Reunion Neuroscience (REUN) 6-KCurrent report (foreign)

Exhibit 99.3

REUNION NEUROSCIENCE INC.

(FORMERLY FIELD TRIP HEALTH LTD.)

AUDITED CONSOLIDATED FINANCIAL STATEMENTS

(expressed in Canadian Dollars, unless otherwise noted)

FOR THE FISCAL YEARS ENDED
March 31, 2023 AND 2022

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Reunion Neuroscience Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated statements of financial position of Reunion Neuroscience Inc. (formerly Field Trip Health Ltd.) (the “Company”) as of March 31, 2023 and 2022, the related consolidated statements of loss and comprehensive loss, changes in equity and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at March 31, 2023 and 2022, and the results of its operations and its cash flows for the years then ended in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

The Company's Ability to Continue as a Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring losses from operations, and has stated that substantial doubt exists about the Company’s ability to continue as a going concern. Management's evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company‘s management. Our responsibility is to express an opinion on the Company‘s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Ernst & Young LLP

Chartered Professional Accountants

Licensed Public Accountants

We have served as the Company‘s auditor since 2021

Toronto, Canada

June 28, 2023

REUNION NEUROSCIENCE INC. (FORMERLY FIELD TRIP HEALTH LTD.)
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

Going concern disclosure (Note 2)

Subsequent events (Note 25)

The accompanying notes are an integral part of these Consolidated Financial Statements.

REUNION NEUROSCIENCE INC. (FORMERLY FIELD TRIP HEALTH LTD.)

CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS

Going concern disclosure (Note 2)

The accompanying notes are an integral part of these Consolidated Financial Statements.

REUNION NEUROSCIENCE INC. (FORMERLY FIELD TRIP HEALTH LTD.)

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Going concern disclosure (Note 2)

The accompanying notes are an integral part of these Consolidated Financial Statements.

REUNION NEUROSCIENCE INC. (FORMERLY FIELD TRIP HEALTH LTD.)

CONSOLIDATED STATEMENTS OF CASH FLOWS

Going concern disclosure (Note 2)

The accompanying notes are an integral part of these Consolidated Financial Statements.

REUNION NEUROSCIENCE INC. (FORMERLY FIELD TRIP HEALTH LTD.) 

Notes to the Consolidated Financial Statements 

For the Fiscal Year Ended March 31, 2023 and 2022 

1.     NATURE OF OPERATIONS

Reunion Neuroscience Inc. (“Reunion” or the “Company”) is a clinical-stage biopharmaceutical company with a mission to develop innovative next generation therapeutic solutions for underserved mental health conditions.

The Company’s lead asset, RE104, is a patented, clinical-stage serotonergic psychedelic therapeutic designed as a single-dose, fast-acting and durable antidepressant. The Company recently completed a Phase 1 clinical study evaluating the safety, tolerability, pharmacokinetics and pharmacodynamics of RE104 and, based on results and the selection of a recommended Phase 2 dose, plans to evaluate RE104 as a treatment for patients who suffer from postpartum depression (“PPD”) and other mental health conditions. A Phase 2 clinical study in PPD is planned to start by the end of calendar year 2023.

Reunion is also developing the RE200 series, which are molecules designed to be structurally similar to classical psychedelics with selective potency at the target serotonin 2A receptor (5HT2A) and designed to be devoid of 5HT2B receptor agonism. Since 5HT2B activation acts detrimentally on the cardiovascular system, the RE200 series are intended to be used in chronic treatments, in broader patient populations and in a wider set of indications.

Reorganization and Spinout of Clinic Operations

On August 11, 2022, Reunion completed its previously announced reorganization which resulted in the separation of its drug development and clinic divisions into two independent companies (the “Spinout Transaction”). The reorganization was completed by way of a Plan of Arrangement (the “Arrangement”). Upon closing, Reunion transferred the entirety of its clinics in Canada, United States and the Netherlands, its natural products research in Jamaica, the associated digital assets and part of its corporate operations in Canada and United States (collectively, the “Clinic Operations”) to Field Trip Health & Wellness Ltd. (“Field Trip H&W”). Pursuant to the terms of the Arrangement, each Field Trip share was exchanged for one common share of Reunion and approximately 0.86 common shares of Field Trip H&W. Reunion Shares were consolidated on a 5:1 basis.

Field Trip Health Ltd. was renamed Reunion Neuroscience Inc. and remains listed on the NASDAQ Stock Market and Toronto Stock Exchange under the ticker symbol “REUN”, concurrent with the listing of Field Trip H&W (see below). Reunion continues to focus on the research and development of novel psychedelic molecules such as RE104 and RE200 series of drug development candidates.

Field Trip H&W operated as a separate company with a separate management team and Board of Directors focused on the Clinic Operations.

Concurrent with closing of the Arrangement, Field Trip H&W completed a series of private placement financings for gross proceeds of approximately $20 million and listed on the Toronto Stock Exchange Venture under the ticker symbol “FTHW”. In connection with the Arrangement, Reunion subscribed for 19,615,000 FTHW shares at $0.50 per share and holds a 21.84% interest in Field Trip H&W on a non-diluted basis (see Note 9 for details).

The following diagram describes the subsidiaries of Reunion prior to the Spinout Transaction, and as of the date hereof, including their place of incorporation and continuance or formation. All subsidiaries are wholly-owned.

REUNION NEUROSCIENCE INC. (FORMERLY FIELD TRIP HEALTH LTD.) 

