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Change Your Health
Without Changing Your Life
EDAP TMS is a high-tech medical company listed on the
Nasdaq (EDAP) which develops, manufactures and markets
minimally invasive medical devices using ultrasound tech-
nology for various medical applications and offers a wide
portfolio of complementary distribution products in urology.
By strongly investing in R&D activities and partnering with
renowned medical research institutions since its incep-
tion, EDAP TMS today’s development efforts are focused
on making High Intensity Focused Ultrasound (HIFU) a
standard therapy for soft tissue ablation.
Based near Lyon-France, the company is actively operat-
ing worldwide with subsidiaries and offices in USA, Japan,
Germany, Malaysia, South Korea, as well as through more
than 70 distribution partners.
The HIFU and ESWL divisions market products developed
and manufactured by EDAP TMS for the treatment of
Prostate Cancer and Urinary Stones. To complete EDAP’s
product offering, the distribution division also markets
third-party devices in the urology space.
EDAP TMS - 4, rue du Dauphiné - PA La Poudrette Lamartine - 69120 Vaulx-en-Velin - FRANCE
Tel: +33 (0)4 72 15 31 50 - Fax: +33 (0)4 72 15 31 51 - www.edap-tms.com - contact@edap-tms.com
ANNUAL
REPORT
2022
May 17, 2023
To my fellow Shareholders,
In 2022, EDAP delivered another strong year of financial and operational performance, achieving record
revenue and more than doubling worldwide Focal One sales compared to 2021. With EDAP experiencing
strong positive HIFU momentum, particularly in the U.S., we have now reached a key inflection point to
make this transition and to further accelerate our global expansion. The Board of Directors and myself
have complete confidence i n Ryan Rhodes, a s new C hief Executive Officer of EDAP Group and in his
ability to continue to accelerate the growth and development of the Company in support of its ongoing
strategic objectives.
As the global leader in therapeutic HIFU, it is becoming increasingly clear that EDAP’s technology
leadership, product offering, as well as customer support and distribution capabilities are all translating
into increased recognition of Focal One® Robotic HIFU as a leading non-invasive treatment option for
men diagnosed with prostate cancer. As we continue to demonstrate our technological leadership
in therapeutic HIFU, we also expect to benefit from higher levels o f reimbursement for Focal One
procedures which officially went into effect on January 1st, 2023.
In addition to these strategic efforts, we are also making meaningful progress in developing HIFU beyond
prostate cancer. We recently announced positive clinical results from the Phase 2 study evaluating the
safety of therapeutic HIFU for the treatment of rectal endometriosis. Treatment with Focal One resulted
in significant improvements in endometriosis symptoms and quality of life and positive safety profile.
Based on this positive safety and preliminary efficacy data, we intend to confirm the efficacy of the Focal
One HIFU treatment in rectal endometriosis with a Phase 3 multi-center, double blind, randomized,
controlled clinical study. If successful, this rigorously designed study will provide the strongest clinical
evidence to date demonstrating the utility of therapeutic HIFU to address this painful and debilitating
condition.
We entered 2023 with a strong operational momentum, achieving record capital sales in the first quarter,
and we are sufficiently well capitalized to continue to execute on our growth plans while at the same
time pursuing potentially high-value pipeline expansion opportunities. Looking ahead, I remain very
optimistic about our sales pipeline and our team’s ability to execute and I believe EDAP will continue to
build on its ongoing success throughout 2023.
In closing, I would like to thank the entire EDAP team for their tireless work and dedication to get us to
this point and you, our shareholders, for your continued support.
Sincerely,
Marc Oczachowski
Chairman of the Board
EDAP TMS S.A.
Senior Executive Officers
EDAP TMS’s subsidiaries
Officers
Ryan Rhodes
Chief Executive Officer
François Dietsch
Chief Financial Officer
EDAP TMS S.A.
Board of Directors
Marc Oczachowski
Chairman
Lyon, France
Pierre Beysson
Paris, France
Rob Michiels
San Clemente, CA, USA
Argil Wheelock
Chattanooga, TN, USA
Marie Meynadier
Paris, France
EDAP TMS S.A.
Corporate Headquarters
Parc d’Activités - La Poudrette Lamartine
4, Rue du Dauphiné
F 69120 Vaulx-en-Velin - France
Tel : +33 (0)4 72 15 31 50
www.edap-tms.com
www.hifu-prostate.com
www.focalone.com
Blandine Confort
Head of Legal Affairs
Investor Relations
Tel : +33 4 72 15 31 72
bconfort@edap-tms.com
Frédéric Pech
President
EDAP TMS France S.A.S.
Lyon, France
Ryan Rhodes
Chief Executive Officer
EDAP Technomed, Inc.
Austin TX, USA
Judith Johannsen
General Manager
EDAP TMS GmbH
Flensburg, Germany
Jean-François Bachelard
Asia Operations Supervisor
General Manager
EDAP Technomed Co. Ltd
Tokyo, Japan
Hervé de Soultrait
General Manager
EDAP Technomed (M) Sdn, Bhd
Kuala Lumpur, Malaysia
EDAP TMS’s Branches
Officers
Jeon Jon-Hyeon
General Manager
EDAP TMS Korea
Seoul, Korea
Franck Lepoivre
General Manager
EDAP
Dubai, U.A.E.
Table of Contents
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(B) OR (G) OF THE SECURITIES EXCHANGE
ACT OF 1934,
OR
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2022
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
OR
☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
Date of the event requiring this shell company report_______________________
For the transition period from ________ to _________
000-29374
(Commission file number)
EDAP TMS S.A.
(Exact name of registrant as specified in its charter)
France
(Jurisdiction of incorporation or organization)
Parc d’Activites la Poudrette-Lamartine
4/6, rue du Dauphiné
69120 Vaulx-en-Velin, France
(Address of principal executive offices)
Ms. Blandine Confort -Tel. +33 4 72 15 31 50, E-mail : bconfort@edap-tms.com
Parc d’Activites la Poudrette-Lamartine, 4/6, rue du Dauphiné, 69120 Vaulx-en-Velin, France
(Name, Telephone, E-mail and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of each class
American Depositary Shares, each representing
one Ordinary Share
(Ordinary Shares, nominal value €0.13 per share)
Trading
Symbol
EDAP
Name of each exchange on which registered
Nasdaq Global Market
Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
Outstanding shares of each of the issuer’s classes of capital or common stock as of December 31, 2022: 36,910,925
Ordinary Shares
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
Table of Contents
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes __ No _X
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required
to file such reports) and (2) has been subject to such filing requirements for the past 90 days.Yes _X No __
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter ) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files).Yes _X No __
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an
emerging growth company. See definition of “large accelerated filer”, “accelerated filer” and “emerging growth company”
in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer __ Accelerated filer _X Non-accelerated filer __ Emerging growth company __
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards† provided pursuant to Section 13(a) of the Exchange Act. __
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting
Standards Board to its Accounting Standards Codification after April 5, 2012. Indicate by check mark which basis of
accounting the registrant has used to prepare the financial statements included in this filing:
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the
effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.
7262(b)) by the registered public accounting firm that prepared or issued its audit report. _X__
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements
of the registrant included in the filing reflect the correction of an error to previously issued financial statements. __
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of
incentive- based compensation received by any of the registrant’s executive officers during the relevant recovery period
pursuant to §240.10D-1(b). __
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in
this filing:
U.S. GAAP _X International Financial Reporting Standards as issued by the International Accounting Standards
Board __ Other __
If "Other" has been checked in response to the previous question indicate by check mark which financial statement item,
the registrant has elected to follow. Item 17 __ Item 18 __
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).Yes __ No _X
Table of Contents
TABLE OF CONTENTS
Presentation of Financial and Other Information
Cautionary Statement on Forward-looking Information
PART I
PART II
Item 1.
Item 2.
Item 3.
Item 4.
Item 4A.
Item 5.
Item 6.
Item 7.
Item 8.
Item 9.
Item 10.
Item 11.
Item 12.
Identity of Directors, Senior Management and Advisors
Offer Statistics and Expected Timetable
Key Information
Information on the Company
Unresolved Staff Comments
Operating and Financial Review and Prospects
Directors, Senior Management and Employees
Major Shareholders and Related Party Transactions
Financial Information
The Offer and Listing
Additional Information
Quantitative and Qualitative Disclosures about Market Risk
Description of Securities Other than Equity Securities
Defaults, Dividend Arrearages and Delinquencies
Material Modifications to the Rights of Security Holders and Use of Proceeds
Controls and Procedures
Item 13.
Item 14.
Item 15.
Item 16A. Audit Committee Financial Expert.
Item 16B. Code of Ethics
Item 16C.
Item 16D. Exemptions from the Listing Standards for Audit Committees
Item 16E.
Item 16F. Change in Registrant’s Certifying Accountant
Item 16G. Corporate Governance
Item 16H. Mine Safety Disclosure
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Principal Account Fees and Services
PART III
Item 17.
Item 18.
Item 19.
Financial Statements
Financial Statements
Exhibits
Page
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PRESENTATION OF FINANCIAL AND OTHER INFORMATION
Unless the context otherwise requires, references herein to “we,” “us,” “our” or “group” are to EDAP TMS
S.A. and its consolidated subsidiaries and references herein to the “Company,” “EDAP” or “EDAP TMS” are to EDAP
TMS S.A.
We prepare our consolidated financial statements in conformity with United States generally accepted
accounting principles (“U.S. GAAP”). In this annual report, references to “euro” or “€” are to the legal currency of the
countries of the European Monetary Union, including the Republic of France, and references to “dollars,” “U.S.
dollars” or “$” are to the legal currency of the United States of America. Solely for the convenience of the reader, this
annual report contains translations of certain euro amounts into dollars at specified rates. These translations should not
be construed as representations that the euro amounts actually represent such dollar amounts or could be converted
into dollars at those rates. See Item 11, ‘‘Quantitative and Qualitative Disclosures about Market Risk’’ for a discussion
of the effects of fluctuations in currency exchange rates on the Company.
The following are registered trademarks of the Company in the United States: EDAP®, Ablatherm®,
Ablasonic®, Ablapak® and Focal.One®. This annual report also makes references to trade names and trademarks of
companies other than the Company.
CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION
This annual report includes certain forward-looking statements within the meaning of applicable federal
securities laws, including Section 27A of the U.S. Securities Act of 1933 (the “Securities Act”) or Section 21E of the
U.S. Securities Exchange Act of 1934 (the “Exchange Act”), which may be identified by words such as “believe,”
“can,” “contemplate,” “could,” “plan,” “intend,” “is designed to,” “may,” “might,” “potential,” “objective,” “target,”
“project,” “predict,” “forecast,” “ambition,” “guideline,” “should,” “will,” “estimate,” “expect” and “anticipate,” or
the negative of these and similar expressions, which reflect our views about future events and financial performance.
Forward-looking statements involve inherent known and unknown risks and uncertainties including matters not yet
known to us or not currently considered material by us. Actual events or results may differ materially from those
expressed or implied in such forward-looking statements as a result of various factors that may be beyond our control.
Factors that could affect future results or cause actual events or results to differ materially from those expressed or
implied in forward-looking statements include, but are not limited to:
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risks associated with the current worldwide inflationary environment, uncertain worldwide economic,
political and financial environment, geopolitical instability, climate change impact, and in particular with
respect to the COVID-19 pandemic and its related impact on our business operations;
the success of our High Intensity Focused Ultrasound (“HIFU”) technology;
the uncertainty of market acceptance for our HIFU devices;
the clinical and regulatory status of our devices in various geographical territories;
the uncertainty in the regulatory agencies review and approval process for any of our devices and
changes in their recommendations and guidance;
the impact of government regulation, particularly relating to public healthcare systems and the
commercial distribution of medical devices;
effects of intense competition in the markets in which we operate;
the uncertainty of reimbursement status of procedures performed with our products and their level of
reimbursement;
the market potential for our HIFU devices;
-
- dependence on our strategic suppliers and distribution partners;
- difficulties to attract and recruit high-level experts in software, design, and development of high
technology devices such as our HIFU products
any event or other occurrence that would interrupt operations at our primary production facility;
reliance on patents, licenses and key proprietary technologies;
cybersecurity risks and incidents,
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- product liability risk;
5
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risk of exchange rate fluctuations, particularly between the euro and the U.S. dollar and between the
euro and the Japanese yen;
fluctuations in results of operations due to the cyclical nature of demand for medical devices;
risks relating to ownership of our securities; and
risks relating to securities litigations involving class actions.
You should also consider the information contained in Item 3, “Key Information—Risk Factors” and Item 5,
“Operating and Financial Review and Prospects,” or further discussion of the risks and uncertainties that may cause
such differences to occur. In light of the significant uncertainties in these forward-looking statements, you should not
regard these statements as a representation or warranty by us or any other person that we will achieve our objectives
and plans in any specified time frame or at all. Moreover, forward-looking statements speak only as of the date they
are made. Other than required by law, we do not undertake any obligation to update them in light of new information
or future developments. These forward-looking statements are based upon information, assumptions and estimates
available to us as of the date of this annual report, and while we believe such information forms a reasonable basis for
such statements, such information may be limited or incomplete, and our statements should not be read to indicate that
we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information.
You should read this annual report and the documents that we reference in this annual report and have filed
as exhibits completely and with the understanding that our actual future results may be materially different from what
we expect. We qualify all of our forward-looking statements by these cautionary statements.
PART I
Item 1. Identity of Directors, Senior Management and Advisors
Not applicable.
Item 2. Offer Statistics and Expected Timetable
Not applicable.
Item 3. Key Information
Risk Factors
In addition to the other information contained in this annual report, the following risk factors should be
carefully considered in evaluating us and our business. These statements are intended to highlight the material risk
factors that may cause actual financial, business, research or operating results to differ materially from expectations
disclosed in this annual report. See also factors disclosed under “Cautionary statement on forward-looking
information”.
Risks Relating to Our Business
Worldwide inflationary environment could have a material adverse effect on our business, results of operations and
financial condition.
Current geopolitical instability including the conflict in Ukraine and the related sanctions, and other factors
including, but not limited to, global supply chain constraints, key components sourcing issues, increase in prices and
disruptions of energy supply, and labor shortages, have led to higher worldwide inflation, which is likely, in turn, to
lead to an increase in costs and may cause additional changes in tax and governmental policies. We may be unable to
raise the prices of our devices and services in a higher inflationary environment and to keep up with the rate of inflation.
Such inflationary pressures may materially impact our business, for example in contracts where we committed to
contractual fixed costs. We may not be able to adjust pricing, reduce our costs or implement counter measures. Our
customers (i.e. hospitals and clinics) are also experiencing financial and operational pressures directly related to this
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inflationary environment, which may impact their ability or willingness to spend on capital equipment and may have
an adverse impact our business, financial condition, results of operations, or cash flows.
Our future revenue growth and income depend, among other things, on the success of our HIFU technology and
our capacity to scale up to meet demand.
We depend on the success of our HIFU technology for future revenue growth and net income. In particular,
we are dependent on the successful development and commercialization of other product lines, such as medical devices
based on HIFU but not limited to the Focal One, to generate significant additional revenues, achieve, and sustain
profitability in the future. Our focus is currently to expand our HIFU business in the U.S. as HIFU is FDA approved
and reimbursed at an acceptable level. Should HIFU adoption be successful and our HIFU business grow dramatically,
we may have some difficulties to scale up and adapt our U.S. structure to our growth. Inability to adequately staff and
structure our U.S. business to respond to such growth may impact our business and stock price, with a negative adverse
effect on our results of operations and reputation. Although we are particularly dependent on the success of our HIFU
technology to grow our business through our HIFU division, other revenues, generated by our Extracorporeal
ShockWave Lithotripsy (“ESWL”) division and our Distribution (“Distribution”) division directly linked to the
distribution of other complementary products on behalf of third-party medical companies, continue to increase
significantly and contribute to our revenue growth. While we regularly evaluate any new product opportunities and
anticipate potential distribution terminations, we have no assurance that our existing distribution agreements will be
renewed. While we believe that our Distribution division can successfully pursue the marketing of its worldwide
distribution platform, any termination of distribution commitments from such medical third parties could have a
material adverse effect on our business, financial condition or results of operations. See Item 4, “Information on the
Company—Distribution Division—Distribution Division Sales and Distribution of Products.”
Although we achieved operational profitability in 2019 and 2020, we incurred operating losses in 2021 and
2022 and in every fiscal year prior to 2015, since 1998. We expect that our marketing, selling and research and
development expenses will increase as we attempt to further develop and commercialize our High Intensity Focused
Ultrasound (“HIFU”) devices and particularly with the acceleration of our U.S. HIFU expansion plan. In this respect,
we may not, generate a sufficient level of revenue to offset these expenses and may not be able to adjust spending in a
timely manner to respond to any unanticipated decline in revenue. We cannot guarantee that we will realize sufficient
revenue to sustain profitability in the future. See Item 5, “Operating and Financial Review and Prospects.”
We utilize distributors for our sales abroad, which subjects us to a number of risks that could harm our business.
We have developed strategic relationships with a number of distributors for sales and service of our devices
in certain foreign countries where we are not directly represented by a subsidiary. If these relationships are terminated
and not replaced, our revenues and/or ability to market or service our devices in the related territories could be
adversely affected. Our distributors’ actions may affect our ability to effectively market our devices in certain foreign
countries if, for example, a distributor holds the regulatory authorizations in such countries and causes, by action or
inaction, the suspension of such regulatory authorizations or sanctions for non-compliance. It may be difficult,
expensive, and time consuming for us to re-establish reputation, market access or regulatory compliance in such case.
Moreover, our distributors must be in compliance with anti-corruption laws and applicable sanctions, such as the U.S.
Foreign Corrupt Practices Act, sanctions imposed by the U.S. Department of the Treasury’s Office of Foreign Assets
Control, the European Union, His Majesty’s Treasury, or other governmental or supranational entities, and other local
laws prohibiting corrupt payments to governmental officials or to customers and we may not be able to trace or be kept
informed of such corruption. In addition, we may be named as a defendant in lawsuits against our distributors related
to sales or service of our devices performed by these distributors. See our risk factor below: “—We face a significant
risk of exposure to product liability claims in the event that the use of our products results in personal injury or death.”
New device developments and introductions may adversely impact our financial results.
From time to time, we develop and introduce new devices with enhanced features and extended capabilities,
targeting new clinical applications or improving existing approaches. The success of new device introductions depends
on a number of factors including, but not limited to, timely and successful research and development, receipt of
regulatory clearances or approvals, pricing, competition, market and consumer acceptance, manufacturing and supply
costs, and the risk that new devices may have quality or other defects.
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We invest in various research and development projects to expand our product offerings. Our research and
development efforts are critical to our success, and our research and development projects may not be successful. We
may be unable to develop and market new products successfully, and the products we invest in and develop may not
be well received by customers or meet our expectations. Our research and development investments may not generate
significant operating income or contribute to our future operating results for several years, and such contributions may
not meet our expectations or even cover the costs of such investments. If we fail to effectively develop new products,
obtain regulatory clearances or approval and manage new product introductions in the future, our business, financial
condition, results of operations, or cash flows could be materially and adversely impacted.
We operate in a highly regulated industry and our future success depends on obtaining and maintaining
government regulatory approval of our products, which we may not receive or be able to maintain or which may be
delayed for a significant period of time.
Government regulation significantly impacts the development and marketing of our products, particularly in
the United States, EU and Japan. We are regulated in each of our major markets with respect to preclinical and clinical
testing, manufacturing, labeling, distribution, sale, marketing, advertising and promotion of our products. To market
and sell products, we are required to obtain approval or clearance from the relevant regulatory agencies, including the
FDA with respect to the United States. The process of applying for regulatory approval or clearance is often lengthy
and requires the expenditure of substantial resources. Further, there can be no assurance that we will receive the
required approvals or clearance for our products from the required regulatory authorities or, if we do receive the
required approvals, that we will receive them on a timely basis, on the conditions and for the indications we seek, or
that we will otherwise be able to satisfy the conditions of such approval, if any.
