Please standby. Good evening ladies and gentlemen, and welcome to the Fourth Quarter and Fiscal Year 2020 Earnings Conference Call for Helius Medical Technologies. At this time, all participants have been placed in a listen-only mode. Please note that this conference call is being recorded, and that the recording will be 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. These forward-looking statements involve inherent risks and uncertainties that could cause actual results to differ materially from those indicated, including among other things risks and uncertainties around the clinical development process and FDA regulatory submission and approval process and other risks identified in the Risk Factors section of our most recent annual report on Form 10-K and quarterly reports on Form 10-Q.

Thank you operator, and welcome everyone to Helius Medical's fourth quarter and full year 2020 earnings conference call. I'm joined on this call today by Joyce LaViscount, our Chief Financial Officer and Chief Operating Officer; and Mark Leno, our Vice President and General Manager of our Canadian operations. Let me provide you with a quick agenda of what we are going to focus on today as part of our continued strategy to reposition Helius to create intermediate and long-term shareholder value. I'll begin my remarks with a brief update on our US regulatory strategy and the recent progress we have made. Following this discussion, Mark will provide you with an update on our commercial activities in Canada. Joyce will then review our fourth quarter financial results, the recent progress we have made to secure additional capital, enhance our balance sheet condition, and share some thoughts on our expectations as we enter 2021. Following Joyce's remarks, I will share some closing thoughts on our near-term initiatives in 2021 and longer-term outlook before we open the call for questions. With that, let's get started with an update on our US regulatory strategy and progress. As we announced in March of 2020, our US regulatory strategy is focused on pursuing an indication in multiple sclerosis, or MS, as the pathway for obtaining the first US clearance for our PoNS device. Our target indication represents a large patient population with a high unmet medical need. As a reminder, in the United States, there are approximately one million patients estimated to be living with MS. Our aim is to provide MS patients with gait deficits a non-drug, non-implantable treatment that has the potential to significantly improve their walking, which may greatly impact their safety and quality of life. Despite the onset of the COVID-19 pandemic, we made strong progress throughout 2020, obtaining breakthrough device designation from the FDA for our MS indication in May and submitting our request to the FDA for de novo classification and clearance of the PoNS device on August 4. During the fourth quarter of 2020, we received a request from the FDA for additional information approximately 75 days into the review process for our de novo request, which we announced on October 19.

Thank you, Dane. For the fourth quarter we reported a total revenue of $191,000 compared to $152,000 in the fourth quarter of the prior year. Our revenue in both periods was driven by sales to neurotherapy clinics in Canada that have been authorized to provide our PoNS treatment. During the quarter, we continued to experience significant business disruption in Canada as a result of the COVID-19 pandemic and the protocols implemented to ensure patient health and safety, which impacted our sales performance.

Thanks, Mark. For the fourth quarter of 2020, our gross loss decreased by $146,000 or 94% year-over-year to $10,000 due to changes in the inventory reserves impacting the cost of goods sold and lower direct costs of manufacturing support personnel versus the prior year. Operating expenses for the fourth quarter of 2020 decreased by $2.5 million or 45% year-over-year to $3 million reflecting the continued benefits of the cost reduction initiatives that we implemented during the past year. Operating loss for the fourth quarter of 2020 was $3 million compared to $5.6 million for the prior year period. We reported a net loss for the fourth quarter of 2020 of $2.5 million or minus $1.77 per basic and diluted common share compared to a net loss of $5.3 million or minus $6.71 per basic and diluted common share for the same period last year. As a reminder, on December 31, 2020, we completed a 1-for-35 reverse split of our Class A common stock in order to regain compliance with the NASDAQ stock market's continued listing requirements. We received written notice from NASDAQ on January 19, 2021, which confirmed our compliance with all applicable listing standards. Turning to a discussion of our balance sheet condition and recent financing activities. As of December 31, 2020, we had $3.3 million of cash compared to $5.5 million as of December 31, 2019. We had no outstanding debt obligations in either period. Our average cash burn from operations during the fourth quarter of 2020 was approximately $700,000 per month compared to approximately $1.5 million per month in the fourth quarter of last year reflecting our continued efforts to control our expenses and allocate capital prudently. On October 26, 2020 we closed a private placement resulting in net proceeds of approximately $3.2 million, which was led by Dane and myself and included participation from existing and new shareholders. Subsequent to quarter end, we raised $1.3 million in net proceeds through the exercise of warrants in January and closed an underwritten public offering of common stock and warrants for net proceeds of approximately $9.6 million including a full 15% overallotment. On February 1, this was completed. We believe the proceeds raised from these transactions along with our existing cash will be sufficient to fund our operations into the first quarter of 2022. Importantly, this expectation does not include any potential incremental benefit to our cash position due to proceeds raised from the exercise of additional warrants during the remaining months of 2021.

Thank you, Joyce. In summary while 2021 was undoubtedly a challenging year, we are very impressed by the resourcefulness demonstrated by our team as well as their commitment to advancing our regulatory and commercial initiatives. With our de novo request currently under review by the FDA, an expanded network of 31 Canadian clinic locations, and an enhanced balance sheet to support our operations, we are pleased by the progress made this past year and excited about our long-term growth prospects. As we enter 2021 we remain focused on executing as efficiently as possible against our two near-term growth initiatives: obtaining US regulatory clearance and facilitating the commercial adoption of our PoNS treatment in Canada. In the United States, we will continue to work with the FDA as necessary to facilitate the review of our de novo request while proactively engaging with CMS to obtain clarity on the new MCIT rule and work towards obtaining coverage via this pathway with FDA clearance.

Thank you. And our first question will come from Jeffrey Cohen with Ladenburg Thalmann. Please state your question.

Hi, Dane, Mark, and Joyce. How are you?

Great, Jeff. How are you?

Fine. So, I just wanted to review a couple of your previous commentary points. So firstly, as far as the agency is concerned, so the August 4 date was halted on October 19-ish, and then you submitted a response back on the 11th of January. So that restarts the clock? And what does that look like as far as the anticipated 120 days in totality? What does that get you to sometime in April?

Yes, Jeff. Actually it's 150 days, just to correct what you said. It's 150 days. The first possible chance would be in April. But just being very conservative in setting expectations, we've always stated that we would expect a first half decision by the FDA.

Okay. And were there two points to that? You mentioned the de novo status. And then the second point was the clearance. So, is one contingent upon the other?

Jeff, can you just clarify that? I'm sorry, I…

You mentioned that you would expect to hear about the de novo status and the clearance status at some point in the first half. Was it one or the other or both?

It's both. Yes, it's a de novo classification and clearance that come together.

Correct. So, there wouldn't be any further questions regarding the classification. It's really an issue of the clearance?

Yes.

Okay. I got it. And then secondly, I guess more for Mark, just trying to get a better understanding of the centers there that it sounded like certainly way less than 50% were open due to regulations, but you now have 31 in totality training from seven. So, how many of those now are open, are enrolling, or patients are visiting? Could you give us an indication of how many might be open today? Is it five, 10?

Yeah. So I'm happy to clarify that. So in Ontario, we have approximately 17 clinics and out of those 17, the vast majority of them are in the Greater Toronto area. And so capacity-wise, we're seeing anywhere from a 20% to probably a 30% to 40% capacity across the country. And I think that the challenge continues to be that our biggest center of population if you think of Canada it's 37 million people roughly, 13.5 million live in Ontario and roughly 9 million live in the sort of broader Toronto area. So Toronto just this week came out of a very strict lockdown, stay-at-home type of order. So it's very restrictive here. In-person visits to our clinics are very challenging at the moment. I have to say it's very dynamic and unique and it's a headwind that we are fighting against every day.

Got it. So then the 31 trained, so 17 would be the subset out of the total trained of 31, meaning potentially there are 14 kind of in the queue once things may open up?

No, I was just giving you a snapshot of our biggest population center here in the Greater Toronto area. But we have, out of the 31, almost all of them are open to some small capacity, but again at that 15% to 30% range across the country based on a lot of factors, with provincial regulations being primarily the main driver of their ability to open. It's further impacted by, of course, the risk tolerance of patients that may be prospective candidates for PoNS treatment that then they want to wait until things have cleared up, particularly knowing that MS patients have a lot of other health issues that are exacerbated by potential COVID risk.

Right. So it sounds like if I were to hope or assume that COVID continues to decrease as far as its impact in Canada with vaccinations and cases at some point in the coming months or quarters, the company could be at 30-ish clinics open?

