property rights or secure rights to patents of others, the value of our intellectual property rights would diminish.



Our success, competitive position, and future
revenues will depend in part on our ability and the abilities of our licensors to obtain and maintain patent protection for our products,
methods, processes, and other technologies, to preserve our trade secrets, to prevent third parties from infringing on our proprietary
rights, and to operate without infringing the proprietary rights of third parties.



To date, we have exclusive rights to certain Canadian,
United States, and other foreign intellectual property. We anticipate filing additional patent applications in Canada, the United States,
and in other countries, as appropriate. However, we cannot predict:



| | • | the degree and range of protection any patents will afford us against competitors,
including whether third parties will find ways to invalidate or otherwise circumvent our patents;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | if and when patents will issue;
| | - | -------------------------------



| | • | whether or not others will obtain patents claiming aspects similar to those
covered by our patents and patent applications; or
| | - | ------------------------------------------------------------------------------------------------------------------------------



| | • | whether we will need to initiate litigation or administrative proceedings
which may be costly whether we win or lose.
| | - | ---------------------------------------------------------------------------------------------------------------------



Our success also depends upon the skills, knowledge,
and experience of our scientific and technical personnel, our consultants and advisors, as well as our licensors and contractors. To help
protect our proprietary know-how and our inventions for which patents may be unobtainable or difficult to obtain, we rely on trade-secret
protection and confidentiality agreements. To this end, it is our policy generally to require our employees, consultants, advisors, and
contractors to enter into agreements which prohibit the disclosure of confidential information and, where applicable, require disclosure
and assignment to us of the ideas, developments, discoveries, and inventions important to our business. These agreements may not provide
adequate protection for our trade secrets, know-how, or other proprietary information in the event of any unauthorized use or disclosure
or the lawful development by others of such information. If any of our trade secrets, know-how, or other proprietary information is disclosed,
the value of our trade secrets, know-how, and other proprietary rights would be significantly impaired and our business and competitive
position would suffer.



Owning a patent does not per se prevent competition.
To stop third-party infringement, a patent owner and/or licensee must take steps to enforce the patent through court proceedings. This
can be a very lengthy and costly process and the outcome may be uncertain.



Obtaining and maintaining our patent protection
depends on compliance with various procedural, document submission, fee payment, and other requirements imposed by governmental patent
agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.



The Canadian Intellectual Property Office (“CIPO”)
and various foreign national or international patent agencies require compliance with a number of procedural, documentary, fee payment,
and other similar provisions during the patent application process. Periodic maintenance fees on any issued patent are due to be paid
to CIPO and various foreign national or international patent agencies in several stages over the lifetime of the patent. While an inadvertent
lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations
in which non-compliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss
of patent rights in the relevant jurisdiction. Non-compliance events that could result in abandonment or lapse of patent rights include,
but are not limited to, failure to timely file national and regional stage patent applications based on our international patent application,
failure to respond to official actions within prescribed time limits, non-payment of fees, and failure to properly legalize and submit
formal documents.








- 55 -




If we fail to maintain the patents and patent
applications covering our product candidates, our competitors might be able to enter the market, which would have a material adverse effect
on our business.



While a patent may be granted by a national patent
office, there is no guarantee that the granted patent is valid. Options exist to challenge the validity of the patent which, depending
upon the jurisdiction, may include re-examination, opposition proceedings before the patent office, and/or invalidation proceedings before
the relevant court. Patent validity may also be the subject of a counterclaim to an allegation of patent infringement.



Pending patent applications may be challenged
by third parties in protest or similar proceedings. Third parties can typically submit prior art material to patentability for review
by the patent examiner. Regarding Patent Cooperation Treaty applications, a positive opinion regarding patentability issued by the International
Searching Authority does not guarantee allowance of a national application derived from the Patent Cooperation Treaty application. The
coverage claimed in a patent application can be significantly reduced before the patent is issued, and the patent’s scope can be
modified after issuance. It is also possible that the scope of claims granted may vary from jurisdiction to jurisdiction.



The grant of a patent does not have any bearing
on whether the invention described in the patent application would infringe the rights of earlier filed patents. It is possible to both
obtain patent protection for an invention and yet still infringe the rights of an earlier granted patent.



We may become subject to claims by third parties
asserting that we or our employees have misappropriated their intellectual property, or claiming ownership of what we regard as our own
intellectual property.



Our commercial success depends upon our ability
to develop, manufacture, market, and sell our product candidates, and to use our related proprietary technologies without violating the
intellectual property rights of others. We may become party to, or threatened with, future adversarial proceedings or litigation regarding
intellectual property rights with respect to our product candidates, including interference or derivation proceedings before CIPO, United
States Patent and Trademark Office, and other applicable patents offices in foreign jurisdictions. Third parties may assert infringement
claims against us based on existing patents or patents that may be granted in the future. If we are found to infringe a third party’s
intellectual property rights, we could be required to obtain a license from such third party to continue commercializing our product candidates.
However, we may not be able to obtain any required license on commercially reasonable terms or at all. Under certain circumstances, we
could be forced, including by court order, to cease commercializing the applicable product candidate. In addition, in any such proceeding
or litigation, we could be found liable for monetary damages. A finding of infringement could prevent us from commercializing our product
candidates or force us to cease some of our business operations, which could materially harm our business. Any claims by third parties
that we have misappropriated their confidential information or trade secrets could have a similar negative impact on our business.



We may not be able to protect our intellectual
property rights throughout the world.



Filing, prosecuting, and defending patents on
all of our product candidates throughout the world would be prohibitively expensive. Therefore, we have filed applications and/or obtained
patents only in key markets, such as the United States, Canada, and certain countries internationally. Competitors may use our technologies
in jurisdictions where we have not obtained patent protection to develop their own products and their products may compete with ours.








- 56 -




We rely and will continue to rely on third
parties to conduct and monitor many of our pre-clinical studies and our clinical trials, and their failure to perform as required could
cause substantial harm to our business.



We rely and will continue to rely on third parties
to conduct a significant portion of our pre-clinical and clinical development activities. Pre-clinical activities include in vivo studies
providing access to specific disease models, pharmacology and toxicology studies, and assay development. Clinical development activities
include trial design, regulatory submissions, clinical patient recruitment, clinical trial monitoring, clinical data management and analysis,
safety monitoring and project management, contract manufacturing, and quality assurance. If there is any dispute or disruption in our
relationship with third parties, or if they are unable to provide quality services in a timely manner and at a feasible cost, our active
development programs will face delays. Further, if any of these third parties fails to perform as we expect or if their work fails to
meet regulatory requirements, our testing could be delayed, cancelled, or rendered ineffective.



Failure to comply with cannabis laws in Canada
and controlled substances laws elsewhere may adversely affect the results of our business operations.



Our ability to successfully produce our product
candidates is dependent on extensive ongoing regulatory compliance and reporting requirements by the DEA, the FDA, Health Canada and other
foreign regulatory authorities. Failure to comply with such requirements could have a material adverse impact on our business, financial
condition and operating results. There is no assurance that regulatory approval will be granted or continued for our product candidates.
Should regulatory approval not be granted or continued, our business, financial condition and operating results would be materially adversely
affected. Even if we receive regulatory approval for our product candidates, this approval may carry conditions that limit the market
for the products or put the products at a competitive disadvantage relative to alternative therapies. For instance, regulatory approval
may limit the indicated uses for which we can market a product (if approved) or the patient population that may utilize the product or
may be required to carry a warning on its packaging. Once a product candidate is approved, we remain subject to continuing regulatory
obligations, such as safety reporting requirements and additional post-marketing obligations, including regulatory oversight of promotion
and marketing.



If our operations are found to be in violation
of any of the federal and state laws or any other governmental regulations that apply to us, we may be subject to penalties, including
criminal and significant civil monetary penalties, damages, fines, imprisonment, exclusion from participation in government programs,
injunctions, recall or seizure of products, total or partial suspension of production, denial or withdrawal of pre-marketing product approvals,
private “qui tam” actions brought by individual whistleblowers in the name of the government, or refusal to allow us to enter
into supply contracts, including government contracts, and the curtailment or restructuring of our operations, any of which could adversely
affect our ability to operate our business and our results of operations. To the extent that any of our product candidates (if approved)
are sold in a foreign country, we may be subject to similar foreign laws and regulations, which may include, for instance, applicable
post-marketing requirements, including safety surveillance, anti-fraud and abuse laws, and implementation of corporate compliance programs
and reporting of payments or transfers of value to healthcare professionals.



In both domestic and foreign markets, the development,
formulation, manufacturing, packaging, labelling, handling, distribution, import, export, licensing, sale, and storage of pharmaceuticals
are affected by a body of laws, governmental regulations, administrative determinations, including those by the Canadian Food Inspection
Agency and the FDA, court decisions, and similar constraints. Such laws, regulations and other constraints can exist at the federal, provincial
or local levels in Canada and at all levels of government in foreign jurisdictions. We and our partners may be required to incur significant
costs to comply with such laws and regulations in the future, and such laws and regulations may have an adverse effect on the business.
The failure of us or our partners to comply with current or future regulatory requirements could lead to the imposition of significant
penalties or claims and may have a material adverse effect on our business. In addition, the adoption of new laws, regulations or other
constraints or changes in the interpretations of such requirements might result in significant compliance costs or lead us and our partners
to discontinue product development and could have an adverse effect on our business.








- 57 -




Our ability to research, develop, and commercialize
product candidates, if approved, is dependent on our ability to obtain and maintain licenses relating to possession and supply of controlled
substances



Our research and manufacturing facilities are
located in Canada. In Canada, various licenses are required to produce pharmaceutical cannabinoids. Our continued ability to research,
develop, and commercialize our product candidates is dependent on our ability to obtain, and subsequently maintain, licenses relating
to possession and supply of controlled substances. Loss of such licenses or inability to obtain such licenses could have an adverse effect
on our business.



Controlled substance legislation differs between
countries and legislation in certain countries may restrict or limit ability to sell products



Most countries are parties to the Single Convention
on Narcotic Drugs 1961, which governs international trade and domestic control of narcotic substances, including cannabis. Countries may
interpret/implement their treaty obligations in a way that creates a legal obstacle to our obtaining marketing approval for our product
candidates in those countries. These countries may not be willing or able to amend or otherwise modify their laws and regulations to permit
our product candidates to be marketed, if approved, or achieving such amendments to the laws and regulations may take a prolonged period
of time.



Changes in laws and regulations may make compliance
challenging, costly and time consuming for us.



Our operations are subject to a variety of laws,
regulations and guidelines relating to pharmacology, cannabinoids, and drug delivery, as well as laws and regulations relating to health
and safety, the conduct of operations, and the protection of the environment. While, to our knowledge, we are currently in material compliance
with all such laws, changes to such laws, regulations and guidelines due to matters beyond our control may cause adverse effects to our
operations and financial condition. These changes may require us to incur substantial costs associated with legal and compliance fees
and ultimately require us to alter our business plan.



In addition, if the governments of Canada or the
U.S. were to enact or amend laws relating to our industry, it may decrease the size of, or eliminate entirely, the market for our product
candidates, if approved, may introduce significant new competition into the market and may otherwise potentially materially and adversely
affect our business, results of operations, and financial condition.



Tax and accounting requirements may change
in ways that are unforeseen to the Corporation and the Corporation may face difficulty or be unable to implement and/or comply with any
such changes.



The Corporation is subject to numerous tax and
accounting requirements, and changes in existing accounting or taxation rules or practices, or varying interpretations of current
rules or practices, could have a significant adverse effect on the Corporation’s financial results, the manner in which it
conducts its business, or the marketability of any of its products. In the future, the geographic scope of the Corporation’s business
may expand, and such expansion will require the Corporation to comply with the tax laws and regulations of multiple jurisdictions. Requirements
as to taxation vary substantially among jurisdictions. Complying with the tax laws of these jurisdictions can be time consuming and expensive
and could potentially subject the Corporation to penalties and fees in the future if the Corporation were to inadvertently fail to comply.
In the event the Corporation was to inadvertently fail to comply with applicable tax laws, this could have a material adverse effect on
the business, results of operations, and financial condition of the Corporation.



Management may not be able to successfully
implement adequate internal controls over financial reporting (“ICFR”).



Proper systems of internal controls over financial
accounting and disclosure are critical to the operation of a public company. However, the Corporation does not expect that its Disclosure,
Controls, and Procedures or ICFR will prevent all error and all fraud. A control system, no matter how well designed and operated, can
provide only reasonable, not absolute, assurance that the control system’s objectives will be 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, no evaluation of controls can provide absolute assurance that all control
issues and instances of fraud, if any, have been detected. Due to the inherent limitations in a cost-effective control system, misstatements
due to error or fraud may occur and may not be detected in a timely manner or at all. If the Corporation cannot provide reliable financial
reports or prevent fraud, its reputation and operating results could be materially adversely affected, which could cause investors to
lose confidence in the Corporation’s reported financial information, which in turn could result in a reduction in the value of the
common shares.








- 58 -




Medical research of cannabinoids remains limited.



Research in Canada, the United States, and internationally
regarding the medical benefits, viability, safety, efficacy, and dosing of cannabinoids remains limited. There have been relatively few
clinical trials conducted on the benefits of cannabinoids. The statements made in this MD&A concerning the potential medical benefits
of cannabinoids are based on published articles and reports with details of research studies and clinical trials. As a result, the statements
made in this MD&A are subject to the experimental parameters, qualifications, and limitations in the studies that have been completed.



Although the Corporation believes that the articles
and reports with details of research studies and clinical trials referenced in this MD&A reasonably support its beliefs regarding
the medical benefits, viability, safety, efficacy, and dosing of cannabinoids as set out in this MD&A, future research and clinical
trials in pursuit of our development efforts may prove such statements to be incorrect, or could raise concerns regarding and perceptions
relating to, cannabinoids. Given these risks, uncertainties and assumptions, undue reliance should not be placed on such articles and
reports. Future research studies and clinical trials may draw opposing conclusions to those stated in this MD&A or reach negative
conclusions regarding the viability, safety, efficacy, dosing, social acceptance or other facts and perceptions related to cannabinoids,
which could have a material adverse effect on the demand for the Corporation’s product candidates, if approved, and therefore materially
impact the business, financial condition, and operating results of the Corporation.



Pharmaceutical cannabinoid and other product
candidates, if approved, may be unable to achieve the expected market acceptance and, consequently, limit our ability to generate revenue
from new products.



Even if product development is successful and
regulatory approval is obtained, our ability to generate significant revenue depends on the acceptance of our products by physicians and
patients. We cannot assure you that our pharmaceutical cannabinoid product candidates will achieve the expected market acceptance and
revenue if and when they obtain the requisite regulatory approvals. The market acceptance of any product depends on a number of factors,
including the indication statement and warnings approved by regulatory authorities on the product label, continued demonstration of efficacy
and safety in commercial use, physicians’ willingness to prescribe the product, reimbursement from third-party payers such as government
health care systems and insurance companies, the price of the product, the nature of any post-approval risk management plans mandated
by regulatory authorities, competition, and marketing and distribution support. Any factors preventing or limiting the market acceptance
of our products could have a material adverse effect on our business, results of operations, and financial condition.



We currently have no commercialized products.



Even if we obtain regulatory approval for a product
candidate, our future success will still depend on our ability to successfully commercialize our products, which depends on a number of
factors beyond our control, including the willingness of physicians to prescribe our products to patients, payers' willingness and ability
to pay for the product, the level of pricing achieved, patients' response to our products, the ability of our marketing partners to generate
sales, and our ability to manufacture products on a cost-effective and efficient basis. If we are not successful in the commercialization
of our products, our business, results of operations, and financial condition may be harmed.








- 59 -




We rely on contract manufacturers over whom
we have limited control. If we are subject to quality, cost, or delivery issues with the pre-clinical and clinical grade materials supplied
by contract manufacturers, our business operations could suffer significant harm.



We currently have no manufacturing experience
and rely on Dalton and other contract manufacturing organizations (“CMOs”) to manufacture our product candidates for pre-clinical
studies and clinical trials. We rely on CMOs for manufacturing, filling, packaging, storing, and shipping of product candidates in compliance
with current good manufacturing practice, or cGMP, regulations applicable to our product candidates. The FDA ensures the quality of drug
products by carefully monitoring drug manufacturers’ compliance with cGMP regulations. The cGMP regulations for drugs contain minimum
requirements for the methods, facilities, and controls used in manufacturing, processing, and packaging of a drug product. If our CMOs
increase their prices or fail to meet our quality standards, or those of regulatory agencies such as the FDA, and cannot be replaced by
other acceptable CMOs, our ability to obtain regulatory approval for and commercialize our product candidates may be materially adversely
affected.



Business disruptions affecting our third-party
suppliers, manufacturers, and CROs could harm our future revenues and financial condition and increase our costs and expenses.



We rely on third parties to supply the materials
for and manufacture our APIs for our pre-clinical and clinical trials. There are only a limited number of suppliers and manufacturers
of our APIs and our ability to obtain these materials could be disrupted if the operations of these manufacturers are affected by earthquakes,
power shortages, telecommunications failures, water shortages, floods, hurricanes, typhoons, fires, extreme weather conditions, medical
epidemics, including the ongoing COVID-19 pandemic, and other natural or man-made disasters or business interruptions. We also rely on
CROs, clinical data management organizations, and consultants to design, conduct, supervise, and monitor pre-clinical studies of our product
candidates and will do the same for our planned clinical trials. If their facilities are unable to operate because of an accident or incident,
even for a short period of time, some or all of our research and development programs may be harmed or delayed, and our operations and
financial condition could suffer.



Our existing collaboration agreements and any
such agreement entered into in the future may not be successful, which would have adverse consequences.



We are a party to, and may seek additional, collaboration
arrangements with pharmaceutical or biotechnology companies for the development or commercialization of our current and potential product
candidates. We may enter into new arrangements on a selective basis depending on the merits of retaining commercialization rights for
ourselves as compared to entering into selective collaboration arrangements with leading pharmaceutical or biotechnology companies for
each product candidate, both in Canada and internationally. To the extent that we decide to enter into collaboration agreements, we will
face significant competition in seeking appropriate collaborators. Moreover, collaboration arrangements are complex and time consuming
to negotiate, document, and implement. We may not be successful in our efforts to establish, implement, and maintain collaborations or
other alternative arrangements if we choose to enter into such arrangements. In addition, the terms of any collaboration or other arrangements
that we may establish may not be favorable to us.



Any existing or future collaboration that we enter
into may not be successful. The success of our collaboration arrangements will depend heavily on the efforts and activities of our collaborators.
Collaborators generally have significant discretion in determining the efforts and resources that they will apply to these collaborations.



Disagreements between parties to a collaboration
arrangement regarding development, intellectual property, regulatory or commercialization matters, can lead to delays in the development
process or commercialization of the applicable product candidate, if approved, and, in some cases, termination of the collaboration arrangement.
These disagreements can be difficult to resolve if neither of the parties has final decision-making authority.



Collaborations with pharmaceutical or biotechnology
companies and other third parties often are terminated or allowed to expire by the other party. Any such termination or expiration would
adversely affect us financially and could harm our business reputation.