The regulatory agencies may not act favorably or quickly in their review of our submissions, or we may
encounter significant difficulties in our efforts to obtain their clearance or approval, or to maintain our existing
approvals, all of which could delay or preclude the sale of new or existing products in the related territories. In the
European Union, the regulation of medical devices is being updated by the European Medical Device Regulation
(“MDR”) imposing stricter requirements on the conformity assessment and the commercialization of our products. A
transition period to conform MDR requirement has been adopted based on MDR classification of devices with a latest
application date of December 31, 2028. The extension of the period during which the devices can be placed on the
market is subject to conditions. To benefit from the new provisions, the manufacturer must have implemented and
must maintain a Quality Management System that complies with the MDR requirements before May 26, 2024. An
MDR compliance action plan is currently being performed in preparation of MDR enforcement within the expected
timelines. We are implementing regulatory actions to ensure our devices may be distributed on the European and
international market to conform to MDR, if applicable.
Even if regulatory approval to market a product is granted, it may include limitations on the indicated uses
for which the product may be marketed. Failure to comply with regulatory requirements can result in fines, suspension
or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal
prosecutions. Regulatory policy may change and additional government regulations may be established that could
prevent or delay regulatory approval of our products. Any delay, failure to receive regulatory approval or the loss of
previously received approvals could have a material adverse effect on our business, financial condition and results of
operations. For more information on the regulation of our business, see Item 4, “Information on the Company—
Government Regulation” and “Information on the Company—HIFU Division—HIFU Division Clinical and
Regulatory Status.”
Moreover, we may also be required to abandon previous strategies for regulatory approval or clearance,
despite having made significant financial and time investments, or refocus our efforts on alternative regulatory
strategies, resulting in increased costs and efforts of management, without any guarantee of success, which could
materially adversely affect our business, financial condition and results of operations.
Our manufacturing operations must comply with regulations established by regulatory agencies in the United
States, the European Union and other countries, and in particular with the Current Good Manufacturing Practices
(“CGMP”) and other standards for quality assurance and manufacturing process control under applicable regulatory
authorities. Since such standards may change, we may not, at all times, comply with all applicable standards and, as a
result would be unable to manufacture our products for commercial sale or for clinical trial supply. Our manufacturing
facilities are subject to inspection by regulatory authorities at any time. If any inspection by the regulatory authorities
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reveals deficiencies in manufacturing, we could be required to take immediate remedial actions, suspend production
or close the current and future production facilities, which would disrupt our manufacturing processes. Accordingly,
failure to comply with these regulations could have a material adverse effect on our business, financial condition and
results of operations.
Finally, changes to regulatory policies or the adoption of additional statutes or regulations that affect our
business could impose substantial additional costs or otherwise have a material adverse effect on our business, financial
condition and results of operations.
Our clinical trials related to products using HIFU technology may not be successful and we may not be able to
obtain regulatory approvals necessary for commercialization of all of our HIFU products.
Before obtaining regulatory approvals or clearance for the commercial sale of any of our devices under
development, we must demonstrate through preclinical testing and clinical trials that the device is safe and effective
for use in each indication. Product development, including pre-clinical studies and clinical trials is a long, expensive
and uncertain process, and is subject to delays and failures at any stage. We or the relevant regulatory authorities may
suspend or terminate clinical trials at any time and regulating agencies may even refuse to grant exemptions to pursue
clinical trials. The results from preclinical testing and early clinical trials may not predict the results that will be
obtained in large-scale clinical trials. Companies can suffer significant setbacks in later-stage clinical trials, even after
promising results in earlier trials. Furthermore, data obtained from a trial can be insufficient to demonstrate that our
products are safe, effective, and marketable. The commencement, continuation or completion of any of our clinical
trials may be delayed or halted, or inadequate to support approval of an application to regulatory authorities for
numerous reasons including, but not limited to:
•
that regulatory authorities do not approve a clinical trial protocol or a clinical trial, or place a clinical trial on
hold, discussions with regulatory authorities to improve our clinical protocols may prove difficult and lengthy;
see Item 4, “Information on the Company—HIFU Division Clinical and Regulatory Status;”
• slower than expected rates of patient recruitment and enrolment;
•
inability to adequately monitor patient during or after treatment;
•
failure of patients to complete the clinical trial;
• prevalence and severity of adverse events and other unforeseen safety issues;
•
• governmental and regulatory delays or changes in regulatory requirements, policies or guidelines;
•
third-party organizations not performing data collection and analysis in a timely and accurate manner;
that regulatory authorities conclude that our trial design is inadequate to demonstrate safety and efficacy.
The data we collect from our current clinical trials, our preclinical studies and other clinical trials may not be
sufficient to support requested regulatory approval. Additionally, certain regulatory authorities may disagree with our
interpretation of the data from our preclinical studies and clinical trials, or may find the clinical trial design, conduct
or results inadequate to prove safety or efficacy, and may require us to pursue additional preclinical studies or clinical
trials, which would increase costs and could further delay the approval of our products. If we are unable to demonstrate
the safety and efficacy of our products in our clinical trials, we will be unable to obtain regulatory approval to market
our products.
Our robotic HIFU devices that have not received regulatory approval may not prove to be effective or safe in
clinical trials or may not be approved by the appropriate regulatory authorities. If our HIFU devices do not prove to be
effective and safe in clinical trials to the satisfaction of the relevant regulatory authorities, our business, financial
condition and results of operations could be materially adversely affected.
The commercial success of our products depends on whether procedures performed by those products are eligible
for reimbursement approved by national health authorities and third-party payers.
Our success depends, among other things, on the extent to which reimbursement can be obtained from
healthcare payers for procedures performed with our products. In the United States, we are dependent upon favorable
coverage and benefit decisions by Centers for Medicare and Medicaid Services (CMS) for Medicare reimbursement,
state Medicaid agencies, individual managed care organizations, private insurers and other payers. With the support of
the American Urological Association, and the American Association of Clinical Urologists, the American Medical
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Association (AMA) established a new Category 1 CPT code for the ablation of malignant prostate tissue with HIFU
technology, effective January 1, 2021. In late 2022, CMS published its final rules for the calendar year 2023 for
ambulatory payment classification (APC) procedures and physician fee schedule established reimbursement rates that
recognize both facility or hospital payment and physician professional service payments for HIFU procedures. CMS
final rule was updated in late 2022, with a reimbursement level close to surgery, effective on January 1, 2023. For
private insurers, policy coverage decisions supporting coverage and reimbursement related to HIFU procedures are
limited given that HIFU is a new technology. With expanded third party coverage decisions, our Focal One HIFU
procedure will have broader market access in the United States. However, public or private payors may decide to limit
coverage or reimbursement of HIFU technologies that are available to individuals, including potentially modifying
existing guidance to further limit available coverage. Changes to coverage decisions, which may be revised from time
to time, could negatively impact reimbursement for procedures performed using our devices and may result in a
material adverse effect on our business, financial conditions and results of operations. Outside the United States, and
in particular in the European Union and Japan, third-party reimbursement is generally conditioned upon decisions by
national health authorities and we cannot guarantee that a definitive reimbursement will be granted. See Item 4,
“Information on the Company——HIFU Division—HIFU Reimbursement Status.”Lithotripsy procedures currently are
reimbursed by public healthcare systems in the European Union, in Japan and in the United States. However, a decision
in any of those countries to modify reimbursement policies for these procedures could have a material adverse effect
on our business, financial conditions and results of operations. For example, in April 2016, the Japanese authorities
decided to stop reimbursing lithotripters’ disposables (electrodes) necessary to perform a lithotripsy procedure. This
decision had and will have a material effect on our current and future sales of lithotripsy disposables in Japan.
We cannot assure investors that expanded coverage decisions or additional reimbursement approvals will be
obtained in the near future, if ever. If payor coverage or reimbursement for procedures related to our products is
unavailable, limited in scope or amount, or if certain levels of public or private payor reimbursement or coverage
policies change, it could have a material adverse effect on our business, financial condition and results of operations.
HIFU technology may not be adopted by the medical community and may never become a standard of care.
Our robotic HIFU devices represent new therapies for the conditions that they are designed to treat.
Notwithstanding any positive clinical results that our HIFU devices may have achieved or may achieve in the future
in terms of safety and efficacy and any marketing approvals that we have obtained or may obtain in the future, there
can be no assurance that such products will gain adoption by the medical community. Physician adoption depends,
among other things, on evidence of the cost effectiveness of a therapy as compared to existing therapies and on
adequate coverage policies supporting reimbursement from healthcare payers. Furthermore, acceptance by patients
depends in part on physician recommendations, as well as other factors, including the degree of invasiveness, the rate
and severity of complications and other side effects associated with the therapy as compared to other therapies.
If our robotic HIFU devices do not achieve an adequate level of acceptance by physicians, patients, health
care payers and the medical community and never become a standard of care, we may not generate or maintain positive
cash flows and we may not become profitable or be able to sustain profitability. If we do achieve market acceptance
of our products, we may not be able to sustain it or otherwise achieve it to a degree which would support the ongoing
viability of our operations.
Our cash flow is highly dependent on cyclical demand for our products.
Our cash flow has historically been subject to significant fluctuations over the course of any given
financial year due to cyclical demand for medical devices, and the resulting annual and quarterly fluctuations in trade
and other receivables and inventories. This has in the past resulted in significant variations in working capital
requirements and operating cash flows. Since we anticipate relying on cash flow from operating activities to meet our
liquidity requirements, a decrease in the demand for our products, or the inability of our customers or distributors to
meet their financial obligations to us, would reduce the funds available to us. In the future, our liquidity may be
constrained and our cash flows may be uncertain, negative or significantly different from period to period. Our future
cash flow will be affected by increased expenses in clinical trials, sales efforts and other market costs related to
implementing our expanded U.S. and global strategy following the FDA clearance of Focal One and CMS
reimbursement which will require significant additional resources. However, there is no assurance that this will result
in an increase in the demand for our products and services.
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Competition in the markets in which we operate is intense and is expected to increase in the future.
Competition in the markets in which we operate is intense and is expected to increase in the future. In each
of our main businesses, we face competition both directly from other manufacturers of medical devices that apply the
same technologies that we use, as well as indirectly from existing or emerging therapies for the treatment of urological
disorders.
In the markets that we target for our robotic HIFU products, competition comes from new market entrants
and alternative therapies, as well as from current manufacturers of robotic medical devices. In the HIFU market, our
devices, in particular the Ablatherm and the Focal One, compete with all current treatments for localized tumors,
including surgery, external beam radiotherapy, brachytherapy and cryotherapy. See Item 4, “Information on the
Company—HIFU Division— HIFU Competition” and Item 4, “Information on the Company—ESWL Division.”
Many of our competitors have significantly greater financial, technical, research, marketing, sales, distribution
and other resources than we have and may have more experience in developing, manufacturing, marketing and
supporting new medical devices. In addition, our future success will depend in large part on our ability to maintain a
leading position in technological innovation, and we cannot assure investors that we will be able to develop new
products or enhance our current ones to compete successfully with new or existing technologies. Rapid technological
development by competitors may result in our products becoming obsolete before we recover a significant portion of
the research, development and commercialization expenses incurred with respect to those products.
We also face competition for our maintenance and service contracts. Larger hospitals often utilize their in-
house maintenance departments instead of contracting with equipment manufacturers like us to maintain and repair
their medical equipment. In addition, third-party medical equipment maintenance companies increasingly compete
with equipment manufacturers by offering broad repair and maintenance service contracts to hospitals and clinics. This
increased competition for medical devices and maintenance and service contracts could have a material adverse effect
on our business, financial condition and results of operations.
We depend on a single site to manufacture our products, and any interruption of operations could have a material
adverse effect on our business.
Most of our manufacturing currently takes place in a single facility located in Vaulx-en-Velin, on the outskirts
of Lyon, France. In the event of a significant interruption in the operations of our sole facility for any reason, such as
fire, flood or other natural disaster or pandemic diseases such the COVID-19 virus necessitating quarantine
implementation or a failure to obtain or maintain required regulatory approvals, we would have no other means of
manufacturing our products until we would be able to restore the manufacturing capabilities at our facility or develop
alternative facilities, which could take considerable time and resources and have a material adverse effect on our
business, financial condition and results of operations.
For certain components or services, we depend on a single supplier who, due to events beyond our control may fail
to deliver sufficient supplies to us or increase the cost of items supplied, which would interrupt our production
processes or negatively impact our results of operations.
We purchase the majority of the components used in our products from a number of suppliers, but rely on a
single supplier for some key components. In addition, we rely on single suppliers for certain services. If the supply of
these components or services were interrupted for any reason, including geopolitical tensions or instability, a pandemic
and implied restrictions, our manufacturing and marketing of the affected products would be delayed. Certain of these
key suppliers may be exposed to variations in the costs of raw materials and components, included in our products and,
consequently, may suffer issues or delays in sourcing these components which would harm their business and
operations. These delays could be extensive, especially in situations where a component substitution would require
regulatory approval. In addition, such suppliers could decide unilaterally to increase the price of supplied items,
therefore causing additional charges for the Company and impacting our margins. We are currently renegotiating a
supply agreement concerning a key component for our HIFU devices as prices increased dramatically, unilaterally,
following a strategic shift in our supplier’s marketing strategy. We expect to continue to depend upon our suppliers for
the foreseeable future, while we pursue exploration of new sourcing alternatives. Failure to obtain adequate supplies
of components or services in a timely manner and at an acceptable price could have a material adverse effect on our
business, financial condition and results of operations.
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We may have difficulties in attracting and recruiting highly qualified experts in software, design and development
of high technology devices such as our HIFU and ESWL products
Our devices require highly qualified individuals as well as high-level of expertise and experience in design,
software, mechanics and electronics. We are highly dependent on our ability to attract and retain qualified personnel
and engineers to develop our devices. In addition, the learning curve required to master our systems is lengthy and, if
we do not find qualified experts and engineers, we may not be able to meet our development schedule and obtain
market approval in due time, which in time may delay market introduction of new products. Failure to recruit and
attract experts in a timely manner may have a material adverse effect on our development, business, financial condition
and results of operations.
Intellectual property rights are essential to protect our medical devices, and any dispute with respect to these rights
could be costly and have an uncertain outcome.
Our success depends in large part on our ability to develop proprietary products and technologies and to
establish and protect the related intellectual property rights, without infringing the intellectual property rights of third
parties. The validity and scope of claims covered in medical technology patents involve complex legal and factual
questions and, therefore, the outcome of such claims may be highly uncertain. The medical device industry has been
characterized by extensive patents and other intellectual property rights litigation. We may receive letters from third
parties drawing our attention to their patent rights, or patent grant contestations may be filed. Third parties also may
challenge our patents before administrative bodies in the United States or abroad. Such mechanisms include re-
examination, post-grant review, inter partes review, interference proceedings, derivation proceedings, and equivalent
proceedings in foreign jurisdictions (e.g., opposition proceedings). Such proceedings could result in the revocation or
cancellation of or amendment to our patents in such a way that they no longer cover our product candidates or provide
any competitive advantage. The outcome of future such challenges is unpredictable, and the loss of patent protection
could have a material adverse impact on our business, financial condition and result of operations.
Our products, including our HIFU devices, may be subject to litigation involving claims of patent
infringement or violation of other intellectual property rights of third parties. The defense and prosecution of
intellectual property suits, patent opposition proceedings and related legal and administrative proceedings are both
costly and time consuming and may result in a significant diversion of effort and resources by our technical and
management personnel. An adverse determination in any such litigation or proceeding to which we become a party
could subject us to significant liability to third parties, require us to seek licenses from third parties and pay ongoing
royalties, require us to redesign certain products or subject us to injunctions preventing the manufacture, use or sale of
the affected products. In addition to being costly, drawn-out litigation to defend or prosecute intellectual property rights
could cause our customers or potential customers to defer or limit their purchase or use of our products until the
litigation is resolved. See Item 4, “Information on the Company—HIFU Division—HIFU Division Patents and
Intellectual Property” and Item 4, “Information on the Company—ESWL Division—ESWL Division Patents and
Intellectual Property.”
We own or co-own patents covering several of our technologies and have additional patent applications
pending in the United States, the European Union, Japan and elsewhere. The process of seeking patent protection can
be long and expensive and there can be no assurance that our patent applications will result in the issuance of patents.
We also cannot assure investors that our current or future patents are or will be sufficient to provide meaningful
protection or commercial advantage to us. Our patents or patent applications could be challenged, invalidated or
circumvented in the future. Failure to maintain or obtain necessary patents, licenses or other intellectual property rights
from third parties on acceptable terms or the invalidation or cancellation of material patents could have a material
adverse effect on our business, financial condition or results of operations. Litigation may be necessary to enforce
patents issued to us or to determine the enforceability, scope and validity of the proprietary rights of others. Our
competitors, many of which have substantial resources and have made substantial investments in competing
technologies, may apply for and obtain patents that will interfere with our ability to make, use or sell certain products,
including our HIFU devices and/or our ESWL medical equipment, either in the United States or in foreign markets.
Certain of our patents may also expire and fall into the public domain, as has already occurred with certain
patents in the HIFU division’s patent portfolio. See Item 4, “Information on the Company—HIFU Division—HIFU
Division Patents and Intellectual Property.”. We also rely on trade secrets and proprietary know-how, which we seek
to protect through non-disclosure agreements with employees, consultants and other parties. It is possible, however,
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that those non-disclosure agreements will be breached, that we will not have adequate remedies for any such breach,
or that our trade secrets will become known to, or independently developed by, competitors. We also rely on copyright
protection. Litigation may be necessary to protect trade secrets, know-how or copyrights owned by us. In addition,
effective copyright and trade secret protection may be unavailable or limited in certain countries.
The occurrence of any of the foregoing could have a material adverse effect on our business, financial
condition and result of operations.
Our use of “open source” software could negatively affect our ability to sell our products and subject us to possible
litigation.
Our products incorporate so-called “open source” software, and we may incorporate additional open source
software in the future. Open source software is generally licensed by its authors or other third parties under open source
licenses. According to certain of these licenses, we may be subject to certain conditions, including requirements that
we offer our products that incorporate the open source software for no cost, that we make available source code for
modifications or derivative works we create based upon, incorporating or using the open source software and/or that
we license such modifications or derivative works under the terms of the particular open source license. If an author
or other third party that distributes such open source software were to allege that we had not complied with the
conditions of one or more of these licenses, we could be required to incur significant legal expenses defending against
such allegations and could be subject to significant damages, enjoined from the sale of our products that contained the
open source software and required to comply with the foregoing conditions, which could disrupt the distribution and
sale of our products.
We face a significant risk of exposure to product liability claims in the event that the use of our products results in
personal injury or death.
Our products are designed to be used in the treatment of severe afflictions and conditions. Despite the use of
our products, patients may suffer personal injury or death, and we may, as a result, face significant product liability
claims. We maintain separate product liability insurance policies for the United States and Canada and for the other
markets in which we sell our products. Product liability insurance is expensive and there can be no assurance that it
will continue to be available on commercially reasonable terms or at all. In addition, our insurance may not cover
certain product liability claims or our liability for any claims may exceed our coverage limits. A product liability claim
or series of claims brought against us with respect to uninsured liabilities or in excess of our insurance coverage, or
any claim or product recall that results in significant cost to or adverse publicity against us could have a material
adverse effect on our business, financial condition and results of operations. Also, if any of our products prove to be
defective, we may be required to recall or redesign the product which could result in costly corrective actions and harm
to our business reputation, which could materially affect our business, financial condition and results of operations.
Our French and international operations expose us to additional costs and legal and regulatory risks, which could
have a material adverse effect on our business, results of operations and financial condition.
