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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from      to

Commission File No. 001-38445

HELIUS MEDICAL TECHNOLOGIES, INC.

(Exact name of Registrant as specified in its charter)

Delaware

    

36-4787690

(State or other jurisdiction of
incorporation or organization)

642 Newtown Yardley Road, Suite 100
Newtown, Pennsylvania
(Address of principal executive offices)

(I.R.S. Employer
Identification No.)

18940

(Zip Code)

(215) 944-6100

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

   

Trading Symbol(s)

   

Name of each exchange on which registered

Class A Common Stock, $0.001 par value per share

HSDT

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes      No  

As of May 9, 2024, the registrant had 2,529,863 shares of Class A common stock, $0.001 par value per share, outstanding.

HELIUS MEDICAL TECHNOLOGIES, INC.

INDEX

Part I.

Financial Information

Item 1.

Condensed Consolidated Financial Statements

3

Unaudited Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023

3

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2024 and 2023

4

Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2024 and 2023

5

Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023

6

Notes to Unaudited Condensed Consolidated Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

15

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

21

Item 4.

Controls and Procedures

21

Part II.

Other Information

22

Item 1.

Legal Proceedings

22

Item 1A.

Risk Factors

22

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

22

Item 3.

Defaults Upon Senior Securities

22

Item 4.

Mine Safety Disclosures

22

Item 5.

Other Information

22

Item 6.

Exhibits

24

Signatures

25

2

PART I. FINANCIAL INFORMATION

ITEM 1. Condensed Consolidated Financial Statements

Helius Medical Technologies, Inc.

Unaudited Condensed Consolidated Balance Sheets

(in thousands, except share data)

March 31, 2024

December 31, 2023

ASSETS

  

 

  

Current assets

  

 

  

Cash and cash equivalents

$

3,638

$

5,182

Accounts receivable, net

 

49

 

117

Other receivables

 

513

 

520

Inventory, net

 

384

 

457

Prepaid expenses and other current assets

 

940

 

1,162

Total current assets

 

5,524

 

7,438

Property and equipment, net

 

174

 

178

Intangible assets, net

 

17

 

24

Operating lease right-of-use asset, net

 

42

 

52

Total assets

$

5,757

$

7,692

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

Current liabilities

 

  

 

Accounts payable

$

814

$

531

Accrued and other current liabilities

 

674

 

1,260

Current portion of operating lease liabilities

 

46

 

45

Current portion of deferred revenue

 

42

 

43

Total current liabilities

 

1,576

 

1,879

Operating lease liabilities, net of current portion

 

 

12

Deferred revenue, net of current portion

 

115

 

128

Derivative liability

2,080

3,323

Total liabilities

 

3,771

 

5,342

Commitments and contingencies (Note 9)

 

  

 

Stockholders' equity

 

  

 

Class A common stock, $0.001 par value; 150,000,000 shares authorized; 887,847 and 714,590 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively

 

1

 

1

Additional paid-in capital

 

164,843

 

162,979

Accumulated deficit

 

(162,473)

 

(159,957)

Accumulated other comprehensive loss

 

(385)

 

(673)

Total stockholders' equity

 

1,986

 

2,350

Total liabilities and stockholders' equity

$

5,757

$

7,692

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

3

Helius Medical Technologies, Inc.

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share data)

Three Months Ended

March 31, 

    

2024

    

2023

    

Revenue

Product sales, net

$

124

$

106

Other revenue

 

11

 

5

Total revenue

 

135

 

111

Cost of revenue

 

123

 

122

Gross profit (loss)

 

12

 

(11)

Operating expenses

Selling, general and administrative expenses

 

2,633

 

2,874

Research and development expenses

 

788

 

886

Amortization expense

 

7

 

39

Total operating expenses

 

3,428

 

3,799

Loss from operations

 

(3,416)

 

(3,810)

Nonoperating income (expense)

Interest income (expense), net

(8)

100

Change in fair value of derivative liability

 

1,142

 

1,221

Foreign exchange loss

 

(288)

 

(5)

Other income, net

 

54

 

Nonoperating income, net

 

900

 

1,316

Loss before provision for income taxes

(2,516)

(2,494)

Provision for income taxes

Net loss

 

(2,516)

 

(2,494)

Other comprehensive income (loss)

Foreign currency translation adjustments

 

288

 

5

Comprehensive loss

$

(2,228)

$

(2,489)

Loss per share

Basic

$

(3.08)

$

(4.42)

Diluted

$

(3.08)

$

(4.42)

Weighted average number of common shares outstanding

Basic

 

817,327

 

564,134

Diluted

 

817,327

 

564,134

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

4

Helius Medical Technologies, Inc.

Unaudited Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share data)

Accumulated 

Additional

Other

Class A Common Stock

Paid-In

Accumulated

Comprehensive

    

Shares

    

Amount

    

Capital

    

Deficit

    

Loss

    

Total

Balance as of January 1, 2024

714,590

$

1

$

162,979

$

(159,957)

$

(673)

$

2,350

Issuance of common stock in public offering

148,201

1,374

1,374

Share issuance costs

 

(174)

(174)

Exercise of warrants

 

23,400

 

 

263

 

 

 

263

Settlement of restricted stock units

 

1,656

 

 

 

 

 

Stock-based compensation

 

 

 

401

 

 

 

401

Other comprehensive loss

 

 

 

 

 

288

 

288

Net loss

 

 

 

 

(2,516)

 

 

(2,516)

Balance as of March 31, 2024

 

887,847

$

1

$

164,843

$

(162,473)

$

(385)

$

1,986

Accumulated

Additional

 Other

Class A Common Stock

Paid-In

Accumulated

Comprehensive

    

Shares

    

Amount

    

Capital

    

Deficit

    

Loss

    

Total

Balance as of January 1, 2023

564,094

$

1

$

159,645

$

(151,107)

$

(388)

$

8,151

Settlement of restricted stock units

 

120

 

 

 

 

 

Stock-based compensation

 

 

 

405

 

 

 

405

Other comprehensive gain

 

 

 

 

 

5

 

5

Net loss

 

 

 

 

(2,494)

 

 

(2,494)

Balance as of March 31, 2023

 

564,214

$

1

$

160,050

$

(153,601)

$

(383)

$

6,067

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

5

Helius Medical Technologies, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)

Three Months Ended

March 31, 

    

2024

    

2023

Cash flows from operating activities:

 

  

 

  

Net loss

$

(2,516)

$

(2,494)

Adjustments to reconcile net loss to net cash used in operating activities:

 

  

 

  

Change in fair value of derivative liability

 

(1,142)

 

(1,221)

Stock-based compensation expense

 

401

 

405

Foreign exchange loss

 

288

 

5

Depreciation expense

 

9

 

12

Amortization expense

 

7

 

39

Provision for (reversal of) inventory reserve

 

(19)

 

Non-cash operating lease expense

 

10

 

12

Changes in operating assets and liabilities:

 

 

  

Accounts receivable

 

66

 

60

Other receivables

 

6

 

116

Inventory

 

92

 

(28)

Prepaid expense and other current assets

 

120

 

131

Operating lease liabilities

 

(11)

 

(13)

Accounts payable

 

284

 

213

Accrued and other current liabilities

 

(586)

 

(424)

Deferred revenue

 

(10)

 

(3)

Net cash used in operating activities

 

(3,001)

 

(3,190)

Cash flows from investing activities:

 

  

 

  

Purchase of property and equipment

 

(5)

 

(19)

Net cash used in investing activities

 

(5)

 

(19)

Cash flows from financing activities:

 

  

 

  

Proceeds from issuance of common stock

 

1,374

 

Proceeds from exercise of warrants

162

Payment of deferred offering costs

(31)

Share issuance costs

 

(42)

 

Net cash provided by financing activities

 

1,463

 

Effect of currency exchange rate changes on cash and cash equivalents

 

(1)

 

Net decrease in cash and cash equivalents

 

(1,544)

 

(3,209)

Cash and cash equivalents at beginning of period

 

5,182

 

14,549

Cash and cash equivalents at end of period

$

3,638

$

11,340

Supplemental cash flow information

 

  

 

  

Non-cash investing and financing transactions:

 

  

 

  

Derivative warrant liability reclassified to equity on exercise of warrants

$

101

$

Deferred offering costs reclassified to equity upon public offering

$

132

$

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

6

Helius Medical Technologies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

1.    BASIS OF PRESENTATION

The accompanying interim Unaudited Condensed Consolidated Financial Statements of Helius Medical Technologies, Inc. (together with its wholly owned subsidiaries the “Company”) have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission ("SEC") and should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 that was filed with the Securities and Exchange Commission on March 28, 2024 (“2023 10-K”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP") have been condensed or omitted.

There have been no material changes to the Company's significant accounting policies from those described in the 2023 Form 10-K. Certain prior period amounts have been reclassified to conform to the current period presentation.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results could differ from those estimates.

In the opinion of management, the Unaudited Condensed Consolidated Financial Statements reflect all adjustments necessary for a fair statement of the results for the interim periods presented. All such adjustments, unless otherwise noted herein, are of a normal, recurring nature. The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full year.

Reverse Stock Split

At the annual meeting of stockholders on May 24, 2023, our stockholders voted to approve a reverse stock split of our outstanding Class A common stock (“Common Stock”) at a ratio in the range of 1-for-10 to 1-for-80 to be determined at the discretion of the Company’s Board of Directors (the “Board”). On August 11, 2023, the Board approved a 1-for-50 reverse stock split of the Company’s issued and outstanding Common Stock (the “Reverse Stock Split”). Refer to Note 6 for additional information.

All issued and outstanding Common Stock and per share amounts contained in the financial statements have been retroactively adjusted to reflect this Reverse Stock Split for all periods presented. In addition, a proportionate adjustment was made to the per share exercise price and the number of shares issuable upon the exercise of all outstanding stock options, restricted stock units and warrants to purchase shares of Common Stock. In accordance with the terms of the warrant agreement for the Public Warrants described further in Note 6, the exercise price for these warrants was reset to the volume-weighted average price for the five days following the Reverse Stock Split. A proportionate adjustment was also made to the number of shares reserved for issuance pursuant to the Company’s equity incentive compensation plans to reflect the Reverse Stock Split. Any fraction of a share of Common Stock that was created as a result of the Reverse Stock Split was rounded down to the next whole share and stockholders received cash settlement equal to the market value of the fractional share, determined by multiplying such fraction by the closing sales price of the Company’s Common Stock as reported on Nasdaq on the last trading day before the Reverse Stock Split effective date. The authorized shares and par value of the Common Stock and preferred stock were not adjusted as a result of the Reverse Stock Split.

Going Concern Uncertainty

As of March 31, 2024, the Company had cash, cash equivalents of $3.6 million. For the three months ended March 31, 2024, the Company had an operating loss of $3.4 million, and as of March 31, 2024, its accumulated deficit was $162.5 million. For the three months ended March 31, 2024, the Company had $0.1 million of net revenue from the commercial sale of products. The Company expects to continue to incur operating losses and net cash outflows until such time as it generates a level of revenue to support its cost structure. There is no assurance that the Company will achieve profitable operations, and, if achieved, whether it will be sustained on a continued basis. These factors indicate substantial doubt

7

about the Company’s ability to continue as a going concern within one year after the date the consolidated financial statements are filed. The Company’s Unaudited Condensed Consolidated Financial Statements have been prepared on the basis of continuity of operations, realization of assets and satisfaction of liabilities in the ordinary course of business; no adjustments have been made relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company not continue as a going concern.

The Company intends to fund ongoing activities by utilizing its current cash and cash equivalents on hand, cash received from the sale of its PoNS device in the U.S. and Canada and by raising additional capital through equity or debt financings. There can be no assurance that the Company will be successful in raising additional capital or that such capital, if available, will be on terms that are acceptable to the Company. If the Company is unable to raise sufficient additional capital, the Company may be compelled to reduce the scope of its operations.

Global Economic Conditions

Generally, worldwide economic conditions remain uncertain, particularly due to the conflict between Russia and Ukraine, as well as in the Middle East between Israel and Hamas, disruptions in the banking system and financial markets and increased inflation. The general economic and capital market conditions both in the United States and worldwide, have been volatile in the past and at times have adversely affected the Company’s access to capital and increased the cost of capital. The capital and credit markets may not be available to support future capital raising activity on favorable terms. If economic conditions decline, the Company’s future cost of equity or debt capital and access to the capital markets could be adversely affected.

Changes in economic conditions, supply chain constraints, logistics challenges, labor shortages, the effects of conflicts in Ukraine and the Middle East, disruptions in the banking system and financial markets, high levels of inflation and an increase in interest rates have increased costs and have had and may continue to have a negative impact on the Company’s business. Although the Company has taken and may continue to take measures to mitigate these impacts, if these measures are not effective, the Company’s business, financial condition, results of operations, and liquidity could be materially adversely affected.

2.    RECENT ACCOUNTING PRONOUNCEMENTS

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The guidance requires expanded interim and annual disclosures of segment information including the disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within segment profit and loss. The guidance is effective for the Company's fiscal 2024 Form 10-K and interim periods thereafter. The Company is currently evaluating the ASU to determine its impact on the Company's disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The guidance requires expanded annual disclosures including the standardization and disaggregation of income tax rate reconciliation categories and the amount of income taxes paid by jurisdiction. The guidance is effective for the Company’s fiscal 2025 Form 10-K. The Company is currently evaluating the ASU to determine its impact on the Company’s disclosures.

8

3.    SUPPLEMENTAL BALANCE SHEET DISCLOSURES

Components of selected captions in the unaudited condensed consolidated balance sheets consisted of the following:

Accounts receivable, net

Accounts receivable from product sales are net of allowance for credit losses of less than $1 thousand as of both March 31, 2024 and December 31, 2023.

Inventory, net (in thousands)

    

March 31, 

    

December 31, 

    

2024

2023

Raw materials

$

295

$

351

Work-in-process

 

62

 

67

Finished goods

 

66

 

96

Inventory, gross

423

514

Inventory reserve

 

(39)

 

(57)

Inventory, net

$

384

$

457

During the three months ended March 31, 2024, $0 and $14 thousand of inventory was written off to the inventory reserve.

Prepaid expenses and other current assets (in thousands)

March 31, 

    

December 31, 

    

2024

2023

Prepaid expenses

$

547

$

689

Inventory related

 

355

 

333

Deferred offering costs

38

140

Total prepaid expenses and other current assets

$

940

$

1,162

Accrued and other current liabilities (in thousands)

March 31, 

    

December 31, 

    

2024

    

2023

Insurance payable

$

281

$

446

Employees benefits

275

509

Professional services

 

41

 

52

Franchise tax

 

50

 

168

Other

 

27

 

85

Total accrued and other current liabilities

$

674

$

1,260

Deferred revenue

Exclusive Distribution Agreement

Pursuant to an Exclusive Distribution Agreement with Health Tech Connex Inc. (“HTC”) (“Exclusivity Agreement”) entered into on March 3, 2023, subject to certain terms and conditions, the Company granted to HTC the exclusive right to provide PoNS Therapy in the Fraser Valley and Vancouver metro regions of British Columbia. HTC will purchase the PoNS devices for use in these regions exclusively from the Company and on terms no less favorable than the then-current standard terms and conditions. This Exclusivity Agreement replaced the previous Clinical Research and Co-Promotion Agreement (“Co-Promotion Agreement”) between the parties entered into in October 2019 that included a similar exclusive right provision. The exclusive right under the Exclusivity Agreement was granted for a value of CAD$273 thousand, which is represented by the unamortized up-front payment under the former Co-Promotion

9

Agreement. The initial term of the Exclusivity Agreement expires on December 31, 2027, and is renewable by HTC for one additional five-year term upon sixty days’ written notice to the Company.

Deferred revenue as of both March 31, 2024 and December 31, 2023 is comprised of the remaining unamortized amount under these agreements. Revenue recognized is included in Other revenue in the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss.

4.    LEASES

The Company has an operating lease for office space with lease terms expiring in March 2025. The lease does not contain any options to extend. Operating lease costs for the three months ended March 31, 2024 and 2023 were $10 thousand and $14 thousand, respectively.

Maturities of operating lease liabilities as of March 31, 2024 were as follows (in thousands):

2024 (remaining)

$

35

2025

12

Total lease payments

 

47

Less: imputed interest

 

(1)

Total lease liabilities

$

46

5.    FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Fair value of an asset or liability considers assumptions that market participants would use in pricing the asset or liability, including consideration of non-performance risk. The inputs used to determine fair values are categorized in one of the following three levels of the fair value hierarchy:

Level 1 – Quoted market prices in active markets for identical assets or liabilities.

Level 2 – Inputs, other than quoted prices in active markets, that are observable, either directly or indirectly.

Level 3 – Unobservable inputs that are not corroborated by market data.

The Unaudited Condensed Consolidated Financial Statements include financial instruments for which the fair market value of such instruments may differ from amounts reflected on a historical cost basis. As of March 31, 2024 and December 31, 2023, financial instruments of the Company consist of cash equivalents, which were comprised of deposits of excess cash in an unrestricted money market savings account and a money market mutual fund. The carrying value of cash equivalents generally approximates fair value due to their short-term nature.

The Company’s derivative liability as of March 31, 2024 and December 31, 2023 is comprised of warrants issued in connection with the registered public offering completed in August 2022 (“August 2022 Public Offering”) discussed in more detail in Note 8 to our Consolidated Financial Statements included our 2023 10-K. The derivative liability is classified as Level 3 within the fair value hierarchy and is required to be recorded at fair value on a recurring basis. See Note 6 for further information on the fair value of the derivative liability.

The majority of the Company’s non-financial instruments, which include intangible assets, lease assets, inventories and property and equipment, are not required to be carried at fair value on a recurring basis. However, if certain triggering events occur (or at least annually for indefinite-lived intangible assets), a non-financial instrument is required to be evaluated for impairment. If the Company determines that the non-financial instrument is impaired, the Company would be required to write down the non-financial instrument to its fair value.

10

6.    COMMON STOCK, PREFERRED STOCK AND WARRANTS

At-The-Market Offering

On June 23, 2023, the Company entered into a Sales Agreement (the “Sales Agreement”) with Roth Capital Partners, LLC (“Roth”) to create an at-the-market offering program (“ATM”) under which the Company may offer and sell shares with an aggregate offering price of up to $2.0 million. Roth is entitled to a fixed commission rate equal to up to 3% of the gross proceeds pursuant to the Sales Agreement. As of March 31, 2024, 201,211 shares have been sold under the ATM generating net proceeds of $1.8 million.

Series B Preferred Stock

On March 23, 2023, the Board of Directors declared a dividend of one one-thousandth of a share of Series B Preferred Stock (“Series B Preferred Stock”) for each outstanding share of Common Stock held of record on April 3, 2023. The value of the Series B Preferred Stock issued in connection with the stock dividend was immaterial.

The outstanding shares of Series B Preferred Stock will vote together with the outstanding shares of the Company’s Common Stock, as a single class, exclusively with respect to a proposal giving the Board of Directors the authority, as it determines appropriate, to implement a reverse stock split within twelve months following the approval of such proposal by the Company’s stockholders as well as any proposal to adjourn any meeting of stockholders called for the purpose of voting on the foregoing matters.

Each share of Series B Preferred Stock entitled the holder to 1,000,000 votes per share and each fraction of a share of Series B Preferred Stock had a ratable number of votes. The holder of Series B Preferred Stock, as such, will not be entitled to receive dividends.

At the annual meeting of stockholders of the Company held on May 24, 2023, the Company’s stockholders approved an amendment to the Company’s Certificate of Incorporation to effect a reverse stock split of its outstanding Common Stock. All shares of Series B Preferred Stock that did not vote in person or by proxy were redeemed in whole by the Company. Shares of Series B Preferred Stock that did vote in person or by proxy will need to request redemption from the Company at a rate of $0.001 per share in cash. As of March 31, 2024, no shareholders of Series B Preferred Stock have requested such redemption.

Warrants

The Company issued warrants to purchase an aggregate of 720,000 shares of Common Stock (“2022 Warrants”) in connection with the August 2022 Public Offering, as more fully described in Note 8 to our Consolidated Financial Statements included our 2023 10-K. The 2022 Warrants did not meet the guidance for being classified as an equity instrument due to a potential price reset prompted by a change in an unrelated instrument’s conversion rate or, in the event of a fundamental transaction, settlement rights that differ from those of the underlying common stockholders. Accordingly, the 2022 Warrants are being accounted for as a derivative liability instrument. As a result of the Company’s Reverse Stock Split on August 16, 2023, refer to Note 1, the exercise price on the 2022 Warrants was reset to $6.9135 per share based on the volume-weighted average price for the five stock trading days immediately following the Reverse Stock Split.

11

The fair value of the 2022 Warrants as of March 31, 2024 and December 31, 2023 was determined using both a Monte Carlo simulation model, which uses multiple input variables to determine the probability of the occurrence of a price reset or a fundamental transaction and the Black-Scholes option pricing model. The following table includes the share price and the inputs used to estimate the fair value of the warrants:

    

March 31, 

December 31, 

 

    

2024

2023

 

Stock price

$

5.83

$

8.04

Warrant term (in years)

 

3.36

 

3.61

Expected volatility

 

82.10

%

 

84.10

%

Risk-free interest rate

 

4.37

%

 

3.96

%

Dividend rate

 

0.00

%

 

0.00

%

The fair value of the derivative liability associated with the 2022 Warrants as of March 31, 2024 and December 31, 2023 was $2.1 million and $3.3 million, respectively. The change in the fair value of the derivative liability was recognized as a component of nonoperating income (expense) in the Company’s Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss. 2022 Warrants were exercised to purchase of 23,400 shares of Common Stock at $6.9135 per share for $162 thousand in net proceeds and no 2022 Warrants were cancelled during the three months ended March 31, 2024. The portion of the derivative liability relating to the exercised warrants of $101 thousand was reclassified into stockholders’ equity based on the fair value on the date of reclassification. The remaining outstanding 2022 Warrants to purchase 603,690 shares of Common Stock are classified as a derivative liability as of March 31, 2024, are exercisable upon issuance and will expire five years following the date of issuance.

On May 9, 2024, in connection with the 2024 Public Offering (as defined below), the exercise price of the 2022 Warrants was repriced again. Refer to Note 11 for additional information.

The Company has outstanding equity-classified warrants to purchase 9,969 shares of Common Stock at a weighted average exercise price of $819.77, with expiration dates ranging from October 2023 to February 2026. During the three months ended March 31, 2024, no equity-classified warrants were exercised or cancelled.

7.    STOCK-BASED COMPENSATION

The Company may issue stock-based compensation awards under the Helius Medical Technologies, Inc. 2022 Equity Incentive Plan (“2022 Plan”) or the Helius Medical Technologies, Inc. 2021 Inducement Plan (as amended, the “Inducement Plan”), as described more fully in the 2023 10-K. On January 1, 2023, pursuant to the automatic increase provision of the 2022 Plan, the number of shares authorized for issuance increased from 264,319 to 319,941. As of March 31, 2024, the remaining shares available for grant were 74,643 under the 2022 Plan and 9,240 under the Inducement Plan.

During the three months ended March 31, 2024, the Company did not grant any stock options or restricted stock units out of the 2022 Plan or the Inducement Plan.

As of March 31, 2024, there were an aggregate of 245,830 stock options outstanding with a weighted average exercise price of $76.28 per share and 572 unvested restricted stock units outstanding with a weighted average grant date fair value of $7.81 per share.

12

Total stock-based compensation expense was as follows (in thousands):

Three Months Ended

March 31, 

2024

2023

Cost of sales

$

4

$

4

Selling, general and administrative

331

320

Research and development

66

81

Total stock-based compensation expense

$

401

$

405

As of March 31, 2024, the total remaining unrecognized compensation expense related to nonvested stock options and restricted stock units was $2.1 million which will be amortized over the weighted-average remaining requisite service period of 0.9 years.

8.    BASIC AND DILUTED LOSS PER SHARE

The table below presents the computation of basic and diluted loss per share (in thousands, except share and per share information):

Three Months Ended

March 31, 

2024

   

2023

Basic:

  

 

  

Net loss available to common stockholders — basic

$

(2,516)

$

(2,494)

Weighted average common shares outstanding — basic

 

817,327

 

564,134

Loss per share - basic

$

(3.08)

$

(4.42)

  

 

  

Diluted:

  

 

  

Net loss available to common stockholders — diluted (1)

$

(2,516)

$

(2,494)

Weighted average common shares outstanding — diluted (1)

 

817,327

 

564,134

Loss per share — diluted

$

(3.08)

$

(4.42)

(1)For the three months ended March 31, 2024 and March 31, 2023, no adjustment was made to the numerator and no incremental shares were added to the denominator for the Public Warrants being accounted for as a derivative liability, as the Public Warrants were out-of-the-money during the periods. Refer to Note 6 for additional information about the Public Warrants.

The following outstanding securities, presented based on amounts outstanding as of the end of each period, were not included in the computation of diluted net loss per share for the periods indicated, as they would have been anti-dilutive due to the net loss in each period.

Three Months Ended

March 31, 

2024

   

2023

Stock options

245,830

222,424

Restricted stock units

572

40

Warrants

613,659

731,853

9.    COMMITMENTS AND CONTINGENCIES

The Company is obligated under a license agreement with Advanced NeuroRehabilitation, LLC to pay a 4% royalty on net revenue collected from the sale of devices covered by the patent-pending technology. During the three months ended March 31, 2024 and 2023, the Company recorded royalty expense from the sale of devices of approximately $5 thousand and $4 thousand, respectively, in its Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss.

13

10.    ENTERPRISE-WIDE DISCLOSURES

Operating segments are defined as components of an enterprise for which discrete financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and in assessing performance. Our CODM is the Chief Executive Officer. The Company operates and manages its business within one operating and reportable segment related to the sale of PoNS devices directly to patients in the United States and to clinics in Canada.

The following table presents the Company’s revenue disaggregated by geographic area (in thousands):

    

Three Months Ended

March 31, 

2024

2023

Product sales, net:

United States

$

79

$

75

Canada

45

31

Total product sales, net

124

106

Other revenue

 

11

 

5

Total revenue

$

135

$

111

Two customers accounted for 94% of net product sales for the three months ended March 31, 2024 and a single customer accounted for 14% of net product sales for the three months ended March 31, 2023. Two customers accounted for 94% of accounts receivable, net as of March 31, 2024 and a single customer accounted for 68% of accounts receivable, net as of March 31, 2023.

11.    SUBSEQUENT EVENTS

On May 9, 2024, the Company closed on a registered public offering consisting of 704,999 shares of Common Stock (the “2024 Public Offering”), pre-funded warrants to purchase 2,147,222 shares of Common Stock (the “Pre-funded Warrants”) and accompanying Series A Warrants to purchase up to 2,852,221 shares of its Common Stock (“Series A Warrants”) and Series B Warrants to purchase up to 2,852,221 shares of its Common Stock (“Series B Warrants”, and together with the Series A Warrants, the “2024 Public Warrants”). The 2024 Public Offering price per share of Common Stock and accompanying Series A Warrants and Series B Warrants was $2.25, the public offering price per Pre-funded Warrant and accompanying Series A and Series B warrant was $2.249. The Pre-funded Warrants have an exercise price of $0.001 per share and 1,076,445 were exercised on the closing date. Net proceeds from the 2024 Public Offering, after deducting placement agent fees and expenses and other offering costs, were approximately $5.6 million.

The 2024 Public Warrants have an exercise price of $2.25 per share, are exercisable upon issuance, and the Series A Warrants will expire five years following the date of issuance and the Series B Warrants will expire twelve months following the date of issuance. The Pre-funded Warrants are exercisable upon issuance and may be exercised at any time until the Pre-funded Warrants are exercised in full.

As a result of the 2024 Public Offering, the exercise price of the 2022 Warrants will be repriced per the terms of the warrant agreement.

14

ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Unless otherwise specified or the context otherwise requires, references to “we,” “us,” “our,” “Helius” or “Company” mean Helius Medical Technologies, Inc. and its wholly owned operating subsidiaries, Helius Medical, Inc. (“HMI”) and Helius Medical Technologies (Canada), Inc. (“HMC”). The interim financial statements and this Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the financial statements and notes thereto for the year ended December 31, 2023, and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission (“SEC”) on March 28, 2024 (the “2023 10-K”). All financial information is stated in U.S. dollars unless otherwise specified. Our Unaudited Condensed Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”).

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties, including statements regarding the Company’s market, strategy, competition, capital needs, business plans and expectations. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may”, “will”, “should”, “expect”, “plan”, “intend”, “anticipate”, “believe”, “estimate”, “predict”, “potential” or “continue”, the negative of such terms or other comparable terminology. Forward-looking statements are made, without limitation, in relation to the Company’s future growth and operational progress including expected enrollment, receipt of prescriptions and progress of commercialization of the PoNS device in the U.S., the impacts of the current global macroeconomic environment on the Company, the issuance by the Centers for Medicare & Medicaid Services (“CMS”) of rules regarding coverage of emerging technologies, clinical development plans, product development activities, the safety and effectiveness of the Company’s product, the manufacturing plans for the Company’s product, sufficiency of cash and availability of funds, and operating costs. Such forward-looking statements involve risks and uncertainties, known and unknown, including capital requirements to achieve the Company’s business objectives, the impact on the Company of global macroeconomic conditions including effects from supply chain constraints, logistics challenges, labor shortages, disruptions in the banking system and financial markets, high levels of inflation and increased interest rates on the Company’s ability to operate its business and access capital markets, the success of the Company’s business plan, including the Company’s ability to secure contracts with rehabilitation clinics, obtain national Medicare coverage and a reimbursement code so that the PoNS device is covered by Medicare and Medicaid, to build internal commercial infrastructure, secure state distribution licenses, build a commercial team and build relationships with Key Opinion Leaders, neurology experts and neurorehabilitation centers, market awareness of the PoNS device, availability of funds, manufacturing, the Company’s ability to maintain and enforce its intellectual property rights, clinical trials and the clinical development process, the product development process, the regulatory submission review and approval process, the Company’s operating costs and use of cash, and the Company’s ability to achieve significant revenues and other factors discussed in the section entitled “Item 1A. Risk Factors” in our 2023 10-K and those described from time to time in the Company’s future reports filed with the SEC. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith, based on information available to the Company as of the date hereof, and reflect the Company’s current judgment regarding its business plans, Helius cannot guarantee future results, events, levels of activity, performance or achievement and its actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. The Company does not intend, and undertakes no obligation, to update or revise any of the forward-looking statements as a result of new information, future events or otherwise or to conform these statements to actual results, except as required by applicable law, including the securities laws of the United States.

The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with its unaudited condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q.

15

Company Overview

We are a neurotechnology company focused on neurological wellness. Our purpose is to develop, license or acquire non-implantable technologies targeted at reducing symptoms of neurological disease or trauma.

Our product, known as the Portable Neuromodulation Stimulator, or PoNS®, is an innovative non-implantable medical device, inclusive of a controller and mouthpiece, which delivers mild electrical stimulation to the surface of the tongue to provide treatment of gait deficit and chronic balance deficit. PoNS Therapy® is integral to the overall PoNS solution and is the physical therapy applied by patients during use of the PoNS device. PoNS has marketing clearance in the U.S. for use as a short-term treatment of gait deficit due to mild-to-moderate symptoms for multiple sclerosis (“MS’) and is to be used as an adjunct to a supervised therapeutic exercise program in patients 22 years of age and over by prescription only. We began accepting prescriptions for PoNS in the U.S. in March 2022, and commercial sales of PoNS commenced in April 2022. PoNS is authorized for sale in Canada for three indications: (i) as a short term treatment (14 weeks) of chronic balance deficit due to mild-to-moderate traumatic brain injury and is to be used in conjunction with physical therapy; (ii) as a short term treatment (14 weeks) of gait deficit due to mild and moderate symptoms from MS and it is to be used in conjunction with physical therapy; and (iii) as a short term treatment (14 weeks) of gait deficit due to mild and moderate symptoms from stroke, to be used in conjunction with physical therapy. It has been commercially available in Canada since March 2019. PoNS is authorized for sale as a Class IIa medical device in Australia and we have been seeking a business partner to commercialize and distribute PoNS in Australia.

Recent Developments

Corporate Updates

As discussed further in Note 6 to our unaudited condensed consolidated financial statements, in May 2024, the Company closed on a public offering of its Class A common stock (“Common Stock”) and warrants and received net proceeds of approximately 5.6 million.

On May 2, 2024, CMS published a proposed fee schedule payment rates for the PoNS Controller and PoNS Mouthpiece to be discussed at CMS' bi-annual Healthcare Common Procedure Coding System (“HCPCS”) public meeting to be held on May 29, 2024. For the PoNS Controller (HCPCS Code A4593), CMS preliminarily set pricing by mapping reimbursement to existing code E0745, (Neuromuscular stimulator, electronic shock unit), resulting in a capped fee of $1,206.53. For the PoNS Mouthpiece (HCPCS code A4594), CMS based pricing on the cash pay price of $4,500, resulting in a total capped payment of $3,075.53.

On April 4, 2024, the Company received written notice from the Nasdaq Stock Market LLC (“Nasdaq”) stating that the Company no longer complies with the minimum stockholders’ equity requirement under Nasdaq Listing Rule 5550(b)(1) for continued listing on The Nasdaq Stock Market LLC because the Company’s stockholders' equity, as reported in our 2023 10-K, has fallen below $2.5 million. The notice also indicates that the Company does not meet the alternative compliance standards. Under applicable Nasdaq rules, the Company has 45 calendar days from the date of the notice, or until May 20, 2024, to submit a plan to regain compliance. The Company intends to timely submit such a plan to Nasdaq. If the Company’s plan is accepted, Nasdaq may grant the Company an extension of up to 180 calendar days from the date of the notice to evidence compliance. The notice has no immediate impact on the listing of the Company’s Common Stock, which will continue to trade on The Nasdaq Stock Market LLC under the symbol “HSDT”.

During the first quarter of 2024, the Company partnered with Lovell Government Services (“Lovell”), an SBA-certified Service-Disabled Veteran-Owned Small Business (“SDVOSB”), to make the PoNS device available to federal healthcare systems.

On February 29, 2024, CMS assigned HCPCS Level II codes to the PoNS controller and PoNS mouthpiece, effective April 1, 2024.  The Company has since provided CMS additional information to support reimbursement economics ahead of the public meetings expected in late May 2024 for consideration by CMS for determination of a reimbursement amount for each of the PoNS controller and mouthpiece in our efforts to secure reimbursement by CMS to be effective October 1, 2024.

16

During the first quarter of 2024, the Company reached alignment with the FDA on the stroke program that consists of two studies a clinical trial of PoNS Therapy in stroke participants in collaboration with Medical University of South Carolina that commenced in 2023 and an open label study to evaluate the therapeutic benefit of PoNS in chronic stroke subjects started enrolling participants in the first quarter of 2024 in three sites in the U.S. and Canada as part of our registrational program for gait and balance deficit due to stroke. Enrollment for both studies is expected to be completed by the end of 2024 with a submission to FDA targeted for mid-to-late 2025.

During the third quarter of 2023, the Company began implementing the transition of the manufacturing of PoNS device controllers and mouthpieces to Minnetronix, Inc. from its previous contract manufacturer, Key Tronic Corporation. The Company expects the transition to be fully completed in the third quarter of 2024.

Presently, PoNS Therapy is not covered by CMS or reimbursed by any third-party payers in the U.S. We are pursuing commercial insurance coverage and Medicare reimbursement for PoNS within the Durable Medical Equipment, or DME, benefit category. We expect to interact again with CMS in late May 2024 to seek Medicare final payment determinations for both codes to be effective at the next scheduled date of October 1, 2024.

We will continue to monitor the development of CMS’s new pathway for coverage of innovative new devices, Transitional Coverage of Emerging Technology (“TCET”), which is replacing the repealed Medicare Coverage of Innovative Technologies rule. CMS is expected to provide additional information about TCET to the public for comments in 2024. As we follow the evolution of TCET, we will continue to assess our evidence generation strategy to reach the greatest potential to gain CMS reimbursement benefits as a result of our Breakthrough designation in MS.

We also intend to provide broad access and reimbursement for the PoNS Therapy over time through commercial insurers. Prior to the initiation of CMS or broad commercial payer coverage, we anticipate the primary source of sales will be self-pay patients. We expect to support the cost of the PoNS Therapy by offering a cash pay discount, collaborating with third parties to provide self-pay patients with financing options as well as working with advocacy groups and charitable organizations to help self-pay patients access our technology. In general, we anticipate that it will take at least 24 months to obtain broad coverage and reimbursement among government and private payers once the HCPCS codes become effective.

Material Trends and Uncertainties

Global Economic Conditions

Generally, worldwide economic conditions remain uncertain, in part due to supply chain disruptions, labor shortages, global conflicts and increased inflation. The general economic and capital market conditions both in the U.S. and worldwide, have been volatile in recent years and at times have adversely affected our access to capital and have increased the cost of capital. The capital and credit markets may not be available to support future capital raising activity on favorable terms. If economic conditions continue to remain volatile or decline, our future cost of equity or debt capital and access to the capital markets could be adversely affected.

Our operating results could be materially impacted by changes in the overall macroeconomic environment and other economic factors. Changes in economic conditions, supply chain constraints, logistics challenges, labor shortages, global conflicts such as the conflicts in Ukraine and in the Middle East, and steps taken by governments and central banks as well as other stimulus and spending programs, have led to higher inflation, which has led to an increase in costs and has caused changes in fiscal and monetary policy, including increased interest rates. Although we may take measures to mitigate these impacts, if these measures are not effective, our business, financial condition, results of operations, and liquidity could be materially adversely affected.

17

Results of Operations

Three Months Ended March 31, 2024 compared to the Three Months Ended March 31, 2023

The following table summarizes our results of operations for the three months ended March 31, 2024 and 2023 (in thousands):

Three Months Ended March 31, 

    

    

2024

    

2023

    

Change

Revenue:

 

  

 

  

  

Product sales, net:

United States

$

79

$

75

$

4

Canada

45

31

14

Total product sales, net

124

106

18

Other revenue

 

11

 

5

 

6

Total revenue

 

135

 

111

 

24

Cost of revenue

 

123

 

122

 

1

Gross profit (loss)

 

12

 

(11)

 

23

Operating expenses:

 

  

 

  

 

  

Selling, general and administrative expenses

 

2,633

 

2,874

 

(241)

Research and development expenses

 

788

 

886

 

(98)

Amortization expense

 

7

 

39

 

(32)

Total operating expenses

 

3,428

 

3,799

 

(371)

Loss from operations

 

(3,416)

 

(3,810)

 

394

Nonoperating income (expense)

 

  

 

  

 

  

Interest income (expense), net

(8)

100

(108)

Change in fair value of derivative liability

 

1,142

 

1,221

 

(79)

Foreign exchange loss

 

(288)

 

(5)

 

(283)

Other income, net

 

54

 

 

54

Nonoperating income, net

 

900

 

1,316

 

(416)

Loss before provision for income taxes

(2,516)

(2,494)

(22)

Provision for income taxes

Net loss

$

(2,516)

$

(2,494)

$

(22)

Revenue

Net product sales for the three months ended March 31, 2024 were comparable to the same period in the prior year.

Cost of Revenue

The cost of revenue for the three months ended March 31, 2024 as compared with the same period in the prior year remained relatively flat year to year and is comprised of product costs from net product sales and fixed overhead costs.

Gross Profit (Loss)

Gross profit for the three months ended March 31, 2024 was $12 thousand compared to gross loss of $11 thousand for the same period in the prior year. The increase was primarily a result of a decrease in inventory reserve and an increase in other revenue.

18

Selling, General and Administrative Expense

The decrease in selling, general and administrative expenses in the first quarter of 2024 as compared to 2023 resulted primarily from a $0.4 million decrease in professional fees and payroll related expenses, partially offset by a $0.1 million increase in contract manufacturer expense associated with the transition to the new contract manufacturer during the current year period.

Research and Development Expense

The decrease in research and development expenses was driven primarily by a decrease in product development expenses and clinical trial activities as we transitioned our focus from product development and clinical trials to U.S. commercialization activities.

Amortization Expense

Amortization expense was primarily comprised of the amortization of acquired finite-lived intangible assets. The change in amortization expense period over period is primarily due to certain intangible assets becoming fully amortized.

Nonoperating income (expense)

Interest Income (Expense), Net

Net interest expense for the three months ended March 31, 2024 compared to net interest income in the prior year period resulted from lower balances earning interest income year to year, respectively, offset by interest expense related to lease commitments.

Change in Fair Value of Derivative Liability

As discussed in more detail in Note 6 to our Unaudited Condensed Consolidated Financial Statements, the warrants issued in connection with the public offering completed on August 9, 2022 are being accounted for as a derivative liability instrument. The gain on change in fair value of derivative liability for the three months ended March 31, 2024 of $1.1 million was primarily due to a decrease in our stock price.

Foreign Exchange Loss

The change in foreign exchange (loss) gain was primarily due to fluctuations in the Canadian to U.S. dollar exchange rates.

Other Income, Net

Other income for the three months ended March 31, 2024 was primarily attributable to dividend income earned on investments of excess cash in money market mutual funds.

19

Liquidity and Capital Resources

The following table summarizes our cash and cash equivalents and working capital as of the end of the periods indicated in the table below (in thousands):

    

March 31, 

December 31, 

2024

2023

Cash and cash equivalents

$

3,638

$

5,182

Working capital

3,948

5,559

Our available capital resources have been primarily used to expand our U.S. commercialization efforts, fund manufacturing activities for the PoNS device, conduct clinical trials and for working capital and general corporate purposes. Our primary sources of cash and cash equivalents have been proceeds from public and private offerings of our Common Stock, which most recently included $16.3 million in net proceeds we received from a public offering of our Common Stock and warrants completed in August 2022 as discussed in more detail in Note 8 to our Consolidated Financial Statements included our 2023 10-K. As discussed in more detail in Note 6 to our Unaudited Condensed Consolidated Financial Statements, the Company entered into a sales agreement related to our at-the-market offering program (“ATM”) under which we may offer and sell shares having gross proceeds up to $2.0 million. During the three months ended March 31, 2024 the Company issued and sold shares with gross proceeds of $1.4 million under the ATM. As discussed in more detail in Note 6, the Company received gross proceeds of $0.2 million from the issuance of shares upon the exercise of warrants in the three months ended March 31, 2024.

Statement of Cash Flows

The following table summarizes our cash flows for the three months ended March 31, 2024 and 2023 (in thousands):

Three Months Ended March 31, 

    

2024

    

2023

    

Change

Net cash used in operating activities

$

(3,001)

$

(3,190)

$

189

Net cash used in investing activities

 

(5)

 

(19)

 

14

Net cash provided by financing activities

 

1,463

 

 

1,463

Effect of foreign exchange rate changes on cash

 

(1)

 

 

(1)

Net decrease in cash and cash equivalents

$

(1,544)

$

(3,209)

$

1,665

Net Cash Used in Operating Activities

The lower level of cash used in operating activities in the three months ended March 31, 2024 primarily resulted from the decrease in selling, general and administrative expenses and research and development expenses as compared with the same period in the prior year.

Net Cash Used in Investing Activities

Our investing activities are primarily related to the purchases of property and equipment.

Net Cash Provided by Financing Activities

During the three months ended March 31, 2024, we received net proceeds of $1.3 million from the issuance and sale of shares under the ATM. In addition, we received $0.2 million in net proceeds from the exercise of warrants.

Cash Requirements

Our ability to generate product revenues sufficient to achieve profitability will depend heavily on the successful commercialization of PoNS Therapy in the U.S. Our net loss was $2.5 million for each of the three months ended March

20

31, 2024 and 2023. As of March 31, 2024, we had an accumulated deficit of $162.5 million. We expect to continue to incur significant expenses and operating losses for the foreseeable future. These and other factors indicate substantial doubt about our ability to continue as a going concern. Refer to Note 1 to our Unaudited Condensed Consolidated Financial Statements for additional discussion about our going concern uncertainty.

We intend to use our available capital resources primarily to expand our U.S. commercialization efforts, fund manufacturing activities for the PoNS device, conduct clinical trials and for working capital and general corporate purposes. We believe that our existing capital resources, as well as the 5.6 million net proceeds from the issuance of Common Stock in May 2024 will be sufficient to fund our operations into 2025, but we will be required to seek additional funding through the sale of equity or debt financing to continue to fund our operations thereafter. We will need additional funding for our planned clinical trial for stroke. The amount required to fund operations thereafter will depend on various factors, including timing of approval of clinical trials, duration and result of clinical trials and other factors that affect the cost of the clinical trial, manufacturing costs of product, development of our product for new indications and demand for our authorized products in the market.

There can be no assurance that we will be successful in raising additional capital or that such capital, if available, will be on terms that are acceptable to us. If we are unable to raise sufficient additional capital, we may be compelled to reduce the scope of our operations and planned capital expenditure or sell certain assets, including intellectual property, and we may be forced to cease or wind down operations, seek protection under the provisions of the U.S. Bankruptcy Code, or liquidate and dissolve our company.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our Unaudited Condensed Consolidated Financial Statements that have been prepared in accordance with U.S. GAAP. This preparation requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities.

Our critical accounting policies and estimates are described in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Estimates” of our 2023 10-K. There have been no changes in critical accounting policies in the current year from those described in our 2023 10-K.

ITEM 3.    Quantitative and Qualitative Disclosures about Market Risk

Not applicable.

ITEM 4.    Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, under the direction of our Chief Executive Officer and our Chief Financial Officer, we have evaluated our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report. Our management has concluded that the financial statements included elsewhere in this Quarterly Report on Form 10-Q present fairly, in all material respects, our financial position, results of operations and cash flows in conformity with generally accepted accounting principles.

Changes in Internal Control over Financial Reporting

There has not been any change in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect our internal control over financial reporting.

21

PART II – OTHER INFORMATION

Item 1.    Legal Proceedings

From time to time, we are subject to litigation and claims arising in the ordinary course of business. We are not currently a party to any material legal proceedings, and we are not aware of any pending or threatened legal proceeding against us that we believe could have a material adverse effect on our business, operating results or financial condition.

Item 1A. Risk Factors

Our business is subject to risks and events that, if they occur, could adversely affect our financial condition and results of operations and the trading price of our securities. During the three months ended March 31, 2024, our risk factors have not changed materially from those risk factors previously disclosed in our 2023 10-K except as set forth below. You should carefully consider the risk factors discussed in Part I, “Item 1A. Risk Factors” in our 2023 10-K. The risks described in our 2023 10-K are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition and/or operating results.

Risks Related to our Reliance on Third Parties

We are currently in the process of transitioning our manufacturing functions to a new contract manufacturer and any delays in the manufacturing process as a result of this transition could harm our business.

We have depended on our third-party contract manufacturing partner, Key Tronic Corporation, to manufacture and supply our PoNS device for clinical and commercial purposes. During the third quarter of 2023, the Company began implementing the transition of the manufacturing of PoNS systems and mouthpieces to Minnetronix, Inc. While the Company expects this transition to be fully completed in the third quarter of 2024, it is possible that the transition could create delays or disruptions in the manufacturing process. Any delays or disruptions in the manufacturing of our PoNS device during this transition could negatively impact our business.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3.    Defaults upon Senior Securities

Not applicable.

Item 4.    Mine Safety Disclosures

Not applicable.

Item 5.    Other Information

On March 12, 2024, the Company’s Board of Directors approved and adopted the Company’s Second Amended and Restated Bylaws (the “Second Amended and Restated Bylaws”), which became effective the same day. Among other things, the amendments contained in the Second Amended and Restated Bylaws:

reduce the quorum requirement for all meetings of stockholders of the Company from a majority of the voting power of the outstanding shares of stock entitled to vote to one-third of the voting power of the outstanding shares of stock entitled to vote;

22

address the universal proxy rules adopted by the U.S. Securities and Exchange Commission, by providing that no person may solicit proxies in support of a director nominee other than the Board’s nominees unless such person has, or is part of a group that has, complied with Rule 14a-19 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including applicable notice and solicitation requirements;
update disclosure requirements in connection with stockholder nominations of directors and submissions of proposals regarding other business at stockholder meetings (other than proposals to be included in the Company’s proxy materials pursuant to Rule 14a-8 under the Exchange Act), including, without limitation, disclosure of derivative security interests and material interests, agreements and relationships between a proposing stockholder (and other participants in a solicitation) and the Company as well as between proposed director nominees and a proposing stockholder and providing that the Board may request a proposing stockholder or proposed director nominee to provide additional information as reasonably required by the Board;
require a stockholder or group of stockholders calling a special meeting in order to nominate a person to the Board to hold 10% of the votes at the meeting, to be a stockholder at the time of the notice, and at the record date of the meeting; and
clarify personal jurisdiction and service of process matters for foreign actions.

The Second Amended and Restated Bylaws also incorporate certain technical, modernizing, clarifying and conforming changes, including to reflect updates in the Delaware General Corporation Law.

Rule 10b5-1 Trading Plans – Directors and Section 16 Officers

During the three months ended March 31, 2024, none of the Company’s directors or Section 16 officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) of the Exchange Act or any “non-Rule 10b5-1 trading arrangement”.

23

Item 6.    Exhibits

Exhibit No.

    

Description of Exhibit

3.1

Certificate of Conversion filed with the Delaware Secretary of State on July 18, 2018 (incorporated by reference to Exhibit 3.1 to the Form 10-Q filed August 9, 2018)

3.2

Certificate of Incorporation, as corrected (incorporated by reference to Exhibit 3.1 to the Form 8-K filed October 30, 2018)

3.3

Certificate of Amendment to Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Form 8-K filed on December 31, 2020)

3.4

Certificate of Designation of the Series B Preferred Stock of the Registrant (incorporated by reference to Exhibit 3.1(a) to the Registrant’s Registration Statement on Form 8-A, filed with the Securities and Exchange Commission on March 24, 2023)

3.5

Corrected Certificate of Amendment to Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Form 8-K filed on August 16, 2023)

3.6

Second Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 to the Form 8-K filed March 15, 2024)

31.1#

Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2#

Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1#*

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2#*

Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS#

Inline XBRL Instance Document

101.SCH#

Inline XBRL Taxonomy Extension Schema Document

101.CAL#

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB#

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE#

Inline XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF#

Inline XBRL Taxonomy Extension Definition Linkbase Document

104#

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

#

Filed herewith.

*

These certifications are being furnished solely to accompany this quarterly report pursuant to 18 U.S.C. Section 1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference into any filing of the registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

24

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

HELIUS MEDICAL TECHNOLOGIES, INC.

Dated: May 13, 2024

By:

/s/ Dane C. Andreeff

Dane C. Andreeff

President and Chief Executive Officer

 

Dated: May 13, 2024

By:

/s/ Jeffrey S. Mathiesen

Jeffrey S. Mathiesen

Chief Financial Officer, Treasurer and Secretary
(Principal Financial

Officer and Principal Accounting Officer)

25

EXHIBIT 31.1

CERTIFICATIONS

I, Dane C. Andreeff, certify that:

1)I have reviewed this report on Form 10-Q for the period ended March 31, 2024 of Helius Medical Technologies, Inc.
2)Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3)Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4)The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5)The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions);
a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 13, 2024

    

/s/ Dane C. Andreeff

Dane C. Andreeff

Chief Executive Officer


EXHIBIT 31.2

CERTIFICATIONS

I, Jeffrey S. Mathiesen, certify that:

1)I have reviewed this report on Form 10-Q for the period ended March 31, 2024 of Helius Medical Technologies, Inc.
2)Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3)Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4)The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5)The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions);
a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 13, 2024

/s/ Jeffrey S. Mathiesen

Jeffrey S. Mathiesen

Chief Financial Officer


EXHIBIT 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

HELIUS MEDICAL TECHNOLOGIES, INC.

FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2024

PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I am the Chief Executive Officer of Helius Medical Technologies, Inc., a Delaware corporation (the “Company”). I am delivering this certificate in connection with the Form 10-Q of the Company for the quarter ended March 31, 2024 and filed with the Securities and Exchange Commission (“Form 10-Q”).

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I hereby certify that, to the best of my knowledge, the Form 10-Q fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 and that the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 13, 2024

    

/s/ Dane C. Andreeff

Dane C. Andreeff

Chief Executive Officer


EXHIBIT 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

HELIUS MEDICAL TECHNOLOGIES, INC.

FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2024

PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I am the Chief Financial Officer of Helius Medical Technologies, Inc., a Delaware corporation (the “Company”). I am delivering this certificate in connection with the Form 10-Q of the Company for the quarter ended March 31, 2024 and filed with the Securities and Exchange Commission (“Form 10-Q”).

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I hereby certify that, to the best of my knowledge, the Form 10-Q fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 and that the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 13, 2024

/s/ Jeffrey S. Mathiesen

Jeffrey S. Mathiesen

Chief Financial Officer


v3.24.1.1.u2
Document and Entity Information - shares
3 Months Ended
Mar. 31, 2024
May 09, 2024
Document and Entity Information    
Document Type 10-Q  
Document Period End Date Mar. 31, 2024  
Document Quarterly Report true  
Document Transition Report false  
Entity File Number 001-38445  
Entity Registrant Name HELIUS MEDICAL TECHNOLOGIES, INC.  
Entity Incorporation, State or Country Code DE  
Entity Tax Identification Number 36-4787690  
Entity Address, Address Line One 642 Newtown Yardley Road, Suite 100  
Entity Address, City or Town Newtown  
Entity Address, State or Province PA  
Entity Address, Postal Zip Code 18940  
City Area Code 215  
Local Phone Number 944-6100  
Title of 12(b) Security Class A Common Stock, $0.001 par value per share  
Trading Symbol HSDT  
Security Exchange Name NASDAQ  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Non-accelerated Filer  
Entity Small Business true  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   2,529,863
Entity Central Index Key 0001610853  
Current Fiscal Year End Date --12-31  
Document Fiscal Year Focus 2024  
Document Fiscal Period Focus Q1  
Amendment Flag false  
v3.24.1.1.u2
Unaudited Condensed Consolidated Balance Sheets - USD ($)
$ in Thousands
Mar. 31, 2024
Dec. 31, 2023
Current assets    
Cash and cash equivalents $ 3,638 $ 5,182
Accounts receivable, net 49 117
Other receivables 513 520
Inventory, net 384 457
Prepaid expenses and other current assets 940 1,162
Total current assets 5,524 7,438
Property and equipment, net 174 178
Intangible assets, net 17 24
Operating lease right-of-use asset, net 42 52
Total assets 5,757 7,692
Current liabilities    
Accounts payable 814 531
Accrued and other current liabilities 674 1,260
Current portion of operating lease liabilities 46 45
Current portion of deferred revenue 42 43
Total current liabilities 1,576 1,879
Operating lease liabilities, net of current portion   12
Deferred revenue, net of current portion 115 128
Derivative liability 2,080 3,323
Total liabilities 3,771 5,342
Commitments and contingencies (Note 9)
Stockholders' equity    
Class A common stock, $0.001 par value; 150,000,000 shares authorized; 887,847 and 714,590 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively 1 1
Additional paid-in capital 164,843 162,979
Accumulated deficit (162,473) (159,957)
Accumulated other comprehensive loss (385) (673)
Total stockholders' equity 1,986 2,350
Total liabilities and stockholders' equity $ 5,757 $ 7,692