Psyence™

Psyence Group Inc.

Management Discussion & Analysis (MD&A)
for the three months ended
September 30, 2024

Date of the MD&A:
November 29, 2024

Registration number: 1074709
LEI: 549300RPEOIVSD0MJC07
www.psyence.com

PSYENCE GROUP INC.
Management's Discussion and Analysis

Table of Contents: _____________

Forward-Looking Information __________ 2
Overview __________ 4
Corporate Structure __________ 4
Development of the business __________ 5
Business Overview and Discussion of Operations __________ 6
Intellectual Property __________ 14
Regulatory Framework and Licensing Regime __________ 14
Corporate Governance and Compliance Program __________ 17
Financial Information __________ 18
Operations __________ 20
Off Balance Sheet Arrangements __________ 22
Transactions between Related Parties __________ 22
Subsequent Highlights __________ 23
Financial Instruments and Other Instruments __________ 23
Risk Factors __________ 24
Material Contracts __________ 37
Additional Information _____________ 37

Psyence
Healing Minds with Science
Changing Lives with Nature

PSYENCE GROUP INC.
Management's Discussion and Analysis

Psyence Group Inc.

Management Discussion & Analysis

Dated: November 29, 2024

The following information should be read in conjunction with the unaudited condensed consolidated interim financial statements for the period ended September 30, 2024 of Psyence Group Inc. (the "Company" or "Psyence"), which are prepared in accordance with International Financial Reporting Standards ("IFRS"). All figures are expressed in Canadian dollars unless otherwise indicated.

Forward-Looking Information

This Management Discussion & Analysis ("MD&A") contains forward-looking statements and forward-looking information as such terms are defined under applicable Canadian securities laws. These forward-looking statements and forward-looking information include, but are not limited to, statements with respect to management's expectations regarding the future growth, results of operations, performance and business prospects of the Company, and relate to, without limitation:

the Company's research and development plans, business model, strategic objectives and growth strategy;
the Company's future growth plans;
anticipated trends and challenges in the Company's business and the markets in which it operates;
the future demand for psilocybin and psilocybin mushroom products from time to time produced, supplied, or distributed by the Company;
the Company's expectations regarding regulatory requirements and developments in the jurisdictions in which it operates;
the approval of regulatory bodies of psychedelic substances including psilocybin for the treatment of various health conditions;
controlled substances laws;
the Company's ability to obtain the issue and/or renewal of licenses and regulatory authorizations for its business operations;
the Company's estimate of the size of the potential markets for its products;
the Company may not develop its product and service offerings in a manner that enables it to be profitable and meet its customers' requirements;
risks that its growth strategy may not be successful;
risks that fluctuations in its operating results will be significant relative to its revenues;
risks relating to an evolving regulatory regime related to psilocybin and psychedelic products;
risks relating to operations based in its emerging markets;
the continuation of the Company as a going concern;
the Company's intellectual property;
the growth of competition from other companies in the industry;
the Company's actual financial position and results of operations may differ materially from the expectations of the Company's management;
the Company's exposure to fluctuations in foreign currencies; and
the Company's expectations regarding the sufficiency of its cash for funding non-development related expenditures and future cash balances.

These forward-looking statements and forward-looking information may also include other statements that are predictive in nature, or that depend upon or refer to future events or conditions. Without

Psyence
Healing Minds with Science
Changing Lives with Nature

PSYENCE GROUP INC.
Management's Discussion and Analysis

limitation, the words "may", "will", "would", "should", "could", "expect", "plan", "intend", "trend", "indicate", "assume", "anticipate", "believe", "estimate", "predict", "likely" or "potential", or the negative or other variations of these words or other comparable words or phrases, are intended to identify forward-looking statements. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances contain forward-looking information. Forward-looking statements and forward-looking information are not historical facts but instead represent management's expectations, estimates and projections regarding future events.

With respect to forward-looking statements and forward-looking information contained in this MD&A, assumptions have been made regarding, among other things: future research and development plans for the Company proceeding substantially as currently envisioned, future expenditures to be incurred by the Company, research and development and operating costs, additional sources of funding, the impact of competition on the Company and the Company being able to obtain financing on acceptable terms.

Although management believes the expectations reflected in such forward-looking statements and forward-looking information are reasonable, forward-looking statements and forward-looking information are based on the opinions, assumptions and estimates of management at the date the statements are made, and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements and forward-looking information.

These risks, uncertainties and factors include, but are not limited to: risks, uncertainties and the results of the development of the Company's future products, its ability to establish lawful distribution networks for such products, and the timing thereof; the Company may not have sufficient capital to achieve its growth strategy; risks that its growth strategy may not be successful; regulatory policies concerning psilocybin products; development of laws governing controlled substances; the ability to obtain the issuance of and/or renewal of and/or approvals for licences and authorizations; competition from other companies; clinical trial results; limitations on insurance coverage; the timing and amount of estimated capital expenditure in respect of the business of the Company; operating expenditures; success of marketing activities; estimated budgets; currency fluctuations; requirements for additional capital; the timing and possible outcome of litigation in future periods; goals; strategies; future growth; planned business activities and planned future acquisitions; the adequacy of financial resources; and other events or conditions that may occur in the future.

In addition, if any of the assumptions or estimates made by management prove to be incorrect, actual results and developments are likely to differ, and may differ materially, from those expressed or implied by the forward-looking statements contained in, or incorporated by reference into, this MD&A. Accordingly, readers are cautioned not to place undue reliance on such statements.

All of the forward-looking statements and forward-looking information in this MD&A are qualified by these cautionary statements. Statements containing forward-looking statements and/or forward-looking information contained herein are made only as of the date hereof. The Company expressly disclaims any obligation to update, revise or alter statements containing any forward-looking statements or forward-looking information, or the factors or assumptions underlying them, whether as a result of new information, future events or otherwise, except as required by law. New factors emerge from time to time, and it is not possible for the Company to predict which factors may arise. In addition, the Company cannot assess the impact of each factor on the Company's business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements or forward-looking information.

Psyence
Healing Minds with Science
Changing Lives with Nature

PSYENCE GROUP INC.
Management's Discussion and Analysis

Overview

Corporate Structure

The Company is a life science biotechnology company listed on the Canadian Securities Exchange (CSE:PSYG), with a focus on natural psychedelics. We commenced the clinical trial process to evaluate the safety and efficacy of our erstwhile drug candidate, the development of which has been taken over by a subsidiary company, Psyence Biomedical Ltd ("PBM"), the world's first life science biotechnology company traded on the Nasdaq (NASDAQ: PBM) that is focused on the development of botanical (nature derived, or non-synthetic) psilocybin-based psychedelic medicines, and works with natural psilocybin products for the healing of psychological trauma and its mental health consequences in the context of palliative care.

The below diagram shows the corporate structure of Psyence Group Inc. as at September 30, 2024:

Notes:

The Company transferred its shareholding in Good Psyence, Psyence South Africa, Mind Health, and Psyence UK Group to Psyence Labs Ltd ("PsyLabs"), a third-party private company, as part of the strategic restructuring of its non-clinical business (described in more detail below in the section titled Development of the business - Strategic Restructuring of Business Units). On September 17, 2024, the Company entered into an agreement (the "Psylabs Sale Agreement") with PBM whereby PBM acquired the Company's entire shareholding in PsyLabs effective October 28, 2024.
As at September 30, 2024, the Company holds 9,921,314 common shares in PBM which equates to approximately 15%.

Psyence
Healing Minds with Science
Changing Lives with Nature

PSYENCE GROUP INC.
Management's Discussion and Analysis

Development of the business

Psyence Biomed Corp. ("PBC") was a private corporation incorporated under the laws of British Columbia. Effective July 21, 2023 PBC was continued under the laws of the Province of Ontario. It was a wholly owned subsidiary of the Company, and also referred to as the Psyence Therapeutics division.

The Psyence Group was created through a business combination of Psyence Biomed Corp. with Cardinal Capital Partners Inc., a public company, in January 2021, resulting in the Company's public listing in Canada.

The Company and PBC concluded their amalgamation on January 16, 2024, with the Company being the surviving entity (the "Amalgamation"). The Company therefore remains the holding company of the subsidiaries of the group.

Business Combination

On January 9, 2023 the Company announced that it had entered into a definitive business combination agreement (the "Business Combination Agreement") with Newcourt Acquisition Corp (NASDAQ: NCAC), a special purpose acquisition company ("SPAC") formed for the purpose of acquiring or merging with one or more businesses ("Newcourt"). Newcourt has entered into the Business Combination Agreement with PBC, in order to create a public company leveraging natural psilocybin in the treatment of palliative care ("Business Combination"). This Business Combination Agreement was amended and restated on July 31st, 2023. Further details of the Business Combination are set out in the section titled Business Overview - Psyence Therapeutics).

Canadian Restructuring to Facilitate the Business Combination (as described in more detail below in the section titled Business Overview - Psyence Therapeutics)

For purposes of facilitating the Business Combination, the Company incorporated PBM and Psyence Biomed II Corp (the "Target"), wholly-owned subsidiaries incorporation under the laws of the Province of Ontario, on June 29, 2023 as well as Psyence (Cayman) Merger Sub ("Merger Sub") an exempted company incorporated in the Cayman Islands on July 26, 2023. On January 22, 2024, the Company transferred 100% of its shareholding in Psyence Australia to the Target. On January 25, 2024, Merger Sub merged into Newcourt with Newcourt being the surviving entity under the laws of the Cayman Islands. Upon the close of the Business Combination effective January 25, 2024, the Company owned approximately 37% of the common shares in PBM. As at the date hereof, the Company holds 9,921,314 common shares in PBM.

Strategic Restructuring Of Business Units

The Company entered into a privatisation agreement with Psyence Labs Ltd ("PsyLabs") on April 1, 2024. PsyLabs is incorporated under the laws of the British Virgin Islands. The transaction involved the strategic restructuring of the Company's non-clinical business whereby the Company transferred its non-clinical subsidiaries Mind Health (Pty) Ltd (Lesotho) and Psyence South Africa (Pty) Ltd (South Africa), the vehicles housing the psilocybin cultivation, extraction, and production operations in Southern Africa, and Psyence UK Group Ltd (UK), the entity engaged in Active Pharmaceutical Ingredient ("API") and IP development, and, Good Psyence (Pty) Ltd, the functional mushroom brand GOODMIND™ (together, the "Non-Clinical Assets") to PsyLabs which will be responsible for raising the private investment required and ongoing finance to continue the operations of the Non-Clinical Assets ("Strategic Restructuring"). The Company received an approximate share of 11% the PsyLabs group. The Company will retain sales and distribution rights for all products and services developed and offered by PsyLabs with the intention of creating a marketplace in the psychedelics industry.

On October 31, 2024 the Company announced that it disposed of its share in the PsyLabs group to PBM. Per the terms of the disposal, PBM issued 2,000,000 shares of its common stock to the Company.

Listing on CSE and board of directors

The Company listed on the Canadian Securities Exchange ("CSE") on January 27, 2021.

Psyence
Healing Minds with Science
Changing Lives with Nature

PSYENCE GROUP INC.
Management's Discussion and Analysis

The board of directors and management of the Company are comprised of Jody Aufrichtig (Chairman), Alan Friedman (director), Warwick Corden-Lloyd (director), and Adri Botha (CFO).

Psyence Group Inc and subsidiaries post CSE listing

On February 15, 2023 the Company incorporated a wholly owned subsidiary called "Psyence Australia (Pty) Ltd." in Victoria, Australia ("Psyence Australia"). This subsidiary was incorporated to conduct the clinical trial in Australia (described below) and apply for the Australian Federal Government's Research & Development tax incentive program, which provides up to a 43.5% rebate on Psyence's research and development expenses in Australia as described below. Prior to the Amalgamation and Business Combination, Psyence Australia was a wholly owned subsidiary of PBC. Post the Business Combination, it is now a wholly owned subsidiary of PBM, and the Company retains an indirect interest therein.

Outstanding Share Data

Security	As of September 30, 2024	At date of this MD&A
Common Shares	140,031,222	140,031,222
Options	6,059,043	6,059,043
Warrants	3,887,982	-
Restricted Share Units ("RSUs")	2,234,204	2,234,204
Common Shares on a fully diluted basis	152,212,451	148,324,469

Business Overview and Discussion of Operations

The Company is focussed on the sales and distribution of products and services for the psychedelic industry and is invested in two businesses, PBM and PsyLabs. The Company will retain sales and distribution rights for all products and services developed and offered by PsyLabs with the intention of creating a marketplace therefor in the psychedelics industry. The Company's management team intends to expand its asset-light business model in addition to the marketing and distribution of PysLabs' products and services, by minimizing asset maintenance costs through the Strategic Restructuring and identifying additional less capital-intensive opportunities in the psychedelics space.

