EDAP TMS SA

NOTE 1. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The accompanying unaudited condensed consolidated financial statements of EDAP TMS S.A. and its subsidiaries (collectively, the “Company,” “we,” “us” or “our”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) for interim financial information, including Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements.

Effective January 1, 2026, the Company no longer qualified as a “Foreign Private Issuer” as defined in Rule 3b-4 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and became a U.S. domestic issuer. The Company also qualifies as a “smaller reporting company” as defined under the rules of the SEC. This Quarterly Report on Form 10-Q (this “Quarterly Report”) is the Company’s first quarterly report filed as a U.S. domestic issuer.

These unaudited condensed consolidated financial statements have been prepared on the same basis as, and should be read in conjunction with, the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025, filed with the SEC on March 25, 2026 (the “2025 Annual Report”). In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the financial position, results of operations, and cash flows for the interim periods presented have been included. Operating results for the three months ended March 31, 2026 are not necessarily indicative of the results that may be expected for the full fiscal year ending December 31, 2026.

The Company has a history of operating losses and expects such losses to continue in the foreseeable future. As of March 31, 2026, the Company had$15.0 million in cash and cash equivalents, a decrease of$5.4 million from December 31, 2025. The Company drew Tranche B of its credit facility (the “Credit Facility”) established pursuant to that certain finance contract (the “Finance Contract”), dated October 17, 2025, with European Investment Bank (“EIB”), for€12 million in April 2026 (refer to note 19). With these additional proceeds, the Company believes it will have sufficient funds to support its operations for at least a period of twelve months from the date of issue of these interim condensed consolidated financial statements.

However, the Company may need to raise substantial additional financing in order to meet its cash flow needs in the subsequent period and until it achieves profitability. The Company may not be able to raise additional financing on acceptable terms or at all and this condition may in the future raise uncertainty regarding its ability to continue as a going concern. Management is actively exploring various alternatives, including seeking additional funding through the debt and equity capital markets, cost-cutting measures, and restructuring opportunities, but there is no assurance that these efforts will be successful or sufficient to address these liquidity concerns. If the Company is unable to raise capital when needed on acceptable terms, or at all, the Company may be forced to restructure its business or delay, reduce, or terminate its research and product development programs, future commercialization efforts or other operations

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Significant Accounting Policies

There have been no changes in the Company’s significant accounting policies as disclosed in Note 1 to the audited consolidated financial statements included in the 2025 Annual Report.

Recently Adopted Accounting Pronouncements

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09,Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which enhances transparency by requiring additional disclosures related to income taxes. The amendments primarily require:

•a tabular reconciliation of the effective tax rate to the statutory rate, including both dollar amounts and percentages, with separate disclosure of items that are equal to or greater than 5% of the statutory rate; and

•disaggregation of income taxes paid between federal, state, and foreign jurisdictions, and identification of any individual jurisdiction that accounts for 5% or more of total income taxes paid.

The guidance is effective for annual periods beginning after December 15, 2024, with early adoption permitted.

There have been no recently issued accounting standards that are expected to have a material impact on our results of operations, financial condition, or cash flows.

Accounting Pronouncements Not Yet Adopted

The FASB has not issued any accounting standards updates during the first three months ended March 31, 2026. For information on accounting pronouncements issued in prior years but not yet adopted, refer to Note 1-25 to the audited consolidated financial statements included in the Company’s 2025 Annual Report.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s consolidated financial statements upon adoption.

NOTE 3. TRADE ACCOUNTS AND NOTES RECEIVABLE, NET

Trade accounts and notes receivable consisted of the following as of March 31, 2026 and 2025:

Notes receivable usually represent commercial bills of exchange with initial maturities of 90 days or less.

Bad debt expenses amount to a net cost of $182 thousand and a net cost of $18 thousand for the three months ended March 31, 2026 and March 31, 2025, respectively.

NOTE 4. INVENTORIES

The provision for slow moving inventory relates to components and spare parts. The increase in the allowance for slow moving inventory (excluding exchange rate impact), which are classified within cost of sales, amounted to $42 thousand for the three months ended March 31, 2026 and $81 thousand for the three months ended March 31, 2025.

NOTE 5. GOODWILL AND INTANGIBLE ASSETS

As discussed in Note 1-13 of the 2025 Annual Report, ASC 350 requires that goodwill not be amortized but instead be tested at least annually for impairment, or more frequently when events or change in circumstances indicate that the asset might be impaired, by comparing the carrying value to the fair value of the reporting unit to which they are assigned. The Company considers its ASC 280 operating segments—High Intensity Focused Ultrasound (“HIFU”), Lithotripsy (“ESWL”) and Distribution services (“Distribution”)—to be its reporting units for purposes of testing for impairment. Goodwill amounts to $570 thousand for the ESWL division, $1,461 thousand for the Distribution division and to $741 thousand for the HIFU division, at March 31, 2026.

