Edap TMS SA: Form 10-Q for the period ended Mar 31, 2026

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the unaudited condensed consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q (this “Quarterly Report”) and our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 25, 2026 (the “2025 Annual Report”). The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in these forward-looking statements. See the section of this Quarterly Report titled “Cautionary Statement on Forward-Looking Information.”

Overview

Our activities are organized into three divisions: High Intensity Focused Ultrasound (“HIFU”), Lithotripsy (“ESWL”) and Distribution services (“Distribution”). We have shifted to a growth strategy focused on developing our core proprietary HIFU activities and placing less emphasis on our non-HIFU Distribution and ESWL business activities. This strategy has impacted, and we expect it will continue to impact, our operating results.

In our HIFU division, revenue is generated through sales of Focal One® robotic HIFU systems and disposables, revenue-per-procedure (“RPP”) arrangements and leases, and maintenance services. In the U.S. and certain other jurisdictions, we provide Focal One systems under operating leases with the intent to convert to capital sales at the end of the defined period. In Europe, we provide Focal One systems under an RPP model, which generates a smaller but more predictable revenue stream. In our ESWL division, final Sonolith i-move system sales were concluded in the second half of 2025, and revenue going forward will consist of consumable electrodes, spare parts, and repair services for the installed base. In our Distribution division, revenue has declined as a result of the termination of certain distribution agreements, consistent with our strategic de-emphasis of non-HIFU activities.

Results of Operations

Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025

The following table sets forth our net sales and profit (loss), including by division, for the three months ended March 31, 2026 and 2025:

(in millions of US dollars, except percentages)

Our total revenues increased 24.8%, from $14.3 million in the three months ended March 31, 2025 to $17.8 million in the three months ended March 31, 2026.

HIFU Division

The HIFU division’s total revenues increased by 78.3% from $6.5 million in the three months ended March 31, 2025 to $11.6 million in the three months ended March 31, 2026, reflecting growth of equipment sales and treatment-driven revenue.

The HIFU division's sales of medical devices increased 146.7% with $6.4 million in the three months ended March 31, 2026, with 11 Focal One units sold (including 5 in the United States), as compared to $2.6 million in the three months ended

March 31, 2025, with 6 Focal One units sold (including 2 in the United States). Treatment-driven revenue, which includes sales of revenue-per-procedure (“RPP”) & leases, sales of disposables, and treatment-related services, increased by 30.5% to $4.5 million in the three months ended March 31, 2026, as compared to $3.4 million in the same period in 2025.

Sales of HIFU maintenance services increased by 50.1% to $0.7 million in the three months ended March 31, 2026 reflecting our growing installed base, as compared to $0.5 million the same period in 2025.

As a result of this growth, the HIFU division represented an increasing share of our total revenues in the three months ended March 31, 2026 compared to the prior year period, consistent with our strategic focus on expanding our higher-margin HIFU business while revenues from legacy Distribution and ESWL activities continue to represent a smaller portion of total revenues over time.

ESWL Division

The ESWL division’s total revenues decreased 15.8%, from $1.8 million in the three months ended March 31, 2025 to $1.5 million in the three months ended March 31, 2026, primarily due to the decrease in sales of equipment, consistent with our strategic shift to de-emphasize our ESWL division.

Sales of ESWL-related consumables, spare parts, supplies, RPP, leasing, and services decreased 11.4% from $1.6 million in the three months ended March 31, 2025 to $1.4 million in the three months ended March 31, 2026.

Distribution Division

The Distribution division’s total revenues decreased 21.2%, from $5.9 million in the three months ended March 31, 2025 to $4.7 million in the three months ended March 31, 2026, consistent with our strategic shift to de-emphasize our Distribution division.

The Distribution division’s sales of medical devices decreased 44.9%, from $3.2 million in the three months ended March 31, 2025 to $1.8 million in the three months ended March 31, 2026.

Sales of Distribution-related consumables, spare parts, supplies, leasing, and services increased 6.6%, from $2.7 million in the three months ended March 31, 2025 to $2.9 million in the three months ended March 31, 2026.

Cost of Sales and Gross Margin

Cost of sales increased 16.8%, from $8.3 million in the three months ended March 31, 2025 to $9.7 million in the three months ended March 31, 2026, and represented 54% of net sales in the three months ended March 31, 2026, down from 58% of net sales in the three months ended March 31, 2025. Gross margin increased to 45.7% during the three months ended March 31, 2026, compared to 42.0% for the three months ended March 31, 2025. The increase in gross margin was primarily attributable to the growth in HIFU unit sales which have higher relative gross margins and favorable absorption of our fixed costs due to higher production volumes, partially offset by impact of tariffs.

Operating Expenses

Operating expenses increased 26%, or $3.2 million, from $12.3 million in the three months ended March 31, 2025 to $15.5 million in the three months ended March 31, 2026.

Marketing and sales expenses were $7.1 million in the three months ended March 31, 2026, compared to $6.1 million in the three months ended March 31, 2025.

Research and development (“R&D”) expenses remained flat at $2.6 million in the three months ended March 31, 2026 compared to $2.6 million the three months ended March 31, 2025.

General and administrative expenses increased $3.7 million, or 58.5%, in the three months ended March 31, 2025 to $5.8 million in the three months ended March 31, 2026, primarily driven by an increase in fees related to our transition to domestic filer status.

Financial (Expense) Income, Net

Net financial expense was $1,714 thousand in the three months ended March 31, 2026, compared to net financial income of $15 thousand in the three months ended March 31, 2025.

