Mr. Philippe Deschamps reports

HELIUS MEDICAL TECHNOLOGIES, INC. REPORTS THIRD QUARTER 2018 FINANCIAL RESULTS

Helius Medical Technologies Inc. has released financial results for the third quarter and nine months ended Sept. 30, 2018. Amounts are stated in U.S. dollars unless otherwise indicated.

Third quarter 2018 financial summary:

• Operating loss of $4.9-million, compared with operating loss of $6.0-million in third quarter 2017;
• Net loss of $4.5-million, compared with net loss of $12.9-million in third quarter 2017;
• Cash of $12.4-million as of Sept. 30, 2018, compared with $5.6-million as of Dec. 31, 2017.

Third quarter highlights:

• Effective July 9, 2018, the company appointed Jennifer Laux as chief commercial officer. Ms. Laux brings to Helius extensive experience in leading successful global commercialization strategies and new product launches.
• On Sept. 4, 2018, the company announced the submission of its request to the U.S. Food and Drug Administration (FDA) for de novo classification and 510(k) clearance of the portable neuromodulation stimulator (PoNS), an investigational medical device. The company is pursuing de novo classification and 510(k) clearance of the PoNS device for the treatment of balance deficit due to mild to moderate traumatic brain injury (TBI).
• On Sept. 19, 2018, the company announced that it has partnered with the Ohio State University Wexner Medical Center, a leading U.S. neurorehabilitation centre located in Columbus, Ohio, to establish its first clinical experience program for the PoNS treatment.

Highlights subsequent to quarter-end:

• On Oct. 2, 2018, the company announced it has entered into an agreement with HealthTech Connex Inc. to develop and manage neuroplasticity clinics in Canada.
• On Oct. 22, 2018, the company announced that its wholly owned subsidiary, NeuroHabilitation Corp., received authorization from Health Canada to market its PoNS device, a Class 2 medical device in Canada. The Health Canada medical device licence certifies that the PoNS device meets all Canadian safety, effectiveness and quality requirements. The company may now market its PoNS treatment as an adjunct to physical therapy for balance deficit in patients with mild to moderate TBI.
• On Oct. 24, 2018, the company announced that its wholly owned subsidiary, NeuroHabilitation, has partnered with Northwell Health's Feinstein Institute for Medical Research in Manhasset, N.Y. This partnership will enable the company to implement its second clinical experience program for its investigational PoNS treatment.

"During the third quarter, Helius made exciting progress on our regulatory strategy with the goal of bringing our innovative PoNS treatment to market for the treatment of balance deficit in patients with mild to moderate TBI," said Helius's chief executive officer, Philippe Deschamps. "Most importantly, we submitted our request for de novo classification and 510(k) clearance of our PoNS device to the FDA and submitted an application to Health Canada for a Class 2 medical device licence. We received our Health Canada Class 2 medical device licence in October, 2018, enabling us to market the PoNS device as an adjunct to physical therapy for balance deficit in patients with mild to moderate TBI."

Mr. Deschamps continued: "In tandem with our regulatory strategy, we are focused on key activities to prepare for the launch of our PoNS treatment, including the establishment of our commercial infrastructure in Canada and the pursuit of our preregulatory clearance activities in the [United States]. By executing on these key activities, we aim to bring our innovative PoNS treatment to market as efficiently and effectively as possible, improve the lives of patients and their loved ones, and address the large global unmet need for balance deficit due to TBI in addition to delivering long-term value to our shareholders."

Third quarter 2018 financial results

Operating expenses for the third quarter of 2018 decreased $1.1-million, or 18 per cent year over year, to $4.9-million, compared with $6.0-million in the third quarter of 2017. The year-over-year decrease in operating expenses in the third quarter was driven by a decrease of $1.5-million, or 39 per cent year over year, in research and development expenses, due to reduced clinical trial expenses and product development costs, offset partially by an increase of $400,000, or 19 per cent year over year, in general and administrative expenses, primarily due to higher wages and salaries, as well as increased consulting expenses relating to the company's commercial infrastructure buildout.

Operating loss for the third quarter of 2018 decreased $1.1-million, or 18 per cent year over year, to $4.9-million, compared with $6.0-million in the third quarter of 2017.

Total other income (expense) for the third quarter of 2018 increased $7.3-million year over year to an income of $400,000, compared with an expense of $7.0-million in the third quarter of 2017. The year-over-year increase in total other income (expense) was driven primarily by the change in fair value of derivative financial instruments, which was a gain of $400,000 for the third quarter of 2018, compared with a loss of $6.0-million in the third quarter of 2017. The change in fair value of the company's derivative financial instruments was primarily attributable to the change in the company's stock price, volatility and the number of derivative financial instruments being measured during the period, as the company reclassified non-employee stock options previously recorded as derivative financial instruments to equity.

The increase in total other income (expense) was also driven by the change in foreign exchange gain (loss), which resulted in a gain of $1,000 for the third quarter of 2018, compared with a loss of $1.0-million in the third quarter of 2017. The change in foreign exchange gain (loss) was primarily due to the amount of Canadian dollars held at the end of each reporting period, coupled with the change in the company's functional currency from the Canadian dollar to the U.S. dollar. The change in functional currency was accounted for prospectively from April 1, 2018, and financial statements prior to and including the period ended March 31, 2018, have not been restated for the change in functional currency.

Net loss for the third quarter of 2018 decreased $8.4-million, or 65 per cent year over year, to $4.5-million, or 19 cents per basic and diluted common share, compared with a net loss of $12.9-million, or 67 cents per basic and diluted common share, in the third quarter of 2017. Weighted-average shares used to compute basic net loss per share were 23.4 million and 19.2 million for the third quarters of 2018 and 2017, respectively. Weighted-average shares used to compute diluted net loss per share were 23.8 million and 19.2 million for the third quarters of 2018 and 2017, respectively.

Nine-month 2018 financial results

Operating expenses for the nine months ended Sept. 30, 2018, increased $4.4-million, or 26 per cent year over year, to $21.4-million, compared with $17.0-million in the nine months ended Sept. 30, 2017. The increase in operating expenses in the period was driven primarily by an increase of $7.8-million, or 133 per cent year over year, in general and administrative expenses. The increase in general and administrative expenses was largely due to higher stock-based compensation expense, which was primarily the result of the change in the company's functional currency, along with increased legal and other professional services expenses. The year-over-year increase in operating expenses was offset partially by a decrease of $3.3-million, or 30 per cent year over year, in research and development expenses, primarily due to reduced clinical trial expenses.

Operating loss for the nine months ended Sept. 30, 2018, increased $4.4-million, or 26 per cent year over year, to $21.4-million, compared with operating loss of $17.0-million in the prior-year period.

Total other expense for the nine months ended Sept. 30, 2018, decreased $5.2-million, or 71 per cent year over year, to $2.1-million, compared with $7.3-million in the prior-year period. The year-over-year decrease in total other expense was driven primarily by the change in fair value of derivative financial instruments, which was a loss of $3.4-million for the nine months ended Sept. 30, 2018, compared with a loss of $5.5-million in the prior-year period. The change in fair value of the company's derivative financial instruments was primarily attributable to the change in the company's stock price, volatility and the number of derivative financial instruments being measured during the period. The year-over-year decrease in total other expense was also driven by the change in foreign exchange gain (loss), which resulted in a gain of $1.2-million for the nine months ended Sept. 30, 2018, compared with a loss of $1.9-million in the prior-year period.

Net loss for the nine months ended Sept. 30, 2018, decreased approximately $800,000, or 3 per cent year over year, to $23.5-million, or $1.06 per basic and diluted common share, compared with net loss of $24.3-million, or $1.32 per basic and diluted common share, in the prior-year period. Weighted-average shares used to compute basic and diluted net loss per share were 22.2 million and 18.4 million for the nine months ended Sept. 30, 2018, and 2017, respectively.

As of Sept. 30, 2018, the company had cash of approximately $12.4-million, compared with $5.6-million at Dec. 31, 2017. The company had no debt outstanding at Sept. 30, 2018.

The increase in cash during the period was driven primarily by $21.7-million of cash provided by financing activities, which was composed of $17.1-million in net proceeds received in connection with the sale of common stock and accompanying warrants in a public offering in April, 2018, and $4.6-million in proceeds from the exercise of stock options and warrants. The increase in cash during the period was partially offset by net cash used in operating activities of $14.5-million and net cash used in investing activities of $400,000.

Conference call

Management will host a conference call at 4:30 p.m. Eastern Time on Nov. 8 to discuss the results of the quarter. Those who would like to participate may dial 866-393-4306 (734-385-2616 for international callers) and provide access code 6767726. A live webcast of the call will also be provided on the events section of the company's investor relations website.

For those unable to participate, a replay of the call will be available for two weeks at 855-859-2056 (404-537-3406 for international callers), access code 6767726. The webcast will be archived on the events section of the company's investor relations website.

About Helius Medical Technologies Inc.

Helius Medical Technologies is a neurotech company focused on neurological wellness. The company's purpose is to develop, license and acquire unique and non-invasive platform technologies that amplify the brain's ability to heal itself. The company's first product in development is the portable neuromodulation stimulator.

          CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS)
                      (amounts in thousands except per-share data) 
                                                        
                                               Three months ended       Nine months ended
                                                    Sept. 30,                Sept. 30,  
                                                 2018        2017        2018        2017
Operating expenses
Research and development                       $2,309      $3,798      $7,781     $11,121
General and administrative                      2,581       2,172      13,632       5,862
Total operating expenses                        4,890       5,970      21,413      16,983
Operating (loss)                               (4,890)     (5,970)    (21,413)    (16,983)
Other income (expense)
Other income                                        4           -          63           -
Change in fair value of derivative
financial instruments                             368      (5,960)     (3,356)     (5,452)
Foreign exchange gain (loss)                        1      (1,008)       1,198     (1,860)
Total other income (expense)                      373      (6,968)     (2,095)     (7,312)
Net (loss)                                     (4,517)    (12,938)    (23,508)    (24,295)
Other comprehensive (loss)
Foreign currency translation adjustments          (96)      1,266        (930)      1,916
Comprehensive (loss)                           (4,613)    (11,672)    (24,438)    (22,379)
Net (loss) per share
Basic                                           (0.19)      (0.67)      (1.06)      (1.32)
Diluted                                         (0.19)      (0.67)      (1.06)      (1.32)

We seek Safe Harbor.