EX-99.1 2 tm2315143d1_ex99-1.htm EXHIBIT 99.1

 

Exhibit 99.1

 

 

 

 

 

CARDIOL THERAPEUTICS INC.
CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2023
(EXPRESSED IN CANADIAN DOLLARS)
(UNAUDITED)

 

 

 

   

 

 

 

Cardiol Therapeutics Inc.

Condensed Interim Consolidated Statements of Financial Position

(Expressed in Canadian Dollars)

Unaudited

 

 

 

  

As at
March 31,

2023

  

As at
December 31,
2022

 
ASSETS          
           
Current assets          

Cash and cash equivalents (note 3)

  $49,467,863   $59,469,868 
Accounts receivable   197,826    209,923 
Other receivables   210,337    270,274 
Prepaid expenses (note 14)   2,232,769    1,487,913 
Total current assets   52,108,795    61,437,978 
           
Non-current assets          

Property and equipment (note 4)

   302,782    295,738 
Intangible assets (note 5)   273,691    294,802 
Total assets  $52,685,268   $62,028,518 
           

EQUITY AND LIABILITIES

          
           
Current liabilities          

Accounts payable and accrued liabilities (note 14)

  $6,723,262   $9,334,158 
Current portion of lease liability (note 6)   51,573    50,447 
Derivative liability (note 7)   345,820    419,901 
Total current liabilities   7,120,655    9,804,506 
           
Non-current liabilities          

Lease liability (note 6)

   9,089    22,424 
Total liabilities   7,129,744    9,826,930 
           
Equity          

Share capital (note 8)

   147,632,348    147,545,399 
Warrants (note 10)   3,517,867    3,517,867 
Contributed surplus   15,943,155    15,586,832 
Deficit   (121,537,846)   (114,448,510)
Total equity   45,555,524    52,201,588 
Total equity and liabilities  $52,685,268   $62,028,518 

 

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

 

Commitments (notes 5 and 12)

 

Approved on behalf of the Board:

 

“David Elsley”, Director  “Guillermo Torre-Amione”, Director

 

 - 1 - 

 

 

 

Cardiol Therapeutics Inc.

Condensed Interim Consolidated Statements of Loss and Comprehensive Loss

(Expressed in Canadian Dollars)

Unaudited

 

 

 

  

Three Months
Ended

March 31,

2023

  

Three Months
Ended

March 31,

2022

 
Operating expenses (notes 9, 13, 14)         
General and administration  $3,658,440   $5,940,952 
Research and development   4,127,696    3,847,527 
Loss before other income   (7,786,136)   (9,788,479)
Interest income   545,927    72,311 
Gain (loss) on foreign exchange   76,792    (1,370,444)
Change in derivative liability (note 7)   74,081    2,132,517 
Net loss and comprehensive loss for the period  $(7,089,336)  $(8,954,095)
           
Basic and diluted net loss per share (note 11)  $(0.11)  $(0.14)
Weighted average number of common shares outstanding   64,091,647    61,925,221 

 

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

 

 - 2 - 

 

 

 

Cardiol Therapeutics Inc.

Condensed Interim Consolidated Statements of Cash Flows

(Expressed in Canadian Dollars)

Unaudited

 

 

 

   Three Months   Three Months 
   Ended   Ended 
   March 31,   March 31, 
   2023   2022 
Operating activities        
Net loss and comprehensive loss for the period  $(7,089,336)  $(8,954,095)
Adjustments for:          
Depreciation of property and equipment   37,094    32,509 
Amortization of intangible assets   21,111    21,111 
Share-based compensation   426,823    1,066,394 
Change in derivative liability   (74,081)   (2,132,517)
Unrealized foreign exchange gain on cash   (2,760)   (1,387,976)
Accretion on lease liability   1,635    2,638 
Shares for services   16,449    133,535 
Research and development expenses settled through warrant exercise   -    730,107 
Changes in non-cash working capital items:           
Accounts receivable   12,097    (22,423)
Other receivables   59,937    (56,451)
Prepaid expenses   (744,856)   (570,692)
Accounts payable and accrued liabilities   (2,610,896)   723,115 
Net cash used in operating activities   (9,946,783)   (10,414,745)
           
Investing activities          
Purchase of property and equipment   (44,138)   (15,463)
Net cash used in investing activities   (44,138)   (15,463)
           
Financing activities          
Payment of lease liability   (13,844)   (12,979)
Net cash used in financing activities   (13,844)   (12,979)
Net change in cash and cash equivalents   (10,004,765)   (10,443,187)
Cash and cash equivalents, beginning of period   59,469,868    83,899,070 
Impact of foreign exchange on cash and cash equivalents   2,760    1,387,976 
Cash and cash equivalents, end of period  $49,467,863   $74,843,859 

 

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

 

 - 3 - 

 

 

 

Cardiol Therapeutics Inc.

Condensed Interim Consolidated Statements of Changes in Equity

(Expressed in Canadian Dollars)

Unaudited

 

 

 

   Share capital       Contributed         
   Number   Amount   Warrants   surplus   Deficit   Total 
Balance, December 31, 2021   61,922,999   $142,918,829   $4,176,780   $12,660,329   $(83,517,863)  $76,238,075 
Shares for services   2,500    133,535    -    -    -    133,535 
Share-based compensation (note 9)   -    -    -    1,066,394   -    1,066,394 
Fair value of warrants earned   -    -    730,107    -    -    730,107 
Net loss and comprehensive loss for the period   -    -    -   -    (8,954,095)   (8,954,095)
Balance, March 31, 2022   61,925,499   $143,052,364   $4,906,887   $13,726,723   $(92,471,958)  $69,214,016 
                               
Balance, December 31, 2022   64,042,536   $147,545,399   $3,517,867   $15,586,832   $(114,448,510)  $52,201,588 
Restricted share units exercised   50,000    70,500    -    (70,500)   -    - 
Shares for services   5,000    16,449    -    -    -    16,449 
Share-based compensation (note 9)   -    -    -    426,823    -    426,823 
Net loss and comprehensive loss for the period   -    -    -    -    (7,089,336)   (7,089,336)
Balance, March 31, 2023   64,097,536   $147,632,348   $3,517,867   $15,943,155   $(121,537,846)  $45,555,524 

 

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

 

 - 4 - 

 

 

 

Cardiol Therapeutics Inc.

Notes to Condensed Interim Consolidated Financial Statements

Three Months Ended March 31, 2023 

(Expressed in Canadian Dollars)

Unaudited

 

 

 

1.Nature of operations

 

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

 

The Corporation is a clinical-stage life sciences company focused on the research and clinical development of anti- inflammatory and anti-fibrotic therapies for the treatment of heart disease. The Corporation's lead drug candidate, CardiolRx™ (cannabidiol) oral solution, is pharmaceutically manufactured and in clinical development for use in the treatment of heart disease.

 

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

 

2.Significant accounting policies

 

Statement of compliance

 

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

 

These unaudited condensed interim consolidated financial statements have been prepared on a historical cost basis. In addition, these unaudited condensed interim consolidated have been prepared using the accrual basis of accounting except for cash flow information.

 

The policies applied in these unaudited condensed interim consolidated financial statements are based on IFRSs issued and outstanding as of May 12, 2023, the date the Board of Directors approved the statements. The same accounting policies and methods of computation are followed in these unaudited condensed interim consolidated financial statements as compared with the most recent annual consolidated financial statements as at and for the year ended December 31, 2022.

 

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

 

 - 5 - 

 

 

 

Cardiol Therapeutics Inc.

Notes to Condensed Interim Consolidated Financial Statements

Three Months Ended March 31, 2023 

(Expressed in Canadian Dollars)

Unaudited

 

 

 

3.Cash and cash equivalents

 

Interest earned on cash and cash equivalents for the three months ended March 31, 2023 amounted to $545,927 (three months ended March 31, 2022 - $72,311). As at December 31, 2022, Cash and cash equivalents included a cashable Guaranteed Investment Certificate totaling $61,875 earning interest of 0.5% per annum and maturing on December 4, 2023. The Guaranteed Investment Certificate was redeemed prior to maturity without penalty during the three months ended March 31, 2023.

 

4.Property and equipment

 

 

Cost

  Right-of-
use asset		  

 

Equipment

   Leasehold
improvements		   Office
equipment		   Computer
equipment		  

 

Total

 
Balance, December 31, 2021  $200,319   $130,770   $237,248   $65,716   $79,823   $713,876 
Additions   -    41,094    -    1,148    32,467    74,709 
Balance, December 31, 2022   200,319    171,864    237,248   $66,864   $112,290   $788,585 
Additions   -    44,138    -    -    -    44,138 
Balance, March 31, 2023  $200,319   $216,002   $237,248   $66,864   $112,290   $832,723 

 

Accumulated Depreciation  Right-of-
use asset		   Equipment   Leasehold
improvements		   Office
equipment		   Computer
equipment		   Total 
Balance, December 31, 2021  $103,509   $75,211   $105,872   $25,659   $47,132   $357,383 
Depreciation for the year   40,068    19,750    50,840    8,069    16,737    135,464 
Balance, December 31, 2022  $143,577   $94,961   $156,712   $33,728   $63,869   $492,847 
Depreciation for the period   10,017    9,078    12,710    1,657    3,632    37,094 
Balance, March 31, 2023  $153,594   $104,039   $169,422   $35,385   $67,501   $529,941 

 

Carrying value  Right-of-
use asset		   Equipment   Leasehold
improvements		   Office
equipment		   Computer
equipment		   Total 
Balance, December 31, 2022  $56,742   $76,903   $80,536$   33,136   $48,421   $295,738 
Balance, March 31, 2023  $46,725   $111,963   $67,826$   31,479   $44,789   $302,782 

 

 - 6 - 

 

 

 

Cardiol Therapeutics Inc.

Notes to Condensed Interim Consolidated Financial Statements

Three Months Ended March 31, 2023 

(Expressed in Canadian Dollars)

Unaudited

 

 

 

5.Intangible assets

 

Cost   Exclusive global
license agreement		  
Balance, December 31, 2021, December 31, 2022, and March 31, 2023   $ 767,228   
         
Accumulated Amortization   Exclusive global
license agreement		  
Balance, December 31, 2021   $ 387,982  
Amortization for the year     84,444  
Balance, December 31, 2022   $ 472,426  
Amortization for the period     21,111  
Balance, March 31, 2023   $ 493,537  
         
Carrying Value   Exclusive global
license agreement		  
Balance, December 31, 2022   $ 294,802  
Balance, March 31, 2023   $ 273,691  

 

Exclusive global agreement ("Meros License Agreement")

 

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

 

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

 

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

 

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

 

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

 

 - 7 - 

 

 

 

Cardiol Therapeutics Inc.

Notes to Condensed Interim Consolidated Financial Statements

Three Months Ended March 31, 2023 

(Expressed in Canadian Dollars)

Unaudited

 

 

 

5Intangible assets (continued)

 

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

 

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

 

6.Lease liability

 

   Carrying
Value		   
Balance, December 31, 2021  $117,579 
Repayments   (53,934)
Accretion   9,226 
Balance, December 31, 2022  $72,871 
Repayments   (13,844)
Accretion   1,635 
Balance, March 31, 2023  $60,662 
Current portion   51,573 
Long-term portion  $9,089 

 

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

 

7.Derivative liability

 

On November 5, 2021, the Corporation issued 8,175,000 warrants as part of a unit financing. Each warrant is exercisable into one common share at the price of USD$3.75 per share for a period of three years from closing. The original estimated fair value of $11,577,426 was assigned to the 8,175,000 warrants issued by using a fair value market technique incorporating the Black-Scholes option pricing model, with the following assumptions: a risk-free interest rate of 1.01%; an expected volatility factor of 81%; an expected dividend yield of 0%; and an expected life of 3 years. The only significant unobservable input is the volatility, which could cause an increase or decrease in fair value. The warrants have been classified as a derivative liability on the statement of financial position and are re-valued at each reporting date, as the warrants were issued in a currency other than the Corporation's functional currency. As at March 31, 2023, the fair value of the derivative liability was $345,820 (December 31, 2022 - $419,901), resulting in a decrease in the value of the derivative liability for the three months ended March 31, 2023 of $74,081 (three months ended March 31, 2022 - $2,132,517).

 

 - 8 - 

 

 

 

Cardiol Therapeutics Inc.