- 60 -




Product candidate shipment delays would have
an adverse effect on the business.



The shipment, import, and export of our product
candidates may require import and export licenses. In the United States, the FDA, United States Customs and Border Protection, and in
other countries, similar regulatory authorities, regulate the import and export of pharmaceutical products that contain controlled substances.
Specifically, the import and export process requires the issuance of import and export licenses by the relevant controlled substance authority
in both the importing and exporting country. Once we are in the production phase, we may not be granted, or if granted, maintain, such
licenses from the authorities in certain countries. Even if we obtain the relevant licenses, shipments of our product candidates may be
held up in transit, which could cause significant delays and may lead to product batches being stored outside required temperature ranges.
Inappropriate storage may damage the product shipment resulting in a partial or total loss of revenue from one or more shipment of our
other product candidates. A partial or total loss of revenue from one or more shipment of our product candidates could have a material
adverse effect on our business, results of operations and financial condition.



Our ability to generate product revenues will
be diminished if our pharmaceutical cannabinoid products (if approved) sell for inadequate prices or patients are unable to obtain adequate
levels of reimbursement



Our ability to commercialize our pharmaceutical
cannabinoid products, if approved, alone or with collaborators, will depend in part on the extent to which reimbursement will be available
from:



| | · | government and health administration authorities;
| | - | -------------------------------------------------



| | · | private health maintenance organizations and
health insurers; and
| | - | -----------------------------------------------------------------



| | · | other healthcare payers.
| | - | ------------------------



Significant uncertainty exists as to the reimbursement
status of newly approved healthcare products. Healthcare payers are challenging the prices charged for medical products and services.
Government and other healthcare payers increasingly attempt to contain healthcare costs by limiting both coverage and the level of reimbursement
for drugs. Even if our product candidates are approved by the FDA or Health Canada, insurance coverage may not be available, and reimbursement
levels may be inadequate, to cover our pharmaceutical cannabinoid (if approved). If government and other healthcare payers do not provide
adequate coverage and reimbursement levels for our pharmaceutical cannabinoid, once approved, market acceptance of such pharmaceutical
cannabinoid could be reduced.



We do not have a history of selling, marketing,
or distributing products.



We may not be able to market, sell, and distribute
our product candidates, if approved, successfully. Our future success may depend, in part, on our ability to enter into and maintain collaborative
relationships for such capabilities, the collaborator’s strategic interest in the product candidates under development, and such
collaborator’s ability to successfully market and sell any such product candidates, if approved. Although we intend to pursue collaborative
arrangements regarding the sale and marketing of our product candidates, if approved, there can be no assurance that we will be able to
establish or maintain our own sales operations or effect collaborative arrangements, or that if we are able to do so, our collaborators
will have effective sales forces. There can also be no assurance that we will be able to establish or maintain effective relationships
with third party collaborators or develop in-house sales and distribution capabilities. To the extent that we will in the future depend
on third parties for marketing and distribution, any revenues we receive will depend upon the efforts of such third parties, and there
can be no assurance that such efforts will be successful. In addition, there can also be no assurance that we will be able to market and
sell our product candidates, if approved, internationally.



We may face intense competition from other
companies which may be larger and better financed.



Competition from pharmaceutical companies, biotechnology
companies and universities is intense and is expected to increase. Increased competition by larger and better financed competitors could
materially and adversely affect the business, financial condition, and results of operations of the Corporation. The Corporation's future
success depends in part on its ability to maintain a competitive position, including the ability to further progress its portfolio candidates
through the necessary pre-clinical and clinical trials towards regulatory approval for sale and commercialization. Other companies may
succeed in commercializing products earlier than the Corporation is able to commercialize its product candidates, if approved, or they
may succeed in developing products that are more effective. While the Corporation will seek to expand its capabilities in order to remain
competitive, there can be no assurance that developments by others will not render its product candidates, if approved, non-competitive
or that the Corporation or its licensors will be able to keep pace with technological developments. Competitors have developed or could
develop technologies that could be the basis for competitive products. Some of those products may have an entirely different approach
or means of accomplishing the desired therapeutic effect than the Corporation's product candidates and may be more effective or less costly
than the Corporation's product candidates, if approved. In addition, other forms of medical treatment may offer competition to the Corporation's
product candidates, if approved. The success of the Corporation's competitors and their products relative to the Corporation's capabilities
and competitiveness could have a material adverse effect on the future of pre-clinical and clinical trials of the Corporation's product
candidates, including its ability to obtain the necessary regulatory approvals for the conduct of such trials.








- 61 -




The Corporation expects to face intense competition
from other companies in the sale of cannabidiol, some of which can be expected to have more financial resources and manufacturing and
marketing experience than the Corporation. Increased competition by larger and better financed competitors could materially and adversely
affect the business, financial condition, and results of operations of the Corporation.



The sale of cannabinoid products is regulated
under the Cannabis Act and various provincial regimes in Canada. With the opening of the cannabinoids market under the Cannabis Act, the
Corporation expects to face additional competition from new entrants. If the number of users of medical cannabis in Canada increases,
the demand for products will increase and the Corporation expects that competition will become more intense, as current and future competitors
begin to offer an increasing number of diversified products. To remain competitive, the Corporation will require a continued high level
of investment in research and development, marketing, sales, and client support. The Corporation may not have sufficient resources to
maintain research and development, marketing, sales, and client support efforts on a competitive basis which could materially and adversely
affect the business, financial condition, and operating results of the Corporation.



Research and development, and evolving technology
and products, may render our product candidates (if approved) obsolete, if we are unable to continue to improve our product offerings
in the future.



Rapidly changing markets, technology, emerging
industry standards and frequent introduction of new products characterize the Corporation’s business. The introduction of new products
embodying new technologies, including new manufacturing processes, and the emergence of new industry standards may render the Corporation’s
product candidates, if approved, obsolete, less competitive, or less marketable. The process of developing the Corporation’s product
candidates is complex and requires significant continuing costs, development efforts, and third-party commitments. The Corporation’s
failure to develop new technologies and product candidates and the obsolescence of existing technologies could adversely affect the business,
financial condition, and operating results of the Corporation. The Corporation may be unable to anticipate changes in its potential customer
requirements that could make the Corporation’s existing technology obsolete. The Corporation’s success will depend, in part,
on its ability to continue to enhance its existing technologies, develop new technology that addresses the increasing sophistication and
varied needs of the market, and respond to technological advances and emerging industry standards and practices on a timely and cost-effective
basis. The development of the Corporation’s proprietary technology entails significant technical and business risks. The Corporation
may not be successful in using its new technologies or exploiting its niche markets effectively or adapting its businesses to evolving
customer or medical requirements or preferences or emerging industry standards.



Negative public or consumer perception around
cannabinoid may negatively affect he development and commercialization of our product candidates.



The Corporation believes the cannabinoid industry
is highly dependent upon consumer perception regarding the safety, efficacy, and quality of the cannabinoid produced. Consumer perception
of the Corporation’s pharmaceutical cannabinoid product candidates can be significantly influenced by scientific research or findings,
regulatory investigations, litigation, media attention, and other publicity regarding the consumption of cannabinoids. There can be no
assurance that future scientific research, findings, regulatory proceedings, litigation, media attention, or other research findings or
publicity will be favourable to the cannabinoid market or any particular product, or consistent with earlier publicity. Future research
reports, findings, regulatory proceedings, litigation, media attention, or other publicity that are perceived as less favourable than,
or that question, earlier research reports, findings, or publicity could have a material adverse effect on the demand for the Corporation’s
pharmaceutical cannabinoids, if approved, and the business, results of operations, financial condition, and cash flows of the Corporation.
The Corporation’s dependence upon consumer perceptions means that adverse scientific research reports, findings, regulatory proceedings,
litigation, media attention, or other publicity, whether or not accurate or with merit, could have a material adverse effect on the Corporation,
the demand for the Corporation’s pharmaceutical cannabinoids, if approved, and the business, results of operations, financial condition,
and cash flows of the Corporation. Further, adverse publicity reports or other media attention regarding the safety, efficacy, and quality
of cannabinoid in general, or the Corporation’s pharmaceutical cannabinoids, if approved, specifically, or associating the consumption
of cannabinoid with illness or other negative effects or events, could have such a material adverse effect. Such adverse publicity reports
or other media attention could arise even if the adverse effects associated with such products resulted from consumers’ failure
to consume such products legally, appropriately, or as directed.








- 62 -




We may face risks from product liability claims,
if our product candidates are approved.



If we become a manufacturer and distributor of
products designed to be ingested by humans, the Corporation faces an inherent risk of exposure to product liability claims, regulatory
action, and litigation if its product candidates (once approved) are alleged to have caused significant loss or injury. In addition, the
manufacture and sale of cannabis products involve the risk of injury to consumers due to tampering by unauthorized third parties or product
contamination. Previously unknown adverse reactions resulting from human consumption of cannabis products alone or in combination with
other medications or substances could occur. The Corporation may be subject to various product liability claims, including, among others,
that the products produced by the Corporation caused injury or illness, include inadequate instructions for use or include inadequate
warnings concerning possible side effects or interactions with other substances. A product liability claim or regulatory action against
the Corporation could result in increased costs, could adversely affect the Corporation’s reputation with its clients and consumers
generally, and could have a material adverse effect on the business, financial condition, and operating results of the Corporation. There
can be no assurances that the Corporation will be able to obtain or maintain product liability insurance on acceptable terms or with adequate
coverage against potential liabilities. Such insurance is expensive and may not be available in the future on acceptable terms, or at
all. The inability to obtain sufficient insurance coverage on reasonable terms or to otherwise protect against potential product liability
claims could prevent or inhibit the commercialization of product candidates (if approved).



The Corporation's product candidates, if approved,
may  be subject to product recalls.



Manufacturers and distributors of products are
sometimes subject to the recall or return of their products for a variety of reasons, including product defects, such as contamination,
unintended harmful side effects or interactions with other substances, packaging safety and inadequate or inaccurate labeling disclosure.
If any of the product candidates (if approved) that the Corporation produces or intends to produce are recalled due to an alleged product
defect or for any other reason, the Corporation could be required to incur the unexpected expense of the recall and any legal proceedings
that might arise in connection with the recall. The Corporation may lose a significant amount of sales and may not be able to replace
those sales at an acceptable margin or at all. In addition, a product recall may require significant Management attention. Although the
Corporation has detailed procedures in place for testing finished products (if our product candidates are approved), there can be no assurance
that any quality, potency, or contamination problems will be detected in time to avoid unforeseen product recalls, regulatory action,
or lawsuits. Additionally, if one of Corporation's product candidates, if approved, were subject to recall, the image of that product
and the Corporation could be harmed. A recall for any of the foregoing reasons could lead to decreased demand for products produced by
the Corporation and could have a material adverse effect on the results of operations and financial condition of the Corporation. Additionally,
product recalls may lead to increased scrutiny of the operations of the Corporation by Health Canada or other regulatory agencies, requiring
further Management attention and potential legal fees and other expenses.



The Corporation may seek to expand its business
and operations into jurisdictions outside of Canada, and there are risks associated with doing so.



The Corporation may in the future expand its operations
and business into jurisdictions outside of Canada. There can be no assurance that any market for the Corporation’s product candidates
(if approved) will develop in any such foreign jurisdiction. The Corporation may face new or unexpected risks or significantly increase
its exposure to one or more existing risk factors, including economic instability, changes in laws and regulations, and the effects of
competition. These factors may limit the Corporation’s capability to successfully expand its operations and may have a material
adverse effect on the Corporation’s business, financial condition, and results of operations.








- 63 -




The Corporation may become subject to liability
arising from any fraudulent or illegal activity by its employees, contractors, and consultants.



The Corporation is exposed to the risk that
its employees, independent contractors, and consultants may engage in fraudulent or other illegal activity. Misconduct by these
parties could include intentional, reckless and/or negligent conduct or disclosure of unauthorized activities to the Corporation
that violates: (i) government regulations; (ii) manufacturing standards; (iii) federal and provincial healthcare
fraud and abuse laws and regulations; or (iv) laws that require the true, complete, and accurate reporting of financial
information or data. It is not always possible for the Corporation to identify and deter misconduct by its employees and other third
parties, and the precautions taken by the Corporation to detect and prevent this activity may not be effective in controlling
unknown or unmanaged risks or losses or in protecting the Corporation from governmental investigations or other actions or lawsuits
stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted against the
Corporation, and it is not successful in defending itself or asserting its rights, those actions could have a significant impact on
our business, including the imposition of civil, criminal and administrative penalties, damages, monetary fines, contractual
damages, reputational harm, diminished profits and future earnings, and curtailment of the Corporation’s operations, any of
which could have a material adverse effect on the Corporation’s business, financial condition and results of operations.



Corporation’s business is dependent on
key inputs, and the inability to secure such inputs may negatively affect our business.



The Corporation’s business is dependent
on a number of key inputs and their related costs including raw materials and supplies related to its growing operations, as well as electricity,
water, and other local utilities. Any significant interruption or negative change in the availability or economics of the supply chain,
including as a result of the ongoing COVID-19 pandemic, for key inputs could materially impact the business, financial condition, and
operating results of the Corporation. Any inability to secure required supplies and services or to do so on appropriate terms could have
a materially adverse impact on the business, financial condition, and operating results of the Corporation.



Our insurance coverage may be insufficient
to protect us from our operating risk.



The Corporation has insurance to protect its assets,
operations, and employees. While the Corporation believes its insurance coverage addresses all material risks to which it is exposed and
is adequate and customary in its current state of operations, such insurance is subject to coverage limits and exclusions and may not
be available for all risks and hazards to which the Corporation is exposed. In addition, no assurance can be given that such insurance
will be adequate to cover the Corporation’s liabilities or will be generally available in the future or, if available, that premiums
will be commercially justifiable. If the Corporation were to incur substantial liability and such damages were not covered by insurance
or were in excess of policy limits, or if the Corporation were to incur such liability at a time when it is not able to obtain liability
insurance, its business, results of operations, and financial condition could be materially adversely affected.



We may be unable to manage our growth effectively.



The Corporation may be subject to growth-related
risks, including capacity constraints and pressure on its internal systems and controls. The ability of the Corporation to manage growth
effectively will require it to continue to implement and improve its operational and financial systems and to expand, train, and manage
its employee base. The inability of the Corporation to deal with this growth may have a material adverse effect on the Corporation’s
business, financial condition, results of operations, and prospects.








- 64 -




Some of our directors
and/or officers may have conflicts of interest from other business activities.



The Corporation may be subject to various potential
conflicts of interest because of the fact that some of its officers and directors may be engaged in a range of business activities. In
addition, the Corporation’s executive officers and Directors may devote time to their outside business interests, so long as such
activities do not materially or adversely interfere with their duties to the Corporation. In some cases, the Corporation’s executive
officers and Directors may have fiduciary obligations associated with these business interests that interfere with their ability to devote
time to the Corporation’s business and affairs and that could adversely affect the Corporation’s operations. These business
interests could require significant time and attention of the Corporation’s executive officers and Directors. In addition, the Corporation’s
executive officers and Directors control a large percentage of common shares and may have ability to control matters affecting the Corporation.



The Corporation may also become involved in other
transactions which conflict with the interests of its Directors and the officers who may from time-to-time deal with persons, firms, institutions,
or Companies with which the Corporation may be dealing, or which may be seeking investments similar to those desired by it. The interests
of these persons could conflict with those of the Corporation. In addition, from time to time, these persons may be competing with the
Corporation for available investment opportunities. Conflicts of interest, if any, will be subject to the procedures and remedies provided
under applicable laws. In particular, in the event that such a conflict of interest arises at a meeting of the Corporation’s Directors,
a director who has such a conflict will abstain from voting for or against the approval of such participation or such terms. In accordance
with applicable laws, the Directors of the Corporation are required to act honestly, in good faith, and in the best interests of the Corporation.



Certain publicity may cause damage to our reputation.



Damage to the Corporation’s reputation could
be the result of the actual or perceived occurrence of any number of events, and could include any negative publicity, whether true or
not. The increased usage of social media and other web-based tools used to generate, publish, and discuss user generated content and to
connect with other users has made it increasingly easier for individuals and groups to communicate and share opinions and views in respect
to the Corporation and its activities, whether true or not. Although the Corporation believes that it operates in a manner that is respectful
to all stakeholders and that it takes care in protecting its image and reputation, the Corporation does not ultimately have direct control
over how it is perceived by others. Reputation loss may result in decreased investor confidence, increased challenges in developing and
maintaining community relations, and an impediment to the Corporation’s overall ability to advance its product candidates, thereby
having a material adverse impact on financial performance, financial condition, cash flows, and growth prospects.



Third parties may perceive reputational risk
for doing business with us as a company involved in the medical cannabis business.



The parties with which the Corporation does business
may perceive that they are exposed to reputational risk as a result of the Corporation’s medical cannabis business activities. This
may impact the Corporation’s ability to retain current partners, such as its banking relationship, or source future partners as
required for growth or future expansion in Canada or internationally. Failure to establish or maintain business relationships could have
a material adverse effect on the Corporation.



Our relationships with healthcare providers,
patients and third-party payors will be subject to applicable anti-kickback, fraud and abuse, and other healthcare laws and regulations,
which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm, and diminished profits and future
earnings



Healthcare providers, customers, and third-party
payors play a primary role in the recommendation and prescription of any product candidates for which we obtain marketing approval. Our
future arrangements with healthcare providers, third-party payors and customers may expose us to broadly applicable fraud and abuse and
other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market,
sell, and distribute our products for which we obtain marketing approval. As a pharmaceutical company, even though we do not and will
not control referrals of healthcare services or bill directly to Medicare, Medicaid, or other third-party payors, certain federal and
state healthcare laws and regulations pertaining to fraud and abuse and patients’ rights are and will be applicable to our business.








- 65 -




Efforts to ensure that our business arrangements
with third parties will comply with applicable healthcare laws and regulations will involve substantial costs. It is possible that governmental
authorities will conclude that our business practices may not comply with current or future statutes, regulations, or case law involving
applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws
or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal, and administrative penalties,
damages, fines, imprisonment, exclusion from government funded healthcare programs, and the curtailment or restructuring of our operations.
If any physicians or other healthcare providers or entities with whom we expect to do business are found to not be in compliance with
applicable laws, they may be subject to criminal, civil, or administrative sanctions, including exclusions from government funded healthcare
programs.



We and our third-party providers may face security
threats to information systems.



The Corporation has entered into agreements with
third parties for hardware, software, telecommunications, and other information technology (“IT”) services in connection with
its operations. The Corporation’s operations depend, in part, on how well it and its suppliers protect networks, equipment, IT
systems, and software against damage from a number of threats, including, but not limited to, cable cuts, damage to physical plants, natural
disasters, terrorism, fire, power loss, hacking, computer viruses, vandalism, and theft. The Corporation’s operations also depend
on the timely maintenance, upgrade, and replacement of networks, equipment, IT systems and software, as well as pre-emptive expenses
to mitigate the risks of failures. Any of these and other events could result in information system failures, delays and/or increase in
capital expenses. The failure of information systems or a component of information systems could, depending on the nature of any such
failure, adversely impact the Corporation’s reputation and results of operations.