The Company completed the required annual impairment test in the fourth quarter of 2025. To determine the fair value of the Company’s reporting units, the Company used the discounted cash flow approach for each of thethree reportable units. In all three cases, the fair value of the reporting unit was in excess of the reporting unit’s book value, which resulted inno goodwill impairment. Since the annual impairment test in the fourth quarter of 2025, the Company has not identified events or change in circumstances indicating that the goodwill might be impaired.

Intangible assets consisted of the following as of March 31, 2026 and December 31, 2025:

Amortization expenses related to intangible assets amounted to $84 thousand and $58 thousand for the three months ended March 31, 2026 and March 31, 2025, respectively.

NOTE 6. LONG TERM DEBT

The Company has the following outstanding debt as of March 31, 2026 and December 31, 2025:

EIB Credit Facility and Warrants

On October 17, 2025, EDAP entered into the Finance Contract with EIB for up to €36 million to support the research and development (“R&D”) of EDAP’s Robotics HIFU programs. The Finance Contract provides funding inthree tranches : €11 million (“Tranche A”), €12 million (“Tranche B”) and €13 million (“Tranche C”) subject to satisfaction of condition precedents. In connection with the Finance Contract, the Company also agreed to issue warrants (“Warrants”) for each tranche in accordance with the terms and conditions of a warrant agreement (the “Warrant Agreement”).

The Tranche A borrowings and the Tranche A Warrants are each defined as freestanding financial instruments in accordance with ASC 480-10-20. At inception, the proceeds are allocated between i) the Warrants at their initial fair value and (ii) a debt component for the residual amount. Subsequently, the Warrants are remeasured at fair value with changes in fair value reflected in earnings and the debt component is accounted for at amortized cost.

EIB – Tranche A Warrants

On October 17, 2025, the Company issued 2,624,421 Warrants to EIB as a condition to the financing of Tranche A.

The Warrant Agreement includes a put option: EIB may request the Company to buy back the Warrants in cash for their fair market value as determined in accordance with the valuation principles set out in the Warrant Agreement. The amount is capped at $23.5 million, and EIB may exercise the Warrants for which they did not exercise the put option.

Puttable warrants that permit the counterparty to require the issuer to pay cash to settle the warrant or to purchase the shares obtained upon exercise of the warrants, freestanding warrants and other similar instruments on shares that are redeemable require liability classification under ASC 480.

The Tranche A Warrants were classified as a liability at inception (on October 17, 2025) and then changes in fair value are recognized in earnings in subsequent periods. The fair value of the Tranche A Warrants amounted to $8.1 million on December 31, 2025 and $9.2 million on March 31, 2026, resulting in $1.1 million of loss for the three months ended March 31, 2026.

EIB Credit Facility – Tranche A – Financial debt at amortized cost

Tranche A borrowings of $12.4 million were recognized as financial debt for the residual amount of $6.9 million as of December 31, 2025, which took into account the fair value of the derivative instrument (warrants) at inception and the borrowing costs of $0.8 million. The amortized cost of the financial debt amounted to $7.6 million as of March 31, 2026, with an effective interest rate of 21.63%.

The carrying value of the EIB borrowings and Warrants was as follows as of March 31, 2026 and December 31, 2025:

Other Loans

NOTE 7. PENSION AND OTHER BENEFIT PLANS

The Company does not have a funded benefit plan. The following is a reconciliation of pension cost components for the three months ended March 31, 2026 and 2025:

NOTE 8. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The components of accumulated other comprehensive income (loss) net of tax, for the three months ended March 31, 2026 and 2025, were as follows:

NOTE 9. TOTAL SALES

The amount of total sales derived from our operations in Asia, France, the United States and other geographical areas, were as follows for the three months ended March 31, 2026 and 2025:

The amount of sales is recognized on the following timing:

NOTE 10. SHAREHOLDER’S EQUITY

During the three months ended March 31, 2026, the Company granted 76,000 time-based stock-options to employees that vest over three years and 18,000 time-based free shares (referred to herein as “restricted stock units”) to employees that vest over four years.

NOTE 11. INCOME TAXES

For interim periods, the Company’s income tax expense or benefit is computed based on its estimated annual effective tax rate and any discrete items that impact the interim periods. For the three months ended March 31, 2026, and 2025, the Company recorded a tax expense of $145 thousand and $144 thousand, respectively. The estimated annual effective tax rates for all periods were impacted by losses in jurisdictions where the recording of a tax benefit is not available. Furthermore, the tax expense or benefit recorded can vary from period to period depending on the Company’s relative mix of earnings and losses by jurisdiction.

The Company has tax carryforwards in the United States and in certain states and foreign jurisdictions. We have deferred tax assets related to net operating loss and other tax carryforwards in the U.S. and in certain states and foreign jurisdictions. We recognize a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized.

NOTE 12. LOSS PER SHARE

The effects of dilutive securities, for the three months ended March 31, 2026, and 2025 were excluded from the calculation of diluted LPS as a net loss was reported in these periods.

NOTE 13. COMMITMENTS AND CONTINGENCIES

Commitments

The Company currently has commitments regarding its operating leases as described in Note 13-2 to the audited consolidated financial statements included in the Company’s 2025 Annual Report.

Contingencies

The Company currently has contingencies relating to standard warranties provided to customers for products as described in Note 1-15 and Note 12 to the audited consolidated financial statements included in the Company’s 2025 Annual Report.

NOTE 14. FAIR VALUE OF FINANCIAL INSTRUMENTS

The following disclosure of the estimated fair value of financial instruments was made in accordance with the requirements of ASC 820 “Disclosure about fair value of financial instruments” and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value.

ASC 820 defines three levels of inputs that may be used to measure fair value and requires that the assets or liabilities carried at fair value be disclosed by the input level under which they were valued. The input levels are defined as follows:

Level 1: Quoted (unadjusted) prices in active markets for identical assets and liabilities that the reporting entity can access at the measurement date.

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3: Unobservable inputs for the asset or liability.

The recorded amount of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities and short-term borrowings are a reasonable estimate of their fair value due to the short-term maturities of these instruments. As of March 31, 2026 and December 31, 2025, the Company did not have any other asset or liability measured at fair value, other than the Tranche A Warrants issued in connection with the Credit Facility (see note 6).

As of March 31, 2026 and December 31, 2025, the fair value of the Company’s long-term debt was not materially different from the carrying value.

NOTE 15. CONCENTRATION OF CREDIT RISK

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash and cash equivalents and trade accounts and notes receivable from customers, primarily located in France, Japan and the United States. The Company maintains cash deposits with major banks. Management periodically assesses the financial condition of these institutions and believes that credit risk is limited.

The Company has implemented procedures to monitor the creditworthiness of its customers. The Company obtains bank guarantees for first time or infrequent unknown customers, and in certain cases obtains insurance against the risk of a payment default by the customer. The Company reviewed individual customer balances considering current and historical loss experience and general economic conditions in determining the allowance for doubtful accounts receivable of $0.7 million and $0.5 million, as of March 31, 2026 and December 31, 2025, respectively.

Actual losses may vary from the current estimates, and any adjustments are reported in earnings in the periods in which they become known.

For the three months ended March 31, 2026 and for the year ended December 31, 2025, the Company did not generate more than 10% of its revenue from a single customer.

**NOTE 16.**FOREIGN CURRENCY TRANSACTIONS

The Company generates a significant percentage of its revenues, and of its operating expenses, in currencies other than the Euro. The Company’s operating profitability could be materially adversely affected by large fluctuations in the rate of exchange between the Euro and such other currencies. The Company may engage in foreign exchange hedging activities when deemed necessary, but there can be no assurance that hedging activities will be offset by the impact of movements in exchange rates on the Company’s results of operations. As of March 31, 2026, there were no outstanding hedging instruments.

NOTE 17.** DIVISION INFORMATION (**SEGMENT REPORTING)

Our activity is organized into three reportable segments corresponding to ourthree divisions: HIFU, ESWL (including lithotripsy activities) and Distribution. Through these three divisions, we develop, produce, market and distribute non-invasive medical devices, mainly for urological diseases. HIFU division includes sales of Focal One, and related consumables and services, ESWL division includes revenues generated by the existing Sonolith range of lithotripters and, Distribution division includes the sale of complimentary products such as lasers, micro-ultrasound systems and other products from third parties.

The organization of our activities into three divisions better clarified our vision and enhanced our financial reporting of ourthree businesses HIFU, ESWL and Distribution. This new structure also allows for an improved measurement of our business progress.

The business in which the Company operates is the development, production and distribution of non-invasive medical devices, primarily for the treatment of urological diseases. The divisions derive their revenues from this activity.

The following tables set forth the key statement of income (loss) figures by segment for the three months ended March 31, 2026 and 2025, and the key balance sheet figures by segment as of March 31, 2026 and 2025. Division operating profit or loss and division assets are determined in accordance with the same policies as those described in the summary of significant accounting policies and they are reviewed by the chief operating decision maker (the “CODM”), who is the Chief Executive Officer of the Company. The CODM uses operating income (loss) as the measure of profit or loss to allocate resources, assess performance, and monitor budgets against actual results. A reconciliation of segment operating profit or loss to consolidated net loss is as follows:

A summary of the Company’s operations by segment is presented below for the three months ended March 31, 2026, and 2025:

**NOTE 18.**SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Interest and income taxes paid were as follows for the three months ended March 31, 2026 and 2025:

NOTE 19— SUBSEQUENT EVENTS

On April 1, 2026, the Company requested disbursement of Tranche B borrowings of €12.0 million under the EIB Finance Contract, and in connection therewith issued 1,116,244 Tranche B Warrants to EIB to purchase up to 1,116,244 ordinary shares at a strike price of €3.23 per ordinary share. The Tranche B borrowings were disbursed by EIB on April 20, 2026, will mature five years from the disbursement date, and bear interest payable on the maturity date.