PROPOSAL 5 – APPROVAL OF AN AMENDMENT TO THE HELIUS MEDICAL TECHNOLOGIES, INC. 2018 OMNIBUS INCENTIVE PLANThe stockholders are being asked to approve an amendment (the “Amendment”)adjustments to the Helius Medical Technologies, Inc. 2018 Omnibus Incentive Plan,conversion prices of certain convertible securities, as previously amended (as amended,described below, the “2018 Plan”). The Amendment, if so approved, would (i) increase by 565,000 the maximum number ofreverse stock split will not affect any stockholder’s percentage ownership or proportionate voting power.
All shares of CommonSeries B Preferred Stock that mayare not present in person or by proxy at the Annual Meeting as of immediately prior to the opening of the polls at the Annual Meeting will be issuedautomatically redeemed in the Initial Redemption. Any outstanding shares of Series B Preferred Stock that were not redeemed pursuant to awards granted under the 2018 Plan;Initial Redemption will be redeemed in whole, but not in part, (i) if and (ii) increase the maximum number of shares of Common Stock with respect to which incentive stock options may be granted under the 2018 Plan to 1,500,000 shares of Common Stock.
When originally adoptedwhen ordered by our Board or (ii) automatically upon the approval by the Company’s stockholders of the Reverse Stock Split Certificate of Amendment effecting the Reverse Stock Split. Please refer to the discussion in the Questions and approved by our stockholders,Answers About the 2018 Plan providedAnnual Meeting section under “Who is entitled to vote?”, “What are the voting rights of the stockholders?” and “What vote is required to approve each item of business?” for a number of shares of Common Stock available for issuance equal to the sum of (1) 153,031 and (2) any shares subject to outstanding stock awards granted under the Prior Plans that, following the effective date of the 2018 Plan (i) expire or terminate for any reason prior to exercise or settlement or (ii) are forfeited, cancelled or otherwise returned to the Company because of the failure to meet a contingency or condition required for the vesting of such shares (collectively, the “Prior Plans’ Returning Shares”). As of April 8, 2021, there remained 46,143 shares of our Common Stock available for awards granted under the 2018 Plan. There are no shares available for grant under any other Company equity incentive plan.
The affirmative vote of the holders of a majoritydescription of the voting power of the shares present by remote communication or represented by proxy atSeries B Preferred Stock.
Based on the Annual Meeting and entitled to vote is required to approveCompany’s capitalization as of March 31, 2023, the Amendmentprincipal effect of the 2018 Plan. Broker non-votes, if any, will have no effect onreverse stock split (at a ratio between 1-for-10 and 1-for-80), not taking into account the outcometreatment of this proposal. Abstentions will havefractional shares described under “—Procedure for Effecting the same effect as a vote against Reverse Stock Split—Treatment of Fractional Shares” below, would be that:
the matter.
The Board believes that it is in the best interestnumber of shares of the CompanyCompany’s Common Stock issued and its stockholders for outstanding would be reduced from 28,213,378 shares to between approximately 352,667 shares and 2,821,337 shares;
the Company to be in a position to offer equity awards to executive officers, key employees, outside directors, consultants and advisors in accordance with the termsnumber of shares of the 2018 Plan. The Company anticipates making key corporate hires, includingCompany’s Common Stock issuable upon the exercise of outstanding stock options would be reduced from 11,122,299 to between approximately 139,028 shares and 1,112,229 shares (and the respective exercise prices of the options would increase by a permanent Chief Executive Officer, Chief of Medical Affairs, and potentially two to three other senior executives, along with additional key talent as we prepare to commercialize our PoNS Treatment in the United States following the recent receipt of marketing authorization by the U.S. Food and Drug Administration. The life sciences market is highly competitive, and our results are largely attributablefactor equal to the talents, expertise, efforts and dedication of our employees. Our compensation program, including the granting of equity compensation, is a crucial way to attract and recruit new employees and retain existing employees, with equity compensation serving as our primary recruitment, retention and motivational tool as opposed to cash compensation.
We are often competing for highly-skilled talent with many companies that offer aggressive equity compensation to their executive and key professional positions, with many of our competitors having evergreen plans that allow automatic replenishmentinverse of the equity share pool on an annual basis. We do not currently have enoughsplit ratio);
the number of shares to assist with recruitment and retention of the necessary talentCompany’s Common Stock issuable upon the exercise of outstanding warrants would be reduced from 36,593,924 to between approximately 457,424 shares and do not have an evergreen provision in our 2018 Plan that provides for an annual increase of new3,659,392 shares to grant and, as such, we are required to request stockholders approve a total share pool that will accommodate future equity awards needed to achieve our recruiting and retention goals and this request is intended to do so. Our total share pool request is intended to simply position our pay at a competitive opportunity level, while reducing emphasis on cash compensation.
The proposed Amendment is set forth on Appendix A to this proxy statement. The full text(and the respective exercise prices of the 2018 Plan (not reflectingwarrants would increase by a factor equal to the proposed Amendment) is set forth on Appendix B to this Proxy Statement.
In respectinverse of the Amendment, split ratio);
the Company intends to rely on the exemption set forth in Section 602.1number of shares of the TSX Company Manual, which provides thatCompany’s Common Stock issuable upon the Toronto Stock Exchange will not apply its standardssettlement of outstanding restricted stock units would be reduced from 2,016 to certain transactions involving eligible interlisted issuers on a recognized exchange, such as the Nasdaq Capital Market.between approximately 25 shares and 201 shares;
Requested Shares
Subject to adjustment for certain changes in our capitalization, if this Proposal 5 is approved by our stockholders, the aggregate number of shares of ourthe Company’s Common Stock reserved for issuance, in connection with future awards under the Company’s 2022 Equity Incentive Plan and 2021 Inducement Plan would be reduced from 2,669,478 to between approximately 33,368 shares and 266,947 shares;
the number of shares of the Company’s authorized Common Stock would remain unchanged at 150,000,000 shares;
the 10,000,000 shares of the Company’s authorized preferred stock would remain unchanged; and
the number of shares of the Company’s Common Stock that mayare authorized, but unissued and unreserved, would increase from 71,398,905 to between approximately 142,139,894 shares and 149,017,488 shares; and the par value of the Company’s Common Stock and preferred stock would remain unchanged at $0.001 per share, and, as a result, the stated capital attributable to Common Stock on the Company’s balance sheet would be issued underreduced proportionately based on the 2018 Plan will not exceedreverse stock split ratio, the sumadditional paid-in capital account would be credited with the amount by which the stated capital is reduced, and the per-share net income or loss and net book value of (1) 718,031 and (2) any Prior Plans’ Returning Shares following the effective dateCompany’s Common Stock would be restated because there would be fewer shares of Amendment.
At April 8, 2021, equity awards covering an aggregate of 155,704 shares were outstanding under the 2018 Plan.Common Stock outstanding.