Welcome to the Helius Medical Technologies Q1 2022 Earnings Conference Call. My name is Richard, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. As a reminder, the conference is being recorded. I'll now turn the call over to Judy DiClemente. You may begin.

Thank you, operator. Welcome to the first quarter 2022 earnings conference call for Helius Medical Technologies. This is Judy DiClemente of In-Site Communications, Investor Relations for Helius. With me on today's call are Dane Andreeff, Helius Medical’s President and Chief Executive Officer; Jeff Mathiesen, Chief Financial Officer; Antonella Favit-Van Pelt, Chief Medical Officer; and Fred Fantazzia, Vice President-Sales and Marketing, North America. At this time, all participants have been placed in a listen-only mode. Please note that this call is being recorded and access to the webcast can be obtained through the Investors section of the Helius website at www.heliusmedical.com. 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 those identified in the risk factors section of our most recent annual report on Form 10-K and quarterly report on Form 10-Q. Such factors may be updated from time to time in our other filings with the SEC, which are available on our website. All statements made during this call are as of May 12, 2022. 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. I would now like to turn the call over to Dane Andreeff, President and Chief Executive Officer of Helius.

Thanks, Judy. Welcome everyone to Helius Medical’s first quarter 2022 earnings conference call. This was the first quarter that PoNS Therapy was commercially available in the United States and we are already seeing an enthusiastic response. As a reminder, PoNS stands for Portable Neuromodulation Stimulator, and it is currently indicated in the United States for short-term treatment of gait deficit due to mild-to-moderate symptoms of MS and is designed to be used in conjunction with a supervised therapeutic exercise program. Until now, treatment options have been limited but 14 weeks of PoNS Therapy has demonstrated significant gait improvement as compared to physical therapy alone. PoNS is both safe and effective and the launch is an important development, not only for the company but also for the over 1 million patients in the U.S. suffering from MS. Before we provide more color on the rollout, I wanted to introduce to you, Dr. Antonella Favit-Van Pelt, MD, PhD, a board certified neurologist and Helius Chief Medical Officer who will go into greater detail about PoNS Therapy. Antonella?

Thank you, Dane. I’m truly excited about the recent launch of PoNS. Gait impairment can greatly affect functions and quality of life, especially considering that, until now, known pharmacological interventions have had their limitations. With PoNS now available to more patients and healthcare providers in the United States, those suffering from gait deficit will have access to a non-implantable accessible drug-free therapeutic intervention. PoNS's mechanism of action employs neuromodulation, which is the modification of neuronal activity triggered by one or more targeted stimuli. Neuromodulation treatments can be life-changing, eliciting a response where there was previously a limited one or none, leading to neuroplasticity, which is the brain's ability to modify, change, and/or adapt in response to modulations of brain activity. In fact, neuroplasticity has the potential to induce clinically meaningful changes in brain areas, consolidating pathways that can offset functional deficits in patients with MS, this may lead to improved gait. Neuromodulation can be performed in an invasive or non-invasive manner but to elicit real change, it is critical that patients have continued access to the treatment with as few barriers to treatment as possible. PoNS induces trigeminal nerve neuromodulation via the tongue. This mechanism of treatment delivery allows for regular and consistent utilization, making the therapy unique and the first of its kind. PoNS Therapy is to date the only patented treatment combining trigeminal nerve stimulation with physical therapy to reduce symptoms of neurological disease. This combination of neurostimulation with physical rehabilitation intervention reaches and modulates specific brain targets, just as a pharmacological treatment, which means that PoNS is not just a technological aid; it’s an actual therapy. To better understand the extent to which a patient's adherence to a PoNS Therapy regimen can lead to a meaningful therapeutic outcome, we are partnering with some of the nation's premier academic medical centers through our Therapeutic Experience Program or TEP, a company-sponsored open-label observational trial. TEP offers us the chance to observe PoNS Therapy in a real-world setting and also enables the key opinion leaders in MS management to build their knowledge and advise the broader medical community. TEP was launched during the fourth quarter of 2021. The goal is to treat 40 to 50 patients across 10 to 12 planned Centers of Excellence during 2022, targeting the neurologist and neurorehabilitation centers identified as having the greatest potential to be early adopters of our technology. The program is progressing quickly. We plan to soon provide PoNS guidance to NYU Langone Health, and we're completing set activities to enroll several highly regarded Centers of Excellence, which we expect to announce soon. As doctors, we aim to treat our patients with the most appropriate and effective therapies and want to help them not just in the now, but equally important over the course of their disease. Currently, PoNS is the only portable and readily accessible neurostimulation therapy that is consistently used to consolidate neuroplastic changes that would improve gait function. The effectiveness of PoNS Therapy, combined with its accessibility, makes it a great option for MS patients suffering from gait impairment who could use it regularly during their physical rehabilitation journey.

