Business context and reporting period
The supplied filing is Helius Medical Technologies, Inc.’s unaudited Form 10-Q for the quarter and six months ended June 30, 2023, filed August 10, 2023. It does not identify Solana Co. as the registrant; investors should verify the company and filing identity. Helius develops and commercializes the PoNS neurostimulation device and therapy. U.S. commercial sales began in April 2022; the product is also sold in Canada.
Financial performance and position
Amounts below are in U.S. dollars; financial statement amounts are in thousands except per-share data.
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $256 | $119 | $367 | $309 |
| Gross profit | $72 | $31 | $61 | $97 |
| Gross margin | 28.1% | 26.1% | 16.6% | 31.4% |
| Operating loss | $(3,219) | $(3,430) | $(7,029) | $(7,994) |
| Net loss | $(1,648) | $(3,810) | $(4,142) | $(8,156) |
| Loss per share | $(0.06) | $(0.97) | $(0.15) | $(2.11) |
- Q2 U.S. product sales were $175,000 and Canadian sales $69,000. Six-month sales were $250,000 in the U.S. and $100,000 in Canada.
- Six-month operating cash outflow was $5.93 million, compared with $8.35 million a year earlier. Cash declined by $5.95 million to $8.60 million from year-end 2022.
- At June 30, cash was $8.60 million, working capital $8.74 million, and total liabilities $6.18 million. The balance sheet reports a $4.47 million derivative liability tied to public warrants; no conventional borrowings are listed in the supplied balance sheet.
- Six-month expenses included $7.09 million in operating expenses, including $5.44 million SG&A and $1.57 million R&D. No income tax provision was recorded.
Material changes and unusual items
- Q2 revenue rose 115% year over year, while six-month revenue increased 19%. Q2 growth was primarily attributed to higher U.S. sales, partly as patients sought discounted pricing before the Patient Therapy Access Program (PTAP) ended June 30, 2023.
- Six-month gross profit fell despite higher revenue, with management citing a greater mix of lower-margin PTAP sales. R&D fell as the company shifted emphasis from product development and clinical trials toward U.S. commercialization.
- Net losses improved year over year, in part because nonoperating income included a $2.44 million six-month gain from the decrease in the fair value of warrant liabilities. This is a valuation gain, not operating revenue or cash generation.
- Weighted-average shares increased to 28.2 million from 3.9 million in the prior-year periods, materially affecting loss per share comparisons. The filing also reports 36 million liability-classified public warrants with a $0.75 exercise price.
- The company established a $2.0 million at-the-market equity program in June; it had issued no shares under it by quarter-end. Stockholders approved a reverse stock split, but the board had not declared one by the filing date.
Outlook, risks, and contingencies
- Management stated existing capital resources were expected to fund operations through 2023, but additional equity or debt financing would be needed thereafter, including funding for a planned stroke clinical trial. The filing states that substantial doubt exists about the company’s ability to continue as a going concern within one year after filing.
- PoNS was not covered by CMS or other U.S. third-party payers. The company was pursuing Medicare and commercial reimbursement, planned to gather further clinical and real-world evidence, and expected broad reimbursement could take at least 24 months. Self-pay patients were expected to remain the primary sales source before coverage.
- Nasdaq had granted an extension until September 18, 2023 to regain compliance with its $1.00 minimum bid-price requirement. Failure to regain compliance could lead to delisting and make capital raising more difficult.
- Risks discussed include the need for additional capital, commercialization and reimbursement execution, clinical and regulatory outcomes, supply chain and labor constraints, inflation, interest rates, and volatile capital markets. The filing reports no material legal proceedings and no material changes to previously disclosed risk factors.
- Revenue was highly concentrated: two customers accounted for 64% of Q2 and one customer for 35% of six-month product sales; two customers represented 91% of accounts receivable at June 30.
Important facts for investors to verify
- Confirm the registrant: the provided filing is for Helius Medical Technologies, Inc., not Solana Co.
- Assess cash runway and financing needs against the going-concern disclosure and management’s through-2023 liquidity statement.
- Track actual PoNS sales after PTAP ended, gross margins, customer concentration, and progress toward payer reimbursement.
- Verify Nasdaq bid-price compliance and any board action on the approved reverse stock split.
- Review dilution and potential warrant and stock-option impacts; distinguish warrant fair-value gains from cash operating performance.