We have significant French and international operations. We have direct distribution channels in almost fifty
countries outside of France, our country of incorporation, and through our foreign subsidiaries. Compliance with
complex foreign and French laws and regulations that apply to our international operations increases our cost of doing
business. These regulations include, among others, U.S. laws such as the U.S. Foreign Corrupt Practices Act (FCPA)
and other U.S. federal laws and regulations established by the Office of Foreign Asset Control, laws such as the UK
Bribery Act 2010 or other local laws, which prohibit corrupt payments to governmental officials or certain payments
or remunerations to customers. We have adopted a Code of Ethics that requires employees to comply with applicable
laws and regulations and particularly with the applicable provisions of the French law known as the Sapin II law, and
the related implementing decrees, and notably the requirements of Article 8 of the law, which requires the
establishment of a whistle-blowing policy. These numerous and sometimes conflicting laws and regulations include,
among others, data privacy requirements, labor relations laws, tax laws, anti-competition regulations, “Know Your
Customer” requirements, import and trade restrictions, export requirements.
We are also subject to healthcare laws and regulations pertaining to physician payment transparency, privacy
and data protection regulations. These regulations include, but are not limited to (i) the U.S. federal Health Insurance
Portability and Accountability Act (“HIPAA”) of 1996, as amended by the Health Information Technology for
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Economic and Clinical Health Act, which governs the conduct of certain electronic healthcare transactions and protects
the security and privacy of protected health information; (ii) the U.S. federal Physician Payment Sunshine Act (the
“Sunshine Act”), which requires manufacturers of medical devices for which payment is available under Medicare,
Medicaid, to report annually to the CMS information related to payments or other “transfers of value” made to
physicians, (iii) two main sets of laws enacted in France about transparency requirements: “The French Anti-Gift
Law” –updated in 2020 and 2022- which regulates the provision of gifts, discounts and other incentives to physicians
and the “Bertrand law” which imposes disclosure obligations on companies relating to benefits and remunerations
granted to, and agreements concluded with, physicians and (iv) the provisions of the French Public Health Code
relating to the processing and/or hosting of health-related personal data. Any failure to comply with these regulations
may have a material adverse effect on our business, financial condition and results of operations.
Furthermore, in addition to HIPAA we are subject to other data privacy and protection laws and regulations
that apply to the collection, transmission, storage and use of personally identifying information, which among other
things, impose certain requirements relating to the privacy, security and transmission of personal information. The
legislative and regulatory landscape for privacy and data protection continues to evolve in jurisdictions worldwide,
and there has been an increasing focus on privacy and data protection issues with the potential to affect our business.
There are numerous European, French, U.S. federal and U.S. state laws and regulations related to the privacy and
security of personal information. For example, in the European Union, the collection and use of personal data is
governed by the provisions of the General Data Protection Regulation (“GDPR”) which took effect in May 2018. The
GDPR significantly increases the level of data protection and imposes a greater compliance burden on companies. In
particular, it treats clinical data as personal data, requiring us or our subcontractors to implement more extensive
procedures in the collection and processing of clinical trial data. Furthermore, the GDPR significantly increases the
level of sanctions for non-compliance. The European Union data protection authorities have the power to impose
administrative fines of up to a maximum of €20 million or 4% of the Company’s consolidated revenues for the
preceding financial year, whichever is higher. The GDPR is also supplemented by the provisions of the French data
protection act (law n°78 17 of 6 January 1978), in particular in respect of the processing of personal data in the field
of healthcare. We believe that the GDPR did not have a material impact on our business or the way our technologies
operate. However, due to the small size of the Company, we may not be able to adequately document all data collection,
to obtain related consents in due time, to adequately protect personal data or to react in due time to address an individual
request linked to the GDPR.
Given the high level of complexity of these laws, and the fact that we do business in regions where regulatory
compliance is less robust, including in Russia and parts of Asia, there is a risk that we may inadvertently breach some
provisions, for example, through fraudulent or negligent behavior of individual employees or business partners, our
failure to comply with certain formal documentation requirements, or otherwise. See “— General Risk Factors—“Our
results of operations and financial condition could be adversely affected by the adverse economic, geopolitical and
financial environment, the impact of climate change or pandemics such as COVID-19”. Our success depends, in part,
on our ability to anticipate these risks and manage these challenges. We have a decentralized international sales
organization, and this structure makes it more difficult for us to ensure that our international selling operations comply
with our global policies and procedures.
Violations of these laws and regulations could result in fines, criminal sanctions against us, our officers or
our employees, requirements to obtain export licenses, cessation of business activities in sanctioned countries and
prohibitions on the conduct of our business. Violations of laws and regulations also could result in prohibitions on our
ability to offer our products in one or more countries and could materially damage our reputation, our brand, our
international expansion efforts, our ability to attract and retain employees, or our business, results of operations and
financial condition.
We sell our products in many parts of the world and, as a result, our business is affected by fluctuations in currency
exchange rates.
We are exposed to foreign currency exchange rate risk because the mix of currencies in which our costs are
denominated is different from the mix of currencies in which we earn our revenue. In 2022, 60% of our total costs of
sales and operating expenses were denominated in euro, while 59% of our sales were denominated in currencies other
than euro (primarily the U.S. dollar and the Japanese yen). Our operating profitability could be materially adversely
affected by large fluctuations in the rate of exchange between the euro and other currencies. For instance, a decrease
in the value of the U.S. dollar or the Japanese yen against the euro would have a negative effect on our revenues, which
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may not be offset by an equal reduction in operating expenses and would therefore negatively impact operating
profitability. From time to time we enter into foreign exchange forward sale contracts to hedge against fluctuations in
the exchange rates of the principal foreign currencies in which our receivables are denominated (in particular, the U.S.
dollar and the Japanese yen), but there can be no assurance that such hedging activities will limit the effect of
movements in exchange rates on our results of operations. As of December 31, 2022, we had no outstanding hedging
instruments. In addition, since any dividends that we may declare will be denominated in euro, exchange rate
fluctuations will affect the U.S. dollar equivalent of any dividends received by holders of ADSs. For more information
concerning our exchange rate exposure, see Item 11, “Quantitative and Qualitative Disclosures about Market Risk.”
Our results of operations have fluctuated significantly from quarter to quarter in the past and may continue to do
so in the future, as we experience long and variable product sales cycles which are long and seasonal and are partly
dependent on access to sufficient lease financing
Our results of operations have fluctuated in the past and are expected to continue to fluctuate significantly
from quarter to quarter depending upon numerous factors, including, but not limited to, the timing and results of clinical
trials, changes in healthcare reimbursement policies, cyclicality of demand for our products, changes in pricing policies
by us or our competitors, new product announcements by us or our competitors, customer order deferrals in anticipation
of new or enhanced products offered by us or our competitors, product quality problems and exchange rate fluctuations.
Furthermore, because our main products have relatively high unit prices, the amount and timing of individual orders
can have a substantial effect on our results of operations in any given quarter.
The sales cycle of our products is lengthy as our products are high value capital items for our customers that
purchase generally requires the approval of management or Boards of hospitals, purchasing groups and government
authorities if applicable. In addition, some sales are subject to public tender offer processes and approvals which could
happen to be lengthy and as a result, hospitals may delay their purchase orders according to their timelines and budget
allocation. It is difficult to predict the exact timing for closing product sales directly linked to the length of capital
expenditure cycles. Historically, our sales of products have tended to be stronger during the fourth quarter of each
fiscal year.
In addition, we rely on the credit market to secure dedicated lease financings to fund the development of our
Revenue-Per-Procedure (“RPP”) business model related to the sale of treatments’ procedures. Due to the limited
availability of lending, we may be unable to access sufficient lease financing. Without lease financing, we may be
unable to continue the development of our RPP model or we may need to fund such activity out of our existing working
capital. Similarly, some of our clients rely on lease financing to finance their purchases of equipment. Limited
availability of lease financing facilities may also affect their purchasing decisions and may adversely impact our
equipment sales.
We have identified material weaknesses in our internal controls over financial reporting with respect to our U.S.
subsidiary and if we fail to remediate these material weaknesses or if we experience additional material weaknesses
in the future or otherwise fail to achieve an effective system of internal controls, we may not be able to report our
financial results accurately. In addition, the trading price of our securities may be adversely affected by a related
negative market reaction.
As a publicly traded company, we are subject to the reporting requirements of the Exchange Act and the
Sarbanes-Oxley Act of 2002. We have incurred, and expect to continue to incur, significant continuing costs, including
accounting fees and staffing costs, to maintain compliance with the internal control requirements of the Sarbanes-
Oxley Act of 2002. As described in Item 15, we have identified material weaknesses with respect to internal controls
in our U.S. subsidiary, Edap Technomed Inc, which were due to insufficient resources in the finance department of the
subsidiary, leading to insufficient segregation of duties and inability to perform certain controls. Our management has
concluded that, as a result, our internal control over financial reporting was not effective as of December 31, 2022.
Nevertheless, we have concluded that these material weaknesses did not result in a material misstatement of the
consolidated financial statements for the year ended December 31, 2022, or require a restatement of consolidated
financial statements with respect to any prior period previously reported by the Company.
Although we have initiated remediation actions to address these material weaknesses, as a small company,
we may have insufficient personnel to allow us to segregate duties, and consistently execute the Company’s internal
controls.
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Furthermore, the ongoing requirements of the Sarbanes-Oxley Act may place a strain on our systems and
resources. Our management is required to evaluate the effectiveness of our internal control over financial reporting as
of each year-end, and we are required to disclose management’s assessment of the effectiveness of our internal control
over financial reporting, including any material weakness in our internal control over financial reporting.
Our internal control over financial reporting has been designed to provide our management and Board of
Directors with reasonable assurance regarding the preparation and fair presentation of our consolidated financial
statements. On an on-going basis, we are reviewing, documenting and testing our internal control procedures. In order
to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial
reporting, and as our business develop, additional resources and management oversight may be required.
In an effort to remediate the material weaknesses that were identified as of December 31, 2022, and to enhance
our overall control environment, the Company has hired a Chief Financial Officer in our U.S. subsidiary on December
5th, 2022 and hired a person responsible for financial planning and analysis in January 2023. Controls are being
designed and/or implemented, including appropriate segregation of duties. We believe this will allow us to remediate
these deficiencies in the short term.
Any failure to complete our assessment of our internal control over financial reporting, to remediate any
material weaknesses that we have identified or may identify in the future, any failure to implement new or improved
controls, or difficulties encountered in their implementation, could harm our operating results, cause us to fail to meet
our reporting obligations or result in material misstatements in our financial statements. Any failure to maintain
adequate internal controls over financial reporting and provide accurate financial statements may subject us to
litigation, render future financings more difficult or expensive, and could cause the trading price of our common stock
to decrease substantially. Inferior controls and procedures could cause investors to lose confidence in our reported
financial information, which may give rise to a class action and have a negative effect on the trading price of our
common stock. Any such failure could also adversely affect the results of the periodic management evaluations of our
internal controls and, in the case of a failure to remediate any material weaknesses that we have identified or may
identify in the future, would adversely affect the annual auditor attestation reports regarding the effectiveness of our
internal control over financial reporting that are required under Section 404 of the Sarbanes-Oxley Act of 2002.
Risks Relating to Ownership of Securities
Our securities may be affected by volume fluctuations, and may fluctuate significantly in price, causing you to lose
some or all of your investment.
Our ADSs are currently traded on The Nasdaq Global Market. The average daily trading volume of our ADSs
in 2022 was 72,813, the high and low bid price of our ADSs for the last two financial years ended on December 31,
2022 and December 31, 2021, was $11.53 and $10.68, and $5.54 and $5.28, respectively. Our ADSs have experienced,
and are likely to experience in the future, significant price and volume fluctuations, which could adversely affect the
market price of our ADSs without regard to our operating performance. For example, average daily trading volume of
our ADSs in December 2021 was 6,943 as opposed to 101,126 for the same period of 2022. The price of our securities
and our ADSs in particular, may fluctuate as a result of a variety of factors, including changes in our business,
operations and prospects, and factors beyond our control, including regulatory considerations, results of clinical trials
of our products or those of our competitors, developments in patents and other proprietary rights, general market and
economic conditions and results of operations being below analysts’ or investors’ expectations. Any downward
pressure on the price of ADSs caused by the sale of ADS’s could also encourage short sales by third parties. In a short
sale, a prospective seller borrows shares from a shareholder or broker and sells the borrowed shares. The prospective
seller hopes that the share price will decline, at which time the seller can purchase shares at a lower price for delivery
back to the lender. The seller profits when the share price declines because it is purchasing shares at a price lower than
the sale price of the borrowed shares. Such sales could place downward pressure on the price of our ADSs by increasing
the number of ADSs being sold, which could further contribute to any decline in the market price of our ADSs.
These broad market and industry factors may adversely affect the market price of our ADSs, regardless of
our operating performance. If you invest in our ADSs, you could lose some or all of your investment.
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In addition, following periods of volatility in the market price of a company’s securities, securities class action
litigation has often been instituted. Any additional litigation, if instituted, causes and could cause us to incur substantial
costs and our management resources are and could be diverted to defending such litigation, which could adversely
affect our financial condition or results of operations.
Holders of ADSs have fewer rights than shareholders and must act through the Depositary to exercise those rights.
Holders of ADSs do not have the same rights as shareholders and accordingly, cannot exercise rights of
shareholders against us. The Bank of New York Mellon, as Depositary (the “Depositary”), is the registered shareholder
of the deposited shares underlying the ADSs, and therefore holders of ADSs will generally have to exercise the rights
attached to those shares through the Depositary. We have used and will continue to use reasonable efforts to request
that the Depositary notify the holders of ADSs of upcoming votes and ask for voting instructions from them. If a holder
fails to return a voting instruction card to the Depositary by the date established by it for receipt of such voting
instructions, or if the Depositary receives an improperly completed or blank voting instruction card, or if the voting
instructions included in the voting instruction card are illegible or unclear, then such holder will be deemed to have
instructed the Depositary to vote its shares and the Depositary shall vote such shares in favor of any resolution proposed
or approved by our Board of Directors and against any resolution not so proposed or approved.
Preferential subscription rights may not be available for U.S. persons.
Under French law, shareholders have preferential rights to subscribe for cash issuances of new shares or other
securities giving rights to acquire additional shares on a pro rata basis. U.S. holders of our securities may not be able
to exercise preferential subscription rights for their shares unless a registration statement under the Securities Act is
effective with respect to such rights or an exemption from the registration requirements imposed by the Securities Act
is available. We may, from time to time, issue new shares or other securities giving rights to acquire additional shares
(such as warrants) at a time when no registration statement is in effect and no Securities Act exemption is available. If
so, U.S. holders of our securities will be unable to exercise their preferential rights and their interests will be diluted.
We are under no obligation to file any registration statement in connection with any issuance of new shares or other
securities.
For holders of ADSs, the Depositary may make these rights or other distributions available to holders after
we instruct it to do so and provide it with evidence that it is legal to do so. If we fail to do this and the Depositary
determines that it is impractical to sell the rights, it may allow these rights to lapse. In that case, the holders of ADSs
will receive no value for them.
General Risk Factors
Our results of operations and financial condition could be adversely affected by the adverse economic, geopolitical
and financial environment, the impact of climate change or pandemics such as the COVID-19
As of the date of filing of this report, the global economy remains impacted by geopolitical tensions and
instability and, in particular, the conflict between Russia and Ukraine. Since February 24, 2022, Russia has engaged
in a military conflict against Ukraine. It is difficult to predict the consequences and outcomes of such military action,
which could lead to significant disruptions, including impacts on the prices and supply of energy resources, on
purchases from customers who may defer their orders or change their purchase preferences. Should such military
conflict continue, it may entail instability in financial markets and impact political and economic situations in Europe
and worldwide. Russia’s military action against Ukraine has led to implementation of sanctions by the United States,
the European Union, the United Kingdom, Canada, Switzerland, Japan, and other countries against Russia, Belarus,
the Crimea Region of Ukraine, the so-called Donetsk People’s Republic, and the so-called Luhansk People’s Republic.
In response to these international sanctions, Russian authorities have also imposed significant currency
control and restrictive measures. As the situation is evolving, and additional sanctions may be implemented, such new
restrictions could adversely affect the global economy, prices and energy supply, financial markets, supply chains, and
could adversely affect our business, financial condition, and results of operations. As we evaluated the impact of such
measures on our business, in 2022, we decided to definitively close our representative office in Moscow to avoid
further difficulties in maintaining a direct administrative and operational activity in Russia. Net sales in Russia are not
significant as they represented approximately 2.5% in 2021 and 1.5% in 2022 of our consolidated revenues. Our sales
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in Russia are historically subject to significant variation and long purchase order periods. We have recently established
an exclusive distribution agreement with a business partner with significant experience in marketing and distributing
medical equipment in Russia. This partnership will allow us to continue offering a HIFU solution to Russian patients
and to maintain our existing installed base in Russia. To date, we have not experienced any material disruptions in our
business with Russia, but we cannot predict outcomes that such conflict may have on our future results of operations.
Moreover, uncertain global climate change may result in certain types of more intense and more frequent
natural disasters including, but not limited to hurricanes, wildfires or flooding. Such extreme disasters could imply
risks to our facilities and disrupt our supply chain and may cause us to incur additional operational costs. Such intense
events may also trigger internet security threats or damage to global communication networks that would harm our
global operations and our customers’ operations. Climate change may also result in new regulatory or legal obligations
to address the effects of climate change on the environment. Such new obligations could imply increased compliance
costs to meet the regulatory or legal requirements and may adversely affect sourcing, manufacturing operations, and
the distribution of our products. Such natural disasters could have a material adverse impact on our business, financial
condition, results of operations, or cash flows.
When epidemic, contagious and even pandemic diseases such as the COVID-19 virus occur, they are expected
to impact the development of our business worldwide. Upon the occurrence in 2020 of the COVID-19 virus we adopted
some measures such as remote work, which was implemented for one to two days a week for some of our employees,
that are still in place. The pandemic resulted in further postponement and/or cancelation of the sale and installation of
new devices and disposables in hospitals or clinics as investment decisions had been put on hold or their resources
refocused on COVID-19. We also experienced cancellations of treatments in certain circumstances, which had some
impact on our recurring business and servicing activities. In addition, pandemics could also result in the postponement
of clinical trials using our devices and may continue to impact the performance of clinical trials and recruitment of
patients. Such outbreak of a contagious disease also negatively affected non-COVID-19 related hospital admission
rates and disrupted our global business, and it may continue to negatively impact our activities, including our ability
to manufacture and distribute our devices, for example due to potential quarantine measures, should it occur again.
Worldwide economies and capital markets have been negatively impacted by the COVID-19 pandemic, and
the impact may cause an extended local and/or global economic recession. Such economic disruption, if persisting,
could have a material adverse effect on our business as clinics and hospitals would curtail and reduce capital and
overall expenditures. During the pandemic, we also experienced difficulties in obtaining some materials or components
used in our devices, including electronic parts, computers, plastics and mechanical parts due to supply shortage directly
linked to logistics challenges, Asian manufacturing plants capacity constraints, and disrupted shipping routes impacted
by port closures. These challenges had not materially impacted our ability to deliver devices and services to our
customers during the COVID-19 pandemic, but future disruptions may do so. Finally, we cannot predict the impact
that future pandemics will have on our customers, suppliers and other business partners, and the financial conditions
of these actors; however, any material effect on these parties could adversely impact us. The impact of pandemics may
also exacerbate other risks discussed in this section, any of which could have a material effect on us and may materially
adversely affect the Company’s financial condition, liquidity, or results of operations is uncertain.
We may also be unable to meet the future criteria used by rating agencies in their environmental, social and
governance (ESG) assessments process, leading to a downgrading in our rating. Financial investments in companies
which perform well in ESG assessments are increasingly popular, and major institutional investors have made known
their interest in investing in such companies. Depending on ESG assessments and on the rapidly changing views on
acceptable levels of action across a range of ESG topics from investors, we may be unable to meet society’s or
investors’ expectations on these matters, which may cause reputational harm, or disappoint the expectations of our
stakeholders, and we may face increased compliance or other costs and demand for securities issued by us and our
ability to participate in the debt and equity markets may decrease.
