Form 10-Q - Quarterly report [Sections 13 or 15(d)]

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Table of Contents

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 June 30, 2024


☐	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 August 7, 2024, the registrant had 3,576,196 shares of Class A common stock, $0.001 par value per share, outstanding.

Table of Contents

HELIUS MEDICAL TECHNOLOGIES, INC.

INDEX


Part I.	Financial Information

Item 1.	Condensed Consolidated Financial Statements	3

	Unaudited Condensed Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023	3

	Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2024 and 2023	4

	Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2024 and 2023	5

	Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023	7

	Notes to Unaudited Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25

Item 4.	Controls and Procedures	25

Part II.	Other Information	25

Item 1.	Legal Proceedings	25

Item 1A.	Risk Factors	25

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26

Item 3.	Defaults Upon Senior Securities	27

Item 4.	Mine Safety Disclosures	27

Item 5.	Other Information	27

Item 6.	Exhibits	28

Signatures		29

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. Condensed Consolidated Financial Statements

Helius Medical Technologies, Inc.

Unaudited Condensed Consolidated Balance Sheets

(in thousands, except share data)


	June 30, 2024		December 31, 2023
ASSETS
Current assets
Cash and cash equivalents	$	6,387	$	5,182
Accounts receivable, net		121		117
Other receivables		538		520
Inventory, net		821		457
Prepaid expenses and other current assets		774		1,162
Total current assets		8,641		7,438
Property and equipment, net		165		178
Intangible assets, net		9		24
Operating lease right-of-use asset, net		31		52
Total assets	$	8,846	$	7,692
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	1,287	$	531
Accrued and other current liabilities		694		1,260
Current portion of operating lease liabilities		35		45
Current portion of deferred revenue		41		43
Total current liabilities		2,057		1,879
Operating lease liabilities, net of current portion		—		12
Deferred revenue, net of current portion		103		128
Derivative liability		347		3,323
Total liabilities		2,507		5,342
Commitments and contingencies (Note 9)
Stockholders' equity
Class A common stock, $0.001 par value; 150,000,000 shares authorized; 3,198,196 and 714,590 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively		3		1
Additional paid-in capital		170,666		162,979
Accumulated deficit		(164,085)		(159,957)
Accumulated other comprehensive loss		(245)		(673)
Total stockholders' equity		6,339		2,350
Total liabilities and stockholders' equity	$	8,846	$	7,692

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

Table of Contents

Helius Medical Technologies, Inc.

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share data)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023

Revenue
Product sales, net	$	171	$	244	$	295	$	350
Other revenue		11		12		22		17
Total revenue		182		256		317		367
Cost of revenue		118		184		241		306
Gross profit		64		72		76		61
Operating expenses
Selling, general and administrative expenses		2,457		2,569		5,090		5,443
Research and development expenses		870		684		1,658		1,570
Amortization expense		7		38		14		77
Total operating expenses		3,334		3,291		6,762		7,090
Loss from operations		(3,270)		(3,219)		(6,686)		(7,029)
Nonoperating income (expense)
Interest income (expense), net		(5)		89		(13)		189
Change in fair value of derivative liability		1,733		1,223		2,875		2,444
Foreign exchange gain (loss)		(141)		259		(429)		254
Other income, net		71		—		125		—
Nonoperating income, net		1,658		1,571		2,558		2,887
Loss before provision for income taxes		(1,612)		(1,648)		(4,128)		(4,142)
Provision for income taxes		—		—		—		—
Net loss		(1,612)		(1,648)		(4,128)		(4,142)
Other comprehensive income (loss)
Foreign currency translation adjustments		140		(267)		428		(262)
Comprehensive loss	$	(1,472)	$	(1,915)	$	(3,700)	$	(4,404)
Loss per share
Basic	$	(0.64)	$	(2.92)	$	(2.48)	$	(7.34)
Diluted	$	(0.64)	$	(2.92)	$	(2.48)	$	(7.34)
Weighted average number of common shares outstanding
Basic		2,518,071		564,423		1,667,699		564,279
Diluted		2,518,071		564,423		1,667,699		564,279

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

Table of Contents

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 April 1, 2024	887,847	$	1	$	164,843	$	(162,473)	$	(385)	$	1,986
Issuance of common stock in public offering	704,999		1		1,586		—		—		1,587
Issuance of warrants in public offering	—		—		4,829		—		—		4,829
Share issuance costs	—		—		(959)		—		—		(959)
Exercise of warrants	1,604,778		1		—		—		—		1
Settlement of restricted stock units	572		—		—		—		—		—
Stock-based compensation	—		—		367		—		—		367
Other comprehensive income	—		—		—		—		140		140
Net loss	—		—		—		(1,612)		—		(1,612)
Balance as of June 30, 2024	3,198,196	$	3	$	170,666	$	(164,085)	$	(245)	$	6,339


								Accumulated
				Additional				Other
	Class A Common Stock			Paid-In		Accumulated		Comprehensive
	Shares	Amount		Capital		Deficit		Loss		Total
Balance as of April 1, 2023	564,214	$	1	$	160,050	$	(153,601)	$	(383)	$	6,067
Settlement of restricted stock units	1,144		—		—		—		—		—
Stock-based compensation	—		—		420		—		—		420
Other comprehensive income	—		—		—		—		(267)		(267)
Net loss	—		—		—		(1,648)		—		(1,648)
Balance as of June 30, 2023	565,358	$	1	$	160,470	$	(155,249)	$	(650)	$	4,572

Table of Contents

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	853,200		1		2,960		—		—		2,961
Issuance of warrants in public offering	—		—		4,829		—		—		4,829
Share issuance costs	—		—		(1,132)		—		—		(1,132)
Exercise of warrants	1,628,178		1		263		—		—		264
Settlement of restricted stock units	2,228		—		—		—		—		—
Stock-based compensation	—		—		767		—		—		767
Other comprehensive loss	—		—		—		—		428		428
Net loss	—		—		—		(4,128)		—		(4,128)
Balance as of June 30, 2024	3,198,196	$	3	$	170,666	$	(164,085)	$	(245)	$	6,339


								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	1,264		—		—		—		—		—
Stock-based compensation	—		—		825		—		—		825
Other comprehensive income	—		—		—		—		(262)		(262)
Net loss	—		—		—		(4,142)		—		(4,142)
Balance as of June 30, 2023	565,358	$	1	$	160,470	$	(155,249)	$	(650)	$	4,572

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

Table of Contents

Helius Medical Technologies, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)


	Six Months Ended
	June 30,
	2024		2023

Cash flows from operating activities:
Net loss	$	(4,128)	$	(4,142)
Adjustments to reconcile net loss to net cash used in operating activities:
Change in fair value of derivative liability		(2,875)		(2,444)
Stock-based compensation expense		767		825
Foreign exchange loss (gain)		428		(254)
Depreciation expense		18		22
Amortization expense		14		77
Provision for (reversal of) inventory reserve		(15)		8
Non-cash operating lease expense		20		25
Changes in operating assets and liabilities:
Accounts receivable		(8)		(74)
Other receivables		(19)		230
Inventory		(349)		18
Prepaid expense and other current assets		255		298
Operating lease liabilities		(22)		(26)
Accounts payable		609		(53)
Accrued and other current liabilities		(566)		(426)
Deferred revenue		(21)		(14)
Net cash used in operating activities		(5,892)		(5,930)
Cash flows from investing activities:
Purchase of property and equipment		(5)		(20)
Net cash used in investing activities		(5)		(20)
Cash flows from financing activities:
Proceeds from issuance of common stock		2,961		—
Proceeds from issuance of warrants		4,829
Proceeds from exercise of warrants		163		—
Share issuance costs		(850)		—
Net cash provided by financing activities		7,103		—
Effect of currency exchange rate changes on cash and cash equivalents		(1)		—
Net decrease in cash and cash equivalents		1,205		(5,950)
Cash and cash equivalents at beginning of period		5,182		14,549
Cash and cash equivalents at end of period	$	6,387	$	8,599
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	$	—
Share issuance costs included in accounts payable	$	150	$	—

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

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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 June 30, 2024, the Company had cash, cash equivalents of $6.4 million. For the six months ended June 30, 2024, the Company had an operating loss of $6.7 million, and as of June 30, 2024, its accumulated deficit was $164.1 million. For the six months ended June 30, 2024, the Company had $0.3 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

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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.

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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 June 30, 2024 and December 31, 2023.

Inventory, net (in thousands)


	June 30,		December 31,
	2024		2023
Raw materials	$	323	$	351
Work-in-process		388		67
Finished goods		153		96
Inventory, gross		864		514
Inventory reserve		(43)		(57)
Inventory, net	$	821	$	457

During the six months ended June 30, 2024, $2 thousand of inventory was written off to the inventory reserve.

Prepaid expenses and other current assets (in thousands)


	June 30,		December 31,
	2024		2023
Prepaid expenses	$	454	$	689
Inventory related		313		333
Deferred offering costs		7		140
Total prepaid expenses and other current assets	$	774	$	1,162

Accrued and other current liabilities (in thousands)


	June 30,		December 31,
	2024		2023
Insurance payable	$	114	$	446
Employees benefits		427		509
Professional services		86		52
Franchise tax		20		168
Other		47		85
Total accrued and other current liabilities	$	694	$	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

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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 June 30, 2024 and December 31, 2023 is comprised of the remaining unamortized amount under the Exclusivity Agreement. 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 and six months ended June 30, 2024 and 2023 were $10 thousand and $20 thousand, $13 thousand and $27 thousand respectively.

Maturities of operating lease liabilities as of June 30, 2024 were as follows (in thousands):


2024 (remaining)	$	23
2025		12
Total lease payments		35
Less: imputed interest		—
Total lease liabilities	$	35

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 June 30, 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 June 30, 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.

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6. COMMON STOCK, PREFERRED STOCK AND WARRANTS

Public Offering

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 $5.5 million.

The 2024 Public Warrants have an exercise price of $2.25 per share and are exercisable upon issuance. 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.

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 June 30, 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 voted 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, are not 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 June 30, 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

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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 (“VWAP”) for the five stock trading days immediately following the Reverse Stock Split. On May 9, 2024, in connection with the 2024 Public Offering, the exercise price of the 2022 Warrants was again reset to $1.6163 per share based on the VWAP for the five stock trading days immediately following the announcement of the 2024 Public Offering.

The fair value of the 2022 Warrants as of June 30, 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:


	June 30,			December 31,
	2024			2023
Stock price	$	0.98		$	8.04
Warrant term (in years)		3.11			3.61
Expected volatility		87.00	%		84.10	%
Risk-free interest rate		4.51	%		3.96	%
Dividend rate		0.00	%		0.00	%

The fair value of the derivative liability associated with the 2022 Warrants as of June 30, 2024 and December 31, 2023 was $0.3 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 six months ended June 30, 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 June 30, 2024, are exercisable upon issuance and will expire five years following the date of issuance.

The Company has outstanding equity-classified warrants to purchase 6,399,466 shares of Common Stock at a weighted average exercise price of $3.34, with expiration dates ranging from March 2025 to May 2029. The weighted average exercise price includes 542,444 Pre-funded Warrants with a nominal exercise price of $0.001 outstanding as of June 30, 2024. The weighted average exercise price excluding the outstanding Pre-funded Warrants is $3.65. During the six months ended June 30, 2024, 1,604,778 equity-classified warrants were exercised.

7. STOCK-BASED COMPENSATION

The Company may issue stock-based compensation awards under the Helius Medical Technologies, Inc. 2022 Equity Incentive Plan (as amended, the “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. On May 30, 2024, the Board adopted a First Amendment (the “Amendment”) to the 2022 Plan. On June 27, 2024, at the annual meeting of stockholders, the stockholders of the Company approved the Amendment. Pursuant to the terms and conditions of the Amendment, the 2022 Plan was amended to increase the aggregate number of shares of Common Stock that may be issued under the 2022 Plan to 2,089,000 new shares with an automatic increase on January 1st of each year by an amount equal to 5% of the Fully Diluted Shares (as defined in the 2022 Plan) as of the last day of the preceding calendar year. As of June 30, 2024, the remaining shares available for grant were 1,846,187 under the 2022 Plan. On July 2, 2024, the Company approved an amendment to the Inducement Plan pursuant to which, the Inducement Plan was amended to increase the aggregate number of shares of Common Stock that may be issued under

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the Inducement Plan to 150,000 new shares. As of July 2, 2024 there were 147,290 shares of common stock available for issuance under the Inducement Plan.

During the six months ended June 30, 2024, the Company did not grant any stock options or restricted stock units out of the 2022 Plan or the Inducement Plan.

As of June 30, 2024, there were an aggregate of 245,523 stock options outstanding with a weighted average exercise price of $76.29 per share and no unvested restricted stock units outstanding.

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


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023
Cost of sales	$	5	$	5	$	9	$	9
Selling, general and administrative		298		339		628		659
Research and development		64		76		130		157
Total stock-based compensation expense	$	367	$	420	$	767	$	825

As of June 30, 2024, the total remaining unrecognized compensation expense related to nonvested stock options and restricted stock units was $1.7 million which will be amortized over the weighted-average remaining requisite service period of 0.8 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				Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023
Basic:
Net loss available to common stockholders — basic	$	(1,612)	$	(1,648)	$	(4,128)	$	(4,142)
Weighted average common shares outstanding — basic⁽¹⁾		2,518,071		564,423		1,667,699		564,279
Loss per share - basic	$	(0.64)	$	(2.92)	$	(2.48)	$	(7.34)

Diluted:
Net loss available to common stockholders — diluted ⁽²⁾	$	(1,612)	$	(1,648)	$	(4,128)	$	(4,142)
Weighted average common shares outstanding — diluted ⁽¹⁾		2,518,071		564,423		1,667,699		564,279
Loss per share — diluted	$	(0.64)	$	(2.92)	$	(2.48)	$	(7.34)

(1)

In May 2024 in connection with the 2024 Public Offering the Company issued and sold Pre-funded Warrants exercisable for an aggregate of 2,147,222 shares of Common Stock. The total price of the Pre-funded Warrants is $2.25 per share, $2.249 of which was pre-funded and paid to the Company upon issuance of the Pre-funded Warrants. The exercise price of the Pre-funded Warrants is $0.001 per share. The Pre-funded Warrants are immediately exercisable and do not expire. As of June 30, 2024, 1,604,778 Pre-funded Warrants were exercised and 542,444 Pre-funded Warrants remained outstanding. As the remaining shares underlying the Pre-funded Warrants are exercisable for nominal consideration of $0.001 per share, 542,444 in common shares underlying the unexercised Pre-funded Warrants were considered outstanding for purposes of the calculation of loss per share as of June 30, 2024. Refer to Note 6 for additional information about the 2024 Public Offering and the Pre-funded Warrants.

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(2)

For the six months ended June 30, 2024 and 2023, no adjustment was made to the numerator.

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		Six Months Ended
	June 30,		June 30,
	2024	2023	2024	2023
Stock options	245,523	245,407	245,523	245,407
Restricted stock units	—	5,540	—	5,540
Warrants ⁽¹⁾	6,460,712	731,853	6,460,712	731,853

(1)

Anti-dilutive warrants include the 2022 Warrants, Series A Warrants, Series B Warrants and other equity classified warrants that are out-of-the-money.

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 and six months ended June 30, 2024 and 2023, the Company recorded royalty expense from the sale of devices of approximately $7 thousand and $12 thousand, $10 thousand and $14 thousand, respectively, in its Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss.

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

Six Months Ended

June 30,

2024

2023

2024

2023

Product sales, net:

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