The financial expense was primarily driven by the variation of the fair value of the warrants we issued to European Investment Bank (“EIB”) of $1.3 million and the interest expense of the EIB loan of $0.4 million in the three months ended March 31, 2026.

Foreign Currency Exchange Gain (Loss), Net

In the three months ended March 31, 2026, we recorded a net foreign currency exchange gain of $142 thousand, mainly due to the variation of the U.S. dollar against the Euro, compared to a loss of $1.0 million in the three months ended March 31, 2025.

Income Taxes

Income tax expenses in the consolidated statement of operations remained relatively flat at $145 thousand in the three months ended March 31, 2026, compared to $144 thousand in the three months ended March 31, 2025.

Net Loss

As a result of the above, we recorded a consolidated net loss of $9.1 million in the three months ended March 31, 2026, compared with a consolidated net loss of $7.4 million in the three months ended March 31, 2025.

Effects of Inflation

In 2026 and 2025, geopolitical instability and other factors have continued to contribute to worldwide inflation, leading to a global increase in costs. We are constantly addressing this cost increase by mitigating the impact on our margins, in particular by adjusting our prices, reducing our costs, and implementing countermeasures to ensure the minimum residual impact.

Liquidity and Capital Resources

Our primary sources of capital have been from ongoing operations, proceeds from our public and private securities offerings, and the issuances of debt.

Our primary short-term needs for capital for our planned operations, which are subject to change, include:

• continued commercialization efforts and expansion of our sales and marketing infrastructure and programs to drive anticipated sales growth in the United States and elsewhere; and
• expanding our R&D initiatives to improve our existing products and develop new products and solutions.

We have based our short-term capital needs and planned operating requirements on assumptions that may prove to be incorrect and we may use all our available capital resources sooner than we expect. We may require additional financing to fund our operations and planned growth. We may also seek additional financing opportunities. We may seek to raise any additional capital through public or private equity offerings or debt financings, credit or loan facilities, or a combination of one or more of these funding sources. Additional funds may not be available to us on acceptable terms or at all. If we fail to obtain necessary capital when needed on acceptable terms, or at all, we could be forced to delay, limit, reduce, or terminate our product development programs, commercialization efforts, or other operations. If we raise additional funds by issuing equity securities, our shareholders will suffer dilution and the terms of any financing may adversely affect the rights of our shareholders. In addition, as a condition to providing additional funds to us, future investors may demand, and may be granted, rights superior to those of existing shareholders. If we raise additional capital through collaboration agreements, licensing arrangements, or marketing and distribution arrangements, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs, or products, or grant licenses that may not be favorable to us. Debt financing, if available, may involve restrictive covenants limiting our flexibility in conducting future business activities, and, in the event of insolvency, debt holders would be repaid before holders of our equity securities received any distribution of our corporate assets.

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

However, we may need to raise substantial additional financing in order to meet its cash flow needs in the subsequent period and until we achieve profitability. We may not be able to raise additional financing on acceptable terms or at all and this condition may in the future raise uncertainty regarding our 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 we are unable to raise capital when needed on acceptable terms, or at all, we may be forced to restructure our business or delay, reduce, or terminate our research and product development programs, future commercialization efforts or other operations.

Cash Flows

The following table sets forth the primary sources and uses of cash for the periods presented below:

(in thousands of U.S. dollars)

Net Cash Used in Operating Activities

Net cash used in operating activities for the three months ended March 31, 2026, was $3.0 million, consisting of net loss of $9.1 million offset by non-cash expenses of $3.4 million and positive changes in working capital of $2.7 million. These non-cash expenses primarily consisted of $0.9 million of depreciation and amortization, $0.3 million of stock-based compensation expense, and $1.7 million related to the change in the fair value of the EIB warrants and loan amortizations.

Net Cash Used in Investing Activities

Net cash used in investing activities for the three months ended March 31, 2026, was $0.8 million, consisting primarily of investments of $0.4 million in capitalized assets and investment of $0.5 million in property and equipment.

Net Cash Used in Financing Activities

Net cash used in financing activities for the three months ended March 31, 2026, was $1.4 million, consisting primarily of the repayment of long-term borrowings and financing leases of $0.7 million and reduction of short-term borrowings of $0.7 million.

Contractual Obligations and Commitments

None.

Critical Accounting Policies

Our significant accounting policies are discussed in Note 1, Notes to the Condensed Consolidated Financial Statements (Unaudited) and Note 2, Summary of significant accounting policies, of the notes to the unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report.

Critical Accounting Estimates

Management has not identified any estimates made in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the financial condition or results of operations of the registrant.

Off-Balance Sheet Arrangements

As of March 31, 2026, we had no off-balance sheet arrangements.

New Accounting Standards Not Yet Adopted

See Note 2, Summary of Significant Accounting Policies, to our unaudited condensed consolidated financial statements included in Item 1 of this Quarterly Report for more information.

Not applicable. We are a “smaller reporting company,” as defined by Rule 12b-2 under the Exchange Act of 1934, as amended (the “Exchange Act”), and in Item 10(f)(1) of Regulation S-K, and are not required to provide the information under this item.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer, Ryan Rhodes, and Chief Financial Officer, Ken Mobeck, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of March 31, 2026. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2026.

Disclosure controls and procedures means controls and other procedures that are designed to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosures. The Company’s disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that the objectives of its disclosure control system are met. Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended March 31, 2026, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

As of the date of this Quarterly Report, there have been no material changes to the risk factors previously disclosed in Part I, Item 1A of our 2025 Annual Report. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations.