Psyence Biomedical Ltd. (Formerly the carve-out of Psyence Biomed Corp.) Unaudited Condensed Consolidated Interim Financial Statements For the three and six months ended

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Psyence Biomedical Ltd.

(Formerly the carve-out of Psyence Biomed Corp.)

Unaudited Condensed Consolidated Interim Financial Statements

For the three and six months ended September 30, 2024 and 2023

Expressed in United States Dollars

Condensed Consolidated Interim Statements of Financial Position

As at September 30, 2024 and March 31, 2024

Going concern (Note 1)

Subsequent events (Note 18)

Approved on behalf of Board of Directors

The accompanying notes are an integral part of the Condensed Consolidated Interim Financial Statements

Condensed Consolidated Interim Statements of Net Loss and Comprehensive Loss

For three and six months ended September 30, 2024 and 2023

The accompanying notes are an integral part of the Condensed Consolidated Interim Financial Statements

Condensed Consolidated Interim Statements of Changes in Shareholder Equity

For the six months ended September 30, 2024 and 2023

The accompanying notes are an integral part of the Condensed Consolidated Interim Financial Statements

Condensed Consolidated Interim Statements of Cash Flows

For the six months ended September 30, 2024 and September 30, 2023

The accompanying notes are an integral part of the Condensed Consolidated Interim Financial Statements

Notes to the Condensed Consolidated Interim Financial Statements

1. Nature of operations and going concern

Psyence Biomedical Ltd. (the "Company" or "PBM"), is a life science biotechnology company traded on the Nasdaq exchange (NASDAQ: PBM) that is focused on the development of botanical (nature derived, or non-synthetic) psilocybin-based psychedelic medicines. The Company is working towards developing safe and effective, nature-derived psychedelic therapeutics to treat a broad range of mental health disorders. The Company is initially focused on mental health disorders in the context of Palliative Care. The Company is currently conducting research through clinical trials to evaluate the safety and effectiveness of natural psilocybin in treating adjustment disorder in patients with an incurable cancer diagnosis in a palliative care context (the "Clinical Trials").

The Company's registered office is at 121 Richmond Street West, PH Suite 1300, Toronto, Ontario M5H 2K1.

The Company listed on the NASDAQ exchange on January 25, 2024 ("listing").

These Unaudited Condensed Consolidated Interim Financial Statements (the "Financial Statements") provide historical financial information of PBM, reflecting PBM as if it had been historically operating the Clinical Trials conducted by Psyence Group Inc. ("PGI") prior to the listing of PBM. The Financial Statements are carve out statements up to the date of listing of PBM.

On November 26, 2024, the Company consolidated its common shares on the basis of 75:1. As a result of the common share consolidation, figures in notes 9, 10, 11, 12 and 18 have been revised to reflect this consolidation.

These Financial Statements are prepared on a going concern basis, which contemplates that the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of business. The Company's ability to continue operations depends on its ability to secure additional financing. There is uncertainty regarding the availability of financing at acceptable terms, which could impact the Company's ability to continue operating. These conditions indicate a material uncertainty that cast significant doubt on the Company's ability to continue as a going concern.

These Financial Statements do not reflect the adjustments to the carrying values and classifications of assets and liabilities that would be necessary if the Company were unable to realize its assets and settle its liabilities as a in the normal course of operations. Such adjustments could be significant.

2. Basis of presentation

Statement of compliance

These Unaudited Condensed Consolidated Interim Financial Statements have been prepared in accordance with IAS 34 Interim Financial Reporting as issued by the International Accounting Standards Board ("IASB"). Accordingly, certain disclosures included in annual consolidated financial statements prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the IASB have been condensed or omitted and these Unaudited Condensed Consolidated Interim Financial Statements should be read in conjunction with the Company's audited Consolidated Financial Statements for the year ended March 31, 2024. These Condensed Consolidated Interim Financial Statements follow the same accounting policies, estimates, and methods of application as our most recent annual financial statements.

The Unaudited Condensed Consolidated Interim Financial Statements were authorized for issue on January 21, 2024 by the directors of the Company.

Consolidated Statements of Financial Position

The Consolidated Statements of Financial Position include the assets and liabilities that are the Clinical Trial related assets and liabilities, which have been determined in the following manner:

Consolidated Statements of Net Loss and Comprehensive Loss

The comparative Condensed Consolidated Interim Financial Statements for the three and six months were presented on a carve out basis ("Carve-out Financial Statements").

The Carve-out Financial Statements have been prepared on a carve-out basis from the PGI consolidated financial statements for the purpose of presenting the historical financial position, financial performance and cash flows of the Company on a stand-alone basis. The accounting policies applied in the Carve-out Financial Statements are, to the extent applicable, consistent with accounting policies applied in the PGI consolidated financial statements, and as a result, reflect the carrying amounts that are included in PGI's consolidated financial statements.

In determining the perimeter of the Carve-out Financial Statements, the activities related to the Company's clinical trials were considered to include the operations of Psyence Biomed Corp. and Psyence Australia (Pty) Ltd carried out through PGI directly as well as through legal entities of PGI as detailed above.

The Company believes the allocation assumptions applied in the Carve-out Financial Statements to be a reasonable reflection of the utilization of services provided by PGI. However, different allocation assumptions could have resulted in different outcomes. The allocations are therefore not necessarily representative of the financial position, financial performance or cash flows that would have been reported if PBM operated on its own or as an entity independent from PGI during the periods presented.

The Company believes the basis of preparation described above results in the Carve-out Financial Statements reflecting the assets and liabilities associated with PBM and reflects costs associated with the functions that would be necessary to operate independently.

Basis of consolidation

These Condensed Consolidated Interim Financial Statement incorporate the accounts of PBM and its subsidiaries performing Clinical Trials. A subsidiary is an entity controlled by PBM and its results are consolidated into the financial results of the Company from the effective date of control up to the effective date of loss of control.

Control exists when an investor is exposed, or has the rights, to variable returns from the involvement with the investee and has liability to affect those returns through its power over the investee.

The subsidiaries of PBM as at September 30, 2024 and March 31, 2024 for the purpose of these Financial Statements are as follows:

Inter-company balances and transactions are eliminated upon consolidation.

The financial results of subsidiaries in financial period ended September 30, 2023 were presented on a carve out basis.

Functional and presentation currency

These Financial Statements are presented in United States Dollars ("USD $"), which is also PBM's functional currency. The Company's functional currency before the listing on the NASDAQ was Canadian Dollars. The USD $ represents the currency of the Company's funding and is the currency of the primary economic environment in which the Company operates in, except for the Company's Australian subsidiary which has an Australian Dollar functional currency. See change in accounting policy in Note 3 for further details on the change in the Company's presentation currency.

3. Material accounting policies

These Condensed Consolidated Interim Financial Statements follow the same accounting policies, estimates, and methods of application as our most recent Annual audited Consolidated Financial Statements.

Change in accounting policy

Upon NASDAQ listing the Corporation decided to change the presentation currency of its consolidated financial statements from Canadian Dollars to United States Dollars.

The Board of Directors believe that US Dollar financial reporting provides more relevant presentation of the Corporation's financial position, funding and treasury functions, financial performance and cash flows.

A change in presentation currency represents a change in accounting policy in terms of IAS 8 - Accounting Policies, Changes in Accounting Estimates and Errors, requiring the restatement of comparative information.

In accordance with IAS 21 - The Effects of Changes in Foreign Exchange Rates, the methodology followed in restating historical financial information from CDN$ to US$.

The average and closing rates used in translating the historical financial information from CDN$ to US$ for the various periods were as follows:

The closing rate used as at March 31, 2023 was $0.7389.

The average rate used for the three month period ended September 30, 2023 was $0.7455 and for the six month period ended September 30, 2023 was $0.7451.

The change in presentation currency is a voluntary change which is accounted for retrospectively. For comparative reporting purposes, historical financial information has been translated to United States dollars which is disclosed in the tables below:

Classification of Liabilities as Current or Non-Current and Non-Current Liabilities with Covenants (Amendments to IAS 1)

In January 2020 and October 2022, the IASB issued amendments to IAS 1 Presentation of Financial Statements which were incorporated into Part I of the CPA Canada Handbook - Accounting in April 2020 and December 2022, respectively.

The amendments clarify the requirements for classifying liabilities as either current or non-current by clarifying:

Both the January 2020 and October 2022 amendments are effective for annual reporting periods beginning on or after January 1, 2024. The amendments are to be applied retrospectively. Earlier application is permitted. The amendments have been adopted and resulted in no material impact to the Condensed Consolidated Interim Financial Statements.

4. Critical accounting estimates and judgements

These Condensed Consolidated Interim Financial Statements follow the same accounting policies, estimates, and methods of application as our most recent annual financial statements.

5. Cash, restricted cash and cash equivalents

Cash and cash equivalents include the following amounts:

7. Accounts payable and accrued liabilities

Accounts payable and accrued liabilities include the following amounts:

Included in trade payables is an amount of $93,750 of share settled share issuance costs not yet settled. Refer Note 12.

8. Convertible note liability

During the prior fiscal year, the Company entered into a securities purchase agreement with Harraden Circle Investments, LLC ("Investor"), relating to up to four senior secured convertible notes, obligations under which are guaranteed by certain assets of the Company. Issuable to the Investors for the aggregate principal amount of up to $12,500,000 in exchange for up to $10,000,000 in cash subscription amounts (the "Convertible Note Financing").

The First Tranche Notes, for an aggregate of $3,125,000 principal, were delivered by the Company to the Investors on listing, in exchange for an aggregate of $2,500,000 in financing. On the original issuance date of the First Tranche Notes, interest began accruing at 8.0% per annum based on the outstanding principal amount of the First Tranche Notes and is payable monthly in arrears in cash or in common shares of the Company at the Conversion Price. The maturity date of the First Tranche Notes is January 25, 2027.

The Second Tranche Notes, for an aggregate of $1,000,000 principal, were delivered by the Company to the Investors, in exchange for an aggregate of $1,250,000 in financing. On the original issuance date of the Second Tranche Notes, interest began accruing at 8.0% per annum based on the outstanding principal amount of the Second Tranche Notes and is payable monthly in arrears in cash or in common shares of the Company at the Conversion Price. The maturity date of the First Tranche Notes is May 31, 2027.