The Corporation has not experienced any material
losses to date relating to cyber-attacks or other information security breaches, but there can be no assurance that the Corporation will
not incur such losses in the future. The Corporation’s risk and exposure to these matters cannot be fully mitigated because of,
among other things, the evolving nature of these threats. As a result, cybersecurity and the continued development and enhancement of
controls, processes, and practices designed to protect systems, computers, software, data, and networks from attack, damage, or unauthorized
access is a priority. As cyber threats continue to evolve, the Corporation may be required to expend additional resources to continue
to modify or enhance protective measures or to investigate and remediate any security vulnerabilities.



We do not currently, and have no plans to,
pay dividends on our common shares.



Our current policy is to retain earnings to finance
the development and enhancement of our product candidates and to otherwise reinvest in the Corporation. Therefore, we do not anticipate
paying cash dividends on the common shares in the foreseeable future. Our dividend policy will be reviewed from time to time by our board
of directors in the context of our earnings, financial condition, and other relevant factors. Until the time that we do determine to pay
dividends, which we might never do, our shareholders will not be able to receive a return on their common shares unless they sell them.



Future sales of common shares by existing shareholders.



Holders of options to purchase common shares will
have an immediate income inclusion for tax purposes when they exercise their options (that is, tax is not deferred until they sell the
underlying common shares). As a result, these holders may need to sell common shares purchased on the exercise of options in the same
year that they exercise their options. This might result in a greater number of common shares being sold in the public market, and fewer
long- term holds of common shares by Management and our employees.



Cardiol may be subject to securities litigation
which is expensive and could divert Management’s attention.



The market price of the common shares may be volatile,
and in the past companies that have experienced volatility in the market price of their shares have been subject to securities class action
litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial
costs and divert our Management’s attention from other business concerns, which could seriously harm our business.








- 66 -




Our common shares are subject to market price
volatility



The market price of common shares may be adversely
affected by a variety of factors relating to the Corporation's business, including fluctuations in the Corporation's operating and financial
results, the results of any public announcements made by the Corporation and its failure to meet analysts' expectations. In addition,
from time to time, the stock market experiences significant price and volume volatility that may affect the market price of common shares
for reasons unrelated to the Corporation's performance. Additionally, the value of common shares is subject to market value fluctuations
based upon factors that influence the Corporation's operations, such as legislative or regulatory developments, competition, technological
change, global capital market activity and changes in interest and currency rates. There can be no assurance that the market price of
common shares will not experience significant fluctuations in the future, including fluctuations that are unrelated to the Corporation's
performance.



The market value of common shares may also be
affected by the Corporation's financial results and political, economic, financial, and other factors that can affect the capital markets
generally, the stock exchanges on which common shares are traded and the market segments in which the Corporation is a part.



Issuances of our equity securities in the future
may result in dilution to current shareholders.



Our articles of incorporation and by-laws allow
it to issue an unlimited number of common shares for such consideration and on such terms and conditions as established by the Corporation's
board of directors, in many cases, without shareholder approval. The Corporation may issue additional common shares in future offerings
(including through the sale of securities convertible into or exchangeable for common shares) and on the exercise of stock options or
other securities exercisable for common shares. The Corporation cannot predict the size of future issuances of common shares or the effect
that future issuances and sales of common shares will have on the market price of common shares. Issuances of a substantial number of
additional common shares, or the perception that such issuances could occur, may adversely affect prevailing market prices for common
shares. With any additional issuance of common shares, investors will suffer dilution to their voting power and may experience dilution
in its earnings per share.



Failure to comply with the U.S. Foreign Corrupt
Practices Act (“FCPA”), the Canadian Corruption of Foreign Public Officials Act (“CFPOA”), and other global anti-corruption
and anti-bribery laws could subject the Corporation to penalties and other adverse consequences.



The FCPA and the CFPOA, as well as any other applicable
domestic or foreign anti-corruption or anti-bribery laws to which the Corporation is or may become subject generally prohibit corporations
and individuals from engaging in certain activities to obtain or retain business or to influence a person working in an official capacity
and requires companies to maintain accurate books and records and internal controls, including at foreign-controlled subsidiaries.



Compliance with these anti-corruption laws and
anti-bribery laws may be expensive and difficult, particularly in countries in which corruption is a recognized problem. In addition,
these laws present particular challenges in the pharmaceutical industry, because, in many countries, hospitals are operated by the government,
and physicians and other hospital employees are considered to be foreign officials. Certain payments by other companies to hospitals in
connection with clinical trials and other work have been deemed to be improper payments to governmental officials and have led to FCPA
enforcement actions.



The Corporation’s internal control policies
and procedures may not protect it from reckless or negligent acts committed by the Corporation’s employees, distributors, licensees,
or agents. The Corporation can make no assurance that they will not engage in prohibited conduct, and the Corporation may be held liable
for their acts under applicable anti- corruption and anti-bribery laws. Noncompliance with these laws could subject the Corporation to
investigations, sanctions, settlements, prosecution, other enforcement actions, disgorgement of profits, significant fines, damages, other
civil and criminal penalties or injunctions, suspension or debarment from contracting with certain persons, the loss of export privileges,
whistleblower complaints, reputational harm, adverse media coverage, and other collateral consequences. Any investigations, actions or
sanctions or other previously mentioned harm could have a material adverse effect on the Corporation’s business, operating results,
and financial condition.








- 67 -




The Corporation may be classified as a “passive
foreign investment company” for U.S. federal income tax purposes, which would subject U.S. investors that hold the Corporation’s
Common Shares to potentially significant adverse U.S. federal income tax consequences.



If the Corporation is classified as a passive
foreign investment company (“PFIC”) for U.S. federal income tax purposes in any taxable year, U.S. investors holding the Corporation’s
Common Shares generally will be subject, in that taxable year and all subsequent taxable years (whether or not the Corporation continued
to be a PFIC), to certain adverse



U.S. federal income tax consequences. The Corporation
will be classified as a PFIC in respect of any taxable year in which, after taking into account its income and gross assets (including
the income and assets of 25% or more owned subsidiaries), either (i) 75% or more of its gross income consists of certain types of
 “passive income” or (ii) 50% or more of the average quarterly value of its assets is attributable to “passive assets”
(assets that produce or are held for the production of passive income). Based upon the current and expected composition of the Corporation’s
income and assets, the Corporation believes that it was a PFIC for the taxable year ended December 31, 2020 and expects that it may
be a PFIC for the current taxable year. Because the Corporation’s PFIC status must be determined annually with respect to each taxable
year and will depend on the composition and character of the Corporation’s assets and income, including the Corporation’s
use of proceeds from offerings, and the value of the Corporation’s assets (which may be determined, in part, by reference to the
market value of Common Shares, which may be volatile) over the course of such taxable year, the Corporation may be a PFIC in any taxable
year. Because there are uncertainties in the application of the relevant rules and PFIC status is a factual determination made annually
after the close of each taxable year, there can be no assurance that the Corporation will not be a PFIC for any future taxable year. In
addition, it is possible that the U.S. Internal Revenue Service may challenge the Corporation’s classification of certain income
and assets as non-passive, which may result in the Corporation being or becoming a PFIC in the current or subsequent years.



If the Corporation is a PFIC for any year during
a U.S. Holder’s (as defined below) holding period, then such U.S. Holder generally will be required to treat any gain realized upon
a disposition of Common Shares, or any “excess distribution” received on its Common Shares, as ordinary income, and to pay
an interest charge on a portion of such gain or distribution, unless the U.S. Holder makes a timely and effective “qualified electing
fund” election (“QEF Election”) or a “mark-to-market” election with respect to its Common Shares. A U.S.
Holder who makes a QEF Election generally must report on a current basis its share of the Corporation’s net capital gain and ordinary
earnings for any year in which the Corporation is a PFIC, whether or not the Corporation distributes any amounts to its shareholders.
However, U.S. Holders should be aware that there can be no assurance that the Corporation will satisfy the record keeping requirements
that apply to a QEF, or that the Corporation will supply U.S. Holders with information that such U.S. Holders require to report under
the QEF Election rules, in the event that the Corporation is a PFIC and a U.S. Holder wishes to make a QEF Election. Thus, U.S. Holders
may not be able to make a QEF Election with respect to their Common Shares. A U.S. Holder who makes a mark-to-market election generally
must include as ordinary income each year the excess of the fair market value of the Common Shares over the taxpayer’s basis therein.
Each U.S. Holder should consult its own tax advisors regarding the PFIC rules and the U.S. federal income tax consequences of the
acquisition, ownership, and disposition of Common Shares.



As used in this discussion, the term "U.S.
Holder" means a beneficial owner of Common Shares that is, for U.S. federal income tax purposes, (1) an individual who is a
citizen or resident of the United States, (2) a corporation (or entity treated as a corporation for U.S. federal income tax purposes)
created or organized in or under the laws of the United States, any state thereof, or the District of Columbia, (3) an estate the
income of which is subject to U.S. federal income tax regardless of its source or (4) a trust (x) with respect to which a court
within the United States is able to exercise primary supervision over its administration and one or more U.S. persons have the authority
to control all of its substantial decisions or (y) that has elected under applicable U.S. Treasury regulations to be treated as a
domestic trust for U.S. federal income tax purposes.








- 68 -




It may be difficult for United States investors
to obtain and enforce judgments against the Corporation because of the Corporation’s Canadian incorporation and presence.



The Corporation is a corporation existing under
the laws of Ontario, Canada. Most of the Corporation’s directors and officers are residents of Canada, and all or a substantial
portion of their assets, and a substantial portion of the Corporation’s assets, are located outside the United States. Consequently,
it may be difficult for holders of the Corporation’s securities who reside in the United States to effect service of process within
the United States upon those directors, officers, and experts who are not residents of the United States. It may also be difficult for
holders of the Corporation’s securities who reside in the United States to realize in the United States upon judgments of courts
of the United States predicated upon the Corporation’s civil liability and the civil liability of the Corporation’s directors,
officers and experts under United States federal securities laws. Investors should not assume that Canadian courts would (i) enforce
judgments of United States courts obtained in actions against the Corporation or such directors or officers predicated upon the civil
liability provisions of the United States federal securities laws or the securities or “blue sky” laws of any state or jurisdiction
of the United States or (ii) would enforce, in original actions, liabilities against the Corporation or such directors, officers
or experts predicated upon the United States federal securities laws or any securities or “blue sky” laws of any state or
jurisdiction of the United States. In addition, the protections afforded by Canadian securities laws may not be available to investors
in the United States.



As a foreign private issuer, the Corporation
is subject to different U.S. securities laws and rules than a U.S. domestic issuer, which may limit the information publicly available
to U.S. investors.



The Corporation is a “foreign private issuer”,
under applicable U.S. federal securities laws, and is, therefore, not subject to the same requirements that are imposed upon U.S. domestic
issuers by the Securities and Exchange Commission (“SEC”). Under the U.S. Securities Exchange Act of 1934, as amended (the
 “US Exchange Act”), the Corporation is subject to reporting obligations that, in certain respects, are less detailed and less
frequent than those of U.S. domestic reporting companies. As a result, the Corporation does not file the same reports that a U.S. domestic
issuer would file with the SEC, although the Corporation is required to file with or furnish to the SEC the continuous disclosure documents
that it is required to file in Canada under Canadian securities laws. In addition, the Corporation’s officers, directors, and principal
shareholders are exempt from the reporting and short-swing profit recovery provisions of Section 16 of the U.S. Exchange Act. Therefore,
the Corporation’s shareholders may not know on as timely a basis as with U.S. domestic issuers when the Corporation’s officers,
directors and principal shareholders purchase or sell Common Shares, as the reporting periods under the corresponding Canadian insider
reporting requirements are longer. As a foreign private issuer, the Corporation is exempt from the rules and regulations under the
U.S. Exchange Act related to the furnishing and content of proxy statements. The Corporation is also exempt from Regulation FD, which
prohibits issuers from making selective disclosures of material non-public information. While the Corporation complies with the corresponding
requirements relating to proxy statements and disclosure of material non-public information under Canadian securities laws, these requirements
differ from those under the U.S. Exchange Act and Regulation FD and shareholders should not expect to receive the same information at
the same time as such information is provided by U.S. domestic companies. In addition, the Corporation may not be required under the U.S.
Exchange Act to file annual and quarterly reports with the SEC as promptly as U.S. domestic companies whose securities are registered
under the U.S. Exchange Act. In addition, as a foreign private issuer, the Corporation has the option to follow certain Canadian corporate
governance practices, except to the extent that such laws would be contrary to U.S. securities laws, and provided that the Corporation
disclose the requirements it is not following and describe the Canadian practices it follows instead. The Corporation has elected to follow
home country practices in Canada with regard to certain corporate governance matters. As a result, the Corporation’s shareholders
may not have the same protections afforded to shareholders of U.S. domestic companies that are subject to all corporate governance requirements.



The Corporation may lose its foreign private
issuer status in the future, which could result in significant additional costs and expenses to the Corporation.



In order to maintain its status as a foreign private
issuer, a majority of the Corporation’s Common Shares must be either directly or indirectly owned by non-residents of the U.S. unless
the Corporation also satisfies one of the additional requirements necessary to preserve this status. The Corporation may in the future
lose its foreign private issuer status if a majority of its Common Shares are held in the U.S. and if the Corporation fails to meet the
additional requirements necessary to avoid loss of its foreign private issuer status. The regulatory and compliance costs under








- 69 -




U.S. federal securities laws as a U.S. domestic
issuer may be significantly more than the costs incurred as a Canadian foreign private issuer eligible to use the multi-jurisdictional
disclosure system adopted by the securities regulatory authorities in Canada and the United States (the “MJDS”). If the Corporation
is not a foreign private issuer, it would not be eligible to use the MJDS or other foreign issuer forms and would be required to file
periodic and current reports and registration statements on U.S. domestic issuer forms with the SEC, which are more detailed and extensive
than the forms available to a foreign private issuer, and would be required to file financial statements prepared in accordance with United
States generally accepted accounting principles. In addition, the Corporation may lose the ability to rely upon exemptions from Nasdaq
corporate governance requirements that are available to foreign private issuers.



The Corporation relies upon certain accommodations
available to it as an “emerging growth company.”



The Corporation is an “emerging growth company”
as defined in section 3(a) of the U.S. Exchange Act (as amended by the JOBS Act, enacted on April 5, 2012), and the Corporation
will continue to qualify as an emerging growth company until the earliest to occur of: (a) the last day of the fiscal year during
which the Corporation has total annual gross revenues of US$1,070,000,000 (as such amount is indexed for inflation every five years by
the SEC) or more; (b) the last day of the fiscal year of the Corporation following the fifth anniversary of the date of the first
sale of common equity securities of the Corporation pursuant to an effective registration statement under the U.S. Securities Act; (c) the
date on which the Corporation has, during the previous three year period, issued more than US$1,000,000,000 in non-convertible debt; and
(d) the date on which the Corporation is deemed to be a “large accelerated filer”, as defined in Rule 12b-2 under
the U.S. Exchange Act. The Corporation will qualify as a large accelerated filer (and would cease to be an emerging growth company) at
such time when on the last business day of its second fiscal quarter of such year the aggregate worldwide market value of its common equity
held by non-affiliates will be US$700,000,000 or more. For so long as the Corporation remains an emerging growth company, it is permitted
to and intends to rely upon exemptions from certain disclosure requirements that are applicable to other public companies that are not
emerging growth companies. These exemptions include not being required to comply with the auditor attestation requirements of Section 404
of the Sarbanes-Oxley Act. The Corporation cannot predict whether investors will find the Common Shares less attractive because the Corporation
relies upon certain of these exemptions. If some investors find the Common Shares less attractive as a result, there may be a less active
trading market for the Common Shares and the Common Share price may be more volatile. On the other hand, if the Corporation no longer
qualifies as an emerging growth company, the Corporation would be required to divert additional management time and attention from the
Corporation’s development and other business activities and incur increased legal and financial costs to comply with the additional
associated reporting requirements, which could negatively impact the Corporation’s business, financial condition, and results of
operations.



The impacts of the ongoing COVID-19 pandemic
on the Corporation's business are uncertain.



On March 11, 2020, the World Health Organization
declared the outbreak of COVID-19 a global pandemic. In response to the outbreak, governmental authorities in Canada and internationally
have introduced various recommendations and measures to try to limit the pandemic, including travel restrictions, border closures, non-
essential business closures, quarantines, self-isolations, shelters-in-place, and social distancing. The COVID-19 outbreak and the response
of governmental authorities to try to limit it are having a significant impact on the private sector and individuals, including unprecedented
business, employment, and economic disruptions.



Although the Corporation has taken steps to mitigate
the impact of COVID-19, the continued presence and spread of COVID-19 nationally and globally could have a material adverse impact on
the Corporation's business, operations, financial results and position and prospects, including through employee attrition, disruptions
to the Corporation's activities, as well as a deterioration of general economic conditions including a possible national or global recession.
Due to the speed with which the COVID-19 situation is developing and the uncertainty of its magnitude, outcome, and duration, it is not
possible to estimate its impact on the Corporation's business, operations, financial results and position or prospects at this time.








- 70 -




The Corporation continues to monitor the situation
and work with its stakeholders (including customers, employees, and suppliers) in order to assess further possible implications to its
business, supply chain and customers, and, where practicable, mitigate adverse consequences and responsibly address this global pandemic.



DIVIDENDS



We have not declared dividends on our Common Shares
in the past. We currently intend to reinvest all future earnings in order to finance the development and growth of our business. As a
result, we do not intend to pay dividends on our Common Shares in the foreseeable future. Any future determination to pay dividends will
be at the discretion of our Board of Directors and will depend on the financial condition, business environment, operating results, capital
requirements, any contractual restrictions on the payment of dividends, and any other factors that the Board of Directors deems relevant.



CAPITAL
STRUCTURE



Common Shares



As of the date hereof, 61,925,499 Common Shares
are issued and outstanding. Each Common Share entitles the holder to receive notice of and attend all meetings of the Shareholders. Each
Common Share carries the right to one vote. The holders of Common Shares are entitled to receive any dividends declared by the Corporation
in respect of the Common Shares at such time and in such amount as may be determined by the Board, in its discretion. In the event of
the liquidation, dissolution, or winding-up of the Corporation, whether voluntary or involuntary, holders of Common Shares are also entitled
to participate, rateably, in the distribution of the assets of the Corporation, subject to the rights of the holders of any other class
of shares ranking in priority to the Common Shares.



Share Purchase Warrants



The following table reflects the share purchase
warrants of the Corporation issued and outstanding, excluding 1,020,000 Meros 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:



|Expiry date      |  | Exercise 
price ($) |      |   | Warrants 
outstanding |  |            | 
|---------------- |  | ------------------- | ---- | - | --------------------- |  | ---------- | 
|August 31, 2022  |  |                     | 4.00 |   |                       |  | 824,000    | 
|May 12, 2024     |  |                     | 4.60 |   |                       |  | 3,453,178  | 
|November 5, 2024 |  |                     | 3.75 | 1 |                       |  | 8,175,000  | 
|Total            |  |                     |      |   |                       |  | 12,452,178 | 



1Exercise
price denoted in USD.