We may issue additional securities that may be dilutive to our existing shareholders, in view of funding our new
developments and accelerating our business expansion.
On June 30, 2021, our shareholders adopted resolutions allowing the Board of Directors to issue two million
new shares under the form of subscription options and 200,000 free shares to motivate and reward the teams dedicated
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to successfully implementing our worldwide activities, particularly in the United States. Based on the June 30, 2021
resolutions, a total of 659,000 subscription options and 101,500 free shares were granted in 2021 and 2022, under
certain conditions, to members of management and U.S. employees. On June 30, 2022, our shareholders also adopted
a resolution allowing the Board of Directors to issue 600,000 free shares to incentivize worldwide teams in charge of
the Company’s operations. This new resolution superseded the June 2021 resolution authorizing the issuance of
200,000 free shares, cancelling the unused portion of the 2021 resolution. Based on the June 30, 2022 resolution, as of
December 31, 2022, a total of 291,500 free shares were granted, under certain conditions, to members of management
and EDAP’s Group’s employees.
On June 30, 2022, our shareholders renewed and extended resolutions allowing the Board of Directors to
issue new shares in an aggregate maximum amount of 10 million shares in order to meet any fundraising opportunities
that may be necessary to finance the Company’s further developments and to address potential strategic moves while
strengthening our long-term growth.
The issuance of additional ordinary shares, including any additional ordinary shares issuable pursuant to the
exercise of preferential subscription rights that may not be available to all of our shareholders, would reduce the
proportionate ownership and voting power of the then-existing shareholders.
We are subject to different corporate disclosure standards that may limit the information available to holders of our
ADSs.
As a foreign private issuer, we are not required to comply with the notice and disclosure requirements under
the Exchange Act relating to the solicitation of proxies for shareholder meetings. Although we are subject to the
periodic reporting requirements of the Exchange Act, the periodic disclosure required of foreign private issuers under
the Exchange Act is more limited than the periodic disclosure required of U.S. issuers. Therefore, there may be less
publicly available information about us than is regularly published by or about other public companies in the United
States.
Judgments of U.S. courts, including those predicated on the civil liability provisions of the federal securities laws
of the United States, may not be enforceable in French courts.
An investor in the United States may find it difficult to:
• effect service of process upon or obtain jurisdiction over us or our non-U.S. resident directors and officers in the
United States;
• enforce U.S. court judgments based upon the civil liability provisions of the U.S. federal securities laws against us
and our non-U.S. resident directors and officers in France; or the United States; or
• bring an original action in a French court to enforce liabilities based upon the U.S. federal securities laws against us
and our non-U.S. resident directors and officers.
We may in the future be the target of securities class action or other litigation, which could be costly and time
consuming to defend.
In the past, securities class action litigation has often been brought against companies following a decline in
the market price of its securities. This risk is especially relevant for us because innovative life sciences and medical
device companies have experienced significant stock price volatility in recent years.
Any litigation, if instituted, could cause us to incur substantial costs and our management resources may be
diverted to defending such litigation, which could adversely affect our financial condition or results of operations.
We are exposed to risks related to cybersecurity threats and incidents.
In the conduct of our business, we collect, use, transmit and store data on information technology systems.
This data includes confidential information belonging to us, our customers and other business partners, as well as
personally identifiable information of individuals. We also store data related to our clinical trials on our information
technology systems. We also rely in part on the reliability of certain tested third parties’ cybersecurity measures,
including firewalls, virus solutions and backup solutions. Cybersecurity incidents, such as breaches of data security,
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disruptions of information technology systems and cyber threats, may result in business disruption, the
misappropriation, corruption or loss of confidential information and critical data (ours or that of third parties),
reputational damage, litigation with third parties, diminution in the value of our investment in research and
development, data privacy issues and increased cybersecurity protection and remediation costs. Like many companies,
we may experience certain of these incidents given that the external cyber-attack threat continues to grow in part due
to a perceived increased vulnerability associated with current remote working conditions. In late 2020, we received
fraudulent invoices, purportedly from our suppliers, submitted to us using fraudulent email addresses and made
payments in connection with two such fraudulent invoices. While we have protocols in place to protect against such
fraudulent transfers, we may fail to identify fraudulent payment requests that we may receive in the future and may
inadvertently provide payment in connection with such requests, which may have a material adverse effect on our
business, financial condition or results of operations.
We devote significant resources to network security, data encryption and other measures to protect our
systems and data from unauthorized access or misuse, including meeting certain information security standards that
may be required by our customers, all of which increases cybersecurity protection costs. As these threats and incidents,
and government and regulatory oversight of associated risks, continue to grow, we may be required to expend
additional resources to enhance or expand upon the security measures we currently maintain. Nevertheless, with the
current ongoing conflict between Russia and Ukraine and the related political uncertainty, there is an increased
possibility that cybersecurity incidents or cyberattacks may occur and impact our results of operations.
There can be no assurance that our efforts or those of our third-party service providers to implement adequate
security and control measures would be sufficient to protect against breakdowns, service disruption, data deterioration
or loss in the event of a system malfunction, or prevent data from being stolen or corrupted in the event of a cyber-
attack, security breach, industrial espionage attacks or insider threat attacks which could result in financial, legal,
business or reputational harm. Future cybersecurity breaches or incidents or further increases in cybersecurity
protection costs may have a material adverse effect on our business, financial condition or results of operations.
The expansion of social media platforms and new technologies present risks and challenges for our business and
reputation.
We increasingly rely on social media and new technologies to communicate about our products and
technologies. The use of these media requires specific attention. Unauthorized communications, such as press releases
or posts on social media, purported to be issued by the Company, may contain information that is false or otherwise
damaging and could have an adverse impact on our stock price. Negative or inaccurate posts or comments about the
Company, our business, directors or officers on any social networking website could seriously damage our reputation.
In addition, our employees and partners may use social media and mobile technologies inappropriately, which may
give rise to liability for the Company, or which could lead to breaches of data security, loss of trade secrets or other
intellectual property or public disclosure of sensitive information, including information about our employees, clinical
trials or customers. Such uses of social media, mobile technologies, or information technology more generally could
have a material adverse effect on our reputation, business, financial condition and results of operations.
Item 4. Information on the Company
We develop and market robotic HIFU devices, advanced choices for the treatment of localized prostate cancer.
HIFU treatment is shown to be a minimally invasive and effective treatment option for localized prostate cancer
(T1-T2) with a low occurrence of side effects. Our HIFU devices are also used for patients who failed a radiotherapy
treatment. In addition, we are developing a HIFU platform for the treatment of various types of tumors including rectal
endometriosis, liver and pancreatic cancer. We also produce and commercialize medical equipment for the treatment
of urinary tract stones using ESWL and distribute other types of urology devices in certain countries.
History and Development of the Company
Our legal name is EDAP TMS S.A. and our commercial name is EDAP TMS. EDAP TMS S.A. was
incorporated on December 3, 1979 as a société anonyme organized under the laws of the Republic of France for a
duration of 60 years from the date of incorporation. Our principal executive offices are located at Parc d’Activités la
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Poudrette- Lamartine, 4/6, rue du Dauphiné, 69120 Vaulx-en-Velin, France and our telephone number is +33 (0) 4 72
15 31 50. Corporation Service Company, 251 Little Falls Drive, Wilmington, DE19808-1674, United States, is our
agent for service of process in the United States. The SEC maintains an Internet site that contains reports, proxy and
information statements, and other information regarding the Company’s electronic filings with the SEC. Such
electronic filings can be found by visiting the SEC web site at http://www.sec.gov or the Company’s web site at
http://www.edap-tms.com, section “Investor Relations”.
On June 7, 2018, we obtained FDA clearance for our Focal One device dedicated to the focal ablation of
prostate tissue. It incorporates our proprietary fusion software, which merges MRI and ultrasound images, providing
increased accuracy during planning and prostate treatment for physicians.
In May 2020, we signed an exclusive worldwide agreement with Exact Imaging to distribute their diagnostic
micro ultrasound technologies. Their lead product, ExactVuTM, delivers diagnostic accuracy similar to MRI in
identifying prostate cancer and supports real-time imaging for the prostate. The combination of ExactVu with our
Focal One HIFU soft tissue ablation technology represents what we believe to be the most complete end-to-end solution
for the focal management of prostate cancer.
In May 2020, we also initiated a strategic shift after an extensive review of our different businesses, including
HIFU, ESWL and Distribution activities. We have decided to strengthen and refocus our development efforts towards
HIFU for both prostate application and beyond and hence, to realign our activities and report our financial results in
three segments: HIFU, ESWL and Distribution.
In July 2020, we received clearance from French health authorities to initiate a Phase II multi-centric clinical
trial evaluating Focal One for the treatment of deep invasive rectal endometriosis. This is a truly debilitating condition
for women suffering from this pathology, which is responsible for a significant decline in quality of life. We enrolled
our first female subjects in September 2020 and completed the study in late 2022.
In January 2021, U.S. CPT Code Category 1 reimbursement for HIFU became effective. CMS established,
for the first time, a Category 1 CPT code including reimbursement to physicians performing ablation of malignant
prostate tissue with HIFU in the United States.
In April 2021, we completed a successful public offering of common stock in the form of ADSs that raised
gross proceeds of $28,012,500 or €23,250,747. We intend to use the vast majority this funding to further build up our
U.S. clinical, sales and marketing infrastructure.
In June 2021, soon after completing our capital increase and in line with our strategy to expand our HIFU
activities particularly in the U.S., we hired medical technology industry veteran Ryan Rhodes as Chief Executive
Officer of EDAP Technomed Inc., the Company’s U.S. subsidiary.
In September 2022, we completed a successful public offering of common stock in the form of ADSs that
raised gross proceeds of $23,000,003 or €23,913,314. We intend to use the majority of this funding to further expand
and continue executing our U.S. Focal One growth initiatives while, in parallel, exploring new indications and other
development opportunities.
On November 1, 2022, the U.S. Centers for Medicare and Medicaid Services (CMS) released its final
outpatient prospective payment system (OPPS) reimbursement rule for calendar year 2023 (CY23), which became
effective on January 1, 2023. The final rule increased the reimbursement level to an Ambulatory Payment
Classification (APC) level 6, similar to surgery, as compared to APC level 5 in place.
In November 2022, following completion of a Phase II study evaluating Focal One HIFU as a potential
treatment for deep infiltrating endometriosis, we received approval from French authorities to initiate a Phase III
randomized, controlled clinical trial evaluating Focal One high intensity focused ultrasound (HIFU) as a potential
treatment for such pathology.
Additional information regarding the principal capital expenditures and divestitures can be found in Item 5,
“Operating and Financial Review and Prospects—Operating Results—Overview”.
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Business Overview & Strategy
EDAP TMS S.A. is a holding company and is responsible for providing common services to its subsidiaries,
including preparation and consolidation of the financial statements for the group, complying with the requirements of
various regulatory agencies and maintaining the listing of its publicly held securities and, in conjunction with its Board
of Directors, directing the overall strategy of our group.
Our activity is organized in three divisions: HIFU, ESWL (including lithotripsy activities) and Distribution.
Through these three divisions, we develop, produce, market and distribute minimally invasive medical devices, and
mainly for urological diseases. The HIFU division includes sales of Focal One, related consumables and services
(including servicing the Ablatherm installed base), the ESWL division includes revenues generated by the existing
installed base of Sonolith range of lithotripters and, the Distribution division includes the sale of complementary
products such as lasers, micro-ultrasound systems and other products from third parties.
Our global strategy is to expand our HIFU activities in the U.S. and accelerate HIFU adoption through our
HIFU division. We are also focusing our efforts on the development of HIFU in other medical conditions beyond
prostate cancer. We are leveraging our Distribution and ESWL divisions to help optimizing our global development
while rolling out our HIFU strategy.
We believe that these three divisions will help to better support the expansion of our HIFU development and
sales activities as well as to maximize the potential of our Distribution activities.
Our three divisions operate in Europe, the Americas, Asia and the rest of the world. Total net sales for the
HIFU division (in net contributions to total consolidated sales) were €15.6 million, €9.9 million and €11.4 million for
2022, 2021 and 2020, respectively. Those sales are generated in Europe, the United States and the rest of the world,
excluding certain countries in Asia, such as Japan, where our HIFU devices are not approved yet. Total net sales for
the ESWL division were €11.6 million (including €5.6 million in Asia and €6.0 million in Europe and the rest of the
world), €11.0 million (including €5.4 million in Asia and €5.6 million in Europe and the rest of the world), and €12.9
million (including €6.7 million in Asia and €6.2 million in Europe and the rest of the world), each for 2022, 2021 and
2020, respectively. Total net sales for the Distribution division were €27.9 million (including €12.1 million in Asia
and €15.8 million in Europe and the rest of the world), €23.1 million (including €10.2 million in Asia and €13.0 million
in Europe and the rest of the world), and €17.3 million (including €9.0 million in Asia and €8.3 million in Europe and
the rest of the world), each for 2022, 2021 and 2020, respectively.
See Note 29 to our consolidated financial statements for a breakdown of total sales and revenue during the
past three fiscal years by operating division and Item 5, “Operating and Financial Review and Prospects.”
HIFU Division
The HIFU division is engaged in the development, manufacturing and marketing of robotic medical devices
based on HIFU technology for the minimally invasive treatment of urological and other clinical indications. Our HIFU
business is cyclical and generally linked to lengthy hospital decisions and investment processes. Hence, our quarterly
revenues are often impacted and fluctuate according to these parameters, generally resulting in a higher purchasing
activity in the last quarter of the year. The HIFU division contributed €15.6 million to our consolidated net sales during
the fiscal year ended December 31, 2022.
HIFU Division Business Overview
The HIFU division currently develops, manufactures and markets robotic devices for the minimally invasive
ablation of certain types of localized tumors using HIFU technology. HIFU technology uses a high-intensity
convergent ultrasound beam generated by high power transducers to produce heat. HIFU technology is intended to
allow the surgeon to destroy a well-defined area of diseased tissue without damaging surrounding tissue and organs,
thereby eliminating the need for incisions, transfusions and general anesthesia and associated complications. The HIFU
division markets the Focal One high-end device, a HIFU fully robotic device for prostate tissue ablation dedicated to
the focal therapy of localized prostate cancer at stage T1-T2, thereby destroying targeted cancer cells only. The robotic
features of our HIFU devices make the treatment procedure safer for the patient and less operator dependent. The Focal
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One HIFU device can be used for patients who are not candidates for surgery or who have failed a radiotherapy
treatment.
In addition to selling HIFU devices, the HIFU division also records revenues driven from HIFU treatments
performance (“HIFU Treatment Driven Revenues”) which include net sales of (i) disposables, (ii) leases (iii) RPP and
(iv) treatment related services. We offer a HIFU mobile treatment option, which provides access to our HIFU devices
without requiring hospitals and clinics to make an up-front investment in the equipment. Instead, hospitals and clinics
perform treatments using these devices and remunerate us on a RPP basis (i.e., on the basis of the number of individual
treatments provided). With this model, once the treatment is established in the medical community, a permanent
installation may become more attractive, leading to the sale of the device in some of the larger locations.
In addition, the HIFU division also generates revenues from net sales of maintenance services associated to
our installed HIFU devices, including Focal One, but also Ablatherm and Ablatherm fusion devices. As of
December 31, 2022, the HIFU division had an active installed base of 85 Focal One machines including 34 in the U.S.
HIFU Division Business Strategy
The HIFU division’s business strategy is to capitalize on its expertise in HIFU and its position in urology to
achieve long-term growth as a leader in the development, manufacturing, marketing and distribution of minimally
invasive medical devices for urological and other indications, using HIFU technology, while preserving patient quality
of life. The HIFU division believes that minimally invasive treatments using HIFU could provide an alternative to
current invasive therapies on the basis of reduced cost and reduced morbidity for a number of different indications.
The key elements of the HIFU division’s strategy to achieve that objective are:
• Provide Minimally Invasive Solutions to Treat Localized Prostate Cancer using HIFU. Building upon
our established position in the urology market, our HIFU division is striving to become the leading
provider of our minimally invasive HIFU treatment option for prostate cancer. We believe that there is a
large market opportunity with an increase in incidence linked to the aging male population, an increase
in screening and recent campaigns to increase awareness about prostate cancer. We also believe that
HIFU could represent a credible alternative to surgery, external beam radiotherapy, brachytherapy and
cryotherapy for the treatment of organ-confined prostate cancer without the cost, in-patient
hospitalization and adverse side effects associated with those therapies. With the growing demand for
more focused treatments that destroy the tumor only (focal therapy) while continuously controlling the
disease, HIFU and its focused approach, is well positioned to address this new clinical approach. The
HIFU division intends to achieve this through a direct sales network in key European countries and the
United States and through selected distributors in other European countries and in Asia. Our strategy is
also to accelerate HIFU adoption in the U.S. now that the technology has a CPT Code and an established
level 6 reimbursement. We need to work building coverage and market acceptance in order to offer this
minimally invasive option to U.S. prostate cancer patients at a broader level. Speed of execution could
depend on the amount of resources invested in this strategy. The HIFU division has built a strong clinical
credibility based on clinical articles published in peer-reviewed journals. We ensure effective patient and
physician education through a focused communication and training program.
• Achieve Long-Term Growth by Expanding HIFU Applications Beyond Prostate Cancer. The HIFU
division’s long-term growth strategy is to apply our HIFU technology in the treatment of other medical
conditions beyond prostate cancer. We believe that HIFU could represent an alternative to surgery and
radiotherapy for the treatment of many tumors without the cost, in-patient hospitalization and adverse
side effects associated with those therapies. The HIFU division is exploring various other applications
such as rectal endometriosis, liver and pancreatic cancers, where HIFU could provide an alternative to
current therapies. In 2022, the HIFU division increased gross expenses by 36% compared to 2021 on
research and development (“R&D”) projects to develop HIFU applications beyond prostate cancer. The
division is considering increasing levels of R&D spending in 2023 and future years to strengthen its
technological leadership in HIFU and expand its application beyond urology.
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HIFU Products
Cell destruction by HIFU is accomplished by a combination of thermal and cavitation effects caused by
focused application of piezoelectric-generated high-intensity ultrasound; HIFU procedures are performed under
general or spinal anesthesia.
Currently, we commercialize the Focal One, a HIFU fully robotic device dedicated to the focal therapy of
prostate cancer by the ablation of prostate tissue. Focal One combines the three essential components to efficiently
perform a focal treatment of localized prostate cancer: (i) high-quality imaging to localize tumors with the use of
magnetic resonance imaging (MRI) combined with real-time ultrasound, (ii) high precision of HIFU treatment focused
on identified targeted cancer areas and (iii) immediate feedback on treatment efficacy utilizing Contrast-Enhanced
Ultrasound Imaging. Focal One provides an effective and accurate ablative treatment of localized tumors with the
capacities of being flexible and repeatable, while preserving patient quality of life.
We also maintain and service installed bases of the prior generation of HIFU devices such as:
• Ablatherm, an ultrasound guided robotic HIFU device for ablation of prostate tissue and is used in the
treatment of organ-confined prostate cancer. It consists of a treatment module, including a HIFU
endorectal probe, a control table with a computer and a computer screen, and a diagnostic ultrasound
device connected to the treatment module. After insertion of an endorectal probe, the physician visualizes
the prostate using ultrasound imaging and defines the area to be treated. The computer automatically
calculates the optimum treatment distribution of lesions. During the treatment, the probe automatically
moves and fires HIFU beams at each predefined lesion until the entire targeted area has been treated. At
the same time, the physician is able to control and visualize the treatment in real time due to the integrated
imaging system.
• Ablatherm Fusion, an evolution of Ablatherm, and incorporates the Company’s proprietary fusion
software which merges MRI and ultrasound images providing physicians with increased accuracy during
planning and treatment.