Notes to the Consolidated Financial Statements 

For the Fiscal Year Ended March 31, 2023 and 2022

Pre-Spinout Transaction

As of the date hereof

On September 30, 2022, Field Trip Discovery USA Inc. was renamed to Reunion Neuroscience USA Inc.

On October 4, 2022, Field Trip Psychedelics Inc. (“FTP”) was amalgamated with Field Trip Discovery Inc. following which the amalgamated entity was renamed Reunion Neuroscience Canada Inc.

REUNION NEUROSCIENCE INC. (FORMERLY FIELD TRIP HEALTH LTD.) 

Notes to the Consolidated Financial Statements 

For the Fiscal Year Ended March 31, 2023 and 2022

2.     BASIS OF PREPARATION

Statement of Compliance

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board and interpreted by the IFRS Interpretations Committee.

These consolidated financial statements were approved for issue by the Board of Directors on June 28, 2023.

Basis of Presentation

These consolidated financial statements have been prepared on a going concern basis, under the historical cost convention.

Going Concern

The Company has incurred operating losses since its inception, and expects to continue to incur significant operating losses for the foreseeable future and may never become profitable. As of March 31, 2023, the Company had a cash balance of $27,200,097 and working capital of $21,239,423. The Company’s cash flows used in operating activities for continuing operations amounts to $21,684,654 for the fiscal year ended March 31, 2023. The Company also expects additional cash outflows of $3,367,910 to settle its financial guarantees. The Company anticipates incurring additional losses until such time, if ever, that it can obtain marketing approval to sell, and then generate significant sales, of its single clinical-stage drug candidate, RE104, that is currently in development. Substantial additional financing will be needed by the Company to fund its operations and to develop and commercialize RE104. The Company’s current cash balance is insufficient to fund the Company’s operations and other commitments for the next twelve months from the date of issuance of these financial statements. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

As disclosed in Note 25, Reunion entered into a definitive arrangement agreement whereby MPM BioImpact would acquire Reunion by way of a statutory plan of arrangement under the Canada Business Corporations Act. Closing of the acquisition will, among other things, require shareholder approval and remains subject to the satisfaction (or waiver) of a number of closing conditions. If the acquisition does not close, the Company would be required to pay a termination fee and expense reimbursement to MPM BioImpact of up to US$1,500,000. In such an event that the acquisition does not close, the Company will seek to obtain additional capital through equity or debt financings or other arrangements to fund operations; however, there can be no assurance that the Company will be able to raise needed capital under acceptable terms, if at all. If the acquisition does not close, the sale of additional equity would dilute existing stockholders and newly issued shares or debt securities may contain senior rights and preferences compared to currently outstanding shares of common stock and may contain covenants that limit the Company’s ability to pay dividends or make other distributions to stockholders. If the Company is unable to obtain such additional financing, future operations would need to be scaled back or discontinued.

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

REUNION NEUROSCIENCE INC. (FORMERLY FIELD TRIP HEALTH LTD.) 

Notes to the Consolidated Financial Statements 

For the Fiscal Year Ended March 31, 2023 and 2022

Basis of Consolidation

The consolidated financial statements include the financial statements of the Company and its wholly-owned subsidiaries, Reunion Neuroscience Canada Inc., Field Trip Discovery Australia Pty Ltd., and Reunion Neuroscience USA Inc. All intercompany balances and transactions have been eliminated upon consolidation.

Spinout of Clinic Operations

The Company accounted for the Clinic Operations as discontinued operations rather than continuing operations since the Spinout Transaction was successfully completed on August 11, 2022.

Therefore, the Clinic Operations’ assets and liabilities were classified and presented separately as items held for transfer in the unaudited interim consolidated statements of financial position and were measured at their carrying amount. Clinic Operations are excluded from the results of continuing operations and are presented as a single amount under Net loss before and after tax from discontinued Clinic Operations in the consolidated statements of loss and comprehensive loss. Property, plant and equipment, intangible assets and right-of-use assets were not depreciated or amortized once classified as held for sale. Additional disclosures are provided in Note 4. All other notes to the consolidated financial statements include amounts from continuing operations.

Functional Currency and Presentation Currency

The Company’s functional currency is the Canadian dollar. Transactions undertaken in foreign currencies are translated into Canadian dollars at daily exchange rates prevailing when the transactions occur. Monetary assets and liabilities denominated in foreign currencies are translated at period-end exchange rates and non-monetary items are translated at historical exchange rates. Realized and unrealized exchange gains and losses are recognized in net loss.

The assets and liabilities of foreign operations are translated into Canadian dollars using the period-end exchange rates. Income, expenses, and cash flows or foreign operations are translated into Canadian dollars using the average exchange rates. Exchange differences resulting from the translation of foreign operations into Canadian dollars are recognized in other comprehensive loss and accumulated in equity.

These consolidated financial statements are presented in Canadian dollars, the Company’s presentation currency. The Company’s and its subsidiaries functional currencies are as follows:

Subsidiaries are entities controlled by the Company. Control exists when the Company has the power, directly and indirectly, to govern the financial and operating policies of an entity and be exposed to the variable returns from its activities. The financial statements of subsidiaries are included in the consolidated financial statements from the date that the control commences until the date the control ceases. All significant intercompany balances and transactions have been eliminated upon consolidation.

REUNION NEUROSCIENCE INC. (FORMERLY FIELD TRIP HEALTH LTD.) 

