---

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-K/A(Amendment No. 1)

|[X]   | Annual report pursuant to Section 13 or 15(d) of the
      Securities Exchange Act of 1934.For the fiscal year ended March
    31, 2016.
|----- | ----------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                         
|[   ] | Transition report pursuant to Section 13 or
      15(d) of the Securities Exchange Act of 1934.                                         

For the transition period from _______to _______

Commission File No. 000-55364



HELIUS MEDICAL TECHNOLOGIES,
INC.(Exact name of registrant as specified in its
charter)

|WYOMING                         | 36-4787690         
|------------------------------- | -------------------
|(State or other jurisdiction of | (I.R.S. Employer   
|incorporation or organization)  | Identification No.)

Suite 400, 41 University DriveNewtown,
Pennsylvania, 18940(Address of principal executive offices) (Zip
Code)

Registrants telephone number, including area code: (215)
809-2018

Securities registered pursuant to Section 12(b) of the Act:

|Title of each class | Name of each exchange on which
      registered
|------------------- | -----------------------------------------------
|None                | Toronto Stock Exchange                         

Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock

Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
[   ]     No [X]

---

Indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or Section
15(d) of the Act. Yes [   ]     No [X]

Indicate by check mark whether
the registrant (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days:
Yes [X]     No [   ]

Indicate by check mark whether
the registrant has submitted electronically and posted on its corporate Web
site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (Section §232.405 of this chapter) during
the preceding 12 months (or for such shorter period that the registrant was
required to submit and post such files).
Yes [X]     No [   ]

Indicate by check mark if
disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the best of registrants
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K.     [X]

Indicate by check mark whether
the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated filer and smaller reporting company
in Rule 12b-2 of the Exchange Act:

|Large accelerated filer [   ] | Accelerated filer [   ] | Non-accelerated filer [   ] | Smaller reporting company
|----------------------------- | ----------------------- | --------------------------- | -------------------------
|                              |                         |                             | [X]                      
|                              |                         | (Do not check if a smaller  |                          
|                              |                         | reporting company)          |                          

Indicate by check mark whether
the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).Yes [   ]     No [X]

The aggregate market value of the
common equity held by non-affiliates of the registrant on September 30, 2015,
based on the closing price on that date of CAD $0.84 (USD $0.61), was approximately
$39,359,835. As of October 31, 2016 there were 84,534,684 shares of the
registrants common stock outstanding.

Explanatory Note

This  Amendment No. 1 to the Annual Report on Form 10-K (this “Amendment No. 1”) of  Helius Medical Technologies, Inc. (the “Company”) amends the Company’s Annual  Report on Form 10-K for the year ended March 31, 2016, which was filed with the  Securities and Exchange Commission (“SEC”) on June 28, 2016 (the “Original Filing”).  The Company is filing this Amendment No. 1 to include an audit report that is  signed by our independent registered public accountants as required by Article  2 of Regulation S-X, and Section 302 and 906 certifications.

This  Amendment No. 1 speaks as of the filing date of the Original Filing, does not  reflect events which may have occurred since the filing date of the Original  Filing, and does not amend or modify any disclosure made in the Original Filing  except to incorporate changes to Form 10-K Page F-2, Exhibits 23.1, 31.1, 31.2,  and 32.1.

This  additional disclosure does not revise or alter the Company’s financial  statements and any forward-looking statements contained in the Original Filing.  As required by Rule 12b-15 under the Securities Exchange Act of 1934, as  amended (the “Exchange Act”), this Amendment No. 1 contains new certifications  by our principal executive officer and principal financial officer, which are  being filed or furnished as exhibits to this Amendment No. 1.

---

TABLE OF CONTENTS

|Item       | Description                                                                                                                  | Page
|---------- | ---------------------------------------------------------------------------------------------------------------------------- | ----
|           |                                                                                                                              |     
|           | PART I                                                                                                                       | 3   
|           |                                                                                                                              |     
|ITEM 1.    | BUSINESS                                                                                                                     | 3   
|ITEM 1A.   | RISK FACTORS                                                                                                                 | 3   
|ITEM 1B.   | UNRESOLVED STAFF COMMENTS                                                                                                    | 40  
|ITEM 2.    | PROPERTIES                                                                                                                   | 41  
|ITEM 3.    | LEGAL PROCEEDINGS                                                                                                            | 41  
|ITEM 4.    | MINE SAFETY
      DISCLOSURES                                                                                                | 41  
|           |                                                                                                                              |     
|           | PART II                                                                                                                      | 43  
|           |                                                                                                                              |     
|ITEM 5.    | MARKET FOR
      REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER
    MATTERS AND ISSUER
      PURCHASES OF EQUITY SECURITIES | 43  
|           |                                                                                                                              |     
|ITEM 6.    | SELECTED
      FINANCIAL DATA                                                                                                | 44  
|ITEM 7.    | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
      CONDITION AND RESULTS OF OPERATIONS                                  | 44  
|ITEM 7A.   | QUANTITATIVE AND
      QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                             | 51  
|ITEM 8.    | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                                                  | 51  
|ITEM 9.    | CHANGES IN AND
      DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE                                   | 52  
|ITEM 9A.   | CONTROLS AND PROCEDURES                                                                                                      | 52  
|ITEM 9B.   | OTHER INFORMATION                                                                                                            | 53  
|           |                                                                                                                              |     
|           | PART III                                                                                                                     | 54  
|           |                                                                                                                              |     
|ITEM 10.   | DIRECTORS,
      EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE                                                                 | 54  
|ITEM 11.   | EXECUTIVE COMPENSATION                                                                                                       | 57  
|ITEM 12.   | SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS                   | 57  
|ITEM 13.   | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
      DIRECTOR INDEPENDENCE                                              | 63  
|ITEM 14.   | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                                                                       | 65  
|           |                                                                                                                              |     
|           | PART IV                                                                                                                      | 66  
|           |                                                                                                                              |     
|ITEM 15.   | EXHIBITS,
      FINANCIAL STATEMENT SCHEDULES                                                                                | 66  
|           |                                                                                                                              |     
|SIGNATURES |                                                                                                                             

1

---

In this annual report on Form 10-K, unless otherwise specified,
references to we, us, our, Helius or the Company mean Helius Medical
Technologies, Inc. (formerly known as 0996445 B.C. Ltd.) and its wholly-owned
subsidiaries, NeuroHabilitation Corporation, or NHC, and Helius Medical
Technologies (Canada), Inc., unless the context otherwise requires. All
financial information is stated in U.S. dollars unless otherwise specified. Our
financial statements are prepared in accordance with accounting principles
generally accepted in the United States, or U.S. GAAP.

FORWARD-LOOKING STATEMENTS

This annual report on Form 10-K (Annual Report) includes
certain statements that may constitute forward-looking statements. All
statements contained in this Annual Report, 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 Annual Report include
but are not limited to statements relating to: enrollment and future plans for
our clinical trials, progress of and reports of results from clinical studies,
clinical development plans, product development activities, other products not
yet developed or acquired, our product candidate success, plans for U.S. Food
and Drug Administration (FDA) filings and their subsequent approvals, other
foreign or domestic regulatory filings by us or our collaboration partners, our
ability to commercialize the product(s), the safety and efficacy of our product
candidate, the timeline for our improvement plans, our market awareness, our
ability to compete effectively, the ability and limitation of our manufacturing
source(s), our distribution network, the adequacy of our intellectual property
protection, our future patent approvals, potential infringement of our
intellectual property, future litigation waged against us and its outcome, any
product liability we may incur, the sufficiency of our operating insurance,
including sufficient product liability insurance, our limited operating history,
our dependence on a small number of employees, employee conflicts of interest,
our dependence on outside scientists and third party research institutions, our
future expenses and cash flow, our ability to become profitable, our future
financing arrangements, our ability to accurately report our financial position,
our accountants future perspective including any going concerns, our ability to
maintain effective internal controls, any future stock price, the potential
dilution of the stock, future sales of the Companys equity securities, any
future Financial Industry Regulatory Authority sales practice requirements, the
ability of a limited number of shareholders to take shareholder action without
the involvement of the management or the Companys other shareholders, future
disclosure requirements, future regulatory risks, our relationship with the U.S.
Army, our ability to use existing reimbursement codes or receive reimbursement
codes from the American Medical Association and the U.S. Department of Health
and Human Services, and our ability to receive reimbursement coverage under
Medicare, Medicaid or under other insurance plans. These and additional risks
and uncertainties are more fully described in this Annual Report and our other
public filings with the Securities and Exchange Commission (SEC).

Although the Company believes 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. Factors that could cause the actual
results to differ materially from those in the forward-looking statements
include future economic, competitive, reimbursement and regulatory conditions;
new product introductions, demographic trends, the intellectual property
landscape, litigation, financial market conditions, continued availability of
capital and financing, and, future business decisions made by us and our
competitors. All of these factors are difficult or impossible to predict
accurately and many of them are beyond our control. Investors are cautioned that
any such forward-looking statements are not guarantees of future performance and
actual results or developments may differ materially from those projected in the
forward-looking statements. Undue reliance should not be placed on forward
looking statements which speak only as of the date they are made. Except as
required by applicable securities laws, the Company undertakes no obligation to
update or alter these forward-looking statements (and expressly disclaims any
such intention or obligation to do so) in the event that management's beliefs,
estimates, opinions, or other factors should change.

1

---

INDUSTRY AND MARKET DATA

In this Annual Report, we reference information, statistics and
estimates regarding the medical devices and healthcare industries. We have
obtained this information from various independent third-party sources,
including independent industry publications, reports by market research firms
and other independent 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 review of
internal surveys, general information discussed in the industry, and independent
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
report and other publications.

2

---

PART I

|ITEM 1. | BUSINESS
|------- | --------

Our Business

We are a medical technology company focused on neurological
wellness and our mission statement is to:

Develop, license and acquire unique, non-invasive
treatments designed to help patients affected by neurological symptoms caused by
disease or trauma.

Our first product in development, the portable neuromodulation
stimulator (PoNS) device, exemplifies this mission as the device, when used in
combination with physiotherapy, is designed to enhance the brains ability to
compensate for damage due to trauma or disease.

Improving the process by which the brain can reorganize itself
and compensate for damage, or even augment how we learn, has far-reaching
implications for the treatment of disease as well as for the healthy population.
We intend to pursue these opportunities using our platform PoNS technology.
Neuroplasticity, the ability of the brain to reorganize a neural network or
re-task neurons and form new synaptic connections, is core to all cerebral
learning, training, and rehabilitation. Neuromodulation is the alteration of
nerve activity in response to the delivery of electrical stimulation or chemical
agents. Our proprietary PoNS device is designed to induce Cranial Nerve Non
Invasive Neuromodulation through a dramatic increase in stimulation of the
facial and trigeminal nerves which innervate the tongue. This appears to enhance
neuroplasticity and benefit persons with neurological, cognitive, sensory, and
motor disorders when combined with the rehabilitation process.

Traditional rehabilitation interventions have typically
involved medication and various forms of therapies, including physical therapy.
Our patented PoNS device has been developed to deliver to the tongue a
non-invasive neurostimulation, in a form that induces neuromodulation. Published
studies, suggest neurologic diseases and disorders such as Traumatic Brain
Injury (TBI), Multiple Sclerosis (MS), Stroke, Parkinsons disease, Alzheimers
diseases, Depression, Attention Deficit Hyperactivity Disorder, and Autism, all
have symptoms that may benefit from enhanced neuromodulation as a component of
their rehabilitation therapy.

When the PoNS device is placed into and held in the patients
mouth, it stimulates the trigeminal and facial nerves that innervate the
anterior two-thirds of the human tongue using a sequenced pattern of superficial
electrical stimulation. This stimulation excites a natural flow of neural
impulses to the brainstem and cerebellum that is designed to effect changes in
the function of these targeted brain structures. A series of studies, which are
further described below, suggest that prolonged activation of 20 minutes or more
of neuronal circuits, when combined with physical therapy, initiate a durable
neuronal reorganization with a variety of positive results, including the
correction of gait/balance impairments resulting from TBI. These results
represent what we refer to as anecdotal evidence, and must be confirmed by a
larger well-controlled, independently reviewed scientific study. Successful
results from FDA approved and reviewed clinical trials are required prior to
regulatory clearance for sale in the U.S.

The inventors of the PoNS device conducted a series of
Institutional Review Board sanctioned feasibility studies, case studies, and one
placebo-controlled study. In total, these studies involved approximately 260
patients using the first generation PoNS device in conjunction with physical or
cognitive therapy at the University of Wisconsin-Madison. An Institutional
Review Board is a scientific and patient advocacy board that reviews the
validity and safety of clinical trials on behalf of patients. A feasibility
study is a study with a small sample size that allows for early clinical
evaluation for proof of principle and initial clinical safety data. A
feasibility study may be appropriate early in device development when clinical
experience is necessary because nonclinical testing methods are not available or
adequate to provide the information needed to advance the developmental process.
We use the term case study to mean a study of one patient that may support at
most anecdotal evidence of efficacy. By placebo-controlled study, we mean a
way of testing a medical therapy in which, in addition to a group of subjects
that receives the treatment to be evaluated, a separate control group receives
an artificial placebo treatment which is specifically designed to have no real
effect. These studies were conducted primarily at the Tactile Communication and
Neurorehabilitation Laboratory, or TCNL, at the University of Wisconsin-Madison
with the approval and oversight by the universitys Institutional Review Board,
which is required for scientific studies involving human subjects.

3

---

Based on the prior results in subjects with MS, a further
controlled feasibility study in 14 MS subjects was independently performed at
the Montreal Neurological Institute in 2015 using the next generation PoNS
device to treat gait and balance disorder associated with MS. The results of
this study were consistent with the previously completed studies on MS and
further supported the devices safety and efficacy in this cohort.

As described below, we have developed the PoNS device to
secure FDA clearance for commercial use in treating balance disorder in TBI
subjects. We are conducting a clinical trial of our PoNS device for the
treatment of balance disorder in patients with TBI. Should the PoNS device be
cleared by the FDA, we believe the addressable market for our product device to
treat balance disorder associated with TBI is potentially over $5.0 billion.
According to the U.S. Center for Disease Control and Prevention, approximately
5.3 million individuals in the U.S. were living with permanent TBI symptoms in
1999, and the incidence of new TBI diagnoses, as measured by hospitalizations
and emergency department visits, has increased between 2001 and 2010.
Additionally, the Brain Injury Association of America estimates that
approximately 40% of patients diagnosed with TBI experience balance disturbance.
Our addressable market estimate for TBI in the U.S. is based on the number of
persons living with TBI (5.3 million) multiplied by the rate of balance
disturbance in TBI patients (40%), and multiplied by the expected price per unit
of our product.

In addition to the ongoing TBI study, we plan on conducting a
registrational clinical trial of our PoNS device for the treatment of gait and
balance disorder in patients with MS. Should the PoNS device be cleared by the
FDA, we believe the addressable markets for our PoNS device to treat gait and
balance disorder associated with MS is potentially over $500 million. According
to the National Multiple Sclerosis Society, there are approximately 400,000
individuals in the U.S. with MS. Our addressable market estimate for MS is
calculated by multiplying the estimated number of persons with MS by the rate of
balance disturbance in MS patients (50%) and the expected price per unit of our
product.

Supporting our three issued U.S. medical method patents, are a
further twenty-one issued design and utility patents. Additional domestic and
international patent filings for the PoNS device connected to both further
medical methods and other designs and utility are a key component of the value
of the Company and will continue to be expanded.

Our Principal Product

The predecessor to the current PoNS device was developed in
2008 at the TCNL. Since then, we have conducted a significant amount of
experimentation, research, and development to arrive at the present-day PoNS
device. We have completed the technical and product design phases of the PoNS
device as well as the manufacturing development phase which will enable us to
manufacture the device commercially. We are performing the registration clinical
trials for FDA clearance with the device for use in treating balance disorder in
TBI subjects and plan to launch a registrational clinical trial for MS subjects
in late 2016.

We anticipate that the full commercial device will be ready for
release in the fourth quarter of calendar year 2016, and we expect to produce
the PoNS device in accordance with FDAs Quality System Regulation, or QSR,
current good manufacturing practices, or cGMPs, and in compliance with European
and Canadian regulatory requirements. Previously, we disclosed that we
anticipated that the full commercial device would be ready for release in the
first quarter of calendar 2016. We delayed the commercial device build based on
our revised forecast for the clinical trial completion.

The PoNS device is ergonomically designed for patient comfort,
is relatively light, contains a replaceable hygienic mouthpiece, a rechargeable
battery and allows for technical data logging and communications. See Figure
1.

4

---



The PoNS device is an electrical pulse generator that delivers
controlled electrical stimulation to the tongue. Pulses are generated and
organized by a counter, timer, and wave-shaping electronic components. The
device is held lightly in place by the lips and teeth around the neck of the tab
that goes into the mouth and rests on the anterior and superior part of the
tongue. See Figure 2.

The paddle-shaped tab of the device has a hexagonally patterned
array of 143 gold-plated circular electrodes (1.50 mm diameter, on 2.34 mm
centers) that is created by a photolithographic process used to make printed
circuit boards. It is designed to use low-level electrical current to stimulate
the lingual branch projections of at least two cranial nerves in the anterior
tongue through the gold-plated electrodes. Device function is controlled by four
buttons: On, Off, Intensity Up, and Intensity Down.

A rechargeable lithium- polymer battery with built-in charge
safety circuitry provides power. While the voltage and pulse timing to each
electrode are programmed into the device and cannot be altered, the stimulus
intensity can be adjusted by the user. The sensation produced by the array is
similar to the feeling of drinking a carbonated beverage. The waveform is
specifically designed to minimize the potential for tissue irritation.

When the PoNS device is turned off, the intensity setting
automatically resets to zero. Upon first introduction to the device stimulation,
subjects are instructed to press the Up intensity button and hold it for
approximately 4-5 seconds to reach sensation threshold. Subjects will frequently
notice that the sensation intensity decreases 2-4 minutes after stimulation
onset. Subjects are instructed to simply increase the sensation level to return
to the predetermined perceptual midpoint of their individual perceptual dynamic
range.



5

---

Ximedica

We have completed the design phase of the PoNS device and we
will subcontract the building of commercial quantities of the device to
Ximedica, LLC (Ximedica), a contract manufacturer based in Providence, Rhode Island, that
we selected after an exhaustive procurement process. We place an emphasis on
protecting our patented technology, trade secrets and know-how and only share
confidential information on a need to know basis, even with our manufacturers.
We expect that the PoNS device will require some very light assembly and
labeling that will be performed by Ximedica. Ximedica is registered as a medical
device manufacturer in good standing with the FDA, and is certified with
International Organization for Standardization (ISO) 13485, a comprehensive
quality management system for the design and manufacture of medical devices.

We are currently evaluating commercial-scale manufacturers for
the PoNS device with the goal of building sufficient stock to warehouse and
ship the product to our distributor, who will in turn manage customer
distribution.

U.S. Army

We are designing the PoNS device with the cooperation of the
U.S. Army pursuant to an agreement known as a cooperative research and
development agreement, (the CRADA). The U.S. Army was interested in signing
the CRADA because of the very high incidence of TBI in
soldiers and the fact that there are very few proven, effective treatments
available for those soldiers who suffer from chronic TBI symptoms. Department of
Defense statistics show that incidence of TBI in the U.S. Army has numbered
approximately 30,000 per year from 2012 to 2014 in active duty personnel, and
over 300,000 U.S. military personnel have been diagnosed with TBI since 2000. Of
the 30,000 active duty personnel who suffer from TBI annually, we estimate that
approximately 20-30% will develop chronic symptoms related to their TBI. While
the number of cases of TBI among active duty personnel may vary based on troop
levels maintained by the federal government, our primary target market will be
the large number of retired soldiers who suffer from chronic TBI symptoms as
this population is less subject to material, year-to-year fluctuation. The Army
has expressed its desire to distribute our PoNS device to service members who
would benefit, should the device be cleared by the FDA. However, the U.S. Army
is not under any obligation to purchase our product under the CRADA or any other
agreement with us, and there is no assurance that the U.S. Army will ultimately
purchase our product.

Pursuant to the CRADA, as amended, the laboratories of the U.S.
Army Medical Material Agency (USAMMA) and the U.S. Army Medical Material
Development Activity (USAMMDA) (collectively, the Army Laboratories), agreed
to cooperate with NHC on research for the ongoing design and development to
determine if the PoNS device can be developed for commercial use in assisting
physical therapy in the treatment of soldiers and others with military relevant
neurological manifestations of TBI, including but not limited to Tinnitus,
post-traumatic stress disorder, or PTSD, pain and any subsequent indications
identified by the parties. The CRADA may be terminated by NHC or the Army
Laboratories unilaterally at any time by providing the other party written
notice at least 30 days prior to the desired termination date. In addition, the
CRADA automatically expires on December 31, 2017 unless modified in writing by
the parties, provided that the CRADA is subject to a four-year automatic
extension as required for both FDA clearance in the event that a pre-market
approval application with the FDA is required for a PoNS indication in respect
of aid to therapy for chronic balance deficits resulting from TBI as well as for
commercialization of the PoNS device.

We will initially seek FDA clearance only for treatment of
patients with chronic balance deficit due to TBI. The U.S. Army has expressed an
interest in supplying PoNS devices to the military personnel who need it,
subject to our ability to demonstrate its safety and effectiveness and our
ability to obtain such FDA clearance. Based on this interest, we estimate that
there is a sufficient potential market of active duty and retired soldiers who
could potentially benefit from the PoNS device due to their chronic TBI
symptoms. However, the U.S. Army has not made any guarantees and is not
otherwise under any contractual obligations to purchase PoNS devices, even if
we do demonstrate effectiveness and obtain FDA clearance.

If we are able to complete development of the PoNS device and
obtain FDA clearance of the device to treat chronic balance deficit due to mild
to moderate TBI, we plan to develop the PoNS device to treat other indications,
or symptoms caused by neurological disorders. As set forth in the January 12,
2015 amendment of our CRADA, the U.S. Army has also expressed interest in our
development of the PoNS device to treat other symptoms of TBI or any other
indications caused by neurological disorders. We would be required to commit our
own resources to sponsor the regulatory process for these additional
indications. However, the Army Laboratories has agreed in the January 12, 2015
amendment to our CRADA to be responsible for supporting the execution of studies
using the PoNS device as a treatment for mutually agreed-upon military relevant
neurological disorders, which could include but not be limited to Tinnitus,
PTSD, sleep regulation and pain (headache) and any subsequent indications
identified by the parties. The amount of such support, if any, and the terms of
such responsibility to support such studies are not yet negotiated and we have
no assurance that we can ultimately reach agreement with the Army Laboratories
on such amount or terms of support. There can be no assurance that the Army
Laboratories will not otherwise attempt to renegotiate its responsibilities
under the CRADA.

6

---

Food and Drug Administration

To date, no prior premarket notifications for clearance of the
PoNS device have been submitted by NHC to the FDA, but the Army Laboratories,
which previously was responsible as the regulatory sponsor until such role was
assumed by NHC, submitted a request for information with the FDA with respect to
the potential classification of the PoNS device through what is known as a
513(g) request for information. In response to a 513(g) request, the FDA
provides information regarding the classification of the device or the
requirements applicable to a device under the Federal Food, Drug, and Cosmetic
Act, or the FD&C Act. Under the 513(g) request, the Army Laboratories sought
guidance from the FDA regarding the classification of the PoNS device and the
applicable requirements under the FD&C Act. As a result of this process, the
FDA responded with guidance on pursuing de novo classification of the PoNS
device as a Class II medical device.

We plan to utilize the de novoclassification process to obtain
Class II classification and 510(k) clearance from the FDA for the PoNS device.
We have been deemed by the FDA through the pre-submission process a
non-significant risk device in the context of the TBI clinical trial and thus do
not need an Investigation Device Exemption to complete our clinical trials. We
are seeking to complete a safety and effectiveness clinical trial by the first
quarter of calendar year 2017 and will thereafter submit a request for de novoclassification and the premarketing notification (i.e., 510(k)) to the FDA.
Previously, we had sought to complete the safety and effectiveness clinical
trial by the first quarter of calendar year 2016.

On a parallel path to our request for de novo classification
and premarket notification to the FDA, we expect to submit an application for
the clearances of the PoNS device for both TBI and MS indications to Europe for
a CE Mark and to Health Canada (the department of the government of Canada with
responsibility for national public health). Our goal is that the CE Mark and
Canadian clearance for the PoNS device will be obtained in early 2017.

On April 29, 2014, NHC, as cooperator, entered into Notice of
Modification No. 1 of the CRADA, with Advanced NeuroRehabilitation LLC (ANR), one of our
significant shareholders, the inventors, and the Army Laboratories, whereby NHC
will no longer provide expertise and training in the design of clinical study
protocols or for U.S. Army and/or VA personnel in the physical therapy
interventions required for clinical studies. In addition, pursuant to the
amended CRADA, ANR will share all data with USAMMA and NHC will provide all data
supporting clinical claims for regulatory approval.

On January 12, 2015, NHC, as cooperator, entered into Notice of
Modification No. 2 of the CRADA, with ANR, the inventors, and the Army
Laboratories. Under this amendment to the CRADA, the Army Laboratories agreed to
transfer some of the CRADA responsibilities to NHC. We believe the Army
Laboratories agreed to transfer certain responsibilities to us under the CRADA
to enable us to accelerate development of the PoNS device for the eventual
potential treatment of soldiers. One of the material changes reflected in the
amendment to the CRADA is the shifting from the Army Laboratories to NHC of sole
responsibility as the regulatory sponsor for all interactions with the FDA in
order to gain approval and clearance from the FDA, including the initial 513(g)
submission. As part of the amendments to the CRADA, NHC has agreed to be
responsible to fund the FDA process as well as to provide the supply of all
devices to support all studies governed by the CRADA. While under the amendments
NHC gains control of the FDA regulatory process, the amendments materially
increase the financial burden on NHC to meet these funding and supply
obligations. The amendments also extend from two to four years both the time for
regulatory approval in the event a pre-market approval application, or PMA, is
required by the FDA as well as for commercialization of the PoNS device.

While NHC has sole responsibility as the regulatory sponsor
under the CRADA, the U.S. Army Medical Research and Materiel Command (USAMRMC)
has entered into a sole-source contractual agreement to support the execution of
the registration trial for treatment of balance disorder associated with mild to
moderate TBI. The objective of this contract is to defray the costs of the
registration trial. The Army Laboratories also agreed in the January 12, 2015
amendment to our CRADA to be responsible for supporting the execution of studies
using the PoNS device as a treatment for mutually agreed-upon military relevant neurological disorders, which
could include but not be limited to Tinnitus, PTSD, and pain and any subsequent
indications identified by the parties. The amount of such support, if any, and
the terms of such responsibility to support such clinical studies are not yet
negotiated and we have no assurance that we can ultimately reach agreement with
the Army Laboratories on such amount or terms of support, and there can be no
assurance that the Army Laboratories will not otherwise attempt to renegotiate
its responsibilities under the CRADA. The Army Laboratories may terminate their
obligations under the CRADA at any time upon 30 days prior written notice to us.
If there are insufficient funds available to cover the necessary research and
development costs for our product, the Army Laboratories could terminate the
CRADA and cease research and development efforts which could jeopardize our
ability to commercialize our PoNS device.

7

---

On July 7, 2015, the Company announced that NHC entered into a
sole source cost sharing contract with the USAMRMC. The contract will support
the Companys registrational trial investigating the safety and effectiveness of
the PoNS device. Under the contract, the USAMRMC will reimburse the Company for
approximately 62% of the initially budgeted costs related to the registrational
trial of up to a maximum amount of
$2,996,244. The sole source cost sharing agreement expires December 31, 2016. As
of March 31, 2016, the Company has received a total of $1,458,374 in respect of
expenses reimbursed.

On December 28, 2015, NHC, as cooperator, entered into Notice
of Modification No. 3 of the CRADA, with ANR, the inventors, and the Army
Laboratories to extend the expiration date of the CRADA to December
31, 2017.

Our Market

NHC is in the neurostimulation market. According to a study by
Grand View Research, the neurostimulation market was valued at $3.4 billion in
2013 and is expected to grow at a compounded annual growth rate of 14.4% from
2014 to 2020. The leading sectors in the industry are Spinal Cord Stimulation,
Deep Brain Stimulation, Sacral Nerve Stimulation and Vagal Nerve Stimulation. We
believe that due to the significant lack of non-invasive devices, non-invasive
stimulation addresses only approximately 3% of the overall neurostimulation
market today. This allows for a significant market opportunity for the Company.

Market Competition

The neurostimulation market is competitive and growing. Our
competitors in the industry are predominantly large, publically-traded companies
that have a history in the market, have significantly easier access to resources
and have an established product pipeline. The combined clinical research and
product development done by the industry, including by us and all of our
competitors, is foundational, and neurostimulation has slowly become integrated
into neurological therapy. This foundation has allowed for new and innovative
neurostimulation companies to enter the market.

We believe that our technology, the PoNS device, introduces an
innovative target and method of stimulation because targeting the tongue for
neurostimulation provides several clear advantages, which are discussed below.
While we believe that the factors described below competitively distinguish our
technologies and provide the PoNS device a competitive advantage for
non-invasive neuromodulation therapy, we note that these factors are only
supported by anecdotal evidence of efficacy from the initial work done at the
TCNL Laboratories. We believe that our pilot study on MS done at the Montreal
Neurological Institute and Hospital and Concordia Universitys PERFORM Center
using functional MRI provides scientific evidence of efficacy, and from our
Press Release dated November 2, 2015, we announced that our device met all of
its study objectives and that the results suggested the device may be
facilitating neural plasticity. We therefore are making the assumption that the
results of our current TBI clinical trial program will be positive and further
support these claims at that time.

Advantages of the PoNS Device

| |  | Other technologies stimulate other branches of the
      trigeminal nerve. We target the lowest branch of the trigeminal nerve,
      which is found in the tongue. It is also the largest branch, having the
      highest amount of nerve fibers of the three branches.                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                 
| |  | Stimulating the tongue also allows for the simultaneous
      stimulation of a second cranial nerve found in the tongue, the facial
      nerve. The ability to stimulate more than one nerve alone differentiates
      us from our competition. However, it has not been scientifically proven
      that stimulating additional nerves adds to the efficacy of the treatment.

8

---

| |  | The tongue has an anatomically unique surface
      with a high density of receptors, a consistently moist and conductive
      environment, constant pH, constant temperature and a direct connection to
      the brain through at least two cranial nerves.                                                                                                                                                                                                                                                                                                                  
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | We believe that the trigeminal and facial
      cranial nerves offer a high-bandwidth pathway for impulses to directly
      affect the central nervous system. The trigeminal and facial nerves
      project directly onto several areas of the brain, primarily the brainstem
      (trigeminal and solitary nuclei), cerebellum, cochlear nuclei and spinal
      cord. Secondary targets include the limbic system, basal ganglia and
      thalamus. We believe that this range of projections allows impulses be
      sent through sites regulating dozens of functions.
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | Unlike Deep Brain Stimulation devices,
      implantable vagal nerve devices and other invasive forms of electrical
      stimulation, the tongue allows for neurostimulation to be delivered
      non-invasively and portably. This opens the door for integration of
      neurostimulation with a wide range of therapies previously unexplored for
      neurological rehabilitation.                                                                                                                                                                                      

Reimbursement

If we complete our clinical trials and obtain FDA clearance,
and ultimately receive customer orders for the PoNS device, we plan to submit
applications for appropriate reimbursement codes so that insurers, including
Medicare and Medicaid, are able to pay for the device. We plan to seek coverage
and reimbursement of the PoNS device from public payers, such as Medicare and
Medicaid, as well as private payers. There are complex laws, regulations and
guidance that set forth Medicare coverage and reimbursement policies. To help us
navigate the regulatory complexities, we have engaged consultants to assist us
with our reimbursement strategy.

From time to time, Congress enacts laws that impact Medicare
coverage and reimbursement policy. In addition, the Centers for Medicare &
Medicaid Services, or CMS, regularly engage in rulemaking activities and issues
instructions and guidance that may affect Medicare coverage and reimbursement
policy. Similarly, the federal and state governments may enact future laws or
issue regulations or guidance that may impact Medicaid coverage and
reimbursement policies, or the coverage and reimbursement policies of private
insurers. We must ensure that we are in full compliance with all applicable
requirements, and that we remain abreast of potential legislative or regulatory
developments that could impact its business. For all payers, the PoNS device
must fit within an identifiable coverage category and fully meet the
requirements of such category.

Once we complete our clinical trials and obtain FDA clearance,
and ultimately receive customer orders for the PoNS device, we intend to seek
coverage for the PoNS device under the Medicare part B durable medical
equipment benefit. This will involve ensuring that the PoNS device meets all of
the criteria for coverage under that benefit. In addition, as part of the
coverage process, we may have to submit an application request to CMS to revise
the Healthcare Common Procedure Coding System, or HCPCS, level II national code
set so that the PoNS device becomes eligible to be covered and reimbursed, not
only by Medicare, but by other public and private payers. The HCPCS Level II
Code Set is a standardized coding set used for claims submitted to public and
private payers that identifies particular products, supplies and services. At
present, we do not believe that the PoNS device would fit easily within an
existing HCPCS code. Thus, we are considering submitting a request to CMS for a
new HCPCS code and are evaluating our options with our consultants. An applicant
can request that (1) a new permanent code be added to the HCPCS level II
national code set; (2) the language used to describe an existing code be
modified; or (3) an existing code be deleted. However, prior to submitting its
coding request application, we must satisfy several criteria, including but not
limited to receiving documentation of the FDAs approval of the device and
having sufficient claims activity or volume in the United States (evidenced by 3
months of marketing activity). The national codes are updated annually. Coding
requests must be received by January 3 of the current year to be considered for
the January update of the following year.

If we do submit such a request for a new HCPCS code, it will be
reviewed by the CMS HCPCS Workgroup, which is comprised of representatives of
CMS, Medicaid state agencies, and the Pricing, Data Analysis and Coding
contractor. The HCPCS Workgroup meets monthly and determines whether each coding
request warrants a change to the HCPCS national coding set.

In addition, Medicare and other insurers must find that the
PoNS device is medically reasonable and necessary for the treatment of
patients illness or injuries. If Medicare and other insurers find that the
PoNS device does not meet their medical necessity criteria, it will not be reimbursed. Medicare
and commercial insurers must also develop a payment amount for the PoNS device.
If that amount is inadequate to cover the costs of the PoNS device, healthcare
providers will be unlikely to use this device.

9

---

Deployment

Our PoNS device has a design feature that stops delivering
therapy every fourteen weeks. This is expected to require patients to return to
their physician or physical therapy center, or PTC, for assessment of their
progress and reestablishment of challenging physical therapy to achieve higher
goals. We currently expect the device to be inspected visually by the physical
therapist, reset for another fourteen weeks of treatment, and the tongue array
would be replaced by a new one to ensure no degradation of the electrodes
occurs. We expect this business model feature to ensure proper support for
patients in the early phase of their therapy.

We expect physicians will be informed to prescribe both the
PoNS device and the local trained PTCs for their patients to receive the
PoNS device and certified their training. We anticipate supporting the launch
of the PoNS device with the development and implementation of a hub services center to
help facilitate the healthcare transaction.

Upon discharge from the PTC, patients are expected to be
monitored in their home therapy through the PTCs. At the end of their prescribed
treatment, we expect patients to be directed back to their physician for
assessment and then return to the PTC for additional treatment as well as
replacement of the tongue array if the fourteen weeks have expired.

PoNS in the U.S. Army

If it ultimately decides to purchase PoNS devices from us, we
expect that the U.S. Army would deploy the device to Active Duty Personnel
through their rehabilitation centers under orders from the central medical
command. All personnel are expected to be certified PoNS trainers supported by
live, paper and video-based training materials developed through this project by
the U.S. Army.

We have also approached the Canadian and United Kingdom Armed
Forces to discuss their support of a similar program in Canada and discussions
are ongoing. We also intend to pursue other military organizations in relevant
countries based on need and size of potential deployment.

PoNS in Civilian Population

We believe that a key to deployment success will be to create a
national framework of PoNS-trained Physical Therapists (PTs). We have developed
a training certification program where PTs can become certified PoNS therapists
after on-line and in-person training. We expect there to be a strong financial
incentive for the PT community to partner with us because PoNS training offers
substantial opportunity for growth for the PTs. We anticipate that PTs will be
able to use existing reimbursement codes for the physical therapy portion of the
therapy. As discussed above, we plan to apply for reimbursement codes for the
PoNS device.

We will concentrate our efforts in the United States, Canadian
and UK marketplaces as first launch markets. We are currently uncertain which of
these three markets will launch first, primarily due to the relative speed of
the regulatory process, and there is no assurance that any will launch at all.
Following the initial launch of marketplaces, we intend to commercialize the
PoNS device in the rest of Europe, Australia and Japan as second phase
countries (2018-2019) and Brazil, India and other markets as phase III countries
(2019-2020). Previously, we disclosed that we intended to commercialize the
PoNS device in the phase II countries in 2017 and the phase III countries in
2018. This change is based on the timing of our current clinical trial.

In November 2014 we signed a development and distribution
agreement with Altair (a Russian company based in Moscow) to apply for
registration and distribute the PoNS device in the territories of the former
Soviet Union. Thus far the device has received a letter of conformity as an
adjunct to physical therapy in Russia and Uzbekistan following regulatory
applications to the health authorities of these two countries.

10

---

Licensed Intellectual Property

Pursuant to the Second Amended and Restated Patent Sub-License
agreement dated as of June 6, 2014 entered into between ANR and NHC (the
SublicenseAgreement), ANR has granted NHC a worldwide, exclusive
license to make, have made, use, lease and sell devices utilizing certain patent
applications, which are collectively referred to as the Patent Pending Rights.
The Patent Pending Rights relate to the PoNSTM device and include the
following patents and patent applications, which cover a device that
noninvasively delivers neurostimulation through the skin or intra- orally to the
brain stem via the trigeminal nerve, the facial nerve or both:

U.S. Patent
      Application No.
    Application Filing Date
    Status
    U.S. Patent No.
    Issue
      Date
    Subject Matter12/348,301
    1/4/2009
    Issued
    8,849,407
    9/30/2014
    non-invasive neurostimulation of the skin
      combined with simultaneous physical therapy to provide neurorehabilitation
      of a patient to treat various maladies including, e.g., TBI, stroke and
      Alzheimers disease14/340,144
    7/24/2014
    Issued
    8,909,345
    12/9/2014
    non- invasive neurostimulation within a
      patients mouth combined with physical therapy to provide
      neurorehabilitation of a patient to treat various maladies including,
      e.g., TBI, stroke, and Alzheimers disease14/341,141
    7/25/2014
    Issued
    9,020,612
    4/28/2015
    non- invasive neurostimulation within a
      patients mouth combined with cognitive therapy to provide
      neurorehabilitation of a patient resulting in improved reading
      comprehension and increased attention span as well as the treatment
      various maladies including, but not limited to, TBI, stroke, and
      Alzheimers disease14/615,766
    2/6/2015
    Pending
    N/A
    N/A
    non- invasive neurostimulation within a
      patients mouth combined with stimulation of the patients vision,
      hearing, vestibular systems, or somatosensory systems for the treatment of
      tinnitus14/689,462
    4/17/2015
    Pending
    N/A
    N/A
    non- invasive neurostimulation of a patients
      skin combined with cognitive therapy to provide neurorehabilitation of a
      patient resulting in improved reading comprehension and increased
      attention span as well as the treatment various maladies including, e.g.,
      TBI, stroke, and Alzheimers disease14/815,171
    7/31/2015
    Pending
    N/A
    N/A
    non- invasive neurostimulation of a patients
      mouth combined with therapy to provide neurorehabilitation of a patient,
      with a focus on features of a neurostimulation device61/019,061 (Provisional)
    1/4/2008
    Expired
    N/A
    N/A
    N/A61/020,265 (Provisional)
    1/10/2008
    Expired
    N/A
    N/A
    N/A


11

---

U.S. Patent Nos. 8,909,345 and 9,020,612 and U.S. Patent
Application Nos. 14/615,766, 14/689,462 and 14/815,171 claim priority to U.S.
Patent No. 8,849,407.

A U.S. provisional patent application provides the means to
establish an early effective filing date for a later filed nonprovisional patent
application. Therefore, though the two provisional applications have expired,
they establish a priority date for U.S. Patent Nos. 8,849,407, 8,909,345,
9,020,612, and U.S. Patent Application Nos. 14/615,766, 14/689,462, 14/815,171
and any future filings that claim priority. We intend to file additional
continuation applications in the USPTO claiming priority to U.S. Patent
Application Nos. 14/615,766, 14/689,462, and 14/815,171 to protect other aspects
of the PoNSTM device and related non- invasive neurostimulation
techniques.