HIFU Division Patents and Intellectual Property
As of December 31, 2022, the HIFU division’s patent portfolio contained 30 granted owned or co-owned
patents consisting of six patents in the United States, ten patents in the European Union, seven patents in Japan and
seven patents in China. These patents belong to ten groups of patents covering technologies related to therapeutic
ultrasound principles, systems and associated software.
Additional owned or co-owned patent applications covering certain other aspects of our HIFU technology,
including two international patent applications under the Patent Cooperation Treaty, two patent applications in the
United States, five patent applications in the European Union, two patent applications in Japan and two patent
applications in China, are currently pending before the relevant patent offices. Our ongoing research and development
objectives are to maintain our leadership position in the treatment of prostate cancer and to extend the HIFU technology
to new applications and minimally invasive systems. These research projects are conducted in cooperation with the
French National Institute for Health and Medical Research (“INSERM”) which collaboration gives rise in some cases
to the filing of patent applications, followed by the registration of co-owned patents, if granted. We have entered into
license agreements with INSERM related to certain patents co-owned with INSERM whereby we commit to pay an
amount of royalties to INSERM based on a fixed rate of the net revenues generated from the sales of HIFU devices
using such co-owned patents. Under these agreements, which last for the life of each such co-owned patent, we have
the exclusive right to the commercial use of these co-owned patents, including the right to out-license such commercial
rights. We have an option to obtain an exclusive license from INSERM relating to other patents co-owned with
INSERM.
Although we believe that our HIFU patents are valid and should be enforceable against third parties and that
our patent applications should, if successfully pursued, result in the issuance of additional enforceable patents, there
can be no assurance that any or all of these patents or patent applications, if issued, will provide effective protection
for the HIFU division’s proprietary rights in such technology. HIFU devices, as they are currently or may in the future
be designed, may also be subject to claims of infringement of patents owned by third parties, which could result in an
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adverse effect on our ability to market HIFU systems. See Item 3, “Risk Factors—Risks relating to Intellectual
Property Rights.”
HIFU Division Clinical and Regulatory Status
Clinical and Regulatory Status in Europe
Ablatherm devices previously placed on the market are maintained for use according to applicable regulation
and any new placement of HIFU devices, in Europe or in territory covered by CE Marking, is being addressed with a
Focal One new generation device. Based on clinical study results, we obtained a CE Marking for Focal One in
June 2013, which allowed us to market the Focal One in the European Union and in worldwide territories where CE
Marking is required. Our current notified body has recently expanded our Focal One CE certificate until May 2024.
Clinical and Regulatory Status in the United States
In November 2015, we received 510(k) clearance from the FDA to market Ablatherm® Integrated Imaging
HIFU in the U.S. for the ablation of prostate tissue and in October 2017, we were granted a 510(k) clearance for our
Ablatherm Fusion device.
On June 7, 2018, based on Ablatherm clearance and European pre-market and post-market clinical data, we
obtained FDA 510(k) clearance for our Focal One device.
Clinical and Regulatory Status in Japan
We have initiated discussions with the Japanese authorities (“PMDA”) on the best process to apply to obtain
Japanese approval for our Focal One device. We will need to conduct a clinical trial in Japan to obtain clearance for
our HIFU Focal One device. The process of requesting approval to market the Focal One in Japan may be long and
may never result in the approval to market the Focal One in Japan. See Item 3, “Risk Factors—Our future revenue
growth and income depend, among other things, on the success of our HIFU technology” and “— Our clinical trials
related to products using HIFU technology may not be successful and we may not be able to obtain regulatory
approvals necessary for commercialization of all of our HIFU products.”
Clinical and Regulatory Status in China
We did not obtain marketing clearance of our HIFU devices by Chinese authorities due to lengthy and
complex processes. We are currently reviewing our regulatory and market access strategy.
Clinical and Regulatory Status in the Rest of the World
The Ablatherm is cleared for distribution in Canada, Egypt, Russia and Taiwan.
The Focal One device is cleared for distribution in Saudi Arabia, Argentina, Brazil, Canada, South Korea,
Costa Rica, Egypt, Singapore, United Arab Emirates, Ecuador, Israel, Malaysia, Mexico, U.K, Russia, Switzerland
and Uruguay.
See Item 3, “Risk Factors—We operate in a highly regulated industry and our future success depends on
government regulatory approval of our products, which we may not receive or which may be delayed for a significant
period of time.”
HIFU Clinical Developments
HIFU in Prostate Cancer
The clinical study initiated in 2015 within the scope of “Forfait Innovation” (the “HIFI” study) and piloted
by the French Association of Urology (“AFU”) aimed at evaluating the reimbursement of HIFU in France. The
patients’ inclusion period closed on September 30, 2019. Patients included in the HIFI study were followed for
30 months ahead of data analysis and results publication. During that follow-up period, we pursued patient treatments
using HIFU under the specific Forfait Innovation coverage process, but these patients were not followed as part of
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HIFI Study. In September 2021, the Study Coordinator presented 24th month interim results at the AUA annual
congress and in November 2021, the 30th month interim results were presented in AFU congress. The results of these
interim analyses (non-consolidated results) show a significantly better 30-month recurrence-free survival (i.e., the rate
of salvage treatment by external beam radiotherapy and/or hormone therapy) for the patients treated with HIFU
compared to the patients undergoing surgery (p<0.001). Additionally, urinary continence was better and erectile
function was significantly less impacted for the patients undergoing HIFU compared to those in the RP arm. Follow-
up of patients was completed in September 2022 and the patient database was finalized in December 2022. Final data
analysis is planned for Q1 2023. Once finalized, this data analysis will be submitted to French authorities in 2023 in
view of a final decision regarding HIFU reimbursement in France. In July 2017, we, together with our academic,
scientific and clinical partners, initiated a collaborative project (the “PERFUSE” project) under the “French National
Investment Program for the Future”. The overall objective of the PERFUSE project is two-fold: (i) to set-up several
clinical studies to assess focal therapy using the Focal One device in view of a better understanding of focal therapy in
prostate cancer management and, (ii) to prepare a change of paradigm in the treatment of prostate cancer via technical
innovations such as focal therapy. The whole project was awarded funding of €8 million over five years. We, as a
partner of the PERFUSE project, are to receive about €1.2 million over the period as a non-refundable grant. As of
December 31, 2022, we received a non-refundable grant of a total of €1.0 million.
As part of PERFUSE project, several studies were initiated and sponsored by academic partner HCL -
Edouard Herriot Hospital. In September 2018, a Phase II multi-centric study was launched to evaluate the efficacy and
safety of HIFU focal therapy in patients with intermediate-risk single-lobed prostate cancer (the “FOCALE” study).
170 patients were included in the FOCALE study over 14 centers. The last patient was included in May 2021.
Inclusions are now closed, patient follow-up is on-going and last patient follow-up visit is scheduled for October 2025.
In October 2018, a Phase III, multi-centric, randomized study was initiated aiming at evaluating the efficacy of focal
HIFU versus active surveillance hence reducing the need for radical treatment for low-risk prostate cancer patients (the
“HIFUSA” study). As of December 2022, 109 patients have been included within 14 French centers. Patient inclusion
is now closed. Patient follow-up is on-going and last patient follow-up visit is scheduled for October 2026. In
February 2020, a Phase I study was launched aiming at evaluating the use of HIFU guided by a new imaging modality
(“PSMA-PET-MRI”) to evaluate prostate cancer recurrence after radiotherapy (the “PMSA” study). 20 patients are to
be included in the study. The first patient was included in this study in July 2020. Six patients have been included in
the study as of December 2022.
The majority of Academic Centers using EDAP’s Focal One HIFU Technology are collecting data following
an Investigational Review Board approval in order to continue building clinical evidence and long-term HIFU
outcomes. These various sources of clinical data are a basis for individual sites to present abstracts at regional, national
or international conferences and submit manuscripts for peer-review to renown journals and publications. This holds
the potential for the FDA, which cleared HIFU for prostate tissue ablation in 2015, to re-evaluate the technology in the
future for a prostate cancer indication. Likewise, health insurance reimbursements on a wider scale are also possible
with such prospective data collection efforts documenting HIFU data from patients in the U.S.
HIFU for Potential Treatment of benign prostatic hyperplasia
In 2021, we initiated a mono-centric Phase I study to investigate the feasibility of BPH (Benign prostatic
hyperplasia) HIFU treatment with a Focal One device. A total of 10 patients will be treated and the treatment safety
will be evaluated at three months after HIFU treatment. The first patient was included in this study in March 2022. As
for December 31, 2022, six patients have been enrolled and treated.
HIFU for Potential Treatment of Pancreatic and Liver Cancer
In view of addressing liver cancer using HIFU technology, we entered into a multi-partner liver cancer
development project named the HECAM consortium in 2015 to develop a novel HIFU –per operative- approach to
treat liver metastasis. The HECAM project was completed in 2020. To fund this development program, EDAP received
a total of €1.5 million including €1.0 million as a conditional subsidy and €0.5 million as a non-refundable grant.
Despite a first single-center study successfully implemented with Lyon’s Centre Leon Bérard cancer center, we decided
not to pursue the development of HIFU for liver cancer as a per-operative approach. Additionally, the multi-center
Phase II study, which was to be initiated following the single-center study, will not be implemented. We determined
that the per-operative approach will not be sufficiently distinct from existing options to be commercially viable at this
time and will require lengthy comparative clinical studies against existing therapeutic solutions to fulfill the
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requirement of the new European MDR regulations which became effective in May 2021. The company intends to
leverage the efforts, knowledge and assets resulting from the HECAM project in two ways: to evaluate the technology
and approach for pancreatic cancer for patients with few or even no alternatives and to evaluate the technology and
approach as an extracorporeal solution for patients affected by primary or metastatic liver cancer. In 2021, the
Company decided not to pursue the HECAM project under the initial parameters and based on results obtained as part
of the HECAM program, EDAP has had to reimburse €0.6 million, with the balance of €0.4 million reclassified as a
non-refundable grant.
HIFU for Potential Treatment of Deep Endometriosis
A Phase I study have been successfully completed in 2019 on 20 treated patients, this first study reported
promising results with a significant improvement of the outcomes and in patient quality of life at six months after
HIFU treatment. These results were published in November 2019.
In 2020, we initiated a second Phase II multi-center clinical study in France to investigate further the use of
Focal One HIFU in the treatment of certain types of deep endometriosis situated in the low rectum. The study was
recently completed: a total of 60 women were enrolled in the study at four major hospitals in France and assessed over
a six-month follow-up period. Its intended end-point was to evaluate the safety and efficacy of HIFU for this
pathology. Data from this study have been analyzed and final results on safety and efficacy were presented in France
at the Pari(s) Santé Femmes Gynecology Congress in early 2023.
In 2021, we initiated a long-term follow-up study aiming at including all of the 80 patients treated by HIFU
for their deep endometriosis in the Phase I and II studies. During this study, we will evaluate the quality of life and the
symptoms level of the patients up to five years after their HIFU treatment. As of December 31, 2022, 47 patients have
accepted to be included in the follow-up study.
In late 2022, we received approval from the French authorities to initiate a Phase III randomized, controlled
clinical trial evaluating Focal One HIFU as a potential treatment for rectal deep infiltrating endometriosis. This study
is a level 1 multi-center, double blind, randomized, controlled clinical trial. HIFU treatment will be compared to
simulated surgery. The study will enroll 60 patients across nine centers in France, with 30 patients randomized to each
group. The primary efficacy endpoint is acute pelvic pain evolution three months post procedure. At the conclusion of
the study, patients in the simulated surgery group will be offered HIFU treatment.
HIFU Clinical Publications
To date, clinical results related to our HIFU devices have been published in renowned peer-reviewed journals.
In February 2020, Tourhino-Barbosa et al. from Institut Mutualiste Monsouris, Paris, France, published in the
Journal of Urology a retrospective study presenting their results of focal prostate cancer treatments (HIFU and
cryotherapy) in their institution.
In September 2020, Nahar et al. from University of Miami Miller School of Medicine, Miami, Florida,
published in the Journal of Urology, their results on 52 patients after focal treatments using the Ablaterm device
(January 2016 to July 2018) on patients with clinically significant cancer profile. They concluded that focal HIFU is
safe and effective and may be offered as an alternative to the existing modalities of treatment for select patients with
all risk profiles of prostate cancer.
In October 2020, Abreu et al. From USC Institute of Urology, University of Southern California, Los Angeles,
California, published in the Journal of Urology the first U.S. series of results on a cohort of 100 consecutive men who
underwent hemi-gland HIFU ablation (December 2015 to December 2019). They concluded that focal HIFU ablation
is safe and provides excellent potency and continence preservation with adequate short-term cancer control and that
radical treatment was avoided in 91% of men at two years.
In January 2021, Dr. Castilho Borges et al. from Institut Mutualiste Montsouris, Paris, published in the Journal
of Urology their results on 300 patients, a study in which the results compare the impact on functional results (Sexual
Function and Urinary Continence) in two groups of patients: 195 patients in Focal Treatment (FT) versus 105 patients
in the Whole Gland (WGT) Ablation Prostate Cancer. In the conclusions, FT is associated with better functional
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outcomes, with an earlier urinary continence recovery, and better sexual function at 3 and 12 months. Moreover, the
morbidity associated with focal therapy is substantially lower than that related to whole gland therapy.
In December 2021, Cilleros & al. from EDAP and Labtau, Inserm and Centre Leon Bérard, Lyon, published
in the journal Cancers positive pre-clinical results using intraoperative HIFU ablation of the pancreas in view of
assessing the feasibility HIFU in the pancreas under Doppler guidance to treat the pancreatic parenchyma and tissues
surrounding the superior mesenteric vessels in vivo in an animal model.
In May 2022, Hong sk et al., from Seoul National University Bundang Hospital, Korea, published in the
Jounal of Society Urological Oncology their results on their retrospective study on 163 patients who underwent Partial
Gland HIFU Ablation (“PGA”) by Focal One with a median follow up period of 17 months. In conclusion, the PGA
with HIFU was safe and showed good preservation of functional outcomes as well as satisfactory oncological control.
In October 2022, De Luca et al., from San Luigi Gonzaga University Hospital, Italy published in the Minerva
Urology and Nephrology journal their results on their prospective study on 100 patients with low to intermediate-risk
prostate cancer treated with HIFU by Focal One with 12 months of follow up: 15 patients underwent total ablation, 50
patients hemi-ablation and 35 patients focal ablation. Control biopsy at 12 months of the HIFU-treated zone was
negative in 80% for total ablation, 84% for partial and 80% for focal ablation. Patients had postoperative excellent
quality of life with lower rate of irritative symptoms and negligible impact on voiding and erectile function scores.
In December 2022, Jung G, et al., from Seoul National University Bundang Hospital, Korea, published in the
journal of Prostate International their results on their retrospective study on 685 patients who underwent PGA using
HIFU with Focal One (n=137 patients) versus Robot-Assisted Radical Prostatectomy (“RARP”) (n=548 patients) with
a median follow- up period of 22 months. The authors confirmed that PGA HIFU preserves urinary and erectile
functions, with aslight/minor loss of efficiency, which remained however very satisfactory (80% success rate efficacy
in the treatment).
HIFU Division Market Potential
Prostate cancer is currently the first (in terms of new cases diagnosed) and second (in terms of number of
deaths) most common form of cancer among men in many populations. In the United States, the American Cancer
Society estimates the number of new prostate cancers to be diagnosed for 2023 to be approximately 268,490, of which
approximately 70% are diagnosed with localized stage prostate cancer. Additionally, the HIFU division believes, based
on figures provided by the World Health Organization that the worldwide incidence of localized prostate cancer is
approximately twice this U.S. figure. A more effective diagnostic method for prostate cancer, the PSA test, has
increased public awareness of the disease in developed countries since its introduction. PSA levels jump sharply when
cancer is present. Prostate cancer is an age-related disease, and its incidence in developed countries is expected to
increase as the population ages.
Management believes that HIFU therapy could be expanded to other medical conditions, such as rectal
endometriosis, liver and pancreatic cancers but also to certain localized thyroid, breast, bladder, kidney, brain tumors.
We decided to focus on developing HIFU for certain types of pathologies. However, the expansion of the use of HIFU
to other areas of treatment will require a significant investment in research and development, an investment that we
intend to accelerate as acceptance of HIFU as a treatment for localized prostate cancer is gaining grounds in the medical
community.
For example, in 2019, as we decided to expand the development of HIFU beyond prostate cancer, we
successfully finalized a clinical Phase I study using Focal One HIFU to address certain types of deep endometriosis
located in the low rectum. The study results are promising and show a decrease of symptoms in the treated patients. In
2020 and further in 2021, we initiated Phase II multi-centric studies to investigate further the use of HIFU in this
pathology and the impact on patients’ quality of life. In 2023, we will initiate a Phase III randomized, controlled clinical
trial evaluating Focal One high intensity focused ultrasound (HIFU) as a potential treatment for rectal deep infiltrating
endometriosis. As per the European Society of Human Reproduction and Embryology, endometriosis is estimated to
affect approximately one in 10 women of reproductive age.
In addition, in view of addressing liver cancer using HIFU technology, we decided to pursue the development
of HIFU for liver cancer as an extracorporeal solution, avoiding open surgery approach.
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HIFU Reimbursement Status
In the United States, following the AMA’s establishment of a new Category 1 CPT code, CMS finalized
payment rules for hospitals, facilities, and physicians that facilitates coverage and reimbursement for the ablation of
malignant prostate tissue with HIFU technology, effective January 1, 2021. U.S. private insurers are continuing to
evaluate and advance coverage and payment policies related to HIFU procedures for prostate cancer patients. We have
engaged Medical Technology Partners (MTP) and Argenta Advisors, two leading reimbursement consultancies, to
support us in reimbursement analysis and strategies. As public and private payors expand coverage and payment for
HIFU procedures, our Focal One HIFU device and procedure likely will have accelerated market access and demand
in the United States.
On the hospital payment side, the 2023 final rule upgrades the HIFU procedure from Level 5 Urology
Ambulatory Payment Classification (APC) in 2022 to Level 6 in 2023. This translates into reimbursement to a hospital
performing a HIFU procedure on a Medicare patient to approximately $8,500 per procedure as a national average,
adjusted locally based on the wage index, from the previous approximately $4,500. The Centers for Medicare and
Medicaid Services (CMS) will continue to update payment rates for hospitals on a yearly basis as part of the Hospital
Outpatient Prospective Payment System (OPPS) Rulemaking.
On the physician payment side, CMS first established a payment to physicians performing a HIFU procedure
in the U.S. in 2021. The American Medical Association (AMA) has set the work Relative Value Units for a physician
performing a HIFU procedure at 17.73. In the 2023 Final Rule of the Physician Fee Schedule, CMS has set the total
facility Relative Value Units (“RVUs”) at 28.84. This translates to an average payment of $977 for a urologist
performing a HIFU procedure on a Medicare patient in a facility setting in 2023. As a reference, a comparable
established minimally invasive therapy for prostate cancer, cryotherapy, yields 22.56 total facility RVUs, which
translates to $764 for the urologist under the same setting and patient conditions in 2023. A radical prostatectomy
would grant the urologist 34.39 total facility RVUs, which translates to a Medicare payment of $1,165, or 35.18 total
facility RVUs and $1,192 if performed laparoscopically or robotically. Of note, CMS has finalized a reduction of 18%
for the physician payment for a robotic prostatectomy in 2023 compared to 2022, significantly reducing the difference
between this procedure and HIFU in terms of physician payment.
In the European Union, there is no harmonized procedure for obtaining reimbursement and, consequently, we
must seek reimbursement in each Member State. Procedures performed with our HIFU devices are not reimbursed in
the European Union with the exception of Italy, Germany, the United Kingdom (where procedures are partially
reimbursed by either public healthcare systems or private insurers) and France under certain conditions. In 2014, the
French healthcare government authorities announced the reimbursement of prostate cancer treatment procedures using
HIFU as part of a specific process (“Forfait Innovation”) to further validate breakthrough therapies and to accelerate
their related reimbursement process based on clinical trials and data registries. Patients inclusions and follow-up were
terminated in 2022. Under this specific process, French healthcare government authorities will review the clinical data
gathered under this process in view of granting definitive reimbursement for HIFU. Final decision is expected in 2023.