Notes to the Consolidated Financial Statements 

For the Fiscal Year Ended March 31, 2023 and 2022

3.     SIGNIFICANT ACCOUNTING POLICIES

The accounting policies and use of estimates and judgements described below have been applied consistently in these consolidated financial statements by the Company and its subsidiaries.

Cash and cash equivalents

Cash and cash equivalents comprise cash in bank and non-redeemable guaranteed investment certificates held at financial institutions with an original maturity from the date of acquisition of 90 days or less.

Restricted Cash

Restricted cash comprises cash held as collateral against the Company’s corporate credit card program.

Property, Plant and Equipment

Property, plant and equipment (“PP&E”) is recorded at cost, net of accumulated depreciation and/or accumulated impairment losses. The Company allocates the amount initially recognized in respect of an item of PP&E to its significant components and amortizes each such part separately. Residual values, method of depreciation and useful lives of the assets are reviewed annually or more frequently if required, and any changes in these estimates are adjusted prospectively. Depreciation is calculated over the estimated useful lives of the assets, as follows:

Construction in progress is transferred to property, plant and equipment when the assets are available for use and amortization of the assets commences at that point.

Intangible Assets

Finite life intangible assets are recorded at cost less accumulated amortization and accumulated impairment losses. Residual values, method of depreciation and useful lives of the assets are reviewed annually or more frequently if required, and any changes in these estimates are adjusted prospectively. Amortization is provided on a straight-line basis over the following terms:

Leases

Right-of-use assets

Leased assets are capitalized at the commencement date of the lease and are comprised of the initial lease liability amount, initial direct costs incurred when entering the lease, less any lease incentives received. Right-of-use assets are amortized on a straight-line basis over the life of the underlying lease agreement.

REUNION NEUROSCIENCE INC. (FORMERLY FIELD TRIP HEALTH LTD.) 

Notes to the Consolidated Financial Statements 

For the Fiscal Year Ended March 31, 2023 and 2022

Lease obligations

The lease liability is measured at the present value of the fixed payments and variable lease payments that pertain to an index or rate, net of cash lease incentives that are not paid at the commencement date. Lease payments are apportioned between interest expense and reduction of the lease liability using the rate implicit in the lease to achieve a constant rate of interest on the remaining balance of the liability. If this rate cannot be readily determined, the Company uses its incremental borrowing rate.

Low value assets and short-term lease

The Company has elected not to recognize right-of-use assets and lease liabilities for short-term lease that have a lease term of 12 months or less and leases of low value assets. The lease payments associated with these leases are expensed on a straight-line basis over the lease term.

Impairment of Non-Financial Assets

The carrying amounts of the Company’s non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. If such an indication exists, the recoverable amount is estimated. For the purpose of measuring recoverable amounts, assets are grouped at the lowest levels for which there are separately identifiable cash flows or cash generating units (“CGUs”). The recoverable amount is the higher of an asset’s fair value less cost of disposal and value in use (being the present value of the expected future cash flows of the relevant asset or CGU). An impairment loss is recognized for the amount by which the asset’s carrying value exceeds its recoverable amount. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

Financial Instruments

Financial assets and liabilities are recorded on the consolidated statement of financial position when the Company becomes a party to the financial instrument. Financial assets are derecognized when the contractual rights to the cash flows from the financial asset expire or when the contractual rights to those assets are transferred. Financial liabilities are derecognized when the obligation specified in the contract is discharged, cancelled or expired.

Classification and Measurement of Financial Instruments

The Company initially measures a financial instrument at its fair value adjusted for, in the case of a financial instrument not at fair value through profit (loss) (“FVTPL”), transaction costs that are directly attributable to the acquisition of the financial instrument. Transaction costs of financial instruments carried at fair value through FVTPL are expensed in profit (loss).

Subsequent measurement of financial assets and liabilities depends on the Company’s business model for managing the asset or liability and the cash flow characteristics of the asset or liability. All financial assets and liabilities are measured at amortized cost.

Financial assets and liabilities that are held for collection or payment of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortized cost. Finance income or expense from these financial instruments is recorded in loss using the effective interest rate method. The Company has classified its financial instruments as outlined in Note 20.

REUNION NEUROSCIENCE INC. (FORMERLY FIELD TRIP HEALTH LTD.) 

Notes to the Consolidated Financial Statements 

For the Fiscal Year Ended March 31, 2023 and 2022

Investment in associate

An associate is an entity over which the Company has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not having control over those policies.

The considerations made in determining significant influence or control are similar to those necessary to determine control over subsidiaries. The Company’s investment in its associate, Field Trip H&W, is accounted for using the equity method.

Under the equity method, the investment in an associate is initially recognized at cost. The carrying amount of the investment is adjusted to recognize changes in the Company’s share of net assets of the associate since the acquisition date. Goodwill relating to the associate is included in the carrying amount of the investment and is not tested for impairment separately.

The consolidated statements of loss and comprehensive loss reflects the Company’s share of the results of operations of the associate. Any change in other comprehensive income (“OCI”) of the investee is presented as part of the Company’s OCI. In addition, when there has been a change recognized directly in the equity of the associate, the Company recognizes its share of any changes, when applicable, in the consolidated statements of changes in equity. Unrealized gains and losses resulting from transactions between the Company and the associate are eliminated to the extent of the interest in the associate.

