Good afternoon, and welcome to the Numinus Wellness Inc. Fiscal Fourth Quarter and Year-end 2021 Results Conference Call. A question and answer session for analysts and institutional investors will follow the formal remarks. To ask a question during that time, you may press star one on your telephone keypad. All lines have been placed on mute to prevent any background noise. As a reminder, this call is being recorded. I would now like to turn the conference call over to your host, Jamie Kokoska, Vice President, Investor Relations. Please proceed.
Thank you, Mel. Good afternoon, everyone, and thank you for joining us for our fourth quarter and 2021 year-end results conference call. Discussing Numinus's performance today are Payton Nyquvest, Founder and CEO, and John Fong, Chief Financial Officer. Joining them for analyst and investor questions at the end of our formal remarks will be Evan Wood, Chief Medical Officer. The following discussion may include forward-looking statements that are based on current expectations and are subject to a number of risks and uncertainties. The risks and uncertainties that could cause our actual financial and operating results to differ significantly from our forward-looking statements are detailed in our MD&A for the year ended August 31, 2021, and in other Canadian securities filings available on SEDAR. Numinus does not undertake to update or revise any forward-looking statements to reflect new events or circumstances except as required by law.
Our fourth quarter results were made available earlier this afternoon. We encourage you to review our earnings release, MD&A, and financial statements, which are available on our website as well as on SEDAR. As a reminder, all figures discussed on today's call are in Canadian dollars. I'll now turn the call over to Payton Nyquvest, Chief Executive Officer.
Thanks, Jamie, and good afternoon, everybody. Very happy to be speaking with everybody today. Before I provide my comments, I'd like to acknowledge with the utmost gratitude that our work is conducted on the unceded homeland of the Musqueam, Squamish, and Tsleil-Waututh peoples, and on the sovereign Indigenous lands and territories across Turtle Island. We are committed to a path towards reconciliation through continuous learning, reciprocity, and humility. In many ways, fiscal 2021 was a pivotal year for Numinus as we refocused our research team and lab purely on psychedelics and began building our national network of wellness clinics. The initiatives we completed during the last several quarters have also built a strong foundation that will continue to support our growth for years to come.
Today, we have a world-class executive team, an expanding lab and research facility, scalable clinic infrastructure, and a growing number of revenue-generating wellness clinics. More than ever, we believe Numinus is uniquely positioned within the sector with a strong balance sheet, including CAD 59 million in cash, a longest-established partnership with MAPS, the Multidisciplinary Association for Psychedelic Studies, and improving gross margins, due in part to both our business segments already generating revenue. We also achieved some important milestones during our fourth quarter and in the months since. At Numinus Bioscience, we began the 7,500 sq ft expansion of our existing lab facilities in British Columbia, essentially doubling our lab footprint. This new facility is adjacent to our existing lab and will provide us with significantly more capabilities to meet our growing internal and third-party client demands for psychedelic testing, analytics, research, and IP development.
We have already applied for an additional controlled drugs and substances dealer's license for this new lab and expect the expansion project to complete around mid-2022. Timing will, of course, be dependent on permitting. In the last several months, the Numinus Bioscience team has been busy pursuing new innovative and proprietary technologies to not only produce and process psilocybe fungi species more efficiently, but also test the potency and toxicity of psychedelic mushrooms in an industry-leading and efficient way. This new testing innovation will further prove the safety, consistency, and efficacy of psilocybe products produced in our lab. It is also being shared with hospitals and third-party clients to quickly assess the toxicity and safety of psilocybe compounds. We believe there may be further opportunities to monetize both proprietary production techniques and testing innovation in the future.
As for our research initiatives, we were very pleased to recently announce our continued partnership with MAPS as a designated partner for the Open-Label Extension Study clinical trial, overseeing and managing two Canadian study sites where MDMA for the treatment of post-traumatic stress disorder is being evaluated. In addition, we finalized our phase I safety protocols for the clinical study of a proprietary psilocybin extraction. Following an anticipated successful results of the phase I trial, we expect to be able to move quickly into phase II to begin assessing the compound as a treatment for several potential indications. At Numinus Health, our network of wellness clinics, including Mindspace, we welcomed the addition of the Neurology Centre of Toronto in September. The completion of this acquisition was important for two main reasons.