May 2021 Warrants



Each May 2021 Warrant entitles the holder
to acquire, subject to adjustment in certain circumstances, one Common Share at an exercise price of $4.60 until 4:00 p.m. (Eastern
time) on May 12, 2024 in accordance with the terms of a warrant indenture entered into between the Corporation and Computershare
Trust dated May 12, 2021 (the “May 2021 Warrant Indenture”), after which time the May 2021 Warrants will be
void and of no value.



The subscription rights in effect under the May 2021
Warrant Indenture shall be subject to adjustment from time to time upon the occurrence of certain events, including:



| | i. | the subdivision, redivision or change of the Common Shares into a greater number of shares;
| | -- | -------------------------------------------------------------------------------------------








- 71 -




| | ii. | the reduction, combination, or consolidation of the Common Shares into a lesser number of shares;
| | --- | -------------------------------------------------------------------------------------------------



| | iii. | the issuance of Common Shares or securities exchangeable for or convertible into Common Shares to all
or substantially all of the holders of the Common Shares as a stock dividend or other distribution (other than a distribution of Common
Shares upon the exercise of May 2021 Warrants or any outstanding options);
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | iv. | the issuance to all or substantially all of the holders of the Common Shares of rights, options or warrants
under which such holders are entitled, during a period expiring not more than 45 days after the record date for such issuance, to subscribe
for or purchase Common Shares, or securities exchangeable for or convertible into Common Shares, at a price per share to the holder (or
at an exchange or conversion price per share) of less than 95% of the “current market price”, as defined in the May 2021
Warrant Indenture, for the Common Shares on such record date; and
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | v. | the issuance or distribution to all or substantially all the holders of Common Shares of (i) securities
of any class of the Corporation (other than Common Shares), (ii) rights, options or warrants to subscribe for or purchase Common
Shares (or other securities convertible into or exchangeable for Common Shares), other than pursuant to a rights offering; (iii) evidences
of its indebtedness; or (iv) any property or other assets.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The May 2021 Warrant Indenture also provides
for adjustments in the class and/or number of securities issuable upon exercise of the May 2021 Warrants and/or exercise price per
security in the event of the following additional events: (a) reclassification of the Common Shares or a capital reorganization of
the Corporation (other than as described in clauses i or ii above), (b) consolidations, amalgamations, arrangements or merger of
the Corporation with or into another entity, or (c) any sale or conveyance of the property and assets as an entirety or substantially
as an entirety to another entity, in which case each holder of a May 2021 Warrant which is thereafter exercised will receive, in
lieu of Common Shares, the kind and number or amount of other securities or property which such holder would have been entitled to receive
as a result of such event if such holder had exercised the May 2021 Warrants prior to the event.



The Corporation also covenants in the May 2021
Warrant Indenture that, during the period in which the May 2021 Warrants are exercisable, it will give notice to holders of May 2021
Warrants of certain stated events, including events that would result in an adjustment to the exercise price for the May 2021 Warrants
or the number of Common Shares issuable upon exercise of the May 2021 Warrants, at least 14 days prior to the record date or effective
date, as the case may be, of such events.



No fractional Common Shares will be issuable to
any holder of May 2021 Warrants upon the exercise thereof, and no cash or other consideration will be paid in lieu of fractional
shares. The holding of May 2021 Warrants will not make the holder thereof a shareholder of the Corporation or entitle such holder
to any right or interest in respect of the May 2021 Warrants except as expressly provided in the May 2021 Warrant Indenture.
Holders of May 2021 Warrants will not have any voting or pre-emptive rights or any other rights of a holder of Common Shares.



The May 2021 Warrant Indenture provides that,
from time to time, Computershare Trust and the Corporation, without the consent of the holders of May 2021 Warrants, may be able
to amend or supplement the May 2021 Warrant Indenture for certain purposes, including, among other things, rectifying any ambiguities,
defective or inconsistent provisions, errors, mistakes or omissions contained in the May 2021 Warrant Indenture or in any deed or
indenture supplemental or ancillary to the May 2021 Warrant Indenture, provided that, in the opinion of Computershare Trust, relying
on counsel, the rights of Computershare Trust and of the holders of May 2021 Warrants are in no way prejudiced.



Holders of May 2021 Warrants may also agree
to amend or supplement the May 2021 Warrant Indenture if an Extraordinary Resolution (as defined below) is passed at a meeting of
holders of May 2021 Warrants. An “Extraordinary Resolution” is defined in the May 2021 Warrant Indenture as a resolution
either: (i) passed at a meeting of the holders of May 2021 Warrants at which there are holders of May 2021 Warrants present
in person or represented by proxy representing at least 50% of the aggregate number of the then outstanding May 2021 Warrants and
passed by the affirmative vote of holders of May 2021 Warrants representing not less than 662⁄3% of the aggregate number of
all the then outstanding May 2021 Warrants represented at the meeting and voted on the poll upon such resolution.








- 72 -




November 2021 Warrants



Each November 2021 Warrant entitles the holder
to acquire, subject to adjustment in certain circumstances, one Common Share at an exercise price of USD$3.75 until 5:00 p.m. (Eastern
time) on November 5, 2024 in accordance with the terms of a warrant indenture entered into between the Corporation and Computershare
Trust dated November 5, 2021 (the “November 2021 Warrant Indenture”), after which time the November 2021 Warrants
will be void and of no value. In accordance with a covenant in the November 2021 Warrant Indenture, the Corporation must use commercially
reasonable best effort to maintain an effective registration statement in respect of the warrant shares. The Corporation filed a prospectus
supplement dated February 9, 2022 to register the warrant shares.



The subscription rights in effect under the November 2021
Warrant Indenture shall be subject to adjustment from time to time upon the occurrence of certain events, including:



| | i. | the issuance of Common Shares or securities exchangeable for or convertible into Common Shares to all
or substantially all of the holders of the Common Shares as a stock dividend or other distribution (other than a distribution of Common
Shares upon the exercise of November 2021 Warrants or pursuant to the exercise, conversion or exchange of securities of the Corporation
outstanding as of the date hereof);
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ii. | the subdivision, redivision or change of the Common Shares into a greater number of shares;
| | --- | -------------------------------------------------------------------------------------------



| | iii. | the reduction, combination, or consolidation of the Common Shares into a lesser number of shares;
| | ---- | -------------------------------------------------------------------------------------------------



| | iv. | the distribution to all or substantially all of the holders of the Common Shares of rights, options or
warrants under which such holders are entitled, during a period expiring not more than 45 days after the record date for such issuance,
to subscribe for or purchase Common Shares, or securities exchangeable for or convertible into Common Shares, at a price per share to
the holder (or at an exchange or conversion price per share) of less than 95% of the “current market price”, as defined in
the November 2021 Warrant Indenture, for the Common Shares on such record date; and
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | v. | the issuance or distribution to all or substantially all the holders of Common Shares of (i) shares
of any class of the Corporation (other than Common Shares), (ii) rights, options or warrants to acquire Common Shares (or other securities
convertible into or exchangeable for Common Shares); (iii) evidences of indebtedness; or (iv) cash, securities or any property
or other assets.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The November 2021 Warrant Indenture also
provides for adjustments in the class and/or number of securities issuable upon exercise of the November 2021 Warrants and/or exercise
price per security in the event of the following additional events: (i) the Corporation effects any merger or consolidation of the
Corporation with or into another person, in which the Corporation is not the surviving entity or the shareholders of the Corporation immediately
prior to such merger or consolidation do not own, directly or indirectly, at least 50% of the voting power of the surviving entity immediately
after such merger or consolidation, (ii) the Corporation effects any sale to another person of all or substantially all of its assets
in one or a series of related transactions, (iii) pursuant to any tender offer or exchange offer (whether by the Corporation or another
person), shareholders who tender shares representing more than 50% of the voting power of the Common Shares and the Corporation or such
other person, as applicable, accepts such tender for payment, (iv) the Corporation consummates a share purchase agreement or other
business combination (including, without limitation, a reorganization, recapitalization, spin-off, merger or plan of arrangement) with
another person whereby such other person acquires more than the 50% of the voting power of the Common Shares or (v) the Corporation
effects any reclassification of the Common Shares or any compulsory share exchange pursuant to which the Common Shares are effectively
converted into or exchanged for other securities, cash or property (other than as a result of a subdivision or combination of Common Share
covered above) (in any such case, a “Fundamental Transaction”)








- 73 -






The Corporation also covenants in the November 2021
Warrant Indenture that, during the period in which the Warrants are exercisable, it will give notice to holders of November 2021
Warrants of certain stated events, including events that would result in an adjustment to the exercise price for the November 2021
Warrants or the number of Common Shares issuable upon exercise of the November 2021 Warrants, at least 14 days prior to the record
date or effective date, as the case may be, of such events.



No fractional Common Shares will be issuable to
any holder of November 2021 Warrants upon the exercise thereof, and no cash or other consideration will be paid in lieu of fractional
shares. The holding of November 2021 Warrants will not make the holder thereof a shareholder of the Corporation or entitle such holder
to any right or interest in respect of the November 2021 Warrants except as expressly provided in the November 2021 Warrant
Indenture. Holders of November 2021 Warrants will not have any voting or pre-emptive rights or any other rights of a holder of Common
Shares.



The November 2021 Warrant Indenture provides
that, from time to time, Computershare Trust and the Corporation, without the consent of the holders of November 2021 Warrants, may
be able to amend or supplement the November 2021 Warrant Indenture for certain purposes, including, among other things, rectifying
any ambiguities, defective or inconsistent provisions, errors, mistakes or clerical omissions contained in the November 2021 Warrant
Indenture or in any deed or indenture supplemental or ancillary to the November 2021 Warrant Indenture, provided that, in the opinion
of Computershare Trust, relying on counsel, the rights of Computershare Trust and of the holders of November 2021 Warrants are in
no way prejudiced.



Holders of November 2021 Warrants may also
agree to amend or supplement the November 2021 Warrant Indenture if an Extraordinary Resolution (as defined below) is passed at a
meeting of holders of November 2021 Warrants. An “Extraordinary Resolution” is defined in the November 2021 Warrant
Indenture as a resolution either: (i) passed at a meeting of the holders of November 2021 Warrants at which there are holders
of November 2021 Warrants present in person or represented by proxy representing at least 20% of the aggregate number of the then
outstanding November 2021 Warrants and passed by the affirmative vote of holders of November 2021 Warrants representing not
less than 662⁄3% of the aggregate number of all the then outstanding November 2021 Warrants represented at the meeting and voted
on the poll upon such resolution.



CARO Compensation Warrants



See “Business of Cardiol - Commercialization
Relationships - TecSalud (CARO Development Agreement)”.



Meros Special Warrants



See “Business of Cardiol - Commercialization
Relationships - Meros”.








- 74 -




Stock Options and other Share-Based Awards



The Board of Directors has adopted a Legacy Equity
Compensation Plan, and subsequently an Omnibus Equity Incentive Plan under which options to purchase Common Shares and other Share-Based
Awards (as defined below) may be granted to the Corporation’s Directors, officers, employees, and consultants. See below “Summary
of Legacy Equity Compensation Plan” and “Summary of Omnibus Equity Incentive Plan”. The following table sets out the
current number of options outstanding and details, the expiry date, the grant date, the exercise price, and options exercisable:



|Expiry date        |  | Grant Date         |  | Exercise  price ($) |      |  | Options  outstanding |  |           | Options  exercisable | 
|------------------ |  | ------------------ |  | ------------------- | ---- |  | -------------------- |  | --------- | -------------------- | 
|June 22, 2022      |  | June 23, 2020      |  |                     | 2.58 |  |                      |  | 83,334    |                      | 
|February 8, 2023   |  | February 9, 2021   |  |                     | 4.56 |  |                      |  | 416,666   |                      | 
|February 18, 2023  |  | February 19, 2021  |  |                     | 4.80 |  |                      |  | 560,000   |                      | 
|February 22, 2023  |  | February 23, 2021  |  |                     | 4.46 |  |                      |  | 130,000   |                      | 
|October 15, 2024   |  | October 16, 2019   |  |                     | 3.23 |  |                      |  | 60,000    |                      | 
|December 2, 2024   |  | December 3, 2019   |  |                     | 4.08 |  |                      |  | 60,000    |                      | 
|December 5, 2024   |  | December 6, 2019   |  |                     | 3.69 |  |                      |  | 60,000    |                      | 
|February 23,2025   |  | February 24, 2020  |  |                     | 3.54 |  |                      |  | 81,800    |                      | 
|August 16, 2025    |  | August 16, 2018    |  |                     | 5.00 |  |                      |  | 200,000   |                      | 
|August 19, 2025    |  | August 20, 2020    |  |                     | 2.12 |  |                      |  | 100,000   |                      | 
|August 30, 2025    |  | September 5, 2018  |  |                     | 5.00 |  |                      |  | 480,000   |                      | 
|October 7, 2025    |  | October 8, 2020    |  |                     | 2.90 |  |                      |  | 35,000    |                      | 
|December 2, 2025   |  | December 3, 2020   |  |                     | 2.59 |  |                      |  | 130,000   |                      | 
|January 2, 2026    |  | January 3, 2019    |  |                     | 4.30 |  |                      |  | 150,000   |                      | 
|January 24, 2026   |  | January 24, 2019   |  |                     | 5.34 |  |                      |  | 60,000    |                      | 
|March 29, 2026     |  | March 30, 2021     |  |                     | 4.51 |  |                      |  | 400,000   |                      | 
|April 1, 2026      |  | April 2, 2019      |  |                     | 5.77 |  |                      |  | 140,000   |                      | 
|April 4, 2026      |  | April 5, 2019      |  |                     | 5.42 |  |                      |  | 60,000    |                      | 
|May 12, 2026       |  | May 13, 2021       |  |                     | 3.00 |  |                      |  | 75,000    |                      | 
|June 5, 2026       |  | June 6, 2021       |  |                     | 3.26 |  |                      |  | 60,000    |                      | 
|August 16, 2026    |  | August 17, 2021    |  |                     | 3.26 |  |                      |  | 60,000    |                      | 
|August 24, 2026    |  | August 25, 2021    |  |                     | 3.81 |  |                      |  | 140,000   |                      | 
|September 13, 2026 |  | September 14, 2021 |  |                     | 4.88 |  |                      |  | 55,000    |                      | 
|December 8, 2026   |  | December 9, 2021   |  |                     | 2.65 |  |                      |  | 380,000   |                      | 
|December 8, 2026   |  | December 9, 2021   |  |                     | 3.59 |  |                      |  | 325,000   |                      | 
|January 11, 2027   |  | January 12, 2022   |  |                     | 2.18 |  |                      |  | 220,000   |                      | 
|March 14, 2027     |  | March 15, 2022     |  |                     | 2.07 |  |                      |  | 60,000    |                      | 
|Total              |  |                    |  |                     |      |  |                      |  | 4,581,800 |                      | 



In addition to the options noted above, the following
Share-Based Awards were granted in 2021: 12,054 on January 11, 2021 at a price of $2.80, 2,500 on January 27, 2021 at a price
of $3.19, and 106,618 on March 18, 2021 at a price of $4.14, 37,000 on March 19, 2021 at a price of $4.50, 2,478 on March 31,
2021 at a price of $4.54, 153,500 on April 12, 2021 at a price of $4.28, 30,500 on May 19, 2021 at a price of $2.93, 159,606
on August 25, 2021 at a price of $3.22, 175,000 on September 17, 2021 at a price of $3.22, 4,336 on September 30, 2021
at a price of $5.70, 175,000 on October 17, 2021 at a price of $3.22, 175,000 on November 17, 2021 at a price of $3.22, 18,500
on December 1, 2021 at a price of $2.76, and 175,000 on December 17, 2021 at a price of $3.22. Of the previously listed grants,
75,000 common shares are subject to vesting of 1/3 on each of March 29, 2022, September 29, 2022, and March 29, 2023, and
50,000 common shares are subject to vesting of 1/2 on each of May 17, 2022, and August 17, 2022.



During 2021, 700,000 Performance Share Units were
exercised for one Common Shares. 100,000 of these were valued at a price of $4.60 and the remaining 600,000 were valued at a price of
$4.77. The Corporation currently has 1,200,000 PSUs outstanding that are due to expire on June 30, 2022 and were valued at $2.67
per share.








- 75 -




EQUITY PLANS



Summary of the Legacy Equity Compensation Plans



The Legacy Equity Compensation Plan was designed
to give individuals an interest in preserving and maximizing shareholder value in the longer term, to enable the Corporation to attract
and retain individuals with experience and ability and to reward individuals for current performance and expected future performance.
The Legacy Equity Compensation Plan amended and restated the Corporation’s stock option plan was effective April 22, 2020,
and was approved by the Corporation’s shareholders on June 1, 2020. As of May 21, 2021, the Legacy Equity Compensation
Plan was replaced (see “Summary of Omnibus Equity Incentive Plan” below) and no additional awards will be granted under it.
Previously granted awards under the Legacy Equity Compensation Plan will continue to be governed by it.



A description of the Legacy Equity Compensation
Plan is set out below.



Eligible Participants: Directors, Employees and
Service Providers (as those terms are defined in the Legacy Equity Compensation Plan, and referred to as “Participants”) are
eligible to be granted Awards under the Legacy Equity Compensation Plan and are Participants. “Award” is defined to mean,
individually or collectively, a grant under the Legacy Equity Compensation Plan of Options or a grant or issue under the Legacy Equity
Compensation Plan of Share-Based Awards. “Option” is defined to mean a stock option granted to a Director, Employee or Service
Provider to purchase a Common Share. A Share-Based Award is defined to mean a Common Share award granted or issued to a Non-Executive
Employee, an Independent Director, or a Service Provider (as those terms are defined in the Legacy Equity Compensation Plan).



Number of Shares Reserved: The number of Common
Shares which may be issued pursuant to the Legacy Equity Compensation Plan may not exceed 13% of the issued Common Shares from time to
time. The number of Common Shares which may be issuable pursuant to exercise of Options shall not exceed 10% of issued Common Shares from
time to time. The maximum number of Share-Based Awards granted or issued in any fiscal year shall not exceed 3% of the issued Common Shares,
on the first day of such fiscal year. Common Shares covered by an option that have been exercised, terminated, or expired shall again
be available for an option grant. As of the date hereof, the total number of Common Shares issuable upon exercise of options granted under
the Option Plan is 3,281,800 Common Shares (representing approximately 5.3% of the Common Shares issued and outstanding). Upon adoption
of the Omnibus Equity Incentive Plan during fiscal 2021, no further Options or Common Shares grants are permitted under the Legacy Equity
Compensation Plan



Limitations on Grants: The aggregate number of
Common Shares issuable to insiders of the Corporation within any one-year period under the Legacy Equity Compensation Plan, or when combined
with all of the Corporation’s other security-based compensation arrangements, shall not exceed 10% of the Corporation’s total
issued and outstanding Common Shares. The aggregate number of Common Shares reserved for issuance to insiders of the Corporation at any
time under the Legacy Equity Compensation Plan, or when combined with all of the Corporation’s other security-based compensation
arrangements, shall not exceed 10% of the Corporation’s total issued and outstanding Common Shares. Share-Based Awards cannot be
granted to employees who are insiders of the Corporation.



