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| Item | Description | Page |
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| | | PART I | | 6 |
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| ITEM 1. | | BUSINESS | | 6 |
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| ITEM 1A. | | RISK FACTORS | | 33 |
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| ITEM 1B. | | UNRESOLVED STAFF COMMENTS | | 52 |
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| ITEM 1C. | | CYBERSECURITY | | 52 |
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| ITEM 2. | | PROPERTIES | | 53 |
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| ITEM 3. | | LEGAL PROCEEDINGS | | 53 |
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| ITEM 4. | | MINE SAFETY DISCLOSURES | | 53 |
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| | | PART II | | 54 |
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| ITEM 5. | | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES | | 54 |
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| ITEM 6. | | [RESERVED] | | 54 |
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| ITEM 7. | | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | | 55 |
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| ITEM 7A. | | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | | 63 |
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| ITEM 8. | | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA | | 63 |
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| ITEM 9. | | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE | | 63 |
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| ITEM 9A. | | CONTROLS AND PROCEDURES | | 64 |
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| ITEM 9B. | | OTHER INFORMATION | | 64 |
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| ITEM 9C. | | DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS | | 64 |
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| | | PART III | | 65 |
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| ITEM 10. | | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE | | 65 |
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| ITEM 11. | | EXECUTIVE COMPENSATION | | 71 |
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| ITEM 12. | | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS | | 80 |
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| ITEM 13. | | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE | | 83 |
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| ITEM 14. | | PRINCIPAL ACCOUNTING FEES AND SERVICES | | 84 |
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| | | PART IV | | 86 |
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| ITEM 15. | | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES | | 86 |
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| SIGNATURES | | 84 | |
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In this Annual Report on Form 10-K, (“Form 10-K”) unless otherwise specified, references to “we,” “us,” “our,” “Helius” or “the Company” mean Helius Medical Technologies, Inc. and its wholly owned subsidiaries, Helius Medical, Inc, (“HMI”), Helius Medical Technologies (Canada), Inc., (“HMC”), Helius NeuroRehab, Inc., and Helius Canada Acquisition Ltd., unless the context otherwise requires. Our financial statements are prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”).
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K includes certain statements that may constitute “forward-looking statements.” All statements contained in this Form 10-K, other than statements of historical facts, that address events or developments that the Company expects to occur, are forward-looking statements. These statements are based on management’s expectations at the time the statements are made and are subject to risks, uncertainty, and changes in circumstances, which may cause actual results, performance, financial condition or achievements to differ materially from anticipated results, performance, financial condition or achievements. All statements contained herein that are not clearly historical in nature are forward-looking and the words “anticipate,” “believe,” “calls for,” “could” “depends,” “estimate,” “expect,” “extrapolate,” “foresee,” “goal,” “intend,” “likely,” “might,” “plan,” “project,” “propose,” “potential,” “target,” “think,” and similar expressions, or that events or conditions “may,” “should occur” “will,” “would,” or any similar expressions are generally intended to identify forward-looking statements.
The forward-looking statements in this Form 10-K include but are not limited to statements relating to: the Company’s future growth and operational progress, including manufacturing activities for the PoNS device, receipt of prescriptions and progress of commercialization of the PoNS device in the U.S., our ability to receive reimbursement coverage under Medicare, Medicaid or under other insurance plans, clinical development plans, product development activities, plans for U.S. Food and Drug Administration, or FDA, filings and their subsequent approvals, other foreign or domestic regulatory filings, the safety and effectiveness of our product, our market awareness, our ability to compete effectively, the ability and limitation of our manufacturing sources, our distribution network, the adequacy of our intellectual property protection, our future patent approvals, our future expenses and cash flow, our ability to become profitable, our future financing arrangements, our accountants’ future perspective including any going concerns, any future stock price, and our ability to build commercial infrastructure.
Such forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by Helius, are inherently subject to significant business, economic, competitive political and social uncertainties and contingencies. The factors and assumptions used by management of the Company to develop such forward-looking statements include, but are not limited to, uncertainties associated with the Company’s capital requirements to achieve its business objectives, availability of funds, the ability to find additional sources of funding, manufacturing, labor shortage and supply chain risks, including risks related to manufacturing delays, the Company’s ability to obtain national Medicare insurance coverage and to obtain a reimbursement code, the Company’s ability to continue to build internal commercial infrastructure, secure state distribution licenses, market awareness of the PoNS device, future clinical trials and the clinical development process, the product development process and FDA regulatory submission review and approval process, other development activities, ongoing government regulation and other factors included in the section entitled “Risk Factors.”
Although we believe the expectations expressed in such forward-looking statements are based on reasonable assumptions at the time they were made, they are subject to risks and uncertainties, known and unknown, which could cause actual results and developments to differ materially from those expressed or implied in such statements. Forward-looking statements are not guarantees of future performance and actual results may differ significantly from such forward-looking statements.
You should refer to the “Risk Factors” section of this Form 10-K for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this Form 10-K will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all.
These forward-looking statements speak only as of the date of this Form 10-K. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future. You should, however, review the factors and risks and other information we describe in the reports we will file from time to time with the Securities and Exchange Commission (the “SEC”) after the date of this Form 10-K.
SUMMARY RISK FACTORS
Our business is subject to a number of risks, as fully described in “Item 1A. Risk Factors” in this Annual Report. The principal factors and uncertainties include, among others:
| ● | We have a history of losses and may not achieve or sustain profitability in the future; |
| ● | Global macroeconomic conditions remain volatile and uncertain due in part to geopolitical conflicts, banking and financial markets disruptions, supply chain disruptions, labor shortages, increased inflation and high interest rates, and any adverse impacts of such conditions could significantly harm our business or negatively affect our ability to obtain financing; |
| ● | We will require additional financing to carry out our plan of operations, and failure to obtain such financing may cause our business to fail; |
| ● | We currently only have one product, the PoNS device, which is authorized for commercial distribution in Canada, Australia, and in the U.S. for treatment of MS, and we have not obtained authorization and/or certification to distribute the PoNS device commercially in Europe or in the U.S. for other indications and may never obtain such authorizations and/or certifications; |
| ● | We may encounter substantial delays in planned clinical trials, and planned clinical trials may fail to demonstrate the safety and efficacy of the PoNS device to the satisfaction of regulatory authorities; |
| ● | Generation of revenue related to the PoNS technology is dependent on the PoNS Therapy® being prescribed by physicians in the U.S. and our ability to train physical therapists in the supervision of the use of the PoNS Therapy; |
| ● | Market awareness of the PoNS device is limited, and the neuromodulation market is new and uncertain; |
| ● | We are dependent on third-party scientists and research institutions, in part, for research and development and on third parties for the manufacture and distribution of our product; |
| ● | Third parties may gain access to our technology if our intellectual property protection is insufficient; |
| ● | We may be subject to various litigation claims and legal proceedings, including intellectual property litigation, which may adversely affect our business; |
| ● | Commercialization of our product outside of Canada, Australia, and the U.S. for indications other than MS is dependent on obtaining market authorization and/or certification from the FDA and foreign regulatory authorities, which will require significant time, research, development, and clinical study expenditures and ultimately may not be successful; |
| ● | Failure to secure contracts with workers’ compensation and third-party administrators or rehabilitation clinics could have a negative impact on our sales and would have a material adverse effect on our business, financial condition and operating results; |
| ● | Failure to obtain a Healthcare Common Procedure Coding System code and benefit category determination so that the PoNS device may be more easily covered by Medicare could have a negative impact on our intended sales and would have a material adverse effect on our business, financial condition and operating results; |
| ● | If we fail to comply with healthcare laws, we could face substantial penalties and financial exposure; |
| ● | We face ongoing government scrutiny and regulation in connection with the development of product candidates and following marketing authorization and/or certification; |
| ● | After commercialization, a product recall or the discovery of serious safety issues with our products could have a significant adverse impact on us; |
| ● | Our controls and security measures may not be successful in avoiding cybersecurity incidents; and |
| ● | We are reliant on third-party, single-sourced contract manufacturing, exposing us to risks that could delay our sales or result in higher costs or lost product revenues including additional related risks resulting from the transition of our manufacturer. |
INDUSTRY AND MARKET DATA
In this Form 10-K, we reference information, statistics and estimates regarding the medical devices and healthcare industries. We have obtained this information from various third-party sources, including industry and general publications, reports by market research firms and other sources. This information involves a number of assumptions and limitations, and we have not independently verified the accuracy or completeness of this information. Some data and other information are also based on the good faith estimates of management, which are derived from our research, review of internal surveys, general information discussed in the industry, and third-party sources. We believe that these external sources and estimates are reliable but have not independently verified them. The industries in which we operate are subject to a high degree of uncertainty, change, and risk due to a variety of factors, including those described in “Item 1A. Risk Factors.” These and other factors could cause results to differ materially from those expressed in this Form 10-K and other publications.