HIFU Competition
The principal current therapies for prostate cancer carry side effects that can seriously affect a patient’s quality
of life. One of the current therapies is radical prostatectomy (surgery), which involves the ablation of the entire prostate
gland. Radical prostatectomy requires several days of hospital stay and several weeks of recovery, usually with
catheterization, and may result in partial and/or total urinary incontinence. In addition, it almost invariably renders
patients impotent. A newer surgical technique, nerve-sparing prostatectomy, has been developed to address that
problem. However, the procedure can only be applied when the tumor is not located close to the surface of the prostate
and it requires a very skilled surgeon. Other therapies for localized prostate cancer include brachytherapy, a therapy
that involves the implantation of radioisotopes into the prostate gland, external beam radiation therapy and cryotherapy.
Our robotic HIFU devices compete with all current treatments for localized tumors, which include surgery,
brachytherapy, radiotherapy, cryotherapy and electroporation. We believe that HIFU competes against those
treatments on the basis of efficacy, limited side effects and cost-effectiveness.
We also believe that Focal One will be well positioned to address the growing demand for a “focal” approach
of localized prostate cancer which cannot be answered by surgery or radiation therapy. “Focal” treatment (also known
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as “partial” or “zonal” treatment, as opposed to “radical” or “total” treatment) provides an effective and accurate
ablative treatment of localized tumors with the capacities of being flexible and repeatable, while preserving patient
quality of life.
Other companies are working with HIFU for the minimally invasive treatment of tumors. See Item 3, “Risk
Factors—Competition in the markets in which we operate is intense and is expected to increase in the future.”
Certain existing and potential competitors of our HIFU division may have substantially greater financial,
research and development, sales and marketing and personnel resources than us and may have more experience in
developing, manufacturing, marketing and supporting new products. We believe that an important factor in the
potential future market for HIFU treatments will be the ability to make the substantial investments in research and
development required to advance the technology beyond the treatment of prostate cancer. These future investments are
wholly dependent on the successful acceptance of the device for the treatment of prostate cancer.
Other companies working with HIFU technology for the minimally invasive treatment of tumors include
SonaCare Medical, a U.S. company that markets a device called the Sonablate for the ablation of prostatic tissue.
Sonablate received de novo clearance from the FDA for commercialization in the U.S. in October 2015. Profound
Medical, a Canadian company, holds FDA clearances for transurethral ultrasound ablation for prostate tissue. Profound
Medical acquired Philips Healthcare’s HIFU activity, integrating the development of HIFU devices addressing uterine
fibroids, breast tumors and drug delivery activated by HIFU. Insightec, an Israeli company owned mainly by General
Electric, Elbit Medical Imaging and Koch Industries, has developed a device using HIFU technology to treat uterine
fibroids, painful bone tumors, brain disorders and ablate prostate tissue; this latter intended use was cleared by the
FDA in December 2021. Theraclion, a French company licensed by EDAP to use certain of our HIFU patents, is
currently marketing the Echopulse HIFU device to treat thyroid tumors, benign breast tumors and varicose veins.
Haifu, a Chinese company, is developing HIFU products addressing various types of cancers.
HIFU Division Sales and Distribution of Products
The HIFU division markets and sells its products through our own direct marketing and sales organization as
well as through selected third-party distributors and agents in several countries. Using our direct subsidiaries or
representative offices network, the HIFU division maintains direct marketing and sales forces in France, the United
States, Germany, Malaysia and South Korea, which currently represent its largest HIFU markets. Additionally, the
HIFU division markets and sells its products through our distribution platform in the rest of Europe, Middle East and
Southeast Asia.
The HIFU division’s customers are located worldwide and have historically been principally public and
private hospitals and urology clinics. Management believes that as it increases its customer base it will gain further
access to the medical community, which will enable it to monitor the urological market as well as other new targeted
markets, introduce new products and conduct trials addressing new pathologies under satisfactory conditions. No single
customer of the HIFU division represents a significant portion of the division’s installed base.
The HIFU division’s marketing efforts currently include the organization of information and training
programs for urologists, mainly in key European countries and in the United States where HIFU awareness is growing,
comprehensive media and web programs to educate patients on the availability of HIFU technology to treat localized
prostate cancer and strong participation in focused dedicated urological events. Our dedicated web sites www.hifu-
prostate.com and www.focalone.com for patients and physicians is visited regularly. The information contained on
these websites is not incorporated by reference herein. As HIFU expands in these countries, we intend to strengthen
our marketing efforts and further invest in educational and sales programs in these countries.
ESWL Division
The ESWL lithotripsy division is engaged in the manufacturing, marketing and servicing of our installed base
of Sonolith range of lithotripters. The ESWL division contributed €11.6 million to our consolidated net sales during
the fiscal year ended December 31, 2022.
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Our ESWL business is quite cyclical and generally linked to lengthy hospital decision and investment
processes and their activities. Hence our quarterly revenues are often impacted and fluctuate according to these
parameters, generally resulting in a possible higher selling activity in the last quarter of the year.
ESWL Division Business Overview
The ESWL division’s business is producing and marketing certain medical devices, known as lithotripters,
for the treatment of urinary tract stones by means of ESWL technology. ESWL uses extracorporeal shockwaves, which
can be focused at urinary stones within the human body to fragment the stones, thereby permitting their natural
elimination and preventing the need for incisions, transfusions, general anesthesia, and the potential for related
complications. The ESWL division currently markets one model of lithotripter: the Sonolith i-move. As of
December 31, 2022, the ESWL division maintained or otherwise serviced 522 Sonolith lithotripters.
ESWL Division Business Strategy
The business strategy for the ESWL division is to capitalize on its expertise in ESWL and its position in
urology to maintain our lithotripsy sale and service activity as we intend to maintain this cash generating activity. The
ESWL division manufactures its own lithotripsy device, the Sonolith i-move, via EDAP TMS France SAS (“EDAP
TMS France”), our wholly owned subsidiary.
ESWL Division Products
The ESWL division offers the Sonolith i-move extracorporeal shockwave lithotripter to small and mid-size
hospitals. The ESWL division also sells disposable parts for lithotripters and electrodes of the Sonolith line, which
need to be replaced approximately every ten treatments.
The Sonolith i-move relies on the electroconductive technology for shockwave generation. The
electroconductive technology, which is derived from the electrohydraulic technology on which the first ESWL
lithotripters were based, permits improved focusing of the shockwave, reduces the variability in the shockwave
pressure and allows a better transfer of energy to the calculus. These features result in a faster, more effective treatment
as compared to electrohydraulic lithotripters.
The ESWL division’s customers are located worldwide and have historically been principally large hospitals,
urology clinics and research institutions. To increase its penetration of the market segment of smaller hospitals and
outpatient clinics, the ESWL division developed the Sonolith i-move, a compact electroconductive lithotripter
designed for smaller clinics. The Sonolith i-move offers a wide range of configurations to suit various budgets and
various local market needs. Our Sonolith range has also been very successful thanks to its innovative Visio-Track
ultrasound stone localization: a unique three-dimensional virtual system that uses infrared stereovision proprietary
technology to guide the treatment robotically.
ESWL Division Patents and Intellectual Property
As of December 31, 2022, the ESWL division’s patent portfolio contained six granted owned and co-owned
patents consisting of one granted patent in the United States, four granted patents in the European Union and one
granted patent in Japan.
These patents belong to four groups of patents covering technologies relating to ESWL systems and associated
software capabilities. The ESWL division’s patents cover both piezoelectric and electroconductive technologies
associated to ESWL generator, localization systems and device design. The ESWL division’s ongoing R&D objectives
in ESWL are to further increase the clinical efficacy, the cost-effectiveness and the ease of use of its products to make
them accessible to wider patient and user populations.
ESWL Division Regulatory Status
The Sonolith i-move is cleared and available for commercial distribution in the European Union, Saudi
Arabia, Colombia, South Korea, Singapore, Costa Rica, Egypt, Ecuador, Mexico, the United States, Indonesia, Japan,
Malaysia, United Kingdom, Russia, Serbia, Sudan, Switzerland and Taiwan.
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The ESWL division continues to provide disposables, replacement parts and services for the current installed
base of Sonolith Praktis, Sonolith Visio and Sonolith i-sys even though we have discontinued the manufacture of these
machines.
ESWL Division Market Potential
We estimate that roughly 12% of the world population suffers from kidney or ureteric stones during their
lifetime. Although urinary calculi may be eliminated naturally by the body, natural elimination is frequently
accompanied by considerable pain and very often by serious complications, such as obstruction and infection of the
urinary tract.
Since its introduction in clinical practice more than 35 years ago, ESWL has become the standard treatment
for urinary calculi. ESWL consists of fragmenting calculi within the body using extracorporeal shockwaves without
any surgery. We believe that the market for lithotripters includes both buyers looking for a sophisticated, higher-priced
machine (generally hospitals and larger urology clinics) and buyers looking for simpler and less expensive machines
(typically smaller clinics). The market for lithotripters is mature and has become primarily a replacement and service
and maintenance market in most of the world. We believe that companies with a large installed base of ESWL
lithotripters will be most successful in the replacement market. Consequently, we intend to capitalize on our share of
the installed base of ESWL lithotripters to maintain our position in the replacement market for those machines. Several
geographical opportunities remain in under-equipped countries or in some countries where the national health system
strategy is being reviewed for hospitals and clinics equipment. ESWL is today in competition with less costly stone
laser devices. Consequently, in order to remain competitive, EDAP integrated stone laser products into its ESWL
product range.
We expect the ESWL division to continue to contribute to the financial results despite the mature nature of
the market, due to revenues from consumables, maintenance contracts and demand for replacement machines. See
Item 5, “Operating and Financial Review and Prospects”.
ESWL Division Competition
The ESWL market is characterized by severe price competition among manufacturers, with the result that, in
recent years, the average unit price of ESWL lithotripters has declined. The ESWL division expects this trend to
continue. See Item 5, “Operating and Financial Review and Prospects. ” The ESWL division’s major competitors in
developed countries are Wolf, Storz Medical and Dornier Medtech.
ESWL Division Sales and Distribution of Products
The ESWL division markets, sells and services its products through our direct sales and service platform in
France, Germany, the United States, Japan, South Korea, Malaysia and in the United Arab Emirates through our
representative office in Dubai. The ESWL division also markets its products through agents and third-party distributors
in several other countries.
The ESWL division’s customers are located worldwide and have historically been mainly public and private
hospitals and urology clinics. We believe that the division’s customer base provides it with excellent access to the
urological community and enables it to introduce its ESWL products under satisfactory conditions.
No single customer of the ESWL division represents a significant portion of the division’s installed base. The
ESWL division’s marketing efforts include the organization of training programs for urologists worldwide.
Distribution Division
The Distribution division is engaged in the marketing, distribution and servicing of products complementary
to our global activity such as lasers, micro-ultrasound systems and other medical products from third parties. The
Distribution division contributed €27.9 million to our consolidated net sales during the fiscal year ended
December 31, 2022.
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Distribution Division Business Strategy
The Distribution division’s business strategy is to generate revenues from the marketing and distribution of
medical devices for the minimally invasive diagnosis or treatment of urological disorders and other various clinical
indications. These products include, but are not limited to: micro-ultrasound devices such as the ExactVu product and
lasers. The Distribution division also generates revenues from the leasing of devices, as well as from the sale of
disposables, spare parts and maintenance contracts for equipment sold under the Distribution division.
We have engaged in exclusive distribution agreements with third parties to distribute and service their
products in certain territories, under specific conditions.
The Distribution division strategy is also to distribute products that bring synergies and complementarity to
our existing home grown technologies. In May 2020, we signed an exclusive worldwide distribution agreement with
Exact Imaging, a developer of high resolution micro-ultrasound imaging technologies. Under the terms of the
agreement, we market Exact Imaging’s micro-ultrasound diagnostic devices alongside our Focal One. In that respect,
ExactVu micro-ultrasound complements our Focal One HIFU technology. ExactVu offers all of the steps and
procedures that need to be done prior to a treatment for prostate cancer. By distributing the two technologies, EDAP
offers the urologist a complete solution for focal prostate cancer management, with full autonomy and capabilities
from diagnostic to treatment. This type of complete care is also extremely attractive to patients with prostate cancer as
it represents a non-invasive way of managing their disease by using diagnostics to eliminate unnecessary biopsy
procedures and allows for a very precise non- invasive HIFU ablation of the suspicious and diagnosed region of the
prostate.
Distribution Division Products
The Distribution division currently distributes Lumenis® Holmium lasers (HoLEP) marketed by Boston
Scientific under an exclusive agreement limited to the French territory. HoLEP Moses Lumenis laser is
a groundbreaking, patent-protected pulse delivery technology that remarkably improves energy transmission, resulting
in more efficient lithotripsy and BPH treatments compared to the regular Holmium pulse1. The Distribution division
also exclusively markets lasers manufactured by Italian company Quanta System Spa in Japan, in certain countries in
South-East Asia.
The Distribution division also distributes the ExactVu device, produced by the Canadian company Exact
Imaging, under a worldwide and exclusive agreement. ExactVu is an ultrasound-based imaging system that can operate
and be used the same way as a standard ultrasound, but it also has the unique capability of operating at a very high
frequency of 29MHz. Similar to MRI, it allows urologists to visualize and locate suspicious regions within the prostate
and target biopsies in real time. Exact Imaging’s technology also includes a solution called FusionVu. Where an MRI
is required, FusionVu allows for the quick import, alignment and targeting of MRI-identified lesions. After the MRI
image is imported via FusionVu, ExactVu’s 70 micron real-time resolution, allows physicians to very precisely
targeting lesions.
The Distribution division, through the Group’s Japanese subsidiary, exclusively distributes some urology
products of the American company Laborie Medical Technologies (“Laborie”) in Japan, that includes Urodynamic
equipment, Uroflow, and a range of disposable products. Laborie is the world leader of Urodynamic systems and
disposables which are used by urologists and gynecologists to diagnose lower urinary tract functions. The Group’s
Japanese subsidiary also distributes x-ray imaging systems for the diagnosis of musculoskeletal pathologies and
orthopedic surgical care in Japan on behalf of French company EOS Imaging and also exclusively distributes urology
accessories on behalf of Monaco’s company Rocamed in Japan.
Manufacturing
Our current manufacturing operations consist of manufacturing medical products in our facility, which is
FDA-registered and certified under international ISO 13485: 2016 and MDSAP standards. We manufacture our own
products through our operational subsidiary EDAP TMS France.
We manufacture the critical components for our devices and accessories, unless a subcontractor can
manufacture the component more cost-effectively, and we also perform final assembly and quality control processes
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and maintain our own set of production standards. We purchase the majority of the components used in our products
from a number of suppliers, but for several components of our products, we rely on a single source. Most of single
source components are secured by contract, by double sourcing or by safety stock. Furthermore, we conduct regular
quality audits of suppliers’ manufacturing facilities. Our principal suppliers are located in France, Germany, Denmark,
South Korea and the United States. To date, these challenges have not materially impacted our ability to deliver devices
and services to our customers. Management believes that the relationships with our suppliers are good.
Third parties supply us with some key materials or components, which exposes us to the risk of a supply
shortage or interruption in the event that these suppliers are unable to manufacture our products in line with quality
standards or if they experience financial or other difficulties. We are currently renegotiating a supply agreement with
a key supplier of ultrasound component for our HIFU devices as prices increased dramatically following a major shift
in our supplier’s marketing strategy. We are constantly addressing such risks and are developing alternative options to
maintain our product offering, while taking into account regulatory and cost constraints. We also have experienced
difficulties in obtaining some materials or components used in our devices, including electronic parts, computers,
plastics, mechanical parts due to supply shortage directly linked to logistics challenges, Asian manufacturing plants’
capacity constraints, and shipping routes impacted by ports closures. See Item 3. “Risk Factors—Worldwide
contagious, epidemic diseases may impact our international activities and could have a material adverse effect on our
business, results of operations and financial condition.”
Quality and Design Control
The manufacturing operations of EDAP TMS France must comply with all regulations of countries where we
market our products, including the GMP regulations enacted by the FDA, which establish requirements for assuring
quality by controlling components, processes and document traceability and retention, among other things. EDAP
TMS France’s facilities are also subject to inspections performed by the FDA. EDAP TMS France is ISO 13485: 2016
and MDSAP certified which indicates compliance by EDAP TMS France’s manufacturing facilities with international
standards for quality assurance, design and manufacturing process control. EDAP TMS France also complies with the
applicable requirements that will allow it to affix the CE Marking to certain of its products. Our manufacturing site
also complies with Taiwanese, Japanese, Canadian, Australian, Brazilian and South Korean regulations, as well as
with the U.S. Quality System Regulation. See “—Government Regulation—Healthcare Regulation in the United
States” and “—Government Regulation—Healthcare Regulation in the European Union. ”
Organizational Structure
The following table sets forth the fully consolidated subsidiaries of the Company as of the date of this annual
report:
Name of the Company
EDAP TMS France SAS
EDAP Technomed Inc.
EDAP Technomed Co. Ltd
EDAP Technomed Sdn Bhd
EDAP TMS GmbH
France
United States
Japan
Jurisdiction of
Establishment Percentage Owned(1)
100 %
100 %
100 %
100 %
100 %
Malaysia
Germany
(1) Percentage of equity capital owned by EDAP TMS S.A. directly or indirectly through subsidiaries (percentage of capital owned and
voting rights are the same).
Property and Equipment
We have one principal facility, which is located in Vaulx-en-Velin, on the outskirts of Lyon, France. The
premises comprise 4,150 square meters and are leased to us under a renewable ten-year commercial lease agreement
which became effective on July 1, 2015. We use this facility to manufacture our device portfolio. We believe the terms
of the lease reflect commercial practice and market rates. We are not aware of any environmental issues that could
affect utilization of the facility.
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In addition, we lease office and/or warehouse facilities in Kuala Lumpur (Malaysia), Flensburg (Germany),
Austin (U.S.), Seoul (South Korea), Fukuoka, Osaka, Sapporo and Tokyo (Japan) and Dubai (United Arab Emirates).
Our representative office in Moscow (Russia) was closed in early 2023.
Government Regulation
Government regulation in our major markets, in particular the United States, the European Union and Japan,
is a significant factor in the development and marketing of our products and in our ongoing research and development
activities. . Our products and operations are subject to regulation by the FDA and countries where we market our
products. We must meet the requirements governing the design, manufacture, sourcing, testing, certification,
packaging, installation, use, and disposal (including recycling) of our products. See Item 3, “Risk Factors—Risks
Related to Government Regulations.”
Regulation in the United States
We and our products are regulated in the United States by the FDA under a number of statutes including the
Federal Food, Drug and Cosmetic Act (“FDC Act”). Pursuant to the FDC Act, the FDA regulates the preclinical and
clinical testing, manufacturing, labeling, distribution, sale, marketing, advertising and promotion of medical devices
in the United States. Medical devices are classified in the United States into one of three classes - Class I, II or III - on
the basis of the controls reasonably necessary to ensure their safety and effectiveness. Class I devices are those whose
safety and effectiveness can be ensured through general controls, such as establishment registration, medical device
listing, FDA-mandated CGMP and labeling. Most Class I devices are exempt from premarket notification (510(k)).
