Good evening, ladies and gentlemen, and welcome to the First Quarter of Fiscal Year 2020 Earnings Conference Call for Helius Medical Technologies. At this time, all participants have been placed on a listen-only mode. Please note, that this conference call is being recorded and that the recording will be made available on the company's website for replay shortly. Before we begin, I would like to remind everyone that our remarks and responses to your questions today may contain forward-looking statements that are based on the current expectations of management, including statements regarding the impact of the COVID-19 pandemic on the company's operations, the success of the company's planned study, the future commercialization of the PoNS treatment, expected future clinical and regulatory timelines, the potential receipt of regulatory clearance of the PoNS device in the United States and projected financial results. These forward-looking statements involve inherent risks and uncertainties that could cause actual results to differ materially from those indicated, including those identified in the risk factors section of our most recent annual report on Form 10-K. Such factors may be updated from time to time in our filings with the SEC, which are available on our website. All statements made during this call are as of May 7, 2020. We undertake no obligation to publicly update or revise our forward-looking statements as a result of new information, future events or otherwise, except as required by law.

Thank you, Diego. I appreciate it. Welcome, everyone, to Helius Medical's First Quarter of 2020 Earnings Conference Call. I hope everyone is home and safe in this really crazy time. And certainly, from our perspective, we hope that everyone and your families and your communities are doing well. I'm joined on the call this evening by Joyce LaViscount, our Chief Financial Officer and Chief Operating Officer. Let me provide you with a quick agenda for today's call. I'll begin by discussing our regulatory process in the U.S. and Canada, followed by a review of our first quarter revenue results and the operational progress that we made during the quarter and in recent months. I'll then provide you with detailed updates on our business in light of the disruption caused by the COVID-19 pandemic. Joyce will discuss our first quarter financial results in detail and the recent progress we've made to secure additional capital and enhance our balance sheet conditions. I'll then provide a few closing thoughts before Joyce and I open it up for questions. Before I begin into the formal program, I'd like to share that the feedback we continue to receive from the authorized clinics treating patients in Canada continues to support our view that the real-world performance of our PoNS device and treatment is consistent with the performance that we observed in our clinical trials. This encourages and motivates the clinicians, and patients using PoNS, their loved ones, and certainly our employees. While not everyone responds upon treatment, it is extremely heartwarming and gratifying to be able to make a significant difference in the lives of the majority of patients that we treat. With that as a background, let's start with the review of our regulatory progress in the U.S. and Canada. In the U.S., we made an important strategic decision during the first quarter to prioritize an indication in multiple sclerosis, or MS, as our pathway to pursue our first de novo classification of the PoNS device. This decision was based on the quality of the data included in our MS submission to Health Canada. And to describe that a little bit more, we have two peer-reviewed clinical trials. One of the clinical trials demonstrated that the active group showed statistically greater improvements versus the control group in Dynamic Gait Index, or DGI, which is a measure to assess an individual's gait, balance, and risk of falls. The other study suggested that PoNS stimulation can enhance motor performance and working memory while also driving neuroplasticity.

Thanks, Phil. We reported total revenue of $207,000 for the first quarter of 2020 compared to $677,000 in the prior year period. Product sales represented approximately 92% of revenue in the first quarter of 2020 compared to 100% of total revenue in the first quarter of 2019. Product sales in both periods were generated through the sales of the PoNS device and mouthpieces to neuroplasticity clinics in Canada. As Phil discussed, product sales in the first quarter of 2020 were largely comprised of revenue from sales of clinical locations that were engaged and authorized to provide PoNS treatment prior to 2020. First quarter 2020 product sales were impacted by the COVID-19 pandemic, specifically, the temporary closure of clinic locations. As a reminder, product sales in the first quarter of 2019 benefited from strong initial demand from our first two clinic locations, as Helius initiated the first commercial shipments of its PoNS device in Canada during that period.

Thank you, Joyce. Look, we're extremely proud of our achievements in the past quarter, and we remain confident in the long-term opportunity in store for Helius Medical Technologies. Despite the ongoing challenges created by COVID-19, the progress we have made has better positioned us to successfully submit for U.S. regulatory clearance and continue to drive the potential of our PoNS technology. Before we open it up for questions, I'd like to close by thanking our employees for their exceptional efforts and dedication in the first quarter of 2020 despite the challenging circumstances as we navigate the global COVID-19 pandemic. And I'd also like to thank our customers, certainly our shareholders for their support, and those on the call this evening for your interest in Helius Medical Technologies. I'm very thankful that together, we continue to provide this innovative treatment to people who need it. Joyce and I are now really happy to take questions from the audience.

Our first question comes from Jeff Porter with Porter Capital.

I had been reading that a lot of the approved drugs for MS that are being taken by patients have immunosuppressive characteristics. Therefore, a lot of doctors are discouraging their patients from taking those drugs because they would be extremely vulnerable to COVID-19. Does that create any opportunity for us in our dealings with the FDA to move along our application in light of the fact that we offer a safe alternative?

So here's how I would respond, Jeff. As I mentioned earlier, the FDA has recognized multiple sclerosis as a high priority and a significant unmet medical need. Our noninvasive, non-implantable, nondrug approach aligns well with what patients are seeking. You're right that the FDA has provided some guidance regarding emergency use. We did discuss the possibility of emergency use for PoNS with the FDA, but it wasn't a viable option because they are primarily focused on the central nervous system space. However, given that there is a high unmet medical need and that we are submitting our application at a time when some patients with MS might struggle to start on immunosuppressant medications, we believe this positions us favorably for our application to the FDA today.

Okay, great. Second question is for Joyce. With regard to the Paycheck Protection Program, why was the decision made to return the funds to the government rather than keep the funds and then possibly have it just be a debt that needs to be repaid to the government?

Yes. So when we went through the process, Jeff, with the Paycheck Protection Program, we followed all the rules in terms of eligibility. Initially, there were some questions around the certifications that were required. And based on all the rules in the initial round of that program, we were more than qualified. We thought that we were basically the poster child for the program. As you know, we're a small company, with a limited number of employees. We've kept our employees on staff to continue to work forward on these important initiatives. But as we evaluated the guidance that was coming out and on the advice of our legal counsel, as the Small Business Association did not feel that publicly traded companies, regardless of their status, should be eligible for those loans, we felt it was in our best interest to avoid the potential disruption as well as the penalties, both civil penalties and having to pay back three times the amount if it was determined that you should not have been eligible for that money. So it was a risk analysis done. And we just felt like that was the best way to move forward, even though we had followed all the rules and made sure that our application was appropriate.

Our next question comes from Randy.

Before I ask my question, I believe it's important to provide some historical financial context. As someone with a financial background, I want to be informed before raising my queries. Firstly, I want to refer to the publicly available information that shows both you, Phil, and you, Joyce, received substantial salary increases effective March 31, 2019. Shortly afterward, the company faced a setback when its FDA application was denied, leading to a drastic decline in share value. Additionally, it appears that collectively, the officers and directors own a very small fraction of the company, under 10%. Meanwhile, I and other investors I've brought to Helius have invested millions at around a $10 share price. Since our investment, the share price on April 1, 2019, was $6.46, and it plummeted by 70% to $2.03 shortly after. From April 8 to May 7, it further decreased by another 78%, totaling a nearly 95% drop. To outline my concerns: initially, we had 25.8 million shares, and now over 38 million shares are in circulation. Each time you raise capital, we are experiencing a dilution of about 10% per month due to your current $1 million monthly burn rate. I struggle to see how you can maintain operations with these expenses, particularly as $600,000 of that is simply to operate as a commercial entity in Canada, and $120,000 goes toward D&O insurance. Management is also taking $75,000 monthly, yet you report only $200,000 in revenue across 14 clinics for the first quarter. Given that, you'll need to secure financing for at least a year, and if you continue to sell stock at this pace, you'll have to issue 30 million more shares. I find it hard to believe that can happen. Alternatively, I foresee a situation where someone might offer to take the company private, providing the management team with a 15% clawback and eliminating common shares. I feel a lack of reassurance from this call about how you plan to transition from the current state to a better one. With 30 million people unemployed recently, the high salaries taken by management leave me puzzled. If the device is indeed effective, the priority should be ensuring survival until an approval point is reached. I understand there are reimbursement issues in Canada, and the average revenue per clinic there for the first quarter is less than $15,000. I may be missing some information, and I apologize if that's the case, but I'm presenting the facts regarding your monthly expenses and the uncertain future. There's no revenue guidance because the path ahead is unclear. I also disagree with the notion that COVID-19 significantly impacts your business; the last weeks of March wouldn’t have substantially affected your quarterly results. I want clarity on what you and the Board intend to do to keep the company viable so that shareholders don’t face total losses on their investments.

I appreciate your comment. Let me start by saying that we believe the most important aspect for the company is obtaining U.S. clearance, and we've made significant progress in that area over the last three to six months. While our revenue in Canada is one aspect, the key was preparing to collect data from patients treated in Canada as if it were part of a clinical trial. This data will help us build a database for a potential submission to the U.S. FDA. The major opportunity for us now is that we have gathered real-world evidence from our clinics in Canada. This evidence is extremely valuable as it allows us to better respond to our previous denial on the TBI side and prepare a new submission, given that we already have two clinical trials completed. With the Canadian data, we are preparing to submit based on the FDA's guidelines concerning assurance of clinical efficacy and safety. We're progressing with the FDA submission, and it's gratifying to note that this process is separate from the impacts of COVID-19. We believe that this opportunity is the primary engine for generating value for our shareholders. We are working to minimize our necessary operating expenses while progressing with the FDA, and we aim to make our submission as soon as possible. If we are successful, it should result in value returning to our shareholders. Moreover, from an expense perspective, maintaining our medical device company requires certain infrastructure to uphold our clearance in the U.S. and Canada. We meticulously review our expenses each month to ensure efficiency, focusing on the U.S. MS submission as our number one priority. To support this, our three executives have agreed to take pay cuts ranging from 25% to 50%. Last year, there were 19 de novo submissions to the FDA; 14 were denied, and 5 were accepted, unfortunately placing us in the majority of denials. We are committed to using our current situation to reapply to the FDA, secure U.S. clearance, and restore shareholder value. That's the plan we've set in motion.

Can you comment on whether the intention is for the ATM to continue being the main source of funding for the company if you need another year's worth of capital? I understand you will be voting on a potential reverse split, which is necessary for maintaining your NASDAQ listing. Historically, reverse splits haven't been favorable for share prices. I'm trying to determine my next steps and what advice to give others. If the ATM is your only funding source and a reverse split is coming up at the Annual Shareholder Meeting, I would appreciate more information on other financing options that could help keep the company funded for the next 12 months. I believe in the device and think it could be remarkable; if we obtain MS clearance, there might be a return for all of us. However, with a burn rate of $1 million a month at $0.35, the share price tends to decline when raising capital. What is your plan? Is the ATM your only strategy right now, or are you considering other options? That's my follow-up question.

Sure. Look, Randy, we're always looking at every possible option to raise money to benefit the shareholders in the most efficient, possible way. The ATM is an efficient way to raise money. But fundamentally, it's around trying to reach a milestone as fast as we can to change the value proposition so that when we raise money, we can make it in a much less dilutive way. And so it's impossible for me to outline precisely what options are in front of us. But know that Joyce and I are looking at every possible option. But mostly, it's about reaching an important milestone with FDA and to get some indication from FDA that they're considering our application. And that, we hope, will bring some enthusiasm with people on this really robust path back to FDA.

Our next question comes from Anthony Lamport with Lambda Fund Management.

I understand that you expected to reach a significant milestone with the approval in Canada for MS, which is great. However, I've noticed that it didn't impact our market value at all. It seems that we may have too much confidence in ourselves. The device is impressive, but the market doesn’t share that sentiment. Hearing from the FDA that they are considering our application is not a milestone. Once they finally approve it, it could be another year before that happens. Additionally, as we observed in Canada, clinics did not rush to adopt our previous indication because it wasn't seen as urgent and they struggled with insurance issues. For the U.S. market, we need to ensure we can secure insurance approvals and that patients are willing to visit clinics. This will be a challenging process, and I'd appreciate your thoughts on other issues you considered. The challenge with market financing is that our market value is so low, which only exacerbates the situation, as was previously discussed.

I understand your question, Tony. Let me provide some context. We were actually anticipating a larger increase due to our Canadian operations, but here’s what transpired. The COVID announcements in the U.S. were made on March 16th, while in Canada, they came out about a week earlier. That dominated the news cycle. We received clearance for MS in Canada on March 18, just two days later. Unfortunately, the clinics we authorized focused on neurorehabilitation and had existing MS and stroke patients were shut down approximately 1.5 weeks later. At this point, we can’t determine the impact of this new indication on our clinics' performance. However, we know that there are 100,000 patients who feel a heightened sense of urgency because they understand that their condition may worsen next year. For traumatic brain injury patients, they might think about waiting for reimbursement, as they don’t feel they will improve significantly. The dynamics are different for MS patients. We believe that once COVID subsides and our clinics resume operations, there's potential for them to schedule patients during the downtime, and we expect to see a positive response. I want to manage expectations, though; it’s a matter of scheduling, and the physical therapy needs to occur, so I don’t expect a sudden influx of 1,000 patients the moment we reopen. The overall situation seems more promising. Unfortunately, at that time, the news cycle was extremely negative, which had a significant impact on micro-cap companies like ours. I believe this had the biggest effect, and none of our clinic expansions have benefited from the new indication yet.

What kind of treatment are people with MS, which is a very serious disease, receiving? Are they being treated anywhere in Canada at the moment? You mentioned that the clinics were going to shut down. Is it just our clinics that were using physical therapy that have been shut down?

Our understanding is that all 14 clinics we've been in close contact with have closed to the public. They remain an essential service, providing emergency care for patients such as those needing rehabilitation from car accidents or spinal cord injuries. However, they are not open to the general public. Among various neuro conditions, multiple sclerosis utilizes physical therapy services the most. Currently, many MS patients are staying home instead of visiting the clinics, often doing their exercises at home just like they would with our treatment. Once the economy reopens, they should be able to return to the clinics, complete their two-week initial training, and then continue their regular routines at home. It will be interesting to see how quickly MS patients, who need to be cautious, return to the clinics. This makes it challenging for us to predict how the business will recover amidst the uncertainty, and neither Joyce nor I feel we have enough insight to provide a clearer answer.

Yes, that's understandable. From what I know, those who undergo procedures in the U.S. typically go to rehabilitation hospitals for physical therapy, and this has not been halted in the United States. Is there a way to collaborate with clinics in Canada? These clinics want to provide treatment. Perhaps there's a method to send someone to a patient's home for instructions, or some way to establish this as an emergency procedure. Many things that were previously not possible in the U.S. are now being done. So, is there a way to initiate this with at least some patients? Demonstrating that you are helping people would be beneficial. It could help you gather more material for insurance companies if you were actually providing the service.

Yes, you are correct. We are working with these clinics to explore virtual training programs. Currently, in Canada, the stay-at-home orders are being strictly honored, which means employees are not coming into the clinics. Typically, it is the clinic director who handles the operations. Physical therapy in Canada is not part of the national health service, so all these clinics are private. In the U.S., hospital-based rehab clinics provide services for inpatients, and similarly, in Canada, those clinics also exist. However, they do not treat the outpatients we are discussing, who must go to private clinics. We partner with those private clinics, but they are currently not open. Today, we conducted a two-hour webinar with Canadian MS experts for all our clinics, including nine additional clinics considering joining us when business resumes. We provided a tutorial on important aspects of clinic operation and training system setup. We are doing everything we can under the circumstances to prepare for a swift return to operations when the economy reopens.

You had a Chinese investor at one point, and I know they have right and so on. Is there any way, since China seems to be reopening very aggressively, that you can get some work done in China?

Our Chinese partner remains an important ally and is a Board member. The pathway into China involves the FDA, as the Chinese FDA recognizes the FDA for medical devices. Therefore, our success with the FDA will coincide with that opportunity.

Then they wouldn't honor Canada's approval, is what you're saying?

It's complicated. I apologize for getting technical, but essentially, the approval has to be within the country where the company is located. If we wanted to pursue that, we would need to change our domicile completely. We have explored this thoroughly, working closely with China Medical Systems, a significant and reputable company in China with a market value of $3 billion. We investigated every possibility, but unfortunately, the most secure path remains through the FDA.

Okay, thank you.

You're welcome.

Our next question comes from Sunny Greenwell with Kobe Partners. Please state your question.

Good afternoon, Sonny.

Mr. Greenwell, your line is open. Once again, Mr. Greenwell, your line is open. Did you take yourself off mute? The question comes from Sunny Greenwell with Kobe Partners. Please state your question.

