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.

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 nine months ended September 30, 2026 are not necessarily indicative of the results that may be expected for the full fiscal year ending December 31, 2026.

Discontinued Operations

On May 28, 2026, the Company’s Board of Directors approved a plan to exit the Company’s ESWL and Distribution reportable segments in order to concentrate the Company’s resources on its robotic focal therapy business built around the Focal One® HIFU platform. The Company publicly announced the planned exit on May 29, 2026. During the second quarter of 2026, the ESWL and Distribution segments met the criteria to be classified as held for sale under ASC 205-20, Presentation of Financial Statements — Discontinued Operations, and ASC 360-10, Property, Plant, and Equipment, and the Company determined that the planned exit represents a strategic shift that will have a major effect on the Company’s operations and financial results. Accordingly, the results of the ESWL and Distribution segments are reported as discontinued operations in the condensed consolidated statements of operations for all periods presented, and the related assets and liabilities are presented separately as assets and liabilities of discontinued operations in the condensed consolidated balance sheets as of September 30, 2026 and December 31, 2025. The condensed consolidated statements of cash flows have not been adjusted to separately disclose cash flows related to discontinued operations. The Company has reclassified certain prior year amounts to conform to the current year’s presentation for discontinued operations. Unless otherwise noted, amounts and disclosures in these notes relate to the Company’s continuing operations. The disposal groups were measured at the lower of their carrying amount and fair value less costs to sell. No impairment loss was recognized upon classification as held for sale, as the carrying amount of each disposal group did not exceed its fair value less costs to sell. In accordance with ASC 360-10, depreciation and amortization of the long-lived assets of the disposal groups ceased upon their classification as held for sale. See Note 18, Discontinued Operations.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Significant Accounting Policies

Except as described below with respect to discontinued operations, 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.

Discontinued Operations and Assets Held for Sale

The Company classifies a component or group of components as held for sale in the period in which all of the criteria in ASC 205-20-45-1E are met, including management’s commitment to a plan of sale, availability for immediate sale in present condition, an active program to locate a buyer, probability of sale within one year, active marketing at a price reasonable in relation to fair value, and a low likelihood of significant changes to, or withdrawal of, the plan. A disposal is reported as a discontinued operation when it represents a strategic shift that has, or will have, a major effect on the Company’s operations and financial results. Disposal groups classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell, and depreciation and amortization of long-lived assets ceases upon classification. The results of discontinued operations are presented separately, net of tax, for all periods presented, and the related assets and liabilities are presented separately for all balance sheet periods presented.

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 nine months ended September 30, 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 for HIFU consisted of the following as of:

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

Bad debt expenses amount to a net cost of $190 thousand and a net cost of $14 thousand for the nine months ended September 30, 2026 and 2025, respectively.

NOTE 4. INVENTORIES

HIFU Inventories consisted of the following as of:

The provision for slow moving inventory relates to components and spare parts. The decrease in the allowance for slow moving inventory is mainly due to exchange rate impact and write off.

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. Goodwill amounted to $732 thousand, at September 30, 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. The fair value of the reporting unit was in excess of the reporting unit’s book value, which resulted inno goodwill impairment. With respect to its continuing operations, the Company has not identified events or changes in circumstances indicating that goodwill might be impaired as of September 30, 2026.

Intangible assets consisted of the following as of:

Amortization expenses related to intangible assets amounted to $275 thousand and $219 thousand for the nine months ended September 30, 2026 and 2025, respectively.

NOTE 6. LONG TERM DEBT

The Company has the following outstanding debt as of September 30, 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 and B borrowings and the Tranche A and B 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.

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.

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 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$11.1 million on September 30, 2026, resulting in $3.0 million of financial expense for the nine months ended September 30, 2026.

The following table presents fair value as of:

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 $8.2 million as of September 30, 2026, with an effective interest rate of 21.63%.

The carrying value of the EIB Tranche A borrowings and Tranche A Warrants was as follows as of September 30, 2026 and December 31, 2025:

EIB – Tranche B Warrants

On April 1, 2026, the Company issued 1,116,244 Warrants to EIB as a condition to the financing of Tranche B.