Exercise Price: The exercise price of the Common
Shares covered by each Option is determined by the Board. While the Common Shares are listed on the TSX, the exercise price shall not
be less than the “Market Price” of the Common Shares at the time the option is granted. “Market Price” is defined
in the Legacy Equity Compensation Plan as the closing price of the Common Shares on the TSX, or another stock exchange where the majority
of the trading volume and value of the Common Shares occurs, on the day immediately preceding the relevant date. If the Common Shares
are listed on an exchange other than the TSX, the exercise price will be determined in accordance with the policies of such other exchange,
or in the absence thereof, will be determined as the closing sales price of such Shares as quoted on such exchange for the market trading
date immediately prior to the time of determination less any discount permitted by such exchange.








- 76 -




Vesting: The Legacy Equity Compensation Plan provides
that an option may be exercised (in each case to the nearest full share) during the term of the Option as follows unless determined otherwise
by the Board by resolution: (a) one-third on the first anniversary of the date of the Option certificate relating to the options;
(b) one-third on the second anniversary of the date of the Option certificate; and (c) the remaining one-third shall vest on
the third anniversary of the date of the Option certificate.



Term of Options: Subject to the termination and
change of control provisions noted below, the term of any option granted under the Legacy Equity Compensation Plan is determined by the
Board and may not exceed ten years from the date of grant. Should the expiry date for an option fall within a blackout period or within
nine business days following the expiration of a blackout period, such expiry date shall be automatically extended without any further
act or formality to that date which is the tenth business day after the end of the blackout period, such tenth business day to be considered
the expiry date for such option for all purposes under the Legacy Equity Compensation Plan. A “blackout period” is a period
during which designated persons cannot trade Common Shares of the Corporation pursuant to any policy of the Corporation respecting restrictions
on trading.



Termination: If the Participant is a director,
Employee, or Service Provider of the Corporation and ceases to be such, other than by reason of death, then the expiry date of the Option
is 90 days following the termination date, provided that, the Board has the discretion to waive the 90-day termination requirement, to
permit the Participant to exercise any options for the full term of the Options, unless the Participant is terminated as a result of certain
specified circumstances (including termination for cause for Employees and Service Providers) in which case the expiry date will be the
date the Participant is terminated. The date that the Participant ceases to be an Employee or Service Provider of the Corporation for
the purposes of the Legacy Equity Compensation Plan means the date designated by the Corporation as the effective date on which the Participant
ceases, for any reason whatsoever, to perform services for or to be employed by the Corporation, as determined in the sole discretion
of the Corporation.



In the event of the death of a Participant, the
Participant’s Option may be exercised only within one year next succeeding such death and then only (i) by the person or persons
to whom the Participant’s rights under the Option shall pass by the Participant’s will or the laws of descent and distribution,
and (ii) to the extent that the Participant was entitled to exercise the Option at the date of death. Each Share-Based Award agreement
shall set forth the extent to which the Participant shall have the right to receive Share-Based Awards following termination of the Participant’s
employment or other relationship wit the Corporation. Such provisions shall be determined at the sole discretion of the Administrator.
The Administrator is any director or employee of the Corporation that has been delegated by the Board to administer the Legacy Equity
Compensation Plan.



Change of Control: In the event of an actual or
potential change of control, the Board has the right to deal with any Awards in the manner it deems equitable and appropriate in the circumstances,
including the right to: (i) determine that any Awards will remain in full force and effect in accordance with their terms after the
change of control; (ii) cause any Awards to be converted or exchanged for options to acquire shares of another entity involved in
the change of control, having the same value and terms and conditions as the Awards; (iii) accelerate the vesting of any unvested
Awards; (iv) provide Participants with the right to surrender any Awards for an amount per underlying Common Share equal to the positive
difference, if any, between the fair market value of the Common Share on the date of surrender and the Option exercise price of such Awards;
and (v) accelerate the date by which any Awards must be exercised.



Assignability: The benefits, rights, and Awards
accruing to any Participant in accordance with the terms and conditions of the Legacy Equity Compensation Plan are not transferable or
assignable. During the lifetime of a Participant any benefits, rights and Awards may only be exercised by the Participant.








- 77 -




Amendment Provisions: The Legacy Equity Compensation
Plan provides that the Board may from time to time amend the Legacy Equity Compensation Plan and the terms and conditions of any Award
granted thereunder, provided that any such amendment, modification, or change to the provisions of the Legacy Equity Compensation Plan
shall: (a) not adversely alter or impair any Award previously granted except as permitted by the adjustment provisions in the Legacy
Equity Compensation Plan; (b) be subject to any regulatory approvals, where required, including the approval of the TSX, where necessary;
(c) be subject to Shareholder approval in accordance with the rules of the TSX in circumstances where the amendment, modification
or change to the Legacy Equity Compensation Plan would (i) reduce the exercise price of an option held by an insider of the Corporation;
(ii) extend the term of an Option held by an insider of the Corporation beyond the original term of the Option (other than pursuant
to the blackout period provisions); (iii) amend to remove or to exceed the insider participation limits in the Legacy Equity Compensation
Plan; (iv) increase the fixed maximum percentage of issued and outstanding Common Shares which may be issued pursuant to the Legacy
Equity Compensation Plan or change from a fixed maximum percentage of issued and outstanding Common Shares to a fixed maximum number of
Common Shares; or (v) amend the amendment provisions and (d) not be subject to Shareholder approval in circumstances where the
amendment, modification or change to the Legacy Equity Compensation Plan or Award would (i) be of a “housekeeping nature”;
(ii) be necessary for Awards to qualify for favourable treatment under applicable tax laws; (iii) alter, extend or accelerate
any vesting terms or condition in the Legacy Equity Compensation Plan or any option; (iv) introduce, amend or modify any mechanics
for exercising any Option (including relating to a cashless exercise feature or an automatic exercise feature); (v) change the term
of an Option or change any termination provision in the Equity Compensation or any Award (for example, relating to termination of employment,
resignation, retirement or death), provided that such change does not entail an extension beyond the original term of such Award (other
than such period being extended by virtue of the blackout provisions); (vi) introduce a share appreciation right feature payable
in cash or Common Shares, provided that such feature provides for a full deduction of the number of underlying Common Shares from the
Legacy Equity Compensation Plan maximum as applicable; (vii) change the application of the adjustment or change of control provisions;
(viii) add a form of financial assistance or amend a financial assistance provision which is adopted; or (ix) change the eligible
participants under the Legacy Equity Compensation Plan.



Financial Assistance: The Legacy Equity Compensation
Plan does not provide for the Corporation to give financial assistance to facilitate the purchase of Common Shares under the Legacy Equity
Compensation Plan.



Taxes and Source Deductions: The Legacy Equity
Compensation Plan provides that the Corporation or any subsidiary may take such reasonable steps for the deduction and withholding of
any taxes and other required source deductions that the Corporation or the subsidiary, as the case may be, is required by any law or regulation
of any governmental authority whatsoever to withhold, deduct or remit in connection with the Legacy Equity Compensation Plan, any exercise
or surrender of any option, or a portion thereof, by an Participant or any issuance of Common Shares to an Participant.



In addition, the delivery of any Common Shares
to be issued to a Participant on the exercise or termination of options by the Participant, may be made conditional upon the Participant
(or other person) reimbursing or compensating the Corporation or making arrangements satisfactory to the Corporation for the payment to
it in a timely manner of all taxes required to be remitted for the account of the Participant.



Summary of the Omnibus Equity Incentive Plan



The purpose of the Omnibus Equity Incentive Plan
is to provide the Corporation with a share–related mechanism to attract, retain and motivate qualified Omnibus Participants (as
defined below) and to reward such Omnibus Participants as may be granted Omnibus Awards (as defined below) by the Board from time to time
for their contributions toward the long–term goals and success of the Corporation and to enable and encourage such Omnibus Participants
to acquire Common Shares as long–term investments and proprietary interests in the Corporation.



A description of
theOmnibus Equity Incentive Plan is set out below.



Common Shares Subject to the Omnibus Equity Incentive
Plan: The Omnibus Equity Incentive Plan is a rolling plan which, subject to the adjustment provisions provided for therein, provides that
the aggregate maximum number of Common Shares that may be issued upon the exercise or settlement of awards granted under the Omnibus Equity
Incentive Plan shall not exceed 15% of the Corporation's issued and outstanding Common Shares from time to time (including Common Shares
reserved for issuance in respect of 3,281,800 stock options outstanding under the Legacy Equity Compensation Plan and in respect of any
other security based compensation arrangement), such number being 9,288,824 as at the date hereof. The Omnibus Equity Incentive Plan is
considered an "evergreen" plan, since the Common Shares covered by awards which have been exercised, settled, or terminated
shall be available for subsequent grants under the Omnibus Equity Incentive Plan and the number of awards available to grant increases
as the number of issued and outstanding Common Shares increases.








- 78 -




Insider Participation Limit: The Omnibus Equity
Incentive Plan provides that the aggregate number of Common Shares (a) issuable to insiders at any time (under all of the Corporation's
security-based compensation arrangements) cannot exceed 10% of the Corporation's issued and outstanding Common Shares and (b) issued
to insiders within any one year period (under all of the Corporation's security-based compensation arrangements) cannot exceed 10% of
the Corporation's issued and outstanding Common Shares.



Administration: The Plan Administrator (as
defined in the Omnibus Equity Incentive Plan) is determined by the Board, and is initially the Board. The Omnibus Equity Incentive
Plan may in the future be administered by a committee of the Board. That committee may in turn sub delegate certain functions to an
officer or director. The Plan Administrator determines which directors, officers, consultants, and employees are eligible to receive
awards under the Omnibus Equity Incentive Plan, the time or times at which awards may be granted, the conditions under which awards
may be granted or forfeited to the Corporation, the number of Common Shares to be covered by any award, the exercise price of any
award, whether restrictions or limitations are to be imposed on the Common Shares issuable pursuant to grants of any award, and the
nature of any such restrictions or limitations, any acceleration of exercisability or vesting, or waiver of termination regarding
any award, based on such factors as the Plan Administrator may determine.



Eligibility: All directors, employees, and consultants
of the Corporation and future subsidiaries, if any, are eligible to participate in the Omnibus Equity Incentive Plan (referred to as "Omnibus
Participants"). The extent to which any such individual is entitled to receive a grant of an award pursuant to the Omnibus Equity
Incentive Plan will be determined in the sole and absolute discretion of the Plan Administrator.



Types of Awards: Awards of Options, Restricted
Share Units, Performance Share Units, Deferred Share Units and other share-based awards may be made under the Omnibus Equity Incentive
Plan. All of the awards described below are subject to the conditions, limitations, restrictions, exercise price, vesting, settlement,
and forfeiture provisions determined by the Plan Administrator, in its sole discretion, subject to such limitations provided in the Omnibus
Equity Incentive Plan and will generally be evidenced by an award agreement. In addition, subject to the limitations provided in the Omnibus
Equity Incentive Plan and in accordance with applicable law, the Plan Administrator may accelerate or defer the vesting or payment of
awards, cancel, or modify outstanding awards, and waive any condition imposed with respect to awards or Common Shares issued pursuant
to awards.



Options: An Option
entitles a holder thereof to purchase a prescribed number of treasury Common Shares at an exercise price set at the time of the grant.
The Plan Administrator will establish the exercise price at the time each Option is granted, which exercise price must in all cases be
not less than the five-day volume weighted average closing price (the "5-day VWAP") of the Common Shares on the TSX for the
five trading days immediately preceding the date of grant (for the purposes of this section, the "Market Price"). Subject to
any accelerated termination as set forth in the Omnibus Equity Incentive Plan, each Option expires on its respective expiry date. The
Plan Administrator will have the authority to determine the vesting terms applicable to grants of Options. Once an Option becomes vested,
it shall remain vested and shall be exercisable until expiration or termination of the Option, unless otherwise specified by the Plan
Administrator, or as otherwise set forth in any written employment agreement, award agreement or other written agreement between the Corporation
and theOmnibus Participant. The Plan Administrator has the right to accelerate the date upon which any Option becomes exercisable.
The Plan Administrator may provide at the time of granting an Option that the exercise of that Option is subject to restrictions, in addition
to those specified in the Omnibus Equity Incentive Plan, such as vesting conditions relating to the attainment of specified performance
goals.



Unless otherwise
specified by the Plan Administrator at the time of granting an Option and set forth in the particular award agreement, an exercise notice
must be accompanied by payment of the exercise price. AOmnibus Participant may, with the consent of the Corporation, in lieu of
exercising an Option pursuant to an exercise notice, elect to surrender such Option to the Corporation (a "Cashless Exercise")
in consideration for an amount from the Corporation equal to (i) the Market Price of the Common Shares issuable on the exercise of
such Option (or portion thereof) as of the date such Option (or portion thereof) is exercised, less (ii) the aggregate exercise price
of the Option (or portion thereof) surrendered relating to such Common Shares (the "In-the-Money Amount") by written notice
to the Corporation indicating the number of Options such participant wishes to exercise using the Cashless Exercise, and such other information
that the Corporation may require. Subject to the provisions of the Omnibus Equity Incentive Plan, the Corporation will satisfy payment
of the In-the-Money Amount by delivering to the participant such number of Common Shares having a fair market value equal to the In-the-Money
Amount.








- 79 -




Restricted Share
Units: A Restricted Share Unit (“RSU”) is a unit equivalent in value to a Common Share credited by means of a bookkeeping
entry in the books of the Corporation which entitles the holder to receive one Common Share (or the value thereof) for each RSU after
a specified vesting period. The Plan Administrator may, from time to time, subject to the provisions of the Omnibus Equity Incentive Plan
and such other terms and conditions as the Plan Administrator may prescribe, grant RSUs to anyOmnibus Participant in respect of
a payment for services rendered by the applicable participant in a taxation year.



The number of RSUs (including fractional RSUs)
granted at any particular time under the Omnibus Equity Incentive Plan will be calculated by dividing (a) the amount of the payment
that is to be paid in RSUs, as determined by the Plan Administrator, by (b) the greater of (i) the Market Price of a Common
Share on the date of grant and (ii) such amount as determined by the Plan Administrator in its sole discretion. The Plan Administrator
shall have the authority to determine any vesting terms applicable to the grant of RSUs.



Upon settlement, holders will redeem each vested
RSU for one Common Share in respect of each vested RSU (or, at the election of the holder and subject to the approval of the Plan Administrator,
a cash payment or a combination of Common Shares and cash). Any such cash payments made by the Corporation shall be calculated by multiplying
the number of RSUs to be redeemed for cash by the Market Price per Common Share as at the settlement date.



Performance Share Unit: A Performance Share Unit
(“PSU”) is a unit equivalent in value to a Common Share credited by means of a bookkeeping entry in the books of the Corporation
which entitles the holder to receive one Common Share (or the value thereof) for each PSU after specific performance-based vesting criteria
determined by the Plan Administrator, in its sole discretion, have been satisfied. The performance goals to be achieved during any performance
period, the length of any performance period, the amount of any PSUs granted, the effect of termination of a participant's service and
the amount of any payment or transfer to be made pursuant to any PSU will be determined by the Plan Administrator and by the other terms
and conditions of any PSU, all as set forth in the applicable award agreement. The Plan Administrator may, from time to time, subject
to the provisions of the Omnibus Equity Incentive Plan and such other terms and conditions as the Plan Administrator may prescribe, grant
PSUs to any participant in respect of a bonus or similar payment in respect of services rendered by the applicable participant in a taxation
year (the "PSU Service Year").



The Plan Administrator shall have the authority
to determine any vesting terms applicable to the grant of PSUs. Upon settlement, holders will redeem each vested PSU for the following
at the election of such holder but subject to the approval of the Plan Administrator: (a) one Common Share in respect of each vested
PSU, (b) a cash payment, or (c) a combination of Common Shares and cash. Any such cash payments made by the Corporation to a
participant shall be calculated by multiplying the number of PSUs to be redeemed for cash by the Market Price per Common Share as at the
settlement date. Subject to the provisions of the Omnibus Equity Incentive Plan and except as otherwise provided in an award agreement,
no settlement date for any PSU shall occur, and no Common Share shall be issued or cash payment shall be made in respect of any PSU any
later than the final business day of the third calendar year following the applicable PSU Service Year.



Deferred Share Units:
A Deferred Share Unit (“DSU”) is a unit equivalent in value to a Common Share credited by means of a bookkeeping entry in
the books of the Corporation which entitles the holder to receive one Common Share (or, at the election of the holder and subject to the
approval of the Plan Administrator, the cash value thereof) for each DSU on a future date. The Board may fix from time to time a portion
of the total compensation (including annual retainer) paid by the Corporation to a director in a calendar year for service on the Board
that are to be payable in the form of DSUs. In addition, anOmnibus Participant may, with the Corporation's consent, be given,
subject to the provisions of the Omnibus Equity Incentive Plan, the right to elect to receive a portion of the compensation owing to them
in the form of DSUs.



Share-Based Awards:
The Plan Administrator may grant other types of equity-based or equity-related awards (including the grant or offer for sale of unrestricted
Common Shares) in such amounts and subject to such terms and conditions, including, but not limited to, being subject to performance criteria,
or in satisfaction of such obligations, as the Plan Administrator shall determine. Such awards may involve the issuance of actual Common
Shares toOmnibus Participants, or payment in cash or otherwise of amounts based on the value of Common Shares.








- 80 -




Dividend Equivalents: Except as otherwise determined
by the Plan Administrator or as set forth in the particular award agreement, RSUs, PSUs, and DSUs shall be credited, in accordance with
the terms of the Omnibus Equity Incentive Plan, with dividend equivalents in the form of additional RSUs, PSUs, and DSUs, as applicable,
as of each dividend payment date in respect of which normal cash dividends are paid on Common Shares.



Black-out Periods: In the event an award expires,
at a time when a scheduled blackout is in place or an undisclosed material change or material fact in the affairs of the Corporation exists,
the expiry of such award will be the date that is ten business days after which such scheduled blackout terminates or there is no longer
such undisclosed material change or material fact.



Term: While the Omnibus Equity Incentive Plan
does not stipulate a specific term for awards granted thereunder, as discussed below, awards may not expire beyond ten years from its
date of grant, except where Shareholder approval is received or where an expiry date would have fallen within a blackout period of the
Corporation. All awards must vest and settle in accordance with the provisions of the Omnibus Equity Incentive Plan and any applicable
award agreement, which award agreement may include an expiry date for a specific award.