Psyence Biomedical Ltd

PBM world's first life science biotechnology company traded on the Nasdaq (NASDAQ:PBM) focused on the development of botanical (nature derived, or non-synthetic) psilocybin-based psychedelic medicines. It uses an evidence-based approach to innovate as it works to develop safe and effective, nature-derived psychedelic therapeutics to treat a broad range of mental health disorders. PBM is initially focused on mental health disorders in the context of Palliative Care.

PBM has contracted iNGENü Pty Ltd ("iNGENü"), a contract research organization ("CRO") in Australia that specializes in the study of psychedelics, to conduct a Phase IIb double-blind, randomized, low-dose controlled clinical trial ("Palliative Care Clinical Trial") to assess the efficacy and safety of PEX010, a 25mg in-licensed proprietary botanical drug candidate, which will be sourced from Filament Health Corp (a clinical-stage natural psychedelic drug development company) ("Filament"), in psilocybin-assisted psychotherapy for the treatment of AjD due to incurable cancer.

Palliative Care Clinical Trial

The randomized, double-blind, placebo-controlled Phase IIb study will evaluate two therapeutic doses of nature-derived psilocybin (10mg, 25mg) against an active low-dose comparator (1mg) in 84 patients in conjunction with psychotherapy.

According to PBM's most recent public disclosures, it has made substantial progress in preparing for its Phase IIb study and the company is preparing to initiate the study shortly following the successful export of PEX010 to Australia.

Psyence
Healing Minds with Science
Changing Lives with Nature

PSYENCE GROUP INC.
Management's Discussion and Analysis

Psyence Labs Ltd

PsyLabs operates one of the first federally licensed commercial psilocybin cultivation and production facilities in the world, located in Lesotho, Southern Africa ("PsyLabs Production Facility"). Its expertise is in the production of certified, pharmaceutical-quality psilocybin - yielding mushrooms. The PsyLabs Production Facility has been designed and constructed to The British Standards Institute ("BSI") and Good Manufacturing Practice ("GMP") standards. The facility was International Organization for Standardization ("ISO") 22000:2018 certified by the BSI in February 2022. It is equipped with technology and specialized equipment to ensure optimum growing conditions and efficient harvesting and packaging.

PsyLabs has a focus on extraction, production and R&D with strategic partners. It is working towards providing standardized natural pharmaceutical grade psilocybin products to clinicians, research centres and universities undertaking research and clinical trials in the use of natural psilocybin for the treatment of a range of mental health disorders and other medical conditions.

In addition hereto, PsyLabs owns, and will continue to develop, the Non-Clinical Assets acquired by it as part of the Strategic Restructuring, and will continue to operate the business housed in Mind Health, Psyence South Africa, Good Psyence and Psyence UK.

As stated above, the Company will retain sales and distribution rights for all products and services developed and offered by PsyLabs with the intention of creating a marketplace therefor in the psychedelics industry.

Relationships with Third Parties

The Company's former Australian-based research and development was to be conducted by its licensed partner, and its CRO partner, iNGENü, in Australia. As stated above, Filament's PEX010 will serve as the drug candidate under investigation during the Palliative Care Clinical Trial now being conducted in Australia by PBM following the implementation of the Business Combination.

The Company and Filament concluded an IP licensing agreement ("R&D Licensing Agreement"), relating to the supply and licensing of PEX010 by Filament in connection with the Palliative Care Clinical Trial. All right, title and interest in and to the R&D Licensing Agreement and the license contemplated therein has been assigned from the Company to PBM so that PBM may pursue the execution of the Palliative Care Clinical Trial. The Company and Filament also concluded a binding term sheet (the "Commercial Term Sheet"), relating to the commercial licensing of PEX010, which remained subject to the terms of a definitive agreement. Following further discussions, the parties mutually agreed to terminate the Commercial Term Sheet. Filament will continue to support the supply of PEX010 for the Palliative Care Clinical Trial.

On August 13, 2024, PBM announced that it had concluded a non-binding Letter of Intent with Optimi Health Corp. (CSE: OPTI) (OTCQX: OPTHF) (FRA: 8BN) ("Optimi"), a GMP-approved, Health Canada licensed psychedelics pharmaceutical manufacturer specializing in botanical psilocybin and MDMA. This arrangement would position Optimi as the exclusive supplier of GMP nature-derived (non-synthetic) psilocybin extract for PBM's global drug development and commercialization initiatives for FDA-approved use in the Palliative Care context.

All contracts material to the Psyence Therapeutics business and the Palliative Care Clinical Trial (constituting the clinical assets) have been assigned by the Company to PBM as part of the implementation of the Business Combination. All contracts material to the Non-Clinical Assets have been assigned to PsyLabs as part of the implementation of the Strategic Restructuring.

The Company will retain sales and distribution rights for all products and services developed and offered by PsyLabs. The Company will also be entitled to a 3.5% royalty on net sales generated through the Non-Clinical Assets with respect to the intellectual property transferred as part of the Strategic Restructuring for a period of 7.5 years.

Psyence
Healing Minds with Science
Changing Lives with Nature

PSYENCE GROUP INC.
Management's Discussion and Analysis

Update on Significant Milestones and Business Objectives

The below table is intended to provide an update, as at September 30, 2024 on the Company's business objectives and milestones as disclosed in the Company's Listing Statement dated January 25, 2021 ("Listing Statement"). The Company provides below the status of these milestones, the actual or revised estimated costs and the revised date of expected completion thereof, if applicable. Further, the Company has included additional objectives and milestones that have been identified since the date of the Listing Statement.

The following are "forward-looking statements" and accordingly, there is no guarantee that such milestones will be achieved on the timelines indicated, or at all. All milestones and business objectives are subject to the regulations and laws governing the jurisdictions in which Psyence operates. Forward-looking statements are based on management's current expectations and are subject to a number of risks, uncertainties, and assumptions. Please refer to "Forward-Looking Information" above and "Risk Factors" below for more information.

Objective	Milestones(1)	Prior Estimated Cost in Listing Statement(2)	Actual or Revised Estimated Cost (January 25, 2021 to September 30, 2024)	Actual/ Estimated Timeframe for Completion(3)	Status
Psyence Production (Cultivation and Production)	Capital Expenditure Phase 1.	$100,000	$105,168	Q2 2021	Completed
	Commencing of cultivation including first harvest, sourcing of spores and hiring of mycologist and microbiologist.(4)	$20,500	$19,015	Q1 2021 and Q2 2021	Completed
	First export(5)	$40,000	$14,270	Q3 2022	Completed
	Ongoing cultivation and production expenditure.(6)	$70,500	$487,992	N/A	Transferred to PsyLabs April 1, 2024
	Scale up of Production Facility.(7)	Nil	$150,978	Q2 2022	Completed
Psyence Therapeutics (Observational Studies)	Data collection from 3rd party patient cohorts.(8)	$360,000	Nil	Q1 2022	Cancelled
	Observational studies at Lesotho.	$361,000	Nil	N/A	Cancelled
	Observational studies of Animal Seizure Model.(9)	Nil	$16,205	Q1 2023	Completed
Psyence Therapeutics and Psyence Function (Product Development)	Hiring of product development specialist.(10)	$85,000	$54,708	N/A	Cancelled
	Engage consultants to develop slow-release product.(11)	$130,000	$28,471	Q4 2021	Cancelled
	Development of formulation.	$137,000	Nil	N/A	Cancelled
	Commence clinical observational studies.(12)	$713,000	Nil	N/A	Cancelled
	Launch of functional mushroom brand, "GOODMIND".(13)	Nil	$330,458	Q2 2022	Completed
Psyence Therapeutics	Collaboration Agreement with SRC Phase 1, 2 and 3: Product and Protocol	Nil	$85,500	N/A	Ceased

Psyence
Healing Minds with Science
Changing Lives with Nature

PSYENCE GROUP INC.
Management's Discussion and Analysis

(Scientific Research and Clinical Trials)	development, collection and storage of mushroom strains.^{(14)}
Psyence Therapeutics (Extraction of Psilocybin and Research)	Finalize JV with Pure Extracts Technologies Corp.	Nil	$2,000	Q2 2021	Completed
	Pure Extracts Technologies Corp. will facilitate the importation of psychedelic mushrooms into Canada.	Nil	N/A	N/A	Ceased
	Partnership Agreement with Eden for extraction and product development.^{(15)}	Nil	$1,207,821	Q4 2023	Completed
Psyence Therapeutics (Clinical Trials)	Partnership agreement with Clerkenwell Health to jointly design UK clinical trials.^{(16)}	Nil	$267,457	Q2 2022	Completed
	Licensing agreement with Filament Health Corp.^{(17)}	Nil	$225,000	Q2 2022 and Q3 2023	Completed
	Product development with a Contract Development & Manufacturing Partner.^{(18)}	Nil	$97,874	determined/A	Transferred to PsyLabs April 1, 2024
	LOI with iNGENu to jointly design and deliver Phase IIb clinical trials in Australia.^{(19)}	Nil	$ 105,618	Q1 2023	Completed
	iNGENū MSA signed with iNGENu to jointly design and deliver Phase IIb clinical trials in Australia.^{(20)}	Nil	$3,539,902	N/A	Transferred to PBM January 25, 2024
	Business combination between wholly owned subsidiary Psyence Biomed Corp. and Nasdaq listed Newcourt Acquisition Corp.^{(21)}	Nil	$467,687	NA	Transferred to PBM January 25, 2024
	TOTAL	$2,017,000	$7,206,124

Notes:

(1) There may be sound business reasons underlying the Company's decision to reallocate funds or not to proceed with a milestone.
(2) These were, and still are, subject to receipt of necessary approvals, including the academic and scientific organizations with which the Company is working.
(3) Based on a calendar year-end.
(4) The Company concluded its first cultivation and harvest cycle of natural medical psilocybin mushrooms in January 2021. The Company hired a mycologist who started in May 2021.
(5) The Company received an import permit for raw psilocybin material from Health Canada on behalf of Psilo Scientific and from the Portuguese regulators on behalf of Cooperativa de Ensino Superior Politécnico e Universitário (CESPU) in Portugal. The export took place in August 2022 after the Company secured an export permit from Lesotho. The Company has ceased business activities in Jamaica and has exported products to Canada, Portugal and the UK.
(6) This includes work performed to achieve BSI certification as well as ongoing annual fees. The annual fees are ZAR80,000 (eighty thousand South African Rands).
(7) The Company expanded its laboratory facility in Lesotho and added an overarching roof structure to cover the operations area. Construction work was completed in Q2 2022.

Psyence
Healing Minds with Science
Changing Lives with Nature

PSYENCE GROUP INC.
Management's Discussion and Analysis

(8) The Company had entered into a Research Collaboration Agreement with MycoMeditations Inc. for research and development based observational studies that have been completed. This project was cancelled due to the realignment of the Company's strategy.

(9) The Company had entered into a Research Collaboration Agreement with the University of Toronto for research and development based observational studies of the effects of psilocybin in an Animal Seizure Model. The cost was $16,205.

(10) A service level agreement was entered into with Singapore-based medical biology, forensic science and product development company Base Pair Global Pte. Ltd ("BPH"). BPH completed the evaluation of the development of nutritional products and the Company concluded that it would not proceed with the program in order to prioritize the launch of the functional mushroom brand, GOODMIND™. The agreement with BPH was terminated in August 2021 by way of mutual agreement.

(11) The Company entered a 3-month agreement with a consultant in August 2021 to start September 1, 2021, initially to develop the slow-release product with BPH, however the Company decided to prioritize the development and marketing of GOODMIND™.

(12) The Company revised its strategy to allocate resources and funds to its Palliative Care Clinical Trial.

(13) The Company entered a 50/50 joint venture through a South African-based special purpose vehicle, Good Psyence. The Company launched its functional mushroom brand, GOODMIND™, through Good Psyence in August 2021. The product was launched in the UK in Q4 2022.

(14) As mentioned in note 5, the Company has ceased business activities in Jamaica.

(15) The Company entered a partnership agreement with Eden. The partnership features a Global IP Licencing Agreement (the salient terms of which have been agreed) for the commercialization by the Company for the extraction technology and formulation IP developed by Eden to produce a water soluble, doseable, stabilized psilocybin powder naturally derived from the fruiting bodies of psilocybin-yielding mushrooms cultivated and processed at the federally licensed certified facility in Southern Africa. The specific terms of this Global IP Licencing Agreement are yet to be finalised. The cost was $1,207,821 for the extraction machine.

(16) The Company and Clerkenwell Health were responsible for jointly designing UK clinical trials. Clerkenwell Health assisted the Company in establishing procedures and protocols required to successfully run a clinical trial and gain regulatory approval for the Company's envisaged psilocybin-containing product range. The cost was $267,457.

(17) The Company had entered into an exclusive licencing agreement with Filament Health for the development of natural psilocybin products in respect of phase II clinical trials as well as an exclusive licencing agreement for the commercialisation of such products in respect of the phase III and commercialisation phase of drug development. The agreement was fulfilled at a cost of $225,000.

(18) The Company has partnered with a Contract Development and Manufacturing Partner in the UK for the development of standardised pharmaceutical grade psilocybin and psilocin extracts. The cost is $97,874.

(19) The Company signed a Letter of Intent with Australian CRO iNGENu to execute the clinical development of psilocybin within palliative care. The LOI centres around the Company's global development and regulatory strategy of its licensed compound PEX010 in palliative care in Phase II clinical trials.

(20) The Company signed a Master Services Agreement with Australian CRO iNGENu to execute the clinical development of psilocybin within palliative care. The commencement, regulatory services and site selection have been completed. The cost for the clinical trial is estimated to be $3,539,902.

(21) The business combination between wholly owned subsidiary Psyence Biomed Corp. and Nasdaq listed Newcourt Acquisition Corp. was closed on January 25, 2024.

The allocation of capital towards the Company's ongoing projects and programs is largely dependent on the success, or difficulties encountered, in any part of the process and therefore the time involved in completing it. The time and cost associated with each step are highly dependent on the incremental results of each step and the Company's need to be flexible in reallocating capital to projects whose results show greatest potential. As such, it is difficult for the Company to anticipate the timing and costs associated with taking the projects to the next phase. The Company cannot make assurances that the foregoing estimates will prove to be accurate, as actual results and future events could differ materially from those anticipated. Investors are cautioned not to put undue reliance on the foregoing estimates.

Update on Use of Proceeds

The Company has committed the following capital expenditures to meet its planned growth and fund development activities as of September 30, 2024, and the Company does not anticipate, any changes to its previously made disclosure about the Company's intended use of proceeds except as described below.

The below table below sets out the anticipated use of the available funds and any variances to such use as described in the Listing Statement, and the Company's actual use of proceeds from financings and a private placement as at September 30, 2024. The current use of funds represents the total of the underspend/overspend. The Company notes that the below variances are not expected to have a material impact on the Company's ability to achieve its business objectives and milestones.

Psyence
Healing Minds with Science
Changing Lives with Nature

PSYENCE GROUP INC.
Management's Discussion and Analysis

Use of Available Funds		Previous disclosure regarding use of proceeds in Listing Statement	Actual use of Proceeds as at June 30, 2024 (January 25, 2021 – September 30, 2024)	Additional amounts allocated/(redistributed) at September 30, 2024	Current use of proceeds (April 1, 2024 – September 30, 2025
Psyence Production (Cultivation and Production)^{(1)}	Capital Expenditure Phase 1	$100,000	$105,169	$5,169	Nil
	Commencing of cultivation including first harvest, sourcing of spores and hiring of mycologist and microbiologist	$20,500	$19,015	($1,485)	Nil
	First export	$40,000	$14,270	($25,730)	Nil
	Ongoing cultivation and production expenditure	$70,500	$487,992	$417,492	Nil
	Scale up of Production Facility	Nil	$150,978	$150,978	Nil
Psyence Therapeutics (Observational Studies)^{(2)}	Data collection from 3^{rd} party patient cohorts	$360,000	$70,000	($290,000)	Nil
	Observational studies at Lesotho clinic	$361,000	Nil	($361,000)	Nil
	Observational studies of Animal Seizure Model	Nil	$16,205	$16,205	Nil
Psyence Therapeutics and Psyence Function (Product Development)^{(3)}	Hiring of product development specialist	$85,000	$54,708	($30,292)	Nil
	Engage consultants to develop slow-release product	$130,000	$28,471	($101,529)	Nil
	Development of formulation	$137,000	Nil	($137,000)	Nil
	Commence clinical observational studies	$713,000	Nil	($713,000)	Nil
	Launch of functional mushroom brand, "GOODMIND"	Nil	$256,865	$256,865	Nil
Psyence Therapeutics (Extraction of Psilocybin and Research)	Finalize Joint Venture with Pure Extracts Technologies Corp.^{(4)}	Nil	$2,000	$2,000	Nil
	Partnership Agreement with Eden for	Nil	$1,207,821	$1,207,821	Nil

Psyence
Healing Minds with Science
Changing Lives with Nature
11

PSYENCE GROUP INC.
Management's Discussion and Analysis

	extraction and product development^{(5)}
Psyence Therapeutics (Clinical Trials)^{(5)}	Collaboration Agreement with SRC Phase 1, 2 and 3: Product and Protocol development, collection and storage of mushroom strains	Nil	Nil	Nil	Nil
Psyence Therapeutics (Clinical Trials)	Partnership agreement with Clerkenwell Health to jointly design and deliver UK clinical trials^{(6)}	Nil	$267,457	$267,457	Nil
	Licensing agreement with Filament Health Corp^{(7)}	Nil	$225,000	$225,000	Nil
	Product development with a Contract Development & Manufacturing Partner	Nil	$97,874	$97,874	Nil
	LOI with Australian CRO iNGENu to jointly design and deliver AUS Phase IIb clinical trials.	Nil	$105,618	$105,618	Nil
	Master Service Agreement signed with iNGENu to jointly design and deliver Phase IIb clinical trials in Australia.	Nil	$3,539,902	$3,539,902	Nil
	Business combination between wholly owned subsidiary Psyence Biomed Corp. and Nasdaq listed Newcourt Acquisition Corp.	Nil	$467,687	$467,687	Nil
Other	Professional and consulting fees	$630,000	$11,708,613	$11,150,000	$71,387

Psyence
Healing Minds with Science
Changing Lives with Nature
12

PSYENCE GROUP INC.
Management's Discussion and Analysis

	General and Administrative (8)	$901,219	$3,951,495	$3,500,000	$449,724
	Investment from Private Placement(9)	Nil	($4,449,167)	($4,449,167)	Nil
	Total use of funds	$3,548,219	$18,327,972	$12,881,223	$521,111
	Unallocated working capital(10)	$2,294,510

TOTAL		$5,842,729

Notes:

(1) The Company completed the capital expenditure on Phase 1 of the setting up of the laboratory and grow room. Additional costs of $5,000 were spent on upgrading the grow room. The Company finished the cultivation and first harvest within the budget. The Company sourced a new mycologist during the first quarter of 2021. This change led to a change in cultivation methods and therefore the overspend on ongoing cultivation.

(2) The Company entered into a Research Collaboration Agreement with MycoMeditations Inc. for research and development based observational studies that have been completed. The actual spend for the period was $70,000. This project was cancelled due to the realignment of the Company's strategy. In a separate initiative, the Company no longer anticipates conducting observational studies in Lesotho.

(3) The Company revised its strategy and allocated resources and focus to its Palliative Care Clinical Trial. The Company entered a 50/50 partnership through a South African-based special purpose vehicle, Good Psyence. The Company launched its functional mushroom brand, GOODMIND™, through Good Psyence in August 2021. The product was launched in the UK in Q4 2022. The actual costs spend during the period was $256,865.

(4) The Company finalized the set-up of the joint venture with Pure Extracts Technologies Corp. The costs spend to setup Pure Psyence Corp. was $2,000. The joint venture was dissolved on March 2, 2023.

(5) The Company entered a partnership agreement with Eden. The partnership features a Global IP Licencing Agreement (the salient terms of which have been agreed) for the commercialization by the Company for the extraction technology and formulation IP developed by Eden to produce a water soluble, doseable, stabilized psilocybin powder naturally derived from the fruiting bodies of psilocybin-yielding mushrooms cultivated and processed at the federally licensed certified facility in Southern Africa. The specific terms of this Global IP Licencing Agreement are yet to be finalised. The cost was $1,207,821 for the extraction machinery.

(6) The Company and Clerkenwell Health were responsible for jointly designing and delivering UK clinical trials. Clerkenwell Health assisted the Company in establishing procedures and protocols required to successfully run a clinical trial to gain regulatory approval for the Company's envisaged psilocybin-containing product range. The actual cost spend was $267,457.

(7) The Company has ceased business activities in Jamaica and exported products to Canada, UK and Portugal. The Company has entered into a licensing agreement with Filament who will license its proprietary botanical drug candidate PEX010 (25mg), and the associated intellectual property for Psyence to use in the upcoming clinical trials.

(8) General and administrative expenses are comprised of payroll consulting and benefits of $1,169,962; office and administrative costs of $2,046,035; sales and marketing investor relations costs of $735,583.

(9) Closing of third tranche of private placement of up to $4.4 million.

(10) If there is any unallocated working capital balance, it will be held in short-term interest-bearing securities or in bank accounts at the discretion of management.

The Company has negative cash flow from operating activities and has historically incurred net losses. To the extent that the Company has negative operating cash flows in future periods, it may need to deploy a portion of its existing available cash to fund such negative cash flows. The expected use of funds represents the Company's current intentions based upon its present plans and business condition, which could change in the future as its plans and business conditions evolve. The amounts and timing of the actual use of the net proceeds depends on multiple factors and there may be circumstances where, for sound business reasons, a reallocation of funds may be necessary in order for the Company to achieve its stated business objectives. The Company may also require additional funds in order to fulfil its expenditure requirements to meet existing and any new business objectives, and the Company expects to issue additional securities or incur debt to do so. As a result, management retains broad discretion in the application of the available funds, and shareholders will be relying on the management's judgment regarding such application. There is no assurance that additional capital or other types of financing will be available if needed or that these financings will be on terms at least as favourable to the Company as those previously obtained.

Psyence
Healing Minds with Science
Changing Lives with Nature

PSYENCE GROUP INC.
Management's Discussion and Analysis

See "Quarterly Results of Operations" section for a discussion of transaction costs, marketing expenditure and general and administrative expenses.

Intellectual Property

Trademarks

The Company has filed applications for the registration of the Psyence™ trademark in several jurisdictions including Canada, USA, UK, South Africa and Jamaica. Confirmation of registration of the Psyence™ trademark has been received in respect of Jamaica and the UK.

Licensed Intellectual Property

As stated above, the Company has assigned its rights and obligations under the R&D IP Agreement to PBM as part of the Business Combination and terminated the Commercial Term Sheet with Filament. Please refer to the section titled Relationships with Third Parties for more information.

Regulatory Framework and Licensing Regime

A summary of the applicable regulatory framework for the Company's various business segments and interests and proposed business activity is set out in the table below.

Business Interests	Current / Proposed Jurisdiction of Operation	Summary of Applicable Regulatory Frameworks
Psyence Therapeutics – Research and Development^{7} and Clinical Trials^{8}	UK, Canada, USA and Australia^{6}	UK:
• 1971 UN Convention on Psychotropic Substances
• Misuse of Drugs Act 1971 and Regulations 2001
• Psychoactive Substances Act 2016
• Human Medicines Regulations 2012^{1}

Canada:
• Controlled Drugs and Substances Act
• Food and Drugs Act, R.S.C. 1985, c. F-27, and the Food and Drug Regulations thereunder, C.R.C., c. 870^{2}

USA:
• Federal Food Drug and Cosmetic Act (FDCA)^{7}

Australia:
• The Therapeutic Goods Act 1989
• Therapeutic Goods (Poisons Standard—July 2023) Instrument 2023
• Customs (Prohibited Imports) Regulations 1956^{3} | • Filament
• iNGENü | • R&D IP Agreement
• iNGENü MSA |
| Psyence Sales and Distribution | South Africa, UK, Canada, USA and Australia^{6} | South Africa, UK, USA Canada, and Australia:
Please refer to the domestic and international narcotics laws listed above. | • PsyLabs | • Sales and Distribution Agreement |

Notes:

(1) For more information on the regulatory regime in the UK, please refer to "United Kingdom" below.
(2) For more information on the regulatory regime in Canada, please refer to "Canada" below.
(3) For more information on the regulatory regime in Australia, please refer to "Australia" below.
(4) For more information regarding contracts related to the operations of the Company, please refer to "Material Contracts" below.
(5) Now owned and operated by PsyLabs.
(6) Now owned and operated by PBM.
(7) For more information on the regulatory regime in the USA, please refer to "USA" below.

Psyence
Healing Minds with Science
Changing Lives with Nature

PSYENCE GROUP INC.
Management's Discussion and Analysis

Canada

The Canadian Controlled Drugs and Substances Act ("CDSA") generally prohibits all uses of controlled substances and makes it an offence to possess, produce, sell, traffic, import or export a substance including psilocin or psilocybin. However, these prohibitions are subject to exceptions, in particular an exemption for a medical or scientific purpose, such as research or clinical trials, pursuant to subsection 56(1) of the CDSA. An application must be submitted to Health Canada in order to receive such an exemption. Other than the joint venture formed with Pure Extracts Technologies Corp called "Pure Psyence" (now wound-up), the Company has not commenced psilocybin related commercial business activities in Canada. The Company will pursue sponsored research and collaboration agreements with a duly licensed academic institution to conduct research projects. At all times, the Company will enter into partnerships with organisations which have obtained the necessary dealer's licence and/or section 56 exemption required to handle psilocybin in Canada as it currently does not possess any such licenses.

In addition to the CDSA, the import and export of psilocin or psilocybin are regulated under the Food and Drugs Act and the Food and Drug Regulations. A dealer's licence for psilocin or psilocybin may be obtained under Part J of the Food and Drug Regulations. These laws are described in more detail below:

CDSA

The CDSA is the critical piece of legislation applicable to psilocin, psilocybin, and other psychoactive substances in Canada. The criminal law power is the basis for this federal legislation regarding controlled drugs and substances. Both Psilocin (3-[2-(dimethylamino)ethyl]-4-hydroxyindole) and any salt thereof as well as psilocybin are (3-[2-(dimethylamino)ethyl]-4-phosphoryloxyindole) and any salt thereof are substances included in Schedule III of the CDSA.

Food and Drugs

In addition to the CDSA, the federal Food and Drugs Act, R.S.C. 1985, c. F-27, and the Food and Drug Regulations thereunder, C.R.C., c. 870, regulate food and drugs in Canada. Both psilocin (3-[2-(dimethylamino)ethyl]-4-hydroxyindole) and any salt thereof as well as psilocybin (3-[2-(dimethylamino)ethyl]-4-phosphoryloxyindole) and any salt thereof are restricted drugs included in the Schedule to which Part J of the Food and Drug Regulations is applicable.

Research

If the research to be conducted involves a drug for human use that is to be tested in a clinical trial involving human subjects, then Division V of the Food and Drug Regulations would be the applicable federal law. In addition, if the research is to be conducted in British Columbia or another province in Canada, then the provincial laws of that province should also be consulted, such as those laws regarding the protection of personal health information.

Exemptions & Licences – CDSA and Food and Drug Regulations

As stated above, the CDSA generally prohibits all uses of controlled substances and makes it an offence to possess, produce, sell, traffic, import or export a substance included in Schedule III, including psilocin or psilocybin. However, these prohibitions are subject to exceptions, in particular an exemption for a medical or scientific purpose, such as research or clinical trials, pursuant to subsection 56(1) of the CDSA, as follows: in terms of section 56(1) the Minister may, on any terms and conditions that the Minister considers necessary, exempt from the application of all or any of the provisions of this Act or the regulations any person or class of persons or any controlled substance or precursor or any class of either of them if, in the opinion of the Minister, the exemption is necessary for a medical or scientific purpose or is otherwise in the public interest. An application must be submitted to Health Canada in order to receive such an exemption.

Psyence
Healing Minds with Science
Changing Lives with Nature

PSYENCE GROUP INC.
Management's Discussion and Analysis

A dealer's licence for psilocin or psilocybin may be obtained under Part J of the Food and Drug Regulations. An individual who ordinarily resides in Canada or a corporation with a head office or branch office in Canada is eligible to apply for a dealer's licence for permission to produce, assemble, sell, provide, transport, send, deliver, import or export psilocin or psilocybin as a licensed dealer. An Application for a Controlled Drugs and Substances Dealer's Licence must be submitted to the Office of Controlled Substances at Health Canada. In order to qualify as a licensed dealer, a party must meet all of the requirements mandated by Part J of the Food and Drug Regulations, including having staff that meet the qualifications for a senior person in charge and a qualified person in charge. A dealer's licence must be obtained for each site at which activities are to be conducted. The activities that the licensee may engage in are limited to the strict confines to the licence.

In addition to the dealer's licence, an application must be submitted, and a permit must be obtained from Health Canada before each import or export of a restricted drug such as psilocin or psilocybin by a licensed dealer. This allows the government to track every gram in the country.

Australia

The Therapeutic Goods Administration in Australia ("TGA") is Australia's government authority responsible for evaluating, assessing and monitoring products that are defined as therapeutic goods, and the use of therapeutic goods supplied in clinical trials in Australia under the therapeutic goods legislation. Such legislation includes The Therapeutic Goods Act 1989 ("TG Act"), Regulations and Orders which set out the requirements for inclusion of therapeutic goods in the Australian Register of Therapeutic Goods (ARTG).

Registration of medicines

For a prescription medicine to be registered in the ARTG, a sponsor of the product (usually a pharmaceutical company such as Psyence) is required to submit a dossier of evidence on the clinical efficacy, safety and manufacturing quality for evaluation by the TGA. Clinical trials of medicines and biologicals regulated under the Clinical Trial Notification (CTN) or Clinical Trial Approval (CTA) schemes are subject to the TGA's Good Clinical Practice (GCP) Inspection Program. The TGA has issued a handbook which provides guidance on the legislative, regulatory and good clinical practice (GCP) requirements when conducting clinical trials in Australia using 'unapproved' therapeutic goods in order to assist trial sponsors, Human Research Ethics Committees (HRECs), investigators and approving authorities (institutions) in understanding their roles and responsibilities under the therapeutic goods legislation.

Scheduling of Psilocybin

Until recently, psilocybin was included in Schedule 9 (Prohibited Substances) of the Poisons Standard which, because of interaction with state and territory regulation, largely restricted the lawful supply of goods containing psilocybin to clinical trial settings only. However, effective 1 July 2023, the TGA made the decision to down schedule psilocybin to Schedule 8 in the Poisons Standard when used in respect of certain conditions, namely for the treatment of treatment-resistant depression.

Importation

To import products that contain a controlled substance (such as psilocybin), the importer requires both an exemption, approval or authority under the TG Act and a licence and/or permit to import from the Office of Drug Control under the Customs (Prohibited Imports) Regulations 1956. Licences and permits to import psilocybin are only granted by the Office of Drug Control where the use of the substance is permitted by the relevant state or territory under their respective medicines and poisons legislation and the use of the psilocybin is to be prescribed by an Authorised Prescriber or for an authorised clinical trial.

Psyence will monitor the evolution of Australia's regulations as they pertain to psilocybin and the conduct of clinical trials in Australia.

USA

In connection with the development and future commercialization (if applicable) of the psilocybin-based prospective products, each contemplated product candidate is subject to the Federal Food Drug and Cosmetic Act (FDCA). The FDCA is intended to assure the consumer, in part, that drugs and devices

Psyence
Healing Minds with Science
Changing Lives with Nature

PSYENCE GROUP INC.
Management's Discussion and Analysis

are safe and effective for their intended uses and that all labeling and packaging is truthful, informative, and not deceptive. The FDCA and FDA regulations define the term "drug," in part, by reference to its intended use, as "articles intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease" and "articles (other than food) intended to affect the structure or any function of the body of man or other animals." Therefore, almost any ingested or topical or injectable product that, through its label or labeling (including internet websites, promotional pamphlets, and other marketing material), that is claimed to be beneficial for such uses will be regulated by FDA as a drug. The definition also includes components of drugs, such as active pharmaceutical ingredients. Drugs must generally either receive premarket approval by FDA through the NDA process or conform to a "monograph" for a particular drug category, as established by FDA's Over-the-Counter (OTC) Drug Review. If the FDA does not award premarket approval for our product candidates through the NDA process, this could have a material adverse effect on our business, financial condition and results of operations.

The FDA will accept data from studies performed in other countries, as long as the study complies with GCP and ICH guidelines.

Corporate Governance and Compliance Program

Corporate governance refers to the policies and structure of the board of directors of a company, whose members are elected by and are accountable to the shareholders of the company. Corporate governance encourages the adoption of policies to ensure the board of directors recognizes the principles of good management. The Board is committed to sound corporate governance practices; as such practices are both in the interests of shareholders and contribute to effective and efficient decision-making. The Company has adopted corporate governance policies and guidelines (the "Guidelines") governing key matters and has accordingly enacted: (a) internal guidelines to control transactions involving its securities by all Company directors, officers and insiders (among others) to ensure that such parties are aware of and comply with their legal obligations with respect to "insider trading" and "tipping"; and (b) timely disclosure and confidentiality guidelines to ensure the timely and accurate disclosure of material information relating to the Company and/or its material subsidiaries in accordance with applicable securities laws and stock exchange rules, to prevent the improper use or disclosure of material information or confidential information about the Company and to promote an understanding of and compliance with legal requirements and stock exchange rules.

The Board shall: (a) review the Guidelines on an annual basis; and, (b) at a more appropriate time in the future, (i) implement additional corporate governance policies and guidelines; (ii) implement measures and processes to review critically each director's continuation on the Board every year considering, among other things, a director's service on other boards and the time involved in such other service; and (iii) establish a process for the evaluation of the performance of the Board and each of its committees.

The Company engages professional advisors (legal, financial, and technical) with the relevant expertise to provide assistance in navigating and managing the political, legal and cultural realities of the jurisdictions in which it operates and the impact it may have on the Company's business or operations on an as-needed basis. Additionally, the Company's management team has a long and successful history of doing business in Canada, United Kingdom and Southern Africa. With respect to Southern Africa specifically, the Company's management team has experience engaging with local communities and tribal chiefs as well as a working knowledge of the region's local legal, regulatory and political landscape. The management team's technical division is well acquainted with the region's natural terrain as well as its climactic and infrastructure related challenges.

The Company managers and monitors compliance with applicable laws in each jurisdiction in which it operates through its general legal counsel and Chief Financial Officer, who engage, as needed, local counsel in every jurisdiction, who provide legal opinions or advice in each of these jurisdictions regarding: (a) compliance with applicable laws and regulatory frameworks, (b) applications, maintenance and renewals of licences and permits, and (c) changes in the legal landscape affecting the Company operations.

The Company engages local legal counsel in each jurisdiction in which it conducts business or seeks to conduct business to ensure compliance with material legal, regulatory and governmental

Psyence
Healing Minds with Science
Changing Lives with Nature

PSYENCE GROUP INC.
Management's Discussion and Analysis

developments as they pertain to and affect the Company's operations. The Company's operations are conducted in compliance with local laws where such activities are permissible and either (a) do not require any specific legal or regulatory approvals, or (b) the Company has obtained all necessary legal and/or regulatory approvals.

The Company works with third party facilities, research institutions, and contract manufacturers who require regulatory licensing to handle scheduled drugs. Before commencing any commercial or other ventures with such third parties, the Company conducts a high-level legal, regulatory and quality control due diligence to verify claims made by such third parties. The Company ensures that contracted third parties provide the necessary warranties and undertakings required to ensure compliance with applicable laws in contracts concluded with such parties. Failure of third parties to comply with applicable laws constitutes a material breach of contract, giving rise to a contractual right on the part of the Company to terminate any contract with such offending third party.

The Company held its annual and special general meeting of shareholders on June 7, 2024.

Overall Performance

Financial Information

The Company's most recent financial year end was March 31, 2024. This MD&A presents information relating to the period from April 1, 2024 to September 30, 2024 with comparative information being shown for the period April 1, 2023 to September 30, 2023 ("comparative period").

Results and Overview of operations for the first fiscal quarter to September 30, 2024

Revenue and results

The Company did not report revenue from operations for the 3-month period ended September 30, 2024 (comparative period: $0). The total comprehensive loss for the 3-month period ended September 30, 2024, was $2,408,088 (comparative period: gain of $544,053).

The Company did not report revenue from operations for the 6-month period ended September 30, 2024 (comparative period: $0). The total comprehensive loss for the 6-month period ended September 30, 2024, was $3,853,883 (comparative period: gain of $2,825,699).

Sales and marketing costs

For the 3-month period ended September 30, 2024, the Company's sales and marketing costs of $374,355 were incurred for fundraising activities, conferences, content, promotional materials and website design costs (comparative period: $6,915).

For the 6-month period ended September 30, 2024, the Company's sales and marketing costs of $440,539 were incurred for fundraising activities, conferences, content, promotional materials and website design costs (comparative period: $8,867). Sales and marketing costs increased in comparison to the comparative period as result of increased awareness needing to be raised for its listed subsidiary.

Research and development

For the 3-month ended September 30, 2024, the Company incurred research and development costs of $362,875 (comparative period: $43,644).

For the 6-month period ended September 30, 2024, the Company incurred research and development costs of $362,875 (comparative period: $1,172,227).

Clinical trial activity in Australia was the driver of these costs.

Psyence
Healing Minds with Science
Changing Lives with Nature

PSYENCE GROUP INC.
Management's Discussion and Analysis

General and administration costs

For the 3-month period ended September 30, 2024, the Company incurred general and administrative costs of $335,708 which consisted of bank fees, filing fees, general office expenditure, facility maintenance, salaries and wages and operational costs (comparative period, reversal $809).

For the 6-month period ended September 30, 2024, the Company incurred general and administrative costs of $767,697 which consisted of bank fees, filing fees, general office expenditure, facility maintenance, salaries and wages and operational costs (comparative period, $240,645).

General and administrative costs increased in comparison to the comparative period as a result of increased activities by the subsidiaries of the Company.

Professional and consulting fees

For the 3-month period ended September 30, 2024, professional and consulting fees totalling $552,172 were incurred (comparative period: $365,786). This consisted of $200,362 (comparative period: $244,438) paid to consultants for product development, financial, business strategies and administrative services, legal fees of $220,096 (comparative period: $59,411) paid to legal practitioners for various corporate matters, whilst $7,148 (comparative period: $664) was paid for accounting services and $124,383 (comparative period: $61,272) for audit fees.

The professional and consulting fees for the period increased from the comparative period due to an increase in legal fees relating to transaction advisory.

For the 6-month period ended September 30, 2024, professional and consulting fees totalling $1,173,972 were incurred (comparative period: $1,204,566). This consisted of $632,655 (comparative period: $686,176) paid to consultants for product development, financial, business strategies and administrative services, legal fees of $374,900 (comparative period: $433,066) paid to legal practitioners for various corporate matters, whilst $29,352 (comparative period: $1,225) was paid for accounting services and $136,883 (comparative period: $84,100) for audit fees.

The professional and consulting fees for the period decreased from the comparative period due to a slight decrease in consulting and legal fees.

Other costs

The depreciation and amortization charge for the year was $3,707 in total (comparative period: $46,451). Of this amount, $0 was charged for right-of-use assets (comparative period: $1,311) and $2,444 (comparative period: $43,880) was depreciation on computer equipment, buildings, production equipment, furniture and leasehold improvements. The amortization of intangible assets was $1,264 for the period (comparative period: $1,260). The decrease in depreciation is due to the assets assigned to PsyLabs..

Total assets at quarter end September 30, 2024

Total assets for the period were $4,173,487 and comprised predominantly of: cash and cash equivalents of $2,739,725, other receivables of $392,195, Investment in PsyLabs of $1,011,263 and prepaids of $29,827.

The Company has bank accounts denominated in Canadian dollars, US dollars and Australian dollars. At quarter end the Company had the following currency exposures on these accounts:

Psyence
Healing Minds with Science
Changing Lives with Nature

PSYENCE GROUP INC.
Management's Discussion and Analysis

Canadian bank accounts: $74,699
$2,661,320 (US$1,971,495 – denominated in US dollars)
Australian accounts: $2,275 (AUD$2,438 – denominated in Australian dollars)
$1,335 (US$991 – denominated in US dollars)

Operations

Quarterly Results of Operations

	Quarter end September 30, 2024 $	Quarter end June 30, 2024 $	Quarter end March 31, 2024 $	Quarter end December 31, 2023 $
Total Revenue	-	-	-	-
Total Comprehensive Gain/(Loss)	2,408,088	(1,445,794)	66,696,715	(269,611)
Gain/(Loss) per-share – Basic and diluted	0.02	(0.01)	(0.52)	0.00
Weighted Average Number of Shares	140,031,222	139,716,113	133,336,848	136,084,814
	Quarter end September 30, 2023 $	Quarter end June 30, 2023 $	Quarter end March 31, 2023 $	Quarter end December 31, 2022 $
---	---	---	---	---
Total Revenue	-	-	-	-
Total Comprehensive Gain/(Loss)	544,053	2,281,650	3,150,102	743,364
Loss per-share – Basic and diluted	0.00	(0.02)	(0.03)	(0.01)
Weighted Average Number of Shares	132,407,414	127,030,394	97,876,442	87,249,422

The consolidated financial statements have been prepared in accordance with IFRS as issued by the International Accounting Standards Board (IASB), and the interpretations of the IFRS Interpretations Committee (IFRIC), effective for the Company's reporting for the period ended September 30, 2024.

Liquidity and Capital Resources

	Three months ended September 30,		Six months ended September 30,
CAD $	2024	2023	2024	2023
Cash used in operating activities	(1,066,409)	(982,602)	(2,258,695)	(3,592,516)
Cash used in investing activities	(2,208)	(79,270)	1,370	(80,187)
Cash raised from	3,213,826	1,232,198	3,898,326	2,145,847

Psyence
Healing Minds with Science
Changing Lives with Nature

PSYENCE GROUP INC.
Management's Discussion and Analysis

financing activities
Total Cash Movement
2,145,209
170,326
1,641,001
(1,526,856)

	3 months ended September 30, 2024	6 months ended September 30, 2024
Net cash used in operating activities	This primarily relates to cash used for operating expenses including research and development expenses, salaries, professional fees, and other general and administration expenses. Cash flows from operating activities exclude expenses not affecting cash, such as share based compensation expenses, depreciation, unrealized foreign exchange gains or losses, and net changes in non-cash balances relating to operations.
	For the 3-month period ended September 30, 2024, cash used in operating activities was $1,066,409 driven by a net gain of $2,938,937 and non-cash unrealized foreign exchange gain of $351,653 partially offset by the following non-cash items: reversal share-based compensation of $214,115, loss on disposal of subsidiary $540,970, Fair value gain on convertible note liability as well as derivative warrant liabilities $5,982,926 and depreciation and amortization of $2,022.	For the 6-month period ended September 30, 2024, cash used in operating activities was $2,258,695 driven by a net gain of $4,261,879 and non-cash unrealized foreign exchange gain of $241,456 partially offset by the following non-cash items: share-based compensation of $30,662, loss on disposal of subsidiary $540,970, Fair value gain on convertible note liability as well as derivative warrant liabilities $7,930,096, Fair value loss on warrant exchange $252,837 and depreciation and amortization of $3,708.
Net cash used in investing activities	For the 3-month period ended September 30, 2024, cash flows were mainly driven by:
Additions to property and equipment $2,765 and dis-investment from GIC of $557.	For the 6-month period ended September 30, 2024, cash flows were mainly driven by:
Additions to property and equipment $8,781 and dis-investment from GIC of $10,151.
Net cash from (used in) financing activities	For the 3-month period ended September 30, 2024, cash flows were mainly driven by:
• Proceeds from convertible note liability of $683,000	For the 6-month period ended September 30, 2024, cash flows were mainly driven by:
• Proceeds from convertible note liability of $1,367,500 and
• Proceeds from subsidiary ELOC of $2,530,626.

Liquidity

Since incorporation, the operations have been solely financed from the issuance of equity. The Company's main use for liquidity is to fund scientific research, clinical studies, product development and manufacturing, salaries and professional and consulting fees. The ability to fund operations and to make planned cash flows are subject to prevailing economic conditions, regulatory and financial, business, and other factors, some of which are beyond the Company's control.

As at September 30, 2024 the Company had cash balances of $2,739,725 and negative working capital of $216,654. Working capital represents the excess of current assets over current liabilities. The Company is in its clinical trial and drug development stage as it researches and develops its IP portfolio in anticipation of manufacturing in the future. Therefore, the Company will not be able to generate sufficient amounts of cash and cash equivalents from its revenue generating operations in the short term. Accounts payable and accrued liabilities have contractual maturity dates within one year, lease liabilities which have contractual maturity dates spanning 7 years and amounts due to related parties

Psyence
Healing Minds with Science
Changing Lives with Nature

PSYENCE GROUP INC.
Management's Discussion and Analysis

have a contractual maturity date within one year. All significant contractual obligations and commitments are disclosed under Discussion of operations above and there are no other significant obligations maturing in the short term. The Company does not believe that it will be able to fund operations and significant projects within the next 12 months from the available cash and cash equivalents without raising additional financing. The Company expects to remedy this working capital deficiency through the further issuances of common shares through private placements over the next 12 months. The Company prioritises expenditure, both capital and operational, by regularly reviewing its available cash and cash equivalent balances against the spend required to deliver on its key strategic objectives and milestones.

The Company's current expenditure obligations include commitments for those projects described in "Business overview" above. The Company expects to continue funding these projects with available cash and cash equivalents, and therefore, is subject to risks including, but not limited to, an inability to raise additional funds through the issuance of equity, debt instruments or similar means of financing to support the Company's continued development, including capital expenditure requirements, operating requirements and to meet its liabilities and commitments at they become due.

The Company has experienced operating losses and cash outflows from operations since incorporation and by nature of its business, will require ongoing financing to continue its research and development. It will require ongoing financing in order to continue production, research and development activities. The Company's ability to access both public and private capital is dependant upon, among other things, general and sectoral market conditions and the capital markets generally, market perceptions about the Company and its business operations, and the trading prices of the Company's securities from time to time. There can be no assurance that additional funds can be raised upon terms acceptable to the Company, or at all, as funding for early-stage companies remain challenging generally.

The Company's primary capital needs are funds to advance its research and development activities and for working capital purposes. These activities include staffing, pre-clinical studies, clinical trials and administrative costs. There are uncertainties regarding its ability to continue as a going concern. The Company has not earned any significant. There is no assurance that additional capital or other types of financing will be available if needed or that these financings will be on terms at least as favourable for the Company as those previously obtained, or at all. See "Risk Factors" below.

Off Balance Sheet Arrangements

The Company has not had any off-balance sheet arrangements from the date of its incorporation to the date of this MD&A.

Transactions between Related Parties

Compensation to key management personnel

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Company, directly or indirectly. Key management personnel, as defined by International Accounting Standards 24 Related Party Disclosures, include the Company's executive officers and Board of Directors. For the reporting period, they are as follows: Jody Aufrichtig, Warwick Corden-Lloyd, Corden-Lloyd Consulting, Alan Friedman, Bayline Capital Partners Inc., and Adri Botha.

Short term benefits consist of consulting fees, payroll and other benefits paid to key management personnel.

Key Management Personnel	September 30, 2024	September 30, 2023
Short term benefits	264,744	364,370
Share-based compensation	18,866	150,172
Total	283,610	514,542

Psyence
Healing Minds with Science
Changing Lives with Nature

PSYENCE GROUP INC.
Management's Discussion and Analysis

Balances

As at September 30, 2024, the Company held amounts totaling $nil (September 30, 2023 - $28,111) in accounts payable and accrued liabilities. These are amounts owing to key management personnel.

Subsequent Highlights

On October 31, 2024, the Company completed the sale of its equity interest in Psyence Labs Ltd. to PBM in exchange for 2,000,000 PBM common shares at a price of USD $0.55 per share. The agreement includes a "make-whole payment" provision, whereby PBM will compensate the Company in cash or additional shares if the average VWAP of PBM's common shares for the ten trading days prior to January 15, 2025, is below USD $0.55.

The Company and PBM have entered into a debt-equity swap agreement pursuant to which PBM has agreed to issue 845,394 PBM common shares in exchange for the discharging of the balance of the debt repayment obligation due under a promissory note, dated January 25, 2024. The promissory note was issued by PBM in connection with PBM's listing of its common shares on the NASDAQ in January 2024. The agreement includes a "make-whole payment" provision, whereby PBM will compensate the Company in cash or additional shares if the average VWAP of PBM's common shares for the ten trading days prior to January 15, 2025, is below USD $0.50.

Financial Instruments and Other Instruments

The Company's financial instruments consist of cash, other receivables, prepaids, accounts payable and accrued liabilities and amounts due to related parties. These financial instruments arise in the normal course of business and are classified and measured at amortized cost.

Unless otherwise noted, it is management's opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments. The Company does not partake in hedging activities.

The fair values of these financial instruments approximate their carrying values. As required by IFRS 9 Financial Instruments, the Company applies a forward-looking expected credit loss (ECL) model, at each balance sheet date, to financial assets measured at amortized cost to determine whether the asset is impaired.

In the normal course of business, the Company is exposed to a variety of financial risks: credit risk, liquidity risk, foreign exchange risk and interest rate risk. These financial risks are subject to normal credit standards, financial controls, risk management as well as monitoring. The Company's Board of Directors has overall responsibility for the establishment and oversight of the Company's risk management framework.

Credit risk

Credit risk arises from cash and cash equivalents, restricted cash, other receivables and loan to joint venture. The maximum exposure to credit risk is equal to the carrying value of the financial assets. The objective of managing counterparty credit risk is to prevent losses on financial assets. The Company minimizes the credit risk of cash by depositing with only reputable financial institutions. The Company also assesses the credit quality of counterparties, taking into account their financial position, past experience and other factors.

Cash consists of bank balances and an amount held in trust by a brokerage firm as security for foreign currency exchanges. Other receivables mainly consist of federal sales tax credits.

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due.

As at September 30, 2024, the Company's financial liabilities consist of account payable, accrued liabilities, convertible note liability and a promissory note.

Psyence
Healing Minds with Science
Changing Lives with Nature

PSYENCE GROUP INC.
Management's Discussion and Analysis

The Company manages liquidity risk through an ongoing review of future commitments and cash balances available. Historically, the Company's main source of funding has been the issuance of shares for cash, primarily through private placements. The Company's access to financing is always uncertain. There can be no assurance of continued access to significant equity or debt funding.

The following table illustrates the contractual maturities of financial liabilities as at September 30, 2024:

Financial Instrument Maturity ($)	Carrying amount	Contractual cash flows	Less than 1 year	Between 1 and 3 years
Accounts payable and accrued liabilities	1,391,252	1,391,252	1,391,252	-
Convertible note liability	65,175	251,049	-	251,049
NCAC promissory note	1,691,241	2,180,765	2,180,765	-
Total	3,147,668	3,823,066	3,572,017	251,049

Foreign exchange risk

Foreign currency risk is the risk that the fair values of future cash flows of a financial instrument will fluctuate because they are denominated in currencies that differ from the respective functional currency.

The Company operates internationally and is exposed to foreign exchange risk from the GBP, AUD and USD. Foreign exchange risk arises from transactions as well as recognized financial assets and liabilities denominated in foreign currencies.

A 10% adverse change in exchange rate would have resulted in a loss of $230,300 as at September 30, 2024.

Interest rate risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company has no significant interest-bearing assets or liabilities and therefore its income and operating cash flows are substantially independent of changes in market interest rates. Management therefore regards liquidity risk to be low.

Capital management

The Company's objectives when managing its capital are to safeguard its ability to continue as a going concern, to meet its capital expenditures for its continued operations, and to maintain a flexible capital structure which optimizes the cost of capital within a framework of acceptable risk. The Company manages its capital structure and adjusts it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust its capital structure, the Company may issue new common shares, issue debt, or acquire or dispose of assets. The Company is not subject to externally imposed capital requirements.

Management reviews its capital management approach on an ongoing basis. The Company considers its shareholders' equity balance as capital.

Risk Factors

An investment in the Company is subject to various risks and should be considered highly speculative.

Prior to making an investment decision, investors should consider the investment risks set forth below which are in addition to the usual risks associated with an investment in a business at an early stage of development. The directors of the Company consider the risks set forth below to be the most significant, but do not consider them to be all of the risks associated with an investment in securities of the Company. If any of these risks materialize into actual events or circumstances or other possible

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Changing Lives with Nature

PSYENCE GROUP INC.
Management's Discussion and Analysis

additional risks and uncertainties of which the directors are currently unaware or which they consider not to be material in connection with the Company's business, actually occur, the Company's assets, liabilities, financial condition, results of operations (including future results of operations), business and business prospects, are likely to be materially and adversely affected. In such circumstances, the price of the Company's securities could decline, and investors may lose all or part of their investment.

Initial lack of business diversification

Because the Company will be initially focused on investment in businesses focused research and development, cultivation and production of psilocybin mushrooms and functional over-the-counter mushroom products, the prospects for the Company's success will be dependent upon the future performance and market acceptance of the facilities, products, processes and services in which the Company takes an interest. Unlike certain entities that have the resources to develop and explore numerous product lines or operate in multiple industries, the Company does not anticipate having the ability to immediately diversify or benefit from the possible spreading of risks or offsetting of losses. The Company holds interests in both the psychedelic and non-psychedelic areas of the mushroom industry. Again, the prospects for the Company's success may become dependent upon the development or market acceptance of a very limited number of facilities, products, processes or services.

Regulatory Compliance Risks

Part of the Company's indirect business interests lie in the Kingdom of Lesotho pursuant to licenses and authorizations granted by Lesotho governmental authorities. To a lesser extent, the Company also has indirect business interests in nascent operations focused on product development in South Africa. Certain activities conducted in these jurisdictions are permissible under the enabling Lesotho regulatory regimes, which are less restrictive and onerous than the Canadian regulatory regime.

In the past, Canadian courts and regulatory authorities have taken the view that it is not contrary to Canadian federal or provincial law for a person to be engaged in, or for an entity to hold interests in affiliates that are engaged in certain regulated activities where such activities may be regulated differently than in the home jurisdictions and have enforced extra-territorial laws even where such laws (or regulatory regimes applicable to certain activities or industries) differ from those in the Canadian jurisdiction. There still remains a risk that Canadian courts or applicable Canadian or other governmental authorities may take a contrary view with respect to the business of the Company and view the Company as having violated their local laws, despite all applicable Lesotho licenses or authorizations (and to a lesser extent, applicable South Africa licenses or authorizations (where required)) having been obtained. Therefore, there is a risk that civil and criminal proceedings, including class actions, could be initiated against the Company. Such potential proceedings could involve substantial litigation expense, penalties, fines, seizure of assets, injunctions or other restrictions being imposed upon the Company or its business partners, while diverting the attention of key executives. Such proceedings could have a material adverse effect on the Company's business, revenues, operating results and financial condition as well as an impact upon the Company's reputation.

There is no assurance that the Company will become profitable or pay dividends

There is no assurance as to whether the Company will become profitable or pay dividends. The Company has incurred and anticipates that it will continue to incur substantial expenses relating to the development and initial operations of its business. The payment and amount of any future dividends will depend upon, among other things, the Company's results of operations, cash flow, financial condition and operating and capital requirements. There is no assurance that future dividends will be paid, and, if dividends are paid, there is no assurance with respect to the amount of any such dividends.

Material uncertainty about the Company's ability to continue as a going concern

The Company's ability to continue as a going concern is dependent upon its ability to raise funding, generate revenue and achieve profitable operations and, in the meantime, to obtain the necessary

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Changing Lives with Nature

PSYENCE GROUP INC.
Management's Discussion and Analysis

financing to meet its obligations and repay its liabilities when they become due. External financing, predominantly by the issuance of equity and debt, will be sought to finance the operations of the Company; however, there can be no certainty that such funds will be available at terms acceptable to the Company, or at all.

Substantial additional funding for the Palliative Care Clinical Trial being carried out by PBM

The Company has a sizable stake in PBM and conducting clinical trials and developing biopharmaceutical products is expensive and time consuming. We expect that PBM will require substantial additional capital to conduct research, preclinical studies and clinical trials for the current and future trials, seek regulatory approvals for its drug candidates and launch and commercialize any products for which it may receive regulatory approval. Similarly, should the Company undertake similar endeavours, such endeavours will require the same capital commitments, including the costs associated with building our own commercial sales, marketing and distribution organization.

Additional unforeseen costs due to health and medical regulators

Due to the numerous risks and uncertainties associated with the development of drug candidates, Psyence is unable to predict the timing of the generation of any meaningful revenue by PBM or PsyLabs or whether any of these businesses will be able to achieve or maintain profitability, if ever. The TGA, FDA, the EMA, MHRA, or other comparable foreign regulatory authorities could require the performance of preclinical studies or clinical trials in addition to those that PBM or PsyLabs currently anticipates which could lead to delays in drug development programmes and timelines. There may also be delays in any of their respective future collaborators' clinical trials or the development of the existing drug candidates and any other drug candidates that Psyence may itself identify. Even if existing drug candidates or any future drug candidates that Psyence may identify are approved for commercial sale, Psyence anticipates incurring significant costs associated with commercializing and distributing any approved product and ongoing compliance efforts.

Commercialization and Marketing of Products

The Company is reliant on employees and third-party consultants and service providers to assist in investigating the process of developing, commercializing and distributing psilocybin mushroom products. No assurance can be given that the results of these investigations will determine that manufacturing and distribution of these products will be feasible or commercially viable. A failure to obtain satisfactory results on these investigations could have a material adverse effect on the Company's business and may adversely affect the Company's ability to begin earning revenue.

Risk of failure for drug candidates proceeding through clinical trials

Psyence has no registered pharmaceutical products on the market, and PBM's new potential psilocybin-based drug candidates are currently in the clinical development phase. Psyence's ability to achieve and sustain profitability with respect to prospective drug candidates in which psilocybin is featured as the active pharmaceutical ingredient depends on obtaining regulatory approvals for and, if approved, successfully commercializing, its drug candidates, either alone or with third parties. Before obtaining regulatory approval for the commercial distribution of its current or future drug candidates, PBM or Psyence or an existing or future collaborator (as the case may be) must conduct extensive preclinical tests and clinical trials to demonstrate the safety, purity and potency of its drug candidates.

Generally, there is a high rate of failure for drug candidates proceeding through clinical trials. Both PBM and Psyence may suffer significant setbacks in its clinical trials similar to the experience of a number of other companies in the pharmaceutical and biotechnology industries, even after receiving promising results in earlier trials.

Psyence
Healing Minds with Science
Changing Lives with Nature

PSYENCE GROUP INC.
Management's Discussion and Analysis

Dilution of ownership in PBM and PsyLabs

Both PBM and PsyLabs will require additional funds to grow the businesses and if such additional funds are to be raised through issuances of equity or convertible debt securities, the Company could suffer significant dilution, and any new equity securities issued could have rights, preferences and privileges superior to those held by the Company. 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 acceptable to existing PBM or PsyLabs shareholders, including the Company. In addition, there can be no assurance that future financing can be obtained without substantial dilution to existing shareholders in these businesses.

Risks related to the Business of PBM

There are numerous risks and uncertainties associated with the PBM business including, among others: (i) the ability of iNGENü to execute its obligations in respect of the Palliative Care Clinical Trial; (ii) changes in applicable laws which may impact the clinical trial and/or the conducting thereof; (iii) Psyence Australia's ability to achieve successful clinical results from the Palliative Care Clinical Trial; (iv) PBM's ability to obtain regulatory approval for its product candidates, and any related restrictions or limitations of any approved products; (v) PBM's ability to obtain licensing of third-party intellectual property rights and supply of raw materials for future discovery and development of its product candidates; (vi) the ability of PBM to maintain the listing of its common shares and warrants on Nasdaq; and (vii) volatility in the price of the securities of PBM due to a variety of factors, including changes in the competitive and highly regulated industries in which PBM operates, variations in performance across competitors, changes in laws and regulations affecting PBM's business and changes in PBM's capital structure.

The foregoing list of factors is not exhaustive, however, please refer to the other risks and uncertainties described in the "Risk Factors" section of the final prospectus (File No. 333-282468) filed with the Securities and Exchange Commission ("SEC") on October 10, 2024 and other documents filed by PBM from time to time with the SEC.

Risks related to the Business of PsyLabs

There are numerous risks and uncertainties associated with the PsyLabs business including, among others: (i) the ability of the PsyLabs management team to execute its strategy in respect of the Non-Clinical Assets; (ii) changes in applicable laws which may impact the research and development and cultivation and production elements of the PsyLabs business; (iii) PsyLabs' ability to obtain satisfactory patent protection over its novel creations; (iv) PsyLabs' ability to obtain regulatory approval for its product candidates, and any related restrictions or limitations of any approved products; (v) PsyLabs' ability to maintain its existing licenses and permits; (vi) changes in laws and regulations affecting PsyLabs' business; and (vii) changes in PsyLabs' capital structure.

Reliance on Third Party IP

We do not currently own any granted patents, so any product development endeavours will require heavy reliance on license agreements with third parties under which we are granted rights to intellectual property that are important to our business. If disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on acceptable terms, we may be unable to successfully develop and commercialize the affected drug candidates or other psilocybin-based products.

Additional Risks related to doing Business Internationally

International markets will be a focus for expansion and revenue growth for the Company. Several factors, including legal and regulatory compliance and weakened economic conditions in any of the international jurisdictions in which the Company expects to do business or have projects, could adversely affect such expansion and growth. Additionally, the Company's entry into new international

Psyence
Healing Minds with Science
Changing Lives with Nature

PSYENCE GROUP INC.
Management's Discussion and Analysis

jurisdictions requires management attention and financial resources that would otherwise be spent on other parts of the business. Some of the countries in which the Company expects to sell products are to some degree subject to political, economic, and/or social instability. International business operations expose the Company to risks and expenses inherent in operating or selling products in foreign jurisdictions, and developing and emerging markets in particular, where these risks may be heightened. In addition to the risks mentioned elsewhere, these risks and expenses could have a material adverse effect on the Company's business, results of operations or financial condition and include without limitation:

adverse currency rate fluctuations;
risks associated with complying with laws and regulations in the countries in which the Company expects to sell products, and requirements to apply for and obtain licenses, permits or other approvals and the delays associated with obtaining such licenses, permits or other approvals;
multiple, changing and often inconsistent enforcement of laws, rules and regulations;
risks associated with reliance on international agents and representatives, including the possible failure of such agents and representatives to appropriately understand, represent and effectively market the Company's products;
the imposition of additional foreign governmental controls or regulations, new or enhanced trade restrictions or non-tariff barriers to trade, or restrictions on the activities of foreign agents, representatives and distributors;
increases in taxes, tariffs, customs and duties, or costs associated with compliance with import and export licensing and other compliance requirements;
the imposition of restrictions on trade, currency conversion or the transfer of funds or limitations;
the imposition of Canadian and/or other international sanctions against a country, company, person or entity with whom the Company does business that would restrict or prohibit the Company's ability to hold an indirect interest in operations in Lesotho;
downward pricing pressure on the Company's products in the international markets, due to competitive factors or otherwise;
laws and business practices favouring local companies;
political, social or economic unrest or instability, including without limitation military conflicts and acts of terrorism, military repression, war or civil war, social and labour unrest, organized crime, hostage-taking and violent crime;
expropriation and nationalization and/or renegotiation or nullification of necessary licenses, approvals, permits and contracts;
greater risk on credit terms, longer payment cycles and difficulties in enforcing agreements and collecting receivables through certain foreign legal systems;
difficulties in enforcing or defending intellectual property rights; and
the effect of disruptions caused by severe weather, natural disasters, outbreak of disease or other events that make travel to a particular region less attractive or more difficult.