It provides us with a long-established foothold in an important Toronto market with a well-respected and revenue-producing medical clinic that will provide incremental cash flow to our clinic operations and grow our brand awareness. Secondly, it also expands our leadership team with leaders in neurology as well as our service offering to provide psychedelic-assisted care for those suffering with neurological conditions, something that does and will further differentiate Numinus Wellness services from other providers in our sector. Today, Numinus Health consists of five client-facing wellness clinics, one in Vancouver, one in Toronto, and three in Montreal, with a total of 21 treatment rooms. Here, clients can receive a broad range of mental health care services, including traditional therapies, group therapies, and most recently, ketamine-assisted psychotherapy for depression.
During the fourth quarter, 650 individual clients received a total of 2,671 therapy appointments through our wellness clinics, including one-on-one and group therapy sessions. In the three months following, the total number of client appointments at these same clinics grew 42% to near 3,800, including traditional therapies and ketamine-assisted psychotherapy for depression. While our ketamine for depression treatments were initially launched in two of our locations during the first fiscal quarter of 2021, we are in the process of expanding those services to 2 more clinics in the new year. Initial interest in these services has been extremely positive, with strong enrollment that has so far beat our expectations. We're very pleased with how the client interest and the business levels are growing across the wellness clinics so far.
We expect demand to continue to grow as we train additional therapists to provide psychedelic-assisted therapies and as different psychedelic therapies are approved by Health Canada or the FDA for a wide range of indications to come. MAPS currently expects the approval of MDMA therapies for the treatment of post-traumatic stress disorder in 2023, which is coming up relatively quickly. As well, we're keenly watching Health Canada's review of its Special Access Program, which we anticipate could provide greater availability for psychedelic-assisted therapies to a broad range of Canadians when other treatments have failed. We hope to see some clarity around this in the early mid-part of 2022. Overall, we are very pleased with how the business units performed during the quarter.
While it may be several more years until we reach profitability, our margins are already improving, and we're seeing the benefits of increased scale. Much of the infrastructure needed to support future growth has now been built, so we're well-positioned to continue executing on our growth strategy. With that, I'd like to hand the call over to John Fong to review our fourth quarter and annual financials. After which, we'll provide some commentary on the outlook. Over to you, John.
Thanks, Payton, and good afternoon, everyone. On a quarterly basis, our fourth quarter results were positively impacted by both the acquisition of Mindspace, which added three revenue-producing clinics to our clinic network, compared to Q4 of last year when our first clinic in Vancouver was closed and negatively impacted due to COVID-19 measures. This revenue growth was partially offset by reduced revenues within our bioscience segment, where we ceased cannabis-related activities throughout the year to refocus our resources on advancing our psychedelic-centered service offering. Total fourth quarter revenue increased by 81% to CAD 491 thousand from CAD 271 thousand a year ago. In comparison, the total cost of revenue increased by only 7%, which led to significant improvement in our gross margin during the quarter.
In fact, we generated positive gross margins this quarter, this Q4, the first quarter we've achieved this since refocusing our operations on the psychedelic sector. We believe this demonstrates the momentum building within our business and the merit of our growth strategy. Corporate expenses grew during the quarter as we added new team members and technology systems to support our growth. In addition, we increased our investment in research and development projects with nearly CAD 350,000 of R&D expenses during Q4. Total company expenses for the quarter were CAD 7.6 million, including a CAD 1.6 million non-cash goodwill impairment charge related to the acquisition of Mindspace as part of the company's year-end goodwill impairment valuation. I'd like to reiterate that we continue to have confidence in the value and growth trajectory of Mindspace through its contribution to improving revenue and margins in our business.
As psychedelic therapies are still unregulated in Canada, we are required to discount any future psychedelic-related revenue streams from Mindspace's discounted cash flow projection as part of the company's year-end goodwill impairment value. Compliance with appropriate accounting standards is a reality until there's more clarity around federal approval and regulations related to psychedelic therapies. The loss of the quarter was CAD 7.8 million or CAD 0.04 per share. On an annual basis, total revenues grew 72% to CAD 1.5 million during fiscal 2021, with revenues from Mindspace driving much of that growth. The cost of revenues grew 101%, mostly due to the addition of 3 more wellness clinics and refocusing our bioscience division on the psychedelic sector rather than cannabis as it was in the year prior.
Gross loss for the year was CAD 81,538, representing a gross margin of -5.4%. During fiscal 2021, we increased our investments in our R&D initiatives, including completing the first legal extraction of psilocybin mushrooms, the preparation of phase I clinical trial on a proprietary psilocybin extract, development and delivery of Numinus' ketamine-assisted psychotherapy protocols. As well, we partnered with MAPS on the single-arm open-label trial on MDMA-assisted psychotherapy for PTSD. We also initiated a Compassionate Access trial, psilocybin-assisted psychotherapy for substance use disorder in collaboration with Syreon Corporation. Overall, the company spent CAD 1.4 million on research initiatives, which is more than 640% higher than the year before. As well, our operating expenses grew commensurate with our growth. Total operating expenses for fiscal 2021 were CAD 18.5 million, including a non-cash impairment.
The total loss for the year was CAD 18.8 million or 11 cents per share. In terms of liquidity, we ended the year with a strong balance sheet and CAD 59.2 million of cash in hand. With revenue streams offsetting some of our expenses, we're well-positioned financially with no immediate need to seek any additional financing for our current operations. With that overview of our financial results, I'll turn the call back over to Payton.
Thanks, John Fong. In addition to all the great work occurring within our bioscience and wellness clinic divisions, we're also making great progress in growing our corporate profile in order to reach a broader range of investors. Just last week, we announced that we have been conditionally approved to graduate to the TSX from the TSX Venture Exchange. We anticipate receiving final approval shortly and expect to begin trading on the TSX around December sixteenth, which is an exciting milestone for us. We're also making good progress on improving our U.S. corporate profile. In the last several weeks, we've become DTC eligible, and we've changed our U.S. OTC ticker to NUMIF, N-U-M-I-F, to better align with our TSX ticker, a first step in our U.S. corporate capital market strategy.
We're also aiming to list on a senior U.S. exchange during 2022, which will allow a greater number of U.S. institutional and individual U.S. investors the ability to become shareholders. We'll certainly keep you updated as these strategies progress. As a sector, companies researching and providing psychedelic-assisted psychotherapies are at the forefront of what will become a transformational change in how the world will treat a variety of mental health conditions. Like all emerging sectors, there will be some volatility in the market, prices as investors gain a better understanding of the fundamentals, opportunities, and growth drivers of companies in this space. Within this context, we remain focused on executing our long-term strategy, and we believe the merits of our approach will be valued by our investors, regulators, and the industry in the quarters and years ahead.
More importantly, Numinus remains uniquely positioned within the psychedelic sector. We have a strong balance sheet with more than CAD 59 million of cash on hand. We're generating growing revenue streams in both of our business segments, and we're working with the industry's most well-respected organizations, including MAPS. Looking forward, at Numinus Health, we are building a world-class portfolio of client-facing wellness clinics that will cater to where we think regulatory reform will lead in the next 3-5 years from now. This includes proactively designing all of our clinics for a variety of psychedelic therapies in the future. There will be different clinical infrastructure and human resource needs for clients undergoing treatments with MDMA, psilocybin, and other psychedelics compared to what is currently needed for just ketamine treatments.
There will also be specialized training requirements for practitioners delivering these future therapies. We are actively building out a proprietary training program to deliver this training. Our ongoing role as MAPS' selected partner for its Canadian research trials of MDMA for PTSD will further solidify our role as a leader in this regard. In terms of expansion, we're actively looking at opportunities in the U.S. market and will continue to evaluate opportunities in Canada, which will include converting our two recently acquired research clinics to additional client-facing wellness clinics once research studies at those locations have concluded. It's important to note that our clinic expansion strategy is grounded in what works strategically and economically. We're focused on building our brand awareness and operational scale while also driving margin improvement in the business.
While our goal is to acquire or build at least five additional clinics in 2022, we will only pursue opportunities that meet this criteria. At Numinus Bioscience, we are concentrating our IP and patent strategies on defensible research and innovation. In our opinion, this often means focusing on proprietary formulations and production processes rather than on novel molecules. In the last few months, you've seen us announce new proprietary psilocybin extraction technologies and testing techniques, which could be licensed to others in our sector in the future. As our lab expansion is completed in 2022 and our research capabilities grow, you should expect to see further IP announcements coming from our bioscience division over the next year.
Before we open the call up for questions, I'd like to take a quick moment to thank our growing Numinus team for all their hard work over the last several months and to MAPS for their ongoing support and partnership. We are still at the beginning of what will be a transformative change in mental health care, and collectively, we are all invested financially, mentally, and sometimes emotionally into driving this important healthcare innovation forward. With that, I'd like to open up the call to questions from analysts and institutional investors. Over to you, operator.
Thank you so much, sir. As a reminder, to ask a question, you will need to press star one on your telephone keypad. Again, that will be star one on your telephone keypad. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. We have the first question comes from the line of Sepehr Manochehry, sorry. That's from Eight Capital. Your line is now open. You may ask your question.
Hello, congrats on the gross margin improvement. Obviously, you guys are one of the well-differentiated players in the space with what looks to be, a really unique position given your balance sheet strength. I'd love to start the question period by just gauging your thoughts on M&A outlook and how you prioritize, different targets and what you're looking for. Is it access to particular jurisdictions or, areas that are more amenable to eventual reimbursement of psychotherapy and maybe potentially that combined with psychedelic-assisted psychotherapy? I'd love some color on that and where we should be looking for timing.
Sure. Thanks, Sep . You know, it's really been about a blend of a few things for us and obviously, you know, you've seen the industry grow at quite a rapid pace, especially in the U.S. with a host of ketamine clinics opening up and a lot of advancement on that side. For us, you know, we continue to be really focused on where we believe not just ketamine-assisted psychotherapy is going, but really where psychedelic-assisted psychotherapy is going. You know, the necessary infrastructure, licensing as well as training practitioners, is fairly different with MDMA and psilocybin than just with ketamine. Our expansion plans have really been focused on locations we feel are either easily amenable to that work or have practitioner sets and clients that are keenly interested in the work as well.
Really the first and last for us in terms of acquisition opportunity is making sure that they're profitable and making sure that we're not tacking on a large burn rate knowing that, as I mentioned, MDMA being 2023, which is close, but still a little bit of a ways out, and psilocybin's probably potentially a year or so behind that. Making sure that we're not spending too much cash while we wait for some of these therapies to come through, but making strategic investments where we can continue to generate profitable revenue and bring on the workforce needed in order to make those jumps as we move towards a more favorable regulatory environment. Definitely keeping a close eye on where regulation is going in different jurisdictions.
Obviously, you know, with the advancements in Oregon, California, and some of those other states that are making some of the first leaps around regulatory changes around psychedelics.
Understood. With the description around your outlook on what you're looking to acquire or build, I think you mentioned five. Would that be heavier on building or acquiring? Is that five each or five in total for 2022? You mentioned, I guess as you kind of end your build-out, do you see continued expansion beyond 2022?
Yeah. Absolutely continued expansion beyond 2022. The 5 number really is a conservative number, just making sure that we're not overstretching ourselves. Five would be a total of both acquired and purpose-built. We believe that sets us up in a really good position to be able to hold some of the work, especially as I mentioned, going into 2023 with MDMA.
The focus for the company, while, you know, absolutely wanting to make sure that we can address the massive addressable need we believe is there, really making sure that we're focusing on client outcomes and making sure that we can deliver on the best client outcomes possible, as we believe that's really gonna be the significant differentiator between groups in the space in the next 3-5 years as well.
Interesting. With regards to how you think about buying networks of clinics versus individual clinics, is there one that's preferred? Obviously, you've done Mindspace, which was multiple, and the Toronto acquisition was one. I'd love to know your insights on what route is more accretive and I guess if there is a path to acquisition of public operator or if you're focused more on the private operator side.
Yeah. The focus has been more on the private side. In regards to a network versus one, again, it just really comes down to the criteria. You know, there's potential opportunities out there where it's a network, where majority or all of those locations that they have fit the criteria, and there's other ones where it's maybe just a single location, that's meeting the criteria as well. I would say there's really not too much in terms of differentiation. Obviously, cost is a big part of that as well.
For us, you know, continuing to really make sure that we're building the Numinus brand, we wanna make sure that clients are getting a consistent standard of care regardless of whether you're in, you know, a location in Montreal or a potential location in California or something like that in the future.
Understood. With regards to Montreal locations, I'd love to get a bit more color on the Mindspace side of things and I guess your reassessments and the goodwill impairment there if you have more color.
Sure. You know, it was really our biggest acquisition to date, and integration has gone extremely well. I think that's really highlighted by the increase in revenue, and really it was a great test for the company. What we've been able to pull from Mindspace in terms of some of the additional therapies that they had and additional programs they had and even just their expertise with ketamine-assisted psychotherapy and the trainings that they'd had has really been a very value add acquisition for us. We've been able to take a lot of that programming and protocols and apply them to our other locations. We see that really continuing as we move forward as well and being able to expand that offering into future locations.
In regards to the impairment question, I'll maybe hand that over to John.
Sure. I'll take that. When we acquired Mindspace, it wasn't mainly just for the current services that it offers. We wanted to start building our clinic infrastructure for the future. As we mentioned that, you know, we see an outlook about 3-5 years, psilocybin or MDMA could come online. That being said, as part of our year-end audit, when we do our impairment evaluation for our goodwill, the auditors discount that future just because it's just very unknown right now. Part of the process is to look at auditable evidence of current state offerings and regulated offerings.
That makes sense. I understand it's an accounting measure. With regards to the regulatory side of things, maybe switching over to your outlook on timing on potentially SAP program or potentially maybe a medical access model. I'd just love to hear your thoughts. Obviously, you have a lot of touch points with regulators in both Health Canada and also over in the West Coast, so I'd love to hear your thoughts there.
Sure. You know, the company's been very fortunate to be able to liaise quite a bit with Health Canada over the last year. Obviously, you know, going back to around this time last year when we helped provide a briefing note to Health Canada around changing the Special Access Program. Just to sort of reiterate what the timeline sort of looked like for that, Health Canada posted their intention to change that Special Access Program off the back of the briefing note. There was then a 60-day comment period that completed in February of this year, and the anticipation would be somewhere around a 9- to 12-month turnaround time on the changes to that Special Access Program. Evan, if you're on the call, I wouldn't mind if you could expand on that a little bit.
Yeah. I think, Payton, that's a nice summary. We also had an election in Canada, which I think, you know, the senior bureaucrats have to put tools down, under those circumstances. Obviously, COVID had the entire health and public health infrastructure focused on that. I think it's been slow. Based on what they've shared, we expect imminent changes to that and maybe for some of the U.S. analysts and others. Just very briefly, the U.S. Food and Drug Administration has an Expanded Access Program. People are probably familiar with the Expanded Access Protocol that's been rolled out for MDMA for PTSD.
That in some ways is constraining because it limits the number of patients that are eligible pre-approval, whereas the Health Canada Special Access Program traditionally has been individual patients that are deemed eligible based on their physician's request, and it's not constraining in that way or not restricted to you know a single protocol. We hope that for people that are out there that are struggling with treatment refractory mental disorders that this change will be made soon. We hope that it'll enable a lot of people that could benefit be able to access this therapy. I think that's a nice summary, Payton. Just given the timelines that Health Canada has provided, we think the change will be imminent. That's obviously a Health Canada decision.
That makes total sense. I guess maybe my last question before I hop back is just ibogaine. Do you think that your data from the phase I will position you to potentially be a supplier if SAP goes through at some point next year? Or would you need that phase II data as well? What would be the timing there?
Yeah, good question. It's a really good question. You know, I think the psilocybin space is so complex and so far as you know, this is a molecule in its natural form that's been used for hundreds if not thousands of years. That complicates the intellectual property conversation because obviously there are synthetic molecules that can be brought forward. Yeah, we're big believers obviously when it comes to psilocybin in natural products. That's our intention with the phase I is to demonstrate its safety, undertake the work required to do the dosing and the formulation and have it ready for you know, whatever regulatory models unfold.
Obviously, if you were to look at Oregon, which I won't claim to be an expert on, I don't think they're, you know, gonna be requiring phase III trials of, you know, magic mushrooms products. My understanding is they're looking to move on the fact that we know that psilocybin looks like it's safe when it comes from natural forms, based on historical and obviously the use in the underground psychedelic therapy community or the recreational community. We're just focusing on moving to the point where we'll have this extraction in a known dose, known formulation, with all the stability and everything that's necessary and prove its safety. That'll be a question for the regulators in terms of how it moves to the next stage of things.
We're on multiple tracks 'cause we obviously intend to quickly move into phase II and continue to do the research around the sort of traditional drug development path. If there's other regulatory changes that enable better access for people sooner, then we'd obviously support that too.
Incredible. Well, thanks so much for the insight. I really appreciate it, and we're all certainly very excited for the myriads of catalysts that are ahead on multiple fronts. Thanks for taking my questions today.
No problem. Thanks.
Thank you. Again, if anyone would like to ask a question, you will need to press star one on your telephone keypad. There are no further questions at this time. I would now like to turn the call over to Mr. Payton Nyquvest. Sir.
Sorry about that. We're just stuck on mute there. Yeah. I think that's it from us. Wanna thank everybody for joining the call today, and looking forward to speaking with everybody in January when we will report our fiscal first quarter 2022 results. Thanks so much.
Thank you. Ladies and gentlemen, that concludes today's conference call. Thank you all for participating. You may now disconnect.