Notes to Condensed Interim Consolidated Financial Statements

Three Months Ended March 31, 2023 

(Expressed in Canadian Dollars)

Unaudited

 

 

 

7.Derivative liability (continued)

 

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

 

   Three Months
Ended
March 31,
2023		   Three Months
Ended
March 31,
2022		 
Share price  USD$0.49   USD$1.53 
Exercise price  USD$3.75   USD$3.75 
Risk-free interest rate     3.74%   2.28%
Expected volatility     97%   83%
Expected life in years     1.60    2.60 
Expected dividend yield       Nil     Nil 

 

8.Share capital

 

a)Authorized share capital

 

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

 

b)Common shares issued

 

   Number of
common
shares		   Amount 
Balance, December 31, 2021   61,922,999   $142,918,829 
Shares for services (i)   2,500    133,535 
Balance, March 31, 2022   61,925,499   $143,052,364 
           
Balance, December 31, 2022   64,042,536   $147,545,399 
Shares for services (ii)   5,000    16,449 
Restricted share units exercised (note 9)   50,000    70,500 
Balance, March 31, 2023   64,097,536   $147,632,348 

 

 - 9 - 

 

 

 

Cardiol Therapeutics Inc.

Notes to Condensed Interim Consolidated Financial Statements

Three Months Ended March 31, 2023 

(Expressed in Canadian Dollars)

Unaudited

 

 

 

8.Share capital (continued)

 

(i) During the three months ended March 31, 2022, the Corporation issued 2,500 common shares with a fair value of $5,475. The fair value of the shares was determined to be equal to the value of the services rendered. Included in shares for services is $139,010 related to vesting of previously issued shares.

 

(ii) During the three months ended March 31, 2023, the Corporation issued 5,000 common shares with a fair value of $3,550. The fair value of the shares was determined to be equal to the value of the services rendered. Included in shares for services is $12,899 related to vesting of previously issued shares.

 

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

 

In June 2022, the Corporation announced it entered into an equity distribution agreement with Canaccord Genuity LLC and Cantor Fitzgerald & Co. (the "Sales Agents") acting as co-agents in connection with the 2022 at-the-market offering program (the "2022 ATM Program"). Under the terms of the 2022 ATM Program, the Corporation may, from time to time, sell common shares having an aggregate value of USD$50,000,000 through the Sales Agents on the Nasdaq Capital Market. As at March 31, 2023 and the date of these consolidated financial statements, the Corporation has not issued any shares under the 2022 ATM Program.

 

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

 

9.Share-based payments

 

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

 

During the three months ended March 31, 2023, the total expenses related to share-based compensation amounted to $426,823 (three months ended March 31, 2022 - $1,066,394).

 

 - 10 - 

 

 

 

Cardiol Therapeutics Inc.

Notes to Condensed Interim Consolidated Financial Statements

Three Months Ended March 31, 2023 

(Expressed in Canadian Dollars)

Unaudited

 

 

 

9.Share-based payments (continued)

 

(a)Stock Options

 

   Number of
stock options		   Weighted average
exercise price ($)		 
Balance, December 31, 2021   4,301,800   $4.16 
Issued   280,000    2.16 
Balance, March 31, 2022   4,581,800   $4.03 
           

Balance, December 31, 2022

   1,968,476   $3.52 
Expired   (775,976)   4.65 
Balance, March 31, 2023   1,192,500   $2.79 

 

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

 

    Three Months 
    Ended 
    March 31, 
    2022 
Fair value of stock options at grant date   $1.55 
Share price   $2.07 
Exercise price   $2.16 
Risk-free interest rate    1.62%
Expected volatility    102%
       
Expected life in years    5.00 
Expected dividend yield    Nil 

 

The following table reflects the actual stock options issued and outstanding as of March 31, 2023:

 

Expiry date  Exercise
price ($)		  

Weighted average
remaining
contractual
life (years)

   Number of
options
outstanding		  

Number of
options
vested
(exercisable)

 
February 23, 2025  3.54   1.90   20,000   20,000 
August 19, 2025  2.12   2.39   100,000   66,667 
August 30, 2025  5.00   2.42   85,000   85,000 
April 1, 2026  5.77   3.01   60,000   60,000 
December 8, 2026  3.59   3.69   325,000   108,333 
January 11, 2027  2.18   3.79   220,000   73,333 
March 14, 2027  2.07   3.96   60,000   20,000 
May 12, 2027  1.46   4.12   115,000   - 
September 12, 2027  1.61   4.45   207,500   - 
  2.79   3.63   1,192,500   433,333 

 

 - 11 - 

 

 

 

Cardiol Therapeutics Inc.

Notes to Condensed Interim Consolidated Financial Statements

Three Months Ended March 31, 2023 

(Expressed in Canadian Dollars)

Unaudited

 

 

 

9.Share-based payments (continued)

 

(b)Performance Share Units

 

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

 

(c)Restricted Share Units

 

The total outstanding RSUs at March 31, 2023 is 2,262,963 (December 31, 2022 - 2,312,963). Of the outstanding RSUs, 1,305,984 have fully vested as of March 31, 2023 (December 31, 2022 - 1,355,984). The Corporation did not issue any RSUs during the three months ended March 31, 2023 (three months ended March 31, 2022 - nil).

 

10.Warrants

 

   Number of
warrants		   Amount 
Balance, December 31, 2021   12,452,178   $4,176,780 
Earned (i)   -    730,107 
Balance, March 31, 2022   12,452,178   $4,906,887 
           
Balance, December 31, 2022 and March 31, 2023   11,628,178   $3,517,867 

 

(i)   During the three months ended March 31, 2022, 182,526 warrants with a fair value of $730,107 were earned pursuant to the Caro Development Agreement (see note 12 (iii)).

 

The following table reflects the actual warrants issued and outstanding as of March 31, 2023, excluding 1,020,000 special warrants convertible automatically into common shares for no additional consideration in accordance with the original escrow release terms as described in the Meros License Agreement (see note 5):

 

Expiry date   Exercise
price ($)		     Remaining
contractual
life (years)		     Warrants
exercisable		  
May 12, 2024     4.60       1.12       3,453,178  
November 5, 2024(1)     5.08       1.60       8,175,000  
      4.94       1.46       11,628,178  

  

(1) Warrants carry an exercise price of USD$3.75. This amount was translated to CAD for presentation purposes at the March 31, 2023 rate of 1.35. These warrants are classified as a derivative liability on the statement of financial position (see note 7).

 

 - 12 - 

 

 

 

Cardiol Therapeutics Inc.

Notes to Condensed Interim Consolidated Financial Statements

Three Months Ended March 31, 2023 

(Expressed in Canadian Dollars)

Unaudited

 

 

 

11.Loss per share

 

For the three months ended March 31, 2023, basic and diluted loss per share has been calculated based on the loss attributable to common shareholders of $7,089,336 (three months ended March 31, 2022 - $8,954,095) and the weighted average number of common shares outstanding of 64,091,647 (three months ended March 31, 2022 - 61,925,221,). Diluted loss per share did not include the effect of stock options, PSUs, RSUs, and warrants as they are anti-dilutive.

 

12.Commitments

 

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

 

   Base rent   Variable rent   Total 
2023  $41,532   $38,884   $80,416 
2024   23,073    21,603    44,676 
   $64,605   $60,487   $125,092 

 

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

 

2023   $144,130 

 

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

 

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

 

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

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Cardiol Therapeutics Inc.

Notes to Condensed Interim Consolidated Financial Statements

Three Months Ended March 31, 2023 

(Expressed in Canadian Dollars)

Unaudited

 

 

 

12.Commitments (continued)

 

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

 

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

 

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

 

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

 

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

 

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

 

(v)   Pursuant to the terms of agreements with various other contract research organizations, the Corporation is committed for contract research services for 2023 at a cost of approximately $756,207.

 

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Cardiol Therapeutics Inc.

Notes to Condensed Interim Consolidated Financial Statements

Three Months Ended March 31, 2023 

(Expressed in Canadian Dollars)

Unaudited

 

 

 

13.Other expenses and adjustments

 

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

 

   Three Months
Ended
March 31,
2023		   Three Months
Ended
March 31,
2022		 
Research and development expenses          
Non-cash share-based compensation   97,405    171,837 
           
General and administration expenses          
Depreciation of property and equipment   37,094    32,509 
Amortization of intangible assets   21,111    21,111 
Non-cash share-based compensation   329,418    894,557 

 

14.Related party transactions

 

(a)The Corporation entered into the following transactions with related parties:

 

(i) Included in research and development expense is $628,680 for the three months ended March 31, 2023 (three months ended March 31, 2022 - $340,479) paid to a company related to a director. As at March 31, 2023, $779,691 (December 31, 2022 - $985,022) was owed to this company and this amount was included in accounts payable and accrued liabilities, and $nil (December 31, 2022 - $9,413) was paid to this company and was included in prepaid expenses.

 

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

 

  Three Months
Ended
March 31,
2023		   Three Months
Ended
March 31,
2022		 
Salaries and benefits  $1,170,030   $862,328 
Share-based payments   268,882    481,281 
   $1,438,912   $1,343,609 

 

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

 

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