ANR, which is one of Helius significant shareholders, holds an
interest in the Patent Pending Rights pursuant to an exclusive license from the
inventors. U.S. Patent Application Nos. 14/615,766, 14/689,462, 14/815,171 are
included in the exclusive license as the exclusive license agreement covers (i)
U.S. Patent Application No. 12/348,301 and Provisional Application No.
61/019,061, (ii) any patents issuing therefrom and (iii) any patents claiming
priority to U.S. Patent Application No. 12/348,301 or Provisional Application
No. 61/019,061, which U.S. Patent Application Nos. 14/615,766, 14/689,462,
14/815,171 claim priority through such provisional application as well as
through Provisional Application 61/020,265.

In addition, ANR has agreed that ownership of any improvements,
enhancements or derivative works of the Patent Pending Rights that are developed
by NHC or ANR shall be owned by NHC, provided that if NHC decides not to patent
such improvements, ANR may choose to pursue patent rights independently.
Pursuant to the Sublicense Agreement, NHC has agreed to pay ANR royalties equal
to 4% of NHCs revenues collected from the sale of devices covered by the Patent
Pending Rights and services related to the therapy or use of devices covered by
the Patent Pending Rights in therapy services. The Sublicense Agreement provides
that the sublicense granted by ANR to NHC, if in good standing, shall not be
cancelled, limited or impaired in any way should there be a termination of the
master license granted by the inventors to ANR, which was acknowledged by the
inventors in the Sublicense Agreement. On June 6, 2014, NHC and ANR entered into
a second amended and restated sublicense agreement, or the Second Sublicense
Agreement, which acknowledges the Reverse Merger (see Our Corporate History -
Acquisition of NeuroHabilitation Corporation and Concurrent Financing below),
and adds us as a party to the agreement.

The license of the Patent Pending Rights are subject to the
right of the government of the United States, which funded certain research
relating to the development of the PoNSTM device, to a nonexclusive,
non- transferable, irrevocable, paid- up license to use the Patent Pending
Rights for governmental purposes. In addition, NHC has granted a perpetual,
royalty-free license to the Patent Pending Rights back to ANR for non- profit
research and development activities which do not compete with NHCs business and
to produce and derive revenues from devices and services in connection with
investigational uses of the PoNSTM device and related technology.

The license of the Patent Pending Rights is also subject to the
terms of the CRADA. In the event that Helius is not willing or is unable to
commercialize the PoNSTM technology within four years from the
expiration of the CRADA, the Company is required to transfer possession,
ownership and sponsorship/holdership of the regulation application, regulatory
correspondence and supporting regulatory information related technology to
USAMRMC and grant the U.S. Government a non-exclusive, irrevocable license to
any patent, copyright, data rights, proprietary information or regulatory
information for the U.S. Government to commercialize the technology.

12

---

Company Owned Intellectual Property

On July 17, 2015, the Company announced that the USPTO issued
the Company its first patent related to the design of the current
PoNSTM device. U.S. Patent No. 9,072,889, Systems for Providing
Non-Invasive Neurorehabilitation of a Patient, issued on July 7, 2015, is the
first patent Helius has received related specifically to the new device design.

The Company filed 27 U. S. patent applications related to
various technical and ornamental aspects of the PoNSTMdevice. The
Company filed eleven non-provisional patent applications that describe various
technical features in the current version device and 16 design patent
applications describing various ornamental designs. Helius is the sole assignee
for these 27 U.S. patent filings. Prior to issuance, once the USPTO determines
that a patent application meets all of the statutory requirements for
patentability it provides a notice of allowance. In addition to the first issued
patent (U.S. Patent No. 9,072,889), the USPTO has issued three utility patents,
16 design patents and provided notices of allowance for utility applications as
summarized in the table below:

U.S. Patent Application No.
    Application Filing
      Date
    Status
    U.S. Patent No.
    Issue Date
    Subject Matter14/558,768
    12/3/2014
    Issued
    9,072,889
    7/7/2015
    Utility application covering overall system
      design, including controller and mouthpiece14/559,123
    12/3/2014
    Issued
    9,272,133
    3/1/2016
    Utility application covering strain relief
      mechanisms for the connection between the mouthpiece and the controller14/558,787
    12/3/2014
    Issued
    9,227,051
    1/5/2016
    Utility application covering shape of the
      mouthpiece14/558,789
    12/3/2014
    Issued
    9,283,377
    3/15/2016
    Utility application covering center of gravity
      of the mouthpiece14/559,080
    12/3/2014
    Allowed
    TBD
    TBD
    Utility application covering structural support
      of the mouthpiece14/559,105
    12/3/2014
    Allowed
    TBD
    TBD
    Utility application covering glue wells of the
      mouthpiece29/510,741
    12/3/2014
    Issued
    D750264
    2/23/2016
    Design application covering an alternative
      version of the current PoNS device (over-ear double boom design)29/510,742
    12/3/2014
    Issued
    D749746
    2/16/2016
    Design application covering an alternative
      version of the current PoNS device (overhead minimal interference
      design)29/510,743
    12/3/2014
    Issued
    D752236
    3/22/2016
    Design application covering system design used
      in the current PoNS device29/510,745
    12/3/2014
    Issued
    D750265
    2/23/2016
    Design
      application covering an alternative mouthpiece not used in the current
      PoNS device


13

---

U.S. Patent Application No.
    Application Filing
      Date
    Status
    U.S. Patent No.
    Issue Date
    Subject Matter29/510,754
    12/3/2014
    Issued
    D750794
    3/1/2016
    Design application covering the controller used
      in the PoNS device29/510,755
    12/3/2014
    Issued
    D751215
    3/8/2016
    Design application covering an alternative
      controller not used in the current PoNS device29/510,746
    12/3/2014
    Issued
    D750266
    2/23/2016
    Design application covering an alternative
      mouthpiece not used in the current PoNS device29/510,749
    12/3/2014
    Issued
    D750268
    2/23/2016
    Design application covering an alternative
      mouthpiece not used in the current PoNS device29/510,747
    12/3/2014
    Issued
    D751213
    3/8/2016
    Design application covering an alternative
      mouthpiece not used in the current PoNS device29/510,748
    12/3/2014
    Issued
    D750267
    2/23/2016
    Design application covering an alternative
      mouthpiece not used in the current PoNS device29/510,750
    12/3/2014
    Issued
    D753315
    4/5/2016
    Design application covering mouthpiece used in
      the current PoNS device29/510,751
    12/3/2014
    Issued
    D751722
    3/15/2016
    Design application covering an alternative
      controller not used in the current PoNS device29/510,752
    12/3/2014
    Issued
    D752766
    3/29/2016
    Design application covering an alternative
      controller not used in the current PoNS device29/510,753
    12/3/2014
    Issued
    D753316
    4/5/2016
    Design application covering an alternative
      controller not used in the current PoNS device29/510,744
    12/3/2014
    Issued
    D760397
    6/28/2016
    Design application covering system design used
      in the current PoNS device29/510,756
    12/3/2014
    Issued
    D759830
    6/21/2016
    Design application covering system design used
      in the current PoNS device


Additionally, Helius has filed three international
applications, and 14 foreign design applications: seven in Canada, three in
China, three in Russia, and one community design in Europe. The following three
applications filed in China, which have been assigned to China Medical Systems Holdings LTD. pursuant
to an asset purchase agreement (the StrategicAgreement) dated
effective October 9, 2015 with A&B have issued:

14

---

Chinese Patent Application
      No.
    Application Filing
      Date
    Status
    Chinese Patent
      No.
    Issue Date
    Subject Matter201530177804.4
    6/3/2015
    Issued
    CN303597712S
    2/24/2016
    Design application covering the system design
      currently used in the PoNSTM4.0 device201530178171.9
    6/3/2015
    Issued
    CN303597713S
    2/24/2016
    Design application covering the mouthpiece
      design currently used in the PoNSTM4.0 device201530177398.1
    6/3/2015
    Issued
    CN303597711S
    2/24/2016
    Design application covering the controller
      design currently used in the PoNSTM4.0 device


Further, the three design applications filed in Russia have
been allowed, and the Canadian Design applications and  European community design have issued:

Russian Design Application No.
      Application Filing Date
      Status
      Russian Patent No.
      Issue Date
      Subject Matter2015501883
      6/3/2015
      Allowed
      TBD
      TBD
      Design application covering 
        the
        system design currently 
        used in the PoNSTM4.0 
        device2015501882
      6/3/2015
      Allowed
      TBD
      TBD
      Design application covering 
        the
        mouthpiece design 
        currently used in the 
        PoNSTM4.0
        device2015501881
      6/3/2015
      Allowed
      TBD
      TBD
      Design application covering 
        the
        controller design 
        currently used in the 
        PoNSTM4.0
        deviceCanadian Design
        Application No.
      Application
        Filing Date
      Status
      Canadian
        Patent No.
      Issue Date
      Subject Matter162676
      6/2/2015
      Issued
      162676
      2/29/2016
      Design application covering system design used in the current PoNSTM device162672
      6/2/2015
      Issued
      162672
      2/29/2016
      Design application covering an alternative mouthpiece not used in the current PoNSTM device162671
      6/2/2015
      Issued
      162671
      2/29/2016
      Design application covering an alternative mouthpiece not used in the current PoNSTM device162674
      6/2/2015
      Issued
      162674
      2/29/2016
      Design application covering mouthpiece used in the current PoNSTM device162675
      6/2/2015
      Issued
      162675
      2/29/2016
      Design application covering an alternative controller not used in the current PoNSTM device162670
      6/2/2015
      Issued
      162670
      2/29/2016
      Design application covering the controller used in the PoNSTM device162673
      6/2/2015
      Issued
      162673
      2/29/2016
      Design application covering system design used in the current PoNSTM deviceEU Community Design Application No.
      Application Filing
            Date
      Status
      EU CommunityDesign
            Reg. No.
      **Issue Date**
      Subject Matter002712026
      6/3/2015
      Issued
      002712026
      9/4/2015
      Design application covering 
        several aspects of the 
        system design currently 
        used in the
        PoNSTM4.0 
        device


Currently, Helius uses four trademarks in connection with the
operation of the business: PoNSTM, NeuroHabilitation, NHC and Helius
Medical Technologies. Helius owns the rights to the PoNSTM mark by
virtue of an assignment agreement having an effective date of October 27, 2014
and entered into with ANR and the inventors of the PoNSTMtechnology.
Helius is the sole owner of the rights in the NeuroHabilitation and NHC
trademarks, and Helius is the owner of the rights in the Helius Medical
Technologies mark. On October 31, 2014, Helius filed trademark applications in
the USPTO for these four trademarks.

On January 7, 2015, Helius filed trademark applications with
the Canada Intellectual Property Office, claiming priority to the corresponding
U.S. applications filed on October 31, 2014. The Company is the owner of the
rights in the NeuroHabilitation, NHC, and PoNS marks in Canada, and Helius is
the owner of the rights in the Helius Medical Technologies mark in Canada. The
Company has also applied for the PoNS trademark in Canada, Europe, Russia and
China.

We take precautions to safeguard our intellectual property, and
it has been and may be the subject of lawsuits. See Part I Item 3, Legal
Proceedings.

15

---

Government Regulation

Our products under development and our operations are subject
to significant government regulation. In the United States, our products are
regulated as medical devices by the FDA and other federal, state, and local
regulatory authorities. The following is a general description of the review and
clearance process of the FDA for medical devices.

FDA Regulation of Medical Devices

The FDA and other U.S. and foreign governmental agencies
regulate, among other things, the following activities with respect to medical
devices:

| |  | design, development and manufacturing;                                                                                                                                      
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                             
| |  | testing, labeling, content and language of
      instructions for use and storage;                                                                                          
| |   |                                                                                                                                                                             
| |  | clinical trials;                                                                                                                                                            
| |   |                                                                                                                                                                             
| |  | product storage and safety;                                                                                                                                                 
| |   |                                                                                                                                                                             
| |  | marketing, sales and distribution;                                                                                                                                          
| |   |                                                                                                                                                                             
| |  | pre-market clearance and approval;                                                                                                                                          
| |   |                                                                                                                                                                             
| |  | record keeping procedures;                                                                                                                                                  
| |   |                                                                                                                                                                             
| |  | advertising and promotion;                                                                                                                                                  
| |   |                                                                                                                                                                             
| |  | recalls and field safety corrective actions;                                                                                                                                
| |   |                                                                                                                                                                             
| |  | post-market surveillance, including reporting of deaths
      or serious injuries and malfunctions that, if they were to recur, could
      lead to death or serious injury;
| |   |                                                                                                                                                                             
| |  | post-market approval studies; and                                                                                                                                           
| |   |                                                                                                                                                                             
| |  | product import and export.                                                                                                                                                  

In the United States, numerous laws and regulations govern all
the processes by which medical devices are brought to market and marketed. These
include the FD&C Act and the FDAs implementing regulations, among others.

The FDA Review, Clearance and Approval Process

Each medical device we seek to commercially distribute in the
United States must first receive either clearance under Section 510(k) of the
FD&C Act, receive de novo down-classification, or pre-market
approval, or PMA, from the FDA, unless specifically exempted by the FDA. FDA
review and approval is required for each application of a device, regardless of
whether the device has been approved for other applications. The FDA classifies
all medical devices into one of three classes. Devices deemed to pose the lowest
risk are categorized as either Class I or II, which requires the manufacturer to
submit to the FDA a 510(k) pre-market notification submission requesting
clearance of the device for commercial distribution in the United States, unless
the device is exempted from this requirement. Devices deemed by the FDA to pose
the greatest risk, such as life sustaining, life-supporting or implantable
devices, or devices deemed not substantially equivalent to a previously 510(k)
cleared device are categorized as Class III and require submission and approval
of a PMA application.

In the 510(k) clearance process, the FDA must determine that a
proposed device is substantially equivalent to a device legally on the market,
known as a predicate device, with respect to intended use, technology and
safety and effectiveness, in order to clear the proposed device for marketing.
Clinical data is sometimes required to support a determination of substantial
equivalence. The PMA pathway requires an applicant to demonstrate the safety and
effectiveness of the device based, in part, on extensive data, including, but
not limited to, technical, preclinical, clinical trial, manufacturing and
labeling data. The PMA process is typically required for devices that are deemed
to pose the greatest risk, such as life-sustaining, life-supporting or implantable devices. However, some devices are
automatically subject to the PMA pathway regardless of the level of risk they
pose, because they have not previously been classified into a lower risk class
by the FDA. Manufacturers of these devices may request that the FDA review such
devices in accordance with the de novo classification procedure, which
allows a manufacturer whose novel device would otherwise require the submission
and approval of a PMA prior to marketing to request down-classification of the
device on the basis that the device presents low or moderate risk. If the FDA
agrees with the down-classification, the applicant will then receive approval to
market the device. This device type can then be used as a predicate device for
future 510(k) submissions.

16

---

We intend to utilize the de novo classification
procedures to seek marketing authorization for the PoNS device, because there
is currently no predicate cleared or approved by the FDA for commercial
distribution and no existing classification decision by the FDA for such a
device. The process of obtaining regulatory clearances or approvals, or
completing the de novo classification process, to market a medical device
can be costly and time consuming, and we may not be able to successfully obtain
pre-market reviews on a timely basis, if at all.

If the FDA requires us to go through a lengthier, more rigorous
examination for the PoNS device, introducing the product could be delayed or
canceled, which could cause our launch to be delayed. In addition, the FDA may
determine that the PoNS device requires the more costly, lengthy and uncertain
PMA process. For example, if the FDA disagrees with our determination that the
de novo classification procedures are the appropriate path to obtain
marketing authorizations for the PoNS device, the FDA may require us to submit
a PMA application, which is generally more costly and uncertain and can take
from one to three years, or longer, from the time the application is submitted
to the FDA until an approval is obtained. Further, even with respect to those
future products where a PMA is not required, we cannot be certain that we will
be able to obtain 510(k) clearances with respect to those products.

510(k) Clearance Process

To obtain 510(k) clearance, we must submit a pre-market
notification to the FDA demonstrating that the proposed device is substantially
equivalent to a previously-cleared 510(k) device or is a device that was in
commercial distribution before May 28, 1976 for which the FDA has not yet called
for the submission of PMA applications. The FDAs 510(k) clearance process
usually takes from three to 12 months from the date the application is submitted
and filed with the FDA, but may take significantly longer and clearance is never
assured. Although many 510(k) pre-market notifications are cleared without
clinical data, in some cases, the FDA requires significant clinical data to
support substantial equivalence. In reviewing a pre-market notification
submission, the FDA may request additional information, including clinical data,
which may significantly prolong the review process.

After a device receives 510(k) clearance, any subsequent
modification of the device that could significantly affect its safety or
effectiveness, or that would constitute a major change in its intended use, will
require a new 510(k) clearance or could require PMA. The FDA requires each
manufacturer to make this determination initially, but the FDA may review any
such decision and may disagree with a manufacturers determination. If the FDA
disagrees with a manufacturers determination, the FDA may require the
manufacturer to cease marketing and/or recall the modified device until 510(k)
clearance or PMA is obtained. Under these circumstances, the FDA may also
subject a manufacturer to significant regulatory fines or other penalties. In
addition, the FDA is currently evaluating the 510(k) process and may make
substantial changes to industry requirements, including which devices are
eligible for 510(k) clearance, the ability to rescind previously granted 510(k)s
and additional requirements that may significantly impact the process.

De novo Classification Process

If a previously unclassified new medical device does not
qualify for the 510(k) pre-market notification process because no predicate
device to which it is substantially equivalent can be found, the device is
automatically classified Class III regardless of the level of risk it poses. The
Food and Drug Administration Modernization Act of 1997 established a new route
to market for low to moderate risk medical devices that are automatically placed
into Class III due to the absence of a predicate device, called the Request for
Evaluation of Automatic Class III Designation, or the de novo
classification procedure. This procedure allows a manufacturer whose novel
device is automatically classified into Class III to request down-classification
of its medical device into Class I or Class II on the basis that the device
presents low or moderate risk, rather than requiring the submission and approval
of a PMA application. Prior to the enactment of the Food and Drug Administration
Safety and Innovation Act, or FDASIA, in July 2012, a medical device could only
be eligible for de novo classification if the manufacturer first
submitted a 510(k) premarket notification and received a determination from the
FDA that the device was not substantially equivalent. The FDASIA streamlined the
de novo classification pathway by permitting manufacturers to request de novo classification directly without first
submitting a 510(k) premarket notification to the FDA and receiving a not
substantially equivalent determination. Under the FDASIA, the FDA is required to
classify the device within 120 days following receipt of the de novo application. If the manufacturer seeks reclassification into Class II, the
manufacturer must include a draft proposal for special controls that are
necessary to provide a reasonable assurance of the safety and effectiveness of
the medical device. In addition, the FDA may reject the reclassification
petition if it identifies a legally marketed predicate device that would be
appropriate for a 510(k) or determines that the device is not low to moderate
risk or that general controls would be inadequate to control the risks and
special controls cannot be developed.

17

---

We plan to utilize the de novo classification process to
obtain marketing authorization for the PoNS device under development, and we
plan to seek Class II classification. In order to be placed in Class II, the FDA
would need reasonable assurance of safety and effectiveness of the PoNS device.
Under Class II, general controls (e.g., premarket notification) and special
controls (e.g., specific performance testing) would be applicable. Our goal
would be to complete in six months a safety and effectiveness clinical trial
using the PoNS device, initially only for the treatment of balance disorder in
patients with mild to moderate TBI and balance disorder associated with MS. Our
overall goal for submission of the de novo application and FDA clearance
of a 510(k) would be 24 months from December 2014. The application to the FDA
will be made after the completion of the registration trial, which we anticipate
will be completed in the first quarter of calendar year 2017. Originally, we
anticipated that the registration trial would be completed at the end of 2015,
but that timing was revised due to slower than expected enrollment. We have
invested resources to expand recruiting to recoup for time lost. It will take us
approximately four weeks to prepare the premarket notification to the FDA. We
thus anticipate that we will be applying for clearance in the first half of
calendar year 2017. To the extent the FDA completes its review in 90 days, we
anticipate clearance by the third quarter of calendar year 2017.

Obtaining FDA clearance, de novo down-classification, or
approval for medical devices can be expensive and uncertain, generally takes
from several months to several years, and generally requires detailed and
comprehensive scientific and clinical data. Notwithstanding the expense, these
efforts may never result in FDA clearance. Even if we were to obtain regulatory
clearance, it may not be for the uses we believe are important or commercially
attractive, in which case we would not be permitted to market our product for
those uses.

Pre-market Approval Process

A PMA application must be submitted if the medical device is in
Class III (although the FDA has the discretion to continue to allow certain
pre-amendment Class III devices to use the 510(k) process) or cannot be cleared
through the 510(k) process. A PMA application must be supported by, among other
things, extensive technical, preclinical, clinical trial, manufacturing and
labeling data to demonstrate to the FDAs satisfaction the safety and
effectiveness of the device for its intended use.

After a PMA application is submitted and filed, the FDA begins
an in-depth review of the submitted information, which typically takes between
one and three years, but may take significantly longer. During this review
period, the FDA may request additional information or clarification of
information already provided. Also during the review period, an advisory panel
of experts from outside the FDA may be convened to review and evaluate the
application and provide recommendations to the FDA as to the approvability of
the device. In addition, the FDA will conduct a pre-approval inspection of the
manufacturing facility to ensure compliance with Quality System Regulations, or
QSR, which impose elaborate design development, testing, control, documentation
and other quality assurance procedures in the design and manufacturing process.
The FDA may approve a PMA application with post-approval conditions intended to
ensure the safety and effectiveness of the device including, among other things,
restrictions on labeling, promotion, sale and distribution and collection of
long-term follow-up data from patients in the clinical study that supported
approval. Failure to comply with the conditions of approval can result in
materially adverse enforcement action, including the loss or withdrawal of the
approval. New PMA applications or supplements are required for significant
modifications to the manufacturing process, labeling of the product and design
of a device that is approved through the PMA process. PMA supplements often
require submission of the same type of information as an original pre-market
approval application, except that the supplement is limited to information
needed to support any changes from the device covered by the original PMA
application, and may not require as extensive clinical data or the convening of
an advisory panel.

Clinical Trials

A clinical trial is typically required to support a PMA
application and is sometimes required for a 510(k) pre-market notification.
After a trial begins, the FDA may place it on hold or terminate it if, among
other reasons, it concludes that the clinical subjects are exposed to an
unacceptable health risk. Any trials we conduct must be conducted in accordance
with FDA regulations as well as other federal regulations and state
laws concerning human subject protection and privacy. Moreover, the results of a
clinical trial may not be sufficient to obtain clearance or approval of the
product, and separate clinical trials will be necessary to obtain clearance for
multiple uses of one device.

18

---

Risks of Delay from the FDA Clearance Process and
Regulatory Compliance Risks

The FDA can delay, limit or deny clearance or approval of a
device for many reasons, including:

| |  | we may not be able to demonstrate to the FDAs
      satisfaction that our product candidate is safe and effective, sensitive
      and specific diagnostic tests, for its intended users;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                           
| |  | the data from our pre-clinical studies and
      clinical trials may be insufficient to support clearance or approval,
      where required; and                                          
| |   |                                                                                                                                                                                           
| |  | the manufacturing process or facilities we use
      may not meet applicable requirements.                                                                                                

In addition, the FDA may change its clearance and approval
policies, adopt additional regulations or revise existing regulations, or take
other actions which may prevent or delay approval or clearance of our products
under development or impact our ability to modify our currently approved or
cleared products on a timely basis. For example, in response to industry and
healthcare provider concerns regarding the predictability, consistency and rigor
of the 510(k) regulatory pathway, the FDA initiated an evaluation of the
program, and in January 2011, announced several proposed actions intended to
reform the review process governing the clearance of medical devices. The FDA
intends these reform actions to improve the efficiency and transparency of the
clearance process, as well as bolster patient safety. In addition, as part of
the FDASIA the U.S. Congress reauthorized the Medical Device User Fee Amendments
with various FDA performance goal commitments and enacted several Medical
Device Regulatory Improvements and miscellaneous reforms that are further
intended to clarify and improve medical device regulation both pre- and
post-approval. Any delay in, or failure to receive or maintain, clearance or
approval for our product candidate could prevent us from generating revenue from
our product candidate and adversely affect our business operations and financial
results.

Even if we obtain FDA clearance for our PoNS device, we will
still be required to pursue a 510(k) clearance, de novo
down-classification, or PMA for any future product which will delay future
product launches and would likely place substantial restrictions on how our
device is manufactured, marketed and sold. For example, the manufacture of
medical devices must comply with FDAs QSR. In addition, manufacturers must
register their manufacturing facilities, list the products with FDA, and comply
with requirements relating to labeling, marketing, complaint handling, adverse
event and medical device reporting, reporting of corrections and removals, and
import and export. FDA monitors compliance with the QSR and these other
requirements through periodic inspections. If our facilities or those of our
manufacturers or suppliers are found to be in violation of applicable laws and
regulations, or if we or our manufacturers or suppliers fail to take
satisfactory corrective action in response to an adverse inspection, the
regulatory authority could take enforcement action, including any of the
following sanctions:

| |  | untitled letters, warning letters, fines, injunctions,
      consent decrees and civil penalties;                               
| | - | --------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                 
| |  | customer notifications or repair, replacement, refunds,
      detention or seizure of our products;                             
| |   |                                                                                                                                 
| |  | operating restrictions or partial suspension or total
      shutdown of production;                                             
| |   |                                                                                                                                 
| |  | refusing or delaying requests for 510(k) marketing
      clearance or pre-market approvals of new products or modified products;
| |   |                                                                                                                                 
| |  | withdrawing 510(k) marketing clearances or pre-market
      approvals that have already been granted;                           
| |   |                                                                                                                                 
| |  | refusing to provide Certificates for Foreign Government;                                                                        
| |   |                                                                                                                                 
| |  | refusing to grant export approval for our products; or                                                                          
| |   |                                                                                                                                 
| |  | pursuing criminal prosecution.                                                                                                  

19

---

Additionally, FDA and other regulatory authorities have broad
enforcement powers. Regulatory enforcement or inquiries, or other increased
scrutiny on us, could affect the perceived safety and efficacy of our product
candidate and dissuade our customers from using our product candidate, if and
when they are authorized for marketing.

Pervasive and Continuing U.S. Food and Drug
Administration Regulation

After a medical device is placed on the market, numerous FDA
regulatory requirements apply, including, but not limited to the following:

| |  | the QSR, which requires manufacturers to follow design,
      testing, control, documentation and other quality assurance procedures
      during the manufacturing process;                                                                                                                                                          
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                       
| |  | establishment registration, which requires establishments
      involved in the production and distribution of medical devices, intended
      for commercial distribution in the United States, to register with the
      FDA;                                                                                                      
| |   |                                                                                                                                                                                                                                                                                                                                       
| |  | medical device listing, which requires manufacturers to
      list the devices they have in commercial distribution with the FDA;                                                                                                                                                                                                     
| |   |                                                                                                                                                                                                                                                                                                                                       
| |  | correction and removal reporting regulations which
      require that manufacturers report to the FDA field corrections and product
      recalls or removals undertaken to reduce a risk to health posed by the
      device or remedy a violation of the FD&C Act that may present a risk
      to health;                          
| |   |                                                                                                                                                                                                                                                                                                                                       
| |  | labeling regulations, which prohibit misbranded devices
      from entering the market, as well as prohibit the promotion of products
      for unapproved or off-label uses and impose other restrictions on
      labeling;                                                                                                     
| |   |                                                                                                                                                                                                                                                                                                                                       
| |  | clearance or approval of product modifications that could
      significantly affect safety or efficacy or that would constitute a major
      change in intended use;                                                                                                                                                                
| |   |                                                                                                                                                                                                                                                                                                                                       
| |  | post-market surveillance including Medical Device
      Reporting, which requires manufacturers report to the FDA if their device
      may have caused or contributed to a death or serious injury, or
      malfunctioned in a way that would likely cause or contribute to a death or
      serious injury if it were to recur; and
| |   |                                                                                                                                                                                                                                                                                                                                       
| |  | other post-approval restrictions or conditions.                                                                                                                                                                                                                                                                                       

Our Corporate History Highlights

Formation and Arrangement with Boomerang Oil,
Inc.

We were incorporated on March 13, 2014 under the British
Columbia Business Corporations Act, or the BCBCA, as 0996445 B.C. Ltd. On
March 25, 2014, and amended on April 8, 2014, we entered into an arrangement
agreement with Boomerang Oil, Inc. (formerly known as 0922327 B.C. Ltd.) and
0995162 B.C. Ltd. to reorganize the business structure of such three entities in
such a manner which would allow Boomerang Oil, Inc. to spin us out to become an
independent entity that is a reporting issuer in Canada and for us to complete a
reverse take-over of 0995162 B.C. Ltd. As a result of the arrangement agreement,
we became a reporting issuer in the provinces of British Columbia and Alberta.
In addition, the arrangement resulted in 0995162 B.C. Ltd. becoming our
wholly-owned subsidiary. The assets of 0995162 B.C. Ltd. consisted of cash and
0995162 B.C. Ltd.s interest in a letter agreement pursuant to which it had
agreed to acquire all of the outstanding shares of NHC, a Delaware corporation,
and to seek a listing on a recognized stock exchange.

Reincorporation in Wyoming

On May 23, 2014, we changed our name to Helius Medical
Technologies, Inc. and filed articles of continuation with the Wyoming
Secretary of State office to reincorporate from being a corporation governed by
the BCBCA to a corporation governed by the Wyoming Business Corporation Act, or
WBCA.

Acquisition of NeuroHabilitation Corporation and
Concurrent Financing

On June 13, 2014, we completed the acquisition of NHC by way of
an agreement and plan of merger. We refer to this transaction as the Reverse
Merger. Pursuant to the agreement and plan of merger, HMT Mergersub, Inc., our
wholly-owned subsidiary, merged with and into NHC with NHC as the surviving
corporation. In connection with the Reverse Merger, we issued an aggregate of
35,300,083 shares of our Class A common stock, or our common stock, to the
former shareholders of NHC. The Reverse Merger was deemed to be a capital
transaction in substance and recorded as a reverse recapitalization of
NeuroHabilitation Corporation whereby NeuroHabilitation Corporation is deemed to
be the continuing, surviving entity for accounting purposes, but through
reorganization, has deemed to have adopted the capital structure of Helius.

20

---

In connection with the Reverse Merger, we completed a
non-brokered private placement financing of $7.016 million (CAD$7.62 million) by
issuing 15.24 million subscription receipts. Pursuant to its terms, each
subscription receipt automatically converted into one unit upon satisfaction of
certain escrow release conditions, which had been satisfied. Each unit consisted
of one share of our common stock and one-half of one share purchase warrant with
each whole warrant being exercisable at CAD$1.00 per share for a period of two
years. In connection with the concurrent private placement financing, we paid
aggregate finders fees of $379,806 (CAD $412,200) and issued 824,000 finders
warrants. Each finder warrant is exercisable at CAD$1.00 per share for a period
of two years.

General Development of the Business of NeuroHabilitation
Corporation

Our primary operations are conducted through our wholly-owned
subsidiary NHC. On January 22 2013, NHC entered into a patent sub-license
agreement whereby ANR granted NHC exclusive worldwide rights to ANRs trade
secrets, knowhow, and patent pending technology for a non-invasive means for
delivering neurostimulation through the oral cavity, or the PoNS device. NHC
obtained these rights in exchange for 50% of the outstanding equity in NHC and
an obligation to pay ANR a royalty equal to 4% of any revenue collected by NHC
from (1) the sale of products covered by any claim of the patent rights to end
users and (2) services related to the therapy or use of such products in therapy
services. This agreement was subsequently amended by the Amended and Restated
Patent Sub-License and again by the Sublicense Agreement described above.

Listing of our Common Stock on the CSE, TSX and
OTCQB

Following our Reverse Merger, we obtained approval of the
listing of our common stock on the Canadian Securities Exchange (the CSE).

On April 18, 2016, our common stock was listed on the Toronto
Stock Exchange (TSX) under the symbol HSM. At the same time, we delisted our
common stock from the CSE. Our Warrants were also approved for listing on the
TSX on April 18, 2016.

Our common stock is currently quoted on the OTCQB under the
symbol HSDT.

Our shares of Class A common stock were approved for listing on
the TSX on April 18, 2016. However, some of our shares of common stock were
issued in an offshore offering in April and May of 2016 (the Offshore
Offering) in transactions exempt from the registration requirements of the
Securities Act of 1933, as amended (the Securities Act) and are listed under a
separate ticker symbol for trading on the TSX. These shares of common stock are
subject to restrictions on their resale to a U.S. person (as that term is
defined in Regulation S), or to a person in the United States, unless in a
registered transaction or pursuant to an applicable safe harbor or exemption
from registration. Certain of our warrants were also approved for listing on the
TSX on April 18, 2016. However, because only warrants issued in the Offshore
Offering in transactions exempt from the registration requirements of the
Securities Act were approved for listing on the TSX, the Warrants listed on the
TSX may not be purchased by or on behalf of a U.S. person, or by a person in the
United States, unless in a registered transaction or pursuant to an applicable
safe harbor or exemption from registration.

Employees

As of June 21, 2016, we have six full time employees and 20
full-time equivalent independent contractors.

Business Uncertainties and Going Concern Risk

To date we have not generated any revenue from the sales of
products or services. There are a number of conditions that we must satisfy
before we will be able to generate revenue, including but not limited to
successful completion of the TBI, FDA, CE Mark or Health Canada clearance of the
PoNS device for balance disorder associated with TBI, manufacturing of a commercially-viable version of the PoNS device and
demonstration of safety and effectiveness sufficient to generate commercial
orders by customers for our product. In addition, given the importance of the
U.S. Army to our early commercial plans, if the U.S. Army were to eventually
decide not to purchase our product, we would need to replace those sales in the
civilian market which will lower our early commercialization forecast. To date,
we have not achieved many of these conditions, and the successful achievement of
such conditions will require significant expenditures. Because we have not
generated any revenues, we are dependent entirely on funding from outside
investors. There is no guarantee that such funding will be available at all or
in sufficient amounts to satisfy our required expenditures. Furthermore, even if
we were able to raise sufficient capital to successfully design and manufacture
a commercially-viable version of the PoNS device and to receive FDA, CE Mark or
Health Canada clearance, we do not currently have any contract or other
arrangement to sell the PoNS device. Accordingly, we cannot know for certain
that we will ever be able to generate any revenue from the sales of products or
services.

21

---

Additionally, based on managements assessment that there is
substantial doubt about the Companys ability to continue as a going concern.
This means that there is substantial doubt that we can continue as an on-going
business for the next twelve months. While we had $2,643,937 of cash as of March
31, 2016 and we have raised an additional $7,199,781 (CAD$9,215,000) in the
Offshore Offering and private placement, and $1,409,947 (CAD$1,825,600) from the
exercise of certain warrants issued in 2014, we do not currently have sufficient
resources to accomplish all of the above conditions necessary for us to generate
revenue.

In reviewing this filing, you should carefully consider the
risks described in the section entitled Risk Factors and other risks described
throughout this Annual Report.

|ITEM 1A. | RISK FACTORS
|-------- | ------------

RISK FACTORS

An investment in our common stock involves a number of
very significant risks. You should carefully consider the following risks and
uncertainties in addition to other information in this Annual Report in
evaluating our company and its business before purchasing shares of our common
stock. Our business, operating results and financial condition could be
seriously harmed due to any of the following risks. The risks described below
may not be all of the risks facing our company. Additional risks not presently
known to us or that we currently consider immaterial may also impair our
business operations. You could lose all or part of your investment due to any of
these risks.

Risks Related to Our Company

We have a very limited operating history and have a
history of operating losses.

Helius Medical Technologies, Inc. is our holding company and it
has no material assets other than cash and cash equivalents and its ownership of
all of the outstanding shares of NHC, which is our wholly owned subsidiary. NHC
was incorporated in Delaware on January 22, 2013 and has had limited operations
to date. Since our inception, we have incurred significant net losses. As of
March 31, 2016, our accumulated deficit was approximately $26,305,263.

We are heavily dependent upon the ability and expertise
of our CEO and a very limited number of employees and the loss of such
individuals could have a material adverse effect on our business, operating
results or financial condition.

We currently have a very small management team and almost no
other employees. Our success is dependent upon the ability, expertise, judgment,
discretion and good faith of our senior management, and in particular Mr.
Philippe Deschamps, our President and Chief Executive Officer. Currently, Mr.
Deschamps is joined by Jonathan Sackier, our Chief Medical Officer, Joyce
LaViscount, our Chief Financial Officer and Chief Operating Officer, Brian
Bapty, our Vice President of Strategy and Business Development, and two others
as our only full-time employees. We also have engaged 20 full-time equivalent
persons as independent contractors. While employment agreements are customarily
used as a primary method of retaining the services of key employees, these
agreements cannot assure the continued services of such employees. Any loss of
the services of such individuals could have a material adverse effect on our
business, operating results or financial condition.

22

---

Our independent registered public accounting firm has
included an explanatory paragraph relating to our ability to continue as a going
concern in its report on our audited financial statements. We may be unable to
continue to operate without the threat of liquidation for the foreseeable
future.

In connection with our managements assessment, our report from
our independent registered public accounting firm for the fiscal year ended
March 31, 2016 includes an explanatory paragraph stating that our recurring
losses from operations and net capital deficiency raise substantial doubt about
our ability to continue as a going concern. If we are unable to obtain
sufficient funding, our business, prospects, financial condition and results of
operations will be materially and adversely affected and we may be unable to
continue as a going concern. For example, our existing capital resources will be
insufficient to fund our operations beyond the end of the fourth quarter of
calendar 2016. If we are unable to continue as a going concern, we may have to
liquidate our assets and may receive less than the value at which those assets
are carried on our consolidated financial statements, and investors will likely
lose all or a part of their investment. Future reports from our independent
registered public accounting firm may also contain statements expressing doubt
about our ability to continue as a going concern. If we seek additional
financing to fund our business activities in the future and there remains doubt
about our ability to continue as a going concern, investors or other financing
sources may be unwilling to provide additional funding on commercially
reasonable terms or at all.

We have identified a material weakness in our internal
controls over financial reporting. If we do not maintain effective internal
controls over financial reporting, we could fail to report our financial results
accurately.

We have identified material weaknesses in our internal control
over financial reporting. Under the direction of our Chief Executive Officer and
our Chief Financial Officer, our management evaluated our disclosure controls
and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities
Exchange Act of 1934, as amended (the Exchange Act), and concluded that our
disclosure controls and procedures were ineffective as of March 31, 2015, June
30, 2015, September 30, 2015, December 31, 2015, and March 31, 2016.

In April of 2016, the Board, after consulting with the
Companys management, determined that it was necessary to reevaluate the
Companys accounting relating to warrants issued as part of its private
placements conducted in April, June and July of 2015 (the 2015 Warrants), and
to restate the Companys previously reviewed, unaudited, condensed consolidated
financial statements for the three months ended June 30, 2015, the three months
and six months ended September 30, 2015, and the three and nine months ended
December 31, 2015, as a result of an error in the classification of the 2015
Warrants. The Company previously recorded the issuance of the 2015 Warrants as
equity instruments instead of liabilities. The warrant exercise prices are
denominated in U.S. dollars whereas the functional currency of the Company is
the Canadian dollar; as such, the settlement of the warrants fails the fixed for
fixed criteria of ASC 815 and they are required to be recorded as a liability at
their fair value on inception. The warrant liability is required to be
re-measured at its fair value on each reporting date with the changes in fair
value recorded in the Companys Statement of Comprehensive Loss.

The Company had previously restated its consolidated financial
statements for the periods as of and for the twelve months ended March 31, 2015
and the quarters therein and its interim condensed consolidated financial
statements for the three months ended June 30, 2015 and the three months and six
months ended September 30, 2015, as a result of the Company not previously
re-measuring the fair value of stock options awarded to non-employees that had
not yet vested. The Companys management has determined that the improper design
of controls with respect to the calculation of the fair value of the Companys
share based compensation was a deficiency in its internal control over financial
reporting. It is possible that other control deficiencies could be identified in
the future or may exist or occur without being identified. In the event
additional material weaknesses in our internal controls are discovered in the
future, they may adversely affect our ability to record, process, summarize and
report financial information timely and accurately and, as a result, our
financial statements may contain material misstatements or omissions.

We have incurred substantial net losses since our
inception and anticipate that we will continue to incur substantial net losses
for the foreseeable future. We may never achieve or sustain
profitability.