A couple of questions. When is the Canadian Prime Minister going to open up Canada? Has he talked about it?

Yes, Canada is progressing. As a Canadian myself, I have personal insight into this situation, and I still have a home there that I hope to visit again soon. Prime Minister Trudeau is expected to make an announcement regarding federal recommendations on the 15th. The country has been organized into red, yellow, and green zones, each with specific guidelines for reopening. Some provinces might meet the criteria for reopening based on current conditions. The 15th will provide more clarity on this. It will also be interesting to see how patients respond to reopening, especially since physical therapy clinics are very hands-on. In about a week, Canada will provide further updates.

All right. And then, about the MS indication for the de novo, what data are you going to use? And are you happy to get in front of the same FDA panel that was rather brutal for the company the last time through?

Yes. Interestingly, when we first established the company, we had the intention of focusing on multiple sclerosis. However, circumstances led us to address a need identified by the U.S. Army regarding traumatic brain injury. They were the ones who initially financed our clinical trial, which ultimately led us to specialize in TBI. I believe the data we produced for TBI surpassed our expectations. To give you some background, the inventors of the PoNS conducted a study comparing PoNS to a placebo back in 2010, published in a peer-reviewed journal in 2014. The FDA previously highlighted that the control group did not show significant differences; however, in our study, there was a notable statistical difference between the control and active groups. After we formed the company, one of my initial thoughts was to replicate this study. We collaborated with the Montreal Neurological Institute to conduct a study with a substantial discount, which allowed us to reproduce the MS study. While the endpoint was different, the outcomes were similar. These studies involved small sample sizes of 20 and 14 patients, which were insufficient for an FDA submission. We received our clearance in Canada and immediately began treating patients. By placing them in a validated database similar to a clinical trial, we could collect real-world evidence, which is now an accepted part of the FDA's considerations. We gathered data from between 39 and 50 patients, acknowledging that this number may change as patients finish their treatment. The consistency of improvement among these patients supports our submission with the two studies. Additionally, we have conducted 45,000 treatment sessions in Canada without any significant side effects, confirming the safety of our approach. While Canadian performance has not met expectations, we always intended to gather data there to support our upcoming U.S. submission for any relevant indications. Initially, we believed this would center on TBI, but our assessment has shifted toward MS as a stronger pathway, considering the high unmet medical need.

It's a stronger one? Okay.

We believe we can assemble a strong application based on the guidance provided to us and others, even though we do not have control over the FDA.

In front of the same panel that you did before?

So the panel changes frequently, but it is the same division. Therefore, it is likely that some of the same people will be involved. When our previous application was denied, it was removed, so this will essentially be a new application to the CDRH neuromodulation division. We suspect that some of the same individuals will be part of it, but we do not know that for sure yet.

Okay. So can you give me some time frames on TBI and MS? So you're only about 1.5 month behind on trials in TBI. So when can you maybe get something into the FDA on that? Will it be now next year? Or could it still be by the end of this year?

Yes. So the reason for our decision, Sunny, to go with MS is, all of the environment, as I've described it, the fact that we don't have to get new data, the fact that MS is a higher unmet medical need in the eyes of FDA that we can essentially start preparing the submission today and not have to gather new data in a new clinical trial is what makes the MS pathway much more efficient than having to go and do a clinical trial that would then be submitted to FDA. So the clinical trial would take us roughly a little less than a year to complete. And then we would have to submit to the same process. So I don't want people on the phone to think that this is a sort of a rebound because, ultimately, with the data we generated in Canada, and the fact that we have placebo-controlled, highly statistically significant data to submit to FDA, some of the issues that they raised in our TBI applications sort of go away.

And so that means that if you can submit this, what; did you say by the end of the year? How long does it take the FDA to review it again?

I mentioned the second half of the year. The only reason we're referencing the second half is due to the uncertainty surrounding COVID and the environment we may be facing. We are doing everything we can to expedite the process.

Okay. Thank you.

You're welcome.

Our next question comes from Carmelo Cardella with AGP.

Good afternoon, Carmelo.

Mr. Cardella, your line is open. Thank you. Sir, we are currently showing no additional participants in the queue. So that does conclude our conference call for today. Thank you all for your participation.

Thank you.

Thank you.