Thank you, Antonella, for the valuable insight. When hearing about PoNS from a neurologist's perspective, it's clear why practitioners who treat patients suffering from gait impairment are optimistic about this treatment option. Before we move on, I wanted to quickly review PoNS pricing. The established U.S. list price for the PoNS device is $25,700, comprised of a one-time cost of $17,800 for the controller and $7,900 for the mouthpiece. We expect PoNS sales in the U.S. to remain on a cash-pay basis well into 2023 at a discounted price modestly below the anticipated CMS reimbursement rate, while we actively pursue third-party coverage. In addition, we also expect to provide one or more patient assistance programs to expand accessibility of PoNS Therapy to a broad range of patients and to accelerate adoption and enhance market penetration. We are pleased to hear the recent announcement by CMS of its new Transitional Coverage for Emerging Technologies or TCET, a proposed replacement for the former Medicare Coverage of Innovative Technology or MCIT, which was repealed last November. This proposed rule would establish the criteria for an expedited coverage pathway to provide Medicare beneficiaries with faster access to innovation and beneficial technologies. The rules are not finalized yet, but we believe PoNS would be included in this new reimbursement program due to our FDA granted breakthrough designations in MS and stroke. Additionally, we are hopeful that TCET will get passed later this year or in early 2023, and will keep you apprised of any developments. To date, we have already received 23 prescriptions, and two patients have purchased the devices on a cash-pay basis. The timing of filling prescriptions will be dependent upon whether the patient desires to first pursue insurance reimbursements before committing to cash pay, which we have found to be the case in the vast majority of prescriptions received so far. To give more detail on the rollout, I’d like to introduce Fred Fantazzia, Helius’ VP of Sales and Marketing, North America. Fred?

Thank you, Dane. We’ve indeed seen a great response since our launch in the U.S., where PoNS therapy is authorized for the treatment of gait deficit due to mild to moderate symptoms from multiple sclerosis. Gait dysfunction is an extremely common symptom among people suffering from MS, with over 70% reporting difficulties walking. Despite the pervasiveness of this symptom, there remains a huge unmet need in this area. As the only portable neurostimulation therapy that may lead to neuroplasticity, PoNS therapy offers patients hope and neurologists a new differentiated tool in their toolkit. During the rollout, we’ve been able to be very targeted using data to guide our approach to the marketplace. MS is a well-characterized disease with a fast-growing population cared for by a relatively small population of approximately 16,000 neurologists. An estimated 1 million people in the U.S. suffer from MS, with the majority concentrated in a few states. It’s a very defined group, and to further narrow our focus, we’ve used data to lead us to areas with strong early adoption, where we will deploy and enhance resources, including adding headcount and ramping up marketing initiatives. In hiring sales reps, we will continue to bring on top talent and look to hire individuals with deep experience in the neuromodulation space. As Antonella mentioned, PoNS is the only portable neurostimulation therapy that, when used consistently, may lead to consolidated neuroplastic change that will impact gait function. Mechanism of action is our differentiator, and PoNS is unlike any other therapy currently available. As a first step to ensure this messaging is incorporated across all assets, we are in the process of overhauling our landing page in the U.S. to include, among other things, specific content on the mechanism of action and information on clinical data. Because MS patients are, in general, a vocal and active group with strong advocacy online, we’ve expanded our social media and digital presence with targeted ads starting this quarter. We are currently active on Facebook and LinkedIn. The ponstherapy.com website is another important tool for engaging our target population. We want to provide tools for a positive user experience for patients, therapists, and physicians alike. Through ponstherapy.com, we can offer valuable content for all stakeholders, such as information on how to obtain the PoNS device and a streamlined on-demand training platform for physical therapists. To further spread our message, we plan to attend several in-person industry conferences this year, including CMSE in June and ACRM in November. At CMSE, we plan to present some real-world data. Overall, we are very pleased with the progress of the rollout and we look forward to updating you on our progress. Thanks for letting me speak with you today. And now I’ll hand it back over to Dane.

Thanks, Fred. I appreciate all you and your team have done to ensure PoNS has a successful launch. Before we move on to financial results, let’s touch briefly on our commercial activities outside of the United States. Since 2019, PoNS has been authorized for sale in Canada for the treatment of gait deficit due to mild and moderate symptoms from MS as well as for chronic balance deficit due to mild to moderate traumatic brain injury. We now have 41 authorized PoNS clinics in Canada, up from 37 at the end of 2021, a more than 10% increase. From a trial standpoint, we are continuing our clinical experience program with the Toronto Rehabilitation Institute, which is part of the University Health Network and hope to publish results in late 2022. We also plan to publish real-world evidence we’ve seen from our Canadian commercial activities. With that, let me turn the call over to Jeff to discuss our first quarter financial results in detail.

Thanks, Dane. It is a pleasure to be with you today. Total revenue was $190,000 for the first quarter of 2022, slightly above guidance provided in our year-end call. This compared to revenue of $84,000 in the first quarter of last year for an increase of 126%. For the first quarter of 2022, our gross profit was $66,000 compared to $69,000 in the prior year, reflecting increased fixed costs in the current year period in preparation of our anticipated revenue growth. Operating expenses for the first quarter of 2022 increased to $4.6 million compared to $3.6 million in the first quarter of 2021, an increase of $1 million. This planned increase was primarily due to increased compensation expenses related to personnel additions in late 2021 and the first quarter of 2022 to support the U.S. commercial launch. Operating loss for the first quarter of 2022 was $4.6 million compared to a loss of $3.5 million for the prior year period. We reported a net loss for the first quarter of 2022 of $4.3 million or a loss of $1.15 per basic and diluted common share compared to a net loss of $3.4 million or a loss of $1.65 per basic and diluted common share for the same period last year. Our cash burn from operations for the first quarter of 2022 was $4.7 million compared to $2.9 million for the first quarter of 2021. The increase year-over-year resulted primarily from the increased operating expenses previously discussed as well as the amount and timing of annual bonus and franchise tax payments in 2022, which accounted for just under $1 million of this increase and will not be recurring in the remaining quarters of 2022. As of March 31, 2022, we had $6.3 million of cash and no debt. In addition, we had approximately $14.4 million available under our equity line of credit with Lincoln Park Capital subject to the terms and conditions therein, ensuring a source of equity capital if and as needed, which could extend our cash runway. Turning now to our outlook. We currently expect second quarter revenue to be modestly above the first quarter levels, factoring in the potential delays for some portion of our U.S. patients to pursue insurance coverage prior to filling their prescriptions. As we continue to build momentum and expand our sales coverage, we expect future quarterly revenue to continue increasing sequentially quarter-over-quarter throughout the year and through 2023, as the U.S. commercialization of PoNS develops and third-party reimbursement is established. Based upon our current pricing structure, projected prescription rates, and the anticipated reimbursement timeline in the U.S., we believe we can achieve positive quarterly cash flow from operations by the fourth quarter of 2023. One final consideration, referring to the data analysis Fred discussed earlier, it was determined that on average, approximately 128,000 patients treated for MS annually in the U.S. would immediately qualify for PoNS treatment. This translates into a multi-billion dollar market opportunity in MS alone.

Thank you. We will now begin the question-and-answer session. And our first question online comes from Mr. Jeffrey Cohen from Ladenburg Thalmann. Please go ahead.

Hi, Dane, Jeff, Antonella and Fred. How are you?

Great. Great, Jeff. Thanks for joining us.

So Jeff, could you repeat the latter part of the comment you just made referring to qualifying?

I’m sorry, referring to qualifying, as far as 128,000 patients treated in MS annually. Yes, that was based upon analysis of DRG codes for treated patients. And there’s about I think a handful of DRG codes that would indicate qualification for PoNS treatment.

Perfect. Got it. Can you talk about the progress out there on the payer front and discussions that you’re having in addition to, or separately from this CMS-3421?

Yes. Hi Jeff, it’s Dane. I’ll start this question – this answer, and Fred, you might want to join in. We’re going down the normal path of helping our patients with their reimbursement claims at the moment. And then second on the TCET, which is replacing the MCIT, which was repealed back in November. This is pretty much the same program with different initials, different letters. So this is pretty exciting that they’ve revived this, the CMS and body administration, since we have two breakthrough designations both in MS and stroke.

Okay. That’s super helpful. Thanks. And could you talk about any backlog and also perhaps Fred, if you could talk about awareness out there and commercial efforts with your team and what type of reception and what type of audience you’re in communication with?

Fred, are you off mute?

Yes. I’m off mute. I didn’t know if you wanted to go first or do you want me to go?

Why don’t you start?

Okay. So nice to meet you. So as far as the audience is concerned, basically our three key stakeholders are obviously physicians, primarily neurologists, especially early on. They’re seeing the bulk of the patients that would be most appropriate for the diagnosis, our physical therapists, and obviously the patients themselves. So the engagement so far has been very meaningful. Folks are aware of the therapy. Obviously, we are just kind of working through the required steps with our physical therapists for them to better understand how the therapy is applied, and what type of training platforms are available to them for a neurologist. Neurologists are very familiar with the neuromodulation and specifically mechanism of action talk tracks from some of the other options that they have for different disease states, be it pain or epilepsy and things of that nature. So our mechanism of action seems to resonate, and our mechanism of action message seems to resonate with those key stakeholders. So I would say those are the primary. And then obviously patients, they are clearly an active group. They advocate for themselves. They try to be as well informed as possible.

Okay, got it. And then lastly, could you talk about the experience of Canada now, are the clinics widely open, the 41 you referenced, and how might you anticipate that contributes to revenue over the coming year or two?

Fred, I'll start this one. So, yes, so right now Canada is open. COVID definitely was a big factor in trying to get patients to the clinic to start treatment. If you remember there was only a 50% capacity limitation at the clinics; they're now back to 100. So what's happening with the difference now is that these clinics, these neuro PT clinics have to rehire or hire new physical therapists to get back to capacity. So what we're hearing from those clinics slow, but sure that some of them are actually doing that at the moment. So we're hopeful that not only will we have new patients coming in for their 14th-week treatment, but also we're experiencing still a consistent flow of second and third treatments, especially in MS.

Okay, got it. And one last question from our standpoint on the manufacturing side and assembly side and inventory, how do things stand there and have you had any issues?

Yes. So this is Dane again. We were fortunate to have all our components in stock for two years. The issue that we ran into, Jeff, like most folks, were labor issues at our OEM. Not only a function of COVID but also the environment in general, that they were short on labor, which affected building our product on a timely basis. But the issue that we don't have, we have enough inventory to fill prescriptions not only in the United States but also the needs in Canada for our clinics and our patients.

Okay. Got it. One more please. Any activity outside North America thus far?

So far, we have our TGA clearance in Australia. Australia is a smaller country than Canada. It has only 26 million people but actually presents a bigger opportunity. Since we received authorization in the broadest scope, which is balance and gait deficit with no indication attached. This basically means PoNS Therapy could be used for treatment beyond MS, traumatic brain injury, and also be used for stroke, cerebral palsy, and Parkinson's. Therefore, it's definitely a larger market for us in Canada. It's early for us. We're working to evaluate our best commercial pathway there with the goal of generating cash flow from the onset.

Okay, perfect. But those are for us. Thanks for taking the questions.

Yes, Jeff, just before you head out, getting back to your first question, our presentation on our website on Page 18 of it, it shows the DRG codes that were used to come up with the number that I talked about. And also Fred mentioned concentration of top 10 states, which are shown on that slide as well. So that'll give you a better sense as to how that number was developed and where we're focused.

Okay, perfect. Thanks, Jeff.

Okay. And we have no further questions at this time. I will now turn the call over to Dane Andreeff for closing remarks.

Well, thank you everyone. And just one thing, we're available for calls and Zoom calls, please contact Investor Relations, Lisa Wilson. But we continue to be pleased with the rollout of PoNS, as well as our progress with TEP, and look forward to bringing this important therapy to more patients over the coming quarters. We are at the very beginning of a very exciting journey for all of us. And we thank you for your time and interest in Helius Medical Technologies. Thank you.

And thank you, ladies and gentlemen, this concludes today's conference. Thank you for participating. You may now disconnect.