The aggregate of the Company’s share of profit or loss of an associate is shown on the face of the consolidated statements of loss and comprehensive loss outside operating expense and represents profit or loss after tax and non-controlling interests in the associate.

The consolidated financial statements of the associate are prepared for the same reporting period as the Company.

Impairment in associate

After application of the equity method, the Company determines whether it is necessary to recognize an impairment loss on its investment in associate. At each reporting date, the Company determines whether there is objective evidence that the investment in the associate is impaired. If there is such evidence, the Company calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value, and then recognizes the loss as Share of loss of associate in the consolidated statements of loss and comprehensive loss.

The entire carrying amount of the investment is tested for impairment as a single asset, by comparing its recoverable amount (higher of value in use and fair value less costs of disposal) with its carrying amount. In determining the value in use of the net investment, the Company estimates its share of the present value of the estimated future cash flows expected to be generated by the associate, including the cash flows from the operations of the associate and the proceeds from the ultimate disposal of the investment.

Financial guarantees of associate lease obligations

Financial guarantees of associate lease obligations are initially measured at fair value calculated as the difference in present values of cash flows assuming an unguaranteed rate and the related probability of payment by the Company. Financial guarantees of associate lease obligations are recognized initially in the carrying value of the associate with the corresponding liability set up.

The financial guarantees are then amortized over the remaining period of the leases and recorded in other income (expense). Subsequently, these financial guarantees are remeasured at the higher of the loss allowance determined as expected credit loss under IFRS 9 Financial Instruments and the amount initially recognized less the cumulative income or loss. The difference (as applicable) is recorded in net loss.

REUNION NEUROSCIENCE INC. (FORMERLY FIELD TRIP HEALTH LTD.) 

Notes to the Consolidated Financial Statements 

For the Fiscal Year Ended March 31, 2023 and 2022

The Company has measured expected credit losses on a collective basis as the Company is unable to allocate the carrying amount of individual financial assets or the exposure to credit risk on financial guarantee contracts to the credit risk rating grades for which lifetime expected credit losses are recognized.

Share-based Payments

The Company measures equity settled share-based payments based on their fair value at the grant date and recognizes compensation expense over the vesting period based on the Company’s estimate of equity instruments that will eventually vest. Expected forfeitures are estimated at the date of grant and subsequently adjusted if further information indicates actual forfeitures may vary from the original estimate. Any revisions are recognized in net loss such that the cumulative expense reflects the revised estimate

The fair value of share-based compensation options is estimated using the Black-Scholes option pricing model and rely on a number of estimates, such as expected life of the option and the volatility of the underlying share price. In addition, the Company estimates the rate of forfeiture of options granted. Such estimates and assumptions are inherently uncertain, and any changes in these assumptions affect the fair value estimates of share-based compensation expense.

Share-based payments to non-employees are measured at the fair value of the goods or services received or the fair value of the equity instruments issued if it is determined that the fair value of the goods or services cannot be reliably measured and are recorded at the date the goods or services are received. The amount recognized as an expense is adjusted to reflect the number of awards expected to vest. The corresponding credit is recorded to share-based payments reserve in equity.

Consideration received on the exercise of stock options is recorded in share capital and the related stock-based payments reserve is transferred to share capital.

Reunion Replacement Options

Following the Arrangement, each original Field Trip Health  Ltd. Option was exchanged for one (1) Reunion Replacement Option and 0.85983356 of a Field Trip H&W Option, with each Reunion Replacement Option and each whole Field Trip H&W Option (i) entitling the holder thereof to acquire one (1) Reunion Share and one (1) Field Trip H&W Share, respectively, and (ii) having an exercise price (rounded up to the nearest cent) determined in accordance with the Arrangement. Immediately upon closing of the Arrangement, the Company consolidated its Reunion Shares on a 5:1 basis, resulting in a similar consolidation of Reunion Replacement Options.

The Reunion Replacement Options were accounted for as a modification of the Field Trip Health Ltd. Options. The Company recognized the effects of the modifications that increased the total fair value of the share-based payment arrangement or were otherwise beneficial to the participant. The incremental fair value granted is the difference between the fair value of the Reunion Replacement Options and the fair value of the cancelled equity instruments, immediately before and after the Spinout Transaction closing date. This incremental amount will be recognized as an expense over the remainder of the vesting period.

As the original Field Trip Health Ltd. Option was exchanged for two separate options, the fair value of the Field Trip Health Ltd. Option on the grant date and the incremental gain of the Reunion Replacement Option and Field Trip H&W Option have been allocated to each separate option based on the proportion of each separate option’s corresponding fair value on the date of the Arrangement over their combined total fair value on the date of the Arrangement.

REUNION NEUROSCIENCE INC. (FORMERLY FIELD TRIP HEALTH LTD.) 

Notes to the Consolidated Financial Statements 

For the Fiscal Year Ended March 31, 2023 and 2022

Stock Option Cancellations

As part of the Arrangement, option holders who are not engaged in Reunion are no longer eligible participants under the Reunion equity compensation plan. As such, these participants’ unvested Reunion options were cancelled immediately upon closing of the Spinout Transaction. The vested Reunion options shall remain available for exercise for a period of 12 months following the earlier of: (i) the date of the Arrangement, or (ii) the term of the original Field Trip Health Ltd. Option. Participants who are not engaged in Field Trip H&W will have their options treated likewise.

The cancellation of options was accounted for as an acceleration of vesting, and the amount that otherwise would have been recognized for services received for employment over the remainder of the vesting period was recognized immediately as an expense.