The Tranche B Warrants were classified as a liability at inception (on April 1, 2026) and their changes in fair value are recognized in earnings in subsequent periods. The fair value of the Tranche B Warrants amounted to $3.8 million on their issuance date and then the closing value on September 30, 2026 amounted $4.6 million, resulting in $0.8 million of financial expense.

The following table presents fair value as of:

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

Tranche B borrowings of $13.7 million were recognized as financial debt for the residual amount of $9.9 million at the issuance date, which took into account the fair value of the derivative instrument (warrants) at inception. The amortized cost of the loan amounted to $10.4 million as of September 30, 2026, with an effective interest rate of 13.35%.

The carrying value of the EIB Tranche B borrowings and Tranche B Warrants was as follows as of September 30, 2026:

Other Loans

The following summarizes other loan facilities as of:

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 nine months ended:

NOTE 8. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The components of accumulated other comprehensive income (loss) net of tax were as follows:

NOTE 9. TOTAL SALES

The amount of total sales derived from our continuing operations in Asia, France, the United States and other geographical areas, were as follows:

The amount of sales is recognized on the following timing:

(in thousands of U.S. dollars

NOTE 10. SHAREHOLDERS’ EQUITY

During the three months ended September 30, 2026, the Company granted 245,000 time-based stock-options to certain employees that vest over three years.

On September 15, 2026, pursuant to the June 26, 2026 Shareholders resolution, the Board of Directors approved a new 2026 RSU plan and approved the filing of the corresponding Form S-8 to register the shares underlying the free shares issuable pursuant to such plan.

Underwritten Public Offering

On August 11, 2026, the Company priced an underwritten public offering of 8,425,000 American Depositary Shares ("ADSs"), each representingone ordinary share, with a nominal value of €0.13 per share, at a public offering price of $4.75 per ADS, which closed on August 14, 2026. On August 14, 2026, the underwriters exercised in full their option to purchase an additional 1,263,750 ADSs at the public offering price, less underwriting discounts and commissions. The issuance of the ADSs, pursuant to the underwriters' option, closed on August 19, 2026.

The Company received total gross proceeds of approximately $46.0 million, including the underwriters' option, and net proceeds of approximately $42.4 million, after deducting underwriting discounts and commissions of approximately $2.8 million and offering expenses of approximately $0.8 million. The ADSs were offered pursuant to the Company's shelf registration statement on Form S-3 (File No. 333-294597), which was declared effective on March 31, 2026, and the related prospectus supplement dated August 11, 2026.

The Company intends to use the net proceeds as described under “Use of Proceeds” in the prospectus supplement date August 11, 2026.

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 nine months ended September 30, 2026 and 2025, the Company recorded a tax expense of $40 thousand and $39 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.

(unaudited

NOTE 12. LOSS PER SHARE

The effects of dilutive securities, for the three and nine months ended September 30, 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 September 30, 2026 and December 31, 2025, the Company did not have any other asset or liability measured at fair value, other than the Tranche A and Tranche B Warrants issued in connection with the Credit Facility (see note 6).

As of September 30, 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 September 30, 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 and nine months ended September 30, 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 US$. The Company’s operating profitability could be materially adversely affected by large fluctuations in the rate of exchange between the US$ 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 September 30, 2026, there were no outstanding hedging instruments.

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

Historically, the Company’s activities were organized into three divisions, each of which was a reportable segment: High Intensity Focused Ultrasound (“HIFU”), Lithotripsy (“ESWL”) and Distribution services (“Distribution”). As described in Note 18, on May 28, 2026 the Board of Directors approved a plan to exit the ESWL and Distribution segments to focus the Company exclusively on its HIFU business, and those segments are reported as discontinued operations for all periods presented. Following that classification, HIFU is the Company’ssole continuing reportable segment. The chief operating decision maker, the Company’s Chief Executive Officer, reviews segment operating income or loss for purposes of allocating resources and assessing performance. Segment information for all periods presented below has been recast to reflect the ESWL and Distribution segments as discontinued operations.

A summary of the Company’s operations by segment is presented below for the three and nine months ended September 30, 2026, and 2025:

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NOTE 18. DISCONTINUED OPERATIONS

Background and Plan of Disposal

On May 28, 2026, the Board of Directors approved a plan to discontinue and exit the Company’s ESWL and Distribution reportable segments and delegated authority to management to develop and implement the related disposal plans. The exit implements the Company’s strategic realignment, announced on May 29, 2026 together with the Company’s new FocalTherics corporate identity, to focus the Company exclusively on its robotic focal therapy business built around the Focal One® HIFU platform.