Yes. Again, maybe I'll clarify it. We have 31 clinics that are open, but they're all at varying rates of small capacity. And when you're in the most restrictive environment, that being Toronto, Vancouver, and Montreal, Toronto being the biggest, the level of governmental restrictive measures for COVID have the greatest impact because this is where our highest density of clinics is located. But all of the clinics are open to some degree, just very, very small percentage of throughput. Is that helpful?

Okay. That's really helpful. Lastly, Joyce, could you provide a quick overview of the current cash situation? If we add $9.6 million, $1.3 million, and $3.2 million along with the end of year figure, we arrive at about $15 million, given that you mentioned $3.3 million.

Yeah. Well, you have to take your burn rate out of there as well. So if you have $3.3 million, you’d have to take out roughly that $1.2 million a month from that number and then put the additions that you've spoken of and that would get you there.

That brings me to a range of approximately $13.5 million to $14 million, somewhere in that vicinity currently.

Reasonable. Yes.

Okay. That's reasonable to assume. Okay. Super. We're anticipating and looking forward to the agency having a response for you that puts a smile on our faces.

Agree. Thank you, Jeff.

Yep.

Thanks, Jeff.

Thank you. Our next question comes from Mary Perron. Please go ahead.

This might be unfair. You probably don't know the answer, but I've been using the PoNS. Obviously, I got trained in Canada, but I live in The States and I'm also a Medicare patient. So if and when it gets approved here in The States, do you have any idea if they would pay for the treatment even though I got it in Canada because I don't imagine clinics are going to be opening up here real soon, if I needed to switch to US treatment? Is that clear? I don't know if I asked that very clearly for you to understand.

Joyce, do you want to take that one regarding the MCIT?

We are currently collaborating with CMS to determine the timeline for establishing all necessary quoting and reimbursement processes for MCIT. We are formulating our strategy for the US market, and as mentioned, there will be a delay in implementing our commercial strategy, securing distribution licenses, and fostering partnerships with key neurorehabilitation centers. Regarding Medicare reimbursement, we will have more information in the future. Although I can't guarantee specifics, if you receive a prescription from a US physician, it will depend on the policies and practices in place to determine reimbursement eligibility.

Okay. Thank you.

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

Could you please amplify the insurance reimbursement situation in Canada? Is there any mandatory coverage the way we might have here for MS? And number two, absent that the private insurers are they willing to pay, or basically your revenue is all coming from just out-of-pocket at 100% from the patients?

Yes. Mark, do you want to answer that and update Anthony? Thanks.

Sure. I'll take the question. Thank you, Anthony. So essentially, we are currently working on a strategy on the TBI side. If you recall here in Canada, we have also been given clearance by Health Canada for traumatic brain injury. And so as a result, we feel that that's probably the best strategy for us to lead with in an effort to get reimbursement through the government side of healthcare here. And so we have a strategy, we're working on in an effort to move that forward. As it relates to the private insurers, we're also working diligently with a couple of our key clinics and some private insurance companies on sort of a pilot in order to demonstrate the efficacy and outcomes that we're seeing in the real world, but oftentimes they want to see it for themselves. And so we have some of those underway right now and I would simply say that things are moving in the way in which I would hope. So that's good news. But it's a long process because again due to COVID, this whole process has been heavily restricted. But as it relates to private insurance, that's the commentary there. But there is a strategy to also work at trying to find a way for us to use the TBI piece for getting government support for the product. And so for now we are seeing, once in a while, some insurers will cover in certain cases. And mostly though, however, in this current environment, we're seeing people having to pay out-of-pocket for the most part for the device. But again, if people have insurance through their employment for covering physical therapy, there are elements of that that can help offset some of the cost. And Canada does have a taxation – a federal income tax indication that you can apply for some additional medical expenses that are out-of-pocket that are also in some cases offset through your federal income tax.

You used the word strategy. Strategy is sort of like our strategy is to win the war or something. I mean, it doesn't imply any time, action or anything. So I mean you would say when we're going to market our product, our strategy will be to obtain reimbursements but there's no time attached to it. The strategy could take three years to put into effect or three months. You – now of course in COVID, things may take longer than expected. But how long does it take to – I mean in the US of course, it's different because it's basically private insurers, although of course we have Medicaid too. But it can take a very long time unless you have that special MS immediate payment. As you know it can take three years for a device to become insurable, in order to get reimbursement. So is that similar in Canada that time three years?

I would hesitate to put any time on it. I think in the spirit of your question what you may be asking is, are we actively working on this project or on the strategy? And the answer would be yes, at the rate-limiting step of COVID. But there is nothing on the Helius side that is impeding us from continuing to execute against what we know will be the best strategy for us to do this. But in the COVID environment, it is incredibly restrictive right now to get patient throughput for this.

Well I'm not – I understand the patients in the end. If you build it, they have to come. But how long does it typically take? Leave out COVID to obtain – you have a new device, a de novo device that is approved in Canada, which it was a year ago or two years ago now, how long does it take to convince the insurers, the government insurance should be applied? Certainly there must have been some experience maybe obviously not for Helius but other products. Generally, how long does it take to obtain insurance? In the US that number is three to four years. Is it the same in Canada more, less?

So Mark let me – Anthony, let me answer this. So in Canada, we're starting to see small amounts of reimbursement. It's small. And you're absolutely right, it takes anywhere from two to three years. If we look at the United States, it could be up to three years, like you said. The great thing is that we have a breakthrough designation. And with the new policy with CMS that jump starts our commercialization.

I'm restricting it to Canada, because obviously, it's smooth in the United States until you get approval and then it's 'instant' for at least CMS. The question is in Canada, you think it also would take two, three years. Now you've been in – you were approved in Canada about two years ago weren't you?

Yes, it was March of 2019, and it's taken 18 to 24 months to start getting reimbursement in Canada. It's been slow. It's been steady but it's very small.

Interesting. You mean Canada, that is the government or the provincial governments are giving you – are able to give reimbursement now or it's – there were some special cases. It seems strange. If you're willing to give reimbursement, it seems to me once patients want it then you're willing to give it if they qualify.

Yeah. I think just to clarify the reimbursement that we have seen has come through private insurance not the government insurance.

All right.

So to just circle back, Anthony, to your question around government, there is no, unfortunately, there is no sort of set timelines. When you have a predicate device that's already approved that's different than bringing a completely new device to any market as you can imagine, right? You're creating a new classification or category. And that's a challenge. But again, there's a plan in place that we're working through to do that.

How long would it take to implement that plan? What is your plan? It doesn't mean it will occur…

Yeah. Bottom-line is we're working as fast as possible with some pretty critical individuals in the medical space here in Canada at large academic centers that we believe will bear fruit. I can't tell you how long that's going to take, because we really have to work within the COVID environment in which we are unfortunately hampered by right now. But, everything was at one point not standard of care. And our efforts are trying to move that in that direction as fast as possible. I can't give you an exact date. But we are working fervently to try and find the fastest way for that to happen.

Well, you're working with some academics implies that, in one case, they're part of a committee that advises the government. And in another, it could be the academics now want to run a clinical trial and see what happens and have their own pilot. So they can advise the government. Is that the case, or is it the former case?

It's a mix actually. So we have some pilot programs working with two private insurance companies in the TBI space, here in Canada, that are large insurers. I'm not going to disclose who they are.

Yeah.

But that is…

I know who they are. Would this pilot be of use to the academics who are advising the government? Do they want their own separate trial?

They're probably a bit of both to be very candid with you. Private insurers have different mandates than the healthcare system as it relates to acute patients and things like that. Without going too deep into this, I will say it's a parallel path. You have to do both because not everyone will always fall within the public healthcare system, and the private paying side is probably more nimble. So we're doing both.

Okay. Thank you.

Thank you, Anthony. Next question?

Thank you. Our next question comes from Mark Palin with AALRR. Please state your question.

Yes, hi. This is Mark. Thank you for the information. Given that we've received the breakthrough device designation from the FDA, I understand that means enhanced communication with them. I'm just wondering if you've heard anything from the FDA since you submitted your response to their questions and if you can share any updates on your communications with them since then. Thank you.

Yeah. Joyce, do you want to take this one?

Yeah. So we have not had formal communications. Most would be described as informal back and forth clarifying questions or whatever. But nothing that we've heard can give any more clarity than what we have already disclosed through the prepared comments and what's in our filings.

Thank you.

Thank you.

Thank you. We are currently showing no additional participants in the queue. That does conclude our conference call for today. Thank you for your participation.