Termination of Employment
or Services: The following describes the impact of certain events upon theOmnibus Participants under the Omnibus Equity Plan Incentive
Plan, including termination for cause, resignation, termination without cause, disability, death or retirement, subject, in each case,
to the terms of an Omnibus Participant's applicable employment agreement, award agreement or other written agreement:



| | • | Termination for Cause / Resignation; Any Option
or other award held by the Omnibus Participant that has not been exercised, surrendered, or settled as of the Termination Date (as defined
in the Omnibus Equity Incentive Plan) shall be immediately forfeited and cancelled as of the Termination Date.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | Termination without Cause: Any unvested Option
or other award which would otherwise vest or become exercisable in accordance with its terms based solely on the Omnibus Participant remaining
in the service of the Corporation on or prior to the date that is 90 days after the Termination Date shall immediately vest. Any vested
Options may be exercised by the Omnibus Participant within the time period contemplated by the Omnibus Equity Incentive Plan.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | Death or Disability: Any award that is held by
the Omnibus Participant that has not vested as of the date of the death or disability (as defined under the Omnibus Equity Incentive Plan)
of such Omnibus Participant shall vest on such date. Any vested Options may be exercised by the Omnibus Participant, or Omnibus Participant's
beneficiary or legal representative (as applicable), within the time period contemplated by the Omnibus Equity Incentive Plan.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | Retirement: Any (i) outstanding award that
vests or becomes exercisable based solely on the Omnibus Participant remaining in the service of the Corporation or its subsidiary will
become 100% vested, and (ii) outstanding award that vests based on the achievement of Performance Goals (as defined in the Omnibus
Equity Incentive Plan) that has not previously become vested shall continue to be eligible to vest based upon the actual achievement of
such Performance Goals. Any vested Options may be exercised by the Omnibus Participant within the time period contemplated by the Omnibus
Equity Incentive Plan.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------








- 81 -




Change in Control: Under the Omnibus Equity Incentive
Plan, except as may be set forth in an employment agreement, award agreement or other written agreement between the Corporation or a subsidiary
of the Corporation and a participant:



| | • | If within 12 months following the completion
of a transaction resulting in a Change in Control (as defined in the Omnibus Equity Inventive Plan), an Omnibus Participant's employment,
consultancy or directorship is terminated by the Corporation or a subsidiary of the Corporation without Cause (as defined in the Omnibus
Equity Incentive Plan), without any action by the Plan Administrator:
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | o | any unvested awards held by the participant at the Termination Date shall immediately vest; and
| | - | -----------------------------------------------------------------------------------------------



| | o | any vested awards may be exercised, surrendered to the Corporation, or settled by the participant at any
time during the period that terminates on the earlier of: (A) the expiry date of such award; and (B) the date that is 90 days
after the Termination Date. Any award that has not been exercised, surrendered, or settled at the end of such period being immediately
forfeited and cancelled.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | Unless otherwise determined by the Plan Administrator,
if, as a result of a Change in Control, the Common Shares will cease trading on the TSX, the Corporation may terminate all of the awards,
other than an Option held by an Omnibus Participant that is a resident of Canada for the purposes of the Income Tax Act (Canada),
granted under the Omnibus Equity Incentive Plan at the time of and subject to the completion of the Change in Control transaction by paying
to each holder at or within a reasonable period of time following completion of such Change in Control transaction an amount for each
Award equal to the fair market value of the award held by such participant as determined by the Plan Administrator, acting reasonably.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Non-Transferability
of Awards: Except as permitted by the Plan Administrator and to the extent that certain rights may pass to a beneficiary or legal representative
upon death of a participant, by will or as required by law, no assignment or transfer of awards, whether voluntary, involuntary, by operation
of law or otherwise, vests any interest or right in such awards whatsoever in any assignee or transferee and immediately upon any assignment
or transfer, or any attempt to make the same, such awards will terminate and be of no further force or effect. To the extent that certain
rights to exercise any portion of an outstanding award pass to a beneficiary or legal representative upon the death of a participant,
the period in which such award can be exercised by such beneficiary or legal representative shall not exceed one year from theOmnibus
Participant's death.



Amendments to the Omnibus Equity Incentive Plan:
The Plan Administrator may also from time to time, without notice and without approval of the holders of voting Common Shares, amend,
modify, change, suspend or terminate the Omnibus Equity Incentive Plan or any awards granted pursuant thereto as it, in its discretion,
determines appropriate, provided that (a) no such amendment, modification, change, suspension or termination of the Omnibus Equity
Incentive Plan or any award granted pursuant thereto may materially impair any rights of a participant or materially increase any obligations
of a participant under the Omnibus Equity Incentive Plan without the consent of such participant, unless the Plan Administrator determines
such adjustment is required or desirable in order to comply with any applicable securities laws or stock exchange requirements, and (b) any
amendment that would cause an award held by a U.S. taxpayer to be subject to the income inclusion under Section 409A of the United
States Internal Revenue Code of 1986, as amended, shall be null and void ab initio.



Notwithstanding the above, and subject to the rules of the TSX,
the approval of Shareholders will be required to effect any of the following amendments to the Omnibus Equity Incentive Plan:



| | • | increasing the number of Common Shares reserved
for issuance under the Omnibus Equity Incentive Plan, except pursuant to the provisions in the Omnibus Equity Incentive Plan which permit
the Plan Administrator to make equitable adjustments in the event of transactions affecting the Corporation or its capital;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | increasing or removing the 10% limits on Common
Shares issuable or issued to insiders;
| | - | --------------------------------------------------------------------------------------



| | • | reducing the exercise price of an option award
(for this purpose, a cancellation or termination of an award of a participant prior to its expiry date for the purpose of reissuing an
option award to the same participant with a lower exercise price shall be treated as an amendment to reduce the exercise price of an option
award) except pursuant to the provisions in the Omnibus Equity Incentive Plan which permit the Plan Administrator to make equitable adjustments
in the event of transactions affecting the Corporation or its capital;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------








- 82 -




| | • | extending the term of an Option award beyond
the original expiry date (except where an expiry date would have fallen within a blackout period applicable to the participant or within
ten business days following the expiry of such a blackout period);
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | permitting an Option award to be exercisable
beyond ten years from its date of grant (except where an expiry date would have fallen within a blackout period);
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | permitting awards to be transferred to a person;
| | - | ------------------------------------------------



| | • | changing the eligible Omnibus Participants; and
| | - | -----------------------------------------------



| | • | deleting or otherwise limiting the amendments
which require approval of the Shareholders.
| | - | -----------------------------------------------------------------------------------------



Except for the items
listed above, amendments to the Omnibus Equity Incentive Plan will not require Shareholder approval. Such amendments include (but are
not limited to): (a) amending the general vesting provisions of an award, (b) amending the provisions for early termination
of awards in connection with a termination of employment or service, (c) adding covenants of the Corporation for the protection of
theOmnibus Participants, (d) amendments that are desirable as a result of changes in law in any jurisdiction where an Omnibus
Participant resides, and (e) curing or correcting any ambiguity or defect or inconsistent provision or clerical omission or mistake
or manifest error.



MARKET
FOR SECURITIES



Common Shares



The Common Shares currently trade under the symbol
 “CRDL” on the TSX and the Nasdaq. The Common Shares commenced trading on the TSX on December 20, 2018 and commenced trading
on the Nasdaq on August 10, 2021. The following table sets out the price range and trading volume of the Common Shares, as reported
by the TSX, for each month traded in Cardiol’s financial year ended December 31, 2021, and the current fiscal year to date:



|Common Shares Price Range
|-------------------------
|Month                    
|January 2021             
|February 2021            
|March 2021               
|April 2021               
|May 2021                 
|June 2021                
|July 2021                
|August 2021              
|September 2021           
|October 2021             
|November 2021            
|December 2021            
|January 2022             
|February 2022            
|March 1-22, 2022         








- 83 -






ESCROWED
SECURITIES AND SECURITIES SUBJECT TO CONTRACTUAL RESTRICTIONS ON TRANSFER



As at December 31, 2021, no outstanding Common
Shares or other securities of Cardiol were held in escrow or subject to contractual restrictions on transfer, other than as described
under “Capital Structure – Stock Options and other Share-Based Awards.



May 2021 Warrants



The May 2021 Warrants currently trade under
the symbol “CRDL.WT.A” on the TSX. The May 2021 Warrants commenced trading on the TSX on May 12, 2021. The following
table sets out the price range and trading volume of the May 2021 Warrants, as reported by the TSX, for each month traded in Cardiol’s
financial year ended December 31, 2021, and the current fiscal year to date:



|May 2021 Warrants Price Range | 
|----------------------------- | 
|Month                         | 
|May 12-31, 2021               | 
|June 2021                     | 
|July 2021                     | 
|August 2021                   | 
|September 2021                | 
|October 2021                  | 
|November 2021                 | 
|December 2021                 | 
|January 2022                  | 
|February 2022                 | 
|March 1-22, 2022              | 



DIRECTORS
AND MANAGEMENT



The following table sets out, for each of our
directors and executive officers, the person’s name, province or state, and country of residence, position with us, principal occupation
and, if a director, the date on which the person became a director. Our directors are expected to hold office until our next annual general
meeting of Shareholders. Our directors are elected annually and, unless re-elected, retire from office at the end of the next annual general
meeting of Shareholders. As a group, the Directors and executive officers beneficially own, or control or direct, directly or indirectly,
a total of 3,251,759 Common Shares, representing 5.25% of the Common Shares outstanding.








- 84 -




Directors and Executive Officers



|Name and Province or State and Country of Residence   |  | Position with the Corporation                    |  | Since             |  | Principal Occupation                                                                                                                                                                                                                                                                                                                                                                                                                          
|----------------------------------------------------- |  | ------------------------------------------------ |  | ----------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|David Elsley
Ontario, Canada                          |  | Director, President, and Chief Executive Officer |  | January 19, 2017  |  | President and Chief Executive Officer
    of Cardiol since January 19, 2017. Self-employed, investigated
    drug formulations that are the foundation of Cardiol’s business (from 2013 to 2017).                                                                                                                                                                                                                                             
|                                                      |  |                                                  |  |                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Chris Waddick
Ontario, Canada                         |  | Chief Financial Officer and Corporate Secretary  |  | August 16, 2018   |  | Chief Financial Officer and Corporate Secretary of Cardiol since August 16, 2018. Executive Vice President and CFO of Active Energy Inc., a private energy company, since January 2013 and President of NRJ Consulting Inc., a consulting company, since November 2009.                                                                                                                                                                       
|                                                      |  |                                                  |  |                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Bernard Lim
    Ontario, Canada                       |  | Chief Operating Officer                          |  | December 3, 2020  |  | Chief Operating Officer of Cardiol since December 3, 2020. Chair of the Board of AndersDx (UK) a technology company since 2009. Chair of the Board for Altus Assessments Inc. a technology company focused on professional screening for academic institutions since 2014. Chair of the Board of Front Line Medical, a vascular trauma medical device company since 2020. Director of Aventamed (Ireland) a medical device company since 2015.
|                                                      |  |                                                  |  |                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Dr. Andrew Hamer
    Nelson, New Zealand              |  | Chief Medical Officer (CMO)                      |  | March 29, 2021    |  | Chief Medical Officer of Cardiol since March 29, 2021. Served as Executive Director, Global Development-Cardiometabolic at California-based Amgen Inc.                                                                                                                                                                                                                                                                                        
|                                                      |  |                                                  |  |                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                      |  |                                                  |  |                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Michael Willner(1)(3)(5)
Florida, USA                 |  | Director                                         |  | September 7, 2021 |  | Founder of Willner Capital, Inc., an investment company specializing in public and private equities, as well as debt instruments.                                                                                                                                                                                                                                                                                                             
|                                                      |  |                                                  |  |                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Iain Chalmers(2)(4)(6)
Ontario, Canada                |  | Former Director                                  |  | August 20, 2018   |  | Professor of Marketing and Alcohol Business Management, Centennial College, Toronto. Previously, Vice-President of Marketing and Innovation for Diageo Canada (from 2000 to 2016).                                                                                                                                                                                                                                                            
|                                                      |  |                                                  |  |                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                      |  |                                                  |  |                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Peter Pekos(2)(5)
  Ontario, Canada                   |  | Director                                         |  | December 15, 2017 |  | President and Chief Executive Officer of Dalton Pharma Services.                                                                                                                                                                                                                                                                                                                                                                              
|                                                      |  |                                                  |  |                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Dr. Guillermo Torre-Amione(1)(2)(5)
Monterrey, Mexico |  | Chairman and Director                            |  | August 20, 2018   |  | President of TecSalud. Previously, Chief of Heart Failure Division and Medical Director of Cardiac Transplantation, Houston Methodist DeBakey Heart & Vascular Center.                                                                                                                                                                                                                                                                        
|                                                      |  |                                                  |  |                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Colin Stott(1)(5)
Southport, United Kingdom           |  | Director                                         |  | December 3, 2019  |  | Chief Operating Officer of Alterola Biotech Inc. Previously Chief Operating Officer of Alinova Biosciences Ltd. Previously Scientific Affairs Director, International and R&D Operations Director for GW Pharmaceuticals plc                                                                                                                                                                                                                  
|                                                      |  |                                                  |  |                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Jennifer Chao(2)(4)(5)(6)
    New York, USA           |  | Director                                         |  | March 15, 2022    |  | Founder of CoreStrategies Management, LLC. Previously Managing Director and Senior Lead Biotechnology Securities Analyst at Deutsche Bank.                                                                                                                                                                                                                                                                                                    








- 85 -




Notes:



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



| | (2) | Member of the Corporate Governance and Compensation Committee (“CG&C Committee”)
| | --- | --------------------------------------------------------------------------------



| | (3) | Chair of the Audit Committee
| | --- | ----------------------------



| | (4) | Chair of the CG&C Committee
| | --- | ---------------------------



| | (5) | Independent
| | --- | -----------



| | (6) | As of March 15, 2022, Iain Chalmers resigned from the Board of Directors, and was replaced by
the appointment of Jennifer Chao
| | --- | ------------------------------------------------------------------------------------------------------------------------------



Biographies of Directors and Executive Officers



The following are brief profiles of our executive
officers and directors, including a description of each individual’s principal occupation within the past five years.



David Elsley, MBA – President, Chief
Executive Officer, and Director



Mr. David Elsley is a business leader with
a proven track record of developing, financing, and managing all aspects of corporate development in biotechnology and high-growth organizations.
In 1990, Mr. Elsley founded Vasogen Inc., a biotechnology company focused on the research and commercial development of novel therapeutics
for the treatment of heart failure and other inflammatory conditions. Mr. Elsley assembled a team of management, directors, and scientific
advisors comprising industry professionals and thought leaders from North America and Europe. He managed and directed Vasogen’s
growth from start-up to an organization employing over 250 people with operations and R&D programs in Canada, the United States, and
Europe. Mr. Elsley established the research and development infrastructure, partnerships, manufacturing capability, and corporate
quality systems necessary to advance two anti-inflammatory therapies from concept to completion of international multi-center pivotal
phase III clinical trials involving 2,500 patients. Vasogen went public on the TSX and the Nasdaq, raising over $200 million to support
corporate development and reached a market capitalization of over USD $1 billion. Mr. Elsley holds a Master of Business Administration
from the Ivey School of Business, University of Western Ontario.



Andrew Hamer, MB, ChB – Chief Medical
Officer



Dr. Andrew Hamer
brings 30 years of experience in the global life sciences industry, medical affairs, and cardiology practice to the Corporation.  Most
recently he served as Executive Director, Global Development-Cardiometabolic at California-based Amgen Inc., where he led the Global Development
group for Repatha®, the LDL cholesterol lowering PCSK9 inhibitor evolocumab, which generated revenues of almost USD $900
million in 2020. As development lead, Dr. Hamer headed the Repatha® global evidence generation team collaborating
with safety, regulatory, health economics, observational research, scientific communications, publications, medical affairs, and clinical
operations teams to design and execute several multi-center clinical trials in support of FDA and international regulatory filings. Prior
to his five-year tenure with Amgen, Dr. Hamer served for two years as VP Medical Affairs at Capricor Therapeutics Inc., where he
was responsible for the development of novel therapeutics for heart disease and for the supervision of the clinical operations of the
company, including clinical trial design and execution.



Prior to joining the
life sciences industry, Dr. Hamer practiced cardiology and internal medicine in New Zealand for 19 years. His distinguished career
in cardiology culminated as Chief Cardiologist at Nelson Hospital, Nelson Marlborough District Health Board, Nelson, while concurrently
leading cardiac services nationally in New Zealand.  Dr. Hamer graduated with a medical degree (MB, ChB) from the University
of Otago, New Zealand, an internationally recognized medical school which recently ranked among the top twenty universities in the world
in several medical subject categories. His clinical research training took place at various centres in New Zealand and London, UK, followed
by a cardiology fellowship at Deaconess Hospital, Harvard Medical School, Boston.  Dr. Hamer has co-authored many high-quality
peer-reviewed scientific publications reflecting his considerable experience as a clinical trialist, having served as a principal or co-investigator
for 40 multi-centre clinical trials in therapies for acute coronary syndrome, heart failure, hypertension, cholesterol disorders, atrial
fibrillation, and diabetes.








- 86 -




Chris Waddick, MBA, CPA, CA – Chief Financial
Officer and Corporate Secretary



Mr. Chris Waddick has thirty years of experience
in financial and executive roles in the biotechnology and energy industries, with substantial knowledge of public company management and
corporate governance, and in designing, building, and managing financial processes, procedures, and infrastructure. Mr. Waddick most
recently served as Executive Vice President and Chief Financial Officer for a private Ontario energy company where he was retained by
the shareholders to refinance the company and establish a new strategic direction, as well as the appropriate financial infrastructure.
During his tenure, he implemented two corporate restructurings, drove substantial earnings growth, and significantly reduced both cost
of capital and debt levels. Mr. Waddick spent more than twelve years at Vasogen Inc., a biotechnology company focused on the research
and commercial development of novel therapeutics for the treatment of heart failure and other inflammatory conditions. While serving as
Chief Financial Officer and Chief Operating Officer, the company grew from start up to an organization employing over 250 employees that
established the necessary systems and infrastructure to advance an anti-inflammatory therapy through to the completion of an international
multi-center pivotal trial involving 2,500 patients. Vasogen went public on the TSX and the NASDAQ, raising over $200 million to
support corporate development and reached a market capitalization of over US$ 1 billion. Prior to Vasogen, he held progressively senior
financial positions at Magna International Inc. and Union Gas Limited. Mr. Waddick is a CPA and earned a business degree from Wilfrid
Laurier University and a Master of Business Administration from York University.



Bernard Lim, BSc, PgDip, CEng (UK) –
Chief Operating Officer



Mr. Bernard Lim is a senior executive with
a proven track record of over thirty years in the life sciences industry spanning biotechnology, diagnostics, medical devices, and high-technology
companies in North America and Europe. He was founder and CEO of a highly successful drug delivery company that he led from R&D through
to commercialization and its eventual acquisition by Eli Lily. As Chair of the Board of Altus Assessments, he guided the company’s
spinout from the university and its subsequent rapid growth to become market leader in the US and Canada. As Chair of the Board of AndersDx,
a private UK-based technology company, he led its growth to a profitable enterprise. He is currently Chair of the Board of Front Line
Medical Technologies, a vascular trauma company and board director of Aventamed (Ireland). Previously, Bernard was Senior Vice President,
Operations for Vasogen, as well as head of UK operations for a technology multinational where he scaled its operations exponentially and
delivered multifold improvements in quality and financial performance. He was also CEO of a glaucoma, Alzheimer’s and an in-vitro
diagnostics company and prior to that was head of R&D for a leading neonatology and paediatrics company.



Guillermo Torre-Amione, MD, PhD – Chairman
and Director



Board certified in Cardiovascular Disease and
Advanced Heart Failure/Transplant Cardiology, Dr. Guillermo Torre-Amione is former chief of the Heart Failure Division and former
medical director of Cardiac Transplantation at the Houston Methodist DeBakey Heart & Vascular Center. He is a senior member at
The Methodist Hospital Research Institute, full professor of medicine at the Weill Cornell Medical College of Cornell University, New
York, and, more recently, became President of TecSalud, an academic medical center and medical school of the Instituto Tecnológico
y de Estudios Superiores de Monterrey (ITESM) in Mexico. Dr. Torre-Amione spearheads the Gene and Judy Campbell Laboratory for Cardiac
Transplant Research, where his primary areas of research include heart failure, cardiac transplantation, and the role of the immune response
in modulating the progression of heart failure. He initiated a series of clinical studies that led to an FDA-approved phase II clinical
trial of neurostimulation in heart failure, a novel approach to the treatment of patients with advanced heart failure. Dr. Torre-Amione
received his medical degree from the ITESM and a doctorate degree in immunology from the University of Chicago. He has published more
than 170 manuscripts in peer-reviewed journals. He currently divides his time between his clinical and academic activities at The Methodist
Hospital and ITESM. Prior to being appointed to Cardiol’s Board of Directors, Dr. Torre-Amione was a member of the Corporation’s
Scientific Advisory Board.








- 87 -




Iain Chalmers, MBA, BA, Bed, CAAP – Former
Director



Mr. Iain Chalmers is currently a professor
of Marketing and Alcohol Business Management at Centennial College in Toronto, Ontario as well as part owner of Niagara Falls Craft Distillery.
He recently transitioned to teaching after spending nearly thirty years in the Consumer Packaged Goods business, where for over eight
years, he was the Vice President of Marketing & Innovation for Diageo Canada, the world’s largest alcohol spirits company.
Prior to this, he spent eleven years at Gillette/Procter & Gamble in various senior positions, including General Sales and Marketing
Director for the Gillette Grooming Division. Iain is a seasoned marketer and brand builder with experience in Canada and the U.S. He led
the Business Development and Sales Planning function for Braun USA and worked in marketing and sales positions at Unilever and Wrigley
Canada. While at Diageo Canada, he was recognized by Marketing Magazine as one of the top four Marketers in Canada, based on the strong
creative output of his team and consistent business performance for global brands, including Guinness, Smirnoff, Crown Royal, and Captain
Morgan. Working in the alcohol industry has given Iain extensive experience building brands in a highly government-regulated environment.
He is a past member of the Association of Canadian Advertisers, Advertising Standards Canada (ASC) and was a member of the Judicial Committee
for ASC. Iain holds a BA in Political Science from University of Western Ontario, a Graduate Certificate in Management from Harvard University,
a Bachelor of Education and an MBA from Charles Sturt University, and is a Certified Advertising Agency Practitioner (CAAP) from the Institute
of Canadian Advertising. Iain Chalmers resigned from the Board of Directors on March 15, 2022.



Peter Pekos, BSc, MSc – Director



Mr. Peter Pekos, is a veteran of the pharmaceutical
services industry. In 1986, he was a founder of Dalton Pharma Services (Dalton). Over a period of 30 years, he directed Dalton’s
growth based on strong client relationships. Dalton provides pharma and biotech clients with an array of integrated services in a world-class
42,000 square foot facility, with more than 110 employees, in the heart of one of North America’s largest biomedical clusters. This
includes premium contract chemistry research, a full range of analytical support, medicinal chemistry, formulation, cGMP manufacture of
solid dosage forms, and cGMP aseptic fill-in vials and syringes. Mr. Pekos is currently President and CEO of Dalton, guiding the
evolution of the company to best serve the changing needs of its clients throughout the major global economies, including the world’s
largest pharmaceutical companies. In 1983, he obtained a Chemistry/Biochemistry Double Specialist Degree with a Minor in Biology from
the University of Toronto. In 1986, he completed a Master’s Degree in synthetic chemistry at York University, and with his Professor,
Doug Butler, founded Dalton with a very modest amount of capital. The company used incubator facilities at York University, and initially
manufactured and sold specialty chemical compounds. Mr. Pekos also founded Ashbury Biologicals. Inc., a phyto-pharmaceutical company,
Jupiter Consumer Products, a company that targeted the development of adult-focused confections, and several other technology-based companies
focused on advanced materials and pharmaceutical development tools. Mr. Pekos is currently on the board and was founding Chairman
of ventureLAB, a Regional Innovation Center located at IBM’s York Region campus. VentureLAB guides government program delivery to
support the innovation ecosystem for biotechnology and related industries in southern Ontario.



Colin G. Stott, BSc (Hons) - Director



Mr. Colin Stott is a veteran of the pharmaceutical
and biotech industries, having almost 30 years’ experience in pre-clinical and clinical development, with specific expertise in
the development of cannabinoid-based medicines, and 19 years’ experience in the field. Currently Chief Operating Officer of Alterola
Biotech Inc., Mr. Stott is the former Scientific Affairs Director, International and R&D Operations Director for GW Pharmaceuticals
plc (“GW Pharma”), a world leader in the development of cannabinoid therapeutics. As R&D Operations Director at GW Pharma
for over 16 years, he was a key player in the development of their discovery and development pipeline, and was closely involved in the
Marketing Authorization Application submission and approval of Sativex® and the New Drug Application submission of Epidiolex®,
which was approved by the U.S. Food and Drug Administration as an orphan drug for the treatment of rare forms of paediatric epilepsy in
June 2018, and the European Medicines Agency in September 2019 (as Epidyolex®). More recently, as Scientific
Affairs Director, International, he was part of the Medical Affairs team responsible for the preparation of the international launch
of Epidiolex®. Mr. Stott holds a BSc (Hons) in Medicinal & Pharmaceutical Chemistry and a Diploma in Industrial
Studies from Loughborough University of Technology, U.K., as well as a Post Graduate Diploma in Clinical Research from the Welsh School
of Pharmacy, Cardiff University, U.K. He has published over 20 research papers and is a named inventor on 17 international patent applications.








- 88 -








Michael J. Willner, Esq.
- Director



Mr. Michael J.
Willner has practiced as both an Attorney and a Certified Public Accountant. He graduated from Emory University Law School as a member
of the Emory Law Review. Subsequently, he practiced real estate and corporate law with New York City-based Milbank, Tweed, Hadley &
McCloy, one of the nation’s most prominent international law firms. Prior to his legal career, Mr. Willner was employed by
the former Arthur Andersen & Company, a national accounting firm, where he practiced in Arthur Andersen’s tax department.



Mr. Willner has
been a very active and successful opportunistic investor for over forty years and is the founder of Willner Capital, Inc., an investment
company specializing in public and private equities, as well as debt instruments. Willner Capital primarily uses fundamental analysis
as an evaluation method and event-driven strategies. Over the past ten years, Willner Capital has made significant investments in both
the biotechnology and pharmaceutical cannabinoid industries, focusing primarily on clinical-stage companies that seek to address significant
unmet medical needs. Mr. Willner has been quoted in the New York Times business section and has served as a moderator and participant
on numerous panel discussions and advisory boards regarding his investments in the pharmaceutical side of the cannabinoid industry.



Jennifer Chao -
Director



Ms. Chao has
over 25 years of experience in the biotech and life sciences industries focused primarily on finance and corporate strategy. She is Managing
Partner of CoreStrategies Management, LLC, a company she founded in 2008 to provide transformational corporate and financial strategies
to biotech/life science companies for maximizing core valuation. She currently serves on the Board of Directors of Endo Pharmaceuticals
and is a member of the Audit Committee and Compliance Committee. Prior to joining Endo, Ms. Chao served as Chairman of the Board
of BioSpecifics Technologies Corp. (BioSpecifics) from October 2019 until its acquisition by Endo for approximately US $660 million
in December 2020. She also served as Chair of BioSpecifics’ Compensation Committee and as a member of the Audit Committee,
Strategy Committee, Intellectual Property Committee, and Nominating and Corporate Governance Committee from 2015 to 2020.



Additionally, from
2004 to 2008, Ms. Chao was Managing Director and Senior Lead Biotechnology Securities Analyst at Deutsche Bank, responsible for
U.S. large- and small- to mid-cap biotechnology companies with global client coverage; and was known for differentiated fundamentals
securities analysis and high visibility coverage of game changing technologies, paradigm shifting treatment algorithms, industry trends
and portfolio risk/reward management. Prior to that, Ms. Chao served as Managing Director and Senior Lead Biotechnology Analyst
at RBC Capital Markets and VP, Senior Biotechnology Analyst at Leerink Swann & Co. Ms. Chao was a research fellow at Massachusetts
General Hospital/Harvard Medical School, as a recipient of the BioMedical Research Career Award, and received her B.A. in Politics and
Greek Classics from New York University.



Corporate Cease-Trade Orders



None of our Directors
or executive officers has, within the ten years prior to the date of this AIF, been a director, chief executive officer, or chief financial
officer of any company (including Cardiol) that, while such person was acting in that capacity (or after such person ceased to act in
that capacity but resulting from an event that occurred while that person was acting in such capacity) was the subject of a cease-trade
order, an order similar to a cease-trade order, or an order that denied the company access to any exemption under securities legislation,
in each case for a period of more than 30 consecutive days.








- 89 -




Corporate Bankruptcies



None of our Directors
or executive officers has, within the ten years prior to the date of this AIF, become bankrupt, made a proposal under any legislation
relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had
a receiver, receiver manager, or trustee appointed to hold its assets, been a director or executive officer of any company, that, while
that person was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal
under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise
with creditors or had a receiver, receiver manager, or trustee appointed to hold its assets.



Penalties or Sanctions



No Director or executive
officer of the Corporation or Shareholder holding sufficient securities of the Corporation to affect materially the control of the Corporation
has:



| | · | been
                                            subject to any penalties or sanctions imposed by a court relating to securities legislation
                                            or by a securities regulatory authority or has entered into a settlement agreement with a
                                            securities regulatory authority; or
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | been
                                            subject to any other penalties or sanctions imposed by a court or regulatory body that would
                                            likely be considered important to a reasonable investor making an investment decision.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Conflicts of Interest



Other than as described
below, to the best of our knowledge, there are no known existing or potential conflicts of interest among us and our Directors, officers,
or other members of Management as a result of their outside business interests except that certain of our Directors and officers serve
as directors and officers of other companies, and therefore it is possible that a conflict may arise between their duties to us and their
duties as a director or officer of such other companies.



Peter Pekos, one of
our Directors, founded Dalton in 1986 and continues to serve as its President and CEO. Cardiol and Dalton are parties to the Dalton Services
Agreement pursuant to which Cardiol has subcontracted the manufacturing of its drug product candidates to Dalton. See “Commercialization
Relationships – Dalton”.



AUDIT
COMMITTEE INFORMATION



Charter of the Audit Committee



The full text of the
current Terms of Reference for the Audit Committee is attached as Schedule A to this AIF.



Composition of the Audit Committee



The Corporation’s
Audit Committee consists of three directors, all of whom are independent. They are also all financially literate in accordance with NI
52-110. The members of the Audit Committee are Michael Willner (Chair), Guillermo Torre-Amione, and Colin Stott.



Relevant Education and Experience



See the respective
biographies of each member of the Audit Committee in “Directors and Management - Biographies of Directors and Executive Officers”
for a description of the experience that is relevant to the performance of their responsibilities as Audit Committee members.



Reliance on Certain Exemptions



At no time since the
commencement of Cardiol’s most recently completed financial year has the Corporation relied on any of the exemptions provided in
NI 52-110.








- 90 -




Audit Committee Oversight



At no time since the
commencement of the Corporation’s most recently completed financial year have any recommendations by the Audit Committee respecting
the appointment and/or compensation of the Corporation’s external auditors not been adopted by the board of directors of Cardiol.



Pre-Approval Policies and Procedures



The policy and procedures
relating to the pre-approval of non-audit services provided to the Corporation are described in the Terms of Reference for the Audit
Committee attached as Schedule A to this AIF.



External Auditor Service Fees



The aggregate fees
billed by Cardiol's external auditors in each of the last two fiscal years for audit fees are as follows:



|Fee
    Category   |  | Year
                                            Ended
                                                                                December 31,
                                            2021 |         |  | Year
                                            Ended
                                                                                December 31,
                                            2020 |  
|------------------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -
|Audit Fees         |  | $                                                                                                                                                                                                    | 105,000 |  |                                                                                                                                                                                                      | $
|Audit-Related Fees |  | $                                                                                                                                                                                                    | 58,300  |  |                                                                                                                                                                                                      | $
|Tax Fees           |  | $                                                                                                                                                                                                    | nil     |  |                                                                                                                                                                                                      | $
|All Other
    Fees |  | $                                                                                                                                                                                                    | 84,800  |  |                                                                                                                                                                                                      | $
|Total              |  | $                                                                                                                                                                                                    | 248,100 |  |                                                                                                                                                                                                      | $



“Audit Fees”
are the aggregate fees billed by the Corporation’s external auditor for services provided for the audit of Cardiol’s annual
financial statements.



“Audit-Related
Fees” are the aggregate fees billed for assurance and related services by the Corporation’s external auditor that are reasonably
related to the performance of the audit or review of the Corporation’s financial statements.



“Tax Fees”
are the aggregate fees billed by Cardiol’s external auditor for tax compliance, tax advice and tax planning services.



“All Other Fees”
are the aggregate fees billed by Cardiol’s external auditor for products and services not included in the other categories of fees
described above such as work associated with the filing of prospectuses by the Corporation.



PROMOTERS



Mr. David Elsley
may  be considered to be a promoter of the Corporation within the meaning of applicable securities legislation. As of the date hereof:
Mr. Elsley owns 1,754,500 Common Shares, representing 2.83% of the outstanding Common Shares of the Corporation.



Effective as of the
closing of the IPO, the Corporation began paying Mr. Elsley an annual salary of $450,000 pursuant to the terms of Mr. Elsley’s
employment agreement with the Corporation. Effective December 9, 2021, this was increased to $525,000 per year.



LEGAL
PROCEEDINGS AND REGULATORY ACTIONS



Cardiol was not involved
in any legal proceedings during the year ended December 31, 2021 that had, or could have, a material adverse effect on Cardiol.
Moreover, to the knowledge of Cardiol’s management, Cardiol is not currently involved in any outstanding, threatened or pending
litigation that could have a material adverse effect on Cardiol.








- 91 -




To the knowledge of
Cardiol, during the financial year ended December 31, 2021, there were no: (i) penalties or sanctions imposed against Cardiol
by a court relating to securities legislation or by a securities regulatory authority; (ii) any other penalties or sanctions imposed
by a court or regulatory body against Cardiol that would likely be considered important to a reasonable investor in making an investment
decision; or (iii) settlement agreements Cardiol entered into before a court relating to securities legislation or with a securities
regulatory authority.



INTEREST
OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS



Except
as described elsewhere in this AIF, there have been no related-party transactions in the three most recently completed financial years
of Cardiol that required disclosure under any applicable Canadian securities laws other than disclosed in note 17 to Corporation’s
2021 audited financial statements, in note 16 to Corporation’s 2020 audited financial statements and note 15 to the Corporation’s
2019 audited financial statements, copies of which are available on SEDAR atwww.sedar.com.



TRANSFER
AGENT AND REGISTRAR



The transfer agent
and registrar for the Common Shares is Computershare Investor Services Inc. and the register of transfers of the Common Shares is located
in Toronto, Ontario. The warrant agent for the warrants is Computershare Trust Company of Canada and the register of transfers of the
Warrants is located in Vancouver, British Columbia.



MATERIAL
CONTRACTS



The following are
material contracts of Cardiol required to be filed on SEDAR pursuant to NI 51-102:



| | 1. | the Meros License
                                            Agreement (See “Business of Cardiol - Commercialization Relationships – Meros”),
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------



| | 2. | the Dalton Services
                                            Agreement (See “Business of Cardiol - Commercialization Relationships – Dalton”),
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. | the Purisys Exclusive
                                            Supply Agreement (See “Business of Cardiol - Commercialization Relationships –
                                            Purisys”),
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4. | the CARO Development
                                            Agreement (See “Business of Cardiol - Commercialization Relationships – TecSalud
                                            (CARO Development Agreement)”)
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 5. | the May 2021
                                            Warrant Indenture (See “Capital Structure – Share Purchase Warrants” for
                                            details regarding the Warrant Indenture, and
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 6. | The November 2021
                                            Warrant Indenture (See “Capital Structure – Share Purchase Warrants” for
                                            details regarding the Warrant Indenture.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Copies
of the material contracts set out above are available under our profile on SEDAR atwww.sedar.com.



INTERESTS
OF EXPERTS



BDO is independent
with respect to the Corporation within the meaning of the Rules of Professional Conduct of the Chartered Professional Accountants
of Ontario.



ADDITIONAL
INFORMATION



Additional
information relating to Cardiol may be found on SEDAR atwww.sedar.com. Additional financial
information is provided in Cardiol’s audited financial statements and management’s discussion and analysis for Cardiol’s
most recently completed financial year, copies of which have been filed on SEDAR and are available at www.sedar.com.













SCHEDULE
A



CARDIOL
THERAPEUTICS INC.
(the “Corporation”)



AUDIT
COMMITTEE CHARTER



| | 1. | POLICY
                                            STATEMENT
| | -- | ------------------------------------------------------------



It is the policy of
the Corporation to establish and maintain an Audit Committee (the “Committee”) to assist the directors (individually a “Director”
and collectively the “Board”) of the Corporation in carrying out the Board’s oversight responsibility for the accounting,
internal controls, financial reporting, audits of financial statements, and risk management processes of the Corporation.



The
Committee shall be provided with resources commensurate with the duties and responsibilities assigned to it by the Board including appropriate
administrative support. Without limiting the generality of the foregoing, the Corporation shall provide for appropriate funding, as determined
by the Committee in its capacity as a committee of the Board, for payment of: (a) compensation to any registered public accounting
firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Corporation;
(b) compensation to any advisors engaged by the Committee under Section4(c)(iii) of
this charter; and (c) ordinary administrative expenses of the Committee that are necessary or appropriate in carrying out its duties.