The ESWL segment consists of the Company’s extracorporeal shock wave lithotripsy activities, including systems, mobile treatment activities, service arrangements, spare parts and consumable electrodes, and related personnel and intellectual property. The Distribution segment distributes third-party medical devices, including lasers, imaging, and urodynamics products and related consumables and spare parts, through the Company’s subsidiaries in Japan, South Korea, Malaysia and Germany.

Expected Manner and Timing of Disposal

The Company expects to dispose of the ESWL and Distribution businesses through one or more sale or transfer transactions or, for certain operations, an orderly wind-down which may be structured on a portfolio, regional or counterparty-specific basis. The Company has initiated an active program to locate buyers, including outreach to multiple potential counterparties, execution of confidentiality agreements, and receipt and negotiation of transaction proposals, and expects the disposals to be completed within one year of the held-for-sale classification date. No definitive agreement for the sale of either business had been executed as of the date of this Quarterly Report on Form 10-Q (this “Quarterly Report”).

Held-for-Sale Classification

At the end of the second quarter of 2026, the ESWL and Distribution segments met the held-for-sale criteria in ASC 205-20-45-1E. Because the planned exit involvestwo of the Company’sthree reportable segments and represents a strategic shift that will have a major effect on the Company’s operations and financial results, the ESWL and Distribution segments are reported as discontinued operations for all periods presented. The Company recognizedno loss upon classification as held for sale.

Results of Discontinued Operations

The results of the ESWL and Distribution segments reported as discontinued operations, net of tax, and the major classes of line items constituting the pretax income (loss) of discontinued operations, were as follows for the three and nine months ended September 30, 2026 and 2025:

Assets and Liabilities of Discontinued Operations

The carrying amounts of the major classes of assets and liabilities of the ESWL and Distribution segments classified as discontinued operations in the condensed consolidated balance sheets were as presented below as of September 30, 2026 and December 31, 2025. As we expect the sale of discontinued operations to be completed within one year from June 30, 2026, all the non-current assets or liabilities as of September 30, 2026 have been reclassified as current assets or liabilities in the Condensed Consolidated Balance Sheet.

Allocations, Interest and Continuing Involvement

Amounts reported in discontinued operations include the revenues and costs directly attributable to the ESWL and Distribution segments. General corporate overhead not directly attributable to the discontinued businesses continues to be reported in continuing operations. Except for short-term borrowings related mainly to factored receivables in Japan, the Company does not expect any purchaser to assume Company indebtedness in connection with the planned disposals, and accordinglyno interest expense has been allocated to discontinued operations. Certain transaction proposals contemplate customary transition arrangements, such as training, transfer of employees, customer support, supply of electrodes and spare parts, and licenses of intellectual property and know-how. Following the disposals, the company expects to retain certain obligations relating to the ESWL business, including the continued supply of spare parts to the installed ESWL base, and may enter into transition arrangements with purchasers. The Company will evaluate and disclose the nature, duration and financial effects of any continuing involvement based on definitive transaction terms.

EIB Credit Facility

The Company’s Finance Contract with EIB contains provisions applicable to disposals of assets or businesses, including requirements to inform EIB of contemplated disposals and, in certain circumstances, to apply disposal proceeds toward prepayment of amounts outstanding under the Credit Facility. The Company has informed EIB of the planned exit of the ESWL and Distribution businesses, and these provisions do not restrict the Company’s ability to transfer the businesses in their present condition. The Company will assess any required application of sale proceeds, and the related classification of borrowings under the Credit Facility, upon execution of definitive transaction agreements. See Note 6, Long Term Debt.

Cash Flow Information

The Company has elected not to separately present the operating and investing cash flows of discontinued operations in the condensed consolidated statements of cash flows. Depreciation, amortization, capital expenditures and significant operating and investing noncash items of the discontinued operations for the nine months ended September 30, 2026 and 2025 were as follows:

NOTE 19. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Interest and income taxes paid were as follows:

Income taxes paid during the nine months ended September 30, 2026, primarily relate to discontinued operations.