As a result, the Company recognized the accelerated vesting of Field Trip H&W options for its participants and for those who are not involved in either Reunion or Field Trip H&W.

Revenue Recognition

Prior to the Spinout Transaction, the Company generated revenue from the provision of psychotherapy services performed at its clinic locations. The Company used the following five-step contract-based analysis of transactions to determine if, when and how much revenue can be recognized:

1. Identify the contract with a customer.

2. Identify the performance obligation(s) in the contract.

3. Determine the transaction price.

4. Allocate the transaction price to the performance obligation(s) in the contract; and

5. Recognize revenue when or as the Company satisfies the performance obligation(s).

The Company earned revenue from patients by offering various Ketamine-Assisted Psychotherapy (“KAP”) programs in Canada and the USA and psilocybin-assisted therapies in the Netherlands. The number of sessions in each KAP and psilocybin-assisted therapy program vary, however the structure and pricing were consistent at each location. The KAP programs contained a combination of psychotherapy and ketamine administration appointments. The psilocybin-assisted therapy programs contained a combination of psychotherapy and psilocybin truffles.

The Patient Services Agreement (“PSA”) between the clinic and patient outlined the clinic’s protocol, pricing, payment terms, cancellation fees and refund policy. Each session in the PSA had an assigned standalone value based on a standard hourly rate. Patients could cancel their treatment at any time and receive a full refund on sessions not yet completed, if sessions were paid in advance. Based on these terms, each session was an individual performance obligation and patient service revenues were recognized over a period of time as performance of obligations were completed.

Payment of the transaction price for patient counselling was typically due prior to the services being rendered and therefore, the transaction price was recognized as a contract liability, or deferred revenue, when payment was received. Contract liabilities were subsequently recognized as revenue when the Company fulfiled its performance obligations.

Patient service revenues were measured at the net patient service revenues received or receivable. Third-party payors include federal and state agencies (under the Medicare programs), managed care health plans and commercial insurance companies.

REUNION NEUROSCIENCE INC. (FORMERLY FIELD TRIP HEALTH LTD.) 

Notes to the Consolidated Financial Statements 

For the Fiscal Year Ended March 31, 2023 and 2022

Research and Development

Expenditures on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, are recognized in profit or loss as incurred.

Development expenditures are capitalized only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Company intends to complete development and has sufficient resources to complete development and to use or sell the asset. Other development expenditures are expensed as incurred.

Research and development expenses include all direct and indirect operating expenses supporting the products in development. The costs incurred in establishing and maintaining patents are expensed as incurred.

Income Taxes

Income tax expense consisting of current and deferred tax expense is recognized in the consolidated statements of loss and comprehensive loss. Current tax expense is the expected tax payable on the taxable income for the period, using tax rates enacted or substantively enacted at period end, adjusted for amendments to tax payable with regards to previous periods.

Deferred tax assets and liabilities and the related deferred income tax expense or recovery are recognized for deferred tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using the enacted or substantively enacted tax rates expected to apply when the asset is realized or the liability settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that substantive enactment occurs.

A deferred tax asset is recognized to the extent that it is probable that future taxable income will be available against which the asset can be utilized.

Net Loss per Share

Basic net loss per share is calculated by using the weighted average number of shares outstanding during the year. Diluted net loss per share is computed similar to basic net loss per share, except that the weighted average number of shares outstanding is increased to include additional shares for the assumed exercise of stock options, if dilutive. The number of additional shares is calculated by assuming that the outstanding options and the proceeds from such exercises were used to acquire common stock at the average market price during the reporting period.

Given the Company’s loss position, basic and diluted loss per share are the same and stock options are excluded from the weighted average number of shares outstanding since they are anti-dilutive.

Use of Estimates and Judgments

The preparation of consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of liabilities at the date of these consolidated financial statements and the reported amounts of expenses during the reporting periods. Actual results could differ from these estimates and such differences could be material. The Company reviews its estimates and underlying assumptions on an ongoing basis. Revisions are recognized in the period in which the estimates are revised and may impact future periods.

The key areas of judgment and estimation or use of managerial assumptions are as follows:

REUNION NEUROSCIENCE INC. (FORMERLY FIELD TRIP HEALTH LTD.) 

Notes to the Consolidated Financial Statements 

For the Fiscal Year Ended March 31, 2023 and 2022

Spinout of Clinic Operations

The Clinic Operations reflect Field Trip H&W on a combined carve-out basis as if it had always operated as a stand-alone entity. Prior to April 1, 2022, the Company paid certain costs for Field Trip H&W and performed certain activities on behalf of Field Trip H&W. As a result, the Clinic Operations include allocations of certain transactions reported in the accounts of the Company. These cost allocations have been determined on a basis considered by the Company to be a reasonable reflection of the utilization of services provided to Field Trip H&W.

Compensation related costs have been allocated using methodologies primarily based on proportionate time spent on the Company’s and Field Trip H&W’s respective activities. These cost allocations have been determined on a basis considered by the Company and Field Trip H&W to be a reasonable reflection of the utilization of services provided to the Company.

Management believes both the assumptions and allocations underlying the Clinic Operations are reasonable. However, as a result of the combined carve-out methodology in determining the results of Field Trip H&W, the Clinic Operations may not necessarily be indicative of the operating results and financial position that would have resulted had Field Trip H&W historically operated as a stand-alone entity.