If determined appropriate
by the Committee, it shall have the discretion to institute investigations of improprieties, or suspected improprieties, within the scope
of its responsibilities, including the standing authority to retain special counsel or other experts. The Committee shall have unrestricted
access to the Corporation’s External Auditors, is authorized to seek any information that it requires from any employee and all
employees are directed to co-operate with any request made by the Committee.



| | 2. | COMPOSITION
                                            OF COMMITTEE
| | -- | --------------------------------------------------------------------



| | (a) | The
                                            Committee shall be established by a resolution of the Board. The Committee shall consist
                                            of a minimum of three Directors. The Board shall appoint the members of the Committee and
                                            may seek the advice and assistance of the Corporate Governance Committee in identifying qualified
                                            candidates. The Board shall appoint one member of the Committee to be the chair of the Committee
                                            (the “Chair”).
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) | All
                                            of the members of the Committee shall be Directors who are independent within the meaning
                                            of National Instrument 52-110 – Audit Committees (“NI 52-110”), and the
                                            rules of any stock exchange or market on which the Corporation’s shares are listed
                                            or posted for trading (collectively, “Applicable Governance Rules”). In this
                                            charter, the term “independent” includes the meanings given to similar terms
                                            by Applicable Governance Rules, including the terms “non-executive”, “outside”
                                            and “unrelated” to the extent such terms are applicable under Applicable Governance
                                            Rules. No member of the Committee shall have participated in the preparation of the financial
                                            statements of the Corporation or any current subsidiary of the Corporation at any time during
                                            the past three years. In addition, in order to be considered to be independent, a member
                                            of the Committee may not, other than in his or her capacity as a member of the Committee,
                                            the Board or any other Board committee: (i) accept, directly or indirectly, any consulting,
                                            advisory, or other compensatory fee from the Corporation or any subsidiary thereof, provided
                                            that, unless the rules of any stock exchange or market on which the Corporation’s
                                            shares are listed or posted for trading provide otherwise, compensatory fees do not include
                                            the receipt of fixed amounts of compensation under a retirement plan (including deferred
                                            compensation) for prior service with the Corporation (provided that such compensation is
                                            not contingent in any way on continued service); or (ii) be an affiliated person of
                                            the Corporation or any subsidiary thereof.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------








A-2




| | (c) | All
                                            members of the Committee must be able to read and understand fundamental financial statements
                                            (including a balance sheet, income statement and cash flow statement) and read and understand
                                            a set of financial statements that present a breadth and level of complexity of accounting
                                            issues that are generally comparable to the breadth and level of complexity of the issues
                                            that can reasonably be expected to be raised by the Corporation’s financial statements.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (d) | The
                                            Committee must have at least one member who has past employment in finance or accounting,
                                            requisite professional certification in accounting, or any other comparable experience or
                                            background which results in that individual’s financial sophistication, including being
                                            or having been a chief executive officer, chief financial officer or other senior officer
                                            with financial oversight responsibilities.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (e) | A
                                            Director appointed by the Board to the Committee shall be a member of the Committee until
                                            replaced by the Board or until his or her resignation.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. | MEETINGS
                                            OF THE COMMITTEE
| | -- | ---------------------------------------------------------------------



| | (a) | The
                                            Committee shall convene a minimum of four times each year at such times and places as may
                                            be determined by the Chair of the Committee and whenever a meeting is requested by the Board,
                                            a member of the Committee, the auditors or senior management of the Corporation. Scheduled
                                            meetings of the Committee shall correspond with the review of the quarterly and year-end
                                            financial statements and management discussion and analysis.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) | Notice
                                            of each meeting of the Committee shall be given to each member of the Committee.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------



| | (c) | Notice
                                            of a meeting of the Committee shall:
| | --- | ---------------------------------------------------------------------------------------



| | (i) | be in
                                            writing, which includes electronic communication facilities;
| | --- | --------------------------------------------------------------------------------------------------------------



| | (ii) | state
                                            the nature of the business to be transacted at the meeting in reasonable detail;
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------



| | (iii) | to
                                            the extent practicable, be accompanied by a copy of any documentation to be considered at
                                            the meeting; and
| | ----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iv) | be
                                            given at least two business days prior to the time stipulated for the meeting or such shorter
                                            period as the members of the Committee may permit.
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (d) | A
                                            quorum for the transaction of business at a meeting of the Committee shall consist of a majority
                                            of the members of the Committee. However, it shall be the practice of the Committee to require
                                            review, and, if necessary, approval of important matters by all members of the Committee.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (e) | A
                                            member or members of the Committee may participate in a meeting of the Committee by means
                                            of such telephonic, electronic, or other communication facilities as permits all persons
                                            participating in the meeting to communicate with each other. A member participating in such
                                            a meeting by any such means is deemed to be present at the meeting.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (f) | In
                                            the absence of the Chair of the Committee, the members of the Committee shall choose one
                                            of the members present to chair the meeting. In addition, the members of the Committee shall
                                            choose one of the persons present to be the secretary of the meeting.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (g) | The
                                            Committee may invite such persons to attend meetings of the Committee as the Committee considers
                                            appropriate, except to the extent exclusion of certain persons is required pursuant to this
                                            charter or by applicable laws.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------








A-3




| | (h) | The
                                            Committee may invite the External Auditors to be present at any meeting of the Committee
                                            and to comment on any financial statements, or on any of the financial aspects, of the Corporation.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (i) | The
                                            Committee (A) shall meet with the External Auditors separately from individuals other
                                            than the Committee, and (B) may meet separately with management of the Corporation.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (j) | Minutes
                                            shall be kept of all meetings of the Committee and shall be signed by the chair and the secretary
                                            of the meeting. The Chair of the Committee shall circulate the minutes of the meetings of
                                            the Committee to all members of the Board.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4. | DUTIES
                                            AND RESPONSIBILITIES OF THE COMMITTEE
| | -- | ----------------------------------------------------------------------------------------



| | (a) | The
                                            Committee, in its capacity as a committee of the Board, is directly responsible for selecting
                                            the public accounting firm to be nominated for the purpose of preparing or issuing an audit
                                            report or performing other audit, review or attest services for the Corporation (the “External
                                            Auditor”) as well as the compensation of the External Auditor. The Committee shall
                                            also be directly responsible for the oversight of the work of the External Auditor (including
                                            resolution of disagreements between management and the auditor regarding financial reporting)
                                            and each such External Auditor must report directly to the Committee.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) | The
                                            other primary duties and responsibilities of the Committee are to:
| | --- | ------------------------------------------------------------------------------------------------------------------



| | (i) | identify
                                            and monitor the management of the principal risks that could impact the financial reporting
                                            of the Corporation;
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) | monitor
                                            the integrity of the Corporation’s financial reporting process and system of internal
                                            controls regarding financial reporting and accounting compliance;
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iii) | monitor
                                            the independence, objectivity, and performance of the External Auditors, including, without
                                            limitation: (A) ensuring the Committee’s receipt from the External Auditors at
                                            least annually of a formal written statement delineating all relationships between the External
                                            Auditors and the Corporation; (B) actively engaging in dialogue with the External Auditors
                                            with respect to any disclosed relationships or services that may impact the objectivity and
                                            independence of the External Auditor; and (C) taking, or recommending that the Board
                                            take, appropriate action to oversee the independence of the External Auditors;
| | ----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iv) | evaluate
                                            the performance of the External Auditors at least annually; deal directly with the External
                                            Auditors to approve external audit plans, other services (if any), and fees;
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (v) | directly
                                            oversee the external audit process and results (in addition to items described in Section 4(e) below);
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| | (vi) | provide
                                            an avenue of communication between the External Auditors, management, and the Board;
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------



| | (vii) | review
                                            annually with management of the Corporation the anti-fraud, anti-bribery, anti-corruption,
                                            and risk assessment programs of the Corporation;
| | ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (viii) | carry
                                            out a review designed to ensure that an effective “whistle blowing” procedure
                                            exists to permit stakeholders to express any concerns regarding accounting or financial matters
                                            to an appropriately independent individual; and
| | ------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------








A-4




| | (c) | The
                                            Committee shall have the authority to:
| | --- | --------------------------------------------------------------------------------------



| | (i) | inspect
                                            any and all of the books and records of the Corporation and its subsidiaries;
| | --- | ---------------------------------------------------------------------------------------------------------------------------------



| | (ii) | discuss
                                            with the management of the Corporation and its subsidiaries, any affected party and the External
                                            Auditors, such accounts, records, and other matters as any member of the Committee considers
                                            appropriate;
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iii) | engage
                                            independent counsel and other advisors as it determines necessary to carry out its duties;
                                            and
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iv) | set
                                            and pay the compensation for any advisors engaged by the Committee.
| | ---- | -------------------------------------------------------------------------------------------------------------------



Relationship with the Board



| | (d) | The
                                            Committee shall, at the earliest opportunity after each meeting, report to the Board the
                                            results of its activities and any reviews undertaken and make recommendations to the Board
                                            as considered appropriate.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Relationship with External
Auditors



| | (e) | The
                                            Committee shall:
| | --- | ----------------------------------------------------------------



| | (i) | review
                                            the audit plan with the External Auditors and with management;
| | --- | -----------------------------------------------------------------------------------------------------------------



| | (ii) | review
                                            with the External Auditors the critical accounting policies and practices used by the Corporation,
                                            all alternative treatments of financial information within IFRS that the External Auditors
                                            have discussed with management, the ramifications of the use of such alternative disclosures
                                            and treatments, and the treatment preferred by the External Auditors;
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iii) | discuss
                                            with management and the External Auditors any proposed changes in major accounting policies
                                            or principles, the presentation and impact of material risks and uncertainties and key estimates
                                            and judgments of management that may be material to financial reporting;
| | ----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iv) | review
                                            with management and with the External Auditors material financial reporting issues arising
                                            during the most recent financial period and the resolution or proposed resolution of such
                                            issues;
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (v) | review
                                            any problems experienced or concerns expressed by the External Auditors in performing any
                                            audit, including any restrictions imposed by management or any material accounting issues
                                            on which there was a disagreement with management;
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (vi) | review
                                            with the External Auditors any accounting adjustments that were noted or proposed by the
                                            independent auditor but that were “passed” (as immaterial or otherwise), any
                                            communications between the audit team and the External Auditor’s national office respecting
                                            auditing or accounting issues presented by the engagement, any “management” or
                                            “internal control” letter or schedule of unadjusted differences issued, or proposed
                                            to be issued, by the External Auditors to the Corporation, or any other material written
                                            communication provided by the External Auditors to the Corporation’s management;
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (vii) | review
                                            with senior management the process of identifying, monitoring, and reporting the principal
                                            risks affecting financial reporting;
| | ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------








A-5




| | (viii) | review
                                            and discuss with management and the External Auditors any off-balance sheet transactions
                                            or structures and their effect on the Corporation’s financial results and operations,
                                            as well as the disclosure regarding such transactions and structures in the Corporation’s
                                            public filings;
| | ------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ix) | review
                                            the audited annual financial statements (including management discussion and analysis) and
                                            related documents in conjunction with the report of the External Auditors and obtain an explanation
                                            from management of all material variances between comparative reporting periods;
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (x) | consider
                                            and review with management the internal control memorandum or management letter containing
                                            the recommendations of the External Auditors and management’s response, if any, including
                                            an evaluation of the adequacy and effectiveness of the internal financial controls and procedures
                                            for financial reporting of the Corporation and subsequent follow-up to any identified weaknesses;
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (xi) | review
                                            with financial management and the External Auditors the quarterly unaudited financial statements
                                            and management discussion and analysis before release to the public;
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (xii) | periodically
                                            meet separately with management and the External Auditors;
| | ----- | -------------------------------------------------------------------------------------------------------------------



| | (xiii) | oversee
                                            the financial affairs of the Corporation and its subsidiaries and, if deemed appropriate,
                                            make recommendations to the Board, External Auditors, or management;
| | ------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (xiv) | discuss
                                            with management and the External Auditors any correspondence with regulatory or governmental
                                            agencies that raise material issues regarding the Corporation’s financial statements
                                            or accounting policies;
| | ----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (xv) | consider
                                            the recommendations of management in respect of the appointment and terms of engagement of
                                            the External Auditor;
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (xvi) | pre-approve
                                            all audit and non-audit services to be provided to the Corporation or its subsidiaries by
                                            its External Auditors, or the External Auditors of subsidiaries of the Corporation, subject
                                            to the overriding principle that the External Auditors not be permitted to be retained by
                                            the Corporation to perform internal audit outsourcing services or financial information systems
                                            services; provided that notwithstanding the above, the foregoing pre-approval of non-audit
                                            services may be delegated to a member of the Committee, with any decisions of the member
                                            with the delegated authority reporting to the Committee at the next scheduled meeting;
| | ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (xvii) | approve
                                            the engagement letter for non-audit services to be provided by the External Auditors or affiliates
                                            of External Auditors, together with estimated fees, and consider the potential impact of
                                            such services on the independence of the External Auditors;
| | ------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (xviii) | when
                                            there is to be a change of External Auditors, review all issues and provide documentation
                                            related to the change, including the information to be included in the notice of change of
                                            auditors and documentation required pursuant to the then current legislation, rules, policies
                                            and instruments of applicable regulatory authorities and the planned steps for an orderly
                                            transition period; and
| | ------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (xix) | review
                                            all reportable events, including disagreements, unresolved issues and consultations, as defined
                                            by applicable laws, on a routine basis, whether or not there is to be a change of the External
                                            Auditors.
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------








A-6




| | (f) | In
                                            connection with the public disclosure of financial information and other public disclosure,
                                            the Committee shall:
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (i) | review
                                            the Corporation’s financial statements, management discussion and analysis, and annual
                                            and interim profit or loss press releases before the Corporation publicly discloses this
                                            information;
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) | review
                                            with management its evaluation of the Corporation’s procedures and controls designed
                                            to assure that information required to be disclosed in the Corporation’s periodic public
                                            reports is recorded, processed, summarized, and reported in such reports within the time
                                            periods specified by applicable securities laws for the filing of such reports (“Disclosure
                                            Controls”) and consider whether any changes are appropriate in light of management’s
                                            evaluation of the effectiveness of such Disclosure Controls;
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iii) | establish
                                            a policy, which may include delegation to an appropriate member or members of management,
                                            for release of earnings press releases, as well as for the release of financial information
                                            and earnings guidance provided to analysts and rating agencies;
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iv) | satisfy
                                            itself that adequate procedures are in place for the review of the Corporation’s public
                                            information extracted from the Corporation’s financial statements, other than the public
                                            information reviewed in accordance with Section 4(f)(i), and periodically assess the
                                            adequacy of those procedures;
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (v) | to
                                            the extent deemed appropriate, review and supervise the preparation by management of:
| | --- | ------------------------------------------------------------------------------------------------------------------------------------



| | (A) | the
                                            annual information forms, management information circulars, and annual and interim financial
                                            statements of the Corporation and any other information of the Corporation filed by the Corporation
                                            with applicable securities regulators;
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (B) | press
                                            releases of the Corporation containing financial information, earnings guidance, forward-looking
                                            statements, information about operations, or any other material information;
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (C) | correspondence
                                            broadly disseminated to shareholders of the Corporation; and
| | --- | -----------------------------------------------------------------------------------------------------------------------



| | (D) | other
                                            relevant written and oral communications or presentations;
| | --- | ------------------------------------------------------------------------------------------------------------



| | (vi) | before
                                            release, review and if appropriate, recommend for approval by the Board, all public disclosure
                                            documents containing audited or unaudited financial information, including any prospectuses,
                                            annual reports, annual information forms, management discussion and analysis, and press releases,
                                            focusing particularly on:
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (A) | any
                                            changes in accounting policies and practices;
| | --- | ---------------------------------------------------------------------------------------------



| | (B) | any
                                            important areas where judgment must be exercised;
| | --- | -------------------------------------------------------------------------------------------------



| | (C) | significant
                                            adjustments resulting from the audit;
| | --- | ---------------------------------------------------------------------------------------------



| | (D) | the
                                            going concern assumption, if any;
| | --- | ---------------------------------------------------------------------------------



| | (E) | compliance
                                            with accounting standards; and
| | --- | -------------------------------------------------------------------------------------



| | (F) | compliance
                                            with stock exchange and legal requirements.
| | --- | --------------------------------------------------------------------------------------------------



| | (g) | The
                                            Committee shall enquire into and determine the appropriate resolution of any conflict of
                                            interest in respect of audit or financial matters which are directed to the Committee by
                                            any member of the Board, a shareholder of the Corporation, the External Auditors, or senior
                                            management.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------








A-7




| | (h) | The
                                            Committee shall periodically review with management the need for an internal audit function.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------



| | (i) | The
                                            Committee shall review the accounting and reporting of costs, liabilities, and contingencies
                                            of the Corporation.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (j) | The
                                            Committee shall periodically discuss with management the Corporation’s major financial
                                            risk exposures and the steps management has taken to monitor and control such exposures.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (k) | The
                                            Committee shall establish, monitor, and review policies and procedures for internal accounting,
                                            financial control, and management information.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (l) | The
                                            Committee shall periodically discuss with management the Corporation’s process for
                                            performing its quarterly certifications pursuant to Multilateral Instrument 52-109 –
                                            Certification of Disclosure in Issuers’ Annual and Interim Filings and the U.S. Sarbanes-Oxley
                                            Act.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (m) | The
                                            Committee shall review with the Chief Executive Officer and Chief Financial Officer of the
                                            Corporation any report on significant deficiencies in the design or operation of the internal
                                            controls that could adversely affect the Corporation’s ability to record, process,
                                            summarize, or report financial data, any material weaknesses in internal controls identified
                                            to the auditors, and any fraud, whether or not material, that involves management or other
                                            employees who have a significant role in the Corporation’s internal controls.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (n) | The
                                            Committee shall establish and maintain procedures for:
| | --- | ------------------------------------------------------------------------------------------------------



| | (i) | the
                                            receipt, retention, and treatment of complaints received by the Corporation regarding accounting,
                                            internal accounting controls, or auditing matters;
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) | the
                                            confidential, anonymous submission by employees of the Corporation of concerns regarding
                                            questionable accounting or auditing matters; and
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iii) | reviewing
                                            arrangements by which staff of the Corporation may, in confidence, raise concerns about possible
                                            improprieties in matters of financial reporting and ensuring that arrangements are in place
                                            for proportionate and independent investigation and follow-up action.
| | ----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (o) | At
                                            each meeting of the Committee, the Committee shall review any complaints or concerns of employees
                                            of the Corporation regarding accounting, internal accounting controls, or auditing matters
                                            relating to the Corporation and violations of any applicable law, rule, or regulation and
                                            shall follow the procedures established under the Corporation’s Whistleblower Policy
                                            regarding such concerns and complaints.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (p) | The
                                            Committee shall review all related-party transactions and discuss the business rationale
                                            for these transactions and determine whether appropriate disclosures have been made. For
                                            this purpose, the term “related-party transactions” includes any “material
                                            transaction” required to be disclosed under Item 13 of Form 51-102F2 under National
                                            Instrument 51-102 – Continuous Disclosure Obligations.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (q) | The
                                            Committee shall review the Corporation’s compliance and ethics programs, including
                                            consideration of legal and regulatory requirements, and shall review with management its
                                            periodic evaluation of the effectiveness of such programs.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------








A-8




| | (r) | The
                                            Committee shall review and approve the Corporation’s hiring policies regarding partners,
                                            employees, and former partners and employees of the present and former External Auditors.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (s) | The
                                            Committee shall receive any reports from legal counsel of evidence of a material violation
                                            of securities laws or breaches of fiduciary duty by the Corporation.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (t) | The
                                            Committee shall review with the Corporation’s legal counsel, on no less than an annual
                                            basis, any legal matter that could have a material impact on the Corporation’s financial
                                            statements and any enquiries received from regulators or government agencies.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (u) | The
                                            Committee shall assess, on an annual basis, the adequacy of this charter and the performance
                                            of the Committee.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------