We have incurred substantial net losses since our inception.
For our fiscal years ending March 31, 2016 and March 31, 2015, we incurred a net
loss of $6,881,812 and $9,838,317, respectively, and used cash in operations of
$7,816,536 and $6,321,285 respectively. We have an accumulated deficit of
$26,305,263 and $19,423,451 as of March 31, 2016 and March 31, 2015,
respectively. Our losses have resulted primarily from costs incurred in
connection with our design, manufacturing and development, research and
development activities, stock based compensation, legal, advertising, marketing
and investor relations, and general and administrative expenses associated with
our operations. Even if we are successful in obtaining clearance from the FDA and launching our PoNS device into the
market, we expect to continue to incur substantial losses for the foreseeable
future as we continue to sell and market our current product and research and
develop, and seek regulatory approvals for, other potential product candidates.

23

---

We are subject to all of the business risks and uncertainties
associated with any new business enterprise, including under-capitalization,
cash shortages, limitations with respect to personnel, financial and other
resources, lack of revenue and the risk that we will not achieve our growth
objective. If sales revenue from our current product or any potential product
candidates that receive marketing clearance from the FDA or other regulatory
body is insufficient, if we are unable to develop and commercialize any of our
potential product candidates, or if our product development is delayed, we may
never achieve or sustain profitability.

We will require additional financing to carry out our
plan of operations and if we are unable to obtain such financing, our business
may fail.

We currently have limited working capital and liquid assets. We
held cash totaling $2,643,937 as at March 31, 2016. To date we have not
generated any revenue from the sales of products or of services. There are a
number of conditions that we must satisfy before we will be able to generate
revenue, including but not limited to completion of our clinical trial for the
treatment of balance disorder in subjects with mild to moderate TBI, FDA
clearance of the PoNS device for treating balance disorder in patients with
mild to moderate TBI, manufacturing of a commercially-viable version of the
PoNS device and demonstration of effectiveness sufficient to generate
commercial orders by customers for our product. While we are currently seeking
additional funding, we do not currently have sufficient resources to accomplish
any of these conditions necessary for us to generate revenue, and we do not
expect to generate revenue in an amount sufficient to fund our operations for
the foreseeable future. We will therefore require substantial additional funds
in order to continue to conduct the research and development and regulatory
clearance and approval activities necessary to bring our product to market, to
establish effective marketing and sales capabilities and to develop other
product candidates. Our existing capital resources will not be sufficient to
enable us to fund the completion of the development and commercialization of our
current product and our product candidates. We cannot determine with certainty
the duration and completion costs of the current or future development and
commercialization of our product candidate or if, when, or to what extent we
will generate revenues from the commercialization and sale of our current
product candidate or potential future product candidates for which we obtain
regulatory approval. We may never succeed in achieving regulatory approval for
our current product candidate and any potential future product candidates. We
may be unable to raise the additional funding to finance our business on
commercially reasonable terms, or at all. If we are unable to obtain additional
financing as needed, we may be required to reduce the scope of our operations
and pursue only those projects that can be funded through cash flows generated
from its existing operations, if any.

Raising additional capital by issuing securities or through
debt financings or licensing arrangements may cause dilution to our existing
stockholders, restrict our operations or require us to relinquish rights to our
technologies or product candidate on terms unfavorable to us.

To the extent that we raise additional capital through the sale
of equity or convertible debt securities, your ownership interest will be
diluted, and the terms may include liquidation or other preferences that
adversely affect your rights as a stockholder. Debt financing, if available, may
involve agreements that include covenants limiting or restricting our ability to
take certain actions, such as incurring additional debt, making capital
expenditures or declaring dividends. If we raise additional funds through
strategic partnerships with third parties, we may have to relinquish valuable
rights to our technologies or product candidate, future revenue streams,
research programs or product candidate, or otherwise grant licenses on terms
that are not favorable to us. If we are unable to raise additional capital when
needed, we may be required to delay, limit, reduce or terminate our product
development or commercialization efforts for our product candidate or our
preclinical product candidates, or grant rights to develop and market potential
future product candidates that we would otherwise prefer to develop and market
ourselves. Any of these events could adversely affect our ability to achieve our
product development and commercialization goals and have a material adverse
effect on our business, financial condition and results of operations.

We currently only have one product candidate, which is
still in development, and we have not obtained clearance from the FDA to
commercially distribute the device in the United States or clearance from Health
Canada to commercially distribute the device in Canada, and we may never obtain
such clearances.

Until such time, if ever, as we can generate substantial
product revenues, we expect to finance our cash needs through a combination of
public and private equity offerings, debt financings, and license and
development agreements through strategic partnerships with third parties. For example, we
recently completed a license agreement and debt and equity financing arrangement
with A&B. Under the agreements with A&B, we licensed the use of our
intellectual property in Asia, and arranged for financing through the issuance
of significant amounts of our common stock. We currently have no products
approved for commercial distribution. We currently are dependent on the
potential development of a single product which is our PoNS device for use in
the neuromodulation market. We are still developing this product, and we cannot
begin marketing and selling the device in the United States or Canada until we
obtain clearances from the FDA or Health Canada, respectively. We have not yet
submitted applications for regulatory clearance in the United States, Europe, or
Canada. The process of obtaining regulatory clearance is expensive and
time-consuming and can vary substantially based upon, among other things, the
type, complexity and novelty of a product. Changes in regulatory policy, changes
in or the enactment of additional statutes or regulations, or changes in
regulatory review for each submitted product application may cause delays in the
clearance of a product candidate or rejection of a regulatory application
altogether. The FDA has substantial discretion in the de novo review and
clearance processes and may refuse to accept any application or may decide that
our data are insufficient for clearance and require additional pre-clinical,
clinical, or other studies. In addition, varying interpretations of the data
obtained from pre-clinical and clinical testing could delay, limit, or prevent
marketing authorization from the FDA or regulatory clearance of a product
candidate. Any marketing authorization from the FDA or regulatory clearance we
ultimately obtain may be limited or subject to restrictions or post-market
commitments that render the product candidate not commercially viable. If our
attempts to obtain marketing authorization are unsuccessful, we may be unable to
generate sufficient revenue to sustain and grow our business, and our business,
financial condition, and results of operations will be materially adversely
affected.

24

---

If we are able to complete development of the PoNS device and
obtain clearance of the PoNS device for treatment of chronic balance deficit in
patients with mild to moderate TBI or chronic gait and balance deficit
associated with MS in the United States, Europe, or Canada, we plan to develop
the PoNS device to treat other indications, or symptoms caused by neurological
disorders. We would be required to commit our own resources to fund development
of any other indications and each would require separate FDA clearance. The
costs of such development efforts and FDA clearances would be substantial and
would likely require additional funding, and each such indication would be
subject to the same foregoing risks and uncertainties for FDA clearance.

We are and will continue to be dependent in significant
part on outside scientists and third-party research institutions for our
research and development in order to be able to commercialize our product
candidate.

We currently have a limited number of employees and resources
available to perform the research and development necessary to commercialize our
PoNS device and potential future product candidates. We therefore rely at
present, and will continue to rely on third-party research institution
collaborators for this capability.

Our subsidiary, NHC, is currently party to the CRADA (as
defined below) with the inventors, background patent owners and the Army
Laboratories. Pursuant to the CRADA, the Army Laboratories agree to cooperate
with NHC on research for the ongoing design and development to determine if the
PoNS device can be developed for commercial use in assisting physical therapy
in the treatment of soldiers and others with military relevant neurological
disorders, including but not limited to Tinnitus, post-traumatic stress
disorder, or PTSD, pain and any subsequent indications identified by the
parties. Under the terms of the initial CRADA, we are solely responsible to fund
and oversee clinical studies for the PoNS device and seek FDA clearance and
approval of the PoNS device. We are also solely responsible to complete the
research and development efforts necessary to commercialize our PoNS device.
However, on July 7, 2015, we announced that NHC entered into a sole-source
contractual agreement with USAMRMC to support the execution of the registration
trial for treatment of balance disorder associated with mild to moderate TBI.
The objective of this contract is to defray the costs of the registration trial.
The Army Laboratories also agreed in the January 12, 2015 amendment to our CRADA
to be responsible to support the execution of clinical studies for the PoNS
device as a treatment for mutually agreed upon military relevant neurological
disorders, which could include but not be limited to Tinnitus, PTSD, and pain
and any subsequent indications identified by the parties. The amount of such
support, if any, and the terms of such responsibility to support such clinical
studies are not yet negotiated and we have no assurance that we can ultimately
reach agreement with the Army Laboratories on such amount or terms of support,
and there can be no assurance that the Army Laboratories will not otherwise
attempt to renegotiate its responsibilities under the CRADA. The Army
Laboratories may terminate their obligations under the CRADA at any time upon 30
days prior written notice to us. If there are insufficient funds available to
cover the necessary research and development costs for our product, the Army
Laboratories could terminate the CRADA and cease research and development
efforts which could jeopardize our ability to commercialize our PoNS device.

25

---

If we fail to obtain FDA clearance for commercialization
of or otherwise fail to ensure that the PoNS device is available for purchase
by the U.S. Government by December 31, 2017, we are subject to significant risk
of loss of data, proprietary rights and to certain contractual
penalties.

Under the CRADA if we fail to obtain FDA clearance of the PoNS
device or otherwise fail to ensure that the PoNS device is available for
purchase by the U.S. Government, in each case by the expiration date under the
CRADA of December 31, 2017, we may forfeit the right to pursue commercialization
on our own. Specifically, in either such case, we will be required to (i)
transfer possession, ownership and sponsorship of any regulatory application,
and correspondence supporting the PoNS technology to the USAMRMC and (ii)
provide the U.S. Government with a non-exclusive, irrevocable license to any
patent, copyright, data rights, proprietary information and regulatory
information, in order to permit the U.S. Government to pursue commercialization
on its own. Any such loss of our ability to exclusively market and sell the
PoNS device would have a material adverse effect on our business.

Additionally, under our Strategic Agreement with A&B if we
fail to obtain FDA clearance for commercialization of or otherwise fail to
ensure that the PoNS device is available for purchase by the U.S. Government by
December 31, 2017, we are subject to a US$2,000,000 contract penalty payable to
A&B.

We may encounter substantial delays in our clinical
trials, or our clinical trials may fail to demonstrate the safety and efficacy
of our product candidate to the satisfaction of applicable regulatory
authorities.

Before obtaining marketing approval from regulatory authorities
for the sale of our product candidate, we must conduct extensive clinical trials
to demonstrate the safety and efficacy of the product candidate. Clinical
testing is expensive, time consuming and uncertain as to outcome. We cannot
guarantee that clinical trials will be conducted as planned or completed on
schedule, if at all. A failure of one or more clinical trials can occur at any
stage of testing. Delays can be costly and could negatively affect our ability
to complete a clinical trial.

There is limited market awareness of our product and the
neuromodulation market is new and uncertain.

There is currently limited market awareness of our product. In
order to succeed, we must among other things increase market awareness of our
PoNS product and implement a sales and marketing strategy. If we fail in any of
these endeavors or experience delays in pursuing them, we will not generate
revenues as planned and will need to curtail operations or seek additional
financing earlier than otherwise anticipated. In addition, should the
neuromodulation market fail to expand, it could have a materially adverse effect
on our business and financial position.

Our PoNS technology is a new untested form of
neurostimulation therapy and the medical community tends not to adopt new
therapies very rapidly, which may have a material adverse effect on our business
and financial position.

The effectiveness of our PoNS technology to treat TBI or any
other neurological disorder has not been established in studies conducted in a
controlled environment designed to produce scientifically significant results.
Accordingly, our PoNS technology is a new untested, and therefore unproven,
therapy. Unproven and untested technologies are usually more slowly adopted by
the medical community as the medical community tends to be very conservative and
does not adopt new untested therapies very rapidly. Physicians may elect not
to use our products for a variety of reasons, including:

| |  | lack or perceived lack of evidence supporting
      the beneficial characteristics of our technology;                                                    
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | limited long-term data on the use of PoNS
      technology for therapy;                                                                                 
| |  | physicians perception that there are
      insufficient advantages of our product relative to currently available
      products;                       
| |  | hospitals may choose not to purchase our
      product;                                                                                                  
| |  | group purchasing organizations may choose not
      to contract for our product, thus limiting availability of our products to
      hospital purchasers;
| |  | lack of coverage or adequate payment from
      managed care plans and other third-party payers for our product;                                         
| |  | Medicare, Medicaid or other third-party payers
      may limit or not permit reimbursement for our product; and                                          
| |  | the development of or improvement of
      competitive products.                                                                                         

If the medical community reacts in a similar fashion to
adopting our PoNS device for neurostimulation therapy, we will not be able to
generate significant revenues, if any.

26

---

In order to be successful, we must expand our products
beyond our single product by commercializing new potential product candidates,
but we may not be able to do so in a timely fashion and at expected costs, or at
all.

In order to be successful, we will need to expand our product
lines beyond our PoNS device which is currently our only product. To succeed in
our commercialization efforts, we must effectively continue product development
and testing, obtain regulatory clearances and approvals, and enhance our sales
and marketing capabilities. There is no assurance that we will succeed in
bringing any of our current or potential future product candidates to market. If
we fail in bringing our product candidate to market, or experience delays in
doing so, we will not generate revenues as planned and will need to curtail
operations or seek additional financing earlier than otherwise anticipated.

The development of additional products is subject to the risks
of failure inherent in the development of new, state of the art products,
laboratory devices and products based on new technologies. These risks include:
(a) delays in product development or manufacturing; (b) unplanned expenditures
for product development or manufacturing; (c) failure of new products to have
the desired effect or an acceptable accuracy profile; (d) emergence of superior
or equivalent products; (e) failure by any potential collaborative partners to
successfully develop products; and (f) the dependence on third parties for the
manufacture, development and sale of our products. Because of these risks, our
research and development efforts or those of potential collaborative partners
may not result in any commercially viable products. If a significant portion of
these development efforts is not successfully completed, or any products are not
commercially successful, we are less likely to generate significant revenues, or
become profitable. The failure to perform such activities could have a material
adverse effect on our business, financial condition and results of its
operations.

We can provide no assurance that the development by
others of new or improved devices or products will not result in our present and
future products from becoming obsolete.

The areas in which we plan to commercialize, distribute, and/or
sell products involves rapidly developing technology. There can be no assurance
that we will be able to establish ourselves in such fields, or, if established,
that we will be able to maintain our market position, if any. There can be no
assurance that the development by others of new or improved products will not
make our present and future products, if any, superfluous or obsolete.

Our future success depends on our ability to obtain
approval on the patent for the PoNS technology, failing which we may be unable
to protect our proprietary information and any competitive advantage which may
have a material adverse effect on our business and financial condition.

Our future success will depend, in part, on our ability to
obtain patent approval for the PoNS technology. There can be no assurance that
the patent applications made will result in the issuance of patents or that the
term of the patents will be extendable after they expire in due course, which
would prevent us from being able to protect our proprietary information and may
have a material adverse effect on our business and financial condition.

Much of our know-how and technology may not be patentable,
though they may constitute trade secrets. There can be no assurance, however,
that we will be able to meaningfully protect our trade secrets. To help protect
our intellectual property rights and proprietary technology, we require
employees, consultants, advisors and collaborators to enter into confidentiality
agreements. There can be no assurance that these agreements will provide
meaningful protection for our trade secrets, knowhow or other proprietary
information in the event of any unauthorized use or disclosure.

Our intellectual property has been and may be the subject of
lawsuits. See Part I Item 3,Legal Proceedings.

If our intellectual property protection is inadequate,
competitors may gain access to our technology and undermine our competitive
position.

We regard our intended and future intellectual property as
important to our success, and we intend to rely on patent law to protect our
proprietary rights. Despite our precautions, unauthorized third parties may copy
certain portions of our devices or products or reverse engineer or obtain and
use information that we regard as proprietary. We may seek additional patents in
the future. We do not know if any future patent application will be issued with
the scope of the claims we seek, if at all, or whether any patents we receive
will be challenged or invalidated. Thus, we cannot assure you that any
intellectual property rights that we may receive can be successfully asserted in
the future or that they will not be invalidated, circumvented or challenged. In
addition, the laws of some foreign countries do not protect proprietary rights
to the same extent as do the laws of the United States. Our means of protecting
any proprietary rights we may receive in the United States or abroad may not
be adequate and competitors may independently develop a similar
technology. Any failure to protect our proprietary information and any
successful intellectual property challenges or infringement proceedings against
us could have a material adverse effect on our business, financial condition, or
results of operations.

27

---

We may be subject to various litigation claims and legal
proceedings, including intellectual property litigation, such as patent
infringement claims, which could adversely affect our business.

We, as well as certain of our directors and officers, may be
subject to claims or lawsuits. These lawsuits may result in significant legal
fees and expenses and could divert managements time and other resources. If the
claims contained in these lawsuits are successfully asserted against us, we
could be liable for damages and be required to alter or cease certain of our
business practices or product lines. Any of these outcomes could cause our
business, financial performance and cash position to be negatively impacted.

Additionally, our commercial success will also depend, in part,
on not infringing on the patents or proprietary rights of others. There can be
no assurance that the technologies and products used or developed by us will not
infringe such rights. If such infringement occurs and we are not able to obtain
a license from the relevant third party, we will not be able to continue the
development, manufacture, use, or sale of any such infringing technology or
product. There can be no assurance that necessary licenses to third-party
technology will be available at all or on commercially reasonable term. In some
cases, litigation or other proceedings may be necessary to defend against or
assert claims of infringement or to determine the scope and validity of the
proprietary rights of third parties. Any potential litigation could result in
substantial costs to, and diversion of, our resources and could have a material
and adverse impact on us.

An adverse outcome in any such litigation or proceeding could
subject us to significant liabilities, require us to cease using the subject
technology or require us to license the subject technology from the third party,
all of which could have a material adverse effect on our business.

On January 5, 2015, Wicab sued the Company, NHC, Mitch Tyler, a
director of the Company and NHC and Yuri Danilov, a former director of the
Company and a director of NHC,and ANR, in the U.S. District Court for
the Western District of Wisconsin. ANR is the licensor to the Company of three
issued patents (U.S. Patent Nos. 8,849,407 and 8,909,345 and 9,020,612) and
other patents pending related to neurostimulation methods and devices. The
complaint contained various state and common law claims arising from Messrs.
Danilovs and Tylers prior employment with Wicab and relating to ownership of
two of the issued patents (U.S. Patent Nos. 8,849,407 and 8,909,345). U.S.
Patent No. 9,020,612 was not included in the Wicab complaint. The complaint
alleged, among other things, that following their departure from Wicab, Danilov
and Tyler knowingly filed patent applications for and used ideas and inventions
developed at Wicab in violation of various non-competition and confidentiality
agreements, and that the two issued patents are therefore rightfully the
property of Wicab. The complaint sought an unspecified amount of monetary
damages, an injunction preventing NHC from using the ideas and inventions in the
two patents, an order transferring ownership of the patents from ANR to Wicab,
and recovery of costs and attorneys fees. The Company conducted an internal
investigation and determined that Wicab expressly waived all rights in the two
issued patents and, additionally, that Wicabs claims were barred by the six
year statute of limitations in Wisconsin. On January 14, 2015, the Company
informed Wicab of its belief that the claims were barred due to the express
waiver and the statute of limitations. On the same day, Wicab dismissed the
complaint without prejudice.

On October 12, 2015, the Company received a letter from Wicab
alleging that the two issued patents were invalid in view of prior art cited in
the letter, including scientific publications and patent applications, and that
Paul Bach-y-Rita, Wicabs founder, should have been named as an inventor on
these two issued patents. Wicab indicated in the letter that it may file
reexamination or inter partes review proceedings with the U.S. Patent
Office to attempt to invalidate the claims in the two issued patents. Wicab also
stated that it would consider an unspecified business solution to resolve this
matter. On December 10, 2015, representatives of each of the Company and Wicab
met to discuss the parameters of a potential settlement. As at the date of this
filing, these discussions are ongoing and there can be no guarantee that a
settlement will be reached. In the event that a settlement with Wicab is not
reached, Wicab may file reexamination or inter partes review proceedings
with the U.S. Patent Office to challenge the validity of the two issued patents.
If the Company receives an adverse decision from the U.S. Patent Office in
connection with these proceedings, some or all of the claims in the two patents
may be invalidated or otherwise impaired, which could prevent the Company from
bringing an infringement suit against a future competitor for making use of the
PoNS technology for neurorehabilitation, and could have a material adverse
effect on the Companys business, operating results and financial condition.
Wicab may also take other actions against the Company, its assets, intellectual
property rights, officers, directors, employees, agents or other persons or
entities which may also have a material on business, operating results and
financial condition.

28

---

See Part I Item 3, Legal Proceedings.

If our expenses are greater than anticipated, then we
will have fewer funds with which to pursue our plan of operations and our
financing requirements will be greater than anticipated.

We may find that the costs of carrying out our plan of
operations are greater than we anticipate. Increased operating costs may cause
the amount of financing that we require to increase. Investors may be more
reluctant to provide additional financing if we cannot demonstrate that we can
control our operating costs. There is no assurance that additional financing
required as a result of our operating costs being greater than anticipated will
be available to us. If we do not control our operating expenses, then we will
have fewer funds with which to carry out our plan of operations with the result
that our business may fail.

Our ability to use net operating losses to offset future
taxable income may be subject to certain limitations.

Under Section 382 of the Internal Revenue Code of 1986, as
amended, substantial changes in a corporations ownership may limit the amount
of net operating losses (NOLs) that can be utilized annually in the future to
offset the corporations (and the corporations affiliates) U.S. federal and
state taxable income. Specifically, this limitation may arise in the event of a
cumulative change in ownership of more than 50% within any three-year period.
The amount of the annual limitation is determined based on the value of the
corporation that underwent the ownership change, immediately before the
ownership change. Subsequent ownership changes may further affect any limitation
in future years (including by the way of exercising of warrants). We plan to
undertake a study to analyze and determine if any historical ownership changes
of us or our subsidiary NHC have occurred to determine if there are any
permanent limitations on our ability to utilize NOLs in the future. If we
determine that an ownership change has occurred, the limitations on the use of
our NOLs could increase our U.S. federal and state tax liability and reduce the
amount of cash available for distribution to shareholders or otherwise adversely
affect the value of an investment in our common stock or Warrants.

We may not be able to build an effective distribution
network for our products.

We currently have very few employees and will likely need to
rely on third party distributors to sell our product. We cannot assure you that
we will succeed in entering into and maintaining productive arrangements with an
adequate number of distributors that are sufficiently committed to selling our
products. The establishment of a distribution network is expensive and time
consuming. As we launch new products and increase our marketing effort with
respect to existing products, we will need to continue to hire, train, retain
and motivate skilled independent distributors with significant technical
knowledge. In addition, the commissions we pay our distributors could increase
over time which would result in higher sales and marketing expenses.
Furthermore, current and potential distributors may market and sell the products
of our competitors. Even if the distributors market and sell our products, our
competitors may be able, by offering higher commission payments or other
incentives, to persuade these distributors to reduce or terminate their sales
and marketing efforts related to our products. The distributors may also help
competitors solicit business from our existing customers. Some of our
independent distributors will likely account for a significant portion of our
sales volume, and, if we were to lose them, our sales could be adversely
affected. Even if we engage and maintain suitable relationships with an adequate
number of distributors, they may not generate revenue as quickly as we expect
them to, commit the necessary resources to effectively market and sell our
products, or ultimately succeed in selling our products.

We depend on a single source for the manufacture of our
product and the loss of this third-party manufacture could harm our
business.

We will be dependent on a single third-party to manufacture and
supply our PoNS device. This manufacturer will also hold some inventory and
ship our products to our distribution center who will hold the bulk of our
inventory, warehouse and ship our products to customers as well as handle
customer service related tasks. Our reliance on a single third-party
manufacturer to supply us with our PoNS device and a separate vendor to provide
such other distribution and warranty services exposes us to risks that could
delay our sales, or result in higher costs or lost product revenues. In
particular, our manufacturer could:

| |  | encounter difficulties in achieving volume
      production, quality control and quality assurance or suffer shortages of
      qualified personnel, which could result in their inability to manufacture
      sufficient quantities of our commercially available product to meet market
      demand, or it could experience similar problems that result in the
      manufacture of insufficient quantities of our product candidate; and
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

29

---

| |  | fail to follow and remain in compliance with
      the FDA-mandated QSRs, compliance which is required for all medical
      devices, or fail to document their compliance to QSRs, either of which
      could lead to significant delays in the availability of materials for our
      product.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

If we are unable to obtain adequate supplies of our product
that meet our specifications and quality standards, it will be difficult for us
to compete effectively. We have no supply agreements in place with our
manufacturer and it may change the terms of our future orders or choose not to
supply us with products in the future. Furthermore, if such manufacturer fails
to perform its obligations, we may be forced to purchase our product from other
third-party manufacturers, which we may not be able to do on reasonable terms or
in sufficient time, if at all. In addition, if we are required to change
manufacturers for any reason, we will be required to verify that the new
manufacturer maintains facilities and procedures that comply with quality
standards and with all applicable regulations and guidelines. The delays
associated with the verification of a new manufacturer or the reverification of
an existing manufacturer could negatively affect our ability to produce and
distribute our product in a timely manner.

If the U.S. Army were to decide not to purchase our
product or chose to no longer provide financial support for our clinical testing
through the sole-source cost sharing contract we would face risks related to
finding new partners or customers.

The U.S. Army is under no obligation to purchase the PoNS
device from us and there is no assurance that the U.S. Army will ultimately
purchase the Companys product. Given the importance of the U.S. Army to our
commercial plans, if the U.S. Army were to eventually decide not to purchase our
product, we would need to find other buyers for our product. If the U.S. Army
were to decline to purchase our product, we may have more difficulty persuading
other third parties to purchase our product. Additionally, through our
subsidiary NHC, we are party to a sole source cost sharing contract with the
USAMRMC. Under the contract, the USAMRMC will reimburse the Company for costs
related to a registrational trial investigating the safety and effectiveness of
the PoNS device up to a maximum amount of $2,996,244. The contract expires on
December 31, 2016, however, the Company is working with the USAMRMC to extend
the contract into 2017 based on the current trial forecast timelines . If we fail to complete the registrational trial or renew the
contract by that time we face the risk of needing to find additional financial
support for the trial.

If and when we sell our products, we may be liable for
product liability claims and we may not carry sufficient product liability
insurance.

The devices and products that we intend to develop may expose
us to potential liability from personal injury claims by end-users of the
product. We intend to carry product liability insurance to protect us against
the risk that in the future a product liability claim or product recall could
materially and adversely affect our business. Inability to obtain sufficient
insurance coverage at an acceptable cost or otherwise to protect against
potential product liability claims could prevent or inhibit the
commercialization of our intended products. We cannot assure you that if and
when we commence distribution of our product that we will be able to obtain or
maintain adequate coverage on acceptable terms, or that such insurance will
provide adequate coverage against all potential claims. Moreover, even if we
maintain adequate insurance, any successful claim could materially and adversely
affect our reputation and prospects, and divert managements time and attention.
If we are sued for any injury allegedly caused by our future products our
liability could exceed our total assets and our ability to pay the liability.

We are an emerging growth company under the Jumpstart
Our Business Startups Act of 2012, or JOBS Act, and we cannot be certain if the
reduced disclosure requirements applicable to emerging growth companies will
make our common stock less attractive to investors.

We are an emerging growth company as defined in the JOBS Act.
As an emerging growth company, we may take advantage of certain exemptions
from various reporting requirements that are applicable to other public
companies that are not emerging growth companies including, but not limited
to, not being required to comply with the auditor attestation requirements of
section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations
regarding executive compensation in our periodic reports and proxy statements,
and exemptions from the requirements of holding a nonbinding advisory vote on
executive compensation, shareholder approval of any golden parachute payments
not previously approved and presenting the relationship between executive
compensation actually paid and our financial performance. We cannot predict if
investors will find our common stock less attractive because we may rely on
these exemptions. If some investors find our common stock less attractive as a
result, there may be a less active trading market for our common stock and our
stock price may be more volatile. Additionally, we have irrevocably elected to
comply with new or revised accounting standards even though we are an emerging
growth company.

30

---

We will remain an emerging growth company for up to
five years after our first sale of common stock pursuant to a Securities Act of
1933, as amended, or the Securities Act, registration statement, although we
will lose that status sooner if our revenues exceed $1 billion, if we issue more
than $1 billion in non-convertible debt in a three year period, or if the market
value of our common stock that is held by non-affiliates exceeds $700 million as
of the end of our third quarter in any calendar year.

Our status as an emerging growth company under the JOBS Act
may make it more difficult to raise capital as and when we need it. Because of
the exemptions from various reporting requirements provided to us as an
emerging growth company, we may be less attractive to investors and it may be
difficult for us to raise additional capital as and when we need it. If we are
unable to raise additional capital as and when we need it, our financial
condition and results of operations may be materially and adversely affected.

We are a small company with limited resources compared to
some of our current and potential competitors and we may not be able to compete
effectively and increase market share.

There is potential that we will face intense competition from
other companies, some of which can be expected to have longer operating
histories and more financial resources and manufacturing and marketing
experience than us. Increased competition by larger and better financed
competitors could materially and adversely affect our business, financial
condition and our results of operations.

Because of the early stage of the industry in which we intend
to operate, we expect to face additional competition from new entrants. To be
competitive, we will require a continued high level of investment in research
and development, marketing, sales and client support. We may not have sufficient
resources to maintain research and development, marketing, sales and client
support efforts on a competitive basis which could materially and adversely
affect our business, financial condition and our results of operations.

We have incurred increased costs and have become subject
to additional regulations and requirements as a result of becoming a public
company, which could lower our profits, if any, or make it more difficult to run
our business.

As a public company, we have incurred significant legal,
accounting and other expenses that we did not incur as a private company,
including costs associated with public company reporting requirements. We will
continue to incur costs associated with the rules implemented by the SEC, the
TSX, the OTCQB, and any other exchange on which our common stock may become
listed. The expenses incurred by public companies for reporting and corporate
governance purposes have generally been increasing. These rules and regulations
have increased our legal and financial compliance costs and have made some
activities more time-consuming and costly. These laws and regulations also could
make it more difficult or costly for us to obtain certain types of insurance,
including director and officer liability insurance, and we may be forced to
accept reduced policy limits and coverage or incur substantially higher costs to
obtain the same or similar coverage. These laws and regulations could also make
it more difficult for us to attract and retain qualified persons to serve on our
Board of Directors, our board committees or as our executive officers.
Furthermore, if we are unable to satisfy our obligations as a public company, we
could be subject to delisting of our common stock, fines, sanctions and other
regulatory action and potentially civil litigation.

Several people who work for us on a part-time consulting
basis may be subject to conflicts of interest.

Several people who provide services to us do so on a part-time
consulting basis. Each may devote part of his working time to other business
endeavors, including consulting relationships with other corporate entities, and
may have responsibilities to these other entities. Because of these
relationships, some of the persons who provide services to us may be subject to
conflicts of interest. Such conflicts may include deciding how much time to
devote to our affairs, as well as what business opportunities should be
presented to us.

31

---

Risks Related to Government Regulation

Before we can market and sell our products, we will be
required to obtain approval and clearance by the FDA and foreign regulatory
authorities. These approvals and clearances will take significant time and
require significant research, development, and clinical study expenditures, and
ultimately may not succeed.

Before we begin to label and market the PoNS device for use in
  the United States, we are required to obtain clearance from the FDA under
  Section 510(k) of the FD&C Act, approval of a de novo reclassification
  petition for our product, or approval of pre-market approval application from
  the FDA, unless an exemption from pre-market review applies. We intend to
  utilize the de novo classification procedures to seek marketing authorization
  for the PoNS device, because there is currently no predicate cleared or
  approved by the FDA for commercial distribution and no existing classification
  decision by the FDA for such a device. We will also be required to comply with
  costly and time-consuming compliance by foreign regulatory authorities if we
  want to sell our products outside of the United States. The process of obtaining
  regulatory clearances or approvals, or completing the de novo classification
  process, to market a medical device can be costly and time consuming, and we may
  not be able to successfully obtain pre-market reviews on a timely basis, if at
all.

If the FDA requires us to go through a lengthier, more rigorous
examination for the PoNS device, introducing the product could be delayed or
canceled, which could cause our launch to be delayed. In addition, the FDA may
determine that the PoNS device requires the more costly, lengthy and uncertain
pre-market approval process. For example, if the FDA disagrees with our
determination that the de novo classification procedures are the appropriate
path to obtain marketing authorizations for the PoNS device, the FDA may
require us to submit a PMA application, which is generally more costly and
uncertain and can take from one to three years, or longer, from the time the
application is submitted to the FDA until an approval is obtained.

Further, even with respect to those future products where a PMA
is not required, we cannot be certain that we will be able to obtain 510(k)
clearances with respect to those products.

Obtaining FDA clearance will be costly, may result in
time-consuming delays and will subject us to ongoing compliance costs and
regulatory risk for non-compliance.

Obtaining FDA clearance, de novo down-classification, or
approval for medical devices can be expensive and uncertain, and generally takes
from several months to several years, and generally requires detailed and
comprehensive scientific and clinical data. Notwithstanding the expense, these
efforts may never result in FDA clearance. Even if we were to obtain regulatory
clearance, it may not be for the uses we believe are important or commercially
attractive, in which case we would not be permitted to market our product for
those uses.

The FDA can delay, limit or deny clearance or approval of a
device for many reasons, including:

| |  | we may not be able to demonstrate to the FDAs
      satisfaction that our product candidate is safe and effective, sensitive
      and specific diagnostic tests, for its intended users;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the data from our pre-clinical studies and
      clinical trials may be insufficient to support clearance or approval,
      where required; and                                          
| |  | the manufacturing process or facilities we use
      may not meet applicable requirements.                                                                                                

In addition, the FDA may change its clearance and approval
policies, adopt additional regulations or revise existing regulations, or take
other actions which may prevent or delay approval or clearance of our products
under development or impact our ability to modify our currently approved or
cleared products on a timely basis. For example, in response to industry and
healthcare provider concerns regarding the predictability, consistency and rigor
of the 510(k) regulatory pathway, the FDA initiated an evaluation of the
program, and in January 2011, announced several proposed actions intended to
reform the review process governing the clearance of medical devices. The FDA
intends these reform actions to improve the efficiency and transparency of the
clearance process, as well as bolster patient safety. In addition, as part of
the FDASIA the U.S. Congress reauthorized the Medical Device User Fee Amendments
with various FDA performance goal commitments and enacted several Medical
Device Regulatory Improvements and miscellaneous reforms which are further
intended to clarify and improve medical device regulation both pre- and
post-approval. Any delay in, or failure to receive or maintain, clearance or
approval for our product candidate could prevent us from generating revenue from
our product candidate and adversely affect our business operations and financial
results.

Even if granted, a 510(k) clearance, de novo
down-classification, or pre-market approval for any future product would likely
place substantial restrictions on how our device is marketed or sold, and FDA
will continue to place considerable restrictions on our products and operations.
For example, the manufacture of medical devices must comply with FDAs QSR. In
addition, manufacturers must register their manufacturing facilities, list the
products with FDA, and comply with requirements relating to labeling, marketing,
complaint handling, adverse event and medical device reporting, reporting of
corrections and removals, and import and export. FDA monitors compliance with
the QSR and these other requirements through periodic inspections. If our facilities or those of our manufacturers or
suppliers are found to be in violation of applicable laws and regulations, or if
we or our manufacturers or suppliers fail to take satisfactory corrective action
in response to an adverse inspection, the regulatory authority could take
enforcement action, including any of the following sanctions:

32

---

| |  | untitled letters, warning letters, fines, injunctions,
      consent decrees and civil penalties;                               
| | - | --------------------------------------------------------------------------------------------------------------------------------
| |  | customer notifications of repair, replacement, refunds,
      detention or seizure of our products                              
| |  | operating restrictions or partial suspension or total
      shutdown of production;                                             
| |  | refusing or delaying requests for 510(k) marketing
      clearance or pre-market approvals of new products or modified products;
| |  | withdrawing 510(k) marketing clearances or pre-market
      approvals that have already been granted;                           
| |  | refusing to provide Certificates for Foreign Government;                                                                        
| |  | refusing to grant export approval for our products; or                                                                          
| |  | pursuing criminal prosecution                                                                                                   

Additionally, the FDA and other regulatory authorities have
broad enforcement powers. Regulatory enforcement or inquiries, or other
increased scrutiny on us, could affect the perceived safety and efficacy of our
product candidate and dissuade our customers from using our product candidate,
if and when it is authorized for marketing.

We expect to be required to conduct clinical trials to
support regulatory approval of some of our potential future product candidates.
We have limited experience in the clinical trials process, they may proceed more
slowly than anticipated, and we cannot be certain that our product candidate
will be shown to be safe and effective for human use.

In order to commercialize our product candidate in the United
States, we may be required by the FDA to submit an application for PMA for
review and approval by the FDA. A PMA application must be submitted to the FDA
if our device cannot be cleared through the 510(k) clearance process or is not
exempt from premarket review by the FDA. We could also be required to submit a
PMA application for other potential future product candidates. If we are
required by the FDA to submit a PMA application, the FDA will also require us to
conduct clinical trials. The FDA could also require us to provide the FDA with
clinical trial data to support some of our 510(k) premarket notifications. We
will receive approval or clearance from the FDA to commercialize products
requiring a clinical trial only if we can demonstrate to the satisfaction of the
FDA, through well-designed and properly conducted clinical trials, that our
product candidate is safe and effective and otherwise meet the appropriate
standards required for approval or clearance for specified indications.

Clinical trials are complex, expensive, time consuming,
uncertain and are subject to substantial and unanticipated delays. Before we may
begin clinical trials, we must submit and obtain approval for an investigational
device exemption, or IDE, that describes, among other things, the manufacture
of, and controls for, the device and a complete investigational plan. Clinical
trials generally involve a substantial number of patients in a multi-year study.
Because we do not have the experience or the infrastructure necessary to conduct
clinical trials, we will have to hire one or more contract research
organizations, or CROs, to conduct trials on our behalf. CRO contract
negotiations may be costly and time consuming and we will rely heavily on the
CRO to ensure that our trials are conducted in accordance with regulatory and
industry standards. We may encounter problems with our clinical trials and any
of those problems could cause us or the FDA to suspend those trials, or delay
the analysis of the data derived from them.

A number of events or factors, including any of the following,
could delay the completion of our clinical trials in the future and negatively
impact our ability to obtain FDA approval for, and to introduce our product
candidate:

| |  | failure to obtain financing necessary to bear the cost of
      designing and conducting clinical trials;                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | failure to obtain approval from the FDA or foreign
      regulatory authorities to commence investigational studies;                                                                                      
| |  | conditions imposed on us by the FDA or foreign regulatory
      authorities regarding the scope or design of our clinical trials;                                                                         
| |  | failure to find a qualified CRO to conduct our clinical
      trials or to negotiate a CRO services agreement on favorable terms;                                                                         
| |  | delays in obtaining or in our maintaining required
      approvals from institutional review boards or other reviewing entities at
      clinical sites selected for participation in our clinical trials;
| |  | insufficient supply of our product candidate or other
      materials necessary to conduct our clinical trials;                                                                                           
| |  | difficulties in enrolling patients in our clinical
      trials;                                                                                                                                          

33

---

| |  | negative or inconclusive results from clinical trials, or
      results that are inconsistent with earlier results, that necessitate
      additional clinical studies;         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | failure on the part of the CRO to conduct the clinical
      trial in accordance with regulatory requirements;                                                                  
| |  | our failure to maintain a successful relationship with
      the CRO or termination of our contractual relationship with the CRO before
      completion of the clinical trials;
| |  | serious or unexpected side effects experienced by
      patients in whom our product candidate are implanted; or                                                                
| |  | failure by any of our third-party contractors or
      investigators to comply with regulatory requirements or meet other
      contractual obligations in a timely manner.     

Our clinical trials may need to be redesigned or may not be
completed on schedule, if at all. Delays in our clinical trials may result in
increased development costs for our product candidate, which could cause our
stock price to decline and limit our ability to obtain additional financing. In
addition, if one or more of our clinical trials are delayed, competitors may be
able to bring products to market before we do, and the commercial viability of
our product candidate could be significantly reduced.

We will be substantially dependent on third parties to
conduct clinical trials.

As we are required to conduct clinical trials to obtain FDA
clearance, we need to rely heavily on third parties over the course of our
clinical trials, and as a result will have limited control over the clinical
investigators and limited visibility into their day-to-day activities.
Nevertheless, we are responsible for ensuring that each of our studies is
conducted in accordance with the applicable protocol and legal, regulatory, and
scientific standards, and our reliance on third parties does not relieve us of
our regulatory responsibilities. We and these third parties are required to
comply with current good clinical practices, or cGCPs, which are regulations and
guidelines enforced by the FDA and comparable foreign regulatory authorities for
product candidates in clinical development. Regulatory authorities enforce these
cGCPs through periodic inspections of trial sponsors, principal investigators,
and trial sites. If we or any of these third parties fail to comply with
applicable cGCP regulations, the clinical data generated in our clinical trials
may be deemed unreliable and the FDA or comparable foreign regulatory
authorities may require us to perform additional nonclinical or clinical trials
before approving our marketing applications. We cannot be certain that, upon
inspection, such regulatory authorities will determine that any of our clinical
trials comply with the cGCP regulations. In addition, our clinical trials may be
required to be conducted with a large number of test patients. Our failure or
any failure by these third parties to comply with these regulations or to
recruit a sufficient number of patients may require us to repeat clinical
trials, which would delay the regulatory approval process. Moreover, our
business may be implicated if any of these third parties violates federal or
state fraud and abuse or false claims laws and regulations or healthcare privacy
and security laws.

Any third parties conducting our clinical trials are not and
will not be our employees and, except for remedies available to us under our
agreements with such third parties, we cannot control whether or not they devote
sufficient time and resources to our ongoing preclinical, clinical, and
nonclinical programs. These third parties may also have relationships with other
commercial entities, including our competitors, for whom they may also be
conducting clinical studies or other drug development activities, which could
affect their performance on our behalf. If these third parties do not
successfully carry out their contractual duties or obligations or meet expected
deadlines, if they need to be replaced, or if the quality or accuracy of the
clinical data they obtain is compromised due to the failure to adhere to our
clinical protocols or regulatory requirements or for other reasons, our clinical
trials may be extended, delayed, or terminated and we may not be able to
complete development of, obtain regulatory approval of or successfully
commercialize our product candidate. As a result, our financial results and the
commercial prospects for our product candidate would be harmed, our costs could
increase, and our ability to generate revenue could be delayed.

If any of our relationships terminate with these third-party
CROs, we may not be able to enter into arrangements with alternative CROs or do
so on commercially reasonable terms. Switching or adding additional CROs
involves additional cost and requires management time and focus. In addition,
there is a natural transition period when a new CRO begins work. As a result,
delays occur, which can materially impact our ability to meet our desired
clinical development timelines. Though we carefully manage our relationships
with our CROs, there can be no assurance that we will not encounter similar
challenges or delays in the future or that these delays or challenges will not
have a material adverse impact on our business, financial condition, and
prospects.

34

---

If we are unable to obtain a reimbursement code from the
U.S. Department of Health and Human Services so that the PoNS device is covered
under Medicare and Medicaid, this would have a negative impact on our intended
sales and would have a material adverse effect on our business, financial
condition and operating results.

We plan to submit an application to the U.S. Department of
Health and Human Services for reimbursement code so that the PoNS device is
covered under Medicare and Medicaid. There can be no assurance that our
application will be successful, or that we will be able to obtain a
reimbursement code in a timely manner. In the event that we do not obtain a
reimbursement code for the PoNS device, our customers may be unable to obtain
reimbursement for their purchases under private or government-sponsored
insurance plans which would have a negative impact on sales and have a material
adverse effect on our business, financial condition and operating results. In
addition, Medicare and its administrative contractors as well as other insurers
must find that the PoNS device meets their medical necessity requirements for
the treatment of patients or they will not pay for the device. In addition,
there is a risk that the payment amount for the PoNS device is too low to
incentivize customer adoption.

If hospitals and other healthcare providers are unable to
obtain coverage or adequate reimbursement for procedures performed with our
products, our product will not likely be widely used.

In the United States, the commercial success of our existing
product and any future products will depend, in part, on the extent to which
governmental payers at the federal and state levels, including Medicare and
Medicaid, private health insurers and other third-party payers provide coverage
for and establish adequate reimbursement levels for procedures utilizing our
products. Hospitals and other healthcare providers that purchase our product for
treatment of their patients generally rely on third-party payers to pay for all
or part of the costs and fees associated with our products as part of a
bundled rate for the associated procedures. The existence of coverage and
adequate reimbursement for our products and the procedures performed with them
by government and private payers critical to market acceptance of our existing
and future products. Neither hospitals nor physicians are likely to use our
product and any future products if they do not receive adequate reimbursement
for the procedures utilizing our products.

Many private payers currently base their reimbursement policies
on the coverage decisions and payment amounts determined by the CMS, which
administers the Medicare program. Others may adopt different coverage or
reimbursement policies for procedures performed with our products, while some
governmental programs, such as Medicaid, have reimbursement policies that vary
from state to state, some of which may not pay for the procedures performed with
our products in an adequate amount, if at all. A Medicare national or local
coverage decision denying coverage for one or more of our products could result
in private and other third-party payers also denying coverage for our products.
Third-party payers also may deny reimbursement for our products if they
determine that a product used in a procedure was not medically necessary, was
not used in accordance with cost-effective treatment methods, as determined by
the third-party payer, or was used for an unapproved use. Unfavorable coverage
or reimbursement decisions by government programs or private payers underscore
the uncertainty that our products face in the market and could have a material
adverse effect on our business.

Many hospitals and clinics in the United States belong to group
purchasing organizations, which typically incentivize their hospital members to
make a relatively large proportion of purchases from a limited number of vendors
of similar products that have contracted to offer discounted prices. Such
contracts often include exceptions for purchasing certain innovative new
technologies, however. Accordingly, the commercial success of our products may
also depend to some extent on our ability to either negotiate favorable purchase
contracts with key group purchasing organizations and/or persuade hospitals and
clinics to purchase our product off contract.

The healthcare industry in the United States has experienced a
trend toward cost containment as government and private payers seek to control
healthcare costs by paying service providers lower rates. While we believe that
hospitals will be able to obtain coverage for procedures using our products, the
level of payment available to them for such procedures may change over time.
State and federal healthcare programs, such as Medicare and Medicaid, closely
regulate provider payment levels and have sought to contain, and sometimes
reduce, payment levels. Private payers frequently follow government payment
policies and are likewise interested in controlling increases in the cost of
medical care. In addition, some payers are adopting pay-for-performance programs
that differentiate payments to healthcare providers based on the achievement of
documented quality-of-care metrics, cost efficiencies, or patient outcomes.
These programs are intended to provide incentives to providers to deliver the
same or better results while consuming fewer resources. As a result of these
programs, and related payer efforts to reduce payment levels, hospitals and
other providers are seeking ways to reduce their costs, including the amounts
they pay to medical device manufacturers. We may not be able to sell our
implants profitably if third-party payers deny or discontinue coverage or reduce
their levels of payment below that which we project, or if our production costs
increase at a greater rate than payment levels. Adverse changes in payment rates
by payers to hospitals could adversely impact our ability to market and sell our
products and negatively affect our financial performance.

35

---

In international markets, medical device regulatory
requirements and healthcare payment systems vary significantly from country to
country, and many countries have instituted price ceilings on specific product
lines. We cannot assure you that our products will be considered cost-effective
by international third-party payers, that reimbursement will be available or, if
available, that the third-party payers reimbursement policies will not
adversely affect our ability to sell our products profitably. Any failure to
receive regulatory or reimbursement approvals would negatively impact market
acceptance of our products in any international markets in which those approvals
are sought.

Risks Related to Our Common Stock

A decline in the price of our common stock could affect
our ability to raise any required working capital and adversely impact our
operations.

A decline in the price of our common stock could result in a
reduction in the liquidity of our common stock and a reduction in our ability to
raise any required capital for our operations. Because our operations to date
have been principally financed through the sale of equity securities, a decline
in the price of our common stock could have an adverse effect upon our liquidity
and our continued operations. A reduction in our ability to raise equity capital
in the future may have a material adverse effect upon our business plan and
operations. If our stock price declines, we may not be able to raise additional
capital or generate funds from operations sufficient to meet our obligations.

Our common stock does not have a well-established trading
market in the United States. Trading of our common stock is sporadic, and the
price of our common stock may be volatile; we caution you as to the highly
illiquid nature of an investment in our shares.

Our common stock is currently periodically quoted on the OTCQB
electronic quotation service operated by OTC Markets Group Inc. A
well-established market for our common stock may never develop in the United
States. Trading in stock quoted on the OTCQB is often thin and characterized by
wide fluctuations in trading prices, due to many factors that may have little to
do with our operations or business prospects. This volatility could depress the
market price of our common stock for reasons unrelated to operating performance
or future prospects of our business. Moreover, the OTCQB is not a stock
exchange, and trading of securities on the OTCQB is often more sporadic than the
trading of securities listed on a quotation system like NASDAQ or a stock
exchange like Amex. Accordingly, shareholders may have difficulty reselling any
of the shares.

Our common stock has been listed on the TSX since April 18,
2016. Certain shares of our common stock are also restricted for immediate
resale to U.S. persons or to anyone for the account or on behalf of any U.S.
person, pursuant to the requirements of Regulation S. These shares are traded
separately on the TSX under a separate ticker symbol. To date, trading on the
TSX in our common stock has been extremely limited and sporadic. Trading in our
common stock on the CSE was also extremely limited.

Our Warrants were also approved for listing on the TSX on April
18, 2016. However, because only the Warrants issued in the Offshore Offering in
transactions exempt from the registration requirements of the Securities Act
were approved for listing on the TSX, the Warrants listed on the TSX may not be
purchased by or on behalf of a U.S. person, or by a person in the United States,
unless in a registered transaction or pursuant to an applicable safe harbor or
exemption from registration.

Securities of microcap and small-cap companies have experienced
substantial volatility in the past, often based on factors unrelated to the
companies financial performance or prospects. We believe that trading in our
stock, if it occurs at all, will likely be subject to significant volatility
since, among other reasons, we do not have nor will we have in the foreseeable
future an active trading market in our stock. These factors include
macroeconomic developments in North America and globally and market perceptions
of the attractiveness of particular industries. Factors unrelated to our
performance that may affect the price of our common stock include the following:
the extent of analytical coverage available to investors concerning our business
may be limited if investment banks with research capabilities do not follow us,
a reduction in trading volume and general market interest in our common stock
may affect an investors ability to trade significant numbers of shares of our
common stock; the size of our public float may limit the ability of some
institutions to invest in our common stock; and a substantial decline in the
price of shares of our common stock that persists for a significant period of
time could cause our common stock, if listed on an exchange, to be delisted from
such exchange, further reducing market liquidity. As a result of any of these
factors, the market price of our common stock at any given point in time may not
accurately reflect our long-term value. The price of our common shares may
increase or decrease in response to a number of events and factors, including:
changes in financial estimates; our acquisitions and financings; quarterly
variations in our operating results; the operating and share price performance of other companies that
investors may deem comparable; and purchase or sale of blocks of our common
stock. These factors, or any of them, may materially adversely affect the prices
of our common shares regardless of our operating performance. We caution you as
to the highly illiquid nature of an investment in our shares.

36

---

The market price of our common stock is affected by many other
variables which are not directly related to our success and are, therefore, not
within our control. These include other developments that affect the breadth of
the public market for shares of our common stock and the attractiveness of
alternative investments. The effect of these and other factors on the market
price of our common stock is expected to make our common stock price volatile in
the future, which may result in losses to investors.

We have not voluntarily implemented various corporate
governance measures, in the absence of which, shareholders may have more limited
protections against interested director transactions, conflicts of interest and
similar matters.

Federal legislation, including the Sarbanes-Oxley Act of 2002,
has resulted in the adoption of various corporate governance measures designed
to promote the integrity of the corporate management and the securities markets.
Some of these measures have been adopted in response to legal requirements.
Others have been adopted by companies in response to the requirements of
national securities exchanges, such as the NYSE or the Nasdaq Stock Market, on
which their securities are listed. Among the corporate governance measures that
are required under the rules of national securities exchanges are those that
address board of directors independence, and audit committee oversight. We have
not yet adopted many of these corporate governance measures, including

| |  | the requirement that our board of directors be composed
      of a majority of independent directors; and                                                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the requirement that we have a nominating and corporate
      governance committee, a compensation committee and an audit committee
      composed entirely of independent directors, with written charters
      addressing the committees purpose and responsibilities.

It is possible that if we were to adopt some or all of these
corporate governance measures, stockholders would benefit from somewhat greater
assurances that internal corporate decisions were being made by disinterested
directors and that policies had been implemented to define responsible conduct.
Investors should bear in mind our current lack of corporate governance measures
in formulating their investment decisions.

Our shares are subject to potential delisting if we do
not meet or continue to maintain the listing requirements of the TSX.

The TSX rules for continued listing include minimum market
capitalization and other requirements. Failure to maintain our listing on the
TSX or being de-listed from the TSX would make it more difficult for
shareholders to dispose of our common stock and more difficult to obtain
accurate quotations on our common stock. This could have an adverse effect on
the price of our common stock. Our ability to issue additional securities for
financing or other purposes, or to otherwise arrange for any financing we may
need in the future, may also be materially and adversely affected if our common
stock is not traded on a national securities exchange.

The market price of our common stock is likely to be
highly volatile and subject to wide fluctuations, and you may be unable to
resell your shares at or above the price at which you acquired them, or at
all.

The market price of our common stock is likely to be highly
volatile and could be subject to wide fluctuations in response to a number of
factors that are beyond our control, including, but not limited to:

| |  | quarterly variations in our revenues and
      operating expenses;                      
| | - | ----------------------------------------------------------------------------------------
| |  | developments in the financial markets and
      worldwide or regional economies;        
| |  | announcements of innovations or new products or
      services by us or our competitors;
| |  | announcements by the government relating to
      regulations that govern our industry; 
| |  | significant sales of our common stock or other
      securities in the open market;     
| |  | variations in interest rates;                                                           
| |  | changes in the market valuations of other
      comparable companies; and               
| |  | changes in accounting principles.                                                       

37

---

In the past, stockholders have often instituted securities
class action litigation after periods of volatility in the market price of a
companys securities. If a stockholder were to file any such class action suit
against us, we would incur substantial legal fees and our managements attention
and resources would be diverted from operating our business to respond to the
litigation, which could harm our business.

Our two major shareholders have the ability to take
shareholder action without the involvement of our other shareholders.

In accordance with our governing documents, any action required
to be taken at a shareholders' meeting may be taken without a meeting if
consents in writing setting forth the action so taken are signed by the holders
of our outstanding shares having not less than the minimum number of votes that
would be required to authorize or take the action at a meeting at which all
shares entitled to vote on the action were present and voted. Currently, our two
major shareholders, MPJ Healthcare, LLC (MPJ) and ANR, hold approximately 39%
of our outstanding shares of common stock. Philippe Deschamps, our Chief
Executive Officer, and Jonathan Sackier, our Chief Medical Officer, each serve
on the board of members of MPJ.

Our two major shareholders may have the ability to take
shareholder action at a shareholders' meeting even if they do not hold a
majority of our outstanding common stock.

As long as our two major shareholders, MPJ and ANR,
collectively hold at least 33 1/3% of our outstanding common stock, they may be
able to effect a vote requiring shareholder approval. In accordance with our
governing documents, shareholders holding at least five percent of all the votes
entitled to be cast on a proposal may call a special meeting to vote on the
proposal. Also in accordance with our governing documents, quorum for a
shareholders' meeting is at least 33 1/3% of our outstanding common stock
entitled to vote and, where quorum is present, shareholder action may be taken
by the affirmative vote of a majority of the shares represented at the meeting
and entitled to vote. Accordingly, if our two major shareholders call a meeting
and establish quorum, they can effect shareholder approval on a proposal unless
other shareholders holding a greater number of shares than our two major
shareholders were present at the meeting, either in person or by proxy, and vote
against the proposal. There is no guarantee that such other shareholders will be
present at any such meeting or, even if they were present at such meeting, will
vote against the proposal.

We are authorized to issue an unlimited number of Class A
common stock, and we intend to issue significantly more shares to raise capital,
which would result in substantial dilution to your investment in our
shares.

Our Articles of Incorporation authorize the issuance of an
unlimited number of Class A common shares, that can be issued for such
consideration and on such terms and conditions as are established by our board
of directors without the approval of any of our shareholders. Any additional
financings effected by us may result in the issuance of additional securities
without stockholder approval and the substantial dilution in the percentage of
common stock held by our then existing stockholders. Moreover, the common stock
issued in any such transaction may be valued on an arbitrary or non-arms-length
basis by our management, resulting in an additional reduction in the percentage
of common stock held by our current stockholders. Our board of directors has the
power to issue any or all of such authorized but unissued shares without
stockholder approval. To the extent that additional shares of common stock or
preferred stock are issued in connection with a financing, dilution to the
interests of our stockholders will occur and the rights of the holders of common
stock might be materially and adversely affected. We may issue additional common
shares in connection with a future financing or acquisition. The issuance of
additional common shares may dilute an investors investment in us and reduce
cash available for distribution per common share, if any dividends are declared
by the board of directors in the future.

We have not paid any dividends and do not foresee paying
dividends in the future.

We intend to retain earnings, if any, to finance the growth and
development of our business and do not intend to pay cash dividends on shares of
our common stock in the foreseeable future. The payment of future cash
dividends, if any, will be reviewed periodically by the board of directors and
will depend upon, among other things, conditions then existing including
earnings, financial condition and capital requirements, restrictions in
financing agreements, business opportunities and other factors.

38

---

A significant portion of our outstanding common stock may
be sold into the public market in the future, which could cause the market price
of our common stock to drop significantly, even if our business is doing
well.

Sales of a substantial number of shares of our common stock in
the public market could occur in the future. These sales, or the market
perception that the holders of a large number of shares of our common stock
intend to sell shares, could reduce the market price of our common stock.

Our stock is a penny stock. Trading of our stock may be
restricted by the SECs penny stock regulations which may limit a stockholders
ability to buy and sell our stock.

Our stock is a penny stock. The SEC has adopted Rule 15g-9
which generally defines penny stock to be any equity security that has a
market price (as defined) less than $5.00 per share or an exercise price of less
than $5.00 per share, subject to certain exceptions. Our securities are covered
by the penny stock rules, which impose additional sales practice requirements on
broker-dealers who sell to persons other than established customers and
accredited investors. The term accredited investor refers generally to
institutions with assets in excess of $5,000,000 or individuals with a net worth
in excess of $1,000,000, not including any equity in that persons or persons
spouses primary residence, or annual income exceeding $200,000 or $300,000
jointly with their spouse. The penny stock rules require a broker-dealer, prior
to a transaction in a penny stock not otherwise exempt from the rules, to
deliver a standardized risk disclosure document in a form prepared by the SEC
which provides information about penny stocks and the nature and level of risks
in the penny stock market. The broker-dealer also must provide the customer with
current bid and offer quotations for the penny stock, the compensation of the
broker-dealer and its salesperson in the transaction and monthly account
statements showing the market value of each penny stock held in the customers
account. The bid and offer quotations, and the broker-dealer and salesperson
compensation information, must be given to the customer orally or in writing
prior to effecting the transaction and must be given to the customer in writing
before or with the customers confirmation. In addition, the penny stock rules
require that prior to a transaction in a penny stock not otherwise exempt from
these rules, the broker-dealer must make a special written determination that
the penny stock is a suitable investment for the purchaser and receive the
purchasers written agreement to the transaction. These disclosure requirements
may have the effect of reducing the level of trading activity in the secondary
market for the stock that is subject to these penny stock rules. Consequently,
these penny stock rules may affect the ability of broker-dealers to trade our
securities. We believe that the penny stock rules discourage investor interest
in and limit the marketability of our common stock.

FINRA sales practice requirements may also limit a
stockholders ability to buy and sell our stock.

In addition to the penny stock rules promulgated by the SEC,
the Financial Industry Regulatory Authority (FINRA) has adopted rules that
require that in recommending an investment to a customer, a broker-dealer must
have reasonable grounds for believing that the investment is suitable for that
customer. Prior to recommending speculative low priced securities to their
non-institutional customers, broker-dealers must make reasonable efforts to
obtain information about the customers financial status, tax status, investment
objectives and other information. Under interpretations of these rules, FINRA
believes that there is a high probability that speculative low priced securities
will not be suitable for at least some customers. The FINRA requirements make it
more difficult for broker-dealers to recommend that their customers buy our
common stock, which may limit your ability to buy and sell our stock.

Any future sales of our equity securities will dilute the
ownership percentage of our existing stockholders and may decrease the market
price for our common stock.

Future sales or issuances of equity securities could decrease
the value of our common stock, dilute stockholders voting power and reduce
future potential earnings per share. We intend to sell additional equity
securities in future offerings (including through the sale of securities
convertible into shares of our common stock) and may issue additional equity
securities to finance our operations, development, acquisitions or other
projects. We cannot predict the size of future sales and issuances of equity
securities or the effect, if any, that future sales and issuances of equity
securities will have on the market price of our common stock. Sales or issuances
of a substantial number of equity securities, or the perception that such sales
could occur, may adversely affect prevailing market prices for our common stock.
With any additional sale or issuance of equity securities, investors will suffer
dilution of their voting power and may experience dilution in our earnings per
share.

Anti-takeover provisions may limit the ability of another
party to acquire us, which could cause our stock price to decline.

Though not now, we may be or in the future we may become
subject to Wyomings control share law. The law focuses on the acquisition of a
controlling interest which means the ownership of outstanding voting shares
sufficient, but for the control share law, to enable the acquiring person to
exercise the following proportions of the voting power of the corporation in the
election of directors: (i) one-fifth or more but less than one-third, (ii)
one-third or more but less than a majority, or (iii) a majority or more. The ability to exercise such voting power may
be direct or indirect, as well as individual or in association with others. The
effect of the control share law is that the acquiring person, and those acting
in association with it, obtains only such voting rights in the control shares as
are conferred by a resolution of the stockholders of the corporation, approved
at a special or annual meeting of stockholders. The control share law
contemplates that voting rights will be considered only once by the other
stockholders. Thus, there is no authority to strip voting rights from the
control shares of an acquiring person once those rights have been approved. If
the stockholders do not grant voting rights to the control shares acquired by an
acquiring person, those shares do not become permanent non-voting shares. The
acquiring person is free to sell its shares to others. If the buyers of those
shares themselves do not acquire a controlling interest, their shares do not
become governed by the control share law. If control shares are accorded full
voting rights and the acquiring person has acquired control shares with a
majority or more of the voting power, any stockholder of record, other than an
acquiring person, who has not voted in favor of approval of voting rights is
entitled to demand fair value for such stockholders shares.

39

---

Wyomings control share law may have the effect of discouraging
takeovers of the corporation. In addition to the control share law, Wyoming has
a business combination law which prohibits certain business combinations between
Wyoming corporations and interested stockholders for three years after the
interested stockholder first becomes an interested stockholder, unless the
corporations board of directors approves the combination in advance. For
purposes of Wyoming law, an interested stockholder is any person who is (i)
the beneficial owner, directly or indirectly, of ten percent or more of the
voting power of the outstanding voting shares of the corporation, or (ii) an
affiliate or associate of the corporation and at any time within the three
previous years was the beneficial owner, directly or indirectly, of ten percent
or more of the voting power of the then outstanding shares of the corporation.
The definition of the term business combination is sufficiently broad to cover
virtually any kind of transaction that would allow a potential acquirer to use
the corporations assets to finance the acquisition or otherwise to benefit its
own interests rather than the interests of the corporation and its other
stockholders. The effect of Wyomings business combination law is to potentially
discourage parties interested in taking control of the Company from doing so if
it cannot obtain the approval of our board of directors.

In addition, our Articles of Incorporation provide for
unlimited authorized shares of our Class A common stock. Our authorized but
unissued shares of common stock will be available for future issuance without
stockholder approval. These additional shares may be utilized for a variety of
corporate purposes, including future public offerings to raise additional
capital, corporate acquisitions and employee benefit plans. The existence of
unlimited authorized but unissued shares of common stock could render more
difficult or discourage an attempt to obtain control of a majority of our Class
A common stock by means of a proxy contest, tender offer, merger or otherwise.

Holders of our Warrants will have no rights as
shareholders until such holders exercise their Warrants and acquire our common
shares.

Until holders of Warrants acquire common shares upon exercise
of the Warrants, holders of Warrants will have no rights with respect to the
common shares underlying such Warrants. Upon exercise of the Warrants, the
holders thereof will be entitled to exercise the rights of common shareholders
only as to matters for which the record date occurs after the exercise date.

If securities or industry analysts do not publish or
cease publishing research or reports about us, our business or our market, or if
they change their recommendations regarding our stock adversely, our stock price
and trading volume could decline.

The trading market for our common stock will be influenced by
the research and reports that industry or securities analysts may publish about
us, our business, our market or our competitors. If any of the analysts who may
cover us change their recommendation regarding our stock adversely, or provide
more favorable relative recommendations about our competitors, our stock price
would likely decline. If any analyst who may cover us were to cease coverage of
our company or fail to regularly publish reports on us, we could lose visibility
in the financial markets, which in turn could cause our stock price or trading
volume to decline.

|ITEM 1B. | UNRESOLVED STAFF COMMENTS
|-------- | -------------------------

None.

40

---

|ITEM 2. | PROPERTIES
|------- | ----------

Our head office is located at Suite 400, 41 University Drive,
Newtown, PA 18940. We currently lease three office rooms from Regus for
approximately $3,896 per month. The lease is for one year expiring on April 30,
2017, at which time we will determine whether we should have a dedicated office
space. Currently, we do not have any other material physical properties as we
seek to contract out all the non-core functions such as research and
development, human resources and investor relations in order to maintain a low
fixed cost business model. Our registered office and registered agent is located
at CT Corporation System, 1712 Pioneer Ave., Ste. 120, Cheyenne, Wyoming 82001.

|ITEM 3. | LEGAL PROCEEDINGS
|------- | -----------------

From time to time, we are subject to various legal proceedings
and claims that arise in the ordinary course of our business activities.
Although the results of litigation and claims cannot be predicted with
certainty, as of the date of this filing, we do not believe we are party to any
claim or litigation, the outcome of which, if determined adversely to us, would
individually or in the aggregate be reasonably expected to have a material
adverse effect on our business, other than as set forth below in respect of the
matters described below. Regardless of the outcome, litigation can have an
adverse impact on us because of defense and settlement costs, diversion of
management resources and other factors.

Intellectual Property Litigation

On January 27, 2015 we received a demand letter containing
allegations that we had entered into a consulting arrangement with the
complainants and breached certain of its terms, and used certain intellectual
property in the form of business and marketing plans allegedly prepared by the
complainants, and seeking damages. On May 7, 2015, Mr. Rainier Maas and Dr.
Jochen Scheld filed a complaint in the U.S. District Court for the Eastern
District of Pennsylvania seeking monetary damages in excess of $225,000. On
December 22, 2015, the Company entered into a settlement agreement with the
plaintiffs for an amount of €57,000, which was paid on January 12, 2016. The
parties have since executed the settlement agreement for the aforementioned
amount and the case has been dismissed without prejudice.

On January 5, 2015, Wicab sued the Company, NHC, Mitch Tyler, a
director of the Company and NHC, Yuri Danilov, a former director of the Company
and a director of NHC, and ANR, in the U.S. District Court for the Western
District of Wisconsin. ANR is the licensor to the Company of three issued
patents (U.S. Patent Nos. 8,849,407 and 8,909,345 and 9,020,612) and other
patents pending related to neurostimulation methods and devices. The complaint
contained various state and common law claims arising from Messrs. Danilovs and
Tylers prior employment with Wicab and relating to ownership of two of the
issued patents (U.S. Patent Nos. 8,849,407 and 8,909,345). U.S. Patent No.
9,020,612 was not included in the Wicab complaint. The complaint alleged, among
other things, that following their departure from Wicab, Danilov and Tyler
knowingly filed patent applications for and used ideas and inventions developed
at Wicab in violation of various non-competition and confidentiality agreements,
and that the two issued patents are therefore rightfully the property of Wicab.
The complaint sought an unspecified amount of monetary damages, an injunction
preventing NHC from using the ideas and inventions in the two patents, an order
transferring ownership of the patents from ANR to Wicab, and recovery of costs
and attorneys fees. The Company conducted an internal investigation and
determined that Wicab expressly waived all rights in the two issued patents and,
additionally, that Wicabs claims were barred by the six year statute of
limitations in Wisconsin. On January 14, 2015, the Company informed Wicab of its
belief that the claims were barred due to the express waiver and the statute of
limitations. On the same day, Wicab dismissed the complaint without prejudice.

On October 12, 2015, the Company received a letter from Wicab
alleging that the two issued patents were invalid in view of prior art cited in
the letter, including scientific publications and patent applications, and that
Paul Bach-y-Rita, Wicabs founder, should have been named as an inventor on
these two issued patents. Wicab indicated in the letter that it may file
reexamination or inter partes review proceedings with the U.S. Patent Office to
attempt to invalidate the claims in the two issued patents. Wicab also stated
that it would consider an unspecified business solution to resolve this
matter. On December 10, 2015, representatives of each of the Company and Wicab
met to discuss the parameters of a potential settlement. There can be no
guarantee that a settlement will be reached. In the event that a settlement with
Wicab is not reached, Wicab may file reexamination or inter partes review
proceedings with the U.S. Patent Office to challenge the validity of the two
issued patents. If the Company receives an adverse decision from the U.S. Patent
Office in connection with these proceedings, some or all of the claims in the
two patents may be invalidated or otherwise impaired, which could prevent the
Company from bringing an infringement suit against a future competitor for
making use of the PoNS technology for neurorehabilitation, and could have a
material adverse effect on the Companys business, operating results and
financial condition. Wicab may also take other actions against the Company, its
assets, intellectual property rights, officers, directors, employees, agents or other persons or entities which
may also have a material on business, operating results and financial condition.

41

---

Except as described above, we are not aware of any legal
proceedings contemplated by any governmental authority or any other party
involving us or our properties. As of March 31, 2016, no director, officer or
affiliate is: (i) a party adverse to us in any legal proceeding, or (ii) has an
adverse interest to us in any legal proceedings. We are not aware of any other
legal proceedings pending or that have been threatened against us or our
properties.

|ITEM 4. | MINE SAFETY DISCLOSURES
|------- | -----------------------

Not applicable.

42

---

PART II

|ITEM 5. | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED
      STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|------- | ------------------------------------------------------------------------------------------------------------------

Market Information

Our shares of common stock commenced trading on the TSX under
the symbol HSM on April 18, 2016. Our Warrants were also approved for listing
on the TSX on April 18, 2016. See Part I Item 1, Listing of our Common Stock on
the CSE, TSX and OTCQB.

Our common stock is currently quoted on the OTCQB under the
symbol HSDT.

The following table sets forth, for the periods indicated, the
high and low prices relating to our common stock for the periods indicated, as
provided by the CSE, the TSX and the OTCQB. OTC prices in the table below prior
to February 10, 2015 reflect pricing on the OTCs Grey Market. The Companys
common stock was delisted from the CSE concurrently with the TSX listing. These
quotations reflect inter-dealer prices without retail mark-up, mark-down, or
commissions, and may not reflect actual transactions.

|                                       |  | OTC
      (US$) |  |  | CSE / TSX
      (CAD$) | 
|-------------------------------------- |  | --------------- |  |  | ---------------------- | 
|Period                                 |  | High            |  |  | Low                    | 
|                                       |  |                 |  |  |                        | 
|Fiscal Year Ended March
      31, 2015 |  |                 |  |  |                        | 
|First Quarter                          |  | -               |  |  | -                      | 
|Second
      Quarter                   |  | $2.49           |  |  | $2.03                  | 
|Third Quarter                          |  | $2.79           |  |  | $1.90                  | 
|Fourth Quarter                         |  | $2.70           |  |  | $1.80                  | 
|                                       |  |                 |  |  |                        | 
|Fiscal Year Ended March
      31, 2016 |  |                 |  |  |                        | 
|First Quarter                          |  | $2.60           |  |  | $1.90                  | 
|Second
      Quarter                   |  | $2.10           |  |  | $0.62                  | 
|Third Quarter                          |  | $1.15           |  |  | $0.58                  | 
|Fourth
      Quarter                   |  | $0.86           |  |  | $0.68                  | 
|Fiscal Year Ended March 31, 2017       |  |                 |  |  |                        | 
|First
      Quarter(1)                 |  | $1.50           |  |  | $0.70                  | 

(1) Through June 21, 2016.

As of June 21, 2016, the last reported sales price of our
common stock on the TSX was CAD$1.30 per share. As of June 21, 2016, the last
reported sales price of our common stock on the OTCQB was US$0.99 per share.

The exchange rate in effect on June 21, 2016 as reported by
Bank of Canada was US$1.00 = CAD$1.28.

Holders

On June 21, 2016, there were approximately 213 record holders
of our common stock. The number of holders of record is based on the actual
number of holders registered on the books of our transfer agent and does not
reflect holders of shares in street name or persons, partnerships,
associations, corporations or other entities identified in security position
listings maintained by depository trust companies.

43

---

Compensation Options

As of June 21, 2016 we had compensation options outstanding
which are exercisable to purchase a total of 501,457 units, each unit consisting
of one share of our Class A common stock and one half of one common share
purchase warrant. Each compensation option will entitle the holder thereof to
acquire one unit at a price of CAD$1.00 per unit until April 18, 2018.

Options

As of June 21, 2016, options to purchase 6,675,360 shares of
our common stock with a weighted average exercise price of $1.08 per share, were
outstanding.

Warrants

As of June 21, 2016, we had 9,681,171 common share purchase
warrants outstanding which are exercisable into 9,681,171 shares of common
stock.

Dividend Policy

We have not paid any cash dividends on our common shares since
our inception and do not anticipate paying any cash dividends in the foreseeable
future. We plan to retain our earnings, if any, to provide funds for the
expansion of our business.

RECENT SALES OF UNREGISTERED SECURITIES.

Other than as previously disclosed in our Quarterly Reports on
Form 10-Q, as amended, and our Current Reports on Form 8-K, there were no sales
of equity securities by the Company that were not registered under the
Securities Act during the fiscal year ended March 31, 2016.

|ITEM 6. | SELECTED FINANCIAL DATA
|------- | -----------------------

As a smaller reporting company, we have elected not to provide
selected financial data in reliance on Item 301(c) of Regulation S-K.

|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
      CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------------

You should read the following discussion and analysis of our
financial condition and results of operations together with the section entitled
Selected Financial Data and our consolidated financial statements and related
notes appearing in this 10-K filing. Some of the information contained in this
discussion and analysis or set forth elsewhere in this 10-K filing, including
information with respect to our plans and strategy for our business and related
financing, includes forward-looking statements that involve risks and
uncertainties. As a result of many factors, including those factors set forth in
the Risk Factors section of this annual filing, our actual results could
differ materially from the results described in or implied by the
forward-looking statements contained in the following discussion and analysis.

Restatements

Our Managements Discussion and Analysis of Financial Condition
and Results of Operations gives effect to the restatements of our consolidated
financial statements on January 11, 2016 and again on April 26, 2016.

Overview

We are a medical technology company focused on neurological
wellness. We seek to develop, license or acquire unique and non-invasive
platform technologies that amplify the brains ability to heal itself.

Our mission is to develop, license and acquire non-invasive
treatments designed to help patients affected by neurological symptoms caused by
disease or trauma. Applying the principles of neuroplasticity, our patented
PoNS device induces Cranial Nerve Non Invasive Neuromodulation that utilizes
the brains innate ability to achieve neuroplastic change to aid persons with
neurological, cognitive, sensory, and motor disorders when combined with the
rehabilitation process.

44

---

Since our inception we have incurred significant operating
losses. Our net loss was $6,881,812 and $9,838,317 for the fiscal years ended
March 31, 2016 and 2015, respectively. As of March 31, 2016, we had an
accumulated deficit of $26,305,263. We expect to incur significant expenses and
operating losses for the foreseeable future as we continue to advance our
products through clinical trials, and seek regulatory approval and pursue
commercialization of such products. In addition, if we obtain marketing approval
for any of our products, we expect to incur significant commercialization
expenses related to product manufacturing, marketing, sales and distribution. In
addition, we may incur expenses in connection with the in-license or acquisition
of other potential products.

As a result, we will need substantial additional funding to
support our continuing operations and pursue our growth strategy. Until such
time as we can generate significant revenue from product sales, if ever, we
expect to finance our operations through the sale of equity, debt financings, or
other capital sources, including potential collaborations with other companies
or other strategic transactions. We may be unable to raise additional funds or
enter into such other agreements or arrangements when needed on favorable terms,
or at all. If we fail to raise capital or enter into such agreements, as, and
when, needed, we may have to reduce the scope of our operations and planned
capital expenditures or sell certain assets, including intellectual property
assets.

As of March 31, 2016, we had cash, cash equivalents and short
term investments of $2,643,937. As discussed in more detail below, we recently
raised additional capital in an unregistered offering of common stock and
warrants and we intend to seek additional funding. However, we do not currently
have sufficient resources to accomplish all of the conditions necessary for us
to generate revenue. For this reason, there is substantial doubt that we can
continue as a going concern for the next twelve months unless we obtain
additional capital to pay our expenditures.

Components of Our Results of Operations

Revenue

We have not generated any revenue since our inception and do
not expect to generate any revenue from the sale of products in the near future.

Research and Development Expenses

Research and development expenses consists of expenses incurred
in connection with the discovery and development of our product candidates. We
expense research and development costs as incurred. These expenses include:

| |  | expenses incurred under agreements with
      consultants that conduct our clinical trials;         
| | - | ----------------------------------------------------------------------------------------------------
| |   |                                                                                                     
| |  | outsourced professional scientific development
      services;                                      
| |   |                                                                                                     
| |  | employee-related expenses, which include
      salaries, benefits and stock-based compensation;     
| |   |                                                                                                     
| |  | expenses relating to regulatory activities,
      including filing fees paid to regulatory agencies;
| |   |                                                                                                     
| |  | laboratory materials and supplies used to
      support our research activities; and                
| |   |                                                                                                     
| |  | allocated expenses for utilities and other
      facility-related costs                             

Research and development activities are central to our business
model. Product candidates in later stages of clinical development generally have
higher development costs than those in earlier stages of clinical development,
primarily due to the increased size and duration of later-stage clinical trials.
We expect our research and development expenses to increase significantly over
the next several years as we increase personnel costs, conduct clinical trials
and prepare regulatory filings for our product candidates.

The successful development of our product candidates is highly
uncertain. At this time, we cannot reasonably estimate or know the nature,
timing and costs of the efforts that will be necessary to complete the remainder
of the development of, or when, if ever, material net cash inflows may commence
from any of our other product candidates. This uncertainty is due to the
numerous risks and uncertainties associated with the duration and cost of
clinical trials, which vary significantly over the life of a project as a result
of many factors, including:

45

---

| |  | the number of clinical sites included in the
      trials;             
| | - | -----------------------------------------------------------------------
| |   |                                                                        
| |  | the length of time required to enroll suitable
      patients;         
| |   |                                                                        
| |  | the number of patients that ultimately
      participate in the trials;
| |   |                                                                        
| |  | the number of doses patients receive;                                  
| |   |                                                                        
| |  | the duration of patient follow-up; and                                 
| |   |                                                                        
| |  | the results of our clinical trials.                                    

Our expenditures are subject to additional uncertainties,
including the terms and timing of regulatory approvals, and the expense of
filing, prosecuting, defending and enforcing any patent claims or other
intellectual property rights. We may never succeed in achieving regulatory
approval for any of our product candidates. We may obtain unexpected results
from our clinical trials. We may elect to discontinue, delay or modify clinical
trials of some product candidates or focus on others. A change in the outcome of
any of these variables with respect to the development of a product candidate
could mean a significant change in the costs and timing associated with the
development of that product candidate. For example, if the FDA or other
regulatory authorities were to require us to conduct clinical trials beyond
those that we currently anticipate, or if we experience significant delays in
enrollment in any of our clinical trials, we could be required to expend
significant additional financial resources and time on the completion of
clinical development. Drug commercialization will take several years and
millions of dollars in development costs.

General and Administrative Expenses

General and administrative expenses consist principally of
salaries and related costs for personnel in executive, finance and legal
functions, including stock-based compensation, and travel expenses. Other
general and administrative expenses include facility related costs, professional
fees for legal, auditing and tax services, consulting, and insurance costs.

We anticipate that our general and administrative expenses will
increase as a result of increased personnel costs, including stock-based
compensation, expanded infrastructure and higher consulting, legal and
tax-related services associated with maintaining compliance with stock exchange
listing and Securities and Exchange Commission, or SEC, requirements, accounting
and investor relations costs, and director and officer insurance premiums
associated with being a public company. Additionally, if and when we believe a
regulatory approval of a drug candidate appears likely, we anticipate an
increase in payroll and expense as a result of our preparation for commercial
operations, especially as it relates to the sales and marketing of that drug
candidate.

Interest Expense, net

Interest expense, net consists of accretion of convertible
debenture note discounts and interest income from cash held in interest-bearing
accounts.

Other Income

Other income primarily stems from the distribution of prototype
devices into approved territories in Russia through Altair distribution
agreement. Distribution amounts have been immaterial to date and will continue
to be immaterial until the PoNSTMdevice becomes commercially
available.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and
results of operations are based upon our financial statements that have been
prepared in accordance with U.S. GAAP. This preparation requires management to
make estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses, and the disclosure of contingent assets and
liabilities. U.S. GAAP provides the framework from which to make these
estimates, assumption and disclosures. We choose accounting policies within U.S.
GAAP that management believes are appropriate to accurately and fairly report
our operating results and financial position in a consistent manner. Management
regularly assesses these policies in light of current and forecasted economic
conditions. Actual results could differ from those estimates made by management.
While there are a number of significant accounting policies affecting our
financial statements, we believe the critical accounting policies involving the most complex, difficult and subjective
estimates and judgments are: valuation of non-monetary transactions, stock
compensation for services, valuation of options and valuation of income taxes.

46

---

Stock-Based Compensation

We account for all of our stock-based payments and awards under
the fair value based method. We recognize our stock-based compensation using the
straight-line method.

Stock-based payments to non-employees are measured at the fair
value of the consideration received, or the fair value of the equity instruments
issued, or liabilities incurred, whichever is more reliably measurable. The fair
value of stock-based payments to non-employees is periodically re-measured until
the counterparty performance is complete, and any change therein is recognized
over the vesting period of the award and in the same manner as if we had paid
cash instead of paying with or using equity based instruments. The fair value of
the stock-based payments to non-employees that is fully vested and
non-forfeitable as at the grant date is measured and recognized at that date.

We account for the granting of share purchase options to
employees using the fair value method whereby all awards to employees will be
recorded at fair value on the date of the grant. The fair value of all share
purchase options are expensed over their vesting period with a corresponding
increase to additional capital surplus. Upon exercise of share purchase options,
the consideration paid by the option holder, together with the amount previously
recognized in additional paid-in capital is recorded as an increase to share
capital. Share purchase options granted to employees are accounted for as
liabilities when they contain conditions or other features that are indexed to
other than a market, performance or service condition.

We use the Black-Scholes option pricing model to calculate the
fair value of our share purchase options. We lack historical and implied
volatility information. Therefore, we estimate our expected stock volatility
based on the historical volatility of a publicly traded set of peer companies
and expect to continue to do so until such time as we have adequate historical
data regarding the volatility of our own traded stock price. The expected term
of our stock options has been determined utilizing the simplified method for
awards that qualify as plain vanilla options. The expected term of stock
options granted to non-employees is equal to the contractual term of the option
award. The risk free interest rate is determined by reference to the U.S.
Treasury yield curve in effect at the time of grant of the award for time
periods approximately equal to the expected term of the award. Expected dividend
yield is based on the fact that we have never paid cash dividends and do not
expect to pay any cash dividends in the foreseeable future.

Derivative Liabilities

We evaluate our financial instruments and other contracts to
determine if those contracts or embedded components of those contracts qualify
as derivatives to be separately accounted for in accordance with ASC 815. The
result of this accounting treatment is that the fair value of the embedded
derivative is marked-to-market at each balance sheet date and recorded as a
liability and the change in fair value is recorded in the consolidated
statements of operations and comprehensive loss. Upon conversion or exercise of
a derivative instrument, the instrument is marked to fair value at the
conversion date and then that fair value is reclassified to equity.

The classification of derivative instruments, including whether
such instruments should be recorded as liabilities or as equity, is re-assessed
at the end of each reporting period. Derivative instruments that become subject
to reclassification are reclassified at the fair value of the instrument on the
reclassification date. Derivative instrument liabilities will be classified in
the balance sheet as current or non-current based on whether or not settlement
of the derivative instrument is expected within 12 months of the balance sheet
date.

We use the Black-Scholes option valuation model to value
derivative liabilities. This model uses Level 3 inputs in the fair value
hierarchy established by ASC 820 - Fair Value Measurement.

Results of Operations

Comparison of Fiscal Year Ended March 31, 2015 and
2014

The following table summarizes our results of operations for
the fiscal years ended March 31, 2016 and 2015:

47

---

|                                                   |   | Year Ended March 31, |   |   |            |  
|-------------------------------------------------- | - | -------------------- | - | - | ---------- | -
|                                                   |   | 2016                 |   |   | 2015       |  
|Revenue                                            | $ |                     |   | $ |           |  
|Operating expenses:                                |   |                      |   |   |            |  
|Research and
      development                     |   | 3,645,796            |   |   | 4,500,073  |  
|General and administrative                         |   | 5,671,598            |   |   | 5,308,371  |  
|Total operating expenses                           |   | (9,317,394           | ) |   | (9,808,444 | )
|Loss from operations                               |   |                      |   |   |            |  
|Other items:                                       |   |                      |   |   |            |  
|Interest expense, net                              |   | (46,920              | ) |   | (176,488   | )
|Other income                                       |   | 150,250              |   |   | 20,074     |  
|Change in fair value of
      derivative liability |   | 2,082,703            |   |   | (739,375   | )
|Foreign exchange                                   |   | (18,785              | ) |   | 865,916    |  
|Gain on extinguishment of debt                     |   | 268,334              |   |   | -          |  
|Net loss                                           | $ | (6,881,812           | ) | $ | (9,838,317 | )

Revenues

During the fiscal years ended March 31, 2016 and 2015, we did
not generate any revenues.

Research and Development Expenses

Research and development expenses were $3,645,796  for the
fiscal year ended March 31, 2016, compared to $4,500,073 for the fiscal year
ended March 31, 2015. The decrease of $854,277 was primarily attributable to
research and development reimbursements received from the USAMRC totaling
$596,547 (March 31, 2015 - $nil) which were credited directly to research and
development expenses.

General and Administrative Expenses

General and administrative expenses were $5,671,598 for the
fiscal year ended March 31, 2016, compared to $5,308,371 for the fiscal year
ended March 31, 2015. The increase of $363,227 was primarily attributable to a
general increase in business activities.

Interest Expense, net

Interest expense, net was $46,920 for the fiscal year ended
March 31, 2016, compared to $176,488 for the fiscal year ended March 31, 2015.
The decrease of $129,568 was primarily attributable to the fact that the
convertible debenture was settled in fiscal 2015 and the accompanying accreted
interest was recorded in fiscal 2015.

48

---

Other Income

Other income was $150,250 for the fiscal year ended March 31,
2016, compared to $20,074 for the fiscal year ended March 31, 2015. The increase
of $130,176 was primarily attributable to distribution of prototype devices into
approved territories in Russia through the Altair distribution agreement.

Change in fair value of derivative liability

The change in fair value of derivative liability was $2,082,703
for the fiscal year ended March 31, 2016, compared to ($739,375) for the fiscal
year ended March 31, 2015. The change in fair value of derivative liability is
mostly attributable to the change in our stock price during the year, as well as
the fair value of warrants issued in private placements. The derivative
liabilities do not represent cash liabilities

Foreign exchange

Foreign exchange loss was ($18,785) for the fiscal year ended
March 31, 2016, compared to a gain of $865,916 for the fiscal year ended March
31, 2015.

Gain on extinguishment of debt

Gain on extinguishment of debt relating to the A&B
promissory note was $268,334 for the fiscal year ended March 31, 2016, compared
to a nil amount for the fiscal year ended March 31, 2015. As a result of the
bifurcation of the embedded conversion option, for accounting purposes, two
instruments were considered outstanding and, upon exercise of the contractual
conversion option, extinguishment accounting has been applied. Consequently, the
shares issued pursuant to the conversion are recorded at their fair value on the
date of issuance, determined with reference to their quoted market price on the
date of conversion. The resulting difference between the fair value of the
shares issued, less the fair value of the related conversion feature and the
carrying value of the related debt, is recorded as a gain or loss on the
consolidated statement of operations.

Statement of Cash Flows

Fiscal Year Ended March 31, 2016 Compared to the Fiscal
Year Ended March 31, 2015

The following table summarizes our cash flows for each of the
periods presented:

|                                                    |   | Year Ended March 31, |  
|--------------------------------------------------- | - | -------------------- | -
|                                                    |   | 2016                 |  
|Cash used in/provided by operating
      activities | $ | (7,937,412           | )
|Cash used in/provided by investing activities       |   | 378,000              |  
|Cash used in/provided by financing
      activities |   | 9,691,336            |  
|Net increase/decrease in cash and cash equivalents  |   | 2,225,044            |  

During the fiscal year ended March 31, 2016, our net cash
increased by $2,225,044 (March 31, 2015  increase of $402,925), which included
net cash used in operating activities of $7,937,412 (March 31, 2015 -
$6,321,285) stemming from our increase in operations, net cash provided by
investing activities of $378,000 (March 31, 2016  ($378,000)) stemming from the
redemption of a short-term investment and net cash provided by financing
activities of $9,691,336 (March 31, 2015 - $7,482,728) stemming mainly from the
closing of multiple private placements and drawing down of the A&B
convertible promissory note and credit facility.

Cash Used in Operating Activities

Operating activities for the fiscal year ended March 31, 2016
used cash of $7,937,412 (March 31, 2015 - $6,321,285). This was made up of a net
loss of $6,881,812 (March 31, 2015 - $9,838,317) less adjustments for non-cash
items such as change in fair value of derivative liability of ($2,082,703) (March
31, 2015  $739,375), interest accretion of $29,045 (March 31, 2015 - $176,488),
stock based compensation of $1,231,250 (March 31, 2015 - $2,340,876), a gain on
extinguishment of debt of $268,334 (March 31, 2015 - $nil), receivables of
($390,273) (March 31, 2015  ($8,945)), accounts payable of $637,935 (March 31,
2015  $979,040), prepaid expenses and other current assets of ($91,644) (March
31, 2015  ($110,873)) and unrealized foreign exchange gain of $120,876 (March 31,
2015  ($598,929)). Receivables increased due to the higher amount of refundable
Canadian commodity tax, the Companys reimbursements from the USAMRC, and the
sale of some prototype devices. Prepaid expenses increased due to our increase
in operations, while payables remained relatively unchanged.

49

---

Cash Provided by Investing Activities

During the fiscal year ended March 31, 2016, cash provided by
investing activities totaled $378,000 (March 31, 2015 - ($378,000)). This was
comprised of the redemption of a short-term investment.

Cash Provided by Financing Activities

During the fiscal year ended March 31, 2016, financing
activities provided cash of $9,691,336 (March 31, 2015 - $7,482,728). Financing
activities during the fiscal year ended March 31, 2016, consisted of: issuance
of share capital of $7,636,910 (March 31, 2015 - $6,637,203) stemming from
multiple private placements and the A&B credit facility draw-down, proceeds
from shares to be issued of $nil (March 31, 2015 - $39,545), exercise of
warrants and stock options of $54,426 (March 31, 2015 - $nil), proceeds from the
issuance of convertible debt of $2,000,000 (March 31, 2015 - $nil), proceeds
from the issuance of a promissory note of $200,000 (March 31, 2015 - $632,076),
the repayment of said promissory note of ($200,000) (March 31, 2015 - $nil),
proceeds from a bridge loan of $nil (March 31, 2015 - $150,000), and cash
acquired on recapitalization of $nil (March 31, 2015 - $23,904).

Liquidity and Capital Resources

Our financial statements have been prepared assuming that we
will continue as a going concern and, accordingly, does not include adjustments
relating to the recoverability and realization of assets and classification of
liabilities that might be necessary should we be unable to continue in
operation.

The following table sets out our cash and working capital as of
March 31, 2016 and 2015:

|                          |   | March 31, 2016 |  |   | March 31, 2015 | 
|------------------------- | - | -------------- |  | - | -------------- | 
|Cash and cash equivalents | $ | 2,643,937      |  | $ | 418,893        | 
|Working capital (deficit) | $ | 1,409,568      |  | $ | 18,543         | 

We currently have limited working capital and liquid assets.
Our cash and cash equivalents as of March 31, 2016 were $2,643,937. To date we
have not generated any revenue from the commercial sales of products or
services. There are a number of conditions that we must satisfy before we will
be able to generate revenue, including but not limited to successful completion
of the clinical trial, FDA clearance of the PoNS device for treating balance
disorder associated with mild to moderate TBI, manufacturing of a
commercially-viable version of the PoNS device and demonstration of
effectiveness sufficient to generate commercial orders by customers for our
product. While we are currently seeking additional funding, we do not currently
have sufficient resources to accomplish any of these conditions necessary for us
to generate revenue. We will therefore require substantial additional funds in
order to continue to conduct the research and development and regulatory
clearance and approval activities necessary to bring our product to market, to
establish effective marketing and sales capabilities and to develop other
product candidates.

We will have to continue to rely on equity and debt financing.
There can be no assurance that financing, whether debt or equity, will always be
available to us in the amount required at any particular time or for any
particular period or, if available, that it can be obtained on terms
satisfactory to us. Without additional financing, we do not believe our
resources will be sufficient to meet our operating and capital needs through the
fourth quarter of calendar 2016.

50

---

Off Balance Sheet Arrangements

To the best of managements knowledge, there are no off-balance
sheet arrangements that have, or are reasonably likely to have, a current or
future effect on our results of operations or financial condition.

Tabular Disclosure of Contractual Obligations

As of March 31, 2016, we did not have any contractual
obligations required to be disclosed by Item 303(a)(5) of Regulation S-K during
the fiscal year ended March 31, 2016.

Recently Issued Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases (Topic
842). The new standard establishes a ROU model that requires a lessee to
record a ROU asset and a lease liability on the consolidated balance sheet for
all leases with terms longer than 12 months. Leases will be classified as either
finance or operating, with classification affecting the pattern of expense
recognition in the consolidated income statement. ASU 2016-02 is effective for
annual periods beginning after December 15, 2018, including interim periods
within those annual periods, with early adoption permitted. A modified
retrospective transition approach is required for lessees for capital and
operating leases existing at, or entered into after, the beginning of the
earliest comparative period presented in the financial statements, with certain
practical expedients available. We are currently evaluating the potential impact
of the adoption of this standard.

In January 2016, the FASB issued ASU 2016-01, Recognition
and Measurement of Financial Assets and Financial Liabilities. The
amendments in this update revise the accounting related to the classification
and measurement of investments in equity securities and the presentation of
certain fair value changes for financial liabilities measured at fair value. The
amendments are effective for annual reporting periods after December 15, 2017,
including interim periods within those fiscal years. Early adoption is
permitted. We are currently evaluating the potential impact of the adoption of
this standard.

In November 2015, the FASB issued ASU 2015-17, Balance Sheet
Classification of Deferred Taxes. The amendments in this update simplify the
presentation of deferred income taxes to require that deferred tax liabilities
and assets are classified as noncurrent in a statement of financial position.
The amendments are effective for annual reporting periods beginning after
December 15, 2016 and interim reporting periods within those annual periods.
Early adoption is permitted. We have adopted the provisions of this standard
early, the impact of which on our consolidated financial statements was not
significant.

In April 2015, the FASB issued ASU 2015-03, Interest-
Imputation of Interest (Subtopic 835-30). This guidance is to simplify the
presentation of debt issuance costs by recognizing a debt liability in the
balance sheet as a direct deduction from that debt liability consistent with the
presentation of a debt discount. The amendments in this update are effective for
financial statements issued for fiscal years beginning after December 15, 2015,
and interim periods within those fiscal years. We have adopted this standard and
the adoption did not have a material impact on our financial position.

JOBS Act

In April 2012, the JOBS Act was enacted in the United States.
Section 107 of the JOBS Act provides that an emerging growth company can take
advantage of the extended transition period provided in Section 7(a)(2)(B) of
the Securities Act for complying with new or revised accounting standards. Thus,
an emerging growth company can delay the adoption of certain accounting
standards until those standards would otherwise apply to private companies. We
have irrevocably elected not to avail ourselves of this extended transition
period and, as a result, we will adopt new or revised accounting standards on
the relevant dates on which adoption of such standards is required for
non-emerging growth public companies.

|ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES
      ABOUT MARKET RISK
|-------- | ----------------------------------------------------------------

Not applicable

|ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY
      DATA
|------- | -------------------------------------------------

See the Index to Financial Statements included in this Annual
Report.

51

---

|ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
      ACCOUNTING AND FINANCIAL DISCLOSURE
|------- | ------------------------------------------------------------------------------------------

Not applicable

|ITEM 9A. | CONTROLS AND PROCEDURES
|-------- | -----------------------

(a) Evaluation of Disclosure Controls and Procedures

As required by Rule 13(a)-15 under the Exchange Act, in
connection with this Annual Report, under the direction of the Chief Executive
Officer and the Chief Financial Officer, the Company has evaluated its
disclosure controls and procedures as of March 31, 2016, and has concluded the
disclosure controls and procedures were ineffective as discussed in greater
detail below. As of the date of this filing, the Company is still in the process
of remediating such material weaknesses in its internal controls and procedures.

(b) Managements Report on Internal Control Over Financial
Reporting

Management is responsible for establishing and maintaining
internal control over financial reporting, as such term is defined in Rule
13a-15(f) under the Securities Exchange Act of 1934. Our management evaluated,
under the supervision and with the participation of the Chief Executive Officer
and Chief Financial Officer, the effectiveness of its internal control over
financial reporting as of March 31, 2016.

Based on its evaluation under the framework in Internal
ControlIntegrated Framework (2013), issued by the Committee of Sponsoring
Organizations of the Treadway Commission, management with the participation of
our Chief Executive Officer and our Chief Financial Officer concluded that the
Companys internal control over financial reporting was not effective as of
March 31, 2016, due to the existence of a material weakness, as described in
greater detail below. A material weakness is a control deficiency, or
combination of control deficiencies, such that there is a reasonable possibility
that a material misstatement of the annual or interim financial statements will
not be prevented or detected on a timely basis.

In light of this material weakness, the Company hired an
independent firm to provide technical accounting services for the Company and
they performed additional post-closing procedures and analyses in order to
prepare the consolidated financial statements included in this report. As a
result of these procedures, the Company believes its consolidated financial
statements included in this report present fairly, in all material respects, the
financial position, results of operations and cash flows for the fiscal year
ended March 31, 2016.

Limitations on Effectiveness of Controls

The Companys Chief Executive Officer and Chief Financial
Officer do not expect that disclosure controls or internal control over
financial reporting will prevent all errors and all fraud. A control system, no
matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met. Further,
the design of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their
costs. Because of the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that all control issues and instances
of fraud, if any, within the Company have been detected. These inherent
limitations include the realities that judgments in decision-making can be
faulty, and that breakdowns can occur because of a simple error or mistake.
Additional controls can be circumvented by the individual acts of some persons,
by collusion of two or more people, or by management override of the controls.
The design of any system of controls also is based in part upon certain
assumptions about the likelihood of future events, and there can be no assurance
that any design will succeed in achieving its stated goals under all potential
future conditions; over time, controls may become inadequate because of changes
in conditions, or the degree of compliance with the policies or procedures may
deteriorate. Because of the inherent limitations in a cost-effective control
system, misstatements due to error or fraud may occur and not be detected.

Material Weaknesses Identified

In connection with the preparation of the consolidated
financial statements for the fiscal year ended March 31, 2016, management
identified the following material weakness in internal control:

Our companys accounting staff does not have sufficient
technical accounting knowledge relating to accounting for income taxes and
complex US GAAP matters.

52

---

Our Plans for Remediation of the Material Weakness

Subsequent to March 31, 2016, the Company engaged the services
of a consulting group with expertise in US GAAP and SEC compliance matters to
assist the Company with its financial reporting and SEC filings. In the ensuing
fiscal year, we intend to monitor the progress of our remediation of our
identified material weakness.

|ITEM 9B. | OTHER INFORMATION
|-------- | -----------------

None.

53

---

PART III

|ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
      GOVERNANCE
|-------- | ------------------------------------------------------------

Our directors and executive officers and their respective ages
as of the date of June 21, 2016 are as follows:

|Name               | Age | Position                                                 
|------------------ | --- | ---------------------------------------------------------
|Philippe Deschamps | 54  | President, Chief Executive
      Officer, and Director   
|Joyce LaViscount   | 54  | Chief Financial Officer and Chief Operating
      Officer
|Jonathan Sackier   | 58  | Chief Medical Officer                                    
|Brian Bapty        | 47  | Vice President, Strategy and Business
      Development  
|Savio Chiu         | 34  | Director                                                 
|Huaizheng Peng     | 54  | Director                                                 
|Mitch Tyler        | 63  | Director                                                 
|Edward M. Straw    | 77  | Director                                                 
|Blane Walter       | 46  | Director                                                 

The following describes the business experience of each of our
directors and executive officers, including other directorships held in
reporting companies:

Philippe Deschamps,Chief Executive Officer,
President and a Director

Mr. Deschamps has served as our CEO, President and a Director
since June 13, 2014. Mr. Deschamps has extensive experience in pharmaceutical
and healthcare commercialization. The depth of his expertise stems from his 30
years in the health sciences industry, approximately half spent at Bristol Myers
Squibb (NYSE: BMY), and approximately half on the service side as CEO of GSW
Worldwide, a healthcare commercialization company. From 1986 to 1998, Mr.
Deschamps served as director of neuroscience marketing at Bristol Myers Squibb
in Princeton, N.J., where he participated on several pre-launch global marketing
teams in the neuroscience and pain therapeutic areas. Mr. Deschamps started at
GSW Worldwide in February 1998 as a Vice President and Account Director and
became President and CEO of GSW Worldwide in January 2002, serving in that role
until September 2011. Mr. Deschamps was responsible for the GSW Worldwide
operations which includes offices in 15 major markets around the world. He
primarily consulted on global marketing, commercialization and new business
model development for pharmaceutical, device and diagnostics companies. In
February 2012, Mr. Deschamps joined MediMedia Health, a marketing services
company as CEO where he served until October 2013. At MediMedia Health, he was
responsible for the evaluating the different businesses of the company and
developing recommendations for the sale of the company to the private equity
company that owned it. In October 2013, he became President of NHC. Mr.
Deschamps has a BSc. from the University of Ottawa in Canada which he obtained
in 1985.

Joyce LaViscount,Chief Financial Officer and
Chief Operating Officer

Ms. LaViscount has served as our Chief Financial Officer and
Chief Operating Officer since October 19, 2015 and she previously served as one
of our directors from March 2, 2015 until December 29, 2015. Ms. LaViscount was
at MM Health Solutions (formerly MediMedia Health), a marketing services
company, from July 2012 until August 2015 where she served as Chief Operating
Officer and Chief Financial Officer. Concurrent with her role at MediMedia
Health, Ms. LaViscount also served as the CFO for MediMedia Pharmaceutical
Solutions from January 2014 until February 2015. Prior to joining MM Health
Solutions, Ms. LaViscount was Executive Director/Group Controller North America
for Aptalis Pharmaceuticals (2010 to 2012). From 2004 to 2009 Ms. LaViscount
worked for Endo Pharmaceuticals in a variety of roles, including Chief
Accounting Officer, VP-Investor Relations and Corporate Communications, and VP
Finance Operations, as well as holding operational roles in Sales Operations,
Training and Corporate Strategy Development. Ms. LaViscounts pharmaceutical
industry experience also includes more than 15 years in finance at Bristol-Myers
Squibb and Pharmacia. Ms. LaViscount began her career with Ernst & Young and
is a New Jersey Certified Public Accountant and has Bachelor of Arts in Business
with a concentration in Accounting from Franklin and Marshall College.

54

---

Jonathan Sackier,Chief Medical Officer

Dr. Sackier joined the Company in December of 2014 as Chief
Medical Officer and brings to his role extensive experience in new technologies
and treatment methodologies gained over more than 30 years in the healthcare
industry. Since 2014, Dr. Sackier has been a Visiting Professor of Surgery at
the Nuffield Department of Surgical Sciences at Oxford University. From 2005 to
2014, Dr. Sackier was a Visiting Professor of Surgery at the University of
Virginia and prior to that a served as a Clinical Professor at George Washington
University in Washington, DC from 1995 to 1999. In 1995, while at George
Washington University, Dr. Sackier founded and funded the Washington Institute
of Surgical Endoscopy, a center for education, research, innovation and
technology transfer.

He is widely recognized as one of the leaders of the
laparoscopic surgery revolution. In addition to his academic work, Dr. Sackier
has helped build several companies including medical technology, research and
product-design and medical contract sales organizations. He has also
collaborated with pharmaceutical and medical device technology partners
including ConvaTec, Pfizer, Karl Storz, Applied Medical, Stryker, Siemens, Bayer
and Novartis. Dr. Sackier served as Chairman of Adenosine Therapeutics from 1992
to 1998, which became part of Clinical Data and then Forest Laboratories. Dr.
Sackier also worked to develop and market the AESOP robot with Computer Motion
from 1992 to 1998. He also founded Genethics in 1985, which patented and
licensed amniotic stem cell technology.

Dr. Sackier sits on several boards of directors, he has served
as a member of Kyphas board since 2014, a director of Clinvue since 2010, and a
director of Brandon Medical since 2009. Dr. Sackier was also director for
Hemoshear from 2008 to 2015 and served as Chairman of Adenosine Therapeutics
which became part of Clinical Data and then Forest Laboratories from 2002 to
2008. He is a Trustee of First Star and previously chaired The Larry King
Cardiac Foundation Board of Governors. He has also served as a board member of
The American College of Surgeons Foundation, The Surgical Fellowship Foundation
and Rex Bionics.

A keen pilot, Jonathan advises the Aircraft Owners & Pilots
Association (AOPA) on medical issues germane to pilots and authors the Fly
Well column in AOPA Pilot magazine.

Brian Bapty,Vice President, Strategy and
Business Development

Dr. Bapty joined Helius as a consultant in July 2014, and full
time as the Companys Vice President, Strategy and Business Development in
October 2015. His sixteen years of experience in capital markets and public
companies began in 2000, when he Joined Raymond James as an equity analyst for
Canadian healthcare companies. In 2008, still with Raymond James he moved to the
London desk supporting institutional equity sales. Early in 2009, Dr. Bapty
joined Northland Bancorp Private Equity as a partner and held management
positions in investee companies. These positions included Director of Research
at Galileo Equity Advisors (a small to midcap focused asset management company)
and CEO of Northland Securities (in institutional focused brokerage firm). In
March 2012, Dr. Bapty left Northland Bancorp to join Confederation Minerals as
President and Director where he served until November 2014.

Dr. Bapty has Ph.D. (Research Medicine, Nephrology) from the
University of British Columbia (UBC), and B.Sc. (UBC) in Cell and Developmental
Biology.

Savio Chiu,Director

Mr. Chiu has served as one of our Directors since June 13,
2014. From June 2009 to present, Mr. Chiu has been the Senior Manager, Corporate
Finance of V Baron Global Financial Canada Ltd. (V Baron), which provides us
with corporate advisory services pursuant to the terms of a management
agreement. Since April 2011, Mr. Chiu has served as the Chief Financial Officer
and Corporate Secretary of Confederation Minerals Ltd. (TSXV: CFM). From
December 2010 to August 2014, Mr. Chiu served as a director of Finore Mining
Inc. (CSE: FIN). From October 2010 to August 2013, Mr. Chiu served as the Chief
Financial Officer of Pan American Fertilizer Corp. (formerly Golden Fame
Resources Corp.) (TSXV: PFE). From July 2010 to June 2011, he served as the
Chief Financial Officer of Cassius Ventures Ltd. (TSXV: CZ).

Mr. Chiu is a Chartered Accountant and holds a Bachelor of
Commerce degree in Accounting from the University of British Columbia which he
obtained in 2005. Mr. Chius accounting and financial expertise brings a
valuable oversight role to the board.

55

---

Mitch Tyler,Director

Mr. Tyler has served as one of our Directors since June 13,
2014. Mr. Tyler is a co-inventor of the PoNS device and co-owner of ANR and
Clinical Director of ANR(2009 to present). Mr. Tyler is also the Clinical
Director of the Tactile Communication and NeuroRehabilitation Laboratory,
University of Wisconsin - Madison (1998 to present), and a Senior Lecturer in
Biomedical Engineering. From 1998 through 2005, Mr. Tyler was the Vice President
and Principal Investigator for Wicab Inc. He received his M.S. in Bioengineering
from University of California, Berkeley in 1985 and is currently working on his
Ph.D. in Biomedical Engineering at the UW-Madison. Mr. Tylers extensive
knowledge of our principal product and history in the medical device industry
brings invaluable experience to the board.

Edward M. Straw,Director

Vice Admiral Edward Straw has served as one of our Directors
since November 18, 2014. He founded Osprey Venture Partners, a firm that mentors
young entrepreneurs seeking investment capital and assists with business
development, in 2011 and serves as the Managing Director. Previously he was
President, Global Operations of The Estée Lauder Companies from 2000 to 2005,
SVP, Global Operations of the Compaq Computer Corporation from 1998 to 2000, and
former President of Ryder Integrated Logistics from 1996 to 1998. Prior to
joining the private sector, he had a distinguished 35 year career in the U.S.
Navy and retired as a three-star admiral. During his military service, Vice
Admiral Straw was Chief Executive Officer of the Defense Logistics Agency, the
largest military logistics command supporting the American armed forces. Vice
Admiral Straw holds an MBA from The George Washington University, a Bachelor of
Science degree from Annapolis, and is a graduate of the National War College. He
has been a member of the Defense Science Board, Chairman of Odyssey Logistics
and currently sits on the boards of: The Boston Consulting Federal Group,
Performance Equity Management, and Capital Teas. He was a board member of: Eddie
Bauer, MeadWestvaco, Ply Gem Industries and Panther Logistics. Vice Admiral
Straw is an audit committee financial expert as that term is defined in Item
407(d)(5)(ii) of Regulation S-K. Vice Admiral Straw brings extensive leadership
experience to our board.

Blane Walter,Director

Mr. Walter has served as one of our Directors since December
29, 2015. Mr. Walter has been a Partner at Talisman Capital Partners, a private
investment partnership located in Columbus, Ohio, since 2011. He founded inChord
Communications, Inc. in 1994, which he built into the largest
independently-owned, healthcare communications company in the world. In 2005,
inChord was acquired by Ventiv Health, the largest provider of outsourced sales
and clinical services serving the pharmaceutical industry to create inVentiv
Health. In 2008, Mr. Walter became CEO of the combined public company, a role in
which he served until 2011. Mr. Walters background in the healthcare and
pharmaceutical industries lends important perspective to our board.

Huaizheng Peng,Director

Dr. Peng has served as one of our Directors since December 29,
2015. Since 2013 Dr. Peng has served as the General Manager, and non-executive
Director of China Medical System Holdings (CMS) where he is in charge of
international operations, prior to becoming General Manager, Dr. Peng served on
the CMS board of directors for a period of three years. Prior to joining CMS,
Dr. Peng was a partner in a private equity firm, Northland Bancorp, from 2010 to
2012, head of global life sciences and a director of corporate finance at
Seymour Pierce from 2007 to 2010, and served as a non-executive Director of
China Medstar, an AIM listed medical service company from 2006 to 2008. Dr. Peng
also worked as a senior portfolio manager, specializing in global life science
and Asian technology investment at Reabourne Technology Investment Management
Limited from 1999 to 2006. Dr. Peng was nominated to our board of directors by
A&B pursuant to the terms of the A&B Credit Facility.

Dr. Peng received his Bachelors and Masters degree in
medicine from Hunan Medical College, China. Dr. Peng was awarded his PhD in
molecular pathology from University College London (UCL) Medical School where he
subsequently worked as a clinical lecturer. We believe that Dr. Pengs
leadership experience in international contexts, knowledge of medicine and
investment experience will help our board in its oversight role.

56

---

Director Independence

Our Board of Directors has determined that two of our
directors, Blane Walter and Edward Straw, qualify as independent directors under
the listing standards of the TSX and the NYSE MKT.

Term of Office

Our directors are appointed to hold office until the next
annual general meeting of our stockholders or until they resign or are removed
from the board in accordance with our bylaws. Our officers are appointed by our
Board of Directors and hold office until they resign or are removed from office
by the Board of Directors.

Committees of the Board of Directors

Our Board of Directors has the authority to appoint committees
to perform certain management and administration functions. Our Board of
Directors currently has an audit committee. The charter for the audit committee
is available on our website.

Our audit committee is comprised of Edward Straw and Blane
Walter each of whom are independent directors under the rules of the NYSE MKT
and the SEC. The purpose of the audit committee is to assist our Board of
Directors with oversight of: (i) the quality and integrity of our financial
statements and its related internal controls over financial reporting, (ii) our
compliance with legal and regulatory compliance, (iii) the independent
registered public accounting firms qualifications and independence, and (iv)
the performance of our independent registered public accounting firm. The audit
committees primary function is to provide advice with respect to our financial
matters and to assist our Board of Directors in fulfilling its oversight
responsibilities regarding finance, accounting, and legal compliance. Vice
Admiral Straw is an audit committee financial expert as that term is defined
in Item 407(d)(5)(ii) of Regulation S-K.

Family Relationships

There are no family relationships among our directors and
officers.

Code of Ethics

The Company has adopted a code of business conduct and ethics
that applies to its directors, officers, and employees, including its principal
executive officers, principal financial officer, principal accounting officer,
controller or persons performing similar functions. Our code of business conduct
and ethics (Code of Ethics) can be found on the Investor Relations page of our
website. If we make substantive amendments to the Code of Ethics for or grant
any waiver, including any implicit waiver, we will disclose the nature of such
amendment or waiver on our website or in a report on Form 8-K within four days
of such amendment or waiver.

|ITEM 11. | EXECUTIVE COMPENSATION
|-------- | ----------------------

During the fiscal year ended March 31, 2016, our named
executive officers consisted of Philippe Deschamps, our Chief Executive Officer,
Jonathan Sackier, our Chief Medical Officer, and Joyce LaViscount, our Chief
Financial Officer. Ms. LaViscount joined us as a director on February 27, 2015,
and became our Chief Financial Officer on October 19, 2015.

Summary Compensation Table

Name and
    
    
    
    
    
    
    
    
    
    
    
    
    
    All otherprincipal
    
    Fiscal
    
    
    
    
    
    Option awards
    
    
    
    
    
    Compensation ($)position
    
    Year
    
    
    Salary ($)
    
    
    ($)
    
    
    Bonus ($)
    
    
    
    
    
    Total ($)Philippe Deschamps
    
    2016
    
    
    400,000
    
    
    -
    (1)
    
    120,000
    
    
    15,000
    
    
    535,000Chief Executive Officer
    
    2015
    
    
    360,417
    
    
    432,198
    
    
    -
    
    
    5,000
    
    
    797,615Joyce LaViscount
    
    2016
    
    
    137,500
    
    
    205,848
    (3)
    
    -
    
    
    5,500
    
    
    348,848Chief Financial *Officer and*
      Chief Operating Officer(2)Jonathan Sackier;
    
    2016
    
    
    300,000
    
    
    -
    (4)
    
    -
    
    
    -
    
    
    300,000Chief Medical Officer
    
    2015
    
    
    100,000
    
    
    449,797
    
    
    -
    
    
    -
    
    
    549,797


57

---

|(1) | The grant date fair value was denominated in Canadian
      dollars and converted into U.S. Dollars using the Bank of Canada nominal
      noon exchange rate on June 19, 2014 (the grant date) of CAD$1.00 =
      USD$0.9235.                                                                                                                                                                                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Ms. LaViscount was appointed as Chief Financial Officer
      and Chief Operating Officer on October 19, 2015, and resigned from our
      Board of Directors on December 29, 2015. The compensation reflected in the
      Summary Compensation Table reflects her compensation in connection with
      her role as an executive officer of the Company. Ms. LaViscount was not
      awarded any compensation in connection with her role as a director of the
      Company during the fiscal year ended March 31, 2016.
|(3) | The grant date fair value was denominated in Canadian
      dollars and converted into U.S. Dollars using the Bank of Canada nominal
      noon exchange rate on October 21, 2015 (the grant date) of CAD$1.00 =
      USD$0.7624.                                                                                                                                                                                                                                                                                          
|(4) | The grant date fair value was denominated in Canadian
      dollars and converted into U.S. Dollars using the Bank of Canada nominal
      noon exchange rate on December 8, 2015 (the grant date) of CAD$1.00 =
      USD$0.8717.                                                                                                                                                                                                                                                                                          

Narrative Disclosure to Summary Compensation Table

Employment Agreement with Philippe Deschamps

On June 13, 2014, we entered into an employment agreement with
Philippe Deschamps to serve as our President and CEO. This employment agreement
was amended on September 1, 2014. Pursuant to the employment agreement, Mr.
Deschamps received a base salary at an annualized rate of $250,000 until
investments reached a level of $5 million, or the Financing Threshold, and after
such Financing Threshold was met, on August 14, 2014, the Board approved the
increase of his base salary to $400,000. In addition to Mr. Deschamps base
salary, he has the opportunity to receive a target annual bonus of 30% of the
base salary, conditional upon, and subject to upward or downward adjustment
based upon, achievements and individual goals to be established in good faith by
the Board of Directors and Mr. Deschamps. For the fiscal year ended March 31,
2016, Mr. Deschamps was granted a cash bonus of $120,000. If Mr. Deschamps is
terminated without cause or if Mr. Deschamps resigns for good reason, we shall
pay Mr. Deschamps an aggregate amount equal to the sum of his base salary and
the earned portion of the annual bonus paid for the year preceding the year of
his termination of which such amount is to be paid in equal monthly installments
during the twelve month period following such termination of employment.

Employment Agreement with Joyce LaViscount

On October 19, 2015, we entered into an employment agreement
with Joyce LaViscount to serve as our Chief Financial Officer and Chief
Operating Officer. Pursuant to the employment agreement, Ms. LaViscount will
receive a base salary at an annualized rate of $300,000 for her employment term,
which is at-will. In addition to Ms. LaViscounts base salary, she shall have
the opportunity to receive a target annual bonus of 25% of the base salary,
conditional upon, and subject to upward or downward adjustment based upon
achievements and individual goals to be established in good faith by our CEO and
Ms. LaViscount. If Ms. LaViscount is terminated without cause or if Ms.
LaViscount resigns for good reason, we will pay Ms. LaViscount an aggregate
amount equal to the sum of her base salary and the earned portion of the annual
bonus paid for the year of her termination of which such amount is to be paid in
equal monthly installments during the twelve month period following such
termination of employment.

Employment Agreement with Jonathan Sackier, MD

On December 1, 2014, we entered into an employment agreement
with Dr. Jonathan Sackier to serve as our Chief Medical Officer. Pursuant to the
employment agreement, Dr. Sackier will receive a base salary at an annualized
rate of $300,000 for his employment term, which is at-will. In addition to Dr.
Sackiers base salary, he shall have the opportunity to receive a target annual
bonus of 25% of the base salary, conditional upon, and subject to upward or
downward adjustment based on upon, achievements and individual goals to be
established in good faith by our CEO and Dr. Sackier. If Dr. Sackier is terminated without cause, or if he resigns for good reason, we
will pay Dr. Sackier an aggregate amount equal to the sum of his base salary and
the earned portion of the annual bonus paid for the year of his termination of
which such amount is to be paid in equal monthly installments during the twelve
month period following such termination of employment.

58

---

Employment Agreement with Brian Bapty, PhD

On November 2, 2015, we entered into an employment agreement
with Mr. Brian Bapty to serve as our Vice President of Strategy and Business
Development. Pursuant to the employment agreement, Mr. Bapty will receive a base
salary at an annualized rate of CAN $220,000 for his employment term, which is
at-will. In addition to Mr. Baptys base salary, he shall have the opportunity
to receive a target annual bonus of 25% of the base salary, conditional upon,
and subject to upward or downward adjustment based on upon, achievements and
individual goals to be established in good faith by our CEO and Mr. Bapty. If
Mr. Bapty is terminated without cause, or if he resigns for good reason, we will
pay Mr. Bapty an aggregate amount equal to the sum of his base salary of which
such amount is to be paid in equal monthly installments during the twelve-month
period following such termination of employment.

Option Grants during Fiscal Year 2016

During the fiscal year ended March 31, 2016, we granted 750,000
options to Joyce LaViscount. The grant was made pursuant to the June 2014 Stock
Incentive Plan, which is further described below. Twenty five percent of Ms.
LaViscounts options vested upon grant, and the remaining seventy five percent
will vest at a rate of twenty five percent annually from the grant date. Ms.
LaViscounts options have an exercise price of CAD$0.87 and expire on October
21, 2020.

Management Contract with V Baron Global Financial Canada
Ltd.

Effective July 1, 2014, V Baron has been engaged as an advisor
to provide corporate advisory and CFO services to the Company. V Baron was
initially engaged for a period of 12 months ending on July 1, 2015. Once the 12
month period passed, V Baron continued to provide advisory services on a
month-to-month basis. The corporate advisory services include advising on
corporate governance, assisting in compliance with the standards and policies of
stock exchanges and regulators, advising on continuous disclosure requirements,
assisting in compilation of financial statements, liaising with legal counsel,
auditors and the Companys transfer agent, and assisting/advising on corporate
finance related matters. During the duration of the agreement, each party may
terminate the agreement by providing the other party with 60 days written
notice. V Baron will receive CAD$12,500 per month for the services provided.
Until her resignation in October of 2015, our CFO services were provided by
Amanda Tseng, who is an employee of V Baron. On October 19, 2015, we appointed
Joyce LaViscount to act as our Chief Financial Officer. During the fiscal year
ended March 31, 2016, the Company incurred charges totaling CAD$150,000
(US$114,623) in respect of this agreement.

Savio Chiu, a member of our Board of Directors, is a Senior
Manager, Corporate Finance of V Baron.

June 2014 Stock Incentive Plan

On June 18, 2014, our Board of Directors authorized and
approved the adoption of the 2014 Plan, effective June 18, 2014, under which an
aggregate of 12,108,016 shares of our common stock may be issued. The purpose of
the 2014 Plan is to enhance our long-term stockholder value by offering
opportunities to our directors, officers, employees and eligible consultants to
acquire and maintain stock ownership in order to give these persons the
opportunity to participate in our growth and success, and to encourage them to
remain in our service. Pursuant to the terms of the 2014 Plan, we are authorized
to grant stock options, as well as awards of stock appreciation rights,
restricted stock, unrestricted shares, restricted stock units and deferred stock
units.

The foregoing summary of the 2014 Plan is not complete and is
qualified in its entirety by reference to the 2014 Plan.

59

---

Securities Authorized For Issuance Under Compensation Plans

The following table sets forth the securities to be issued
under the Stock Option Plan as at March 31, 2016:

|                                                                    |  |                               |  |   |                                 |  |  | Number of
      securities      | 
|------------------------------------------------------------------- |  | ----------------------------- |  | - | ------------------------------- |  |  | ------------------------------- | 
|                                                                    |  |                               |  |   |                                 |  |  | remaining available
      for   | 
|                                                                    |  | Number of securities
      to |  |   | Weighted-average
      exercise |  |  | future issuance
      under     | 
|                                                                    |  | be                            |  |   |                                 |  |  |                                 | 
|                                                                    |  | issued upon exercise
      of |  |   | price of
      outstanding      |  |  | equity compensation
      plans | 
|                                                                    |  | outstanding
      options,    |  |   | options, warrants
      and     |  |  | (excluding
      securities     | 
|                                                                    |  | warrants and
      rights     |  |   | rights                          |  |  | reflected in column
      (a))  | 
|                                                                    |  | (a)                           |  |   | (b)                             |  |  | (c)                             | 
|Equity compensation plans approved by
      security holders        |  | -                             |  |   | -                               |  |  | -                               | 
|                                                                    |  |                               |  |   |                                 |  |  |                                 | 
|Equity compensation plans not approved
      by security holders(1) |  | 4,920,000                     |  | $ | 0.8989(2)                       |  |  | 7,188,016                       | 
|                                                                    |  |                               |  |   |                                 |  |  |                                 | 
|Total                                                               |  | 4,920,000                     |  | $ | 0.8989(2)                       |  |  | 7,188,016                       | 

|(1) | Represents grants of stock options pursuant to the 2014
      Plan. See Item 11. Executive Compensation June 2014 Stock Incentive
      Plan for a description of the material features of the 2014
  Plan.               
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | The weighted-average exercise price was denominated in
      Canadian dollars and converted into U.S. dollars based on the Bank of
      Canada nominal noon exchange rate on March 31, 2016 of CAD$1.00 = USD
      $0.7710.

Outstanding Equity Awards at Fiscal Year-End

|                   |  | Number of   |  |  | Number of     |     |  |                |     |  |                   | 
|------------------ |  | ----------- |  |  | ------------- | --- |  | -------------- | --- |  | ----------------- | 
|                   |  | Securities  |  |  | Securities    |     |  |                |     |  |                   | 
|                   |  | Underlying  |  |  | Underlying    |     |  |                |     |  |                   | 
|                   |  | Unexercised |  |  | Unexercised   |     |  |                |     |  |                   | 
|                   |  | Options     |  |  | Options       |     |  | Option         |     |  |                   | 
|                   |  | (#)         |  |  | (#)           |     |  | Exercise Price |     |  | Option Expiration | 
|Name               |  | Exercisable |  |  | Unexercisable |     |  | ($)            |     |  | Date              | 
|                   |  |             |  |  |               |     |  |                |     |  |                   | 
|Philippe Deschamps |  | 1,200,000   |  |  | 600,000       | (1) |  | 0.55           | (2) |  | 06/18/2019        | 
|                   |  |             |  |  |               |     |  |                |     |  |                   | 
|Joyce LaViscount   |  | 66,667      |  |  | 33,333        | (3) |  | 2.51           | (4) |  | 03/16/2020        | 
|                   |  | 250,000     |  |  | 500,000       | (5) |  | 0.66           | (6) |  | 10/21/2020        | 
|                   |  |             |  |  |               |     |  |                |     |  |                   | 
|Jonathan Sackier   |  | 300,000     |  |  | 100,000       | (7) |  | 2.58           | (8) |  | 12/08/2019        | 

|(1) | 600,000 options will vest on June 19, 2016.                                                                                                                                                                                    
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | The option exercise price of CAD$0.60 was converted from
      Canadian dollars to U.S. dollars based on the Bank of Canada nominal noon
      exchange rate on June 19, 2014 (the grant date) of CAD$1.00 =
      USD$0.9235. 
|(3) | 33,333 options will vest on March 16, 2017. These options
      were awarded in connection with Ms. LaViscounts role as a member of our
      Board of Directors.                                                             
|(4) | The option exercise price of CAD$3.20 was converted from
      Canadian dollars to U.S. dollars based on the Bank of Canada nominal noon
      exchange rate on March 16, 2015 (the grant date) of CAD$1.00 =
      USD$0.7834.
|(5) | 250,000 options will vest on each of October 21, 2017 and
      October 21, 2018.                                                                                                                                              
|(6) | The option exercise price of CAD$0.87 was converted from
      Canadian dollars to U.S. dollars based on the Bank
of Canada nominal noon exchange rate on March 16, 2015 (the grant
date) of CAD$1.00 = USD$0.7624.            

60

---

|(7) | 100,000 options will vest on June 8, 2016.                                                                                                                                                                                       
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(8) | The option exercise price of CAD$2.96 was converted from
      Canadian dollars to U.S. dollars based on the Bank of Canada nominal noon
      exchange rate on December 8, 2014 (the grant date) of CAD$1.00 =
      USD$0.8717.

Director Compensation

|                |  | Option    |  |  | All Other    |  |  | Total        | 
|--------------- |  | --------- |  |  | ------------ |  |  | ------------ | 
|                |  | Awards    |  |  | Compensation |  |  | Compensation | 
|Name(1)         |  | ($)       |  |  | ($)          |  |  | ($)          | 
|Savio Chiu      |  | -(2)      |  |  | -            |  |  | -            | 
|Yuri Danilov(3) |  | -         |  |  | 12,350(8)(9) |  |  | -            | 
|Mitch Tyler     |  | -(4)      |  |  | 58,410(8)(9) |  |  | 58,410       | 
|Edward Straw    |  | -(5)      |  |  | -            |  |  | -            | 
|Blane Walter    |  | 18,063(6) |  |  | -            |  |  | 18,063       | 
|Huaizheng Peng  |  | 18,063(7) |  |  | -            |  |  | 18,063       | 

|(1) | Ms. LaViscount resigned from our Board of Directors on
      December 29, 2015. The compensation awarded to Ms. LaViscount in
      connection with her role as a member of our Board of Directors during the
      fiscal year ended March 31, 2016 is reflected above in the Summary
      Compensation Table.                          
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Mr. Chiu had 60,000 options outstanding as of March 31,
      2016, of which 20,000 were not vested.                                                                                                                                                                                                                                      
|(3) | Mr. Danilov resigned from our Board of Directors on
      December 29, 2015.                                                                                                                                                                                                                                                              
|(4) | Mr. Tyler had 400,000 options outstanding as of March 31,
      2016, of which 133,333 were not vested.                                                                                                                                                                                                                                   
|(5) | Mr. Straw had 100,000 options outstanding as of March 31,
      2016, of which 33,333 were not vested.                                                                                                                                                                                                                                    
|(6) | Mr. Walter had 50,000 options outstanding as of March 31,
      2016, of which 33,333 were not vested. The grant date fair value was
      denominated in Canadian dollars and converted into U.S. dollars using the
      Bank of Canada nominal noon exchange rate on December 31, 2015 (the grant
      date) of CAD$1.00 = USD$0.7225.
|(7) | Dr. Peng had 50,000 options outstanding as of March 31,
      2016, of which 33,333 were not vested. The grant date fair value was
      denominated in Canadian dollars and converted into U.S. dollars using the
      Bank of Canada nominal noon exchange rate on December 31, 2015 (the grant
      date) of CAD$1.00 = USD$0.7225.  
|(8) | These amounts were paid pursuant to a consulting
      agreement between each of Messrs. Danilov and Tyler and us. See Certain
      Relationships and Related Transactions, and Director IndependenceRelated
      Party Transactions for a description of the agreement.                                                             
|(9) | These awards were issued to Messrs. Danilov and Tyler as
      part of their compensation for services rendered as non- employee
      consultants.                                                                                                                                                                                       

Narrative Disclosure to Director Compensation Table

During the fiscal year ended March 31, 2016, our directors did
not receive any fees for their service. Instead, we granted stock options to two
of our directors. We granted 50,000 options to Messrs. Walter and Peng,
respectively. Messrs. Walter and Pengs options expire on December 31, 2020 and
have an exercise price of CAD$1.24.

|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
      MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|-------- | ----------------------------------------------------------------------------------------------------

The following table sets forth information relating to the
beneficial ownership of our common stock as of June 21, 2016, by:

| |  | Each of our directors and named executive officers;                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                 
| |  | All of our directors and executive officers as a group;                                                                                         
| |   |                                                                                                                                                 
| |  | each person, or group of affiliated persons, known by us
      to beneficially own more than 5% of our outstanding shares of common
      stock;

The number of shares beneficially owned by each entity, person,
director or executive officer is determined in accordance with the rules of the
SEC, and the information is not necessarily indicative of beneficial ownership
for any other purpose. Under such rules, beneficial ownership includes any
shares over which the individual has sole or shared voting power or investment power as well as any shares that the individual has
the right to acquire within 60 days of June 21, 2016 through the exercise of any
stock options, warrants or other rights. Except as otherwise indicated, and
subject to applicable community property laws, the persons named in the table
have sole voting and investment power with respect to all shares of common stock
held by that person.

61

---

Shares of our common stock that a person has the right to
acquire within 60 days of June 21, 2016 are deemed outstanding for purposes of
computing the percentage ownership of the person holding such rights, but are
not deemed outstanding for purposes of computing the percentage ownership of any
other person, except with respect to the percentage ownership of all directors
and executive officers as a group. Unless otherwise indicated in the footnotes
to the table, the information presented in this table is based on 84,323,934
shares of our Class A common stock outstanding on June 21, 2016. Unless
otherwise indicated below, the address for each beneficial owner listed is c/o
Helius Medical Technologies, Suite 400, 41 University Drive, Newtown, PA 18940.

|Name and Address of Beneficial Owner                               | Amount and Nature of
      Beneficial
|------------------------------------------------------------------ | -------------------------------------
|                                                                   | Ownership                            
|Directors and Named Executive Officers:                            | Shares                               
|Philippe Deschamps                                                 | 17,917,355(1)                        
|President, Director, and
      Chief Executive Officer             |                                      
|Joyce LaViscount                                                   | 517,003(2)                           
|Chief Financial Officer
      and Chief Operating Officer          |                                      
|Jonathan Sackier                                                   | 16,435,026(3)                        
|Chief Medical Officer                                              |                                      
|Savio Chiu                                                         | 60,000(4)                            
|Director                                                           |                                      
|Mitch Tyler                                                        | 400,000(5)                           
|Director                                                           |                                      
|Edward Straw                                                       | 79,167(6)                            
|Director                                                           |                                      
|Blane Walter                                                       | 16,667(7)                            
|Director                                                           |                                      
|Huaizheng Peng                                                     | 16,667(8)                            
|Director                                                           |                                      
|All executive officers and directors as a group (9
      persons): |                                      
|                                                                   |                                      
|5% or greater
      stockholders:                                  | Shares                               
|                                                                   |                                      
|MPJ Healthcare, LLC                                                | 16,035,026(9)                        
|208 Palmer Aly                                                     |                                      
|Newtown, PA 18940                                                  |                                      
|                                                                   |                                      
|Advanced NeuroRehabilitation, LLC                                  | 16,035,026(10)                       
|510 Charmany Dr., Suite
      175F                                 |                                      
|Madison, WI 53719                                                  |                                      
|                                                                   |                                      
|A&B (HK) Company Limited                                           | 11,458,334(11)                       
|Unit A, 11thFloor, Chung Pont Commercial Building, 300             |                                      
|Hennessy Road, Wanchai,
      Hong Kong, P.R.C.                    |                                      

*Represents beneficial ownership of less than one percent of
our outstanding common stock.

| | (1) | Includes 1,800,000 stock options which are immediately
      exercisable or which will become exercisable within 60 days, warrants to
      purchase 25,093 shares, and 16,917,355 shares held by MPJ Healthcare, LLC.
      Investment and voting decisions for the shares held by MPJ Healthcare, LLC
      are made by a board of three members, each holding one vote. The three
      board members are Philippe Deschamps, Jonathan Sackier and Montel
      Williams. This amount includes 7,215,762 shares held in escrow. The
holder has only voting power and no investment power with respect to the
escrowed shares.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

62

---

| | (2)  | Includes 441,667 stock options which are immediately
      exercisable or which will become exercisable within 60 days and warrants
      to purchase 25,112 shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (3)  | Includes 400,000 stock options which are immediately
      exercisable or which will become exercisable within 60 days and 16,917,355
      shares held by MPJ Healthcare, LLC. Investment and voting decisions for
      the shares held by MPJ Healthcare, LLC are made by a board of three
      members, each holding one vote. The three board members are Philippe
      Deschamps, Jonathan Sackier and Montel Williams. This amount includes
      7,215,762 shares held in escrow. The holder has only voting power and no
      investment power with respect to the escrowed shares.                                                            
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (4)  | Includes 60,000 stock options which are immediately
      exercisable or which will become exercisable within 60 days.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (5)  | Includes 400,000 stock options which are immediately
      exercisable or which will become exercisable within 60 days.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (6)  | Includes 66,667 stock options which are immediately
      exercisable or which will become exercisable within 60 days.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (7)  | Include 16,667 stock options which are immediately
      exercisable or which will become exercisable within 60 days.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (8)  | Includes 16,667 stock options which are immediately
      exercisable or which will become exercisable within 60 days.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (9)  | Investment and voting decisions for the shares held by
      MPJ Healthcare, LLC are made by a board of three members, each holding one
      vote. The three board members are Philippe Deschamps, Jonathan Sackier and
      Montel Williams. This amount includes 7,215,762 shares held in escrow. The
      holder has only voting power and no investment power with respect to the
      escrowed shares.                                                                                                                                                                                                                                            
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (10) | Investment and voting decisions for shares held by
      Advanced NeuroRehabilitation, LLC are made by Kurt Kaczmarek, as the
      managing member. This amount includes 7,215,762 shares held in escrow. The
      holder has only voting power and no investment power with respect to the
      escrowed shares.                                                                                                                                                                                                                                                                                                                                       
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (11) | In a Schedule 13D filed March 4, 2016, each of A&B,
      A&B Brother Limited (A&B BVI), and Dr. Lam Kong disclosed shared
      investment and dispositive power over 11,458,334 shares. Based solely upon
      the disclosure in the Schedule 13D, Dr. Lam Kong is the sole officer and
      director of each of A&B and A&B BVI. The business address of
      A&B BVI is Trident Chambers, P.O. Box 146, Road Town, Tortola, British
      Virgin Islands. The business address of Dr. Lam Kong is 8/F Bldg. A,
      Tongfang Information Harbor, No. 11 Langshan Road, Shenzhen Hi-tech
      Industrial Park, Nanshan District, Shenzhen,
P.R.C.

Shares of our Common Stock that are owned by ANR and MPJ are
subject to the terms of a Lock-Up Agreement as discussed herein below. Under
Rule 144 promulgated under the Securities Act, our officers, directors and
beneficial shareholders may sell, subject to the terms of the Lock-Up Agreement,
up to one percent (1%) of the total outstanding shares (or an amount of shares
equal to the average weekly reported volume of trading during the four calendar
weeks preceding the sale) every three months provided that (i) current public
information is available about our Company, (ii) the shares have been held for
at least one year, (iii) the shares are sold in a brokers transaction or
through a market-maker, and (iv) the seller files a Form 144 with the SEC.

|ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
      DIRECTOR INDEPENDENCE
|-------- | -------------------------------------------------------------------------------

Except as described below and in Executive Compensation
above, there are no transactions since our inception, or any currently proposed
transactions, in which we were or are to be a participant and in which any
related person had or will have a direct or indirect material interest.
Related person includes:

63

---

| | (a) | Any of our directors or executive officers;                                                                                                                                                                                                                                                                 
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                             
| | (b) | Any person proposed as a nominee for election as a
      director;                                                                                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                                             
| | (c) | Any person who beneficially owns more than 5% of our
      common stock; or                                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                             
| | (d) | Any child, stepchild, parent, stepparent, spouse,
      sibling, mother-in-law, father-in-law, son-in-law, daughter- in- law,
      brother-in-law, sister-in-law or person (other than a tenant or employee)
      sharing the same household of any person enumerated in paragraph (a), (b),
      or (c).

Related Party Transactions

Consulting and Employment Agreements with Brian
Bapty

On November 2, 2015, we entered into an employment agreement
with Dr. Bapty to serve as the Vice President of Strategy and Business
Development of the Company. Pursuant to the employment agreement, Dr. Bapty will
receive a base salary at an annualized rate of CAD$220,000 for his employment
term, which is at-will. In addition to Dr. Baptys base salary, he shall have
the opportunity to receive a target annual bonus of 25% of the base salary,
conditional upon, and subject to upward or downward adjustment based upon
achievements and individual goals to be established in good faith by the
Companys CEO and Dr. Bapty, which goals have not yet been established. If Dr.
Bapty is terminated without cause or if Dr. Bapty resigns for good reason, the
Company will pay Dr. Bapty an aggregate amount equal to the sum of his base
salary and there will be accelerated vesting of the options described in the
immediately preceding paragraph.

Strategic Agreement with A&B and A&B Credit
Facility

On October 13, 2015, the Company announced that it, through its
wholly owned subsidiary NHC, entered into the Strategic Agreement with A&B
for the development and commercialization of the PoNS therapy in China, Hong
Kong, Macau, Taiwan and Singapore (collectively, the Territories). A&B is
an investment and development company owned by Dr. Kong Lam and based in Hong
Kong. The Strategic Agreement transfers ownership of certain Asian patents,
patent applications, and product support material for the PoNS device from NHC
to A&B and grants to A&B, among other things, an exclusive, perpetual,
irrevocable and royalty-free license, with the right to sublicense, to certain
NHC technology, as more particularly described in the Strategic Agreement, to
market, promote, distribute and sell PoNS devices solely within the
Territories. Pursuant to the Strategic Agreement, A&B has assumed all
development, patent (both application and defense), future manufacturing,
clinical trial, and regulatory clearance costs for the Territories. The Company
and A&B will share and transfer ownership of any intellectual property or
support material (developed by either party) for their respective geographies.
In connection with the Strategic Agreement, A&B agreed to provide a credit
facility to the Company.

On October 9, 2015, the Company had issued a convertible
promissory note (the Note) to A&B in connection with the drawdown of
US$2.0 million under the Companys US$7.0 million credit facility with A&B
(the A&B Credit Facility). The Company also received notice of conversion
on October 9, 2015and immediately satisfied the terms of the Note by issuing to
A&B: (i) 2,083,333 common shares at a deemed price of US$0.96 per common
share; and (ii) 1,041,667 common share purchase warrants, with each warrant
entitling A&B to purchase an additional common share at a price of US$1.44
for a period of three years expiring on November 10, 2018.

On December 29, 2015, the Company drew down the remaining
US$5.0 million from the A&B Credit Facility in exchange for the issuance to
A&B of 5,555,556 common shares at a price of US$0.90 per common share and
warrants to purchase 2,777,778 commons shares for a period of three years having
an exercise price of US$1.35 per common share. Additionally, pursuant to the
terms of the funding commitment from A&B, the Company granted A&B the
right to nominate one person to serve on the Board. A&B nominated Dr. Peng
and the Board appointed Dr. Peng to fill the new vacancy. The common shares and
warrants issued to A&B, and the common shares underlying such warrants, are
subject to a four-month statutory hold period.

Pursuant to the terms of the A&B Credit Facility, we have
agreed to register the shares of common stock issued under the terms of the
Credit Facility upon the request of A&B. A&B currently has beneficial
ownership over 11,458,334 shares of our common stock.

64

---

Consulting Agreement with Montel Media, Inc.

On April 13, 2016, Montel Media, Inc. (Montel Media) entered
into a consulting agreement, or the Montel Media Consulting Agreement, with the
Company to provide consulting services in relation to the promotion of clinical
trials as well as ongoing media/marketing strategy. Montel Media is owned by
Montel Williams. Mr. Williams is one of three board members of MPJ. The Montel
Media Consulting Agreement is valid for a period of 12 months and Montel Media
will charge a monthly fee of $15,000. The total projected dollar value of the
contract is $180,000. Pursuant to the Montel Media Consulting Agreement, Montel
Media will be an independent contractor and subject to the confidentiality
provisions contained in the Montel Media Consulting Agreement.

Review, Approval and Ratification of Related Party
Transactions

Our Board of Directors has responsibility for establishing and
maintaining guidelines relating to any related party transactions between us and
any of our officers or directors. Any conflict of interest between a related
party and us must be referred to the non-interested directors, if any, for
approval. We intend to adopt written guidelines for the board of directors which
will set forth the requirements for review and approval of any related party
transactions.

|ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES
|-------- | --------------------------------------

The following are aggregate fees billed to us by BDO Canada LLP
during the fiscal years ended March 31, 2016 and 2015:

Fiscal Year Ended
    
    
    Fiscal Year EndedMarch 31, 2016
    
    
    March 31, 2015Audit Fees
    $
    155,000
    
    
    86,715Audit-Related Fees
    
    Nil
    
    
    NilTax Fees
    $
    61,550
    
    
    5,090All Other Fees
    
    -
    
    
    NilTotal Fees
    $
    216,550
    
    
    91,805


Audit Fees

Audit fees consist of fees billed for professional services
rendered for the audit of our consolidated financial statements and review of
the interim consolidated financial statements included in quarterly reports and
services that are normally provided by BDO Canada LLP in connection with
statutory and regulatory filings, our registration statements and securities
offerings.

Tax Fees

Tax fees consist of fees billed for professional services for
tax compliance, tax advice and tax planning. These services include assistance
regarding federal, state and tax compliance, customs and duties, mergers and
acquisitions and tax planning.

All Other Fees

This was zero for 2016.

A majority of our independent directors, or the independent
director to whom such authority was delegated by the independent directors, must
pre-approve all services provided by the independent registered public
accounting firm.

65

---

PART IV

|ITEM 15. | EXHIBITS, FINANCIAL STATEMENT SCHEDULES
|-------- | ---------------------------------------

The following documents are filed as part of this Annual
Report:

|1. | Financial StatementsSee the Index to Consolidated
      Financial Statements on Page F-1.                                                                                                                                                                                                   
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                              
|2. | Financial Statement SchedulesNone. We have omitted
      financial statement schedules because they are not required or are not
      applicable, or the required information is shown in the consolidated
      financial statements or notes to the consolidated financial
    statements.
|   |                                                                                                                                                                                                                                                                                              
|3. | Exhibits.                                                                                                                                                                                                                                                                                    

|Exhibit Number | Exhibit                                                                                                                                                                                                                                                                            
|-------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|               |                                                                                                                                                                                                                                                                                    
|2.2            | Agreement and Plan of Merger among Helius Medical
      Technologies, Inc., HMT Mergersub, Inc. and NeuroHabilitation Corporation,
      dated June 6, 2014 (incorporated by reference to Exhibit 10.6 to the Form
      S-1 filed with the SEC on July 14, 2014)                  
|               |                                                                                                                                                                                                                                                                                    
|3.1            | Articles of Continuation (incorporated by reference to
      Exhibit 3.1 to the Form S-1 filed with the SEC on July 14, 2014)                                                                                                                                                      
|               |                                                                                                                                                                                                                                                                                    
|3.2            | Articles of Amendment filed with the Wyoming Secretary of
      State on July 3, 2014 (incorporated by reference to Exhibit 3.2 to the
      Form S-1 filed with the SEC on July 14, 2014)                                                                                         
|               |                                                                                                                                                                                                                                                                                    
|3.3            | Articles of Amendment filed with the Wyoming Secretary of
      State on April 27, 2015 (incorporated by reference to Exhibit 3.3 to
      amendment no. 1 to the Form 10 filed with the SEC on May 4, 2015)                                                                       
|               |                                                                                                                                                                                                                                                                                    
|3.4            | Bylaws as amended and restated (incorporated by reference
      to Exhibit 3.1 to the Form 8-K filed with the SEC on March 23, 2016)                                                                                                                                               
|               |                                                                                                                                                                                                                                                                                    
|4.1            | Form of Warrant (included in Exhibit 4.2)                                                                                                                                                                                                                                          
|               |                                                                                                                                                                                                                                                                                    
|4.2            | Warrant Indenture dated April 18, 2016 by and between
      Helius Medical Technologies, Inc. and Computershare Investor Services Inc.
      (incorporated by reference to Exhibit 4.1 to amendment no. 1 to the Form
      8-K filed April 18, 2016 and amended on April 20, 2016)
|               |                                                                                                                                                                                                                                                                                    
|10.1          | Employment Agreement between Helius Medical Technologies,
      Inc. and Philippe Deschamps, dated June 13, 2014 (incorporated by
      reference to Exhibit 99.1 to the Form S-1 filed with the SEC on July 14,
      2014)                                                       
|               |                                                                                                                                                                                                                                                                                    
|10.2          | Amendment Agreement to the Employment Agreement between
      Helius Medical Technologies, Inc. and Philippe Deschamps, dated September
      1, 2014 (incorporated by reference to Exhibit 99.5 to the Amendment to
      Form S-1 filed with the SEC on September 23, 2014)      
|               |                                                                                                                                                                                                                                                                                    
|10.3          | Employment Agreement between Helius Medical Technologies,
      Inc. and Jonathan Sackier, dated December 1, 2014 (incorporated by
      reference to Exhibit 10.4 to the Form 10-12G filed with the SEC on April
      15, 2015)                                                  
|               |                                                                                                                                                                                                                                                                                    
|10.4          | Consulting Agreement between NeuroHabilitation
      Corporation and Yuri Danilov, dated July 1, 2014 (incorporated by
      reference to Exhibit 99.4 to the Amendment to Form S-1 filed with the SEC
      on September 23, 2014)                                                

66

---

|Exhibit Number | Exhibit                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|-------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|               |                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|10.5          | Consulting Agreement between NeuroHabilitation
      Corporation and Mitch Tyler, dated December 10, 2014 (incorporated by
      reference to Exhibit 10.5 to the Form 10-12G filed with the SEC on
      February 6, 2015)                                                                                                                                                                                                                                 
|               |                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|10.6          | Advisory Agreement between Helius Medical Technologies,
      Inc. and V Baron Global Financial Canada Ltd., dated June 13, 2014
      (incorporated by reference to Exhibit 99.2 to the Form S-1 filed with the
      SEC on July 14, 2014)                                                                                                                                                                                                                
|               |                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|10.7           | License Agreement between Advanced NeuroRehabilitation,
      LLC and Yuri Danilov, Mitchell Tyler, Kurt Kaczmarek and John Klus, dated
      June 29, 2011 (incorporated by reference to Exhibit 10.8 to the Amendment
      to Form S-1 filed with the SEC on September 23, 2014)                                                                                                                                                                         
|               |                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|10.8           | Amended and Restated Patent Sub-License Agreement between
      Advanced NeuroRehabilitation, LLC and NeuroHabilitation Corporation,
      having an effective date of January 22, 2013 (incorporated by reference to
      Exhibit 10.1 to the Form S-1 filed with the SEC on July 14, 2014)                                                                                                                                                               
|               |                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|10.9           | Second Amended and Restated Patent Sub-License Agreement
      between Advanced NeuroRehabilitation, LLC and NeuroHabilitation
      Corporation, dated June 6, 2014, but having an effective date of January
      22, 2013 (incorporated by reference to Exhibit 10.7 to the Form S- 1 filed
      with the SEC on July 14, 2014)                                                                                                                         
|               |                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|10.10          | Master Cooperative Research and Development Agreement
      between NeuroHabilitation Corporation, Advanced NeuroRehabilitation, LLC,
      Yuri Danilov, Mitchell Tyler, Kurt Kaczmarek and U.S. Army Medical
      Material Agency and U.S. Army Medical Material Development Activity, dated
      effective February 1, 2013 (incorporated by reference to Exhibit 10.2 to
      the Form S-1 filed with the SEC on July 14, 2014)                      
|               |                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|10.11          | Notice of Modification No. 1 to Cooperative Research and
      Development Agreement between NeuroHabilitation Corporation, Advanced
      NeuroRehabilitation, LLC, Yuri Danilov, Mitchell Tyler, Kurt Kaczmarek and
      U.S. Army Medical Material Agency and U.S. Army Medical Material
      Development Activity, dated April 29, 2014 (incorporated by reference to
      Exhibit 10.5 to the Form S-1 filed with the SEC on July 14, 2014)         
|               |                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|10.12          | Notice of Modification No. 2 to Cooperative Research and
      Development Agreement between NeuroHabilitation Corporation, Advanced
      NeuroRehabilitation, LLC, Yuri Danilov, Mitchell Tyler, Kurt Kaczmarek and
      U.S. Army Medical Material Agency and U.S. Army Medical Material
      Development Activity, dated January 12, 2015 (incorporated by reference to
      Exhibit 10.12 to the Form 10-12G filed with the SEC on February 6, 2015)
|               |                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|10.13          | Design and Manufacturing Consultant Agreement between
      NeuroHabilitation Corporation and Clinvue, LLC, dated January 30, 2013
      (incorporated by reference to Exhibit 10.3 to the Form S-1 filed with the
      SEC on July 14, 2014)                                                                                                                                                                                                              
|               |                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|10.14          | Commercial Development-to-Supply Program between
      NeuroHabilitation Corporation and Ximedica, dated October 25, 2013
      (incorporated by reference to Exhibit 10.4 to the Form S-1 filed with the
      SEC on July 14, 2014)                                                                                                                                                                                                                       
|               |                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|10.15          | Amendment No. 1 to the Commercial Development-to-Supply
      Program between NeuroHabilitation Corporation and Ximedica, dated October
      25, 2013, amended January 15, 2016 (incorporated by reference to Exhibit
      10.15 to the Form S-1 filed with the SEC on May 4, 2016)                                                                                                                                                                       
|               |                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|10.16         | Employment Agreement between Helius Medical Technologies,
      Inc. and Joyce LaViscount, dated October 19, 2015 (incorporated by
      reference to Exhibit 10.3 to the Form 10-Q filed with                                                                                                                                                                                                                                                              

67

---

|Exhibit Number | Exhibit                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|-------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|               |                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|10.17         | Employment Agreement between Helius Medical Technologies,
      Inc. and Brian Bapty, dated November 2, 2015 (incorporated by reference to
    Exhibit 10.4 to the Form 10-Q filed with the SEC on February 16, 2016)                                                                                                                                                                                                                                    
|               |                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|10.18         | Asset Purchase Agreement between the Company and A&B
      (HK) Company Limited, dated as of October 9, 2015 (incorporated by
      reference to Exhibit 2.1 to the Form 8-K filed with the SEC on October 13,
      2015)                                                                                                                                                                                                                               
|               |                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|10.19          | Convertible Promissory Note between the Company and
      A&B (HK) Company Limited, dated as of October 9, 2015 (incorporated by
      reference to Exhibit 10.1 to the Form 8-K filed with the SEC on October
      13, 2015)                                                                                                                                                                                                                           
|               |                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|10.20          | Notice of Modification No. 3 to Cooperative Research and
      Development Agreement between NeuroHabilitation Corporation, Advanced
      NeuroRehabilitation, LLC, Yuri Danilov, Mitchell Tyler, Kurt Kaczmarek and
      U.S. Army Medical Material Agency and U.S. Army Medical Material
      Development Activity, dated December 28, 2016 (incorporated by reference
      to Exhibit 2.1 to the Form 8-K filed with the SEC on December 31, 2015)
|               |                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|10.21          | Agency Agreement between the Company and Mackie Research
      Capital Corporation, dated as of March 23, 2016 (incorporated by reference
  to Exhibit 10.21 to the Form S-1 filed with the SEC on May 4, 2016)                                                                                                                                                                                                                                          
|               |                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|10.22          | Sole-source cost sharing contract by and between
      NeuroHabilitation Corporation and the U.S. Army Medical Research and
      Materiel Command (USAMRMC) dated as of July 7, 2015 (incorporated by
      reference to Exhibit 10.22 to the Form S-1 filed with the SEC on May 4,
      2016)                                                                                                                                                         
|               |                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|10.23         | 2014 Stock Incentive Plan (incorporated by reference to
  Exhibit 4.1 to the Form S-1 filed with the SEC on July 14, 2014)                                                                                                                                                                                                                                                                                                                               
|               |                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|10.24          | Consulting Agreement between Helius Medical Technologies,
      Inc. and Montel Media, Inc., dated April 13, 2016 (incorporated by
      reference to Exhibit 10.24 to the Form S-1 filed with the SEC on May 4,
      2016)                                                                                                                                                                                                                             
|               |                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|16.1           | Letter from Davidson & Company LLP, dated April 15,
      2015 (incorporated by reference to Exhibit 16.1 to the Form 10-12G filed
      with the SEC on April 15, 2015)                                                                                                                                                                                                                                                                                 
|               |                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|21.1*          | Subsidiaries of Helius Medical Technologies, Inc.:                                                                                                                                                                                                                                                                                                                                                                                                       
|               |                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|               | 1. NeuroHabilitation Corporation is a wholly owned
      subsidiary of Helius Medical Technologies, Inc.                                                                                                                                                                                                                                                                                                                                                 
|               |                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|               | 2. Helius Medical Technologies (Canada), Inc. is a wholly
      owned subsidiary of Helius Medical Technologies, Inc.                                                                                                                                                                                                                                                                                                                                    
|               |                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|23.1*          | Consent of BDO Canada LLP                                                                                                                                                                                                                                                                                                                                                                                                                                
|               |                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|101.INS*       | XBRL Instance Document                                                                                                                                                                                                                                                                                                                                                                                                                                   
|               |                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|101.SCH*       | XBRL Taxonomy Extension Schema Document                                                                                                                                                                                                                                                                                                                                                                                                                  
|               |                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|101.CAL*       | XBRL Taxonomy Extension Calculation Linkbase Document                                                                                                                                                                                                                                                                                                                                                                                                    

68

---

|Exhibit
      Number | Exhibit                                                     
|-------------------- | ------------------------------------------------------------
|                     |                                                             
|101.LAB*             | XBRL Taxonomy
      Extension Label Linkbase Document       
|                     |                                                             
|101.PRE*             | XBRL Taxonomy
      Extension Presentation Linkbase Document
|                     |                                                             
|101.DEF*             | XBRL Taxonomy
      Extension Definition Linkbase Document  

* Filed herewith.

Indicates a management contract or compensatory plan.

Confidential information has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
granted with respect to this omitted information.

69

---

INDEX TO FINANCIAL STATEMENTS

|BDO CANADA LLP REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | F-2 
|---------------------------------------------------------------------------- | ----
|CONSOLIDATED BALANCE SHEETS                                                  | F-5 
|CONSOLIDATED STATEMENTS
      OF COMPREHENSIVE LOSS                          | F-6 
|CONSOLIDATED STATEMENTS OF CAPITAL
      DEFICIT                             | F-7 
|CONSOLIDATED STATEMENTS
      OF CASH FLOWS                                  | F-8 
|NOTES TO THE CONSOLIDATED FINANCIAL
    STATEMENTS                           | F-10

70

---

HELIUS MEDICAL TECHNOLOGIES, INC.CONSOLIDATED FINANCIAL
STATEMENTS

March 31, 2016 and 2015

(Expressed in United States Dollars)



PART I

---

| | Tel: 604 688 5421 Fax: 604 688 5132
      www.bdo.ca | BDO Canada LLP 600 Cathedral Place 925
      West Georgia Street Vancouver BC V6C 3L2 Canada
| | ---------------------------------------------------- | --------------------------------------------------------------------------------------------

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors Helius Medical
Technologies Inc.

We have audited the accompanying consolidated balance sheets of
Helius Medical Technologies Inc. as of March 31, 2016 and 2015, and the related
consolidated statements of operations and comprehensive loss, stockholders
deficit, and cash flows for the years then ended. These financial statements are
the responsibility of the Companys management. Our responsibility is to express
an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Companys internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial position of
Helius Medical Technologies Inc. at March 31, 2016 and 2015, and the results of
its operations and its cash flows for the years then ended,in conformity
with accounting principles generally accepted in the United States of
America.

The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going concern. As
described in Note 1 to the consolidated financial statements, the Company
incurred a net loss of $6,881,812 for the year ended March 31, 2016, had an
accumulated deficit of $26,305,263 at March 31, 2016 and the Company expects to
incur further losses in the development of its business. These conditions raise
substantial doubt about the Companys ability to continue as a going concern.
Managements plans in regard to these matters are also described in Note 1. The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

/s/ BDO Canada LLP

Chartered Professional Accountants

Vancouver, British Columbia June 27, 2016

BDO Canada LLP, a Canadian limited
liability partnership, is a member of BDO International Limited, a UK company
limited by guarantee, and forms part of the international BDO network of
independent member firms.

---

|Helius Medical Technologies, Inc.   
|------------------------------------
|Consolidated Balance Sheets         
|March 31, 2016 and 2015             
|(Expressed in United States Dollars)

|                                                                                                                                                                                                                                            |  | March 31,   |   |  | March 31,   |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------- | - |  | ----------- | -
|                                                                                                                                                                                                                                            |  | 2016        |   |  | 2015        |  
|                                                                                                                                                                                                                                            |  | **$**       |   |  | **$**       |  
|ASSETS                                                                                                                                                                                                                                      |  |             |   |  |             |  
|Current assets                                                                                                                                                                                                                              |  |             |   |  |             |  
|Cash and cash equivalents                                                                                                                                                                                                                   |  | 2,643,937   |   |  | 418,893     |  
|Short-term
      investment                                                                                                                                                                                                                 |  | -           |   |  | 378,000     |  
|Receivables (Note 2)                                                                                                                                                                                                                        |  | 399,106     |   |  | 8,833       |  
|Prepaid expenses                                                                                                                                                                                                                            |  | 502,264     |   |  | 410,621     |  
|Other current assets (Note 14)                                                                                                                                                                                                              |  | 495,415     |   |  | -           |  
|Total current assets                                                                                                                                                                                                                        |  | 4,040,722   |   |  | 1,216,347   |  
|                                                                                                                                                                                                                                            |  |             |   |  |             |  
|TOTAL ASSETS                                                                                                                                                                                                                                |  | 4,040,722   |   |  | 1,216,347   |  
|                                                                                                                                                                                                                                            |  |             |   |  |             |  
|LIABILITIES                                                                                                                                                                                                                                 |  |             |   |  |             |  
|Current liabilities                                                                                                                                                                                                                         |  |             |   |  |             |  
|Accounts payable
      and accrued liabilities                                                                                                                                                                                              |  | 2,181,154   |   |  | 1,197,804   |  
|                                                                                                                                                                                                                                            |  |             |   |  |             |  
|Shares to be issued (Note 14)                                                                                                                                                                                                               |  | 150,000     |   |  | -           |  
|Total current liabilities                                                                                                                                                                                                                   |  | 2,331,154   |   |  | 1,197,804   |  
|                                                                                                                                                                                                                                            |  |             |   |  |             |  
|Derivative liability (Note 7
      and Note 8)                                                                                                                                                                                              |  | 1,725,760   |   |  | 1,581,444   |  
|TOTAL LIABILITIES                                                                                                                                                                                                                           |  | 4,056,914   |   |  | 2,779,248   |  
|                                                                                                                                                                                                                                            |  |             |   |  |             |  
|Commitments and contingencies (Note 10)                                                                                                                                                                                                     |  |             |   |  |             |  
|                                                                                                                                                                                                                                            |  |             |   |  |             |  
|STOCKHOLDERS DEFICIT                                                                                                                                                                                                                       |  |             |   |  |             |  
|Common stock
      (Unlimited Class A common shares
      authorized);        (72,193,209
      shares issued and outstanding at March 31, 2016
      and        63,104,788 shares
      issued and outstanding at March 31, 2015) (Note 7) |  | 24,347,930  |   |  | 16,358,093  |  
|Additional paid-in
      capital                                                                                                                                                                                                            |  | 2,940,539   |   |  | 2,434,552   |  
|Shares to be issued                                                                                                                                                                                                                         |  | -           |   |  | 39,545      |  
|Accumulated other
      comprehensive loss                                                                                                                                                                                                  |  | (999,398    | ) |  | (971,640    | )
|Accumulated deficit                                                                                                                                                                                                                         |  | (26,305,263 | ) |  | (19,423,451 | )
|TOTAL STOCKHOLDERS DEFICIT                                                                                                                                                                                                                 |  | (16,192     | ) |  | (1,562,901  | )
|                                                                                                                                                                                                                                            |  |             |   |  |             |  
|TOTAL LIABILITIES AND STOCKHOLDERS DEFICIT                                                                                                                                                                                                 |  | 4,040,722   |   |  | 1,216,347   |  

(The accompanying notes are an integral part of these
consolidated financial statements.)F-5

---

|Helius Medical Technologies Inc.                                  
|------------------------------------------------------------------
|Consolidated Statements of Operations and Comprehensive
      Loss
|for the fiscal years ended March 31, 2016 and 2015                
|(Expressed in United States Dollars)                              

|                                             |   | Year Ended
      March 31, |  
|-------------------------------------------- | - | -------------------------- | -
|                                             |   | 2016                       |  
|                                             |   | **$**                      |  
|Operating Expenses                           |   |                            |  
|                                             |   |                            |  
|General and administrative                   |   | 5,671,598                  |  
|Research and development                     |   | 3,645,796                  |  
|Loss from operations                         |   | 9,317,394                  |  
|                                             |   |                            |  
|Other Income (expense)                       |   |                            |  
|Interest expense, net                        |   | (46,920                    | )
|Other income                                 |   | 150,250                    |  
|Change in fair value of derivative liability |   | 2,082,703                  |  
|Foreign exchange gain (loss)                 |   | (18,785                    | )
|Gain on extinguishment of debt               |   | 268,334                    |  
|                                             |   | 2,435,582                  |  
|                                             |   |                            |  
|Net loss                                     |   | (6,881,812                 | )
|                                             |   |                            |  
|Other comprehensive income
      (loss)      |   |                            |  
|Foreign currency translation adjustments     |   | (27,758                    | )
|                                             |   |                            |  
|Comprehensive loss                           |   | (6,909,570                 | )
|                                             |   |                            |  
|Net loss per share                           |   |                            |  
|Basic                                        | $ | (0.10                      | )
|Diluted                                      | $ | (0.12                      | )
|                                             |   |                            |  
|Weighted average shares outstanding          |   |                            |  
|Basic                                        |   | 66,522,564                 |  
|Diluted                                      |   | 67,026,545                 |  

(The accompanying notes are an integral part of these
consolidated financial statements.)

F-6

---

|Helius Medical Technologies Inc.                  
|--------------------------------------------------
|                                                  
|Consolidated Statements of Stockholders Deficit  
|for the fiscal years ended March 31, 2016 and 2015
|(Expressed in
      United States Dollars)        

|                                                                                    |  |                    |  |  |            |   |  |                    |   |  |                    |  |  |             |   |  | Accumulated other    |   |  |                         |  
|----------------------------------------------------------------------------------- |  | ------------------ |  |  | ---------- | - |  | ------------------ | - |  | ------------------ |  |  | ----------- | - |  | -------------------- | - |  | ----------------------- | -
|                                                                                    |  |                    |  |  |            |   |  | Additional Paid-In |   |  | Shares
      to be |  |  | Accumulated |   |  | comprehensive income |   |  |                         |  
|                                                                                    |  | Common
      Stock |  |  | Amount     |   |  | Capital            |   |  | Issued             |  |  | Deficit     |   |  | (loss)               |   |  | Capital
      (Deficit) |  
|                                                                                    |  |                    |  |  | **$**      |   |  | **$**              |   |  | **$**              |  |  | **$**       |   |  | **$**                |   |  | **$**                   |  
|Balance  March 31,
      2014                                                      |  | 32,070,052         |  |  | 8,510,000  |   |  | 807,157            |   |  | -                  |  |  | (9,585,134  | ) |  | -                    |   |  | (267,977                | )
|Stock-based compensation on
      2,300,000 options granted                         |  |                    |  |  |            |   |  | 50,303             |   |  | -                  |  |  | -           |   |  | -                    |   |  | 50,303                  |  
|Shares issued to consultant
      for option exercise (Note 6)                      |  | 2,300,000          |  |  | 717        |   |  | -                  |   |  | -                  |  |  | -           |   |  | -                    |   |  | 717                     |  
|Shares issued to consultant
      for option exercise (Note 6)                      |  | 930,031            |  |  | 290        |   |  | -                  |   |  | -                  |  |  | -           |   |  | -                    |   |  | 290                     |  
|Fair value of options
      allocated to share capital on exercise of options       |  | -                  |  |  | 857,460    |   |  | (857,460           | ) |  | -                  |  |  | -           |   |  | -                    |   |  | -                       |  
|Recapitalization of Helius
      Medical Technologies, Inc. (Note 3)                |  | 10,000,000         |  |  | -          |   |  | 162,890            |   |  | -                  |  |  | -           |   |  | -                    |   |  | 162,890                 |  
|Issuance of common stock for
      private placement (Note 5)                       |  | 15,240,000         |  |  | 6,437,041  |   |  | 578,961            |   |  | -                  |  |  | -           |   |  | -                    |   |  | 7,016,002               |  
|Share issuance cost (Note 5)                                                        |  | -                  |  |  | (447,515   | ) |  | 67,709             |   |  | -                  |  |  | -           |   |  | -                    |   |  | (379,806                | )
|Beneficial conversion feature
      (Note 4)                                        |  | -                  |  |  | -          |   |  | 176,488            |   |  | -                  |  |  | -           |   |  | -                    |   |  | 176,488                 |  
|Stock-based compensation on
      3,370,000 options granted (Note 6)(Restated)      |  | -                  |  |  | -          |   |  | 1,227,724          |   |  | -                  |  |  | -           |   |  | -                    |   |  | 1,227,724               |  
|Conversion of debenture (Note
      4)                                              |  | 2,564,705          |  |  | 1,000,100  |   |  | -                  |   |  | -                  |  |  | -           |   |  | -                    |   |  | 1,000,100               |  
|Stock-based compensation on
      100,000 options granted (Note 6)                  |  | -                  |  |  | -          |   |  | 74,190             |   |  | -                  |  |  | -           |   |  | -                    |   |  | 74,190                  |  
|Stock-based compensation on
      100,000 options granted (Note 6)                  |  | -                  |  |  | -          |   |  | 43,229             |   |  | -                  |  |  | -           |   |  | -                    |   |  | 43,229                  |  
|Stock-based compensation on
      400,000 options granted (Note 6)                  |  | -                  |  |  | -          |   |  | 135,564            |   |  | -                  |  |  | -           |   |  | -                    |   |  | 135,564                 |  
|Stock-based compensation on
      100,000 options granted (Note 6)                  |  | -                  |  |  | -          |   |  | 41,987             |   |  | -                  |  |  | -           |   |  | -                    |   |  | 41,987                  |  
|Fair value of vested
      non-employee options reallocated to derivative liability |  | -                  |  |  | -          |   |  | (74,190            | ) |  | -                  |  |  | -           |   |  | -                    |   |  | (74,190                 | )
|Private placement proceeds                                                          |  | -                  |  |  | -          |   |  | -                  |   |  | 39,545             |  |  | -           |   |  | -                    |   |  | 39,545                  |  
|Net loss for the year                                                               |  | -                  |  |  | -          |   |  | -                  |   |  | -                  |  |  | (9,838,317  | ) |  | -                    |   |  | (9,838,317              | )
|Translation adjustments                                                             |  | -                  |  |  | -          |   |  | -                  |   |  | -                  |  |  | -           |   |  | (971,640             | ) |  | (971,640                | )
|Balance  March 31, 2015                                                            |  | 63,104,788         |  |  | 16,358,093 |   |  | 2,434,552          |   |  | 39,545             |  |  | (19,423,451 | ) |  | (971,640             | ) |  | (1,562,901              | )

F-7

---

|Helius Medical Technologies Inc.                  
|--------------------------------------------------
|                                                  
|Consolidated Statements of Stockholders Deficit  
|for the fiscal years ended March 31, 2016 and 2015
|(Expressed in
      United States Dollars)        

|                                                                                                                                          |  |              |  |  |            |   |  |                    |   |  |              |   |  |                 |       |  | Accumulated other          |   |  |                   |  
|----------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ |  |  | ---------- | - |  | ------------------ | - |  | ------------ | - |  | --------------- | ----- |  | -------------------------- | - |  | ----------------- | -
|                                                                                                                                          |  |              |  |  |            |   |  | Additional Paid-In |   |  | Shares to be |   |  | Accumulated     |       |  | comprehensive
      income |   |  |                   |  
|                                                                                                                                          |  | Common Stock |  |  | Amount     |   |  | Capital            |   |  | Issued       |   |  | Deficit         |       |  | (loss)                     |   |  | Capital (Deficit) |  
|                                                                                                                                          |  |              |  |  | **$**      |   |  | **$**              |   |  | **$**        |   |  | **$**           |       |  | **$**                      |   |  | **$**             |  
|Balance 
      March 31, 2015                                                                                                            |  | 63,104,788   |  |  | 16,358,093 |   |  | 2,434,552          |   |  | 39,545       |   |  | (19,423,451     | )     |  | (971,640                   | ) |  | (1,562,901        | )
|Exercise of finders warrants                                                                                                             |  | 14,400       |  |  | 11,926     |   |  | -                  |   |  | -            |   |  | -               |       |  | -                          |   |  | 11,926            |  
|Issuance of
      common stock for private placement                                                                                      |  | 849,273      |  |  | 1,825,937  |   |  | -                  |   |  | -            |   |  | -               |       |  | -                          |   |  | 1,825,937         |  
|Fair value of warrants issued
      in connection with private placement,  classified to derivative liability                             |  |              |  |  | (360,413   | ) |  |                    |   |  |              |   |  |                 |       |  |                            |   |  | (360,413          | )
|Issuance of
      common stock for private placement                                                                                      |  | 335,463      |  |  | 721,243    |   |  | -                  |   |  | (39,545      | ) |  | -               |       |  | -                          |   |  | 681,698           |  
|Fair value of warrants issued
      in connection with private placement,  classified to derivative liability                             |  |              |  |  | (135,540   | ) |  |                    |   |  |              |   |  |                 |       |  |                            |   |  | (135,540          | )
|Issuance of
      common stock for private placement                                                                                      |  | 125,756      |  |  | 270,375    |   |  | -                  |   |  | -            |   |  | -               |       |  | -                          |   |  | 270,375           |  
|Fair value of warrants issued
      in connection with private placement,  classified to derivative liability                             |  |              |  |  | (36,569    | ) |  |                    |   |  |              |   |  |                 |       |  |                            |   |  | (36,569           | )
|Stock option
      exercise                                                                                                               |  | 94,640       |  |  | 42,500     |   |  | -                  |   |  | -            |   |  | -               |       |  | -                          |   |  | 42,500            |  
|Fair value of options exercised                                                                                                           |  | -            |  |  | 34,378     |   |  | (34,378            | ) |  | -            |   |  | -               |       |  | -                          |   |  | -                 |  
|Shares issued
      as a debt discount                                                                                                    |  | 30,000       |  |  | 29,045     |   |  | -                  |   |  | -            |   |  | -               |       |  | -                          |   |  | 29,045            |  
|Issuance of common stock upon
      conversion of convertible note                                                                        |  | 2,083,333    |  |  | 1,731,667  |   |  | -                  |   |  | -            |   |  | -               |       |  | -                          |   |  | 1,731,667         |  
|Fair value of
      warrants issued in connection with initial borrowing under credit
      facility,  classified to derivative liability |  |              |  |  | (206,667   | ) |  |                    |   |  |              |   |  |                 |       |  |                            |   |  | (206,667          | )
|Issuance of common stock for
      draw down of remaining credit facility                                                                 |  | 5,555,556    |  |  | 5,000,000  |   |  | -                  |   |  | -            |   |  | -               |       |  | -                          |   |  | 5,000,000         |  
|Fair value of
      warrants issued in connection with draw down of remaining credit facility,

      classified to derivative liability  |  |              |  |  | (796,945   | ) |  |                    |   |  |              |   |  |                 |       |  |                            |   |  | (796,945          | )
|Share issuance cost                                                                                                                       |  | -            |  |  | (141,100   | ) |  | -                  |   |  | -            |   |  | -               |       |  | -                          |   |  | (141,100          | )
|Stock-based
      compensation on 3,370,000 options granted                                                                               |  | -            |  |  | -          |   |  | 656,512            |   |  | -            |   |  | -               |       |  | -                          |   |  | 656,511           |  
|Stock-based compensation on
      400,000 options granted                                                                                 |  | -            |  |  | -          |   |  | 197,637            |   |  | -            |   |  | -               |       |  | -                          |   |  | 197,637           |  
|Stock-based
      compensation on 100,000 options granted                                                                                 |  | -            |  |  | -          |   |  | 33,483             |   |  | -            |   |  | -               |       |  | -                          |   |  | 33,483            |  
|Stock-based compensation on
      100,000 options granted                                                                                 |  | -            |  |  | -          |   |  | 36,140             |   |  | -            |   |  | -               |       |  | -                          |   |  | 36,140            |  
|Stock-based
      compensation on 50,000 options granted                                                                                  |  | -            |  |  | -          |   |  | 7,967              |   |  | -            |   |  | -               |       |  | -                          |   |  | 7,967             |  
|Stock-based compensation on
      750,000 options granted                                                                                 |  | -            |  |  | -          |   |  | 72,792             |   |  | -            |   |  | -               |       |  | -                          |   |  | 72,792            |  
|Stock-based
      compensation on 950,000 options granted                                                                                 |  | -            |  |  | -          |   |  | 211,274            |   |  | -            |   |  | -               |       |  | -                          |   |  | 211,274           |  
|Stock-based compensation on
      100,000 options granted                                                                                 |  | -            |  |  | -          |   |  | 15,445             |   |  | -            |   |  | -               |       |  | -                          |   |  | 15,445            |  
|Fair value of
      non-employee vested options reallocated to derivative liability                                                       |  | -            |  |  | -          |   |  | (690,885           | ) |  | -            |   |  | -               |       |  | -                          |   |  | (690,885          | )
|                                                                                                                                          |  |              |  |  |            |   |  |                    |   |  |              |   |  |                 |       |  |                            |   |  |                   |  
|Net loss for
      the year                                                                                                               |  | -            |  |  | -          |   |  | -                  |   |  | -            |   |  | (6,881,812      | )     |  | -                          |   |  | (6,881,812        | )
|Translation adjustments                                                                                                                   |  | -            |  |  | -          |   |  | -                  |   |  | -            |   |  | -               |       |  | (27,758                    | ) |  | (27,758           | )
|Balance  March 31, 2016                                                                                                                  |  | 72,193,209   |  |  | 24,347,930 |   |  | 2,940,539          |   |  | -            |   |  | **(26,305,263** | **)** |  | (999,398                   | ) |  | (16,192           | )

(The accompanying notes are an integral part of these
consolidated financial statements. )

F-8

---

|Helius Medical Technologies, Inc.                 
|--------------------------------------------------
|Consolidated Statements of Cash Flows             
|for the fiscal years ended March 31, 2016 and 2015
|(Expressed in United States Dollars)              

|                                                                                  |   | March 31, 2016 |   |   | March 31, 2015 |  
|--------------------------------------------------------------------------------- | - | -------------- | - | - | -------------- | -
|                                                                                  |   | **$**          |   |   | **$**          |  
|Cash flows from operating
      activities                                        |   |                |   |   |                |  
|Net loss                                                                          |   | (6,881,812     | ) |   | (9,838,317     | )
|Adjustments to reconcile net
      loss to net cash used in operating activities: |   |                |   |   |                |  
|Change in fair
      value of derivative liability                                |   | (2,082,703     | ) |   | 739,375        |  
|Interest accretion                                                                |   | 29,045         |   |   | 176,488        |  
|Stock-based
      compensation                                                    |   | 1,231,250      |   |   | 2,340,876      |  
|Gain on extinguishment of debt                                                    |   | (268,334       | ) |   | -              |  
|Unrealized foreign exchange loss (gain)                                           |   | (120,876       | ) |   | (598,929       | )
|Changes in operating assets and liabilities:                                      |   |                |   |   |                |  
|Receivables                                                                       |   | (390,273       | ) |   | (8,945         | )
|Prepaids and other
      current assets                                           |   | (91,644        | ) |   | (110,873       | )
|Accounts payable and accrued liabilities                                          |   | 487,935        |   |   | 979,040        |  
|Shares to be issued                                                               |   | 150,000        |   |   | -              |  
|Net cash used in operating activities                                             |   | (7,937,412     | ) |   | (6,321,285     | )
|                                                                                  |   |                |   |   |                |  
|Cash flows from investing activities                                              |   |                |   |   |                |  
|Proceeds from (purchase of)
      the sale of short term investment               |   | 378,000        |   |   | (378,000       | )
|Net cash provided by (used in) investing
      activities                         |   | 378,000        |   |   | (378,000       | )
|                                                                                  |   |                |   |   |                |  
|Cash flows from financing activities                                              |   |                |   |   |                |  
|Cash acquired on
      recapitalization                                           |   | -              |   |   | 23,904         |  
|Proceeds from the issuance of common stock,
      net                             |   | 7,636,910      |   |   | 6,637,203      |  
|Proceeds from shares to be
      issued                                           |   | -              |   |   | 39,545         |  
|Exercise of warrants and stock options                                            |   | 54,426         |   |   | -              |  
|Proceeds from issuance of
      convertible debt                                  |   | 2,000,000      |   |   | 632,076        |  
|Proceeds from issuance of promissory note                                         |   | 200,000        |   |   | -              |  
|Repayment of promissory note                                                      |   | (200,000       | ) |   | -              |  
|Proceeds from bridge loan                                                         |   | -              |   |   | 150,000        |  
|Net cash provided by
      financing activities                                   |   | 9,691,336      |   |   | 7,482,728      |  
|                                                                                  |   |                |   |   |                |  
|Effect of foreign exchange
      rate changes on cash                             |   | 93,120         |   |   | (380,518       | )
|                                                                                  |   |                |   |   |                |  
|Net change in cash and
      cash equivalents                                     |   | 2,225,044      |   |   | 402,925        |  
|                                                                                  |   |                |   |   |                |  
|Cash and cash equivalents,
      beginning of the period                          |   | 418,893        |   |   | 15,968         |  
|                                                                                  |   |                |   |   |                |  
|Cash and cash equivalents,
      end of the period                                |   | 2,643,937      |   |   | 418,893        |  
|                                                                                  |   |                |   |   |                |  
|                                                                                  |   |                |   |   |                |  
|Supplemental cash flow information                                                |   |                |   |   |                |  
|Interest paid in cash                                                             | $ | 1,651          |   | $ | 11,144         |  
|Income taxes paid in cash                                                         |   | -              |   |   | -              |  

(The accompanying notes are an integral part of these
consolidated financial statements.)

F-9

---

Helius Medical Technologies, Inc.Notes to the
Consolidated Financial StatementsYears ended March 31, 2016 and 2015

|1. | DESCRIPTION OF BUSINESS AND BASIS OF
      PRESENTATION
|-- | -------------------------------------------------------

Helius Medical Technologies, Inc. (the Company) is  engaged primarily in the medical technology industry
focused on neurological wellness. The Companys planned principal operations
include the development, licensing and acquisition of unique and non-invasive
platform technologies to amplify the brains ability to heal itself. To
date the Company has not generated any revenue.

The Company was incorporated in British Columbia, Canada, on
March 13, 2014. On May 28, 2014, the Company completed a continuation via a plan
of arrangement whereby the Company moved from being a corporation governed by
the British Columbia Corporations Act to a corporation governed by the Wyoming
Business Corporations Act. The Companys head office is located in Newtown,
Pennsylvania.

The Company is currently listed on the Toronto Stock Exchange
(the TSX). The Company began trading on the Canadian Securities Exchange on
June 23, 2014, under the ticker symbol HSM, and subsequently moved to the TSX
on April 18, 2016. The Company also began trading on the OTCQB under the ticker
symbol HSDT on February 10, 2015.

On June 13, 2014, the Company completed its acquisition of 100%
of the issued and outstanding shares of Neurohabilitation Corporation (Neuro),
a private company incorporated in Delaware, USA, on January 22, 2013. Prior to
the transaction, the Company was a non-operating public shell company.
Accordingly, for financial reporting purposes, this transaction was deemed to be
a capital transaction in substance and recorded as a reverse recapitalization of
Neuro whereby Neuro is deemed to be the continuing, surviving entity for
accounting purposes, but through reorganization, has deemed to have adopted the
capital structure of the Company. Because the acquisition was considered a
reverse recapitalization for accounting purposes, the combined historical
financial statements of Neuro became the historical financial statements and
from the completion of the acquisition on June 13, 2014, the financial
statements have been prepared on a consolidated basis. The assets and
liabilities of Neuro have been brought forward at their book value and no
goodwill has been recognized in connection with the transaction.

The Company had a wholly-owned subsidiary, 0995162 B.C. Ltd,
which was dissolved on October 23, 2014. On December 17, 2014, Neuro
incorporated a wholly-owned subsidiary, Helius Medical Technologies (Canada),
Inc. (Helius Canada). The financial information is presented in United States
Dollars.

Going Concern

The Companys consolidated financial statements have been
prepared in conformity with accounting principles generally accepted in the
United States of America (U.S. GAAP). The Companys consolidated financial
statements have been prepared on the basis of continuity of operations,
realization of assets and the satisfaction of liabilities in the ordinary course
of business. The Company has incurred a net loss of $6,881,812 for the fiscal year
ended March 31, 2016 and, as of March 31, 2016, the Company has an accumulated
deficit of $26,305,263. The Company has not generated any product revenues and
has not achieved profitable operations. Until the Company generates a level of
revenue to support its cost structure, the Company expects to continue to incur
substantial operating losses and net cash outflows. There is no assurance that
profitable operations will ever be achieved, and, if achieved, will be sustained
on a continuing basis.

While the Company had cash and cash equivalents of $2,643,937
as of March 31, 2016, management does not believe these resources will be
sufficient to meet the Companys operating and capital needs for the ensuing
fiscal year.

F-10

---

The Company intends to fund ongoing activities by utilizing
current cash and cash equivalents and by raising additional capital through
equity or debt financings. There can be no assurance that the Company will be
successful in raising additional capital or that such capital, if available,
will be on terms that are acceptable to the Company. If the Company is unable to
raise sufficient additional capital, the Company may be compelled to reduce the
scope of its operations and planned capital expenditure or sell certain assets,
including intellectual property assets. This material uncertainty gives rise to
substantial doubt about the Companys ability to continue as a going concern.

|2. | SIGNIFICANT ACCOUNTING
POLICIES
|-- | -------------------------------

Use of Estimates

The preparation of the consolidated financial statements in
accordance with U.S. GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and reported amounts of expenses during the reporting
period. Significant estimates include the assumptions used in the fair value
pricing model for share-based payment transactions and deferred income tax asset
valuation allowances. Financial statements include estimates which, by their
nature, are uncertain. Actual outcomes could differ from these estimates.

Principles of Consolidation

The consolidated financial statements include the historic
accounts of Neuro and are consolidated with Helius and its subsidiaries. All
intercompany balances and transactions have been eliminated in consolidation.

Cash and Cash Equivalents

Cash and cash equivalents comprise cash at banks and on hand,
and short-term highly liquid investments that have an insignificant interest
rate risk and an original maturity of 3 months or less.

Concentrations of Credit Risk

The Company is subject to credit risk in respect of its cash. Amounts invested in such
instruments are limited by credit rating, maturity, industry group, investment
type and issuer. The Company is not currently exposed to any significant
concentrations of credit risk from these financial instruments. The Company
seeks to maintain safety and preservation of principal and diversification of
risk, liquidity of investments sufficient to meet cash flow requirements and a
competitive after-tax rate of return.

Accounts Receivable

Accounts receivable are stated at their net realizable value.
At March 31, 2016, the accounts receivable balance consisted primarily of GST
and QST refunds related to the Companys Canadian expenditures.

Stock-Based Compensation

The Company accounts for all stock-based payments and awards
under the fair value based method. The Company recognizes its stock-based
compensation using the straight line method.

Stock-based payments to non-employees are measured at the fair
value of the consideration received, or the fair value of the equity instruments
issued, or liabilities incurred, whichever is more reliably measurable. The fair
value of stock-based payments to non-employees is periodically re-measured until
the counterparty performance is complete, and any change therein is recognized
over the vesting period of the award and in the same manner as if the Company had paid cash instead of paying with or using equity based instruments. The fair value of the stock-based payments to non-employees that are fully vested and non-forfeitable as at the grant date are measured and recognized at that date.

F-11

---

The Company accounts for the granting of share purchase options to employees using the fair value method whereby all awards to employees will be measured at fair value on the date of the grant. The fair value of all share purchase options are
expensed over their vesting period with a corresponding increase to additional capital surplus. Upon exercise of share purchase options, the consideration paid by the option holder, together with the amount previously recognized in additional
paid-in capital is recorded as an increase to share capital. Share purchase options granted to employees are accounted for as liabilities when they contain conditions or other features that are indexed to other than a market, performance or service
condition.

The Company uses the Black-Scholes option pricing model to calculate the fair value of share purchase options. The use of the Black-Scholes option pricing model requires management to make assumptions with respect to the expected term of the option,
the expected volatility of the common stock consistent with the expected term of the option, risk-free interest rates, the value of the common stock and expected dividend yield of the common stock. Changes in these assumptions can materially affect
the fair value estimate.

Foreign Exchange

The functional currency of the Company and Helius Canada is the Canadian dollar (“CAD”) and the functional currency of Neuro is the U.S. dollar (“USD”). The Company’s reporting currency is the U.S. dollar.

Transactions in foreign currencies are remeasured into the functional currency
of the relevant subsidiary at the exchange rate in effect at the date of the
transaction. Any monetary assets and liabilities arising from these transactions are translated into
the functional currency at exchange rates in effect at the balance sheet date or
on settlement. Resulting gains and losses are recorded in other foreign exchange
gain (loss) within the consolidated statements of operations.

The foreign exchange adjustment in the books of Neuro relating to inter-company advances from Helius that are
denominated in Canadian dollars is recorded in the consolidated statements of operations and comprehensive loss. For the years ended March 31, 2016 and 2015, foreign exchange
losses of ($18,785) and gains of
$865,916 were recognized in the consolidated statements of operations and comprehensive loss.

Income Taxes

The Company accounts for income taxes using the asset and liability method. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the
financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the
differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.

The Company has adopted the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740 Income Taxes regarding accounting for uncertainty in income taxes. The Company
initially recognizes tax provisions in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions are initially and subsequently measured as the largest amount
of the tax benefit that is greater than 50% likely of being realized upon ultimate settlement with the tax authority, assuming full knowledge of the position and all relevant facts. Application requires numerous estimates based on available
information. The Company considers many factors when evaluating and estimating its tax positions and tax benefits. These periodic adjustments may have a material impact on the consolidated statements of operations and comprehensive loss. When
applicable, the Company classifies penalties and interest associated with uncertain tax positions as a component of income tax expense in its consolidated statements of operations and comprehensive loss.

F-12

---

Research and Development Expenses

Research and development (R&D) expenses consist primarily
of personnel costs, including salaries, benefits and stock-based compensation,
clinical studies performed by contract research organizations and materials and
supplies. R&D costs are charged to operations when they are incurred.

Segment Information

Operating segments are defined as components of an enterprise
about which separate discrete information is available for evaluation by the
chief operating decision maker, or decision-making group, in deciding how to
allocate resources and in assessing performance. The Company views their
operations and manages their business in one segment.

Derivative Liabilities

The Company evaluates its financial instruments and other
contracts to determine if those contracts or embedded components of those
contracts qualify as derivatives to be separately accounted for in accordance
with ASC 815 Derivatives and Hedging. The result of this accounting
treatment is that the fair value of the derivative is marked-to-market at each
balance sheet date and recorded as a liability and the change in fair value is
recorded in the consolidated statements of operations and comprehensive loss.
Upon conversion or exercise of a derivative instrument, the instrument is marked
to fair value at the conversion date and then that fair value is reclassified to
equity.

The classification of derivative instruments, including whether
such instruments should be recorded as liabilities or as equity, is re-assessed
at the end of each reporting period. Derivative instruments that become subject
to reclassification are reclassified at the fair value of the instrument on the
reclassification date. Derivative instrument liabilities will be classified in
the balance sheet as current or non-current based on whether or not settlement
of the derivative instrument is expected within 12 months of the consolidated
balance sheet date.

Fair Value Measurements

The Companys financial instruments consist primarily of cash
and cash equivalents, accounts receivable and the Ximedica project initiation
deposit, and accounts payable and accrued liabilities. The book
values of these instruments approximate their fair values due to the immediate
or short-term nature of those instruments.

ASC 820 establishes a fair value hierarchy based on the level
of independent, objective evidence surrounding the inputs used to measure fair
value. A financial instruments categorization within the fair value hierarchy
is based upon the lowest level of input that is significant to the fair value
measurement. ASC 820 prioritizes the inputs into three levels that may be used
to measure fair value:

Level 1  Quoted prices in active markets for identical assets
or liabilities;

Level 2  Inputs other than Level 1 that are observable, either
directly or indirectly, such as quoted prices for similar assets or liabilities;
quoted prices in markets that are not active; or other inputs that are
observable or can be corroborated by observable market data for substantially
the full term of the assets or liabilities; and

Level 3  Unobservable inputs that are supported by little or
no market activity and that are significant to the fair value of the assets or
liabilities. To the extent that the valuation is based on models or inputs that
are less observable or unobservable in the market, the determination of fair
value requires more judgment. Accordingly, the degree of judgment exercised by
the Company in determining fair value is greatest for instruments categorized in
Level 3. A financial instruments level within the fair value hierarchy is based
on the lowest level of any input that is significant to the fair value
measurement.

The Company had certain Level 3 derivative liabilities required
to be recorded at fair value on a recurring basis in accordance with U.S. GAAP
as at March 31, 2016 and 2015. Unobservable inputs used in the valuation of
these liabilities includes volatility of the underlying share price and the
expected term. See Note 7. for the inputs used in the Black Scholes model at
March 31, 2016 and the rollforward of the warrant liability and see Note 8. for
the inputs used in the Black Scholes model at March 31, 2016 and 2015 for
the rollforward of the derivative liability for non-employee options.

F-13

---

| |                            |  | Fair Value |  |  | Level 1 |  |  | Level 2 |  |  | Level 3   | 
| | -------------------------- |  | ---------- |  |  | ------- |  |  | ------- |  |  | --------- | 
| | March 31, 2016             |  |            |  |  |         |  |  |         |  |  |           | 
| |                            |  |            |  |  |         |  |  |         |  |  |           | 
| | Liabilities:               |  |            |  |  |         |  |  |         |  |  |           | 
| | Non-employee options       |  | 521,179    |  |  |         |  |  |         |  |  | 521,179   | 
| | Warrants                   |  | 1,204,581  |  |  |         |  |  |         |  |  | 1,204,581 | 
| |                            |  |            |  |  |         |  |  |         |  |  |           | 
| | March 31, 2015             |  |            |  |  |         |  |  |         |  |  |           | 
| |                            |  |            |  |  |         |  |  |         |  |  |           | 
| | Assets:                    |  |            |  |  |         |  |  |         |  |  |           | 
| | Short-term investments     |  | 378,000    |  |  | 378,000 |  |  |         |  |  |           | 
| |                            |  |            |  |  |         |  |  |         |  |  |           | 
| | Liabilities:               |  |            |  |  |         |  |  |         |  |  |           | 
| | Non-employee
      options |  | 1,581,444  |  |  |         |  |  |         |  |  | 1,581,444 | 
| | Warrants                   |  | -          |  |  |         |  |  |         |  |  | -         | 

There were no transfers between any of the levels during the
years ended March 31, 2016 and 2015.

Basic and Diluted Income (Loss) per Share

Earnings or loss per share (EPS) is computed by dividing net
income (loss) available to common stockholders by the weighted average number of
common shares outstanding for the period. Diluted EPS is computed by dividing
net income (loss) by the weighted-average of all potentially dilutive shares of
common stock that were outstanding during the periods presented.

The treasury stock method is used in calculating diluted EPS
for potentially dilutive stock options and share purchase warrants, which
assumes that any proceeds received from the exercise of in-the-money stock
options and share purchase warrants, would be used to purchase common shares at
the average market price for the period.

EPS for convertible debt is calculated under the if-converted
method. Under the if-converted method, EPS is calculated as the more dilutive of
EPS (i) including all interest (both cash interest and non-cash discount
amortization) and excluding all shares underlying the convertible debt or; (ii)
excluding all interest and costs directly related to the convertible debt (both
cash interest and non-cash discount amortization) and including all shares
underlying the convertible debt.

The basic and diluted loss per share for the years ended March
31, 2016 and 2015 were calculated as follows:

|                                                                                  |   | Year endedMarch 31,
      2016 |   |   | Year endedMarch 31,
      2015 |  
|--------------------------------------------------------------------------------- | - | ------------------------------ | - | - | ------------------------------ | -
|                                                                                  |   | $                              |   |   | $                              |  
|                                                                                  |   |                                |   |   |                                |  
|Net loss, basic                                                                   |   | (6,881,812                     | ) |   | (9,838,317                     | )
|Effect of dilutive securities: Change in fair
      value of derivative liability |   | (1,156,002                     | ) |   | -                              |  
|Net loss, diluted                                                                 |   | (8,037,814                     | ) |   | (9,838,317                     | )
|DenominatorWeighted average common
      shares outstanding                       |   | 66,522,564                     |   |   | 57,048,406                     |  
|Effective of dilutive
      securities     Warrants and options                   |   | 503,980                        |   |   | -                              |  
|Diluted weighted average common shares
      outstanding                          |   | 67,026,545                     |   |   | 57,048,406                     |  
|                                                                                  |   |                                |   |   |                                |  
|Basic net loss per share                                                          | $ | (0.10                          | ) | $ | (0.17                          | )
|                                                                                  |   |                                |   |   |                                |  
|Diluted net loss per shares                                                       | $ | (0.12                          | ) | $ | (0.17                          | )

F-14

---

The following outstanding securities for the years ended March
31, 2016 and 2015 have been excluded from the computation of diluted weighted
shares outstanding, as they would have been anti-dilutive:

|                     |  | Year ended     |  |  | Year ended     | 
|-------------------- |  | -------------- |  |  | -------------- | 
|                     |  | March 31, 2016 |  |  | March 31, 2015 | 
|Options outstanding  |  | 5,875,360      |  |  | 4,920,000      | 
|Warrants outstanding |  | 12,973,009     |  |  | 8,444,400      | 
|Total                |  | 18,848,369     |  |  | 13,364,400     | 

Recent Accounting Pronouncements

In March 2016, the FASB issued ASU 2016-09,
CompensationStock Compensation (Topic 718): Improvements to Employee
Share-Based Payment Accounting. The amendments in this update change
existing guidance related to accounting for employee share-based payments
affecting the income tax consequences of awards, classification of awards as
equity or liabilities, and classification on the statement of cash flows. ASU
2016-09 is effective for annual reporting periods beginning after December 15,
2016, including interim periods within those annual periods, with early adoption
permitted. The Company is currently evaluating the potential impact of the
adoption of this standard.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic
842). The new standard establishes a right-of-use (ROU) model that
requires a lessee to record a ROU asset and a lease liability on the
consolidated balance sheet for all leases with terms longer than 12 months.
Leases will be classified as either finance or operating, with classification
affecting the pattern of expense recognition in the consolidated income
statement. ASU 2016-02 is effective for annual periods beginning after December
15, 2018, including interim periods within those annual periods, with early
adoption permitted. A modified retrospective transition approach is required for
lessees for capital and operating leases existing at, or entered into after, the
beginning of the earliest comparative period presented in the financial
statements, with certain practical expedients available. The Company is
currently evaluating the potential impact of the adoption of this standard.

In January 2016, the FASB issued ASU 2016-01, Recognition
and Measurement of Financial Assets and Financial Liabilities. The
amendments in this update revise the accounting related to the classification
and measurement of investments in equity securities and the presentation of
certain fair value changes for financial liabilities measured at fair value. The
amendments are effective for annual reporting periods after December 15, 2017,
including interim periods within those fiscal years. Early adoption is
permitted. The Company is currently evaluating the potential impact of the
adoption of this standard.

In April 2015, the FASB issued ASU 2015-03, Interest-
Imputation of Interest (Subtopic 835-30). This guidance is to simplify the
presentation of debt issuance costs by recognizing a debt liability in the
balance sheet as a direct deduction from that debt liability consistent with the
presentation of a debt discount. The amendments in this update are effective for
financial statements issued for fiscal years beginning after December 15, 2015,
and interim periods within those fiscal years. The Company  has adopted this
standard and the adoption did not have a material impact on the Companys
financial position.

In August 2014, the FASB issued ASU 2014-15, Presentation of
Financial Statements - Going Concern (Subtopic 205-40): Disclosure of
Uncertainties about an Entitys Ability to Continue as a Going Concern,
which is intended to define managements responsibility to evaluate whether
there is substantial doubt about an organizations ability to continue as a
going concern within one year after the date that the financial statements are
issued (or within one year after the date that the financial statements are
available to be issued when applicable) and to provide related footnote
disclosures. The ASU provides guidance to an organizations management, with
principles and definitions that are intended to reduce diversity in the timing
and content of disclosures that are commonly provided by organizations today in
the financial statement footnotes. The ASU is effective for annual periods
ending after December 15, 2016, and interim periods within annual periods
beginning after December 15, 2016, which for the Company is April 1, 2017. Early adoption is permitted. The adoption of this
standard will not have a material impact on the Companys financial position or
results of operations.

F-15

---

The amendments also clarify that the guidance in Topic 275,
Risks and Uncertainties, is applicable to entities that have not
commenced planned principal operations. The central feature of the guidance
on disclosure requirements is that required disclosures are limited to matters
significant to a particular entity. The disclosures focus primarily on risks and
uncertainties that could significantly affect the amounts reported in the
financial statements in the near term or the near-term functioning of the
reporting entity.

|3. | RECAPITALIZATION
|-- | ----------------

On June 13, 2014, the Company completed a recapitalization
transaction where the Company acquired 100% of the issued and outstanding shares
of Neuro. In exchange, the Company issued a total of 35,300,083 shares to the
shareholders of Neuro which merged with a wholly-owned subsidiary of the
Company, HMT Mergersub, for the purpose of the three-corner amalgamation. As a
result, the former Neuro shareholders owned the majority of the outstanding
shares of the Company upon completion of the transaction. Prior to the
recapitalization transaction, the Company did not meet the definition of a
business. Thus, the transaction is considered to be a capital transaction of
Neuro accompanied by a recapitalization.

The ongoing Company has adopted the name Helius Medical
Technologies, Inc. These consolidated financial statements present the results
of Neuro with the exception of common stock which has been retroactively
restated to reflect the Recapitalization. In connection with the
Recapitalization, the Company advanced Neuro an unsecured loan in the amount of
$150,000 (the Bridge Loan). The Bridge Loan was for a term of one year
commencing on May 30, 2014, and was payable in a lump sum at the end of the
term. The Bridge Loan bears interest at a rate of 8% per annum.

F-16

---

The net assets acquired were as follows,

|Cash and cash
      equivalents                | $ | 23,904  |  
|---------------------------------------------- | - | ------- | -
|Receivables                                    |   | 1,644   |  
|Bridge loan receivable                         |   | 150,000 |  
|Prepaid expenses                               |   | 5,970   |  
|Accounts payable and accrued
      liabilities |   | (18,628 | )
|                                               | $ | 162,890 |  

The recapitalization transaction reflects a credit to
additional paid-in capital of $162,890, the carrying value of the net assets of
the Company at the time of the reverse merger.

In connection to the completion of the transaction, the Company
completed a private placement of 15,240,000 units at CAD $0.50 per unit for a
total of $7,016,002 (CAD $7,620,000) (Note 7). Each unit consisted of one common
share of the Company and one-half of a share purchase warrant. Each whole share
purchase warrant is exercisable at CAD $1.00 for a period of twenty-four months.
In respect of this private placement, the Company paid aggregate finders fees
of $379,806 (CAD $412,200) and issued 824,400 finders warrants. Each finders
warrant is exercisable at CAD $1.00 per share for a period of two years.

|4. | CONVERTIBLE DEBENTURE
|-- | ---------------------

On February 19, 2014, the Company entered into a securities
purchase agreement where the Company agreed to sell and issue a note with annual
simple interest at 8% (the Debenture). A total of $1,000,100 in principal had
been received. The Debenture matured on the earliest of (i) February 28, 2015 or
such later date as agreed (ii) the closing of a transaction involving a change
in control of the Company or (iii) the date of the closing of the Companys
qualified financing being an aggregate amount of at least $2,000,000 (qualified
financing).

Upon completion of a qualified financing, the Debenture would
automatically convert into equity securities of the Company at a price per share
equal to 85% of the price per share of the qualified financing. If a qualified
financing did not occur on or before the maturity date, at the option of the
Companys board of directors, the outstanding balance of the debenture would be
converted into the Companys equity securities at a conversion price per share
determined using a valuation of $8.5 million and the number of shares
outstanding at that date.

On June 13, 2014, the Debenture matured on the closing of the
Companys qualified financing and converted into 2,564,705 shares of the
Companys common stock.

The conversion option of the Debenture was accounted for as a
contingent beneficial conversion feature valued at $176,488 which was recorded
as interest expense in the consolidated statements of operations and
comprehensive loss on settlement of the contingency. Upon conversion of the
Debenture, the Company issued a total of 2,564,705 common shares. In addition,
the Company paid the Debenture holders $11,131 with respect to the accrued and
unpaid interest outstanding.

|5. | PROMISSORY NOTE
|-- | ---------------

On September 8, 2015, the Company received $200,000 in exchange
for the issuance of a promissory note (the Promissory Note). The Promissory
Note was to be repaid six months from the date of issuance with interest
accruing at the rate of 6% per annum for the first three months and 10% per
annum thereafter. In addition, the lender was entitled to receive 30,000 common
shares of the Company on the date of the Promissory Note (the Bonus Shares)
and an additional 30,000 common shares every three months thereafter as long as
the principal of the loan remained outstanding. During the year ended March 31,
2016, the Company issued the lender 30,000 Bonus Shares valued at $29,045 based
on their quoted market value to the lender. This amount was recorded as a debt
discount of the Promissory Note at issuance and was being amortized using the
effective interest method over the term of the Promissory Note.

F-17

---

On October 28, 2015, the Company repaid the Promissory Note in
its entirety, along with accrued interest of $1,644. The remaining debt discount
was immediately recorded as interest expense on the date of repayment.

|6. | CONVERTIBLE NOTE
|-- | ----------------

On October 9, 2015, in connection with an Asset Purchase
Agreement, under which the Company licensed the use of its intellectual property
in the Peoples Republic of China, Taiwan, Singapore, Hong Kong, and the Macau
Special Administrative Region, the Company entered into a US$7.0 million funding
commitment with A&B Company Limited (A&B) in the form of a convertible
promissory note. The funding commitment consisted of (i) an initial $2.0 million
under the Note ($2.0 million note and (ii) an additional $5.0 million funding
commitment, upon which the Company could draw down at any time or from time to
time during the six-month period beginning on the issuance date of the
promissory note. The $2.0 million note would accrue interest at a rate equal to
6% per annum, payable in cash on the due date of April 9, 2016. The $2.0 million
note was unsecured and was convertible at the option of the holder into units of
the Company at $0.96 per unit. Each unit would consist of one share of common
stock and one half share purchase warrant exercisable at $1.44 for a period of
three years from the date of issuance.

Pursuant to the guidance of ASC 815 Derivatives and
Hedging, the Company determined that the conversion feature embedded in the
$2.0 Million Note was required to be bifurcated from the Note and accounted for
as a derivative liability because it was considered not to be indexed to the
Companys stock due to its exercise price being denominated in a currency other
than the Companys functional currency. Therefore, pursuant to the guidance of
ASC 815-15, the Company allocated the proceeds from the issuance of the $2.0
million note first to the fair value of the embedded conversion feature, with a
corresponding discount allocated to the Note. This resulted in a debt discount
of $425,208. This debt discount would be amortized using the effective interest
method over the term of the $2.0 million note. During the year ended March 31,
2016, the Company did not record any accretion in respect of this discount,
because the $2.0 million note was immediately converted, as noted below.

On October 9, 2015, the Company received the conversion notice
and on November 10th, 2015, the Company issued 2,083,333 shares of
common stock at a price of $0.96 per share and 1,041,667 warrants exercisable at
$1.44 for a period of three years from the date of issuance. The shares of
common stock and the warrants were issued on November 10, 2015. Pursuant to the
guidance of ASC 815 Derivatives and Hedging, the Company determined that
the warrants are required to be accounted for as liabilities because it they are
considered not to be indexed to the Companys stock due to the exercise price
being denominated in a currency other than the Companys functional currency.
The fair value of these warrants was determined to be $206,667 using the
Black-Scholes option pricing model. See Note 7. for the derivative liability
rollforward.

As a result of the bifurcation of the embedded conversion
option, for accounting purposes, two instruments were considered outstanding
and, upon exercise of the contractual conversion option, extinguishment
accounting has been applied. Consequently, the shares issued pursuant to the
conversion are recorded at their fair value on the date of issuance, determined
with reference to their quoted market price on the date of conversion. The
resulting difference between the fair value of the shares issued, less the fair
value of the related conversion feature and the carrying value of the related
debt, is recorded as a gain or loss on the consolidated statement of operations.
During the year ended March 31, 2016, the Company recorded a gain on
extinguishment of debt of $268,334 in connection with the conversion of the
Note.

The Company could elect to draw down on the additional $5.0
million funding through the issuance of units of the Company at a price based on
the volume weighted average closing price of the Companys shares of common
stock on the date the Company elects to draw down from the commitment (the Draw
Down Price). Each unit would consist of one shares of common stock of the
Company and one half share purchase warrant. The warrant would be exercisable at
the price representing a fifty percent (50%) premium to the Draw Down Price.

On December 29, 2015, the Company drew down the remaining $5.0
million commitment through the issuance of 5,555,556 shares of common stock at a
price of $0.90 per share and 2,777,778 warrants exercisable at $1.35 for a
period of three years from the date of issuance. The shares of common stock and
the warrants were issued on January 7, 2016.

F-18

---

Pursuant to the guidance of ASC 815 Derivatives and
Hedging, the Company determined that the warrants are required to be
accounted for as liabilities because they are considered not to be indexed to
the Companys stock due to the exercise price being denominated in a currency
other than the Companys functional currency. Consequently, the Company
allocated the proceeds from the $5.0 million funding initially to the warrants
at their fair value, with the remainder allocated to the common shares. The fair
value of these warrants was determined to be $796,945 using the Black Scholes
option pricing model. See Note 7. for the derivative liability rollforward
relating to these warrants.

|7. | COMMON STOCK AND WARRANTS
|-- | -------------------------

As of March 31, 2016, the Companys certificate of
incorporation authorized the Company to issue unlimited Class A common shares
without par value. Each Class A common share is entitled to have the right to
vote at any shareholder meeting on the basis of one vote per share. Each Class A
share held entitles the holder to receive dividends as declared by the
directors. No dividends have been declared through March 31, 2016. In the event
of the liquidation, dissolution or winding-up of the Company other distribution
of assets of the Company among its shareholders for the purposes of winding-up
its affairs or upon a reduction of capital the holders of the Class A common
shares shall, share equally, share for share, in the remaining assets and
property of the Company.

The Company is subject to a stockholders agreement, which
places certain restrictions on the Companys stock and its stockholders. These
restrictions include approvals prior to sale or transfer of stock, a right of
first refusal to purchase stock held by the Company and a secondary right of
refusal to stockholders, right of co-sale whereby certain stockholders may be
enabled to participate in a sale of other stockholders to obtain the same price,
term and conditions on a pro-rata basis, rights of first offer of new security
issuances to current stockholders on a pro-rata basis and certain other
restrictions.

Upon completion of the Recapitalization, the Company issued a
total of 35,300,083 shares to the shareholders of Neuro (Note 3). In connection
with the Recapitalization, the Company also closed a non-brokered private
placement (the Private Placement) at CAD $0.50 per unit of 15,240,000 units
raising $7,016,002 on May 30, 2014 (Note 3). Each unit consists of one common
stock of the Company and one half of a warrant of the Company where one full
warrant is exercisable for 2 years at CAD $1.00 into one common stock. The fair
value of the warrants issued was determined using the Black Scholes
option-pricing model and the Company used the relative fair value method to
allocate $578,961 of the gross proceeds to Additional Paid-in Capital to account
for the warrants issued.

On April 30, 2015, the Company closed a non-brokered private
placement (the First Financing) raising gross proceeds of $1,825,937 by the
issuance of 849,273 units (each a First Financing Unit) at a price of $2.15
per First Financing Unit. Each First Financing Unit consists of one (1) common
share and one half of one (1/2) common share purchase warrant (each a First
Financing Warrant). Each whole First Financing Warrant entitles the holder
thereof to purchase one additional common share of the Company at a price of
$3.00 per share for a period of thirty-six (36) months from the closing date of
the Financing. The Company paid a cash finders fee of $84,074 in connection
with this First Financing, as well as 27,396 finders warrants (the First
Financing Finders Warrants). Each First Financing Finders Warrant entitles
the holder thereof to purchase one additional common share of the Company at a
price of $3.00 per share for a period of thirty-six (36) months from the closing
date of the First Financing.

On June 26, 2015, the Company closed a non-brokered private
placement (the Second Financing) raising gross proceeds of $721,243 by the
issuance of 335,463 units (each a Second Financing Unit) at a price of $2.15
per Second Financing Unit. Each Second Financing Unit consists of one (1) common
share and one half of one (1/2) common share purchase warrant (each a Second
Financing Warrant). Each whole Second Financing Warrant entitles the holder
thereof to purchase one additional common share of the Company at a price of
$3.00 per share for a period of thirty-six (36) months from the closing date of
the Second Financing. The Company paid a cash finders fee of $40,803 in
connection with this Second Financing, as well as 18,978 finders warrants (the
Second Financing Finders Warrants). Each Second Financing Finders Warrant
entitles the holder thereof to purchase one additional common share of the
Company at a price of $2.15 per share for a period of sixty (60) months from the
closing date of the Second Financing.

F-19

---

On July 17, 2015, the Company closed a non-brokered private
placement (the Third Financing) raising gross proceeds of $270,375 by the
issuance of 125,756 units (each a Third Financing Unit) at a price of $2.15
per Third Financing Unit. Each Third Financing Unit consists of one (1) common
share and one half of one (1/2) common share purchase warrant (each a Third
Financing Warrant). Each whole Third Financing Warrant entitles the holder
thereof to purchase one additional common share of the Company at a price of
$3.00 per share for a period of thirty-six (36) months from the closing date of
the Third Financing. The Company paid a cash finders fee of $16,223 in
connection with this Third Financing, as well as 7,545 finders warrants (the
Third Financing Finders Warrants). Each Third Financing Finders Warrant
entitles the holder thereof to purchase one additional common share of the
Company at a price of $2.15 per share for a period of sixty (60) months from the
closing date of the Third Financing.

On November 10, 2015, upon conversion of the $2.0 million Note,
the Company issued 2,083,333 shares of common stock at a price of $0.96 per
share and 1,041,667 warrants exercisable at $1.44 for a period of three years
from the date of issuance. See Note 6 Convertible Note.

On December 29, 2015, the Company drew down the remaining $5.0
million commitment through the issuance of 5,555,556 shares of common stock at a
price of $0.90 per share and 2,777,778 warrants exercisable at $1.35 for a
period of three years from the date of issuance. The shares of common stock and
the warrants were issued on January 7, 2016. See Note 6 Convertible Note.

Pursuant to the guidance of ASC 815 Derivatives and
Hedging, the Company determined that all of the warrants issued during the
year ended March 31, 2016 as described above are required to be accounted for as
liabilities because they are considered not to be indexed to the Companys stock
due to the exercise price being denominated in a currency other than the
Companys functional currency. Consequently, the Company determined the fair
value of each warrant issuance using the Black-Scholes option pricing model,
with the remainder of the proceeds allocated to the common shares.

The warrants having an exercise price denominated in a currency
other than the functional currency of the Company that are required to be
accounted for as liabilities are summarized as follows for the years ended March
31, 2016 and 2015:

Year endedMarch
      31, 2016$
    Year endedMarch
      31, 2015$Fair value of warrants, beginning of the
      period
    -
    -Issuance
    1,536,134
    -Change in fair value of warrants during the
      period
    (331,553)
    -Fair value of warrants, end of the period
    1,204,581
    -


The warrants are required to be re-valued with the change in
fair value of the liability recorded as a gain or loss in the change of fair
value of derivative liability, included in other income (expense) in the
Companys consolidated statements of operations and comprehensive loss at the
end of each reporting period. The fair value of the warrants will continue to be
classified as a liability until such time as they are exercised, expire or there
is an amendment to the respective agreements that renders these financial
instruments to be no longer classified as a liability.

The fair value of warrants as of March 31, 2016 were estimated
using the Black-Scholes option pricing model with the following weighted average
assumptions:

March 31, 2016Stock price
    $0.78Exercise Price
    $1.62Expected life
    2.65 yearsExpected volatility
    83.86%Risk  free interest rate
    0.83%Dividend rate
0.00%


F-20

---

The continuity of warrants for the year ended March 31, 2016 is
as follows:

|                        |  | Number of warrants |   |  | Weighted Average Exercise Price | 
|----------------------- |  | ------------------ | - |  | ------------------------------- | 
|                        |  | CAD                |   |  | US                              | 
|Balance, March 31, 2015 |  | 8,444,400          |   |  | -                               | 
|Granted                 |  |                    |   |  | 4,528,609                       | 
|Exercised               |  | (14,400            | ) |  | -                               | 
|Balance, March 31, 2016 |  | 8,430,000          |   |  | 4,528,609                       | 

The warrants outstanding and exercisable at March 31, 2016 are
as follows:

|                                     |                |                  
|------------------------------------ | -------------- | -----------------
|Number of
      warrants outstanding | Exercise Price | Expiry Date      
|8,430,000                            | CAD $1.00      | May 30, 2016     
|452,032                              | US $ 3.00      | April 30, 2018   
|167,731                              | US $ 3.00      | June 26, 2018    
|18,978                               | US $ 2.15      | June 26, 2020    
|62,878                               | US $ 3.00      | July 17, 2018    
|7,545                                | US $ 2.15      | July 17, 2020    
|1,041,667                            | US $ 1.44      | November 10, 2018
|2,777,778                            | US $ 1.35      | December 29, 2018

|8. | SHARE BASED PAYMENTS
|-- | --------------------

On June 18, 2014, the Companys Board of Directors authorized
and approved the adoption of the 2014 Plan (2014 Plan), under which an
aggregate of 12,108,016 shares of common stock may be issued. Pursuant to the
terms of the 2014 Plan, the Company is authorized to grant stock options, as
well as awards of stock appreciation rights, restricted stock, unrestricted
shares, restricted stock units and deferred stock units. These awards may be
granted to directors, officers, employees and eligible consultants. Vesting and
the term of an option is determined at the discretion of the Board of Directors
of the Company. At March 31, 2016, there were 5,432,656 common shares remaining
available for grant under the 2014 Plan.

The continuity of stock options for the year ended March 31,
2016is as follows:

|                                            |  |           |   |   | Weighted       |  |   |                 | 
|------------------------------------------- |  | --------- | - | - | -------------- |  | - | --------------- | 
|                                            |  |           |   |   | Average        |  |   | Aggregate       | 
|                                            |  |           |   |   | Exercise Price |  |   | Intrinsic Value | 
|                                            |  | Number    |   |   | (CAD)          |  |   | (CAD)           | 
|Balance outstanding at March
      31, 2015 |  | 4,920,000 |   | $ | 1.14           |  | $ | 10,120,000      | 
|Exercised                                   |  | (94,640   | ) | $ | 0.60           |  |   | -               | 
|Granted                                     |  | 1,850,000 |   | $ | 0.88           |  |   | -               | 
|                                            |  |           |   |   |                |  |   |                 | 
|Balance outstanding at March 31, 2016       |  | 6,675,360 |   | $ | 1.08           |  | $ | 1,580,883       | 
|                                            |  |           |   |   |                |  |   |                 | 
|Balance exercisable at March 31, 2016       |  | 4,336,864 |   | $ | 1.16           |  | $ | 1,064,963       | 

The options outstanding and exercisable at March 31, 2016 are
as follows:

F-21

---

Optionsoutstandingremaining
    
    
    
    
    
    
    
    
    Number ofNumber of
    
    
    
    
    contractual life
    
    
    Exercise
    
    
    Grant date fair
    
    
    optionsoptions
    
    Expiry date
    
    
    (years)
    
    
    Price (CAD)
    
    
    value (CAD)
    
    
    exercisable3,520,000
    
    June 18, 2019
    
    
    3.22
    
    $
    0.60
    
    $
    0.26
    
    
    2,346,669155,360
    
    June 20, 2019
    
    
    3.22
    
    $
    0.60
    
    $
    0.26
    
    
    155,360100,000
    
    July 14, 2017
    
    
    1.29
    
    $
    2.52
    
    $
    1.05
    
    
    100,000450,000
    
    December 8, 2019
    
    
    3.69
    
    $
    2.92
    
    $
    1.65
    
    
    450,000100,000
    
    December 8, 2019
    
    
    3.69
    
    $
    2.92
    
    $
    1.31
    
    
    66,667400,000
    
    December 8, 2019
    
    
    3.69
    
    $
    2.96
    
    $
    1.29
    
    
    300,000100,000
    
    March 16, 2020
    
    
    4.96
    
    $
    3.20
    
    $
    1.42
    
    
    66,66750,000
    
    August 15, 2015
    
    
    4.38
    
    $
    0.98
    
    $
    0.39
    
    
    16,667750,000
    
    October 21, 2020
    
    
    4.56
    
    $
    0.87
    
    $
    0.36
    
    
    187,500550,000
    
    October 28, 2020
    
    
    4.58
    
    $
    0.84
    
    $
    0.44
    
    
    550,000400,000
    
    October 28,2020
    
    
    4.58
    
    $
    0.84
    
    $
    0.36
    
    
    64,000100,000
    
    December 31, 2020
    
    
    4.76
    
    $
    1.24
    
    $
    0.50
    
    
    33,3346,675,360
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,336,864


Included in the table above are non-employee awards that are
subject to remeasurement each reporting period until vested. As a result, the
grant date fair value is not representative of the total expense that will be
recorded for these awards. As of March 31, 2016, the unrecognized compensation
cost related to non-vested stock options outstanding, was $440,633 to be recognized
over a weighted-average remaining vesting period of approximately 0.76 years.

The fair value of the employee and director stock options
granted during the years ended March 31, 2016 and 2015 were estimated using the
Black-Scholes option pricing model with the following weighted average
assumptions:

March 31, 2016
    March 31, 2015Stock price
    $0.82 CAD
    $1.85 CADExercise Price
    $0.87 CAD
    $2.20 CADExpected life
    3.75 years
    3.9 yearsExpected volatility
    67.85%
    67.85%Risk  free interest rate
    0.63%
    1.32%Dividend rate
    0.00%
    0.00%


The Company has adopted the simplified method prescribed by the
SEC in SAB Topic 14 in respect of estimating the expected term of its stock
options as its limited share purchase option history does not provide a
reasonable basis to estimate the expected terms. Expected volatility was
determined by reference to the average volatility rates of other companies in
the same industry due to the Companys limited trading history. The Company
recognizes compensation expense for only the portion of awards that are expected
to vest. For the years ended March 31, 2016 and 2015, the Company applied an
expected forfeiture rate of 0% based on its historical experience.

Non-Employee Stock Options

In accordance with the guidance of ASC 815-40-15, stock options
awarded to non-employees that are performing services for Neuro are required to
be accounted for as derivative liabilities once the services have been performed
and the options have vested because they are considered not to be indexed to the
Companys stock due to their exercise price being denominated in a currency
other than Neuros functional currency. Stock options awarded to non-employees
that are not vested are re-measured at their respective fair values at each
reporting period and accounted for as equity awards until the terms associated
with their vesting requirements have been met. The changes in fair of the
unvested non-employee awards are reflected in their respective operating expense
classification in the Companys consolidated statements of operations and
comprehensive loss.

F-22

---

The non-employee stock options that are required to be
accounted for as liabilities are summarized as follows for the years ended March
31, 2016 and 2015:

Year endedMarch 31, 2016$
    Year endedMarch 31, 2015$Fair value of non-employee options, beginning of the period
    1,581,444
    -Issuance
    -
    767,879Reallocation of vested non-employee options
    690,885
    74,190Change in fair value of non-employee stock options during
      the period
    (1,751,150)
    739,375Fair value of non-employee options, end of the period
    521,179
    1,581,444


The non-employee options that have vested are required to be
re-valued with the change in fair value of the liability recorded as a gain or
loss on the change of fair value of derivative liability and included in other
items in the Companys consolidated statements of operations and comprehensive
loss at the end of each reporting period. The fair value of the options will
continue to be classified as a liability until such time as they are exercised,
expire or there is an amendment to the respective agreements that renders these
financial instruments to be no longer classified as a liability.

The fair value of non-employee liability classified awards at
March 31, 2016 and 2015 were estimated using the Black-Scholes option pricing
model with the following weighted-average assumptions:

March 31, 2016
    March 31, 2015Stock price
    $0.97 CAD
    $3.20 CADExercise Price
    $1.52 CAD
    $1.90 CADExpected life
    3.23 years
    4.24 yearsExpected volatility
    84.62%
    67.85%Risk  free interest rate
    0.53%
    1.31%Dividend rate
    0.00%
    0.00%


Share-based payments are classified in the Companys statements
of operations and comprehensive loss as follows for the years ended March 31,
2016 and 2015:

Year endedMarch 31, 2016$
    Year endedMarch 31, 2015$Consulting fees
    239,064
    1,167,281Research and development
    158,396
    721,601Wages and salaries
    833,790
    451,9941,231,250
    2,340,876


F-23

---

|9. | INCOME TAXES
|-- | ------------

The components of net loss for the years ended March 31, 2016
and 2015 are as follows:

|         |  | 2016      |  |  | 2015      | 
|-------- |  | --------- |  |  | --------- | 
|         |  | $         |  |  | $         | 
|         |  |           |  |  |           | 
|U.S      |  | 5,132,611 |  |  | 9,301,988 | 
|Non-U.S. |  | 1,749,201 |  |  | 536,329   | 
|         |  |           |  |  |           | 
|         |  | 6,881,812 |  |  | 9,838,317 | 

A reconciliation of the income tax provision computed at
statutory rates to the reported income tax provision for the years ended March
31, 2016 and 2015 is as follows:

|                                                                 |  | 2016       |   |  | 2015       |  
|---------------------------------------------------------------- |  | ---------- | - |  | ---------- | -
|                                                                 |  | $          |   |  | $          |  
|Statutory tax rate                                               |  | 34.00%     |   |  | 34.00%     |  
|Loss
      before income taxes                                   |  | (6,882,812 | ) |  | (9,838,317 | )
|Expected income tax recovery                                     |  | (2,340,000 | ) |  | (3,345,000 | )
|Increase (decrease) in income tax recovery
      resulting from: |  |            |   |  |            |  
|Derivative liability                                             |  | (708,000   | ) |  | 251,000    |  
|Share based
      payments                                       |  | 419,000    |   |  | 796,000    |  
|Other permanent difference                                       |  | 49,000     |   |  | 12,000     |  
|Share issue
      costs                                          |  | -          |   |  | (140,000   | )
|Effect of change in statutory rate                               |  | (147,000   | ) |  | (41,000    | )
|Effect of
      foreign exchange                                 |  | -          |   |  | 89,000     |  
|Effect of over provision in prior year                           |  | (2,164,000 | ) |  | -          |  
|Foreign income taxed at foreign rate                             |  | 100,000    |   |  | 14,000     |  
|Increase in valuation
      allowance                            |  | 4,791,000  |   |  | 2,364,000  |  
|Income tax expense                                               |  | -          |   |  | -          |  

The significant components of the Companys deferred income tax
assets and liabilities after applying enacted corporate tax rates at March 31,
2016 and 2015 are as follows:

|                                               |  | 2016       |   |  | 2015       |  
|---------------------------------------------- |  | ---------- | - |  | ---------- | -
|                                               |  | $          |   |  | $          |  
|                                               |  |            |   |  |            |  
|                                               |  |            |   |  |            |  
|Deferred income tax assets
      (liabilities) |  |            |   |  |            |  
|Operating losses carried forward               |  | 4,915,000  |   |  | 2,074,000  |  
|Intangible costs                               |  | -          |   |  | 285,000    |  
|Share issuance costs                           |  | -          |   |  | 99,000     |  
|Stock
      compensation                       |  | 1,725,000  |   |  | -          |  
|Other                                          |  | 609,000    |   |  |            |  
|Valuation allowance                            |  | (7,249,000 | ) |  | (2,458,000 | )
|                                               |  |            |   |  |            |  
|                                               |  |            |   |  |            |  
|Net
      deferred income tax asset            |  | -          |   |  | -          |  

At March 31, 2016, the Company has accumulated
non-capital losses totaling $1,839,000 in Canada and net
operating losses of $12,616,000 in the U.S., which may be
available to carry forward and offset future years taxable income. The losses
expire in various amounts starting in 2033.

F-24

---

Under the provisions of the Internal Revenue Code, the net
operating loss carryforwards are subject to review and possible adjustment by
the Internal Revenue Service and state tax authorities. Net operating loss
carryforwards may become subject to an annual limitation in the event of certain
cumulative changes in the ownership interest of significant shareholders over a
three-year period in excess of 50 percent, as defined under Section 382 of the
Internal Revenue Code, as well as similar state provisions. This could limit the
amount of tax attributes that can be utilized annually to offset future taxable
income or tax liabilities. The amount of the annual limitation is determined
based on the value of the Company immediately prior to the ownership change.
Subsequent ownership changes may further affect the limitation in future years.

Uncertain Tax Positions

The Company has adopted certain provisions of ASC 740, Income
Taxes, which prescribes a recognition threshold and measurement attribute for
the recognition and measurement of tax positions taken or expected to be taken
in income tax returns. The provisions also provide guidance on the
de-recognition of income tax assets and liabilities, classification of current
and deferred income tax assets and liabilities, and accounting for interest and
penalties associated with tax positions.

The Company files income tax returns in the U.S. federal
jurisdiction, and in various state and foreign jurisdictions. The Companys tax
returns are subject to tax examinations by U.S. federal and state tax
authorities, or examinations by foreign tax authorities until the expiration of
the respective statutes of limitation. The Company currently has no tax years
under examination.

At March 31, 2016, the Company does not have an accrual
relating to uncertain tax positions. It is not anticipated that unrecognized tax
benefits would significantly increase or decrease within 12 months of the
reporting date.

|10. | COMMITMENTS AND
CONTINGENCIES
|--- | -----------------------------

|(a) | On January 22, 2013, the Company entered into a license
      agreement with ANR for an exclusive right on ANRs patent pending
      technology, claims and knowhow. In addition to the issuance of 16,035,026
      shares, the Company agreed to pay a 4% royalty on net revenue on the sales
      of devices covered by the patent-pending technology and services related
      to the therapy or use of devices covered by the patent-pending technology.
      The Company has not made any royalty payments to date under this
      agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(b) | On March 7, 2014, the Company entered into a commercial
      development-to-supply program with Ximedica where Ximedica will design, develop and produce PoNS product solution suitable
      for clinical trial and commercial sale. Under the program, the Company is
      responsible for ensuring the device is in compliance with relevant laws
      and regulations. The agreed budget for phase 1B of development is
      $499,000; phase 2 is $1,065,000; Phase 3 and 4 is $1,389,000 and 2nd
      software development cycle is $586,000, of which $5,191,368 was expensed
      as research and development since inception to March 31, 2016. Invoices
      are to be issued monthly for work in progress. The Company can cancel the
      project at any time with a written notice at least 30 days prior to the
      intended date of cancellation. The Company recorded a prepaid expense of
      $274,000 to Ximedica for the upcoming clinical build of the PoNS device.
      As of March 31, 2016, the Company has expensed $120,448 of the $274,000
      prepayment. As of March 31, 2016, the Company also recorded $300,000 project initiation deposit which will be applied once
      the development-to-supply program has been completed. During the years
      ended March 31, 2016 and 2015, the Company incurred R&D charges of
      $1,937,817 and $2,928,289 pursuant to this agreement.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(c) | On January 27, 2015, the Company received a demand letter
      containing allegations that it had entered into a consulting arrangement
      with the complainants and breached certain of its terms, and used certain
      intellectual property in the form of business and marketing plans
      allegedly prepared by the complainants, and seeking damages. On May 7,
      2015, Mr. Rainier Maas and Dr. Jochen Scheld filed a complaint in the U.S.
      District Court for the Eastern District of Pennsylvania seeking monetary
      damages in excess of $225,000. On December 2, 2015 the Company entered
      into a settlement agreement with the plaintiffs for an amount of €57,000
      which was subsequently paid on January 12, 2016. The parties have since
      executed the settlement agreement for the aforementioned amount and the
      case has been dismissed without prejudice.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

F-25

---

|(d) | On January 5, 2015, Wicab Inc. (Wicab) filed a
      complaint against the Company, NHC, its director Mitchell Tyler, and its
      former director Yuri Danilov, and ANR in the U.S. District Court for the
      Western District of Wisconsin. The complaint contained various state and
      common law claims arising from Messrs. Danilovs and Tylers prior
      employment with Wicab and the Companys two issued patents for the PoNS
      device. The complaint alleged, among other things, that following their
      departure from Wicab, Messrs. Danilov and Tyler knowingly filed patent
      applications for and used ideas and inventions developed at Wicab in
      violation of various non-competition and confidentiality agreements, and
      that the Companys two issued patents are therefore rightfully the
      property of Wicab. The complaint sought an unspecified amount of monetary
      damages, an injunction preventing the Company from using the ideas and
      inventions in the two patents, an order transferring ownership of the
      patents from the Company to Wicab, and recovery of costs and attorneys
      fees. The complaint was voluntarily dismissed without prejudice on January
      14, 2015.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

On October 12, 2015, the Company
received a letter from Wicab alleging that the two issued patents were invalid
in view of prior art cited in the letter, including scientific publications and
patent applications, and that Paul Bach-y-Rita, Wicabs founder, should have
been named as an inventor on these two issued patents. Wicab indicated in the
letter that it may file reexamination or inter partes review proceedings with
the U.S. Patent Office to attempt to invalidate the claims in the two issued
patents. Wicab also stated that it would consider an unspecified business
solution to resolve this matter. On December 10, 2015, representatives of each
of the Company and Wicab met to discuss the parameters of a potential
settlement. There can be no guarantee that a settlement will be reached. In the
event that a settlement with Wicab is not reached, Wicab may file reexamination
or inter partes review proceedings with the U.S. Patent Office to challenge the
validity of the two issued patents. If the Company receives an adverse decision
from the U.S. Patent Office in connection with these proceedings, some or all of
the claims in the two patents may be invalidated or otherwise impaired, which
could prevent the Company from bringing an infringement suit against a future
competitor for making use of the PoNS technology for neurorehabilitation, and
could have a material adverse effect on the Companys business, operating
results and financial condition. Wicab may also take other actions against the
Company, its assets, intellectual property rights, officers, directors,
employees, agents or other persons or entities which may also have a material
effect on the Companys business, operating results and financial condition. The
Company believes that the possibility of an economic outlay is remote.

|(e) | Under the Companys Asset Purchase Agreement with
      A&B, if the Company fails to obtain FDA clearance for
      commercialization of or otherwise fail to ensure that the PoNS device is
      available for purchase by the U.S. Government by December 31, 2017, the
      Company is subject to a US$2,000,000 contract penalty payable to
      A&B.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                              
|(f) | In November 2014, the Company signed a development and
      distribution agreement with the Altair company in Russia to apply for
      registration and distribute the PoNS device in the territories of the
      former Soviet Union. However, there is no assurance that such
      commercialization will occur.                                      

|11. | RELATED PARTY TRANSACTIONS
|--- | --------------------------

During the years ended March 31, 2016 and 2015, the Company
paid $64,210 and $47,100 in consulting fees to directors of the Company. This
expense was included in research and development expense. At March 31, 2016, the
Company owed $3,450 to a director for consulting services (March 31, 2015:
24,418).

During the years ended March 31, 2016 and 2015, a benefit of
$195,709 and an expense of $1,040,854 was included in research & development
expense as the fair value of stock-based compensation attributed to the options
granted to two directors and a consultant for consulting services rendered with
respect to the design and development of the PoNS device.

|12. | SOLE-SOURCE COST-SHARING
  AGREEMENT
|--- | ------------------------------------

During the fiscal year ended March 31, 2016, the Company
entered into a sole source cost sharing contract executed with the USAMRMC. Under the terms of the contract, the USAMRMC
will reimburse the Company up to a maximum of $2,996,244 representing
approximately 62% of the Companys estimated costs for the registrational trial
(the trial) investigating the safety and effectiveness of the portable
neuromodulation stimulator for mild to moderate traumatic brain injury. The
trial expires on December 31, 2016 however the Company is working with the
USAMRMC to extend the contract into 2017 based on the current trial forecast
timelines. As of March 31, 2016, the Company has received a total of $1,458,374
in respect of expenses reimbursed. All reimbursement amounts received are
credited directly to the accounts in which the original expense is recorded,
including research and development, wages and salaries, and legal expenses.

Under the terms of the agreement, the USAMRMC may terminate
their obligation at any time with 30 days written notice.

F-26

---

|13. | SUPPLEMENTAL CASH FLOW
  INFORMATION
|--- | ------------------------------------

Investing and financing activities that do not have a direct
impact on current cash flows are excluded from the consolidated statements of
cash flows.

During the year ended March 31, 2016, the Company had the
following non-cash financing transactions:

| | i)   | Fair value of warrants issued in conjunction with private
      placements in April, June and July 2015 was $532,522.                                                                                                                              
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                    
| | ii)  | Fair value of warrants issued in conjunction with A&B
      credit facility (including upon conversion of $2.0 million convertible
      note and draw down of $5.0 million) was $1,003,612.                                                       
| |      |                                                                                                                                                                                                                                                    
| | iii) | The Company issued 30,000 shares of common stock having a
      fair value of $29,045 based on the quoted market price as a bonus in
      connection with the issuance of a promissory note;                                                      
| |      |                                                                                                                                                                                                                                                    
| | iv)  | A gain on extinguishment of debt of $268,334 based on the difference between the fair value of the shares issued to settle the A&B credit facility and the fair value of the related conversion feature and the carrying value of the related debt.

During the year ended March 31, 2015:

| | i)   | the Company issued 2,564,705 common shares valued at
      $1,000,100 based on the carrying value of the convertible debenture upon
      its conversion;                                          
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                    
| | ii)  | the Company recorded a beneficial conversion feature of
      $176,488 in respect of a qualifying transaction recorded in connection
      with the convertible debenture;                         
| |      |                                                                                                                                                                                                    
| | iii) | the Company recorded a credit to additional paid-in
      capital of $162,890 representing the carrying values of the net assets
      acquired in a reverse merger recapitalization
  transaction.

|14. | SUBSEQUENT EVENTS
|--- | -----------------

On April 18, 2016, the Company closed its short form prospectus
offering in Canada and a concurrent U.S. private placement (the "Offering") of
units (the "Units") with gross proceeds to the Company of CAD $9,215,000 through
the issuance of Units at a price of CAD $1.00 per Unit. Each Unit consists of
one Class A common share in the capital of the Company (a Common Share) and
one half of one Common Share purchase warrant (each whole warrant, a Warrant).
Each Warrant entitles the holder thereof to acquire one additional Common Share
at an exercise price of CAD $1.50 on or before April 18, 2019. Mackie Research
Capital Corporation (the "Agent") acted as agent and sole bookrunner in
connection with the Offering. The Company paid the Agent a cash commission of
CAD $436,050 and has granted to the Agent compensation options exercisable to
purchase 436,050 Units at an exercise price of CAD $1.00 per Unit for a period
of 24 months from the closing of the Offering.

As at March 231, 2016, the Company had received $150,000 in
respect of the Offering; these funds were reflected as a current liability on
Company's consolidated balance sheet as the issuance of the Units in connection
with these proceeds was contingent on the Company achieving a minimum financing
threshold. Subsequent to March 31, 2016, the Company issued the Units in
connection with these proceeds.

In addition, the Company has recorded other current assets of
$495,415 which represent legal fees pertaining to the Offering invoiced to the
Company prior to March 31, 2016. The amount will be recorded as a share issuance
cost upon closing of the Offering.

F-27

---

On May 2, 2016, the Company closed the sale of the additional units issued pursuant to the exercise of the over-allotment option (“Over-Allotment Option”) granted to the Agent in connection with the Offering. The Offering was made
pursuant to a short form prospectus filed with the securities regulatory authorities in each of the provinces of Canada, except Québec. Pursuant to the exercise of the Over-Allotment Option, the Company issued an additional 1,090,125 Units
(the "Over-Allotment Units") at a price of CAD $1.00 per Over-Allotment Unit for additional gross proceeds to the Company of CAD $1,090,125, bringing the total aggregate gross proceeds to the Company under the Offering to CAD
$10,305,125. Each Over-Allotment Unit consists of one Class A common share in the capital of the Company (an “Over-Allotment Common Share”) and one half of one Common Share purchase warrant (each whole warrant, an
“Over-Allotment Warrant”). Each Over-Allotment Warrant entitles the holder thereof to acquire one additional Over-Allotment Common Share at an exercise price of CAD $1.50 on or before April 18, 2019. In connection with the closing of
the Over-Allotment Option, the Company paid the Agent a cash commission of CAD $65,408 and granted to the Agent compensation options exercisable to purchase 65,407 Over-Allotment Units at an exercise price of CAD $1.00 per Over-Allotment
Unit for a period of 24 months from the closing of the Offering.

On June 6th, 2016, the Company announced that it received proceeds of CAD $1,825,600 from the exercise of outstanding warrants which were issued in connection with the Company’s private placement of subscription receipts that
closed on May 30, 2014.

F-28

---

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.

|                        | HELIUS MEDICAL TECHNOLOGIES, INC.
|----------------------- | ---------------------------------
|                        |                                  
|Dated: October 31, 2016 | By:                              
|                        |                                  
|                        |                                  

Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.

|By | /s/
      Philippe Deschamps                        |  | Date: October 31, 2016
|-- | --------------------------------------------------- |  | ----------------------
|   |                                                     |  |                       
|   | Philippe Deschamps                                  |  |                       
|   | President, Chief Executive Officer and a            |  |                       
|   | Director                                            |  |                       
|   |                                                     |  |                       
|By | /s/
      Joyce LaViscount                          |  | Date: October 31, 2016
|   | Joyce LaViscount                                    |  |                       
|   | Chief Financial Officer (Principal
      Accounting |  |                       
|   | Officer), and Corporate Secretary                   |  |                       
|   |                                                     |  |                       
|By | /s/
      Savio Chiu                                |  | Date: October 31, 2016
|   | Savio Chiu                                          |  |                       
|   | Director                                            |  |                       
|   |                                                     |  |                       
|By | /s/
      Blane Walter                              |  | Date: October 31, 2016
|   | Blane Walter                                        |  |                       
|   | Director                                            |  |                       
|   |                                                     |  |                       
|By | /s/
      Mitchell E. Tyler                         |  | Date: October 31, 2016
|   | Mitchell E. Tyler                                   |  |                       
|   | Director                                            |  |                       
|   |                                                     |  |                       
|By | /s/
      Edward M. Straw                           |  | Date: October 31, 2016
|   | Edward M. Straw                                     |  |                       
|   | Director                                            |  |                       
|   |                                                     |  |                       
|By | /s/
      Huaizheng Peng                            |  | Date: October 31, 2016
|   | Huaizheng Peng                                      |  |                       
|   | Director                                            |  |                       

---