On April 28, 2022, in conjunction with the Company’s announcement of the Spinout Transaction and the classification of the Clinic Operations as discontinued operations, the recoverable amount was estimated for certain items of property, plant and equipment, intangible assets and right-of-use assets and no impairment loss was identified. For the purposes of measuring recoverable amounts, assets are grouped at the lowest levels for which there are separately identifiable cash flows or cash generating units (“CGUs”). The recoverable amount is the higher of an asset’s fair value less cost of disposal and value in use (being the present value of the expected future cash flows of the relevant asset or CGU). An impairment loss is recognized for the amount by which the asset’s carrying value exceeds its recoverable amount.

Share-based payments and warrants

The fair value of share-based compensation expense and warrants is estimated using the Black-Scholes option pricing model and rely on a number of estimates, such as the expected life of the option or warrant, the volatility of the underlying share price and the risk-free rate of return. In addition, the Company estimates the rate of forfeiture of options granted. Such estimates and assumptions are inherently uncertain, and any changes in these assumptions affect the fair value estimates of share-based compensation expense and warrants.

The Company measures equity settled share-based payments based on their fair value at the grant date and recognizes compensation expense over the vesting period based on the Company’s estimate of equity instruments that will eventually vest. Expected forfeitures are estimated at the date of grant and subsequently adjusted if further non-market-based information indicates actual forfeitures may vary from the original estimate. Any revisions are recognized in profit and loss such that the cumulative expense reflects the revised estimate.

Incremental borrowing rate

In determining the appropriate measurement of lease liabilities, the Company is required to estimate the incremental borrowing rate (“IBR”) specific to the transaction. The IBR applied reflects the interest rate that the Company would have to pay to borrow a similar amount at a similar term and with a similar security.

REUNION NEUROSCIENCE INC. (FORMERLY FIELD TRIP HEALTH LTD.) 

Notes to the Consolidated Financial Statements 

For the Fiscal Year Ended March 31, 2023 and 2022

Extension options

Some property leases contain extension options exercisable by the Company. The Company assesses at the lease commencement date whether it is reasonably certain to exercise the extension options. The Company reassesses whether it is reasonably certain to exercise the options if there is a significant event or significant changes in circumstances within its control.

New accounting standards, amendments and interpretations not yet adopted

In February 2021, the IASB issued amendments to IAS 1 and IFRS Practice Statement 2 Making Materiality Judgements, in which it provides guidance to help entities apply materiality judgements to accounting policy disclosures. The amendments aim to help entities provide accounting policy disclosures that are more useful by replacing the requirement for entities to disclose their "significant" accounting policies with a requirement to disclose their "material" accounting policies. The amendments are effective January 1, 2023, with early adoption permitted. Management does not expect material changes to its accounting policy disclosures upon adoption of these amendments.

In February 2021, the IASB issued amendments to IAS 8 to introduce a definition of "Accounting Estimates". The amendments clarify the distinction between changes in accounting estimates and accounting policies as well as the correction of errors. Additionally, the IASB clarifies how entities use measurement techniques and inputs to develop accounting estimates. The amendments are effective January 1, 2023, with early adoption permitted. Management has determined that there will be no material impact to the Company’s consolidated financial statements upon adoption of these amendments.

There are no other IFRS standards or interpretations that are not yet effective that would be expected to have a material impact on the consolidated financial statements of the Company.

REUNION NEUROSCIENCE INC. (FORMERLY FIELD TRIP HEALTH LTD.) 

Notes to the Consolidated Financial Statements 

For the Fiscal Year Ended March 31, 2023 and 2022

4.       SPINOUT OF CLINIC OPERATIONS

On August 11, 2022, Reunion transferred its Clinic Operations to Field Trip H&W. The following table presents the net liabilities of the Clinic Operations as of August 10, 2022:

As of August 10, 2022, Field Trip H&W owed an amount of $3,096,841 to Reunion, of which $421,240 relates to the cash balances in the PCs, and $2,675,601 relates to external services incurred for the Spinout Transaction and other payments. Subsequent to the Spinout Transaction $528,442 was advanced mostly for reimbursement of expenses related to external services performed in connection with the Spinout Transaction and $3,565,566 was repaid through March 31, 2023. These advances were payable on demand and non-interest bearing.

On March 22, 2023, Field Trip H&W obtained an order for creditor protection from the Ontario Superior Court of Justice under the Companies’ Creditors Arrangement Act.

REUNION NEUROSCIENCE INC. (FORMERLY FIELD TRIP HEALTH LTD.) 

Notes to the Consolidated Financial Statements 

For the Fiscal Year Ended March 31, 2023 and 2022

The following table presents the effect of the Clinic Operations in the consolidated statements of loss and comprehensive loss:

The following table presents the effect of the Clinic Operations in the consolidated statements of cash flows:

5.            RESTRICTED CASH

As of March 31, 2023, the Company had $516,755 of restricted cash held as collateral against the Company’s credit card limit (March 31, 2022 — $776,551). Of the total, $302,605 is invested in a cashable GIC account that matured on May 18, 2023 while $214,150 is invested in a money market fund.

REUNION NEUROSCIENCE INC. (FORMERLY FIELD TRIP HEALTH LTD.) 

Notes to the Consolidated Financial Statements 

For the Fiscal Year Ended March 31, 2023 and 2022

REUNION NEUROSCIENCE INC. (FORMERLY FIELD TRIP HEALTH LTD.) 

Notes to the Consolidated Financial Statements 

For the Fiscal Year Ended March 31, 2023 and 2022

REUNION NEUROSCIENCE INC. (FORMERLY FIELD TRIP HEALTH LTD.) 

Notes to the Consolidated Financial Statements 

For the Fiscal Year Ended March 31, 2023 and 2022

On April 28, 2022, in conjunction with its announcement of the Spinout Transaction, the Company announced its decision to defer the opening of new clinics to a future date. As construction did not continue, the benefits would not be realized and $997,524 of construction in progress was written off. The remaining assets were subsequently transferred to Field Trip H&W following the Arrangement.

Following the Arrangement, FTHW was incorporated in Canada as a publicly listed Company and was traded on the TSXV under the ticker symbol “FTHW”.

Reunion subscribed for 19,615,000 common shares of Field Trip H&W at $0.50 per share and held a 21.84% interest in Field Trip H&W on a non-diluted basis. Through its ownership interest and representation on Field Trip H&W’s Board, Reunion had the ability to significantly influence, but not control Field Trip H&W’s decisions. Therefore, the Company accounted for its investment in Field Trip H&W using the equity method of accounting.

REUNION NEUROSCIENCE INC. (FORMERLY FIELD TRIP HEALTH LTD.) 

Notes to the Consolidated Financial Statements 

For the Fiscal Year Ended March 31, 2023 and 2022

REUNION NEUROSCIENCE INC. (FORMERLY FIELD TRIP HEALTH LTD.) 

Notes to the Consolidated Financial Statements 

For the Fiscal Year Ended March 31, 2023 and 2022

Prior to the Spinout Transaction, the Company leased real property for its Toronto office, clinical locations in North America and The Netherlands and its research facility in Jamaica. As part of the Transaction, these assets and related lease obligations were transferred to FTHW.

Right-of-use assets consisted of the following:

REUNION NEUROSCIENCE INC. (FORMERLY FIELD TRIP HEALTH LTD.) 

Notes to the Consolidated Financial Statements 

For the Fiscal Year Ended March 31, 2023 and 2022

Lease obligations consisted of the following:

The Company expenses payments for short-term leases and low-value leases as incurred. These payments for short-term leases and low-value leases were $204,142 for the fiscal year ended March 31, 2023 (March 31, 2022 –$392,231).

The Company acts as a guarantor for leases signed by Field Trip H&W’s subsidiaries (Note 21).

As of March 31, 2023, the Company accrued an amount of $1,088,078 related to personnel costs (March 31, 2022 — $2,228,252) included in accounts payable and accrued liabilities.

REUNION NEUROSCIENCE INC. (FORMERLY FIELD TRIP HEALTH LTD.) 

Notes to the Consolidated Financial Statements 

For the Fiscal Year Ended March 31, 2023 and 2022

Share Capital Reserved for Issuance and outstanding on a fully-diluted basis:

Share Capital Authorized

The authorized share capital of the Company consists of an unlimited number of common shares (“Common Shares”), and an unlimited number of preferred shares (“Preferred Shares”).

Common Shares

Holders of Common Shares are entitled to receive notice of, and to attend and vote at, all meetings of the shareholders of Reunion. Each Common Share confers the right to one vote at all meetings of the shareholders, except meetings at which only holders of a specified class of shares are entitled to vote. Subject to the prior rights and privileges attached to any other class of shares of Reunion, the holders of the Common Shares are entitled to receive any dividend declared by Reunion. In the event of the liquidation, dissolution or winding-up of Reunion, whether voluntary or involuntary, subject to the prior rights and privileges attached to any other class of shares of Reunion, the holders of the Common Shares are entitled to receive the remaining property and assets of Reunion.

The Common Shares carry no pre-emptive rights, conversion or exchange rights, or redemption, retraction, repurchase, sinking fund or purchase fund provisions. There are no provisions requiring a holder of Shares to contribute additional capital, and no restrictions on the issuance of additional securities by Reunion. There are no restrictions on the repurchase or redemption of Common Shares by Reunion except to the extent that any such repurchase or redemption would render Reunion insolvent.

Preferred shares

The Preferred Shares may be issued at any time or from time to time in one or more series. Subject to the provisions of the Canada Business Corporations Act, the Board may by resolution alter the articles of Reunion to create any series of Preferred Shares and to fix before issuance, the designation, rights, privileges, restrictions and conditions to attach to the Preferred Shares of each series. The Preferred Shares may be made convertible into Common Shares at such rate and upon such basis as the board of directors of Reunion, in its discretion, may determine. There are currently no Preferred Shares outstanding (March 31, 2022 – nil).

REUNION NEUROSCIENCE INC. (FORMERLY FIELD TRIP HEALTH LTD.) 

Notes to the Consolidated Financial Statements 

For the Fiscal Year Ended March 31, 2023 and 2022

Share Capital Issued and Fully Paid Up as of March 31, 2023

Share Capital Issued and Fully paid up as of March 31, 2022

As part of the Arrangement, all outstanding Field Trip Warrants were deemed to be simultaneously amended to entitle each holder to receive, upon due exercise thereof and for the original exercise price, one (1) Reunion Share and 0.85983356 of a Field Trip H&W Share. Immediately upon closing of the Arrangement, the Company consolidated its Reunion Shares on a 5:1 basis, resulting in a similar consolidation of the Warrants.

The following is a schedule of the warrants outstanding as of March 31, 2023:

REUNION NEUROSCIENCE INC. (FORMERLY FIELD TRIP HEALTH LTD.) 