Governments in certain foreign jurisdictions intervene in their economies, sometimes frequently, and occasionally make significant changes in policies and regulations. Operations may be affected in varying degrees by government regulations with respect to, but not limited to, restrictions on doing business, price controls, export controls, currency remittance, importation of product and supplies, income and other taxes, royalties, the repatriation of profits, expropriation of property, foreign investment, maintenance of concessions, licenses, approvals and permits, environmental matters, land

Psyence
Healing Minds with Science
Changing Lives with Nature

PSYENCE GROUP INC.
Management's Discussion and Analysis

use, land claims of local people, water use and workplace safety. Furthermore, some of the Company's operations are conducted in parts of the world that experience illegal sales practices or corruption or are operated under legal systems susceptible to undue influences to some degree. Although the Company has policies and procedures in place that are designed to promote legal and regulatory compliance, the employees, business partners and consultants of the Company could take actions that violate applicable anticorruption laws or regulations. Violations of these laws, or allegations of such violations, could result in loss, reduction or expropriation and/or have a material adverse effect on the Company's business, results of operations or financial condition. The Company's international efforts may not produce desired levels of sales. If and when the Company enters into new markets in the future, it may experience different competitive conditions and/or different customer requirements. As a result, the Company may be less successful than expected in expanding sales in its future targeted international markets. Sales into new international markets may take longer to ramp up and reach expected sales and profit levels, or may never do so, thereby affecting the Company's overall growth and profitability. To build brand awareness in these new markets, the Company may need to make greater investments in legal compliance, advertising and promotional activity than originally planned, which could negatively impact the expected profitability of sales in those markets. These or one or more of the other factors listed above may harm the Company's business, results of operations or financial condition.

The Company will continue to monitor developments and policies in the emerging markets in which it will operate and assess the impact thereof to its operations, however such developments cannot be accurately predicted and could have an adverse effect on the Company's operations or profitability.

Negative Results from Clinical Trials

From time to time, studies or clinical trials on medical-grade psilocybin mushroom products may be conducted by academics, research institutions or others, including government agencies. The publication of negative results of studies or clinical trials related to PsyLabs', PBM's or the Company's proposed products or the therapeutic areas in which these proposed products will compete could have a material adverse effect on the Company's sales and distribution endeavours and the value of its interests on PsyLabs and PBM.

Serious adverse events or other safety risks

If any of Psyence's future drug candidates, prior to or after any approval for commercial sale, cause serious or unexpected side effects, or are associated with other safety risks such as misuse, abuse or diversion, a number of potentially significant negative consequences could result, for example, regulatory authorities may interrupt, delay or halt clinical trials, regulatory authorities may deny regulatory approval of future drug candidates or Psyence could be sued and held liable for harm caused to patients. Any of these events could prevent us from achieving or maintaining market acceptance of our drug candidates, if approved, and could significantly harm our business, financial condition, results of operations and prospects.

Research and Development Project Implementation

There is no guarantee that the Company's intended project implementation timelines will be met as anticipated, or at all. The failure to achieve these milestones and deliverables could negatively impact the Company's ability to raise additional funds required to fund its ongoing operations and research and development initiatives, ultimately impacting the financial viability of the Company. There is also no guarantee that the Company's research and development efforts will result in commercially viable products, suitable for registration with the necessary authorities, or that it's sales and distribution efforts will be met with adequate demand for the envisaged products or services being sold.

Psyence
Healing Minds with Science
Changing Lives with Nature

PSYENCE GROUP INC.
Management's Discussion and Analysis

Health Canada Regulations

If the Company decides to conduct any future research in Canada into products that involve ingredients that are controlled under the CDSA (including certain psychedelics such as psilocybin) it will require a research license or Section 56 Exemption from Health Canada with similar controlled substance authorizations required from a federal, competent authority in other jurisdictions. There is no assurance that such exemption would be granted, and if it were not to be granted, it might prevent the Company from handling and researching such products in Canada without collaborating with a licensed partner.

The Expansion of the Use of Psychedelics in the Medical Industry may require New Clinical Research

Research in Canada and internationally regarding the medical benefits, viability, safety, efficacy, addictiveness, dosing and social acceptance of psychedelic and psychoactive products derived from psilocybin remains in early stages. There have been relatively few clinical trials on the benefits of such products. Although the Company believes that the articles, reports and studies support its beliefs regarding the medical benefits, viability, safety, efficacy, dosing and social acceptance of psychedelic and psychoactive products derived from psilocybin, future research and clinical trials may prove such statements to be incorrect, or could raise concerns regarding, and perceptions relating to, psychedelic and psychoactive products derived from psilocybin. Given these risks, uncertainties and assumptions, readers should not place undue reliance 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 medical benefits, viability, safety, efficacy, dosing, social acceptance or other facts and perceptions related to psychedelic and psychoactive products derived from psilocybin, which could have a material adverse effect on the demand for the Company's products/compounds with the potential to lead to a material adverse effect on the Company's business, financial condition and results of operations.

Competition from Other Companies

An increase in the companies competing in this industry could limit the ability of the Company to expand its operations. Current and new competitors may have better capitalization, a longer operating history, more expertise and be able to develop higher quality equipment or products at the same or a lower cost. The Company cannot provide assurances that it will be able to compete successfully against current and future competitors. Competitive pressures faced by the Company could have a material adverse effect on its business, operating results and financial condition.

Unfavourable Publicity or Consumer Perception

The Company believes the naturally derived medicinal-grade psilocybin mushroom industry is highly dependent upon consumer perception regarding the safety, efficacy and quality of psilocybin mushrooms distributed to such consumers. Consumer perception of PsyLabs', PBM's or the Company's products may be significantly influenced by scientific research or findings, regulatory investigations, litigation, media attention and other publicity regarding the consumption of naturally derived, medicinal-grade psilocybin mushroom products. 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 naturally derived medicinal-grade psilocybin mushroom 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 Company's products and the business, results of operations, financial condition and cash flows of the Company. The Company'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 Company, the demand for the Company's products, and the Company's business, results of operations, financial condition and cash flows. Further, adverse publicity reports or other media attention regarding the safety, efficacy and quality of naturally derived medicinal-grade psilocybin mushroom in general, or the Company's products

Psyence
Healing Minds with Science
Changing Lives with Nature

PSYENCE GROUP INC.
Management's Discussion and Analysis

(as developed or distributed) specifically, or associating the consumption of naturally derived medicinal-grade psilocybin mushroom's 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 appropriately or as directed.

Development of the Business of the Company

The development of the business of the Company and its ability to execute on its expansion opportunities described herein will depend, in part, upon the amount of additional financing available. Failure to obtain sufficient financing may result in delaying, scaling back, eliminating or indefinitely postponing expansion opportunities and the business of the Company's current or future operations. 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 acceptable to the Company. In addition, there can be no assurance that future financing can be obtained without substantial dilution to existing shareholders.

The Company may incur significant ongoing costs and obligations related to its investment in infrastructure, growth, regulatory compliance and operations

Although the Company plans to expand its asset-light business model in addition to the marketing and distribution of Psylabs' products and services, by minimizing asset maintenance costs through the Strategic Restructuring and identifying additional less capital-intensive opportunities in the psychedelics space, the Company expects that it may incur significant ongoing costs and obligations related to its investment in developing its business and the product sales and distribution pathway, which could have a material adverse impact on the Company's results of operations, financial condition and cash flows. In addition, future changes in regulations, more vigorous enforcement thereof or other unanticipated events could require extensive changes to the Company's operations, increased compliance costs or give rise to material liabilities, which could have a material adverse effect on the business, results of operations and financial condition of the Company. The Company's efforts to grow its business may be costlier than the Company expected, and the Company may not be able to increase its revenue enough to offset its higher operating expenses. The Company may incur significant losses in the future for a number of reasons, including the other risks described in this MD&A, unforeseen expenses, difficulties, complications and delays, and other unknown events. If the Company is unable to achieve and sustain profitability, the market price of the common shares may significantly decrease.

Inability to Innovate

In the area of innovation, the Company must be able to develop new products that appeal to customers. This depends, in part, on the technological and creative skills of its personnel and on its ability to register and protect its intellectual property rights.

Personnel

The Company has a small management team, and the loss of any key individual could affect the Company's business. Additionally, the Company will be required to secure additional personnel to facilitate its marketing and product development initiatives. Any inability to secure and/or retain appropriate personnel may have a materially adverse impact on the business and operations of the Company.

The Continued Development of the Company and its Business will require Additional Financing

The failure to raise additional capital could result in the delay or indefinite postponement of current business objectives or the Company going out of business. There can be no assurance that additional

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Changing Lives with Nature

PSYENCE GROUP INC.
Management's Discussion and Analysis

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 Company.

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

The Company's articles permit the issuance of an unlimited number of common shares, and shareholders will have no pre-emptive rights in connection with such further issuance. The directors of the Company have discretion to determine the price and the terms of issue of further issuances. Moreover, additional common shares will be issued by the Company on the exercise of options under the Company option plan and restricted share units under the Company restricted share unit plan, and upon the exercise of the Company's outstanding warrants. In addition, from time to time, the Company may enter into transactions to acquire assets or shares of other companies. These transactions may be financed wholly or partially with debt, which may temporarily increase the Company'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 Company to obtain additional capital and to pursue business opportunities, including potential acquisitions.

Developing laws and enactment of new regulations governing psilocybin-containing products

The success of any proposed drug candidates and future approved products, if any, is subject to a number of constantly evolving state and federal laws, regulations, and enforcement policies pertaining to psilocybin containing products. Local, state, federal, and international psilocybin laws and regulations remain highly restrictive and subject to evolving interpretations, which could require Psyence to incur substantial costs associated with compliance requirements. Psyence cannot predict the nature of any future laws, regulations, interpretations, or applications, nor can it determine what effect additional governmental regulations or administrative policies and procedures, when and if promulgated, could have on its activities in the psychedelics industry. There can be no assurance that drug candidates containing psilocybin (as the active pharmaceutical ingredient) will be approved for commercialization in Australia, the US or any other target jurisdiction at any time in the near or distant future. Any regulations the FDA issues relating to the sale, marketing, and/or other activities involving administration of psilocybin or psilocybin-assisted psychotherapy could have a material adverse effect on Psyence's business, financial condition and results of operations.

Change in Laws, Regulations and Guidelines

The cultivation, processing, manufacturing, packaging, labeling, advertising and distribution of the Company's planned products is subject to regulation by one or more governmental authorities, and various agencies of the federal, provincial, state and localities in which these products are sold. These government authorities may attempt to regulate any of its products that fall within their jurisdiction. Such governmental authorities may not accept the evidence of safety for any ingredients that the Company may want to market, may determine that a particular product or product ingredient presents an unacceptable health risk and may determine that a particular statement of nutritional support that the Company wants to use is an unacceptable claim. Such a determination would prevent the Company from marketing particular products or using certain statements of nutritional support on its products. The Company also may be unable to disseminate third-party literature that supports its products if the third-party literature fails to satisfy certain requirements. In addition, government authorities could require the Company to remove a particular product from the market. Any recall or removal would result in additional costs to the Company, including lost revenues from any products that it is required to remove from the market, any of which could be material. Any such product recalls or removals could lead to liability, substantial costs and reduced growth prospects, all of which could be material.

Psyence
Healing Minds with Science
Changing Lives with Nature

PSYENCE GROUP INC.
Management's Discussion and Analysis

Limited Market for Securities

The common shares are listed on the CSE, however, there can be no assurance that a continued active and liquid market for the common shares will be maintained.

No Operating History

The Company is an early-stage enterprise and subject to many of the risks common to early-stage enterprises, including under-capitalization, cash shortages, limitations with respect to personnel, financial, and other resources and lack of revenues. The Company has no history in the psilocybin mushroom cultivation industry before May 2020 and no history of operations or earnings, save for the earnings derived from the sale of the GOODMIND™ products.

The Company is therefore subject to many of the risks common to entering a new area of investment, including under-capitalization, limitations with respect to personnel, financial, and other resources and lack of revenues. There is no assurance that the Company will be successful in achieving a return on its investment and the likelihood of success must be considered in light of the Company's lack of experience in this industry.

Because the Company has limited operating history in an emerging area of business, readers should consider and evaluate its operating prospects in light of the risks and uncertainties frequently encountered by early-stage companies in rapidly evolving markets.

These risks may include:

risks that it may not have sufficient capital to achieve its growth strategy;
risks that it may not develop its product and service offerings in a manner that enables it to be profitable and meet its customers' requirements;
risks that its growth strategy may not be successful;
risks that fluctuations in its operating results will be significant relative to its revenues; and
risks relating to an evolving regulatory regime.

The Company's growth will depend substantially on its ability to address these, and the other risks described in this section. If it does not successfully address these risks, its business may be significantly harmed.

Consequences of Violations of Laws and Regulations

In Canada, certain active ingredients such as psilocybin are classified as controlled substances and are listed on Schedule III of the CDSA. As such, possession and use of these substances is prohibited unless approved. The governmental authorities in Canada may allow for exemptions to parties to allow possession of controlled substances for scientific purposes or on compassionate grounds in the case of end-of-life treatment. Further, a dealer's license can be obtained under the Food and Drugs Regulations allowing for the transport, manufacturing, processing and sale of products containing a controlled substance like psilocybin in certain circumstances. Programs relating to controlled substances are strict and penalties for contravention of these laws could result in significant fines, penalties, administrative sanctions, convictions or settlements arising from civil proceedings initiated by either government entities in the jurisdictions in which the Company may in the future operate, or private citizens or criminal charges. The Company's current plans with respect to psilocybin are limited to conducting scientific research and development in compliance with applicable laws in the jurisdictions in which the Company is conducting business. Currently, the Company has no plans to sell psilocybin mushroom products in Canada, however, it is exploring the potential to conduct research with respect to psilocybin in Canada with a duly licenced partner, subject to approvals by all applicable regulatory agencies. There is no guarantee that the Company would be able to obtain an exemption under the CDSA or a dealer's licence under the Food and Drugs Regulation, which would prevent the Company

Psyence
Healing Minds with Science
Changing Lives with Nature

PSYENCE GROUP INC.
Management's Discussion and Analysis

from being able to handle or research those substances in Canada without collaborating with a licensed partner. The Company will apply for an exemption under the CDSA or a dealer's licence under the Food and Drugs Regulation if the Company decides to offer its psilocybin products or conduct research in Canada. The Company does not intend to apply for the aforementioned within the next 12 months. During this process, the Company will seek advice from experts in Canadian food and drugs regulation.

The Company's actual financial position and results of operations may differ materially from the expectations of the Company's management

The Company's actual financial position and results of operations may differ materially from management's expectations. As a result, the Company's revenue, net income and cash flow may differ materially from the Company's internally projected revenue, net income and cash flow. The process for estimating the Company's revenue, net income and cash flow requires the use of judgement in determining the appropriate assumptions and estimates. These estimates and assumptions may be revised as additional information becomes available and as additional analyses are performed. In addition, the assumptions used in planning may not prove to be accurate, and other factors may affect the Company's financial condition or results of operations.

The Company may become subject to litigation

The Company's participation in the medical-grade psilocybin mushroom industry and nutraceuticals market may lead to litigation, formal or informal complaints, enforcement actions and inquiries by third parties, other companies or various governmental authorities against the Company. Litigation, complaints and enforcement actions involving the Company could consume considerable amounts of financial and other corporate resources, which could have an adverse effect on the Company's future cash flows, earnings, results of operations and financial condition.

The Company may be forced to litigate to defend its intellectual property rights, or to defend against claims by third-parties against the Company relating to intellectual property rights

The Company may be forced to litigate to enforce or defend future intellectual property rights, to protect its trade secrets or to determine the validity and scope of other parties' proprietary rights. Any such litigation could be very costly and could distract its management from focusing on operating the Company's business. The existence or outcome of any such litigation could harm the Company's business. Further, because the content of much of the Company's intellectual property concerns medical-grade psilocybin mushroom and other activities that are not legal in some state jurisdictions or under federal law, the Company may face additional difficulties in defending its intellectual property rights.

Insurance Coverage

The Company's business is subject to a number of risks and hazards generally, including adverse environmental conditions, accidents, product liability and changes in the regulatory environment. Such occurrences could result in damage to assets, personal injury or death, environmental damage, delays in operations, monetary losses and possible legal liability. Although the Company maintains insurance to protect against certain risks in such amounts as it considers to be reasonable, its insurance does not cover all the potential risks associated with its operations. The Company may also be unable to maintain insurance to cover these risks at economically feasible premiums. Insurance coverage may not continue to be available or may not be adequate to cover any resulting liability. Moreover, insurance against risks such as environmental pollution or other hazards encountered in the operations of the Company is not generally available on acceptable terms. The Company might also become subject to liability for pollution or other hazards which may not be insured against or which the Company may elect not to insure against because of premium costs or other reasons. Losses from these events may cause the Company to incur significant costs that could have a material adverse effect upon its financial performance and results of operations.

Psyence
Healing Minds with Science
Changing Lives with Nature

PSYENCE GROUP INC.
Management's Discussion and Analysis

Ability to establish and maintain bank accounts

While the Company does not anticipate dealing with banking restrictions, there is a risk that banking institutions in countries where the Company operates will not accept payments related to the psilocybin mushroom industry. Such risks could increase costs for the Company. The Company's inability to manage such risks may adversely affect the Company's operations and financial performance.

Product Liability

The Company intends to sell and distribute products designed to be ingested by humans and will therefore face a risk of exposure to product liability claims, regulatory action and litigation if its products are alleged to have caused bodily harm or injury. In addition, the sale of consumable products involves the risk of injury to consumers due to tampering by unauthorized third parties or product contamination. Section 61 of the South African Consumer Protection Act, No. 68 of 2006 ("CPA") establishes strict liability within the context of defective products distributed in South Africa. A producer, importer, distributor or retailer of any goods must comply with the CPA and can be liable for any harm, irrespective of whether the harm resulted from negligence, meaning that a producer or importer, distributor or retailer of any goods are liable for defective or hazardous products.

Adverse reactions resulting from human consumption of medical-grade psilocybin mushroom products alone or in combination with other medications or substances could occur. The Company could therefore be subject to various product liability claims, including, among others, that its products caused injury or illness, include inadequate instructions for use or include inadequate warnings concerning health risks, possible side effects or interactions with other substances. A product liability claim or regulatory action against the Company could result in increased costs, could adversely affect the Company and could have a material adverse effect on its results of operations and financial conditions.

If the Company is unable to attract and retain key personnel, it may not be able to compete effectively

The Company will depend upon its ability to attract and retain key management, including the Company's directors, officers and technical experts. The Company will attempt to enhance its management and technical expertise by continuing to recruit qualified individuals who possess desired skills and experience in certain targeted areas. The Company's inability to retain employees and attract and retain sufficient additional employees or engineering and technical support resources could have a material adverse effect on the Company's business, results of operations, sales, cash flow or financial condition. Shortages in qualified personnel or the loss of key personnel could adversely affect the financial condition of the Company or results of operations of the business and could limit the Company's ability to develop and market its medical-grade psilocybin mushroom products. The loss of any of the Company's senior management or key employees could materially adversely affect the Company's ability to execute the Company's business plan and strategy, and the Company may not be able to find adequate replacements on a timely basis, or at all. The Company does not maintain key person life insurance policies on any of the Company's employees.

The size of the Company's target market is difficult to quantify

As the psilocybin mushroom industry is in an early stage with uncertain boundaries, there is a lack of information about comparable companies available and, few, if any, established companies whose business model the Company can follow or upon whose success the Company can build. There can be no assurance that the market size is sufficiently large for its business to grow as projected, which may negatively impact its financial results. The Company regularly follows market research.

Reliance on Limited Jurisdictions

To date, the Company's active investments and resources have been primarily focused in Southern Africa and the UK (for research and development) and Australia (for clinical trials). The Company expects to continue the focus on expansion opportunities into other jurisdictions including Canada, the

Psyence
Healing Minds with Science
Changing Lives with Nature

PSYENCE GROUP INC.
Management's Discussion and Analysis

USA and the rest of Europe. Adverse changes or developments within Southern Africa, the UK or Australia could have a material and adverse effect on the Company's ability to continue its business, business interests, financial condition and prospects. Additionally, any material or adverse change in jurisdictions in which the Company will do business may affect the Company's ability to continue sales and distribution efforts linked to medical-grade psilocybin mushroom products, its business, financial condition and prospects.

No guarantee on the use of available funds by the Company

The Company cannot specify with certainty the particular uses of its available funds. Management has broad discretion in the application of its available funds. Accordingly, shareholders will have to rely upon the judgment of management with respect to the use of available funds, with only limited information concerning management's specific intentions. The Company's management may spend a portion or all of the available funds in ways that the Company's shareholders might not desire, that might not yield a favourable return and that might not increase the value of a shareholder's investment. The failure by management to apply these funds effectively could harm the Company's business. Pending use of such funds, the Company might invest available funds in a manner that does not produce income or that loses value.

Management of Growth

The Company may be subject to growth-related risks, including capacity constraints and pressure on its internal systems and controls. The ability of the Company 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 Company to deal with this growth may have a material adverse effect on the Company's business, financial condition, results of operations and prospects.

Inability to protect Intellectual Property

The Company expects to rely upon intangible and intellectual property such as copyrights, trade secrets, unpatented proprietary know-how and continuing innovation to protect the development of its business. There can be no assurances that the steps taken by the Company to protect its intangible property and intellectual property will be adequate. To the extent that this property is infringed on, revenue could be negatively affected, and the Company may have to litigate to enforce its intangible property rights, which could result in substantial costs and divert management's attention and other resources.

Material Contracts

The following are the material contracts, other than contracts in the ordinary course of business, and material contracts in the ordinary course of business required to be listed, that were entered into by the Company in the current financial period or prior to this period and are still in effect as of the date of this MD&A:

Company's new stock option plan, confirmed for adoption at the 2021 AGM;
Amendments to the Company's existing restricted share unit plan approved at the 2021 AGM, as further amended by the Board on February 16, 2022;
Lock-Up Agreement with PBM and certain of PBM's shareholders;
R&D IP Agreement (now assigned to PBM);
Commercial Term Sheet (now terminated);
First Addendum to the R&D IP Agreement and Commercial Term Sheet
Call Option Agreement concluded with PsyLabs;
First Addendum to the Call Option Agreement concluded with PsyLabs;
Promissory Note, dated January 25, 2024, with PBM;
Swap Agreements dated September 30, 2024 and October 25, 2024 respectively with PBM;
PsyLabs Sale Agreement dated September 17, 2024 with PBM;

Psyence
Healing Minds with Science
Changing Lives with Nature

PSYENCE GROUP INC.
Management's Discussion and Analysis

Copies of these material contracts are available under the Company's SEDAR profile at www.sedar.com

Additional Information

All additional information relating to the Company is available on SEDAR at www.sedar.com

Psyence
Healing Minds with Science
Changing Lives with Nature

AI assistant

Psyence Group Inc. — Management Reports 2024

43134_rns_2024-11-29_fff13567-ba3a-493f-aa4d-061c501acf15.pdf

Psyence™

Psyence Group Inc.

Management Discussion & Analysis

Forward-Looking Information

Overview

Corporate Structure

Notes:

Development of the business

Business Combination

Canadian Restructuring to Facilitate the Business Combination (as described in more detail below in the section titled Business Overview - Psyence Therapeutics)

Strategic Restructuring Of Business Units

Listing on CSE and board of directors

Psyence Group Inc and subsidiaries post CSE listing

Outstanding Share Data

Business Overview and Discussion of Operations

Psyence Biomedical Ltd

Palliative Care Clinical Trial

Psyence Labs Ltd

Relationships with Third Parties

Update on Significant Milestones and Business Objectives

Notes:

Update on Use of Proceeds

Notes:

Intellectual Property

Trademarks

Licensed Intellectual Property

Regulatory Framework and Licensing Regime

Notes:

Canada

CDSA

Food and Drugs

Research

Exemptions & Licences – CDSA and Food and Drug Regulations

Australia

Registration of medicines

Scheduling of Psilocybin

Importation

USA

Corporate Governance and Compliance Program

Overall Performance

Financial Information

Results and Overview of operations for the first fiscal quarter to September 30, 2024

Revenue and results

Sales and marketing costs

Research and development

General and administration costs

Professional and consulting fees

Other costs

Total assets at quarter end September 30, 2024

Operations

Quarterly Results of Operations

Liquidity and Capital Resources

Liquidity

Off Balance Sheet Arrangements

Transactions between Related Parties

Compensation to key management personnel

Balances

Subsequent Highlights

Financial Instruments and Other Instruments

Credit risk

Liquidity risk

Foreign exchange risk

Interest rate risk

Capital management

Risk Factors

Initial lack of business diversification

Regulatory Compliance Risks

There is no assurance that the Company will become profitable or pay dividends

Material uncertainty about the Company's ability to continue as a going concern

Substantial additional funding for the Palliative Care Clinical Trial being carried out by PBM

Additional unforeseen costs due to health and medical regulators

Commercialization and Marketing of Products

Risk of failure for drug candidates proceeding through clinical trials

Dilution of ownership in PBM and PsyLabs

Risks related to the Business of PBM

Risks related to the Business of PsyLabs

Reliance on Third Party IP

Psyence Group Inc. Management Reports 2024