GlobeNewswire Inc | Aug 12, 2020 04:05PM EDT

August 12, 2020

NEWTOWN, Pa., Aug. 12, 2020 (GLOBE NEWSWIRE) -- Helius Medical Technologies, Inc. (Nasdaq:HSDT) (TSX:HSM) (Helius or the Company), a neurotech company focused on neurological wellness, today reported financial results for the quarter ended June30, 2020.

Second Quarter and Recent Business Updates

-- On April 30, 2020, the Company announced that its registrational clinical trial, TBI-001, was published on April 29, 2020 inNeuromodulation: Technology at the Neural Interface. The TBI-001 trial found that PoNS Treatment provided significant improvement in balance in patients with a chronic balance deficit following a mild-to-moderate traumatic brain injury (mmTBI). -- On May 12, 2020, the Company announced that it has received Breakthrough Designation for its PoNS device as a potential treatment for gait deficit due to symptoms of Multiple Sclerosis (MS), to be used as an adjunct to a supervised therapeutic exercise program. -- On July 14, 2020, the Company announced the dismissal of a putative shareholder class action lawsuit in the Southern District of New York. -- On August 6, 2020, the Company announced that it has submitted a request to the U.S. Food and Drug Administration (FDA) for de novo classification and clearance of the Portable Neuromodulation Stimulator (PoNS) device and reported preliminary financial results for the second quarter and six months ended June 30, 2020.

Second Quarter 2020 Financial Summary

-- Revenue of $0.1 million, compared to revenue of $0.5 million in second quarter of 2019. -- Operating loss of $3.7 million, compared to operating loss of $5.8 million in second quarter of 2019. -- Net loss of $3.4 million, compared to net loss of $0.2 million in second quarter of 2019. -- As of June30, 2020, the Company had cash of $5.3 million, compared to $5.5 million at December31, 2019. The Company had no debt outstanding at June30, 2020. -- Net cash provided by financing activities during the three months ended June30, 2020 was $4.1 million.

Helius is excited by the considerable progress we have made on our U.S. regulatory strategy, following our strategic decision in the first quarter to prioritize an Multiple Sclerosis (MS) indication as the regulatory pathway to pursue our first U.S. regulatory clearance, said Philippe Deschamps, Chief Executive Officer of Helius. After obtaining Breakthrough Device Designation in May, our clinical and regulatory team continued to work diligently during the second quarter, with the goal of submitting a request for de novo classification and clearance for an MS indication in the second half of 2020. The submission of our request for de novo classification and clearance which we announced on August 6th is the culmination of their collective effort and success, as well as an important step forward on the path to making our PoNS Treatment available to the estimated 1 million MS patients in the U.S.

Mr. Deschamps continued: From a commercial standpoint, during the second quarter we, like many companies in the medical device industry, continued to be impacted by the unprecedented level of disruption created by the COVID-19 pandemic. Most notably, PoNS authorized clinics in Canada continued to suspend in-clinic patient treatments and remained effectively closed in April to comply with government restrictions enacted to slow the spread of the virus. We have been pleased to see clinics reopen in late-May and June, albeit under federal and provincial requirements limiting their capacity to 50% of normal services. As a result of these COVID-related mandates, along with clinic policies designed to ensure appropriate social distancing, clinics in Canada continue to operate at significantly reduced productivity. As such, we believe we remain in the very early stages of recovery, and are unlikely to see material improvements in business trends until these federal and provincial requirements are lifted. Despite the challenging operating environment, our Canadian commercial team has remained focused on supporting our existing clinic customers, and has made important progress in expanding our network of authorized clinics in recent months.

Mr. Deschamps concluded: In spite of the ongoing challenges presented by COVID-19, Im incredibly proud of the commitment and focus that our team has shown with regard to executing against our regulatory and commercial objectives. Most importantly, we remain convinced that our PoNS Treatment represents a truly novel technology, with the potential to improve the lives of patients suffering from the effects of MS, TBI, and other chronic conditions. Looking ahead, we remain committed to pursuing our regulatory and commercial strategies efficiently and effectively to bring our novel PoNS technology into the hands of as many patients as possible.

Second Quarter 2020 Financial Results

Total revenue for the second quarter of 2020 was $0.1 million, compared to $0.5 million in the second quarter of 2019. Product sales represented approximately 95% of total revenue in the second quarter of 2020 compared to 91% of total revenue in the second quarter of 2019. Product sales both periods were generated through sales of the PoNS device pursuant to supply agreements with nineteen PoNS Authorized clinic locations in Canada. License and fee revenue represented 5% of sales in the second quarter of 2020, compared to 9% of sales in the second quarter of 2019.

Gross profit for the second quarter of 2020 was $0.1 million, compared to gross profit of $0.3 million in the second quarter of 2019. Operating expenses for the second quarter of 2020 decreased $2.3 million, or 38% year-over-year, to $3.8 million, compared to $6.1 million in the second quarter of 2019.

Operating loss for the second quarter of 2020 decreased $2.1 million, or 36% year-over-year, to $3.7 million, compared to $5.8 million in the second quarter of 2019.

Total other income for the second quarter of 2020 was $0.4 million, compared to $5.6 million in the second quarter of 2019.

Net loss for the second quarter of 2020 was $3.4 million, or $(0.08) per basic and diluted common share, compared to a net loss of $0.2 million, or $(0.01) per basic and diluted common share, in the second quarter of 2019. Weighted average shares used to compute basic and diluted net loss per common share were 40.6 million and 25.9 million for the second quarters of 2020 and 2019, respectively.

Six Months Ended June 30, 2020 Financial Results

Total revenue for the six months ended June 30, 2020 was $0.3 million, compared to $1.2 million in the prior year period. Product sales represented 94% of total revenue for the six months ended June 30, 2020, compared to 96% of total revenue in the prior year period. Product sales in both periods were generated through sales of the PoNS device pursuant to supply agreements with nineteen PoNS Authorized clinic locations in Canada. License and fee revenue represented 6% of total revenue for the six months ended June 30, 2020, compared to 4% of total revenue in the prior year period.

Gross profit for the six months June 30, 2020 was $0.2 million, compared to gross profit of $0.7 million in the prior year period. Operating expenses for the six months ended June 30, 2020 decreased $5.5 million, or 41% year-over-year, to $7.9 million, compared to $13.4 million in the prior year period.

Operating loss the six months ended June 30, 2020 decreased $4.9 million, or 39% year-over-year, to $7.7 million, compared to operating loss of $12.6 million in the prior year period.

Total other expense for the six months ended June 30, 2020 was $0.4 million, compared to $13.8 million of other income in the prior year period.

Net loss for the six months ended June 30, 2020 was $8.1 million, or $(0.22) per basic and diluted common share, compared to net income of $1.1 million, or $0.04 per basic and diluted common share, in the prior year period. Weighted average shares used to compute basic net income (loss) per share were 36.2 million and 25.9 million for the six months ended June 30, 2020 and 2019, respectively. Weighted average shares used to compute diluted net income (loss) per share were 36.2 million and 26.0 million for the six months ended June 30, 2020 and 2019, respectively.

Net cash provided by financing activities during the six months ended June 30, 2020 was $6.7 million, of which $4.8 million consisted of net proceeds from the issuance of 8,138,808 shares of the Companys common stock at an average price of $0.62 per share in connection with the Companys At The Market Agreement (ATM).

As of June 30, 2020, the Company had cash of $5.3 million, compared to $5.5 million at December 31, 2019.

Full Year 2020 Outlook

On May 7, 2020, the Company withdrew its previously announced full year 2020 outlook. The Company is currently unable to estimate the duration and impact of the COVID-19 pandemic on its financial and operating results for the full year 2020.

Conference Call

Management will host a conference call at 5:00 p.m. Eastern Time on August 12, 2020 to discuss the results of the quarter and business outlook. Those who would like to participate may dial 877-407-2988 (201-389-0923 for international callers) and provide access code 13705949. A live webcast of the call will also be provided on the Events section of the Company's investor relations website at:

https://heliusmedical.com/index.php/investor-relations/events/upcoming-events.

For those unable to participate, a replay of the call will be available for two weeks at 877-660-6853 (201-612-7415 for international callers); access code 13705949. The webcast will be archived on the Events section of the Companys investor relations website.

About Helius Medical Technologies, Inc.

Helius Medical Technologies is a neurotech company focused on neurological wellness. The Companys purpose is to develop, license and acquire unique and non-invasive platform technologies that amplify the brains ability to heal itself. The Companys first commercial product is the Portable Neuromodulation Stimulator (PoNS). For more information, visit www.heliusmedical.com.

About the PoNS Device and PoNS Treatment

The Portable Neuromodulation Stimulator (PoNS) is an authorized class II, non-implantable medical device authorized for sale in Canada. PoNS is intended as a short term treatment (14 weeks) of gait deficit due to mild and moderate symptoms from MS and is to be used in conjunction with physical therapy and is indicated 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. The PoNS is an investigational medical device in the United States, the European Union, and Australia, and is currently under review for clearance by the AUS Therapeutic Goods Administration. PoNS Treatment is currently not commercially available in the United States, the European Union or Australia. Cautionary Disclaimer Statement:

Certain statements in this news release are not based on historical facts and constitute forward-looking statements or forward-looking information within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and Canadian securities laws. All statements other than statements of historical fact included in this news release are forward-looking statements that involve risks and uncertainties. Forward-looking statements are often identified by terms such as believe, continue, look forward, will and similar expressions. Such forward-looking statements include, among others, statements regarding the COVID-19 pandemic, including its impact on the Company, the Companys future clinical and regulatory development plans for the PoNS, the success of the Companys planned study, business and commercialization initiatives and objectives, the potential receipt of regulatory clearance of the PoNS device in the United States and the Companys revenue guidance.

There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those expressed or implied by such statements. Important factors that could cause actual results to differ materially from the Companys expectations include the uncertainties associated with clinical trial enrollments and the results of the planned study, uncertainties associated with the clinical development process and FDA regulatory submission and approval process, including the Companys capital requirements to achieve its business objectives and other risks detailed from time to time in the filings made by the Company with securities regulators, and including the risks and uncertainties about the Companys business described in the Risk Factors sections of the Companys Annual Report on Form 10-K for the years ended December 31, 2019 and December 31, 2018, its Quarterly Report on Form 10-Q for the quarter ended June30, 2020 and its other filings with the United States Securities and Exchange Commission and the Canadian securities regulators, which can be obtained from either at www.sec.gov or www.sedar.com.

The reader is cautioned not to place undue reliance on any forward-looking statement. The forward-looking statements contained in this news release are made as of the date of this news release and the Company assumes no obligation to update any forward-looking statement or to update the reasons why actual results could differ from such statements except to the extent required by law.

The Toronto Stock Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of the content of this news release.

Helius Medical Technologies, Inc.Unaudited Consolidated Balance Sheets(Except for share data, amounts in thousands)

June30, December31, 2020 2019ASSETS Current assets Cash $ 5,264 $ 5,459 Accounts receivable, net 56 210 Other receivables 138 364 Inventory, net of reserve 570 598 Prepaid expenses 715 610 Total current assets 6,743 7,241 Property and equipment, net 478 712 Other assets Goodwill 710 1,242 Intangible assets, net 638 582 Operating lease right-of-use asset, net 117 552 Other assets 18 18 Total other assets 1,483 2,394 TOTAL ASSETS $ 8,704 $ 10,347 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable $ 456 $ 1,676 Accrued liabilities 1,084 1,519 Operating lease liability 154 172 Derivative financial instruments 1 5 Deferred revenue 332 430 Total current liabilities 2,027 3,802 Non-current liabilities Operating lease liability 62 465 Deferred revenue 219 245 TOTAL LIABILITIES 2,308 4,512 STOCKHOLDERS? EQUITY Preferred stock, $0.001 par value; 10,000,000shares authorized; no shares issued and ? ? outstanding as of June 30, 2020 and December31, 2019Class A common stock, $0.001 par value;150,000,000 shares authorized; 45,114,506 and30,718,554 shares issued and outstanding as of 45 31 June 30, 2020 and December 31, 2019,respectivelyAdditional paid-in capital 119,763 111,479 Accumulated other comprehensive loss (521 ) (902 )Accumulated deficit (112,891 ) (104,773 )TOTAL STOCKHOLDERS? EQUITY 6,396 5,835 TOTAL LIABILITIES AND STOCKHOLDERS? EQUITY $ 8,704 $ 10,347

Helius Medical Technologies, Inc.Unaudited Consolidated Statements of Operations and Comprehensive (Loss) Income (Amounts in thousands except share and per share data)

Three Months Ended Six Months Ended June30, June30, 2020 2019 2020 2019 Revenue: Product sales, $ 126 $ 469 $ 317 $ 1,146 netFee revenue ? 49 9 49 License 7 ? 13 ? revenueTotaloperating 133 518 339 1,195 revenueCost of sales: Cost of 64 212 165 448 product salesGross profit 69 306 174 747 Operating expenses:Research and 1,308 2,275 2,428 4,956 developmentSelling,general and 2,394 3,845 5,255 8,426 administrativeAmortization 89 ? 215 ? expenseTotaloperating 3,791 6,120 7,898 13,382 expensesOperating loss (3,722 ) (5,814 ) (7,724 ) (12,635 )Other income (expense):Other income 56 13 63 24 Change in fairvalue ofderivative (1 ) 5,548 3 13,837 financialinstrumentsForeignexchange gain 306 67 (460 ) (88 )(loss)Total otherincome 361 5,628 (394 ) 13,773 (expense)Net (loss) (3,361 ) (186 ) (8,118 ) 1,138 incomeOthercomprehensive (loss) income:Foreigncurrency (255 ) (124 ) 381 (236 )translationadjustmentsComprehensive $ (3,616 ) $ (310 ) $ (7,737 ) $ 902 (loss) incomeNet (loss)income per shareBasic $ (0.08 ) $ (0.01 ) $ (0.22 ) $ 0.04 Diluted $ (0.08 ) $ (0.01 ) $ (0.22 ) $ 0.04 Weightedaverage shares outstandingBasic 40,623,343 25,870,600 36,179,362 25,851,501 Diluted 40,623,343 25,870,600 36,179,362 25,953,654

Helius Medical Technologies, Inc.Unaudited Condensed Consolidated Statements of Cash Flows(Amounts in thousands)

Six Months Ended June30, 2020 2019 Cash flows from operating activities: Net (loss) income $ (8,118 ) $ 1,138 Adjustments to reconcile net (loss) income to net cash used in operating activities:Change in fair value of derivative financial (3 ) (13,837 )instrumentsStock-based compensation expense 1,571 1,776 Unrealized foreign exchange loss 433 153 Depreciation expense 67 47 Amortization expense 215 ? Provision for doubtful accounts 153 ? Intangible asset impairment 181 ? Loss from disposal of property and equipment 110 ? Gain from lease modification (56 ) ? Changes in operating assets and liabilities: Accounts receivable 1 (546 )Other receivables 226 (207 )Inventory 28 (510 )Prepaid expenses (105 ) 145 Other current assets ? 264 Operating lease liability 70 (7 )Accounts payable (1,288 ) 655 Accrued liabilities (381 ) (285 )Deferred revenue (83 ) ? Net cash used in operating activities (6,979 ) (11,214 )Cash flows from investing activities: Purchase of property and equipment (3 ) (204 )Proceeds from sale of property and equipment 61 ? Internally developed software (7 ) ? Net cash provided by (used in) investing activities 51 (204 )Cash flows from financing activities: Proceeds from the issuance of common stock and 7,233 ? accompanying warrantsShare issuance costs (506 ) (52 )Proceeds from the exercise of stock options and ? 215 warrantsProceeds from Paycheck Protection Program Loan 323 ? Repayment of Paycheck Protection Program Loan (323 ) ? Net cash provided by financing activities 6,727 163 Effect of foreign exchange rate changes on cash 6 (17 )Net decrease in cash (195 ) (11,272 )Cash at beginning of period 5,459 25,583 Cash at end of period $ 5,264 $ 14,311



Investor Relations Contact:

Westwicke Partners on behalf of Helius Medical Technologies, Inc.Mike Piccinino, CFAinvestorrelations@heliusmedical.com