Notes to the Consolidated Financial Statements 

For the Fiscal Year Ended March 31, 2023 and 2022

The weighted average life for warrants outstanding as of March 31, 2023 was 0.00 years (March 31, 2022 – 0.48 years).

The following is a schedule of the warrants outstanding as of March 31, 2022:

The weighted average life for warrants outstanding as of March 31, 2022 was 0.48 years (March 31, 2021 – 1.4 years). The weighted average market fair value of shares purchased through warrant exercises during the fiscal year ended March 31, 2022 was $2.00.

FTP Compensation Warrants

The Company issued 299,753 FTP Compensation Warrants to the underwriter in connection with the completion of the FTP Private Placements which closed on August 14, 2020. In connection with the January BD Offering, the short form prospectus qualified the distribution of 49,016 additional FTP Compensation Warrants, for services rendered by the agents in connection with the FTP Private Placements. The warrants have an expiry date of August 14, 2022. Each warrant entitles the holder to purchase one Class A share at $2.00 until the expiry date. The fair value was estimated using the Black-Scholes option pricing model with the following assumptions: (i) expected dividend yield of 0%, (ii) expected weighted average volatility of 80%, (iii) weighted average risk-free rate of 0.29%, (vi) share price of $2, (v) forfeiture rate of 0%, and (vi) weighted average expected life of 1.9 years. As of March 2022, 174,385 FTP Compensation warrants were exercised.

Compensation Warrants

The Company issued 169,565 Compensation Warrants to the underwriter in connection with the January BD Offering which was completed on January 5, 2021. The warrants have an expiry date of January 5, 2023. Each Compensation Warrant entitles the holder to purchase one Common Share at $4.50 until expiry. The fair value was estimated using the Black-Scholes option pricing model with the following assumptions: (i) expected dividend yield of 0%, (ii) expected volatility of 110%, (iii) risk-free rate of 0.19%, (vi) share price of $3.56, (v) forfeiture rate of 0%, and (vi) expected life of 2 years.

The Company issued 763,303 Compensation Warrants to the underwriter in connection with the March BD Offering which was completed on March 17, 2021. An additional 102,000 Compensation Warrants were issued to a consultant in connection with the March BD Offering. The warrants have an expiry date of March 17, 2023. Each Compensation Warrant entitles the holder to purchase one Common Share at $6.50 until expiry. The fair value was estimated using the Black-Scholes option pricing model with the following assumptions: (i) expected dividend yield of 0%, (ii) expected volatility of 110%, (iii) risk-free rate of 0.27%, (vi) share price of $6.16, (v) forfeiture rate of 0%, and (vi) expected life of 2 years.

Warrants

The Company issued 2,224,100 Warrants in connection with the completion of the January BD Offering which closed on January 5, 2021. The warrants are listed and posted for trading on the TSX and have an expiry date of July 5, 2022. Each warrant entitles the holder to purchase one Common Share, at an exercise price of $5.60 until expiry. The fair value was estimated using the Black-Scholes option pricing model with the following assumptions: (i) expected dividend yield of 0%, (ii) expected volatility of 110%, (iii) risk-free rate of 0.18%, (vi) share price of $3.56, (v) forfeiture rate of 0%, and (vi) expected life of 1.5 years. As of March 2022, 153,010 warrants were exercised.

REUNION NEUROSCIENCE INC. (FORMERLY FIELD TRIP HEALTH LTD.) 

Notes to the Consolidated Financial Statements 

For the Fiscal Year Ended March 31, 2023 and 2022

As of March 31, 2023, the number of Common Shares available for issuance under the Stock Option Plan was 206,625.

Under the Stock Option Plan, the Company may grant options to purchase common shares to officers, directors, employees or consultants of the Company or its affiliates. Options issued under the Stock Option Plan are granted for a term not exceeding ten years from the date of grant. In general, options have vested either immediately upon grant or over a period of four to ten years.

Following the Arrangement, each Field Trip Option was exchanged for one (1) Reunion Replacement Option and 0.85983356 of an option to purchase a Field Trip H&W Share. The Reunion Replacement Options were accounted for as a modification of the original grant of Field Trip Health Ltd. Options. Reunion Options were consolidated on a 5:1 basis.

As part of the Arrangement, option holders who were not engaged in or employed by Reunion were no longer eligible participants under the Reunion equity compensation plan. As such, these participants’ unvested Reunion Options were cancelled immediately upon closing of the Spinout Transaction. The vested Reunion Options remain available for exercise for a period of 12 months following the earlier of: (i) the date of the Arrangement, or (ii) the term of the original Field Trip Health Ltd. Option. Participants not engaged in Field Trip H&W had their options treated likewise. The cancellation of options was accounted for as an acceleration of vesting (Note 3 for details).

The following is a schedule of the options outstanding as of March 31, 2023 and 2022:

March 31, 2023

REUNION NEUROSCIENCE INC. (FORMERLY FIELD TRIP HEALTH LTD.)

Notes to the Consolidated Financial Statements

For the Fiscal Year Ended March 31, 2023 and 2022

March 31, 2022

The fair value of each tranche is measured at the date of grant using the Black-Scholes option pricing model.

Weighted average of option model inputs and fair value for options granted during the fiscal year ended March 31, 2023 and 2022 were as follows:

March 31, 2023

Grants following the Arrangement:

Grants before the Arrangement: