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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended March 31, 2015

OR

[   ]  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 Drive Newton, Pennsylvania,
18940(Address of principal executive offices) (Zip Code)

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

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

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

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  [  ]  No  [ X ]

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  [  ] 
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  [ X ] | Smaller reporting company  [  ]
|----------------------------- | ----------------------- | ---------------------------- | -------------------------------
|                              |                         | (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 ]

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The aggregate market value of the
common equity held by non-affiliates of the registrant on September 30, 2014,
based on the closing price on that date of CAD $2.40 (USD $2.14), was
approximately $59,502,069. As of June 26, 2015 there were 63,968,461 shares of
the registrant's common stock outstanding.

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TABLE OF CONTENTS

|                                                                                                                                 | Page
|-------------------------------------------------------------------------------------------------------------------------------- | ----
|PART I                                                                                                                           |     
|ITEM
      1. BUSINESS                                                                                                           | 3   
|ITEM
      1A. RISK FACTORS                                                                                                      | 21  
|ITEM
      1B. UNRESOLVED STAFF COMMENTS                                                                                         | 36  
|ITEM
      2. PROPERTIES                                                                                                         | 36  
|ITEM
      3. LEGAL PROCEEDINGS                                                                                                  | 37  
|ITEM
      4. MINE SAFETY DISCLOSURES                                                                                            | 37  
|PART II                                                                                                                          |     
|ITEM
      5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
      ISSUER PURCHASES OF EQUITY SECURITIES | 38  
|ITEM
      6. SELECTED FINANCIAL DATA                                                                                            | 41  
|ITEM
      7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF OPERATIONS                        | 41  
|ITEM
      7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                        | 49  
|ITEM
      8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (INCLUDED IN F-PAGES)                                                  | 50  
|ITEM
      9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
      FINANCIAL DISCLOSURE                         | 50  
|ITEM
      9A. CONTROLS AND PROCEDURES                                                                                           | 50  
|ITEM
      9B. OTHER INFORMATION                                                                                                 | 51  
|PART III                                                                                                                         |     
|ITEM
      10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE                                                            | 52  
|ITEM
      11. EXECUTIVE COMPENSATION                                                                                            | 55  
|ITEM
      12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
      RELATED STOCKHOLDER MATTERS              | 58  
|ITEM
      13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE                             | 59  
|ITEM
      14. PRINCIPAL ACCOUNTANT FEES AND SERVICES                                                                            | 60  
|PART IV                                                                                                                          |     
|ITEM
      15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES                                                                        | 62  
|SIGNATURES                                                                                                                       |     

1

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In this annual report on Form 10-K, unless otherwise specified,
references to we, us or our 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 contains forward-looking
statements that involve risks and uncertainties, including statements regarding
our market, strategy, competition, capital needs, business plans and
expectations. Such forward-looking statements involve risks and uncertainties
regarding the success of our business plan, availability of funds, government
regulations, operating costs, our ability to achieve significant revenues and
other factors. Forward-looking statements are made, without limitation, in
relation to operating plans, availability of funds and operating costs. Any
statements contained herein that are not statements of historical facts may be
deemed to be forward-looking statements. In some cases, you can identify
forward-looking statements by terminology such as may, will, should,
expect, plan, intend, anticipate, believe, estimate, predict,
potential or continue, the negative of such terms or other comparable
terminology. Actual events or results may differ materially. In evaluating these
statements, you should consider various factors, including the risks outlined in
this annual report. These factors may cause our actual results to differ
materially from any forward-looking statements. While these forward-looking
statements, and any assumptions upon which they are based, are made in good
faith, based on information available to us as of the date hereof, and reflect
our current judgment regarding our business plans, our actual results will
almost always vary, sometimes materially, from any estimates, predictions,
projections, assumptions or other future performance suggested herein. We do not
intend to update any of the forward-looking statements to conform these
statements to actual results, except as required by applicable law, including
the securities laws of the United States.

INDUSTRY AND MARKET DATA

Within this annual report on Form 10-K, 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 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 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 these publications and
reports.

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PART I

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

Our Business

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.

The brains ability to reorganize its operation in response to
new information sources, new functional needs, or new communication pathways is
referred to as neuroplasticity. Neuroplasticity is a process underlying all
cerebral learning, training, and rehabilitation. Neuromodulation is the use of
various external stimulation to intentionally change and regulate the internal
electrochemical environment of the brain.

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 portable
neuromodulation stimulator, or PoNS, device is designed to induce 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.

Traditional rehabilitation interventions have typically
involved medication and various forms of therapies, including physical therapy.
Our patented PoNS device is being developed to enable the first non-invasive
means for delivering neurostimulation through the oral cavity. With respect to
many neurologic diseases and disorders such as Multiple Sclerosis (MS),
Huntingtons, Muscular Dystrophy, Spina Bifida, Parkinson's and Alzheimer's
diseases, Stroke, Epilepsy, and Traumatic Brain Injury (TBI), we believe that
published studies in the field suggest that many such diseases may benefit from
neurostimulation.

The PoNS device, which is placed into and held in the
patients mouth, 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 case studies and
feasibility studies, which are further described below, suggest that prolonged
activation (20 minutes or more) of neuronal circuits, when combined with
physical therapy, may initiate long-lasting processes of neuronal reorganization
with a variety of positive results, including the correction of gait/balance
impairments resultant from TBI. However, these results represent what we refer
to as anecdotal evidence only, which means that the results are not
scientifically supported by a well-controlled, scientific study. Furthermore,
such results may be suggestive but are not adequate to support FDA approval.

The inventors and background patent owners 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 200 patients using the PoNS 2.2 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. We use
the term feasibility study to mean a study that allows for early clinical
evaluation of devices to provide 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. The results for a number of individual test
subjects from these studies suggest that usage of the PoNS 2.2 device resulted
in positive relief in rehabilitating symptoms caused by neurological disorders
or injury for such individual patients. While such case and feasibility studies
qualify only as anecdotal evidence, and the placebo-controlled study qualifies
only as directional evidence, we believe that relief achieved by these patients
suggests that the PoNS device, when combined with physical or cognitive
therapy, improves and sustains functional rehabilitation of the symptoms from
brain dysfunction from traumatic, degenerative, developmental, chemical, or
unknown origins. We use the term directional evidence to mean in respect of
such placebo-controlled study that we conducted, that the results suggested
positive relief in the ten patients tested. However, the feasibility, case, and
placebo-controlled studies were not of sufficient size to produce scientifically
conclusive results. Furthermore, such tests were not adequate to support
clearance of the device by the U.S. Food and Drug Administration, or FDA, for
commercial distribution. Furthermore, the PoNS 2.2 device is a laboratory test
device that is not designed for commercial use.

3

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As described below, we are developing the PoNS 4.0 device to
secure FDA clearance for commercial use in treating balance disorder in mild to
moderate TBI subjects. We will be conducting clinical trials of our PoNS 4.0
device for the treatment of balance disorder in patients in the US with mild to
moderate TBI and for the treatment of balance disorder associated with MS in
patients in Canada. Both registration clinical trials are designed to be
submitted for clearance, the TBI study in support of clearance of the PoNS 4.0
device by the FDA and the MS study in support of clearance by Health Canada,
which is the counterpart to the FDA in Canada. Should the PoNS 4.0 device be
cleared by the FDA and Health Canada, we believe the addressable markets for our
PoNS 4.0 device to treat balance disorder associated with TBI and MS are
potentially up to $5.3 billion for TBI in the U.S. and potentially up to $250
million for MS in Canada. 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 product of 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. Our addressable market
estimate for MS in Canada is calculated by multiplying the estimated number of
persons with MS in Canada (the Multiple Sclerosis Society of Canada estimates
there are approximately 100,000 persons with MS in Canada) by the expected price
per unit of our product. In addition to the currently held method-of-use patent,
we anticipate, based on our pending patent filings, additional patent protection
for the PoNS device tied to uniquely designed therapy for specific therapeutic
indications and functional innovations with respect to design and technology
development.

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 design of the PoNS device, successful completion
of the TBI and MS clinical studies, FDA and Health Canada clearance of the PoNS
device for balance disorder associated with TBI and MS, respectively,
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 any of these conditions, and the successful achievement of
such conditions will require significant expenditures. Because we have not
generated any revenues, we are significantly dependent 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 and Health
Canada clearance, we do not currently have any contract or other arrangement to
sell the PoNS device. Accordingly, we cannot assure you that we will ever be
able to generate any revenue from the sales of products or services.

Additionally, our auditors have issued a going concern opinion.
This means that there is substantial doubt that we can continue as an on-going
business for the next twelve months unless we obtain additional capital to pay
our expenditures. While we are currently seeking additional funding, we do not
currently have sufficient resources to accomplish any of the above conditions
necessary for us to generate revenue.

4

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In reviewing this annual report on Form 10-K, you should
carefully consider these risks and other risks described throughout the annual
report on Form 10-K.

Our Principal Product

History of the PoNS Device

The original PoNS 1.0 experimental device was developed in
2007 in the TCNL. The experimental PoNS 2.2 device shown in the pictures below
was released in 2010. We anticipate producing the clinical PoNS 4.0 device in
the second quarter of 2015. The full commercial device will be ready for release
in the first quarter of 2016.

Physical Construction and User Interface of Version
2.2

The PoNS version 2.2 device is an electrical pulse generator
that delivers controlled electrical stimulation to the tongue. Pulses are
generated and controlled by commercially available counter, timer, and
wave-shaping electronic components. The components are mounted to a single
printed circuit board (Figure 1 and Figure 2). The circuit board contains 143
gold-plated electrodes that contact the tongue. A rechargeable lithium- polymer
battery with built-in charge safety circuitry provides power.

Figure 1: Top of the PoNS Neuro-stimulator board



Figure 2: Bottom of the PoNS Neuro-stimulator board



5

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Figure 3: Photographs of the PoNS Neuromodulation
Stimulator Being Investigated in Conjunction with Physical Therapy for the
Treatment of Balance and Gait Disorders.



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,
superior part of the tongue. 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.

While the voltage and pulse timing to each electrode are
programmed into the device and cannot be altered, the stimulus intensity can be
adjusted with a pair of buttons. At any instant in time, one of the electrodes
in each of the nine sectors on the array is delivering stimulation while the
remaining electrodes serve as the current return path to ground. The sensation
produced by the array is similar to the feeling of drinking a carbonated
beverage. The biphasic waveform is specifically designed to ensure zero net DC
current to minimize the potential for tissue irritation.

When the PoNS 2.2 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. This procedure can be considered comparable to titrating a drug dosage
according to a desired blood level so that the percept (and to a first
approximation the neurophysiological impact) is held invariant.

Proposed Improvements in Version 4.0

Based on market research we have performed to date, we believe
we have completed the technical and product design phases of the PoNS 4.0
device. While we expect to continue to enhance the PoNS 4.0 device design, we
are now commencing efforts to complete the manufacturing development phase which
will enable us to manufacture the device commercially. We anticipate performing
the registration clinical trials for FDA and Health Canada clearance with the
PoNS 4.0 device for use in treating balance disorder in mild to moderate TBI
subjects and MS subjects. While we expect the PoNS 4.0 commercial device to
deliver the same level of stimulation to the patient as the PoNS 2.2 laboratory
device, we are designing the PoNS 4.0 device to be more ergonomic for better
patient comfort, more hygienic (including a replaceable mouthpiece), more
technologically advanced (including a data logging feature) and more feature
laden than its predecessor. The proposed additional functionality of data
logging and data communications for the PoNS version 4.0 device addresses
certain stakeholder needs, such as providing useful information like time
remaining during therapy and ready status of the device (e.g. charge level). We
also expect to produce the PoNS 4.0 device in accordance with FDAs Quality
System Regulation, or QSR, including good manufacturing practices, or GMPs, as
well as in accordance with Canadian regulatory requirements.

6

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Figure 4: Design of PoNS 4.0





Our Design and Manufacturing Process

Ximedica

Once we complete the design of and if we receive customer
orders for the PoNS 4.0 device, we will subcontract the design and build of the
PoNS device to Ximedica, LLC, or Ximedica (based in Providence, Rhode Island),
a contract manufacturer we selected after an exhaustive procurement process. We
expect to share with Ximedica our patented technology, trade secrets and
know-how on a confidential, need to know basis. We expect that the PoNS 4.0
device will require some very light assembly and labeling that will be performed
by Ximedica. Ximedica is certified to ISO 13485 and is registered as a medical
device manufacturer and in good standing with the FDA.

Using monthly forecasts that we will provide to it, Ximedica
will build to stock, warehouse and ship products to the customer as well as
initially handle all customer service related tasks including order entry, order
management and product warranty responsibility. We expect to retain
responsibility for sales, marketing, research and development and all back
office operations. At this stage, we anticipate the primary delivery points will
be regional military centers and national physical therapy centers.

Under the Commercial Development-to-Supply Program between
Ximedica and NHC, dated October 25, 2013, Ximedicas responsibilities will
include:

| |  | designing the commercial device following their
      proven design development process;                                                                                                         
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                  
| |  | developing the manufacturing process and
      completing the initial manufacturing of the device (their facility can
      produce PoNS units in quantities of tens of thousands per year); and

7

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| |  | developing the quality control process.
| | - | ---------------------------------------

If larger industrial quantities will be required, then we plan
to take over the manufacturing and quality control process.

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, or 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 since this population is
less subject to material, year-to-year fluctuation. The Army has expressed its
desire to distribute our PoNS 4.0 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.

The parties to our CRADA with the U.S. Army are our subsidiary
NHC, as cooperator, Advanced NeuroRehabilitation, LLC, or ANR, as the background
patent holder, Yuri P. Danilov, Mitchell E. Tyler and Kurt A. Kaczmarek, as the
inventors and background patent owners, the U.S. Army Medical Material Agency,
or USAMMA, and the U.S. Army Medical Material Development Activity, or USAMMDA.
Pursuant to the CRADA, as amended, the laboratories of the USAMMA and the
USAMMDA, or collectively 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
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 15, 2015 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 mild to moderate 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 mild to moderate TBI and Health
Canada clearance for balance disorder associated with MS. The U.S. Army has
expressed an interest in supplying PoNS devices to the 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 PoNS device to treat chronic balance deficit due to
mild to moderate TBI and Health Canada clearance for balance disorder associated
with MS, we plan to develop the PoNS device to treat other indications, or
symptoms caused by neurological disorders. As set forth in the most recent
January 12, 2015 amendment of our CRADA as described below, 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, 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 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. Some of the indications among active duty and retired personnel
that are being considered under our CRADA are:

8

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| |  | Tinnitus;                      
| | - | -------------------------------
| |  | Post-Traumatic Stress Disorder;
| |  | Sleep regulation; and          
| |  | Pain (headache) relief.        

The parties agreed to the responsibilities set out below with
respect to the development of the PoNSdevice.

Army Laboratories of the U.S. Armed Forces
Responsibilities:

| | Support the execution of studies using the PoNS device
      as a treatment for mutually agreed- upon 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.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Conduct assessments of the manufacturing facility and
      assist/advise facility in meeting FDA manufacturing requirements.                                                                                                                                                                                     
| | Aid in designing the clinical protocols to study the
      PoNS device as an adjunct to specialized physical therapy in patients
      with balance and gait disorders.                                                                                                                                          
| | Provide advice and expertise on all Army administrative
      protocols and approvals to execute the studies with military personnel,
      reservists, and/or veterans.                                                                                                                                          

NHC Responsibilities:

| | Complete the commercial design, including ergonomics
      (e.g. user controls, comfort), and design for improved manufacturability,
      reliability, and field support and regulatory testing to comply with the
      FDA regulations for such devices.                                                                                                                                                                                                                                                                                                                     
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Serve as the sole regulatory sponsor for all interactions
      with the FDA in order to gain approval and clearance from the FDA,
      including the initial 513(g) submission and the execution of any
      FDA-regulated studies.                                                                                                                                                                                                                                                                                                                                          
| | Prepare and submit the necessary regulatory filings for
      the FDA to secure regulatory clearance or approval.                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | Ensure that the Army Laboratories receive copies of all
      formal and informal communications with the FDA related to the PoNS
      device.                                                                                                                                                                                                                                                                                                                                                                                                                                
| | Supply the facilities and personnel to execute and/or
      oversee the execution of clinical studies of the device for FDA
      clearance/approval in support of an intended use of the PoNS device for
      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 treatment of soldiers
      suffering from balance and gait disorders.
| | Provide the supply of PoNS devices in support of
      mutually agreed upon studies governed by the CRADA.                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | Supply all technical specifications, documentation and
      any other information required to address FDA requests to obtain FDA
      clearance/approval of the PoNS device.                                                                                                                                                                                                                                                                                                                                                                                                 
| | Finalize the commercial design of the PoNS device so
      that the devices would be commercially available to the Army should the
      results of the study be positive.                                                                                                                                                                                                                                                                                                                                                                                                     
| | Identify and engage a commercial manufacturer post-FDA
      clearance of the device to produce the device for purchase by the U.S.
      Army in the event it decides to order such devices for use by its
      personnel.                                                                                                                                                                                                                                                                                                                                                    

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.

9

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We plan to utilize the de novo classification 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 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 2016, and will
thereafter submit a request for de novo classification and the premarketing
notification (i.e., 510(k)) to the FDA.

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 Health
Canada (the department of the government of Canada with responsibility for
national public health). Our goal is that Canadian clearance for the PoNS
device will be obtained on a similar timeline to the FDA clearance of the
device.

On April 29, 2014, NHC, as cooperator, entered into Notice of
Modification No. 1 of Cooperative Research and Development Agreement, or the
Amended CRADA, with ANR, 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 Amended CRADA, with ANR, the inventors, and the Army
Laboratories. Under this Amended 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 Amended
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 Army Laboratories has published a Notice of Intent to enter
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 would be to defray the costs of the
registration trial. The terms of the contract and the actual amount of the award
are uncertain because we have not yet completed the negotiation for this
contract, nor can we be assured that the Army will ever ultimately negotiate and
enter into such a contract with us. 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.

10

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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 lack of non-invasive devices, non-invasive stimulation
addresses only approximately 3% of the overall neurostimulation market
today.

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 as well.

We believe that our technology, the PoNS device, introduces an
innovative target and method of stimulation because targeting the tongue for
neurostimulation provides several 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. We therefore are making the
assumption that the results of our upcoming clinical trial program will be
positive and support these claims at that time.

| | 1) | 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.                                                                                                                                                                                                                                                                                                                  
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | 2) | 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.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | 3) | 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.                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | 4) | 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.                                                                                                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | 5) | 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 design efforts, obtain FDA clearance, and
ultimately receive customer orders for the PoNS device, we plan to submit an
application to the U.S. Department of Health and Human Services for an
International Classification of Disease 10 reimbursement code so that the device
is covered under Medicare and Medicaid. 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. 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.

11

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Assuming we complete our design efforts, obtain FDA
clearance, and ultimately receive customer orders for the PoNS device, we
intend seeking 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. 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.

Deployment

We expect the PoNS 4.0 device to have a design feature that
stops delivering therapy every 14 weeks. This is expected to force 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 14 weeks of treatment, and we expect the
tongue array to 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 their training. We expect to launch a PoNS website and to
develop a smart phone application to help physicians select the appropriate PTC
convenient for the patient.

Upon discharge from the PTC, patients are expected to be
monitored in their home therapy from a PTC phone center (set up by NHC through
select PTCs) that plan to help the patients be compliant and ensure the therapy
is performed appropriately. At the end of the 14 weeks of therapy, we expect
patients to be directed back to their physician for assessment and then return
to the PTC for replacement of the tongue array.

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 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.

12

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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.

We expect to be able to leverage the deployment of the device
in the U.S. Army in its marketing of the PoNS device to the civilian
population.

PoNS in Civilian Population

We believe that a key to deployment success will be to set up a
national framework of PoNS-trained Physical Therapists (PTs). We are actively
developing a training certification program where PTs can become trained PoNS
therapists. 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 plan to 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 either will
launch at all. Following the launch of marketplaces in the United States, Canada
and the UK, we intend to commercialize the PoNS device in the rest of Europe
and Japan as second phase countries (2017) and Brazil, India and China as phase
III countries (2018). In November 2014 we 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.

Licensed Intellectual Property

The intellectual property relating to the PoNS device is the
subject of U.S. Patent Applications 12/348,301, 14/340,144, 14/341,141 and
Provisional Patent Applications 61/019,061 and 61/020,265, which we collectively
refer to as the Patent Pending Rights. The Patent Pending Rights include the
following patent applications, which cover a device that non-invasively delivers
neurostimulation through the skin or intra-orally to the brain stem via the
trigeminal nerve, the facial nerve or both:

US Application No.
    Filing Date
    Status
    Patent No.
    Issue Date61/019,061
      (Provisional)
    1/4/2008
    Expired
    N/A
    N/A61/020,265
      (Provisional)
    1/10/2008
    Expired
    N/A
    N/A12/348,301
    1/4/2009
    Issued
    8,849,407
    9/30/201414/340,144
    7/24/2014
    Issued
    8,909,345
    12/9/201414/341,141
    7/25/2014
    Pending
    N/A
    N/A


The inventors received U.S. Patent No. 8,849,407 in relation to
the patent application no. 12/348,301 on September 30, 2014. This patent covers
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 disease. U.S. patent application
14/340,144, which became U.S. Patent No. 8,909,345 on December 9, 2014, and U.S.
patent application 14/341,141 are continuations of application 12/348,301 (now
U.S. Patent 8,849,407). U.S. Patent No. 8,909,345 covers 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 disease. Patent application 14/341,141 covers
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
disease.

A U.S. provisional patent application provides the means to
establish an early effective filing date for a later filed non-provisional
patent application. Therefore, though the two provisional applications have
expired, they establish a priority date for U.S. Patent Nos. 8,849,407 and
8,909,345 and U.S. application 14/341,141 and any future filings that claim
priority.

13

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Now that the inventors have received the U.S. Patent Nos.
8,849,407 and 8,909,345, the use of the PoNS device for various treatment
techniques is patented in the United States, and we have a license to practice
these patented techniques from ANR.

ANR, which is one of our significant shareholders, holds an
interest in the Patent Pending Rights pursuant to an exclusive license from the
inventors. Patent applications 14/340,144 and 14/341,141 are included in the
exclusive license as the exclusive license agreement covers (i) patent
application 12/348,301 and provisional application 61/019,061, (ii) any patents
issuing therefrom, and (iii) any patents claiming priority to patent application
12/348,301 or provisional application 61/019,061, which patent applications
14/340,144 and 14/341,141 claim priority through such provisional application as
well as through provisional application 61/020,265.

Pursuant to an amended and restated sublicense agreement, or
the Sublicense Agreement, ANR has granted NHC a worldwide, exclusive license to
make, have made, use, lease and sell devices utilizing the Patent Pending
Rights. 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 collection 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 sub-license 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), 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 PoNS 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 PoNS device and related technology.

The license of the Patent Pending Rights is also subject to the
terms of the CRADA. In the event that we are not willing or able to
commercialize the PoNS technology within four years from the expiration of the
CRADA, we are 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.

With respect to the Patent Pending Rights, the United States
Patent and Trademark Office, or USPTO, issued U.S. Patent Nos. 8,849,407 and
8,909,345 and U.S. application 14/341,141 remains pending in the USPTO. In
addition, we intend to file additional continuation applications in the USPTO
claiming priority to U.S. application 14/341,141 to protect other aspects of the
PoNS device and related non-invasive neurostimulation techniques.

Company Owned Intellectual Property

We have obtained in September 2014  US Patent No. 8,849,407,
Skin Stimulation + physical therapy = Therapeutic outcome. In December 2014  we
were issued US Patent No. 8,909,345 Oral Cavity Stimulation + Physical exercise
= Therapeutic output and in March 2015  US Patent No. 9,020,612 Oral Cavity
Stimulation + Cognitive exercise = Therapeutic outcome.

14

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We filed 26 patent applications related to various technical
and ornamental aspects of version 4.0 of the PoNS device. We filed ten
non-provisional patent applications that describe various technical features in
the version 4.0 device and 16 design patent applications describing various
ornamental designs for the PoNS version 4.0 device. We are the sole assignee
for these 26 new patent filings.

Currently, we use four trademarks in connection with the
operation of the business: PoNS, NeuroHabilitation, NHC and Helius Medical
Technologies. We own the rights to the PoNS 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 PoNS technology. We are the sole owner of the rights
in the NeuroHabilitation and NHC trademarks, and Helius Medical Technologies,
Inc. is the owner of the rights in the Helius Medical Technologies mark. On
October 31, 2014, we filed trademark applications in the USPTO for these four
trademarks.

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

Our intellectual property has been the subject of a lawsuit
which has been dismissed. For a full description of this lawsuit, please see
Item 3. Legal Proceedings.

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.

15

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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.

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.

16

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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.

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 18 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 at the end of 2015. It will take us approximately 12 weeks to
prepare the premarket notification to the FDA. We thus anticipate that we will
be applying for clearance in second quarter 2016. To the extent the FDA
completed its review in 90 days, we anticipate clearance in the third quarter
2016.

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.

17

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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.

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 candidates are safe and effective, sensitive
      and specific diagnostic tests, for their 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 candidates could prevent us from generating revenue
from these product candidates and adversely affect our business operations and
financial results.

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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.                                                                                                        

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
candidates and dissuade our customers from using our product candidates, 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

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.

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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 constituted a reverse take-over
of us by NHC.

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

Prior to the acquisition of NHC, we had no active business. 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 Sublicense Agreement
and Second Sublicense Agreement described above.

Listing of our Common Stock on the CSE and on a U.S. Stock
Exchange

Following our Reverse Merger, we obtained approval of the
listing of our common stock on the Canadian Securities Exchange, or CSE. Our
common stock currently trades on the CSE under the symbol HSM. Our common
stock is currently quoted on the OTCQB under the symbol HSDT. We have applied
to list our common stock on the Nasdaq Capital Market and the status of this
application is pending. However, there is no guarantee that our listing
application to the Nasdaq Capital Market will be approved or, even if we were
approved, that we will satisfy continuing listing requirements.

Employees

As of June 26, 2015, we have three employees.

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|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 on Form
10-K 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.

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 is a development stage
company that has had limited operations to date.

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. Phil
Deschamps, our President and CEO. Currently Mr. Deschamps is joined by Misha
Danilov, Project Manager, and Jonathan Sackier as our only full-time employees.
We also have engaged 15 full-time equivalent persons as independent contractors,
including our Chief Financial Officer. 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.

We have incurred 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, 2015 and March 31, 2014, we incurred a net
loss of $8,894,555 and $1,067,284, respectively, and used cash in operations of
$6,321,285 and $348,698 , respectively. We have an accumulated deficit of
$18,479,689 as of March 31, 2015. We have incurred net losses since our
inception. Our losses have resulted principally 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.

We will be 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 any of our current product
or 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 product candidates, or if our product development is delayed, we may
never become profitable.

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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.
Our cash and cash equivalents as of March 31, 2015 were $418,893. 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 the design of the
PoNS device, FDA clearance of the PoNS device for treating balance disorder in
patients with mild to moderate TBI and balance disorder associated with MS,
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. 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 candidates or if, when,
or to what extent we will generate revenues from the commercialization and sale
of any of these product candidates for which we obtain regulatory approval. We
may never succeed in achieving regulatory approval for our current and any
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.

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.

Our report from our independent registered public accounting
firm for the year ended March 31, 2015 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 through the end of
the third quarter of 2015. 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.

Raising additional capital by issuing securities or
through debt financings or licensing arrangements may cause dilution to existing
stockholders, restrict our operations or require us to relinquish proprietary
rights.

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 specific actions such as incurring additional debt, making capital
expenditures or declaring dividends. If we raise additional funds through
collaboration and licensing arrangements with third parties, we may have to
relinquish valuable rights to our technologies or products or grant licenses on
terms that are not favorable to us. 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.

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

We currently are dependent on 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 and Canada until we obtain clearances from the FDA and Health Canada,
respectively. We have not yet submitted applications for regulatory clearance in
either the United States 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.

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 in the United States and chronic balance
deficit associated with MS in 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
candidates.

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

Our subsidiary NHC is currently party to the CRADA 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 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, the Army Laboratories has published a
Notice of Intent to enter 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 terms of the contract and the
actual amount of the award are uncertain because we have not yet completed the
negotiation for this contract, nor can we be assured that the Army will ever
ultimately negotiate and enter into such a contract with us. 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.

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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 and proprietary rights.

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.

In addition, 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.

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

We believe our PoNS product has strong potential therapeutic
benefits for the neuromodulation market. The neuromodulation market is
relatively new and its long-term growth prospects are uncertain. Since we do not
yet have FDA clearance for our product, there is limited to no 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 to be very conservative
in not adopting 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;

24

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| |  | 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.

In order to be successful, we must expand our products
beyond our single product by commercializing new 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 future product candidates to market. If we fail
in bringing our product candidates 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:
(i) delays in product development or manufacturing; (ii) unplanned expenditures
for product development or manufacturing; (iii) failure of new products to have
the desired effect or an acceptable accuracy profile; (iv) emergence of superior
or equivalent products; (v) failure by any potential collaborative partners to
successfully develop products; and (vi) 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 approval on the patent for the PoNS technology. There can be no
assurance that the patent application made will result in the issuance of the
patent or that the term of the patent will be extendable after it expires in due
course, which will 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, know-how or other proprietary
information in the event of any unauthorized use or disclosure.

25

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Our intellectual property has been the subject of a lawsuit
which has been dismissed. For a full description of this lawsuit, please see
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.

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.

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.

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.

26

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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 our inventory,
warehouse and ship our products customers as well as handle all customer service
related tasks including, order entry, order management and product warranty
responsibility. Our reliance on a single third-party manufacturer to supply us
with our PoNS device and 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 candidates; and
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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 re-verification of
an existing manufacturer could negatively affect our ability to produce and
distribute our product in a timely manner.

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.

27

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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.

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 will incur increased costs and 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 will incur significant legal,
accounting and other expenses that we have not incurred as a private company,
including costs associated with public company reporting requirements. We will
incur costs associated with the rules implemented by the SEC, any OTC market our
common stock may become quoted on, and any national exchange that our common
stock may become listed on. The expenses incurred by public companies generally
for reporting and corporate governance purposes have been increasing. We expect
these rules and regulations to increase our legal and financial compliance costs
and to make some activities more time-consuming and costly, although we are
currently unable to estimate these costs with any degree of certainty. 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.

28

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One of our officers serves only on a part-time consulting
basis, and she and other persons who work for us on a part-time consulting basis
may be subject to conflicts of interest.

We have three employees, including Philippe Deschamps, our
President, CEO and a director, and Jonathan Sackier, our Chief Medical Officer.
All other persons 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. For example, our Chief Financial
Officer works for us on a part-time consulting basis and serves as the Assistant
Manager, Corporate Finance of V Baron Global Financial Canada Ltd. Pursuant to
an agreement with us, V Baron Global Financial Canada Ltd. offers consulting
services to us for transaction structuring, corporate governance and compliance
issues. 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.

Furthermore, to the extent that our agreement with V Baron
Global Financial Canada Ltd. is terminated, we will lose the services of our
Chief Financial Officer.

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 which 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.

29

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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 candidates are safe and effective, sensitive
    and specific diagnostic tests, for their 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 candidates could prevent us from generating revenue
from these product candidates 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:

| |  | 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 candidates and dissuade our customers from using our product candidates,
if and when they are authorized for marketing.

30

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We expect to be required to conduct clinical trials to
support regulatory approval of some of our product candidates. We have no
experience in the clinical trials process, they may proceed more slowly than
anticipated, and we cannot be certain that our product candidates will be shown
to be safe and effective for human use.

In order to commercialize our product candidates 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 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
candidates are 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
candidates:

| |  | 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 candidates
  or other materials necessary to conduct our clinical trials;                                                                                                
| |  | difficulties in enrolling patients in our
  clinical trials;                                                                                                                                                
| |  | 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 candidates 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 candidates, 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 candidates could be significantly reduced.

31

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If we are required to conduct clinical trials to obtain
FDA clearance and approval, we will be substantially dependent on third parties
to conduct clinical trials.

In the event we were required to conduct clinical trials to
obtain FDA clearance, we would 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 would ultimately be 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 would be 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 candidates. As a result, our financial results and the
commercial prospects for our product candidates 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.

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 an International Classification of Disease 10
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 would 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.

32

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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.

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.

33

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Risks Related to Our Common Stock

Our common stock does not have a well-establish 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 shares are currently periodically quoted on the OTCQB. We
have applied to list our common stock on the Nasdaq Capital Market and our
application is still pending. However, there is no guarantee that our listing
application to the Nasdaq Capital Market will be approved or, even if we were
approved, that we will satisfy continuing listing requirements. As a result, a
well-establish market for our common stock may never develop in the United
States.

Our common stock has been listed on the CSE since June 23,
2014. Our common stock is also restricted for immediate resale in Canada
pursuant to Canadian securities laws. To date, trading on the CSE in our common
stock has been limited and sporadic.

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.

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.

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.

34

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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 and ANR, hold approximately 50.1% of our
outstanding shares of common stock and if they both consent in writing to take a
particular corporate action, they could do so without a meeting that involves
our other shareholders.

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 Healthcare, LLC 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 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.

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 for two consecutive years. 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.

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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, or 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, including the
issuance of 8,882,032 shares of our common stock underlying warrants currently
exercisable, 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.

We are authorized to issue an unlimited number of common
stock which could result in substantial dilution to your investment in our
shares.

Our Articles of Incorporation authorize the issuance of an
unlimited number of common shares, which shares 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. 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.

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

None.

|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,
2016 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.

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

On January 5, 2015, Wicab filed a complaint against us, two of
our directors, Yuri Danilov and Mitch Tyler, 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 Danilovs and Tylers prior employment with Wicab
and our two issued patents for the PoNS device. 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 our two issued patents are therefore rightfully the property of Wicab.
The complaint sought an unspecified amount of monetary damages, an injunction
preventing us from using the ideas and inventions in the two patents, an order
transferring ownership of the patents from us to Wicab, and recovery of costs
and attorneys fees. The complaint was voluntarily dismissed without prejudice
on January 14, 2015.

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. We intend to conduct a vigorous defense of this matter. At this  point management is unable to determine the outcome of this matter.

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 May 1, 2015, 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.

37

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PART II

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

Market Information

There is no established trading market for our common stock in
the United States. Shares of our common stock have been listed on the CSE since
June 23, 2014 under the symbol HSM. The market for our common stock on the CSE
is very recent, and therefore, limited, volatile and sporadic. The following
table sets forth the high and low prices relating to our common stock for the
periods indicated, as provided by the CSE. These quotations reflect inter-dealer
prices without retail mark-up, mark-down, or commissions, and may not reflect
actual transactions.

Quarter Ended
    High
    LowJune 30, 2014
    CAD$2.37
    CAD$1.00September 30, 2014
    CAD$2.72
    CAD$2.27December 31, 2014
    CAD$3.00
    CAD$2.25March 31, 2015
    CAD$3.40
    CAD$2.24


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

Holders

As of June 24, 2015, we had approximately 188 shareholders of
record.

Options

As of June 25, 2015, we have 4,920,000 stock options
outstanding which are exercisable into 4,920,000 shares of our common stock.

Warrants

As of June 25, 2015, we have 8,882,032 common share purchase
warrants outstanding which are exercisable into 8,882,032 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.

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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, 2015:

|                                                                    |  |                               |  |   |                                 |  |  | 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.               
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | 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, 2015 of CAD$1.00 = USD
      $0.7885.

RECENT SALES OF UNREGISTERED SECURITIES.

On April 15, 2014, we issued in aggregate 10,000,000 shares of
our common stock to the shareholders of 0995162 BC Ltd. (174
individuals/entities from Canada and 1 individual from Germany) pursuant to the
plan of arrangement between us, Boomerang Oil, Inc. and 0995162 BC Ltd., in
exchange for all of the issued and outstanding shares of 0995162 BC Ltd. We
relied upon the exemption provided under Section 2.11 of the Canadian Securities
Administrators National Instrument 45-106 - Prospectus and Registration
Exemptions. We did not issue any of our common stock to any U.S.
persons.

On May 28, 2014 we filed our Articles of Continuance with the
Wyoming Secretary of State, which was effective with the State of Wyoming on
June 2, 2014, whereby we continued from the Province of British Columbia into
the State of Wyoming pursuant to a plan of arrangement between us and our
shareholders in accordance with section 288 of the BCBCA. This reincorporation
resulted in the issuance of 10,000,000 shares of our common stock to our
shareholders, in exchange for their existing common shares in the capital of our
company that were issued and outstanding immediately prior to the effectiveness
of the reincorporation transaction. The plan of arrangement between us and our
shareholders required court approval under section 291 of the BCBCA. We advised
the British Columbia Supreme Court, or the Court, prior to the hearing that we
would be relying upon the registration exemption under Section 3(a)(10) of the
Securities Act, and that in order for us to rely upon such Section 3(a)(10)
exemption the Court must approve the fairness of the terms and conditions of the
exchange of our shares from a British Columbia corporation to shares of us as a
Wyoming corporation. The fairness hearing was open to all our shareholders to
whom securities of us as a Wyoming corporation would be exchanged pursuant to
the plan of arrangement and adequate notice was provided to all our
shareholders. On May 27, 2014, the Court found that the terms and conditions of
the plan of arrangement were fair and approved the plan of arrangement. None of
our shareholders exercised their rights of dissent under the BCBCA in respect of
the reincorporation transaction.

On May 30, 2014, we closed a private placement consisting of
15,240,000 subscription receipts at a price of CAD$0.50 per subscription receipt
for gross proceeds of $7,016,002(CAD$7,620,000). On June 13, 2014, each
subscription receipt automatically converted, for no additional consideration,
into one common share and one-half of one common share purchase warrant. We
refer to each whole warrant as a Warrant. Each Warrant entitles the holder
thereof to purchase one additional share of our common stock at a price of
CAD$1.00 until May 30, 2016. We relied on exemptions from registration under the
Securities Act, provided by Rule 506 of Regulation D and/or Section 4(a)(2) for the one U.S. purchaser who was an
accredited investor as defined under Rule 501(a) of Regulation D as well as
Regulation S for the Canadian and offshore purchasers, based on representations
and warranties provided by the purchasers of the subscription receipts in their
respective subscription agreements entered into between us and each
purchaser.

39

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In connection with the May 30, 2014 private placement, we paid
finders fees of$379,806 (CAD$412,200) in cash and 824,400 finders warrants, or
a Finders Warrant, in aggregate to five entities in British Columbia, Canada
and one entity in Nevis, West Indies. The Finders Warrants have the same
attributes as the Warrants. We relied on the exemption from registration under
the Securities Act provided by Regulation S for the issuance of the Finders
Warrants to each finder.

On June 13, 2014, we acquired a 100% interest in NHC, as
discussed above, pursuant to an agreement and plan of merger whereby our
wholly-owned subsidiary was merged with and into NHC and all of the common
shares in the capital of NHC were cancelled in consideration for the issuance of
an aggregate of 35,300,083 shares of our common stock to the NHC shareholders.
We relied on the exemption from registration under the Securities Act provided
by Section 4(a)(2) for the issuance of shares of our common stock to the four
NHC shareholders with which we had a pre-existing relationship. Of the
35,300,083 shares issued in this private placement, 32,070,052 shares were held
in escrow beginning on June 23, 2014.

On June 19, 2014, we granted 2,660,000 options to purchase our
common stock to four of our directors (in individual amounts of 1,800,000;
400,000; 400,000 and 60,000) for services rendered as directors. We also granted
400,000 options to purchase our common stock to an advisor for consulting
services rendered. We relied on Rule 701 under the Securities Act for these
grants. Also on such date, we issued 460,000 options to purchase our common
stock to four persons (in individual amounts of 60,000; 250,000; 50,000 and
100,000). The four persons did not pay cash for the options but rendered
consulting services to us. We relied on Section 4(a)(2) of the Securities Act
for the issuances of these options, as we had a substantive, pre-existing
relationship with each of these four persons, and these persons had access to
information about us.

On June 20, 2014, we issued 250,000 options to purchase our
common stock to one entity. The entity did not pay cash for the options but
rendered consulting services to us. We relied on Section 4(a)(2) of the
Securities Act for the issuances of these options, as we had a substantive,
pre-existing relationship with the entity, and the entity had access to
information about us.

On June 30, 2014, we issued 2,564,705 common shares to one
offshore individual pursuant to the conversion of a convertible note that was
issued by our subsidiary, NHC, in the principal amount of $1,000,100

(CAD$1,090,000 when converted to CAD$) at a price of CAD$0.425 per share. Under
the terms of the agreement and plan of merger with NHC, we agreed to assume
responsibility for satisfying the payment obligations under such convertible
note by issuing shares of our capital stock. We relied upon the exemption from
registration as provided under Regulation S promulgated under the Securities Act
as the securities were issued to the individual through an offshore transaction
which was negotiated and consummated outside of the United States.

On July 14, 2014, we granted 100,000 options to purchase our
common stock to an advisor for consulting services rendered. We relied on Rule
701 under the Securities Act for this grant.

On December 8, 2014, we granted 50,000 options to purchase our
common stock to each of nine advisors for consulting services rendered. Also on
such date, we granted 100,000 options to purchase our common stock to one of our
directors and 400,000 options to purchase our common stock to one of our
employees for services rendered as director and employee, respectively. We
relied on Rule 701 under the Securities Act for these grants.

On March 16, 2015, we granted 100,000 options to purchase our
common stock to one of our directors for services rendered as director. We
relied on Rule 701 under the Securities Act for this grant.

On April 30, 2015, we closed a private placement to 12
accredited investors, which included one institution and 11 individuals,
consisting of an aggregate of 849,273 units at a price of $2.15 per unit for
gross proceeds of approximately $1,825,937. Each unit consisted of one share of
our common stock and one-half of one common share purchase warrant. Each whole
warrant entitles the holder to purchase one additional share of our common stock
at a price of $3.00 per share until April 30, 2018. We relied on the exemption
from registration provided by Section 4(a)(2) of the Securities Act and Rule
506(b) thereunder for the private placement. In connection with the private
placement, we issued 27,396 warrants to one institutional accredited investor
that served as a finder for the private placement. The finders warrant permits
the holder to purchase one share of our common stock at a price of $3.00 per
share until April 30, 2018. We relied on the exemption from registration
provided by Section 4(a)(2) of the Securities Act for the issuance of the
finders warrant.

40

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

The operating and balance sheet data included in the following
selected financial data table have been derived from our consolidated financial
statements. The selected financial data presented below should be read in
conjunction with our consolidated financial statements included elsewhere in
this annual report on Form 10-K and with Managements Discussion and Analysis
of Financial Condition and Results of Operations.

|                                              |  |           |   |  | Years ended |  |  |           | 
|--------------------------------------------- |  | --------- | - |  | ----------- |  |  | --------- | 
|                                              |  | 2015      |   |  | 2014        |  |  | 2013      | 
|Operating Data:                               |  |           |   |  |             |  |  |           | 
|Revenues                                      |  | -         |   |  | -           |  |  | -         | 
|Operating expenses:                           |  |           |   |  |             |  |  |           | 
|Direct
      operating                        |  | 3,828,775 |   |  | 171,781     |  |  | 4,250,000 | 
|Selling, general and administrative           |  | 5,035,907 |   |  | 895,503     |  |  | 4,267,850 | 
|Depreciation and amortization                 |  | -         |   |  | -           |  |  | -         | 
|Operating loss                                |  | 8,864,682 |   |  | 1,067,284   |  |  | 8,517,850 | 
|Other income (expense):                       |  |           |   |  |             |  |  |           | 
|Interest expense                              |  | 176,488   |   |  | -           |  |  | -         | 
|Interest
      income                         |  | (20,074   | ) |  | -           |  |  | -         | 
|Change in fair value of derivative liability  |  | 739,375   |   |  | -           |  |  | -         | 
|Foreign
      exchange gain                   |  | (865,916  | ) |  | -           |  |  | -         | 
|Loss from operating before
      income taxes |  | 29,873    |   |  | 1,067,284   |  |  | 8,517,850 | 
|Income tax
      expense                      |  | -         |   |  | -           |  |  | -         | 
|Net loss                                      |  | 8,894,555 |   |  | 1,067,284   |  |  | 8,517,850 | 
|                                              |  |           |   |  |             |  |  |           | 
|Balance Sheet Data                            |  |           |   |  |             |  |  |           | 
|Total assets                                  |  | 1,216,347 |   |  | 315,968     |  |  | 217       | 
|Long-term liabilities                         |  | -         |   |  | -           |  |  | -         | 
|                                              |  |           |   |  |             |  |  |           | 

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

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.

41

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The following discussion and analysis of our results of
operations, financial condition and plan of operations should be read in
conjunction with (i) our audited financial statements for the year ended March
31, 2015 and (ii) the audited financial statements of NHC for the year ended
March 31, 2014 and for the period from January 22, 2013 (inception) to March 31,
2013. The discussion below contains forward-looking statements that involve
risks, uncertainties and assumptions. Our actual results may differ materially
from those anticipated in these forward-looking statements as a result of many
factors, including, but not limited to, those set forth under Item 1. Business
 Business Uncertainties and Going Concern Risk and elsewhere in this annual
report on Form 10-K.

Fiscal Year Ended March 31, 2015 Compared to the Fiscal
Year Ended March 31, 2014

Revenues

During the fiscal years ended March 31, 2015 and 2014, we did
not generate any revenues.

Operating Expenses

Operating expenses incurred during the fiscal year ended March
31, 2015 were $8,864,682 as compared to $1,067,284 during the period from
inception to March 31, 2014. Significant changes and expenditures are outlined
as follows:

| |  | Advertising, marketing, and IR expenses were
      $774,400 for the fiscal year ended March 31, 2015, and $nil for the fiscal
      year ended March 31, 2014. The increase relates to advertising and
      promotion expenses and investor relation consulting fees. We have engaged
      both investor relations and public relations professionals in Canada and
      the US to help develop corporate material as well as arranging and
      participating in conferences and road shows to increase the public's
  awareness of our activities and the PoNS device.                                                                                                                                                                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  | Audit and accounting fees were $71,340 for the
      fiscal year ended March 31, 2015, and $nil for the fiscal year ended March
      31, 2014. The increase of $71,340 was mainly due to the requirement to
      review and audit the Companys financial statements since it became a
  reporting issuer.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  | Consulting fees were $1,085,606 for the fiscal
      year ended March 31, 2015 and $807,385 for the fiscal year ended March 31,
      2014. The increase of $278,221 was mainly due to the expense in 2015
      associated with the granting of options to consultants for providing
  services in design and manufacturing and our strategic growth plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  | Insurance expenses were $75,425 for the fiscal
      year ended March 31, 2015, and $nil for the fiscal year ended March 31,
      2014. The increase of $75,425 was mainly due to the need for general
      liability, directors and officers, and product insurance as the Company
  continues its research and development plans.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  | Legal fees were $1,478,766 for the fiscal year
      ended March 31, 2015 as compared to $33,966 for the fiscal year ended
      March 31, 2014. The increase of $1,444,800 was primarily composed of fees
      incurred for general corporate matters and the reverse takeover
      transaction. In addition, our legal activity to ensure current and quality
      regulatory filings has increased significantly since becoming a public
      company in Canada. Furthermore, the engagement of various specialized
      legal counsels for the development of our intellectual properties and the
      commercialization of the PoNS device is carried out to secure our
      intellectual property. With the legal counsel's assistance, inventors have
      been issued two important patents so that we now have a license to
  practice patented techniques.
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  | Meals and travel expenses were $272,338 for the
      fiscal year ended March 31, 2015 as compared to $22,860 for the fiscal
      year ended March 31, 2014. The increase of $249,478 was primarily due to
      travel to and from various investor and medical conferences as well as
  required travel for personnel to coordinate the clinical trials.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  | Office expenses were $166,282 for the fiscal
      year ended March 31, 2015 as compared to $8,137 for the fiscal year ended
      March 31, 2014. The increase of $158,145 was mainly due to general and
      administrative expenses but also includes computer and internet
      expenses, telephone expenses, and rent expenses. These expenses increased
  significantly as we ramped up our operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                              

42

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| |  | Professional fees were $14,136 for the fiscal
      year ended March 31, 2015 as compared to $nil for the fiscal year ended
      March 31, 2014. The increase relates to corporate communications and
      industry research fees.                                                                                                                                                                                                                                                                                          
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  | Research and development expenses were
      $3,828,775 for the fiscal year ended March 31, 2015 as compared to
      $171,781 for the fiscal year ended March 31, 2014. The increase was
      primarily due to the continuous efforts on research and development
      activities of the PoNS device, especially activities relating to
      preparation of clinical trials which mostly includes Ximedica's commercial
      development-to-supply program and the NeuroFeedback's 12- month pilot
      clinical trial.
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  | Transfer agent and regulatory fees were
      $104,214 for the fiscal year ended March 31, 2015, as compared to $nil for
      the fiscal year ended March 31, 2014. The increase of $104,214 stems from
      the Companys requirement as a public company to retain a transfer agent,
      as well as the associated filing fees.                                                                                                                                                                                         
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  | Wages and salaries expenses were $993,400 for
      the fiscal year ended March 31, 2015 as compared to $23,155 for the fiscal
      year ended March 31, 2014. The increase of $970,245 was due to an increase
      in the CEOs salary, the hiring of an office assistant, and the hiring of
      the Companys Chief Medical Officer.                                                                                                                                                                                    

Non-Operating Items

We recorded a loss of $29,873 in respect of non-operating items
during the year ended March 31, 2015 as compared to $nil for the year ended
March 31, 2014. Significant changes are outlined as follows:

| |  | Interest expense for year ended March 31, 2015
      was $176,488 as compared to $nil for the fiscal year ended March 31, 2014.
      The increase resulted from recording non-cash interest associated with the
      contingent beneficial conversion feature arising from the conversion of
  the convertible debenture.                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |  | Interest income for the fiscal year ended March
      31, 2015 was $20,074 as compared to $nil for the fiscal year ended March
      31, 2014. The increase stems from the opening of a number of
      interest-bearing short- term investment accounts with our banking
  institutions.                                                                                                                                                                           
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |  | Change in fair value of derivative liability
      for the fiscal year ended March 31, 2015 was $(739,375) as compared to
      $nil for the fiscal year ended March 31, 2014. The change in fair value of
      derivative liability is based on the change of the remaining term of our
      options granted to non-employees providing services for NHC and the change
      in our stock price. The derivative liabilities do not represent cash
  liabilities.
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |  | Foreign exchange gains for the fiscal year
      ended March 31, 2015 were $865,916 as compared to $nil for the fiscal year
      ended March 31, 2014. The gains stem from our exchange of a large sum of
      Canadian dollars into U.S. dollars interest-bearing short-term investments
      with our banking institutions as well as translating the balance of the
      Canadian dollar intercompany to the reporting currency.                             

Net Loss

The net loss was $8,894,555 for the fiscal year ended March 31,
2015 and $1,067,284 for the fiscal year ended March 31, 2014. The increase in
net loss of $7,827,271 resulted primarily from an increase in most operating
expenses, especially advertising, marketing and IR, consulting fees, insurance
expenses, legal fees, research and development, and wages and salaries.

43

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Fiscal Year Ended March 31, 2014 Compared to the Fiscal
Year Ended March 31, 2013

Revenues

During the fiscal year ended March 31, 2014 and the period from
inception to March 31, 2013, we did not generate any revenues.

Operating Expenses

Operating expenses incurred during the fiscal year ended March
31, 2014 were $1,067,284 as compared to $8,517,850 during the period from
inception to March 31, 2013. Significant changes and expenditures are outlined
as follows:

| |  | Consulting fees were $807,385 for the fiscal
      year ended March 31, 2014 and $2,800 for the period from inception to
      March 31, 2013. The increase of $804,585 was mainly due to the expense in
      2014 associated with the granting of options to consultants for providing
      services in design and manufacturing and strategic growth plan, which were
  subsequently exercised.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                    
| |  | Interest expenses were $1,344 for the fiscal
      year ended March 31, 2014 as compared to $Nil for the period from
  inception to March 31, 2013.                                                                                                                                                                                                                                                
| |   |                                                                                                                                                                                                                                                                                                                                                                                                    
| |  | Legal fees were $33,966 for the fiscal year
      ended March 31, 2014 as compared to $14,192 for the period from inception
      to March 31, 2013. The increase of $19,774 was mainly due to legal fees
  associated with patent applications and general corporate matters.                                                                                                                     
| |   |                                                                                                                                                                                                                                                                                                                                                                                                    
| |  | Meals and entertainment expenses were $833 for
      the fiscal year ended March 31, 2014 as compared to $Nil for the period
  from inception to March 31, 2013.                                                                                                                                                                                                                                   
| |   |                                                                                                                                                                                                                                                                                                                                                                                                    
| |  | Office expenses were $6,793 for the fiscal year
      ended March 31, 2014 as compared to $482 for the period from inception to
      March 31, 2013. The increase of $6,311 was mainly due to the increased
      number of activities of the operation and engagement of a part-time office
  assistant.                                                                                         
| |   |                                                                                                                                                                                                                                                                                                                                                                                                    
| |  | Research and development expenses were $171,781
      for the fiscal year ended March 31, 2014 as compared to $4,250,000 for the
  period from inception to March 31, 2014.                                                                                                                                                                                                                        
| |   |                                                                                                                                                                                                                                                                                                                                                                                                    
| |  | Compensation expenses for shares issued for
      services was $Nil for the fiscal year ended March 31, 2014 as compared to
      $4,250,000 for the period from inception to March 31, 2013. The decrease
      of $4,250,000 was a result of not issuing any shares as compensation for
  services rendered during the fiscal year ended March 31, 2014.                                         
| |   |                                                                                                                                                                                                                                                                                                                                                                                                    
| |  | Travel expenses were $22,027 for the fiscal
      year ended March 31, 2014 as compared to $376 for the period from
      inception to March 31, 2013. The increase of $21,651 was mainly due to the
      required traveling of the CEO as we were actively seeking for external
      financing and interviewing external parties in preparation of the research
  and development activities.   
| |   |                                                                                                                                                                                                                                                                                                                                                                                                    
| |  | Wages and salaries expenses were $23,155 for
      the fiscal year ended March 31, 2014 as compared to $Nil for the period
      from inception to March 31, 2013. The increase of $23,155 was due to the
  new employment contract with the CEO.                                                                                                                                                  

44

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Net Loss

The net loss was $1,067,284 for the fiscal year ended March 31,
2014 and $8,517,850 for the period from inception to March 31, 2013. The
decrease in net loss of $7,450,566 resulted primarily from a decrease in
research and development expenses and compensation expenses for shares issued
for services, which was offset somewhat by an increase in consulting fees, legal
fees, travel expenses and wages and salaries.

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, 2015 and March 31, 2014:

|                          |   | March 31, 2015 |  |   | March 31, 2014 |  
|------------------------- | - | -------------- |  | - | -------------- | -
|Cash and cash equivalents | $ | 418,893        |  | $ | 15,968         |  
|Working capital (deficit) | $ | 18,543         |  | $ | (267,977       | )

As of March 31, 2015, our current assets were $1,216,347 (March
31, 2014 - $315,968), which increased mostly due to the closing of a private
placement on June 13, 2014. Current liabilities were $1,197,804 (March 31, 2014
- $583,945), which increased due to an increase in our operations since the
closing of a private placement and our acquisition of NHC. Working capital was
$18,543 (March 31, 2014  ($267,977)). Our current assets as of March 31, 2015
consisted of cash and cash equivalents of $418,893 (March 31, 2014 - $15,968),
which increased mostly due to the closing of the private placement, short-term
investment of $378,000, which increased as a result of acquiring a term deposit
with our banking institution, receivables of $8,833 (March 31, 2014 - $nil),
which increased due to the opening of numerous interest-bearing short-term
investments with our banking institutions, and prepaid expenses of $410,621
(March 31, 2014 - $300,000), which mostly include a prepayment to Ximedica and
insurance expenses. Our current liabilities as of March 31, 2015 consisted of
accounts payable and accrued liabilities of $1,197,804 (March 31, 2014 -
$215,921), which increased due to our increased operations, and a convertible
debenture amount of $nil (March 31, 2014 - $368,024). During the year ended
March 31, 2015, we received an additional $632,076 in respect of convertible
debenture. Upon completion of a qualifying transaction, the convertible
debenture was settled on conversion of the debt in exchange for 2,564,705 common
shares.

As a result of our increased activity, the accumulated deficit
increased from $9,585,134 as at March 31, 2014 to $18,479,689 as at March 31,
2015.

We currently have limited working capital and liquid assets.
Our cash and cash equivalents as of March 31, 2015 were $418,893. 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 design of the
PoNS device, FDA clearance of the PoNS device for treating balance disorder
associated with mild to moderate TBI and MS, 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
third quarter of 2015.

45

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Statement of Cash Flows

Fiscal year ended March 31, 2015 compared to Fiscal year
ended March 31, 2014

During the year ended March 31, 2015, our net cash increased by
$402,925 (March 31, 2014 - $15,751), which included net cash used in operating
activities of $6,321,285 (March 31, 2014 - $348,698) stemming from our increase
in operations, and net cash provided by financing activities of $7,482,728
(March 31, 2014 - $364,449) stemming mainly from the closing of the private
placement, proceeds from the bridge loan, and funds received for the issuance of
a convertible debenture.

Cash Used in Operating Activities

Operating activities in the year ended March 31, 2015 used cash
of $6,321,285 (March 31, 2014 - $348,698). This was made up of a net loss of
$8,894,555 (March 31, 2014 - $1,067,284) less adjustments for non-cash items
such as accretion of beneficial conversion feature of $176,488 (March 31, 2014 
$1,344), change in fair value of derivative liability of $739,375 (March 31,
2014  $nil), stock based compensation of $1,397,114 (March 31, 2014 -
$807,157), a foreign exchange re-measurement of $598,929 (March 31, 2014 -
$nil), receivables of ($8,945) (March 31, 2014 - $nil), accounts payable of
$979,040 (March 31, 2014  $210,085) and prepaid expenses of ($110,873) (March
31, 2014  $300,000). Receivables increased due to the opening of numerous
interest-bearing short-term investments. Payables and prepaid expenses increased
due to our increase in operations.

Cash Used in Investing Activities

During the year ended March 31, 2015, cash used in investing
activities totaled $378,000 (March 31, 2014 - $nil) as a result of the purchase
of a short-term investment with our banking institution.

Cash Provided by Financing Activities

During the year ended March 31, 2015, financing activities
provided cash of $7,482,728 (March 31, 2014 - $364,449). Financing activities
during the year ended March 31, 2015, consisted of: issuance of share capital of
$7,017,009 (March 31, 2014 - $nil) and share issuance costs of ($379,806) (March
31, 2014 - $nil) stemming from the private placement, cash acquired on the
recapitalization of $23,904 (March 31, 2014 - $nil), proceeds from shares to be
issued of $39,545 (March 31, 2014 - $nil), proceeds from a bridge loan of
$150,000 (March 31, 2014 - $nil), short-term loan of $nil (March 31, 2014 
($2,231)), and proceeds from the debenture of $632,076 (March 31, 2014 -
$368,024).

Fiscal year ended March 31, 2014 compared to Fiscal year
ended March 31, 2013

During the year ended March 31, 2014, our net cash increased by
$15,751 (March 31, 2013 - $217), which included net cash used in operating
activities of $348,698 (March 31, 2013 - $12,014) stemming from our increase in
operations, and net cash provided by financing activities of $364,449 (March 31,
2013 - $12,231) stemming mainly from the funds received for the issuance of a
convertible debenture.

Cash Used in Operating Activities

Operating activities in the year ended March 31, 2014 used cash
of $348,698 (March 31, 2013 - $12,014). This was made up of a net loss of
$1,067,284 (March 31, 2013 - $8,517,850) less adjustments for non-cash items
such as stock based compensation of $807,157 (March 31, 2013 - $8,500,000),
accounts payable of $210,085 (March 31, 2013  $5,836) and prepaid expenses of
($300,000) (March 31, 2014  $nil). Payables increased due to an increase in
operations. Prepaid expenses increased due to an upfront payment to Ximedica.

46

---

Cash Provided by Financing Activities

During the year ended March 31, 2014, financing activities
provided cash of $364,449 (March 31, 2013 - $12,231). Financing activities
during the year ended March 31, 2014, consisted of: issuance of share capital of
$nil (March 31, 2013 - $10,000), repayment of a short-term of loan of $2,231
(March 31, 2013  proceeds from a short-term loan of $2,231), and proceeds from
the debenture of $366,680 (March 31, 2014 - $nil).

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, 2015, we did not have any contractual
obligations required to be disclosed by Item 303(a)(5) of Regulation S-K during
the year ended March 31, 2015.

Subsequent Events

On April 30, 2015 the Company closed a non-brokered private
placement (the Financing) raising gross proceeds of CAD $2,208,110
(approximately USD $1,825,937) by the issuance of 849,273 units (each a Unit)
at a price of CAD $2.60 per Unit (USD $2.15 per Unit). Each Unit consists of one
(1) common share and one half of one (1/2) common share purchase warrant (each a
Warrant). Each whole Warrant entitles the holder thereof to purchase one
additional common share of the Company at a price of approximately CAD $3.62 per
share (USD $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 CAD 101,494 (USD
$84,074) in connection with this Financing, as well as 27,396 finders warrants
(the Finders Warrants). Each Finders Warrant entitles the holder thereof to
purchase one additional common share of the Company at a price of CAD $3.62 per
share (USD $3.00 per share) for a period of thirty-six (36) months from the
closing date of the Financing.

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.

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
accelerated attribution 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.

47

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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. Option pricing models require the
input of highly subjective assumptions, including the expected price volatility.
Changes in these assumptions can materially affect the fair value estimate.

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 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.

Recently Issued Accounting Pronouncements

In August 2014, the Financial Accounting Standards Board (the
"FASB") issued Accounting Standards Update ("ASU") No. 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 Company does not intend to early adopt this standard.
The adoption of this standard will not have a material impact on the Company's
financial position or results of operations.

48

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In June 2014, the FASB issued ASU No. 2014-10, "Development
Stage Entities" (ASU 2014-10) which removes the definition of a development
stage entity from the Master Glossary of the Accounting Standards Codification,
thereby removing the financial reporting distinction between development stage
entities and other reporting entities from U.S. GAAP. In addition, the update
eliminates the requirements for development stage entities to (1) present
inception-to-date information in the statements of income, cash flows, and
shareholder equity, (2) label the financial statements as those of a development
stage entity, (3) disclose a description of the development stage activities in
which the entity is engaged, and (4) disclose in the first year in which the
entity is no longer a development stage entity that in prior years it had been
in the development stage. ASU No. 2014-10 is effective for fiscal years and
interim periods beginning after December 15, 2014, with early adoption
permissible. The Company early adopted ASU 2014-10 allowing the financial
statements to be cast without the inception to date information and without
references to the development stage.

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
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.

In June 2014, the FASB issued ASU No. 2014-12, Compensation
- Stock Compensation (Topic 781): Accounting for Share-Based Payments
When the Terms of an Award Provide that a Performance Target Could be Achieved
after the Requisite Service Period. This update requires that a performance
target that affects vesting and that could be achieved after the requisite
service period be treated as a performance condition. As such, the performance
target should not be reflected in estimating the grant date fair value of the
award. This update further clarifies that compensation cost should be recognized
in the period in which it becomes probable that the performance target will be
achieved and should represent the compensation cost attributable to the periods
for which the requisite service has already been rendered. This update is
effective for annual reporting periods (including interim reporting periods
within those periods) beginning after December 15, 2015, which for the Company
is April 1, 2016. Early adoption is permitted. Entities may apply the amendments
in this update either: (a) prospectively to all awards granted or modified after
the effective date; or (b) retrospectively to all awards with performance
targets that are outstanding as of the beginning of the earliest annual period
presented in the financial statements and to all new or modified awards
thereafter. The adoption of this standard will not have a material impact on the
Company's financial position or results of operations.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from
Contracts with Customers (Topic 606). This update outlines a new, single
comprehensive model for entities to use in accounting for revenue arising from
contracts with customers and supersedes most current revenue recognition
guidance, including industry-specific guidance. This new revenue recognition
model provides a five-step analysis in determining when and how revenue is
recognized. The new model will require revenue recognition to depict the
transfer of promised goods or services to customers in an amount that reflects
the consideration a company expects to receive in exchange for those goods or
services. This new guidance is effective for annual reporting periods (including
interim reporting periods within those periods) beginning after December 15,
2016, which for the Company is April 1, 2017; early adoption is not permitted.
Entities have the option of using either a full retrospective or a modified
approach to adopting the guidance. The Company does not anticipate that the
adoption of this update will have a material impact on its financial position or
results of operations.

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

Financial Instruments and Other Risks

We are exposed to credit risks and market risks related to
changes to interest rates and foreign currency exchange rates, each of which
could affect the value of our current assets and liabilities. We invest our cash
equivalents in fixed rate, highly liquid and highly rated financial instruments
such as guaranteed investment contracts, or GICs. At March 31, 2015, our cash
and cash equivalents were primarily held as GICs, the majority of which was
denominated in U.S. dollars. We do not believe that the results of operations or
cash flows would be affected to any significant degree by a sudden change in
market interest rates relative to our investment portfolio, due to the relative short-term nature of the investments. We have not
entered into any forward currency contracts or other financial derivatives to
hedge foreign exchange risk. We are subject to foreign exchange rate
fluctuations that could have a material effect on our total net assets or net
loss. We are exposed to interest rate cash flow risk on our cash and cash
equivalents as these instruments bear interest on current market rates.

49

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

See the Index to Financial Statements included in this annual
report on Form 10-K.

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

On February 19, 2015, the Board of Directors approved the
dismissal of Davidson & Company LLP, or Davidson, as our independent
registered public accounting firm, effective February 19, 2015.

Davidsons report on our annual financial statements for the
fiscal year ended March 31, 2014 and the period from January 22, 2013 to March
31, 2013 did not contain an adverse opinion or a disclaimer of opinion, nor was
it qualified or modified as to uncertainty, audit scope, or accounting
principles.

During the fiscal year ended March 31, 2014 and for the period
from January 22, 2013 (date of inception) to March 31, 2013 as well as the
subsequent interim period through February 19, 2015, there have been no
disagreements (as defined in Item 304(a)(1)(iv) of Regulation S-K and the
related instructions) between us and Davidson on any matter of accounting
principles or practices, financial statement disclosures, or auditing scope or
procedure, which disagreements, if not resolved to the satisfaction of Davidson,
would have caused it to make reference to the subject of such disagreements in
connection with any report prepared by Davidson. Further, there have been no
reportable events (as described in Item 304(a)(1)(v) of Regulation S-K).

On February 19, 2015, the Board of Directors approved the
engagement of BDO Canada LLP, or BDO Canada, as our independent registered
public accounting firm to perform independent audit services. Neither we, nor
anyone on our behalf, has consulted BDO Canada regarding the application of
accounting principles related to a specified transaction, either completed or
proposed, or the type of audit opinion that might be rendered on our financial
statements or as to any disagreement or reportable event as described in Item
304(a)(1)(iv) and Item 304(a)(1)(v), respectively, of Regulation S-K.

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

|(a) | Disclosure Controls and Procedures.
|--- | -----------------------------------

In connection with this annual report on Form 10-K, under the
direction of our Chief Executive Officer and our Chief Financial Officer, our
management has evaluated our disclosure controls and procedures, as defined in
Rules 13a-15(e) and 15d-15(e) of the Exchange Act, and has concluded that our
disclosure controls and procedures were ineffective as of March 31, 2015. As of
the date of this filing, we are still in the process of remediating the material
weakness that caused our disclosure controls and procedures to not be
effective.

Disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that information we are required to
disclose in the reports we file or submit under the Exchange Act is accumulated
and communicated to our management, including our Chief Executive Officer and
our Chief Financial Officer, or persons performing similar functions, as
appropriate, to allow timely decisions regarding required disclosure. In
connection with the preparation of the consolidated financial statements for the
year ended March 31, 2015, our management determined that our accounting staff
does not have sufficient technical accounting knowledge relating to accounting
for income taxes and complex U.S. GAAP matters, which our management determined
has caused our disclosure controls and procedures to be ineffective.

50

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We intend to take appropriate and reasonable steps to make the
necessary improvements to our accounting staff to remediate this material
weakness in our disclosure controls and procedures as resources to do so become
available. There are inherent limitations to the effectiveness of any system of
disclosure controls and procedures, including the possibility of human error and
the circumvention or overriding of the controls and procedures. Accordingly,
even effective disclosure controls and procedures can only provide reasonable
assurance of achieving their control objective.

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

This annual report does not include a report of managements
assessment regarding internal control over financial reporting due to a
transition period established by the rules of the Securities and Exchange
Commission for newly public companies.

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

None.

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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 26, 2015 are as follows:

Name
    Age
    Position HeldPhilippe Deschamps
    53
    CEO, President and DirectorAmanda Tseng
    32
    CFO and Corporate SecretaryJonathan Sackier
    57
    Chief Medical OfficerSavio Chiu
    32
    DirectorYuri Danilov
    58
    DirectorMitch Tyler
    62
    DirectorEdward M. Straw
    76
    DirectorJoyce LaViscount
    53
    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 director
since June 13, 2014. Mr. Deschamps offers extensive experience in pharmaceutical
and healthcare commercialization. The depth of his expertise stems from his 27
years in the health sciences industry, half spent at Bristol Myers Squibb (NYSE:
BMY), and half on the service side as CEO of GSW Worldwide, a healthcare
advertising agency. Mr. Deschamps started at GSW Worldwide in February 1998 as a
Vice President and Account Director and became President and CEO of GSW
Worldwide from January 2002 to September 2011. Mr. Deschamps was responsible for
the GSW Worldwide operations which includes offices in the 15 major markets
around the world. He primarily consulted on global marketing, commercialization
and new business model development for pharmaceutical, device and diagnostics
companies. 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.

In February 2012, Mr. Deschamps joined MediMedia Health, a
marketing services company as CEO until October 2013 when he finished his
assignment. At MediMedia Health, he was responsible for the strategic
development of the organization, nurturing their clients and developing new
non-personal products and services for the healthcare industry. In October 2013,
he became CEO of NHC.

Mr. Deschamps has a BSc. from the University of Ottawa in
Canada which he obtained in 1985.

Amanda Tseng, Chief Financial Officer,
Corporate Secretary

Ms. Tseng has served as our CFO and Corporate Secretary since
June 13, 2014 and as a director from June 13, 2014 to November 17, 2014. Ms.
Tseng is a Chartered Accountant and holds a Bachelor of Commerce degree from the
University of British Columbia which she obtained in 2007. From January 2012 to
present, she serves as the Manager, Corporate Finance of V Baron Global
Financial Canada Ltd. From December 2008 to December 2011, Ms. Tseng served as
the Manager of MNP LLP (Chang Lee LLP). V Baron Global Financial Canada Ltd. is
the Canadian arm of V Baron Group which is a merchant bank headquartered in Hong
Kong. The corporate finance of V Baron Global Financial Canada offers consulting
services on transaction structuring, corporate governance and compliance issues.
Ms. Tsengs primary responsibilities are managing the investment banking
projects and assisting in executing all facets of the investment bank projects.
For managing an investment banking project, Ms. Tseng reviews the quarterly and
yearly financial statements and management discussion and analysis and interacts
with professionals such as lawyers, auditors and transfer agents to facilitate
smooth operations. MNP LLP is a chartered accountant firm where its principal
services include tax, accounting and a wide range of business advisory services.
Ms. Tseng started as a staff accountant and was promoted to a manager at MNP LLP
from March 2007 to December 2011 where her primary responsibilities were managing audit
engagements specifically in relation to public company audits. The audit
engagements ranged in various industries including mining, education, film,
gaming, technology and wholesale. These audit engagements covered compliance in
Canadian GAAP, U.S. GAAP and IFRS. In addition, Ms. Tseng was a staff accountant
of Steingarten & Company LLP from March 2007 to December 2008.

52

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Ms. Tseng is serving as our CFO and Corporate Secretary
pursuant to an agreement we have with V Baron Global Financial Canada Ltd.
Accordingly, Ms. Tseng is not an employee and devotes approximately 50% of her
time to our business. If our agreement with V Baron Global Financial Canada Ltd.
were to terminate, we would likely lose the services of Ms. Tseng.

Jonathan Sackier, Chief Medical
Officer

With more than 30 years in the healthcare industry, Mr. Sackier
brings to his role as Chief Medical Officer extensive experience in new
technologies and treatment methodologies. He is widely recognized as one of the
leaders of the laparoscopic surgery revolution.

A trained surgeon, Mr. 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 Bristol Myers, Pfizer, Karl Storz,
Applied Medical, Stryker, Siemens, Bayer and Novartis.

Mr. Sackier recently served as Chairman of Adenosine
Therapeutics, which became part of Clinical Data and then Forest Laboratories.
Prior, he worked to develop and market the AESOP robot with Computer Motion and
that company went through a successful IPO. He also founded Genethics, which
patented and licensed amniotic stem cell technology

As a Professor at George Washington University in Washington,
DC, Mr. Sackier founded and funded the Washington Institute of Surgical
Endoscopy, a center for education, research, innovation and technology transfer.
He is now a pro bono Visiting Professor of Surgery at the Nuffield Department of
Surgical Sciences at Oxford University.

Mr. Sackier sits on the board of directors of Kypha, Clinvue,
and Hemoshear. He is Chairman of the Board of The Load Zero Foundation and 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,
winner of Londons 2014 Aim Award for outstanding achievement for most
successful growth market.

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

Savio Chiu, Director

Mr. Chiu has served as one of our directors since June 13,
2014. From April 2011 to present, Mr. Chiu serves as the Chief Financial Officer
and Corporate Secretary of Confederation Minerals Ltd. (TSXV: CFM). From
December 2010 to present, Mr. Chiu serves as a director of Finore Mining Inc.
(CSE: FIN). From June 2009 to present, Mr. Chiu has been the Senior Manager,
Corporate Finance of V Baron Global Financial Canada Ltd. From October 2010 to
August 2013, Mr. Chiu served as the Chief Financial Officer of 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.

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Yuri Danilov, Director

Mr. Danilov has served as one of our directors since June 13,
2014. Mr. Danilov, a co-inventor of the PoNS device, is currently the Research
Director of the Tactile Communication and NeuroRehabilitation Laboratory,
UW-Madison (2008 to present), co-owner and Neuroscience Director of ANR (2009 to
present), and former Research Director of Wicab (2002 to 2007). He is also
currently a Senior Scientist of Biomedical Engineering Department of University
of Wisconsin-Madison (2008 to present).

Mr. Danilov received his Ph.D. in Neuroscience from Pavlov
Institute of Physiology, Russian Academy of Science in 1984.

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 (2009
to present). Mr. Tyler is the Clinical Director of the Tactile Communication and
NeuroRehabilitation Laboratory, UW-Wisconsin (2008 to present), a Senior
Lecturer in Biomedical Engineering, and Clinical Director of ANR. He received
his M.S. of Bioengineering from University of California in 1985 and is
currently working on his Ph.D. in Biomedical Engineering at the University of
Wisconsin. In addition, Mr. Tyler was the Principal Investigator for Wicab from
1998 to 2006.

Edward M. Straw, Director

Admiral Straw has served as one of our directors since November
18, 2014. Admiral Straw is the founder and managing partner of Ospey Venture
Partners, a firm that finds investment capital and assists with business
development for start-up entrepreneurs. He is the retired President, Global
Operations of The Estee Lauder Companies, and currently sits on the boards of
the following companies: Performance Equity Management, Odyssey Logistics,
Capital Teas and Document Capture Technologies. He is also the Chairman of
Odyssey Logistics. Prior to joining the Estee Lauder Companies, he was Senior
Vice President, Global Manufacturing and Supply Chain Manager at the Compaq
Corporation in Houston and President of Ryder Logistics in Miami. Prior to
joining the private sector, Admiral Straw had a distinguished career in the U.S.
Navy, retiring as a three-star admiral in 1996.

Joyce LaViscount, Director

Ms. LaViscount has served as one of our directors since March
2, 2015. Ms. LaViscount currently serves as the Chief Financial Officer of
MediMedia Pharmaceutical Solutions, the pharmaceutical division of MediMedia
USA. Prior to joining MediMedia, Ms. LaViscount was Executive Director/Group
Controller North America for Aptalis Pharmaceuticals and spent more than five
years at Endo Pharmaceuticals in a variety of roles including Chief Accounting
Officer, VP-Investor Relations and Corporate Communications, and VP Finance
Operations, as well as operational roles in Sales Operations and 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.

Term of Office

Our directors are appointed for a one-year term 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.

We have formed an audit committee that is comprised of Savio
Chiu, Mitchell Tyler, and Yuri Danilov. Mr. Chiu is an audit committee
financial expert, as that term is defined in Item 407(d)(5)(ii) of Regulation
S-K.

54

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Family Relationships

There are no family relationships among our directors and
officers.

Code of Ethics

As a newly public company, we have not yet adopted a code of
ethics as defined in Item 406(b) of Regulation S-K. When we adopt a code of
ethics that applies to our principal executive officer, principal financial
officer and principal accounting officer or controller, we intend to post the
text of such code of ethics on our Internet website.

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

During the fiscal year ended March 31, 2015, our named
executive officers consisted of Marco Babini and Philippe Deschamps, each of
whom served as our principal executive officer during a portion of the fiscal
year, and Jonathan Sackier, our Chief Medical Officer. Mr. Babini served as our
principal executive officer until June 13, 2014, at which time Mr. Deschamps
became our principal executive officer.

Summary Compensation Table

Name andprincipal
    
    
    
    
    
    
    
    
    
    
    All otherposition
    
    Year
    
    
    Salary ($)
    
    
    Option awards ($)
    
    
    compensation ($)
    
    
    Total ($)Marco Babini Chief
      Executive Officer
    
    2015
    
    
    6,607(1)
    
    
    -
    
    
    -
    
    
    6,607Philippe Deschamps
      Chief Executive Officer
    
    2015
    
    
    360,417
    
    
    382,329(2)
    
    
    5,000
    
    
    747,746Jonathan Sackier Chief
      Medical Officer
    
    2015
    
    
    100,000
    
    
    543,941(3)
    
    
    -
    
    
    643,941


|(1) | The salary was denominated in Canadian dollars and
      converted into U.S. dollars using the average Bank of Canada nominal noon
      exchange rate between April 1, 2014 and March 31, 2015 of CAD$1.00 =
      USD$0.8809.   
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | 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.   
|(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 December 8, 2014 (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 will receive a base salary at an annualized rate of $250,000 until
investments reach a level of $5 million, or the Financing Threshold, and after
such Financing Threshold is met, his base salary will increase to $400,000 until
the end of the employment term, which is at-will. In addition to Mr. Deschamps
base salary, he shall have 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, which goals have not yet
been established. 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.

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Employment Agreement with Jonathan Sackier

On December 1, 2014, we entered into an employment agreement
with Jonathan Sackier to serve as our Chief Medical Officer. Pursuant to the
employment agreement, Mr. Sackier will receive a base salary at an annualized
rate of $300,000 for his employment term, which is at-will. In addition to Mr.
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 Mr. Sackier, which goals have not yet
been established. If Mr. Sackier is terminated without cause or if Mr. Sackier
resigns for good reason, we will pay Mr. 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.

Option Grants during Fiscal Year 2015

During the fiscal year ended March 31, 2015, we granted
1,800,000 options and 400,000 options to Philippe Deschamps and Jonathan
Sackier, respectively. The grants were made pursuant to the 2014 Stock Incentive
Plan, or the 2014 Plan, which is further described below. One-third of Mr.
Deschampss options vested upon grant, and one-third will vest on each of the
first and second anniversaries of the grant date. Mr. Deschampss options have
an exercise price of CAD$0.60 and expire on June 18, 2019. One-quarter of Mr.
Sackiers options vested upon grant, and one-quarter will vest every six months
from the grant date. Mr. Sackiers options have an exercise price of CAD$2.96
and expire on December 8, 2019.

Management Contract with V Baron Global Financial Canada
Ltd.

Effective July 1, 2014, V Baron Global Financial Canada Ltd.
has been engaged as an advisor to provide corporate advisory and CFO services
for a period of 12 months ending on July 1, 2015. The corporate advisory
services will 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 transfer agent, and
assisting/advising on corporate finance related matters. The CFO services will
be provided by Amanda Tseng, who is an employee of V Baron Global Financial
Canada Ltd. During the duration of the agreement, each party may terminate the
agreement by providing the other party with 60 days written notice. Once the 12
month period has passed, a renewal contract is required to be entered into
between the parties in order to continue the relationship. V Baron Global
Financial Canada Ltd. will receive CAD$12,500 per month for the services
provided. During the year ended March 31, 2015, the Company incurred charges
totaling $99,146 (CAD$112,500) in respect of this agreement.

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.

56

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

Outstanding Equity Awards at Fiscal Year-End

Number of
    
    
    Number ofSecurities
    
    
    SecuritiesUnderlying
    
    
    UnderlyingUnexercised
    
    
    UnexercisedOptions
    
    
    Options
    
    
    Option(#)
    
    
    (#)
    
    
    Exercise Price
    
    
    Option ExpirationName
    
    Exercisable
    
    
    Unexercisable
    
    
    ($)
    
    
    DateMarco Babini
    
    -
    
    
    -
    
    
    -
    
    
    -Philippe Deschamps
    
    600,000
    
    
    1,200,000(1)
    
    $
    0.55(2)
    
    
    06/18/2019Jonathan Sackier
    
    100,000
    
    
    300,000(3)
    
    $
    2.58(4)
    
    
    12/08/2019


|(1) | 600,000 options will vest on each of June 19, 2015 and
      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) | 100,000 options will vest on each of June 8, 2015,
      December 8, 2015 and June 8, 2016.                                                                                                                                      
|(4) | 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             |  | ($)        |  |  | ($)          |  |  | ($)          | 
|Savio Chiu       |  | 22,146(1)  |  |  | -            |  |  | 22,146       | 
|Yuri Danilov     |  | 147,639(2) |  |  | 8,250(6)     |  |  | 155,889      | 
|Mitch Tyler      |  | 147,639(3) |  |  | 19,950(6)    |  |  | 167,589      | 
|Edward Straw     |  | 246,051(4) |  |  | -            |  |  | 246,051      | 
|Joyce LaViscount |  | 224,585(5) |  |  | -            |  |  | 224,585      | 

|(1) | Mr. Chiu had 60,000 options outstanding as of March 31,
      2015, of which 40,000 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 June 19, 2014 (the grant
      date) of CAD$1.00 = USD$0.9235.           
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Mr. Danilov had 400,000 options outstanding as of March
      31, 2015, of which 266,666.67 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 June 19, 2014 (the grant
      date) of CAD$1.00 = USD$0.9235.   
|(3) | Mr. Tyler had 400,000 options outstanding as of March 31,
      2015, of which 266,666.67 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 June 19, 2014 (the grant
      date) of CAD$1.00 = USD$0.9235.     
|(4) | Mr. Straw had 100,000 options outstanding as of March 31,
      2015, of which 66,666.67 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 8, 2014 (the grant
      date) of CAD$1.00 = USD$0.8717.   
|(5) | Ms. LaViscount had 100,000 options outstanding as of
      March 31, 2015, of which 66,666.67 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 March 16, 2015 (the
      grant date) of CAD$1.00 = USD$0.7834.
|(6) | These amounts were paid pursuant to a consulting
      agreement between each of Messrs. Danilov and Tyler and us. See Item 13.
      Certain Relationships and Related Transactions, and Director
      IndependenceRelated Party Transactions for a description of each
      agreement.                                                  

57

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Narrative Disclosure to Director Compensation Table

During the fiscal year ended March 31, 2015, our directors did
not receive any fees for their service. Instead, we granted each director stock
options. We granted 60,000; 400,000; 400,000; 100,000 and 100,000 options to
Messrs. Chiu, Danilov, Tyler and Straw and Ms. LaViscount, respectively. Messrs.
Chiu, Danilov and Tylers options expire on June 18, 2019 and have an exercise
price of CAD$0.60. Mr. Straws options expire on December 8, 2019 and have an
exercise price of CAD$2.92. Ms. LaViscounts options expire on March 15, 2020
have an exercise price of CAD$3.20.

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

The following table sets forth certain information concerning
the number of shares of our common stock owned beneficially as of June 26, 2015
by: (i) each person (including any group) known to us to beneficially own more
than 5% of our shares of common stock; (ii) each of our directors; (iii) each of
our named executive officers; and (iv) our executive officers and directors as a
group. To our knowledge, each holder listed possesses sole voting and investment
power with respect to the shares shown.

Title of class
    Name and address of
      beneficial owner
    Amount and nature
      of beneficial owner
    Percentage of
      class(1)Officers and DirectorsCommon Stock
    Marco Babini (former CEO)(2)
    671,600
    1.0%Common Stock
    Philippe Deschamps
    1,204,700(3)
    1.8%Common Stock
    Jonathan Sackier
    200,000(4)
    (*)Common Stock
    Savio Chiu
    40,000(5)
    (*)Common Stock
    Yuri Danilov
    266,667(6)
    (*)Common Stock
    Mitch Tyler
    266,667(7)
    (*)Common Stock
    Edward Straw
    33,334(8)
    (*)Common Stock
    Joyce LaViscount
    33,334(9)
    (*)Common Stock
    All executive officers and directors as a group
      (8 persons)
    2,084,702(10)
    3.2%Persons owning more than 5% of voting
      securitiesCommon Stock
    MPJ Healthcare, LLC 208 Palmer Aly
      Newtown, PA 18940
    16,035,026(11)
    25.1%Common Stock
    Advanced NeuroRehabilitation, LLC 510
      Charmany Dr., Suite 175F Madison, WI 53719
    16,035,026(12)
    25.1%


(*) indicates less than 1%.(1) Based on 63,918,461 shares
of our common stock issued and outstanding as of May 1, 2015. (2) Mr. Babini
resigned as our CEO, President and a director on June 13, 2014.(3) This
figure includes 1,200,000 stock options which are immediately exercisable or
which will become exercisable within 60 days. (4) This figure includes
200,000 stock options which are immediately exercisable or which will become
exercisable within 60 days. (5) This figure includes 40,000 stock options
which are immediately exercisable or which will become exercisable within 60
days.(6) This figure includes 266,667 stock options which are immediately
exercisable or which will become exercisable within 60 days. (7) This figure
includes 266,667 stock options which are immediately exercisable or which will
become exercisable within 60 days.(8) This figure includes 33,334 stock
options which are immediately exercisable or which will become exercisable
within 60 days. (9) This figure include 33,334 stock options which are
immediately exercisable or which will become exercisable within 60 days.

58

---

(10) This figure includes 2,080,002 stock options, which are
immediately exercisable or which will become exercisable within 60 days.(11)
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 12,026,270 shares held in escrow. The holder has only voting power and
no investment power with respect to the escrowed shares.(12) Investment and
voting decisions for shares held by Advanced NeuroRehabilitation, LLC are made
by Kurt Kaczmarek, as the managing member. This amount includes 12,026,270
shares held in escrow. The holder has only voting power and no investment power
with respect to the escrowed shares.

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

Except as described below, there are no transactions since the
beginning of our last fiscal year, or any currently proposed transactions, in
which we were or are to be a participant where the amount involved exceeds
$120,000 and in which any related person had or will have a direct or indirect
material interest. Related person includes:

| | (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

Agreement and Plan of Merger with NHC

On June 6, 2014, we entered into an Agreement and Plan of
Merger among us, HMT Mergersub, Inc., our wholly-owned subsidiary, and NHC.
Pursuant to the Agreement and Plan of Merger we issued 35,300,083 shares of our
common stock to the shareholders of NHC. Two of the shareholders of NHC that
received 16,035,026 shares each were MPJ Healthcare, LLC and ANR. Messrs.
Philippe Deschamps, our President, CEO and director, and Jonathan Sackier, our
Chief Medical Officer, are shareholders of MPJ Healthcare, LLC, and Messrs. Yuri
Danilov and Mitch Tyler, two of our directors, are shareholders of ANR.

Sublicense Agreement with Advanced Rehabilitation, LLC

Pursuant to the Second Sublicense Agreement, ANR has granted
NHC a worldwide, exclusive license to make, have made, use, lease and sell
devices utilizing the Patent Pending Rights. In addition, ANR has agreed that
ownership of any improvements, enhancements or derivative works of the Patent
Pending Rights which 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 collection 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. Messrs. Yuri Danilov and Mitch Tyler, two of our directors, are
shareholders of ANR.

Consulting Agreement with Yuri Danilov

On July 1, 2014, Mr. Danilov entered into a consulting
agreement, or the Danilov Consulting Agreement, with NHC to provide consulting
services in relation to the development of the PoNS technology. The Danilov
Consulting Agreement is valid for a period of 12 months and Mr. Danilov will
charge an hourly fee of $150 per hour or $1,000 per day if 8 or more hours are
worked. Pursuant to the Danilov Consulting Agreement, Mr. Danilov will be an
independent contractor and subject to the confidentiality provisions contained
in the Danilov Consulting Agreement. The Company incurred charges from Mr. Danilov
totaling $8,250 for the year ended March 31, 2015 in respect of this
agreement

59

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Consulting Agreement with Mitch Tyler

On December 10, 2014, Mr. Tyler entered into a consulting
agreement, or the Tyler Consulting Agreement, with NHC to provide consulting
services in relation to the development of the PoNS technology. The Tyler
Consulting Agreement is valid for a period of 12 months and Mr. Tyler will
charge an hourly fee of $150 per hour or $1,000 per day if 8 or more hours are
worked. Pursuant to the Tyler Consulting Agreement, Mr. Tyler will be an
independent contractor and subject to the confidentiality provisions contained
in the Tyler Consulting Agreement. The Company incurred charges from Mr. Tyler
totaling $19,950 for the year ended March 31, 2015 in respect of this 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.

Director Independence

We believe that Savio Chiu, Joyce LaViscount and Edward Straw
qualify as independent directors under the listing standards of the Nasdaq
Capital Market. However, our Board of Directors has not made a formal
determination on this matter.

|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, 2015 and March 31, 2014:

|                   |   | Fiscal Year Ended |  |  | Fiscal Year Ended | 
|------------------ | - | ----------------- |  |  | ----------------- | 
|                   |   | March 31, 2015    |  |  | March 31, 2014    | 
|Audit Fees         | $ | 86,715            |  |  | Nil               | 
|Audit-Related Fees |   | Nil               |  |  | Nil               | 
|Tax Fees           | $ | 5,090             |  |  | Nil               | 
|All Other Fees     |   |                  |  |  |                  | 
|Total Fees         | $ | 91,805            |  |  | Nil               | 

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.

Audit Related Fees

Audit-related fees are fees billed for assurance and related
services that are reasonably related to the performance of the audit or review
of our consolidated financial statements and are not reported under Audit
Fees.

60

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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

All other fees consist of fees for products and services other
than the services reported above.

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.

61

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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 
      No.
    Description of Exhibit2.1
    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 Securities and
      Exchange Commission on July 14, 2014)3.1
    Articles of Continuation
      (incorporated by reference to Exhibit 3.1 to the Form S-1 filed with the
      Securities and Exchange Commission 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 Securities and Exchange
      Commission 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 on May 4, 2015)3.4
    Bylaws (incorporated by reference to
      Exhibit 3.3 to the Form S-1 filed with the Securities and Exchange
      Commission on July 14, 2014)3.5
    First Amendment to the Bylaws
      (incorporated by reference to Exhibit 3.4 to the Amendment to Form S-1
      filed with the Securities and Exchange Commission on September 23, 2014)3.6
    Second Amendment to the Bylaws
      (incorporated by reference to Exhibit 3.3 to amendment no. 1 to the Form
      10 filed on May 4, 2015)10.1
    2014 Stock Incentive Plan
      (incorporated by reference to Exhibit 4.1 to the Form S-1 filed with the
      Securities and Exchange Commission on July 14, 2014)10.2
    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
      Securities and Exchange Commission on July 14, 2014)10.3
    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 Securities and
      Exchange Commission on September 23, 2014)10.4
    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 Securities and Exchange Commission on April 15, 2015)10.5
    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 Securities and Exchange Commission on September 23, 2014)10.6
    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 Securities and Exchange Commission on February 6, 2015)10.7
    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 Securities and Exchange Commission on July 14, 2014)10.8
    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 Securities and Exchange
      Commission on September 23, 2014)10.9
    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 Securities and Exchange Commission on July 14, 2014)


62

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10.10
    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 Securities and Exchange Commission on July 14, 2014)10.11
    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 Securities and
      Exchange Commission on July 14, 2014)10.12
    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 Securities and
      Exchange Commission on July 14, 2014)10.13
    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 Securities
      and Exchange Commission on February 6, 2015)10.14
    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 Securities and Exchange Commission on July 14, 2014)10.15
    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
      Securities and Exchange Commission on July 14, 2014)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 Securities and Exchange Commission 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 Davidson & Company LLP (filed
      herewith)23.2
    Consent of BDO Canada LLP (filed herewith)31.1
    Certification of Chief Executive Officer
      pursuant to Rule 13a-14(a) and Rule 15d-14(a), as adopted pursuant to
      Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)31.2
    Certification of Chief Financial Officer
      pursuant to Rule 13a-14(a) and Rule 15d-14(a), as adopted pursuant to
      Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)32.1
    Certification of Chief Executive Officer and
      Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)


63

---

INDEX TO FINANCIAL STATEMENTS

|BDO
      CANADA LLP REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | F-2
|---------------------------------------------------------------------------- | ---
|DAVIDSON
      & CO. REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | F-3
|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-9

F-1

---



F-2

---







F-3

---

HELIUS MEDICAL TECHNOLOGIES, INC.CONSOLIDATED
FINANCIAL STATEMENTSMarch 31, 2015 and 2014(Expressed in
United States Dollars)





F-4

---

Helius Medical Technologies, Inc. Consolidated
Balance SheetsMarch 31, 2015 and 2014 (Expressed in United States
Dollars)

|                                                                                                                                                                                                              |  | 2015        |   |  | 2014       |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------- | - |  | ---------- | -
|                                                                                                                                                                                                              |  |             |   |  |            |  
|                                                                                                                                                                                                              |  | **$**       |   |  | **$**      |  
|ASSETS                                                                                                                                                                                                        |  |             |   |  |            |  
|Current assets                                                                                                                                                                                                |  |             |   |  |            |  
|Cash and cash equivalents                                                                                                                                                                                     |  | 418,893     |   |  | 15,968     |  
|Short-term
      investment                                                                                                                                                                                   |  | 378,000     |   |  | -          |  
|Receivables                                                                                                                                                                                                   |  | 8,833       |   |  | -          |  
|Prepaid expenses
      (Note 8)                                                                                                                                                                               |  | 410,621     |   |  | 300,000    |  
|Total current assets                                                                                                                                                                                          |  | 1,216,347   |   |  | 315,968    |  
|                                                                                                                                                                                                              |  |             |   |  |            |  
|TOTAL ASSETS                                                                                                                                                                                                  |  | 1,216,347   |   |  | 315,968    |  
|                                                                                                                                                                                                              |  |             |   |  |            |  
|LIABILITIES                                                                                                                                                                                                   |  |             |   |  |            |  
|Current liabilities                                                                                                                                                                                           |  |             |   |  |            |  
|Accounts payable and accrued liabilities                                                                                                                                                                      |  | 1,197,804   |   |  | 215,921    |  
|Convertible debenture (Note 4)                                                                                                                                                                                |  | -           |   |  | 368,024    |  
|Total current liabilities                                                                                                                                                                                     |  | 1,197,804   |   |  | 583,945    |  
|                                                                                                                                                                                                              |  |             |   |  |            |  
|Derivative liability (Note 2)                                                                                                                                                                                 |  | 1,581,444   |   |  | -          |  
|TOTAL LIABILITIES                                                                                                                                                                                             |  | 2,779,248   |   |  | 583,945    |  
|                                                                                                                                                                                                              |  |             |   |  |            |  
|CAPITAL
      (DEFICIT) Common
      stock (Unlimited Class A common shares
      authorized);        (63,104,788
      shares outstanding at March 31, 2015 and 32,070,052 at March 31, 2014)
      (Note 5) |  | 16,358,093  |   |  | 8,510,000  |  
|Additional paid-in capital (Note 5)                                                                                                                                                                           |  | 1,490,790   |   |  | 807,157    |  
|Shares to be
      issued                                                                                                                                                                                     |  | 39,545      |   |  | -          |  
|Accumulated other comprehensive income                                                                                                                                                                        |  | (971,640    | ) |  | -          |  
|Accumulated deficit                                                                                                                                                                                           |  | (18,479,689 | ) |  | (9,585,134 | )
|TOTAL SHAREHOLDERS EQUITY (CAPITAL DEFICIT)                                                                                                                                                                  |  | (1,562,901  | ) |  | (267,977   | )
|                                                                                                                                                                                                              |  |             |   |  |            |  
|TOTAL LIABILITIES & CAPITAL (DEFICIT)                                                                                                                                                                         |  | 1,216,347   |   |  | 315,968    |  

Nature and continuance of operations (Note 1) Commitment
and contingencies (Note 8) Subsequent events (Note 11)

These financial statements are authorized for issue by the
Board of Directors:

|"Philippe
      Deschamps " | Director | "Savio Chiu " | Director
|--------------------------- | -------- | ------------- | --------

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

F-5

---

Helius Medical Technologies Inc.Consolidated
Statements of Comprehensive Lossfor the years ended March 31, 2015 and
2014 and for the period from January 22, 2013 (date of inception) to March 31,
2013 (Expressed in United States Dollars)

|                                                                     |  | 2015       |   |  | 2014       |   |  | 2013       |  
|-------------------------------------------------------------------- |  | ---------- | - |  | ---------- | - |  | ---------- | -
|                                                                     |  | **$**      |   |  | **$**      |   |  | **$**      |  
|Operating
      Expenses                                             |  |            |   |  |            |   |  |            |  
|Advertising, marketing, & IR                                         |  | 774,400    |   |  | -          |   |  |            |  
|Audit & accounting                                                   |  | 71,340     |   |  | -          |   |  |            |  
|Consulting fees                                                      |  | 1,085,606  |   |  | 807,385    |   |  | 4,252,800  |  
|Insurance                                                            |  | 75,425     |   |  | -          |   |  |            |  
|Legal fees                                                           |  | 1,478,766  |   |  | 33,966     |   |  | 14,192     |  
|Meals & travel                                                       |  | 272,338    |   |  | 22,860     |   |  | 376        |  
|Office & general                                                     |  | 166,282    |   |  | 8,137      |   |  | 482        |  
|Professional fees                                                    |  | 14,136     |   |  | -          |   |  | -          |  
|Research & development                                               |  | 3,828,775  |   |  | 171,781    |   |  | 4,250,000  |  
|Transfer agent &
      regulatory                                    |  | 104,214    |   |  | -          |   |  |            |  
|Wages and salaries                                                   |  | 993,400    |   |  | 23,155     |   |  |            |  
|Loss from operations                                                 |  | (8,864,682 | ) |  | (1,067,284 | ) |  | (8,517,850 | )
|                                                                     |  |            |   |  |            |   |  |            |  
|Other items                                                          |  |            |   |  |            |   |  | -          |  
|Interest expense                                                     |  | (176,488   | ) |  | -          |   |  | -          |  
|Interest income                                                      |  | 20,074     |   |  | -          |   |  | -          |  
|Change in fair value of derivative liability                         |  | (739,375   | ) |  | -          |   |  | -          |  
|Foreign exchange gain (loss)                                         |  | 865,916    |   |  | -          |   |  | -          |  
|                                                                     |  | (29,873    | ) |  | -          |   |  | -          |  
|                                                                     |  |            |   |  |            |   |  |            |  
|Net loss for the period                                              |  | (8,894,555 | ) |  | (1,067,284 | ) |  | (8,517,850 | )
|                                                                     |  |            |   |  |            |   |  |            |  
|Other comprehensive income (loss) Translation
      adjustments      |  | (971,640   | ) |  | -          |   |  | -          |  
|                                                                     |  |            |   |  |            |   |  |            |  
|Comprehensive loss for the period                                    |  | (9,866,195 | ) |  | (1,067,284 | ) |  | (8,517,850 | )
|                                                                     |  |            |   |  |            |   |  |            |  
|                                                                     |  |            |   |  |            |   |  |            |  
|Basic and diluted loss per common stock                              |  | (0.16      | ) |  | (0.03      | ) |  | (0.27      | )
|                                                                     |  |            |   |  |            |   |  |            |  
|Weighted average number of common stockoutstanding  basic & diluted |  | 57,048,406 |   |  | 32,070,052 |   |  | 32,070,052 |  

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

F-6

---

HeliusMedicalTechnologiesInc.ConsolidatedStatementsofCapital(Deficit)for the years ended March
31, 2015 and 2014and for the period from January 22, 2013 (date of
inception) to March 31, 2013 
(Expressed in United States Dollars)

Accumulated otherAdditional Paid-In
    
    
    Shares to be
    
    
    Accumulated
    
    
    comprehensive
      incomeCommon Stock
    
    
    Amount
    
    
    Capital
    
    
    Issued
    
    
    Deficit
    
    
    (loss)
    
    
    Capital (Deficit)**$**
    
    
    **$**
    
    
    **$**
    
    
    **$**
    
    
    **$**
    
    
    **$**Balance at January 22,
      2013 (date of inception)
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    -Shares issued for cash,
      intellectual property and services (Note 6)
    
    32,070,052
    
    
    8,510,000
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    8,510,000Net loss for the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,517,850
    )
    
    
    
    
    (8,517,850
    )Balance  March 31,
      2013
    
    32,070,052
    
    
    8,510,000
    
    
    -
    
    
    -
    
    
    (8,517,850
    )
    
    -
    
    
    (7,850
    )Stock-based compensation on
      654,481 options granted
    
    -
    
    
    -
    
    
    173,873
    
    
    -
    
    
    -
    
    
    -
    
    
    173,873Stock-based compensation on
      2,300,000 options granted
    
    -
    
    
    -
    
    
    560,082
    
    
    -
    
    
    
    
    
    -
    
    
    560,082Stock-based compensation on
      275,550 options granted
    
    -
    
    
    -
    
    
    73,202
    
    
    -
    
    
    
    
    
    -
    
    
    73,202Net loss for the year
    
    
    
    
    
    
    
    
    
    
    -
    
    
    (1,067,284
    )
    
    -
    
    
    (1,067,284
    )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
    
    
    -
    
    
    -
    
    
    -
    
    
    50,303Shares issued to consultant
      for option exercise (Note 6)
    
    2,300,000
    
    
    717
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    717Shares issued to consultant
      for option exercise (Note 6)
    
    930,031
    
    
    290
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    290Fair 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
    
    
    -
    
    
    -
    
    
    -
    
    
    162,890Issuance of common stock for
      private placement (Note 5)
    
    15,240,000
    
    
    6,437,041
    
    
    578,961
    
    
    -
    
    
    -
    
    
    -
    
    
    7,016,002Share issuance cost (Note 5)
    
    -
    
    
    (447,515
    )
    
    67,709
    
    
    -
    
    
    -
    
    
    -
    
    
    (379,806
    )Beneficial conversion feature
      (Note 4)
    
    -
    
    
    -
    
    
    176,488
    
    
    -
    
    
    -
    
    
    -
    
    
    176,488Stock-based compensation on
      3,370,000 options granted (Note 6)
    
    -
    
    
    -
    
    
    283,962
    
    
    -
    
    
    -
    
    
    -
    
    
    283,962Conversion of debenture (Note
      4)
    
    2,564,705
    
    
    1,000,100
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    1,000,100Stock-based compensation on
      100,000 options granted (Note 6)
    
    -
    
    
    -
    
    
    74,190
    
    
    -
    
    
    -
    
    
    -
    
    
    74,190Stock-based compensation on
      100,000 options granted (Note 6)
    
    -
    
    
    -
    
    
    43,229
    
    
    -
    
    
    -
    
    
    -
    
    
    43,229Stock-based compensation on
      400,000 options granted (Note 6)
    
    -
    
    
    -
    
    
    135,564
    
    
    -
    
    
    -
    
    
    -
    
    
    135,564Stock-based compensation on
      100,000 options granted (Note 6)
    
    -
    
    
    -
    
    
    41,987
    
    
    -
    
    
    -
    
    
    -
    
    
    41,987Fair value of vested
      non-employee options reallocated to derivative liability
    
    -
    
    
    -
    
    
    (74,190
    )
    
    -
    
    
    -
    
    
    -
    
    
    (74,190
    )Private placement proceeds
    
    -
    
    
    -
    
    
    -
    
    
    39,545
    
    
    -
    
    
    -
    
    
    39,545Net loss for the year
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    (8,894,555
    )
    
    -
    
    
    (8,894,555
    )Translation adjustments
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    (971,640
    )
    
    (971,640
    )Balance  March 31, 2015
    
    63,104,788
    
    
    16,358,093
    
    
    1,490,790
    
    
    39,545
    
    
    (18,479,689
    )
    
    (971,640
    )
    
    (1,562,901
    )


F-7

---

Helius Medical Technologies, Inc.Consolidated
Statements of Cash Flowsfor the years ended March 31, 2015 and 2014 and
for the period from January 22, 2013 (date of inception) to March 31, 2013
(Expressed in United States Dollars)

|                                                         |  | 2015       |   |  | 2014       |   |  | 2013       |  
|-------------------------------------------------------- |  | ---------- | - |  | ---------- | - |  | ---------- | -
|                                                         |  | **$**      |   |  | **$**      |   |  | **$**      |  
|Cash flows from
      operating activities               |  |            |   |  |            |   |  |            |  
|Net loss for the period                                  |  | (8,894,555 | ) |  | (1,067,284 | ) |  | (8,517,850 | )
|Adjustments for:                                         |  |            |   |  |            |   |  |            |  
|Change in fair value of derivative liability             |  | 739,375    |   |  | -          |   |  | -          |  
|Accretion of beneficial conversion feature               |  | 176,488    |   |  | 1,344      |   |  | -          |  
|Stock-based compensation                                 |  | 1,397,114  |   |  | 807,157    |   |  | 8,500,000  |  
|Changes in non-cash working
      capital items:         |  |            |   |  |            |   |  |            |  
|Receivables                                              |  | (8,945     | ) |  | -          |   |  | -          |  
|Accounts payable                                         |  | 979,040    |   |  | 210,085    |   |  | 5,836      |  
|Prepaid expenses                                         |  | (110,873   | ) |  | (300,000   | ) |  | -          |  
|Foreign exchange re-measurement                          |  | (598,929   | ) |  | -          |   |  | -          |  
|Net cash used in operating activities                    |  | (6,321,285 | ) |  | (348,698   | ) |  | (12,014    | )
|                                                         |  |            |   |  |            |   |  |            |  
|                                                         |  |            |   |  |            |   |  |            |  
|Cash flows from Investing
      Activities               |  |            |   |  |            |   |  |            |  
|Purchase of short-term investment                        |  | (378,000   | ) |  | -          |   |  | -          |  
|Net cash used in Investing
      Activities              |  | (378,000   | ) |  | -          |   |  | -          |  
|                                                         |  |            |   |  |            |   |  |            |  
|                                                         |  |            |   |  |            |   |  |            |  
|Cash flows from financing activities                     |  |            |   |  |            |   |  |            |  
|Cash acquired on
      recapitalization                  |  | 23,904     |   |  | -          |   |  | -          |  
|Proceeds from issuance of shares                         |  | 7,017,009  |   |  | -          |   |  | 10,000     |  
|Share issuance costs                                     |  | (379,806   | ) |  | -          |   |  | -          |  
|Proceeds from shares to be issued                        |  | 39,545     |   |  | -          |   |  | -          |  
|Proceeds from bridge loan                                |  | 150,000    |   |  | -          |   |  | -          |  
|Short term loan                                          |  | -          |   |  | (2,231     | ) |  | 2,231      |  
|Proceeds from issuance of
      convertible debt         |  | 632,076    |   |  | 366,680    |   |  | -          |  
|Net cash provided by financing
      activities          |  | 7,482,728  |   |  | 364,449    |   |  | 12,231     |  
|                                                         |  |            |   |  |            |   |  |            |  
|Effect of Foreign Exchange Rate Changes on
      Cash    |  | (380,518   | ) |  | -          |   |  | -          |  
|                                                         |  |            |   |  |            |   |  |            |  
|Net change in cash and cash
      equivalents            |  | 402,925    |   |  | 15,751     |   |  | 217        |  
|                                                         |  |            |   |  |            |   |  |            |  
|Cash and cash equivalents, beginning of
      the period |  | 15,968     |   |  | 217        |   |  | -          |  
|                                                         |  |            |   |  |            |   |  |            |  
|Cash and cash equivalents, end of the
      period       |  | 418,893    |   |  | 15,968     |   |  | 217        |  
|                                                         |  |            |   |  |            |   |  |            |  
|Supplemental information of cash flows                   |  |            |   |  |            |   |  |            |  
|Interest paid in cash                                    |  | 11,144     |   |  | -          |   |  | -          |  
|Income taxes paid in cash                                |  | -          |   |  | -          |   |  | -          |  
|                                                         |  | 11,144     |   |  | -          |   |  | -          |  

Supplemental Cash Flow Information  Note 10

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

F-8

---

Helius Medical Technologies, Inc.Notes to
Financial Statements

|1. | NATURE AND CONTINUANCE OF
  OPERATIONS
|-- | --------------------------------------

Helius Medical Technologies, Inc. (Helius or the Company)
is in the development stage and 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.

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 at 41 University
Drive, Suite 400, Newtown, PA, USA 18940.

The Company is listed on the Canadian Securities Exchange (the
CSE) and began trading on June 23, 2014, under the ticker symbol HSM. 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, Helius 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 Helius. 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.

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

Basis of Presentation and Liquidity

The Companys consolidated financial statements have been
presented in accordance with U.S. generally accepted accounting principles
(U.S. GAAP) and the rules and regulations of the Securities and Exchange
Commission (SEC) that are published at the time of preparation and that are
effective or available on March 31, 2015. The Company has incurred a net loss of
$8,894,555 for the year ended March 31, 2015 and, as of March 31, 2015, the
Company has an accumulated deficit of $18,479,689 (March 31, 2014 - $9,585,134;
March 31, 2013 - $8,517,850). 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. While the Company had cash and cash
equivalents of $418,893 as of March 31, 2015 (March 31, 2014 - $15,968),
management does not believe these resources will be sufficient to meet the
Companys operating and capital needs for the ensuing fiscal year.

The Company intends to fund ongoing activities by utilizing
current cash and cash equivalents and by raising additional capital though
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 an intellectual property asset. This material uncertainty gives rise
to substantial doubt about the Companys ability to continue as a going concern.

Use of Estimates

The preparation of 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 valuation of share-based payment transactions,
compensation expense related to shares issued for services, valuation of options
and warrants and deferred income tax asset valuation allowances. Actual outcomes
could differ from these estimates. Financial statements include estimates which,
by their nature, are uncertain. The impacts of such estimates are pervasive
throughout the financial statements, and may require accounting adjustments based on future occurrences. Revisions
to accounting estimates are recognized in the period in which the estimate is
revised and the revision affects both the current and future periods.

F-9

---

Principles of Consolidation

The consolidated financial statements include the historic
accounts of Neuro and are consolidated with Helius and its subsidiaries
beginning June 13, 2014. 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.

Short-term investment

The short-term investments are readily redeemable term deposits
held at the Companys financial institution. As at March 31, 2015, the
short-term investment consists of a one year guaranteed investment certificate
(GIC) in the amount of $378,000 yielding 0.25% per annum. Due to the Companys
intention to have the short-term investment available for liquidity purposes, it
has been classified as available-for-sale and recorded at its fair value. Any
unrealized gains or losses are excluded from earnings and are recorded in other
comprehensive income.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to
credit risk consist principally of cash and its short-term investments. The
Company is not currently exposed to any significant concentrations of credit
risk from these financial instruments. The Company seeks to maintain the safety
of its investments and diversify its risk, while maintaining sufficient
liquidity of its investments to meet its cash flow requirements while receiving
a competitive after-tax rate of return.

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 accelerated attribution method.

Stock-based payments to non-employees are measured at the fair
value of the consideration received, 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.

The Company accounts 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.

The Company uses the Black-Scholes option pricing model to
calculate the fair value of share purchase options. Option pricing models
require the input of highly subjective assumptions, including the expected price
volatility. 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 and the functional currency of Neuro is the U.S. Dollar. The
Companys reporting currency is the U.S. dollar.

The assets and liabilities of the Company and Helius Canada are
translated into U.S. dollars using year-end exchange rates; income and expenses
are translated using the average exchange rates for the reporting period.
Unrealized foreign currency translation adjustments are deferred in accumulated
other comprehensive loss, a separate component of shareholders equity.

F-10

---

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 Statements of Loss. At March 31, 2015, Neuro recorded a
foreign exchange gain of $573,917 in respect of this adjustment which is
reflected in the consolidated statement of loss for the year ended March 31,
2015.

Net Loss per Common Share

Basic net earnings (loss) per share is computed by dividing net
earnings (loss) available to common stockholders by the weighted average number
of outstanding common stock for the period, without consideration for common
stock equivalents. Diluted net income (loss) per common share includes both the
weighted-average number of common shares outstanding for the period plus the
potentially dilutive securities from stock options and warrants outstanding
determined using the treasury-stock method and the if-converted method, as
applicable. As at March 31, 2015, there were 4,920,000 options (March 31, 2014 
3,230,031; March 31, 2013- nil) outstanding and 8,444,400 warrants (March 31,
2014  nil; March 31, 2013 - nil) outstanding which have not been included in
the weighted average common stock outstanding as these were anti-dilutive.

Fair Value of Financial Assets and Liabilities

The Companys financial instruments consist primarily of cash
and cash equivalents, short-term investment 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 quoted prices included within Level
1 that are either directly or indirectly observable; and

Level 3  Unobservable inputs that are supported by little or
no market activity, therefore requiring an entity to develop its own assumptions
about the assumptions that market participants would use in pricing.

Cash and cash equivalents and short-term investment are
measured using Level 1 inputs.

The Company had certain Level 3 liabilities required to be
recorded at fair value on a recurring basis in accordance with US GAAP as at
March 31, 2015. As at March 31, 2015, the Companys Level 3 liabilities
consisted of the grant of share purchase options to non-employees. The resulting
Level 3 liabilities have no active market and are required to be measured at
their fair value each reporting period based on information that is
unobservable.

A summary of the Companys Level 3 liabilities for the fiscal
years ended March 31, 2015 and 2014 are as follows:

| |                                             |  | March 31,2015 |  |  | March 31, 2014 | 
| | ------------------------------------------- |  | ------------- |  |  | -------------- | 
| |                                             |  | $             |  |  | $              | 
| |                                             |  |               |  |  |                | 
| | Non-employee options (Note
      6(a))      |  |               |  |  |                | 
| | Beginning fair value                        |  | -             |  |  | -              | 
| | Issuance                                    |  | 767,879       |  |  | -              | 
| | Reallocation of vested non-employee options |  | 74,190        |  |  | -              | 
| | Change in fair value                        |  | 739,375       |  |  | -              | 
| | Ending fair value of Level 3 liability      |  | 1,581,444     |  |  | -              | 

Certain assets and liabilities are measured at fair value on a
nonrecurring basis; that is, the instruments are not measured at fair value on
an ongoing basis but are subject to fair value adjustments only in certain
circumstances (for example, when there is evidence of impairment). There were no
assets or liabilities measured at fair value on a nonrecurring basis during the
periods ended March 31, 2015 and 2014.

F-11

---

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 FASB 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. When applicable, the Company classifies penalties and interest
associated with uncertain tax positions as a component of income tax expense in
its consolidated Statement of Income (Loss) and Comprehensive Income (Loss).

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.

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. 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 statement of 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.

The Company uses 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.

Recent Accounting Pronouncements

In August 2014, the Financial Accounting Standards Board (the
"FASB") issued Accounting Standards Update ("ASU") No. 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 Company does not intend to early adopt this standard.
The adoption of this standard will not have a material impact on the Company's
financial position or results of operations.

In June 2014, the FASB issued ASU No. 2014-10, "Development Stage
Entities" (ASU 2014-10) which removes the definition of a development stage
entity from the Master Glossary of the Accounting Standards Codification,
thereby removing the financial reporting distinction between development stage
entities and other reporting entities from U.S. GAAP. In addition, the update
eliminates the requirements for development stage entities to (1) present
inception-to-date information in the statements of income, cash flows, and
shareholder equity, (2) label the financial statements as those of a development
stage entity, (3) disclose a description of the development stage activities in
which the entity is engaged, and (4) disclose in the first year in which the entity is no longer a development stage
entity that in prior years it had been in the development stage. ASU No. 2014-10
is effective for fiscal years and interim periods beginning after December 15,
2014, with early adoption permissible. The Company early adopted ASU 2014-10
allowing the financial statements to be cast without the inception to date
information and without references to the development stage.

F-12

---

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
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.

In June 2014, the FASB issued ASU No. 2014-12, Compensation
- Stock Compensation (Topic 781): Accounting for Share-Based Payments
When the Terms of an Award Provide that a Performance Target Could be Achieved
after the Requisite Service Period. This update requires that a performance
target that affects vesting and that could be achieved after the requisite
service period be treated as a performance condition. As such, the performance
target should not be reflected in estimating the grant date fair value of the
award. This update further clarifies that compensation cost should be recognized
in the period in which it becomes probable that the performance target will be
achieved and should represent the compensation cost attributable to the periods
for which the requisite service has already been rendered. This update is
effective for annual reporting periods (including interim reporting periods
within those periods) beginning after December 15, 2015, which for the Company
is April 1, 2016. Early adoption is permitted. Entities may apply the amendments
in this update either: (a) prospectively to all awards granted or modified after
the effective date; or (b) retrospectively to all awards with performance
targets that are outstanding as of the beginning of the earliest annual period
presented in the financial statements and to all new or modified awards
thereafter. The adoption of this standard will not have a material impact on the
Company's financial position or results of operations.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from
Contracts with Customers (Topic 606). This update outlines a new, single
comprehensive model for entities to use in accounting for revenue arising from
contracts with customers and supersedes most current revenue recognition
guidance, including industry-specific guidance. This new revenue recognition
model provides a five-step analysis in determining when and how revenue is
recognized. The new model will require revenue recognition to depict the
transfer of promised goods or services to customers in an amount that reflects
the consideration a company expects to receive in exchange for those goods or
services. This new guidance is effective for annual reporting periods (including
interim reporting periods within those periods) beginning after December 15,
2016, which for the Company is April 1, 2017; early adoption is not permitted.
Entities have the option of using either a full retrospective or a modified
approach to adopting the guidance. The Company does not anticipate that the
adoption of this update will have a material impact on its financial position or
results of operations.

|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 financial statements present the results of Neuro with
the exception of common stock which has been retroactively restated to reflect
the Recapitalization (see Note 6). 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.

The net assets of Helius acquired were as follows,

Cash and cash equivalents
    $
    23,904Receivables
    
    1,644Bridge loan receivable
    
    150,000Prepaid expenses
    
    5,970Accounts 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
Helius at the time of the reverse merger.

F-13

---

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 5). 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.

Upon completion of a qualified financing in which the Company
was to raise at least $2,000,000, 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 common stock 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. Upon completion of the qualified financing, the
Debenture automatically converted into equity securities of the Company at a
price per share equal to 85% of the price per share of the qualified
financing.

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 Statement of 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. | COMMON STOCK
|-- | ------------

Authorized:

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. 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.

Class B common shares and Class A preferred shares were deleted
from the list of classes of shares the Company is authorized to issue by way of
amendment to the Companys articles effective June 12, 2014.

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.

Prior to the Recapitalization

The number of securities below reflects the Recapitalization
and the exchange ratio retrospectively.

On January 22, 2013, the Company issued a total of 16,035,026
shares to Advanced NeuroRehabilitation LLC (ANR) for cash proceeds of $5,000
and an exclusive license right to ANRs patent pending technology and knowhow
valued at $4.25 million per an independent valuation report. The valuation
expert was engaged to assess the valuation of the costs incurred to date as well
as the ongoing costs which would be required to bring the product to
commercialization, discounted to the date of purchase. The Company recorded the
$4.25 million exclusive license right as research and development expense per
the Companys accounting policy.

F-14

---

On January 22, 2013, the Company also issued a total of
16,035,026 shares to MPJ Healthcare LLC (MPJ) for cash proceeds of $5,000. In
addition, the Company recorded $4.25 million of stock based compensation
expense.

On May 1, 2014, 2,300,000 options were exercised for 2,300,000
common shares for total proceeds of $717.

On May 11, 2014, 930,031 options were exercised for 930,031
common shares for total proceeds of $290.

In conjunction with the private placement completed on May 30,
2014 and recapitalization transaction completed on June 13, 2014 (Note 3), the
Company entered into an escrow agreement with each of ANR, MPJ and the Companys
transfer agent whereby the 32,070,052 common shares issued to ANR and MPJ were
placed in escrow in accordance with Canadian securities regulations. These
shares were scheduled to be released from escrow over a period of 3 years from
the date of the escrow agreement with 10% of the shares placed in escrow
released on the completion date of the reverse merger and with 15% of the
remaining outstanding balance of shares released every 6 months thereafter. The
release of the escrow is not subject to any performance conditions and therefore
not considered to be compensatory in nature. In addition, on their release, the
value recorded in respect of these shares will not change and they are included
in the calculation of earnings per share.

After the Recapitalization

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 (CAD $7.62 million) 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 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.

|6. | SHARE BASED PAYMENTS
|-- | --------------------

|(a) | Stock options
|--- | -------------

The number of securities below reflects the Recapitalization
and the exchange ratio retrospectively.

The Company has a stock option plan whereby the Company is
authorized to grant up to 12,108,016 options. Vesting and the term of an option
is determined at the discretion of the Board of Directors of the Company.

On April 1, 2013, the Company granted a consultant company
930,031 options for 10 years upon completion of certain services in accordance
with a consulting agreement to lead the design and manufacturing program of the
Companys technology. On December 4, 2013, 654,481 options vested. On May 11,
2014, all these options had vested and were exercised for 930,031 common
shares.

On October 30, 2013, the Company granted 2,300,000 options
exercisable for 10 years to a consultant company for strategic business advisory
services which are to vest upon completion of two milestones. On February 11,
2014, 1,150,000 options were vested upon completion of the first of the two
milestones. On April 28, 2014, the remaining 1,150,000 options were vested upon
completion of the second milestone. On May 1, 2014, all 2,300,000 options were
exercised for 2,300,000 shares.

On June 19, 2014, the Company granted 3,520,000 options to
directors, officers, and consultants exercisable at CAD $0.60 for 5 years. One
third of these options vested immediately upon granting. The remaining two
thirds of the options will vest on June 19, 2015, and June 19, 2016
respectively.

On June 20, 2014, the Company granted 250,000 options to an
investor relations consultant exercisable at CAD $0.60 for 5 years. 12.5% of
these options vested immediately upon granting. The remaining 87.5% will vest at
a rate of 12.5% every three months beginning September 20, 2014.

On July 14, 2014, the Company granted 100,000 options to a
consultant exercisable at CAD $2.52 for 3 years. 25% of these options vested
immediately upon granting. The remaining options will vest at a rate of 25% on
September 30, 2014, December 31, 2014, and March 31, 2015, respectively.

On December 8, 2014, the Company granted 450,000 options to
members of its scientific advisory board exercisable at CAD $2.92 for 5 years.
All of these options vested immediately upon granting.

F-15

---

On December 8, 2014, the Company granted 100,000 options to a
new director exercisable at CAD $2.92 for 5 years. One third of these options
vested immediately upon granting. The remaining two thirds of the options will
vest on December 8, 2015, and December 8, 2016 respectively.

On December 8, 2014, the Company granted 400,000 options to its
new Chief Medical Officer exercisable at CAD $2.96 for 5 years. 25% of these
options vested immediately upon granting. The remaining options will vest at a
rate of 25% on June 8, 2015, December 8, 2015, and June 8, 2016, respectively.

On March 16, 2015, the Company granted 100,000 options to a new
director exercisable at CAD $3.20 for 5 years. One third of these options vested
immediately upon granting. The remaining two thirds of the options will vest on
March 16, 2016, and March 16, 2017 respectively.

The continuity of stock options for the period ended March 31,
2015 and 2014 is as follows:

|                                      |  |            |   |   | Weighted       |  |   |                 | 
|------------------------------------- |  | ---------- | - | - | -------------- |  | - | --------------- | 
|                                      |  |            |   |   | Average        |  |   | Aggregate       | 
|                                      |  |            |   |   | Exercise Price |  |   | Intrinsic Value | 
|                                      |  | Number     |   |   | (CAD)          |  |   | (CAD)           | 
|Balance, March 31, 2013               |  | -          |   |   | -              |  |   |                 | 
|Granted                               |  | 3,230,031  |   | $ | 0.0003         |  | $ | -               | 
|                                      |  |            |   |   |                |  |   |                 | 
|Balance, March 31, 2014               |  | 3,230,031  |   | $ | 0.0003         |  | $ | -               | 
|Granted                               |  | 4,920,000  |   | $ | 1.14           |  | $ | -               | 
|Exercised                             |  | (3,230,031 | ) | $ | 0.0003         |  | $ | -               | 
|                                      |  |            |   |   |                |  |   |                 | 
|Balance outstanding at March 31, 2015 |  | 4,920,000  |   | $ | 1.14           |  | $ | 10,120,000      | 
|                                      |  |            |   |   |                |  |   |                 | 
|Balance exercisable at March 31, 2015 |  | 2,015,001  |   | $ | 1.41           |  | $ | 7,757,667       | 

The options outstanding and exercisable at March 31, 2015 are
as follows:

OptionsoutstandingremainingNumber of
    
    
    
    
    contractual life
    
    
    Exercise
    
    
    Grant date fair
    
    
    Number of optionsoptions
    
    Expiry date
    
    
    (years)
    
    
    Price (CAD)
    
    
    value (CAD)
    
    
    exercisable3,520,000
    
    June 18, 2019
    
    
    4.22
    
    $
    0.60
    
    $
    0.23
    
    
    1,173,333250,000
    
    June 20, 2019
    
    
    4.22
    
    $
    0.60
    
    $
    0.23
    
    
    125,000100,000
    
    July 14, 2017
    
    
    2.29
    
    $
    2.52
    
    $
    1.06
    
    
    100,000450,000
    
    December 8, 2019
    
    
    4.69
    
    $
    2.92
    
    $
    1.65
    
    
    450,000100,000
    
    December 8, 2019
    
    
    4.69
    
    $
    2.92
    
    $
    1.49
    
    
    33,334400,000
    
    December 8, 2019
    
    
    4.69
    
    $
    2.96
    
    $
    1.56
    
    
    100,000100,000
    
    March 16, 2020
    
    
    4.96
    
    $
    3.20
    
    $
    1.61
    
    
    33,3344,920,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,015,001


The weighted average grant date fair value of stock options
granted during the year ended March 31, 2015 of CAD$0.54 was estimated using the
Black-Scholes option pricing model with the following weighted average
assumptions: stock price  CAD$1.06; exercise price  CAD$1.14; expected
risk-free interest rate  1.08%; expected life  4.1 years; expected volatility
 67.85% and expected dividend rate  0%. 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.

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 accounted for as equity awards
until the terms associated with their vesting requirements have been met.

F-16

---

The non-employee stock options are accounted for at their
respective fair values and are summarized as follows for the years ended March
31, 2015 and 2014:

| |                                                                            |  | 2015      |  |  | 2014 | 
| | -------------------------------------------------------------------------- |  | --------- |  |  | ---- | 
| |                                                                            |  | $         |  |  | $    | 
| |                                                                            |  |           |  |  |      | 
| | Fair value of non-employee
      options, beginning of the period          |  | -         |  |  | -    | 
| | Fair value of non-employee options, at
      issuance                      |  | 767,879   |  |  | -    | 
| | Reallocation of vested
      non-employee options                          |  | 74,190    |  |  |      | 
| | Change in fair value of non-employee stock options during the
      period |  | 739,375   |  |  | -    | 
| |                                                                            |  |           |  |  |      | 
| | Fair
      value of non-employee options, end of the period                |  | 1,581,444 |  |  | -    | 

The non-employee options 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 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.

Stock-based compensation related to the grant of each of
employee and non-employee options is summarized as follows for the years ended
March 31, 2015 and 2014 and for the period from January 22, 2013 (date of
inception) to March 31, 2013:

|Date of grant          |  | Number     |   |  | 2015      |  |  | 2014    |  |  | 2013 | 
|---------------------- |  | ---------- | - |  | --------- |  |  | ------- |  |  | ---- | 
|                       |  |            |   |  | $         |  |  | $       |  |  | $    | 
|                       |  |            |   |  |           |  |  |         |  |  |      | 
|Employee options       |  |            |   |  |           |  |  |         |  |  |      | 
|                       |  |            |   |  |           |  |  |         |  |  |      | 
|April 1, 2013          |  | 930,031    |   |  | -         |  |  | 247,075 |  |  | -    | 
|October 30, 2013       |  | 2,300,000  |   |  | 50,303    |  |  | 560,082 |  |  | -    | 
|June 19, 2014          |  | 3,370,000  |   |  | 283,962   |  |  | -       |  |  | -    | 
|July 14, 2014          |  | 75,000     |   |  | 74,190    |  |  | -       |  |  | -    | 
|December 8, 2014       |  | 100,000    |   |  | 43,229    |  |  | -       |  |  | -    | 
|December 8, 2014       |  | 400,000    |   |  | 135,564   |  |  | -       |  |  | -    | 
|March 16, 2015         |  | 100,000    |   |  | 41,987    |  |  | -       |  |  | -    | 
|                       |  | 7,275,031  |   |  | 629,235   |  |  | 807,157 |  |  | -    | 
|Options exercised      |  | (3,230,031 | ) |  | -         |  |  | -       |  |  | -    | 
|                       |  | 4,045,000  |   |  |           |  |  |         |  |  |      | 
|                       |  |            |   |  |           |  |  |         |  |  |      | 
|Non-employee *options* |  |            |   |  |           |  |  |         |  |  |      | 
|                       |  |            |   |  |           |  |  |         |  |  |      | 
|June 19, 2014          |  | 400,000    |   |  | 97,094    |  |  | -       |  |  | -    | 
|July 14, 2014          |  | 25,000     |   |  | 24,730    |  |  | -       |  |  | -    | 
|December 8, 2014       |  | 450,000    |   |  | 646,055   |  |  | -       |  |  | -    | 
|                       |  | 875,000    |   |  | 767,879   |  |  | -       |  |  | -    | 
|                       |  | 4,920,000  |   |  | 1,397,114 |  |  | 807,157 |  |  | -    | 

Share-based payments are classified in the Companys Statement
of Loss as follows for the years ended March 31, 2015 and 2014 and for the
period from January 22, 2013 (date of inception) to March 31, 2013:

|                         |  | 2015      |  |  | 2014    |  |  | 2013      | 
|------------------------ |  | --------- |  |  | ------- |  |  | --------- | 
|                         |  | $         |  |  | $       |  |  | $         | 
|                         |  |           |  |  |         |  |  |           | 
|Consulting fees          |  | 894,817   |  |  | 807,157 |  |  | 4,250,000 | 
|Research and development |  | 50,303    |  |  | -       |  |  | 4,250,000 | 
|Wages and salaries       |  | 451,994   |  |  | -       |  |  |           | 
|                         |  |           |  |  |         |  |  |           | 
|                         |  | 1,397,114 |  |  | 807,157 |  |  | 8,500,000 | 

F-17

---

At March 31, 2015, the aggregate unamortized stock based
compensation cost remaining to be recognized totals $1,021,495 with $838,268
expected to be recognized in the year ended March 31, 2016 and $183,227 expected
to be recognized in the fiscal year ended March 31, 2017.

The Company used the Black Scholes option pricing model to
estimate the fair value of the options as the fair value of the services
provided could not be reliably calculated. The following assumptions were
used:

|                             |  |      |  |  | March 31, 2015 |  |  | March 31, 2014 | 
|---------------------------- |  | ---- |  |  | -------------- |  |  | -------------- | 
|Stock Price                  |  | CAD$ |  |  | 0.50  3.18    |  |  | 0.27           | 
|Exercise Price               |  | CAD$ |  |  | 0.60  3.20    |  |  | 0.0003         | 
|Risk-free interest rate (%)  |  |      |  |  | 0.53  1.42    |  |  | 1.20  1.65    | 
|Dividend yield (%)           |  |      |  |  | 0.00           |  |  | 0.00           | 
|Expected volatility (%)      |  |      |  |  | 67.85          |  |  | 97.73  116.82 | 
|Expected option life (years) |  |      |  |  | 3.00  5.00    |  |  | 4.33  5.00    | 

The Black Scholes option pricing model was developed for use in
estimating the fair value of share options that have no vesting provisions and
are fully transferable. Also, option-pricing models require the use of estimates
and assumptions including the expected volatility. The Company uses expected
volatility rates which are based upon the average volatility rates of other
companies in the same industry, due to the Companys limited history. The
Company based the current stock price on the value per shares issued to date.
Changes in the underlying assumptions can materially affect the fair value
estimates.

|(b) | Share Purchase Warrants
|--- | -----------------------

The Company closed its Private Placement at CAD $0.50 per unit
of 15,240,000 units raising CAD $7.62 million on May 30, 2014. 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 share.

The proceeds of the private placement were allocated between
the common shares and the warrants on a relative fair value basis with an amount
of $578,961 allocated to the warrants. In addition, the Company issued 824,400
finders warrants exercisable at CAD $1.00 for 2 years. The fair value of the
finders warrants was determined to be $67,709.

The fair values attributable to the warrants were determined by
using the Black Scholes model based on the following assumptions:

|Stock price                  |  | CAD$0.50 | 
|---------------------------- |  | -------- | 
|Exercise price               |  | CAD$1.00 | 
|Risk-free interest rate (%)  |  | 1.09     | 
|Dividend yield (%)           |  | -        | 
|Expected volatility (%)      |  | 67.85    | 
|Expected option life (years) |  | 1.17     | 

The continuity of warrants for the period ended March 31, 2015
and 2014 is as follows:

|                                 |  |           |  |   | Warrants Outstanding            | 
|-------------------------------- |  | --------- |  | - | ------------------------------- | 
|                                 |  | Number of |  |   | Weighted Average Exercise Price | 
|                                 |  | warrants  |  |   |                                 | 
|Balance, March 31, 2013 and 2014 |  | -         |  | $ | -                               | 
|Granted                          |  | 8,444,400 |  | $ | CAD 1.00                        | 
|Balance, March 31, 2015          |  | 8,444,400 |  | $ | CAD 1.00                        | 

The warrants outstanding and exercisable at March 31, 2015 are
as follows:

|                               |   |                      |  |   | Grant date       |  |  |              | 
|------------------------------ | - | -------------------- |  | - | ---------------- |  |  | ------------ | 
|Number of warrants outstanding |   | Exercise Price (CAD) |  |   | Fair value (CAD) |  |  | Expiry Date  | 
|7,620,000                      | $ | 1.00                 |  | $ | 0.0899           |  |  | May 30, 2016 | 
|824,400                        | $ | 1.00                 |  | $ | 0.0899           |  |  | May 30, 2016 | 

F-18

---

|7. | INCOME TAXES
|-- | ------------

The components of net loss for the years ended March 31, 2015
and 2014 and for the period from January 22, 2013 (date of inception) to March
31, 2013 are as follows:

|         |  | 2015      |  |  | 2014      |  |  | 2013      | 
|-------- |  | --------- |  |  | --------- |  |  | --------- | 
|         |  | $         |  |  | $         |  |  | $         | 
|         |  |           |  |  |           |  |  |           | 
|U.S      |  | 8,358,226 |  |  | 1,067,284 |  |  | 8,517,850 | 
|Non-U.S. |  | 536,329   |  |  | -         |  |  | -         | 
|         |  |           |  |  |           |  |  |           | 
|         |  | 8,894,555 |  |  | 1,067,284 |  |  | 8.517,750 | 

A reconciliation of the income tax provision computed at
statutory rates to the reported income tax provision for the years ended March
31, 2015 and 2014 is as follows:

|                                                                 |  | 2015       |   |  | 2014       |   |  | 2013       |  
|---------------------------------------------------------------- |  | ---------- | - |  | ---------- | - |  | ---------- | -
|                                                                 |  | $          |   |  | $          |   |  | $          |  
|Statutory tax rate                                               |  | 34.00%     |   |  | 25.00%     |   |  | 25%        |  
|Loss
      before income taxes                                   |  | (8,894,555 | ) |  | (1,067,284 | ) |  | (8,517,850 | )
|Expected income tax recovery                                     |  | (3,024,000 | ) |  | (270,000   | ) |  | (2,151,000 | )
|Increase (decrease) in income tax recovery
      resulting from: |  |            |   |  |            |   |  |            |  
|Derivative liability                                             |  | 251,000    |   |  | -          |   |  |            |  
|Share based
      payments                                       |  | 475,000    |   |  | 275,000    |   |  | 2,890,000  |  
|Other permanent difference                                       |  | 12,000     |   |  |            |   |  |            |  
|Share issue costs                                                |  | (140,000   | ) |  | -          |   |  |            |  
|Effect of change in statutory rate                               |  | (41,000    | ) |  | (93,000    | ) |  | (745,000   | )
|Effect of foreign
      exchange                                 |  | 89,000     |   |  | -          |   |  |            |  
|Foreign income taxed at foreign rate                             |  | 14,000     |   |  | -          |   |  |            |  
|Increase in valuation allowance                                  |  | 2,364,000  |   |  | 88,000     |   |  | 6,000      |  
|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,
2015 and 2014 are as follows:

|                                               |  | 2015       |   |  | 2014    |   |  | 2013   |  
|---------------------------------------------- |  | ---------- | - |  | ------- | - |  | ------ | -
|                                               |  | $          |   |  | $       |   |  | $      |  
|                                               |  |            |   |  |         |   |  |        |  
|                                               |  |            |   |  |         |   |  |        |  
|Deferred income tax assets
      (liabilities) |  |            |   |  |         |   |  |        |  
|Operating losses carried forward               |  | 2,074,000  |   |  | 94,000  |   |  | 6,000  |  
|Intangible costs                               |  | 285,000    |   |  |         |   |  |        |  
|Share issuance costs                           |  | 99,000     |   |  | -       |   |  |        |  
|Valuation allowance                            |  | (2,458,000 | ) |  | (94,000 | ) |  | (6,000 | )
|                                               |  |            |   |  |         |   |  |        |  
|                                               |  |            |   |  |         |   |  |        |  
|Net
      deferred income tax asset            |  | -          |   |  | -       |   |  | -      |  

At March 31, 2015, the Company has accumulated non-capital
losses totaling $1,463,000 in Canada and net operating losses of $5,853,000 in
the USA, which are available to carry forward and offset future years taxable
income. The losses expire in various amounts from 2016 to 2034.

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.

F-19

---

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. The Company is subject to tax examinations by tax authorities
for all taxation years commencing after 2014.

At March 31, 2015, 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.

|8. | COMMITMENTS AND
CONTINGENCIES
|-- | -----------------------------

|(a) | 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 (Note 5), 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(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 2ndsoftware
      development cycle is $586,000, of which $3,099,998 was expensed as
      research and development since inception to March 31, 2015. The estimated
      duration of the project is 10 months. Invoices are to be issued monthly
      for work in progress. The Company can cancel the project at anytime with a
      written notice at least 30 days prior to the intended date of
      cancellation. As of March 31, 2015, the Company recorded a prepaid expense
      of $300,000 to Ximedica which will be applied at the end of the project.
      During the year ended March 31, 2015, the Company incurred charges of
      $2,928,289 (March 31, 2014 - $171,781) pursuant to this
  agreement.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(c) | On January 5, 2015, Wicab filed a complaint against us,
      two of our directors, Yuri Danilov and Mitch Tyler, 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 Danilovs and
      Tylers prior employment with Wicab and our two issued patents for the
      PoNS device. 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 our two issued patents are therefore rightfully the property of
      Wicab. The complaint sought an unspecified amount of monetary damages, an
      injunction preventing us from using the ideas and inventions in the two
      patents, an order transferring ownership of the patents from us to Wicab,
      and recovery of costs and attorneys fees. The complaint was voluntarily
      dismissed without prejudice on January 14, 2015.                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(d) | 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, and at this point  management is unable to determine the outcome of this matter.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

|9. | RELATED PARTY TRANSACTIONS
|-- | --------------------------

For the year ended March 31, 2015, the Company was a party to
the following related party transactions:

During the period ended March 31, 2015, the Company paid $6,610
(March 31, 2014 - $nil; March 31, 2013 - $nil) in consulting fees to a former
director of the Company.

During the period ended March 31, 2015, the Company paid
$47,100 (March 31, 2014 - $nil; March 31, 2013 - $nil) in consulting fees to
directors of the Company.

During the period ended March 31, 2015, the Company paid
$99,146 (March 31, 2014 - $nil; March 31, 2013 - $nil) to a company acting as
the Companys corporate advisor and Chief Financial Officer.

F-20

---

|10. | SUPPLEMENTAL CASH FLOW
  INFORMATION
|--- | ------------------------------------

Investing and financing activities that affect recognized
assets or liabilities but that do not result in cash receipts or cash payments
are excluded from the consolidated statements of cash flows. During the year
ended March 31, 2015, the following transactions were excluded from the
consolidated statement of cash flows:

|(a) | 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. (Note 4)                                           
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) | The Company recorded a beneficial conversion feature of
      $176,488 in respect of a qualifying transaction recorded in connection
      with the convertible debenture ( Note 4)                          
|(c) | 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. (Note
  3).

|11. | SUBSEQUENT EVENTS
|--- | -----------------

The Company has evaluated subsequent events through the date of
the issuance of the financial statements.

On April 30, 2015 the Company closed a non-brokered private
placement (the Financing) raising gross proceeds of CAD $2,208,110
(approximately USD $1,825,937) by the issuance of 849,273 units (each a Unit)
at a price of CAD $2.60 per Unit (USD $2.15 per Unit). Each Unit consists of one
(1) common share and one half of one (1/2) common share purchase warrant (each a
Warrant). Each whole Warrant entitles the holder thereof to purchase one
additional common share of the Company at a price of approximately CAD $3.62 per
share (USD $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 CAD 101,494 (USD
$84,074) in connection with this Financing, as well as 27,396 finders warrants
(the Finders Warrants). Each Finders Warrant entitles the holder thereof to
purchase one additional common share of the Company at a price of CAD $3.62 per
share (USD $3.00 per share) for a period of thirty-six (36) months from the
closing date of the Financing.

On April 29, 2015, 14,400 finders warrants were exercised for
gross proceeds of CAD $14,400.

F-21

---

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 June 29, 2015 | 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: June 29, 2015Philippe DeschampsPresident, Chief Executive
      Officer and aDirectorBy
    /s/ Amanda Tseng
    
    Date: June 29, 2015Amanda TsengChief Financial Officer
      (Principal AccountingOfficer), and Corporate
      SecretaryBy
    /s/ Savio Chiu
    
    Date: June 29, 2015Savio ChiuDirectorBy
    /s/ Yuri P. Danilov
    
    Date: June 29, 2015Yuri P. DanilovDirectorBy
    /s/ Mitchell E. Tyler
    
    Date: June 29, 2015Mitchell E. TylerDirectorBy
    /s/ Edward M. Straw
    
    Date: June 29, 2015Edward M. StrawDirectorBy
    /s/ Joyce LaViscount
    
    Date: June 29, 2015Joyce LaViscountDirector


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