Class II devices are those whose safety and effectiveness can reasonably be ensured through the use of general controls
and “special controls”, such as special labeling requirements, mandatory performance standards, and post-market
surveillance. Class II medical devices typically require 510(k) submission and clearance based on a demonstration of
substantial equivalence to an identified predicate device. A successful 510(k) may also require the submission of
clinical data as part of the 510(k) for some Class II devices. For novel devices that present low to moderate risk but
where there is no suitable predicate device to support a standard 510(k) submission, the FDA has what is known as the
De Novo process. Class III devices are those that require submission of a pre-market approval (“PMA”) application
by the FDA to ensure their safety and effectiveness. The PMA process is expensive and often lengthy, typically
requiring several years, and may not necessarily result in approval. The manufacturer or the distributor of the device
must obtain an IDE approval from the FDA before commencing human clinical trials in the United States in support
of the PMA. Some newer PMA devices must also go before an advisory committee before FDA approval. Our
lithotripsy range of Sonolith i-move products is now classified by the FDA as Class II devices. Our Ablatherm and
Focal One HIFU devices are also classified as Class II.
The FDC Act also regulates quality and manufacturing procedures by requiring us to demonstrate and
maintain compliance with current Quality System Regulations (QSR). We believe our manufacturing facilities are in
compliance with the requirements of the QSR. There are also certain requirements of state, local and foreign
governments which must be complied with in the manufacturing and marketing of our products. We believe that the
manufacturing and quality control procedures we employ meet the requirements of these regulations.
Advertising and promotional activities in the United States are subject to regulation by the FDA and by the
U.S. Federal Trade Commission.
Regulation in the European Union
In the European Union, we annually perform ISO 13485: 2016 and MDSAP (Australia, Brazil, Canada, Japan,
U.S.) certification audits, showing that we comply with standards for quality assurance, manufacturing and design
control.
In 2017, the European Union enacted the new MDR. Manufacturers with currently approved medical devices
in their portfolio have had an initial transition time of three years, i.e. until May 26, 2020 to meet new MDR
requirements. The transition period was extended to four years, i.e. until May 26, 2021 due to COVID-19 pandemic
context. An amendment to modify the transitional provisions has been adopted. The schedule is defined based on the
MDR classification of devices with a latest application date of December 31, 2028. The extension of the period during
which the devices can be placed on the market is subject to conditions. To benefit from the new provisions, the
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manufacturer must have implemented and maintained a Quality Management System that complies with MDR
requirements before May 26, 2024. The MDR introduces substantial changes to the way medical device manufacturers
bring their devices to the European market and how they maintain compliance throughout the product’s life cycle.
MDR will replace the EU’s current Medical Device Directive (93/42/EEC) (“MDD”). We are currently updating our
organization and quality system as well as our product development to be able to handle the MDR enforcement within
the expected timelines for our existing devices ranges and the devices under development. We have implemented
regulatory actions to ensure our devices may be marketed in the European and international markets to conform MDR,
if applicable.
The MDD and the MDR provide that medical devices that meet certain safety standards must bear a
certification of conformity, the European Community approval “CE Marking”. Except in limited circumstances,
member states of the European Union may not prohibit or restrict the sale, free movement or use for its intended
purpose of a medical device bearing the CE Marking. Medical devices marketed throughout the European Union must
comply with the requirement of the MDD and MDR as applicable to bear a CE Marking (subject to certain exceptions).
Pursuant to the MDD and MDR, medical devices are classified into different classes on the basis of their
invasiveness and the duration of their use. The classification serves as a basis for determining the conformity
assessment procedures that apply to medical devices to be eligible to receive a CE Marking. The conformity assessment
procedures for Class I devices can be carried out, as a general rule, under the sole responsibility of the manufacturer,
while for devices of other classes, the involvement of a notified body is required. The extent of the involvement of
such body in the development and manufacturing of a device varies according to the class under which it falls, with
Class III devices being subject to the greatest degree of supervision. All of the devices currently marketed by us are
Class I, IIa and IIb devices.
Regulation in Japan
The import and sales of medical devices in Japan is regulated by the Japanese Ministry of Health, Labor and
Welfare (‘the “MHLW”). Our Japanese subsidiary has obtained a license as the “Marketing Authorization Holder” as
well as specific marketing approvals to import and market our products in Japan. Our Japanese subsidiary is also
operating as “Designated Marketing Authorization Holder” on behalf of some companies to market their products in
the Japanese Territory. The MHLW also administers various national health insurance programs to which each
Japanese citizen is required to subscribe. These programs cover, among other things, the cost of medical devices used
in operations. The MHLW establishes a price list of reimbursable prices applicable to certain medical devices under
the national health insurance programs and until a new device is included in this list its costs are not covered by the
programs. The LT02, the LT-02X, the Sonolith Praktis, the Sonolith Vision, the Sonolith i-sys and the Sonolith i-move
are all included on the MHLW’s list for reimbursement.
Item 4A. Unresolved Staff Comments
None.
Item 5. Operating and Financial Review and Prospects
The following discussion of our results of operations and liquidity and capital resources for the fiscal years
ended December 31, 2022 and 2021 is based on, and should be read in conjunction with, our consolidated financial
statements and the notes thereto included in Item 18, “Financial Statements.” The consolidated financial statements
have been prepared in accordance with U.S. GAAP.
The following discussion contains certain forward-looking statements that involve risks and uncertainties.
Actual results may differ materially from those contained in such forward-looking statements. See “Cautionary
Statement on Forward-Looking Information” at the beginning of this annual report.
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Critical Accounting Estimates
Management has not identified any estimates made in accordance with generally accepted accounting
principles 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.
Operating Results
Overview
Our activities are organized into three divisions: HIFU, ESWL and Distribution.
Total revenues of the Company include sales of our medical devices and sales of disposables (“sales of
goods”), sales of RPPs and leases, and sales of spare parts and services, all net of commissions, as well as other
revenues.
Sales of goods have historically been comprised of net sales of medical devices (HIFU devices, ESWL
lithotripters and other third-parties devices) and net sales of disposables (mostly Ablapaks and Focalpaks in the HIFU
division, electrodes in the ESWL division and disposables from third-parties’ devices marketing by the Distribution
division). The sale price of our medical devices is subject to variation based on a number of factors, including market
competition, warranties and payment terms. Consequently, a particular sale of a medical device may, depending on its
terms, result in significant fluctuations in the average unit sale price of the product for a given period, which may not
be indicative of a market trend.
Sales of RPP and leases mainly include the revenues recording in the HIFU division from the sale of
Ablatherm and Focal One treatment procedures and from the leasing of Ablatherm and Focal One devices. We provide
Ablatherm and Focal One devices to clinics and hospitals for free for a limited period, rather than selling the devices.
These hospitals and clinics perform treatments using the devices and usually pay us based on the number of individual
treatments provided. With this business model, the hospital or clinic does not make an initial investment until the
increase in patient demand justifies the purchase of a HIFU device. Consequently, we are able to make Ablatherm or
Focal One treatments available to a larger number of hospitals and clinics, which we believe should serve to create
more long-term interest in the product. Compared to the sale of devices, this business model initially generates a
smaller, although more predictable stream of revenue and, if successful, should lead to more purchases of Ablatherm
and Focal One devices by hospitals and clinics in the long term.
Regarding sales of lithotripters as recorded in our ESWL division, we believe that the market for ESWL
lithotripters is now mature and has become primarily a replacement and maintenance market, with intense competition.
As a result, we expect total market volumes for our ESWL Division to remain stable in the foreseeable future. In
addition, following the discontinuation of our Sonolith i-sys lithotripter in 2020 and of our developments in lithotripsy,
including the development of our Endo-UP platform, our ESWL revenues will be mainly stemming from sales of
Sonolith i-move lithotripters as well as revenues from sales of maintenance contracts and spare parts.
Revenues recorded in our Distribution division include sales of complementary products such as lasers, micro-
ultrasound systems and other products from third parties, including the associated disposables and maintenance
contracts.
Sales of spare parts and services include revenues arising from maintenance services furnished by us for the
installed base of ESWL lithotripters, HIFU devices and complementary products from third parties.
We derive a significant portion of both net sales of medical devices and disposables and net sales of spare
parts and services from our operations in Asia, through our wholly-owned subsidiaries or representative offices in
Japan (Edap Technomed Co. Ltd), Malaysia (Edap Technomed Sdh Bhd) and South Korea (Edap Technomed Korea).
Net sales derived from our operations in Asia represented 33% of our total consolidated net sales in 2022. Net sales of
goods in Asia represented 36% of such sales in 2022 and consisted mainly of sales of urology devices and disposables.
Net sales of spare parts, supplies and services in Asia represented 34% of such sales in 2022 and related primarily to
ESWL lithotripters, reflecting the fact that 44% of the installed base of our ESWL lithotripters that we actively maintain
or otherwise serve is located in Asia. See Note 18 of our consolidated financial statements. We sell our products in
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many parts of the world and, as a result, our business is affected by fluctuations in currency exchange rates. We are
exposed to foreign currency exchange rate risk because the mix of currencies in which our costs are denominated is
different from the mix of currencies in which we earn revenues. In 2022, 60% of our costs of sales and research and
development, selling, marketing and general and administrative expenses were denominated in euro, while 59% of our
sales were denominated in currencies other than euro (primarily the U.S. Dollar and Japanese yen). Our operating
profitability could be materially affected by large fluctuations in the rate of exchange between the euro and such other
currencies. To minimize our exposure to exchange rate risks, we sometimes use certain financial instruments for
hedging purposes. See Item 3, “Risk Factors—We sell our products in many parts of the world and, as a result, our
business is affected by fluctuations in currency exchange rates” and Item 11, “Quantitative and Qualitative Disclosures
About Market Risk” for a description of the impact of foreign currency fluctuations on our business and results of
operations.
Reserves for slow-moving and obsolete inventory are determined based upon quarterly reviews of all
inventory items. Items which are not expected to be sold or used in production, based on management’s analysis, are
written down to their net realizable value, which is their fair market value or zero in the case of spare parts or disposable
parts for devices that are no longer in commercial production.
Consolidated research and development expenses include all costs related to the development of new
technologies and products and the enhancement of existing products, including the costs of organizing clinical trials
and of obtaining patents and regulatory approvals. We do not capitalize any of our research and development expenses,
except for the expenses relating to the production of machines to be used in clinical trials and that have alternative
future uses as equipment or components for future research projects.
Consolidated research and development expenses, as described above, amounted to €4.9 million and €3.4
million in 2022 and 2021, respectively, representing 8.9% and 7.7% of total revenues in 2022 and 2021, respectively.
Research and development government grants and tax credits are deducted from our consolidated research and
development expenses for amounts of €0.8 million and €1.4 million in 2022 and 2021, respectively. Beginning in
2023, management expects the budget for research and development expenses to increase to 11.9% of total revenues,
which we expect will allow us to maintain our strategy to launch new clinical studies (thus strengthening our clinical
credibility), to continue to focus our efforts on obtaining regulatory approvals in Japan in particular, and to build
reimbursement coverage in key countries and particularly in the U.S., to continue to develop our HIFU product range
and to fund projects to expand the use of HIFU beyond the treatment of prostate cancer.
Consolidated selling and marketing expenses amounted to €16.4 million in 2022 and €10.7 million in 2021.
The €5.6 million or 52.6% increase in selling and marketing expenses from 2021 to 2022 was primarily a result of the
implementation of the HIFU expansion plan in the U.S. which includes the impact of share-based compensation plans
of €1.0 million in 2022 and €0.8 million in 2021 and the COVID-19 pandemic impact in 2021 (leading to cancellation
of congresses, limitation of business trips, etc). Beginning in 2023, management expects selling and marketing
expenses to increase in connection with the acceleration of HIFU adoption in the U.S.
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Fiscal Year Ended December 31, 2022 Compared to Fiscal Year Ended December 31, 2021
We report our segment information on a “net contribution” basis. See Note 29 to our consolidated financial
statements.
(in millions of euros)
Total revenues
Total net sales
Of which HIFU
Of which ESWL
Of which DISTRIBUTION
Total cost of sales
Gross profit
Gross profit as a percentage of total net sales
Total operating expenses
Income (loss) from operations
Net income (loss)
Total revenues
2022
2021
55.1
55.1
15.6
11.6
27.9
(30.9)
24.2
43.90 %
(28.5)
(4.3)
(2.9)
44.1
44.1
9.9
11.0
23.1
(25.6)
18.4
41.8 %
(20.0)
(1.6)
0.7
Our total revenues increased 25.1% from €44.1 million in 2021 to €55.1 million in 2022.
HIFU division.
The HIFU division’s total revenues increased by 57.7% from €9.9 million in 2021 to €15.6 million in 2022,
reflecting mainly the development of equipment sales in the U.S.
The HIFU division’s net sales of medical devices increased 152.6% to €7.0 million in 2022, with fifteen Focal
One units sold (including thirteen in the U.S.), as compared to €2.8 million, with seven Focal One units sold in 2021
(including four in the U.S).
Treatment-driven revenue, which includes net sales of RPP & leases, net sales of disposables and treatments
related services, increased by 18.6% to €7.0 million in 2022.
Net sales of HIFU maintenance services increased by 31.1% to €1.6 million in 2022.
ESWL division.
The ESWL division’s total revenues increased 5.0% from €11.0 million in 2021 to €11.6 million in 2022,
primarily due to the increase in sale of equipment after a year impacted by the COVID-19 pandemic in 2021.
The ESWL division’s net sales of medical devices increased 28.9% from €3.0 million in 2021 to €3.9 million
in 2022 with 22 ESWL devices sold in 2022 compared to 21 ESWL units sold in 2021.
Net sales of ESWL-related consumables, spare parts, supplies, RPP, leasing and services decreased 3.6%
from €8.0 million in 2021 to €7.7 million in 2022 reflecting the mature nature of the market.
Distribution division.
The Distribution division’s total revenues increased 20.6% from €23.1 million in 2021 to €27.9 million in
2022, primarily due to the development of Exact Imaging sales.
The Distribution division’s net sales of medical devices increased 16.7% from €13.5 million in 2021 to €15.8
million in 2022. We sold 47 ExactVu units in 2022, as compared to 28 in 2021.
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Net sales of Distribution-related consumables, spare parts, supplies, RPP, leasing and services increased
26.2% from €9.6 million in 2020 to €12.2 million in 2022, reflecting the growth of the installed base.
Cost of sales.
Cost of sales increased 20.6% from €25.6 million in 2021 to €30.9 million in 2022, and represented 56.1% as
a percentage of net sales in 2022, down from 58.2% as a percentage of net sales in 2021. This effect is driven primarily
by the higher sales effect on fixed costs and the increase in the percentage of HIFU revenue to overall revenue (since
HIFU activity has better margins than both ESWL and Distribution).
Operating expenses.
Operating expenses increased 42.0%, or €8.4 million, from €20.0 million in 2021 to €28.5 million in 2022.
Marketing and sales expenses increased €5.6 million, or 52.6% to €16.4 million in 2022, reflecting the impact
of the HIFU expansion plan in the U.S., which includes the impact of share-based compensation plans for €1.0 million
in 2022.
Research and development expenses increased 44.6% at €4.9 million in 2022 from €3.4 million in 2021. R&D
expenses are net of R&D grants and tax credits of €0.8 million in 2022 and €1.4 million in 2021.
General and administrative expenses increased €1.3 million or 21.2% to €7.2 million in 2022, reflecting the
impact of the HIFU expansion plan in the U.S., which includes the impact of share-based compensation plans for €1.1
million in 2022.
Operating profit (loss).
As a result of the factors discussed above, particularly the expansion of our activities in the U.S. to accelerate
HIFU adoption, we recorded a consolidated operating loss of €4.3 million in 2022, as compared to a consolidated
operating loss of €1.6 million in 2021.
We realized an operating loss in the HIFU division of €4.9 million in 2022, as compared with an operating
loss of €3.0 million in 2021, an operating profit in the ESWL division of €0.9 million in 2022, as compared to an
operating profit of €0.9 million in 2021, and an operating profit in the Distribution division of €2.0 million in 2022, as
compared to an operating profit of €2.4 million in 2021.
Financial (expense) income, net.
Net financial income was €0.2 million in 2022, compared with a net financial income of €0.1 million in 2021.
Foreign currency exchange gain (loss), net.
In 2022, we recorded a net foreign currency exchange gain of €1.9 million, mainly due to the variation of the
Euro against the U.S. Dollar, compared to a gain of €2.4 million in 2021.
Income taxes.
Income tax was an expense of €0.8 million in 2022, compared to an expense of 0.2 million in 2021, reflecting
the decrease in 2021 of the valuation allowance for deferred tax assets in Japan.
Net income / (loss).
As a result of the above, we realized a consolidated net loss of €2.9 million in 2022 compared with a
consolidated net income of €0.7 million in 2021.
For comparison between the fiscal year ended December 31, 2021 and the fiscal year ended December 31,
2020, please refer to our report on Form 20-F filed with the SEC on April 8, 2022.
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Effect of Inflation
Management believes that the impact of inflation was not material to our net sales or loss from operations in
the year ended December 31, 2021.
In 2022, geopolitical instability and other factors have led to higher 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 or implementing counter measures to ensure the minimum residual impact.
Liquidity and Capital Resources
Our cash flow has historically been subject to significant fluctuations over the course of any given
financial year due to cyclical demand for medical devices. Cyclical demand has historically resulted in significant
annual and quarterly fluctuations in trade and other receivables and inventories, and therefore led to significant
variations in working capital requirements and operating cash flows that were not necessarily indicative of changes in
our business. We believe our working capital is sufficient for our present working capital requirements although we
have in the past experienced negative cash flows and associated risks to liquidity, and may in the future experience the
same. Our future capital requirements will depend on many factors including our revenue growth rate, the timing, and
extent of spending to support further sales and marketing and research and development efforts. Our cash flow situation
is described in more detail below.
Material Cash Requirements
The following table discloses aggregate information about material contractual obligations and periods in
which payments were due as of December 31, 2022.
Payments Due by Period
1-
4-
Short-Term Debt
Long-Term Debt
Financing Lease Obligations
Operating Leases Obligations
Total
1,846
5,188
549
1,799
Less than 1 year
1,846
1,601
225
901
2,905
244
874
—
682
74
24
3 years
—
5 years More than 5 years
—
6
—
The commitment amounts in the table above are associated with contracts that are enforceable and legally
binding and that specify all significant terms, excluding interest on long-term debt. Future events could cause actual
payments to differ from these estimates.
Long term debts represent a €5.0 million cash requirement as of December 31, 2022 and are mainly related
to the two loans taken out from French banks, in the form of the loans guaranteed by the French State for a total amount
of €4.0 million at inception in the context of the Covid-19 pandemic. These loans taken out in August 2020 with initial
maturity in August 2021 have been extended until August 2026. The amendments provide for reimbursements to be
made over four years, beginning in August 2022.
Operating and Financing leases represent a €2.3 million cash requirement as of December 31, 2022 with a
repayment horizon up to 2028.
Cash Flows
We anticipate that cash flow in future periods will be derived mainly from ongoing operations. As of the date
of this annual report we do not employ any off-balance sheet financing. Because we anticipate relying principally on
cash and cash equivalent balances to meet our liquidity requirements, a decrease in the demand for our products, or
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the inability of our customers to meet their financial obligations to us due to operating difficulties or adverse market
conditions, would reduce the availability of funds to us.
(in thousands of euros)
Net cash generated by/(used in) in operating activities
Net cash generated by/(used in) in investing activities
Net cash generated by/(used in) in financing activities
Net effect of exchange rate changes
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
2022
(3,024)
(2,378)
21,741
(388)
15,952
47,183
63,136
2021
4,445
(1,638)
20,266
(585)
22,488
24,696
47,183
Our cash position as of December 31, 2022 and 2021 was €63.1 million (with no short-term treasury
investments) and €47.2 million (with no short-term treasury investments), respectively. We experienced an increase in
cash and cash equivalent of €16.0 million in 2022 and of €22.5 million in 2021.
In 2022, our positive net cash flow was primarily due to net cash generated by financing activities which
included net proceeds of the offering of common stock in the form of ADSs in September 2022 for €22.0 million. See
Item 4, “Information on the Company—History and Development of the Company”. In 2021, our positive net cash flow
was primarily due to net cash generated by financing activities which included net proceeds of the offering of common
stock in the form of ADSs in April 2021 for €21.3 million. See Item 4, “Information on the Company—History and
Development of the Company”.
In 2022, net cash used in operating activities was €3.0 million compared with net cash generated by operating
activities of €4.4 million in 2021.
In 2022, net cash used in operating activities reflected principally:
a net loss of €2.9 million;
elimination of €4.2 million of net loss without effects on cash, including €1.6 million of depreciation and
amortization, €0.1 million of change in allowances for doubtful accounts & slow-moving inventories and €0.3
million of net capital loss on disposals of assets; and €2.1 million of non-cash compensation linked to stock-
based compensation plans and free shares; and
an increase in working capital of €4.3 million reflecting primarily the increase in inventory and trade receivables
linked to the higher level of sales.
In 2021, net cash generated by operating activities reflected principally:
a net income of €0.7 million;
elimination of €3.2 million of net loss without effects on cash, including €1.9 million of depreciation and
amortization, €0.4 million of change in allowances for doubtful accounts & slow-moving inventories and €0.5
million of reduction in allowance for deferred tax asset; and €1.9 million of non-cash compensation linked to
stock-options plans; and
a decrease in working capital of €0.5 million reflecting primarily the decrease in inventory and the increase
payables on income tax.
-
-
-
-
-
-
In 2022, net cash used in investing activities was €2.4 million compared with net cash used in investing
activities of €1.6 million in 2021.
Net cash used in investing activities of €2.4 million in 2022 reflected mainly:
-
-
investments of €1.6 million in capitalized assets produced by the Company including devices for RPP activity
(€0.3 million) and HIFU treatments probes (€1.2 million); and
investment of €0.6 million in property and equipment (including €0.2 million of laser equipment for demo or
RPP, IT and offices equipment for €0.3 million and vehicles for €0.1 million).
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Table of Contents
Net cash used in investing activities of €1.6 million in 2021 reflected mainly:
-
-
investments of €1.2 million in capitalized assets produced by the Company including devices for RPP activity
(€0.2 million), HIFU treatments probes (€0.7 million) and R&D program (€0.1 million); and
investment of €0.4 million in property, equipment (including €0.2 million of laser equipment for demo and RPP)
and IT and offices equipment (€0.2 million).
In 2022, net cash generated by financing activities was €21.7 million compared with net cash generated by
financing activities of €20.3 million in 2021.
Net cash generated by financing activities of €21.7 million in 2022 reflected principally the net proceeds of
€22.0 million from the offering of common stock in the form of ADSs in September 2022 (see Item 4, “Information
on the Company—History and Development of the Company”), €0.7 million from the exercise of stock options, new
long term borrowings for €0.3 million (composed of a loan in France to finance HIFU treatment probes), the
repayments of long-term borrowings and financing lease for €1.2 million.
Net cash generated in financing activities of €20.3 million in 2021 reflected principally the net proceeds of
€21.3 million from the offering of common stock in the form of ADSs in April 2021 (see Item 4, “Information on the
Company—History and Development of the Company”), €0.4 million from the exercise of stock options, new long
term borrowings for €1.1 million (mainly composed of a loan in France to finance HIFU treatment probes and
conditional government advances for business development in China), the repayments of long-term borrowings and
financing lease for €1.8 million (including extinguishment of the HECAM project conditional government advances)
and a decrease of short-term borrowings of €0.7 million.
Our policy is that our treasury department should maintain liquidity with the use of short-term borrowings
and the minimal use of long-term borrowings. The treasury department currently adheres to this objective by using
fixed-rate debt, which normally consists of long-term borrowing and with certain long-term borrowings consisting of
sale and leaseback equipment financing. Currently the short-term debt consists of account receivables factored and for
which the Company is supporting the collection risk. We maintain bank accounts for each of our subsidiaries in the
local currencies of each subsidiary. The primary currencies in which we maintain balances are the euro, the U.S. dollar
and the Japanese yen. To minimize our exposure to exchange rate risks, we may use certain financial instruments for
hedging purposes from time to time. As of December 31, 2022, there were no outstanding hedging instruments. See
Notes 13 and 14 to the consolidated financial statements for further information on our borrowings.
Recent Accounting Pronouncements
See “Note 1. Summary of Significant Accounting Policies —1.25 Recent Accounting Pronouncements” of the
Notes to consolidated financial statements for a description of recent accounting pronouncements including the
respective expected dates of adoption and estimated effects, if any, on our Consolidated Financial Statements.
Research and Development, Patents and Licenses
See Item 5, “Operating and Financial Review and Prospects—Operating Results—Overview” and Item 4,
“Information on the Company—HIFU Division—HIFU Division Patents and Intellectual Property” and “Information
on the Company—ESWL Division—ESWL Division Patents and Intellectual Property.”
The French government provides tax credits to companies for innovative research and development. This tax
credit is calculated based on a percentage of eligible research and development costs and it is refundable in cash.
Off-Balance Sheet Arrangements
At December 31, 2022, we had no off-balance sheet arrangements.
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Table of Contents
Item 6. Directors, Senior Management and Employees
Senior Executive Officers
The following table sets forth the name, age and position of each of our senior executive officers as of April 7,
2023 (the “Senior Executive Officers”). The Chief Executive Officer and the Chief Financial Officer listed below have
entered into employment contracts with us or our subsidiaries (which permit the employee to resign subject to varying
notice periods). In addition, in case of a change of control of the Company, or of a termination of their employment
contract by the Company without cause, the Senior Executive Officers are entitled to receive severance packages
totaling €1.0 million.
Name
Position
Marc Oczachowski
Age: 53
Chief Executive Officer of EDAP TMS S.A. and Chairman of the Board of Directors
President of EDAP TMS France SAS and EDAP Technomed, Inc.
Marc Oczachowski joined EDAP TMS in 1997 as Area Sales Manager. From 2001 to
2004, he was General Manager of EDAP Technomed Malaysia. In 2004, he was
appointed Chief Operating Officer of EDAP TMS based in Lyon, France, and became
Chief Executive Officer of the Company in 2007. In 2012, he relocated in Austin,
Texas (USA), for a five-year period, to manage U.S. operations and lead the FDA
approval process of the Company’s HIFU devices. On March 25, 2020, he was
appointed Chairman of the Board of Directors. He started his career as Area Sales
Manager for Sodem Systems - power tools for orthopedics. He graduated from Lyon
I University (Molecular Biology), and from Institut Commercial de Lyon, France.
François Dietsch
Age: 47
Chief Financial Officer of EDAP TMS S.A.
François Dietsch joined EDAP in 2005 as Internal Audit and Consolidation Manager,
leading the implementation of internal controls for Sarbanes-Oxley Compliance,
consolidation of financial statements from the Company's subsidiaries and preparation
of financial statements in accordance with U.S. GAAP, including EDAP's annual
report on Form 20-F. In 2012, he was promoted to Group Financial Control Manager
and Finance Manager of EDAP's French subsidiary where, in addition to his previous
responsibilities, he managed accounting firm relationships at the subsidiary level and
was the primary liaison between the Company and its external auditors. He also
managed the Finance department at EDAP France. He was appointed Chief Financial
Officer of the Company on July 14, 2015. He was also appointed Director and
treasurer of EDAP Technomed Inc. in January 2020 and Internal Auditor of Edap
Technomed Co. Limited in March 2020. Prior to joining EDAP he held finance
positions at Valeo, a leading global supplier of components and systems to the
automotive industry. He holds Master's Degrees in Management and Corporate
Finance from University of Paris Dauphine.
In line with EDAP’s global group strategy, and its focus on expansion in the United States and rest of world
markets, and upon recommendation of the Compensation Committee and the Nomination Committee, on March 29,
2023 the Board of Directors unanimously decided to appoint Mr. Rhodes as the new Chief Executive Officer of the
Company for an indefinite term, which will become effective on May 1, 2023. Mr. Oczachowski will continue to serve
as Chairman of the Board of the Company.
Ryan Rhodes joined EDAP in June 2021, as Chief Executive Officer of EDAP Technomed Inc., the
Company’s U.S. subsidiary. Prior to joining EDAP, he served as the President and Chief Executive Officer of
Restoration Robotics, the global leader in robotic aesthetic medicine, from August 2016 to December 2019. Prior to
Restoration Robotics, he spent over 13 years at Intuitive Surgical, the global leader in medical robotics. Prior to
Intuitive Surgical, he spent over 11 years in various management positions in sales, marketing, professional education,
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and market development at Ethicon Inc., a Johnson & Johnson Company. Mr. Rhodes holds a B.A in Public
Administration from San Diego State University.
Board of Directors
The following table sets forth the names and backgrounds of the members of the Board of Directors. On
March 25, 2020, the Board of Directors accepted the resignation of Mr. Philippe Chauveau as Chairman of the Board
and, upon the recommendation of the Company’s Nomination Committee, the Board combined the roles of Chairman
of the Board and Chief Executive Officer, as permitted by the Company’s by-laws, and elected Mr. Marc Oczachowski
as the new Chairman of the Board of Directors. On March 29, 2023, the Board of Directors decided to separate the
roles of Chairman of the Board and Chief Executive Officer as of May 1, 2023, when Mr. Rhodes will begin his term
as Chief Executive Officer and Mr. Oczachowski will continue serving as Chairman. None of the directors has service
contracts with the Company or any of its subsidiaries providing for benefits upon termination of employment (except
for those related to Mr. Oczachowski’s current position as Chief Executive Officer, provided under his employment
agreement). Four Board members out of five are independent within the meaning of Nasdaq Marketplace Rule 5605(2).
The mandate of four of our Directors was renewed for a new period of six years at the General Meeting of Shareholders
held on June 30, 2020 approving the accounts for the financial year ended December 31, 2019. Their mandate will
expire at the end of the ordinary general meeting of shareholders which will approve the accounts for the financial year
ended December 31, 2025, i.e., in the course of 2026. On June 30, 2020, Ms. Marie Meynadier was elected as
independent Director in replacement of Mr. Philippe Chauveau.
Marc Oczachowski
Age: 53
Mandate: 6 years
Appointment: July 10, 2017
Expiration: 2022
Pierre Beysson
Age: 80
Mandate: 6 years
Appointment:
September 27, 2002
(renewed in 2014 & 2020)
Expiration: 2025
Argil Wheelock
Age: 75
Mandate: 6 years
Appointment: June 25, 2009
(renewed in 2014 & 2020)
Expiration: 2025
Chairman of the Board. See Marc Oczachowski’s biography above.
Pierre Beysson was appointed as a member of the Board of Directors in
September 2002. Pierre Beysson was then the Chief Financial Officer of
Compagnie des Wagons-Lits ("CWL"), the on-board train service division of
Accor, a French multinational Hotel and Business Services Group. In this
capacity, he sat on a number of boards of companies related to the Accor Group.
Before his assignment at CWL, Pierre Beysson held a number of senior financial
positions with Nixdorf Computers, Trane (Air Conditioning), AM International
(Office Equipment) and FMC (Petroleum Equipment). Pierre Beysson was
trained as a CPA, has auditing experience and holds an MBA from Harvard
Business School.
Dr. Argil Wheelock was elected as a member of the Company’s Board of
Directors in June 2009. Dr. Wheelock, a U.S. board certified urologist, is
currently Senior Physician at the University of Tennessee Department of Urology
at Erlanger Medical Center, a tertiary care and teaching hospital in Chattanooga,
Tennessee. From 1996 to 2005, Dr. Wheelock served as Chairman and CEO of
HealthTronics, a publicly traded Nasdaq company where he was a founder. He
has built a successful track record introducing new medical devices to the U.S.
and navigating the FDA approval process. He is widely known among the U.S.
urological community for bringing clinical benefits to patients and economic
value to urology practices. Dr. Wheelock graduated from the University of
Tennessee College of Medicine and completed urological training at Mount Sinai
Hospital in New York City.
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Rob Michiels
Age: 73
Mandate: 6 years
Appointment: July 16, 2009
(renewed in 2014 & 2020)
Expiration: 2025
Marie Meynadier
Age: 61
Mandate: 6 years
Appointment: June 30, 2020
Expiration: 2025
Compensation
Rob Michiels was elected as a member of the Company’s Board of Directors in
July 2009. He is a U.S. citizen and a 50-year veteran of the medical device
industry. He most recently served as Chief Executive Officer (CEO) of CardiAQ
Valve Technologies, a venture funded start-up developing Transcatheter Mitral
Valve Implantation which was acquired by Edwards Lifesciences during the
second half of 2015. He previously served as Chief Operating Officer (COO) of
CoreValve (acquired by Medtronic); and as President and COO of InterVentional
Technologies (acquired by Boston Scientific). He helped drive both companies
from cardiovascular start-ups to established market leaders, using new and
innovative technologies which have strong synergies to the HIFU story. Rob
Michiels is a director of Conveyor Ltd and FEops NV, both privately held
companies developing cutting edge cardio-vascular less-invasive technologies.
Rob Michiels is a founding partner of CONSILIUM, a medical device market
research company active in identifying, funding and greenhousing start-up
technologies. He is a senior Venture Partner at 415 Capital (Munich, Germany),
a specialized venture capital firm that invests in early-and development stage-
MedTech companies. Fluent in English, French and Dutch languages, he holds a
bachelor’s degree in economics from Antwerp University in Belgium and a
Master’s in business administration (MBA) from Indiana University.
Marie Meynadier was elected as a member of the Company’s Board of Directors
in June 2020. Ms. Meynadier currently serves on the Boards of Directors of
several medical technology companies in Europe and North America. From 1999
through 2018, she served at EOS Imaging as its CEO and led the company
through a period of rapid worldwide sales growth prior to its sale to Alphatec
Holdings in 2021. Prior to EOS Imaging, Ms. Meynadier served as CEO at
Biospace Lab, a preclinical imaging company she developed and turned to
profitability. Ms. Meynadier received a degree in electrical engineering from Sup
Télécom, Paris, and her Ph.D. in physics from Ecole Normale Supérieure Ulm,
Paris.
Aggregate compensation paid or accrued for services in all capacities by the Company and its subsidiaries to
Senior Executive Officers and to the Board of Directors as a group for the fiscal year 2022 was €659 thousand including
performance bonuses of €135 thousand and benefits in kind of €10 thousand (benefits in kind comprise car allowances
for senior management). No amount was set aside or accrued by us to provide pension, retirement or similar benefits
for Senior Executive Officers and to the Board of Directors as a group in respect of the year 2022. For information
regarding compensation paid in the form of stock options or free shares, see “—Share Ownership” and “Options to
Purchase or Subscribe for Securities—Free Shares.”
Compensation Committee
The Compensation Committee is comprised of the following independent members: Mr. Pierre Beysson,
Dr. Argil Wheelock, Ms. Marie Meynadier and Mr. Rob Michiels. The Committee gathers once a year to review the
compensation of our Chief Executive Officer, as per the approved charter of the Compensation Committee, and to
propose to the Board of Directors any changes to the Chief Executive Officer’s compensation. The Chief Executive
Officer is not present when the Compensation Committee reviews his compensation. In August 2014, the
Compensation Committee updated its charter which was subsequently approved by the Board of Directors.
Audit Committee
The Board of Directors’ Audit Committee comprises four independent members of the Board: Mr. Pierre
Beysson, acting as Head of the Audit Committee and financial expert, Ms. Marie Meynadier, Dr. Argil Wheelock and
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Table of Contents
Mr. Rob Michiels. The purpose of the Audit Committee, in accordance with its annually approved charter, is
summarized below:
- Provide assistance to the Board of Directors in fulfilling their oversight responsibility to the shareholders, potential
shareholders, the investment community and others relating to: the integrity of our financial statements, our compliance
with legal and regulatory requirements, our accounting practices and financial reporting processes, the effectiveness
of our disclosure controls and procedures and internal control over financial reporting,
- Review the independent auditor’s qualifications, compensation and independence, and the performance of our
internal audit function and independent auditors,
- Recommend the appointment of the independent auditors for consideration and approval by the Company’s
shareholders in accordance with French law,
- Review and discuss annual financial statements with Management and independent auditors and prepare the Audit
Committee report, prior to SEC filings, as well as review related press releases, and
- Request any officer or employee of the Company or our outside counsel or independent auditor to attend a meeting
of the Audit Committee or to meet with any members of, or consultants to, the Audit Committee.
For more information on the missions of our Audit Committee, please refer to our web site www.edap-
tms.com, under the Investor Relations Section, where our Audit Committee Charter is available. This Charter is not
incorporated by reference in this annual report.
Nomination Committee
The Company’s Board of Directors recommends for the Board’s selection director nominees to submit to the
vote of the Company’s shareholders. In addition, under specified circumstances and in accordance with French law,
shareholders may also submit resolutions to the general meeting to appoint directors.
The Company’s nominations practice is formalized in a Board resolution and at its Board meeting in
February 2015, the Board resolved that in the event that one or more directors is or are no longer independent, the
Board will create a Nominations Committee (composed exclusively of independent Directors). A Nominations
Committee Charter was approved accordingly, the terms of which apply to the Board of Directors when considering
director nominees including evaluation of potential candidates, and recommendations to the Board of Directors prior
to submitting the candidates to the vote of shareholders. As per this Charter, upon the appointment of Mr. Marc
Oczachowski to the Board as a non-independent Director, on June 30, 2017, the Board of Directors, was convened on
July 10, 2017, and decided to create a Nomination Committee composed exclusively of independent Directors. The
Nomination Committee is comprised of the following independent members: Mr. Pierre Beysson, Dr. Argil Wheelock,
Ms. Marie Meynadier and Mr. Rob Michiels.
Strategic Committee
On August 26, 2020, the Company’s Board of Directors created a Strategic Committee which duties are to
address the development and implementation of the Company’s strategic plan and the risks associated with such plan.
Such responsibility has been further formalized by a charter approved by the Board of Directors. The Strategic
committee is composed of the following members: Ms. Marie Meynadier, independent Director and Head of the
Committee, and Mr. Marc Oczachowski, Chief Executive Officer and Chairman of the Board.
Employees
As of December 31, 2022, we employed 264 individuals on a full-time basis, as follows:
Sales & Manufac-
Research Regula- Clinical Adminis-
France
Germany
Japan
Malaysia
South Korea
USA
Total
Marketing turing
24
5
27
1
2
18
77
29
—
—
—
—
—
29
Service & Dvpt
26
—
—
—
—
—
26
26
4
20
3
4
11
68
tory
Affairs trative Total
21 147
11
2
59
9
6
2
8
2
33
4
40 264
12
—
—
—
—
—
12
9
—
3
—
—
—
12
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As of December 31, 2021, we employed 227 individuals on a full-time basis, as follows:
Sales & Manufac-
Research Regula- Clinical Adminis-
France
Germany
Japan
Malaysia
South Korea
USA
Total
Marketing turing
27
5
25
2
2
7
67
30
—
—
—
—
—
30
Service & Dvpt
21
—
—
—
—
—
22
24
3
17
3
4
6
55
tory
Affairs trative Total
17 136
10
2
50
6
7
2
8
2
16
3
31 227
9
—
—
—
—
—
8
8
—
2
—
—
—
10
As of December 31, 2020, we employed 223 individuals on a full-time basis, as follows:
Sales & Manufac-
Research Regula- Clinical Adminis-
France
Germany
Japan
Malaysia
South Korea
USA
Total
Marketing turing
25
5
27
2
2
6
67
30
—
—
—
—
—
30
Service & Dvpt
22
—
—
—
—
—
22
23
3
17
4
4
4
55
tory
Affairs trative Total
17 133
10
2
52
6
8
2
7
1
13
3
31 223
8
—
—
—
—
—
8
8
—
2
—
—
—
10
Management considers labor relations to be good. Employee benefits are in line with those specified by
applicable government regulations.
Share Ownership
As of March 15, 2023, the total number of shares issued was 37,202,731 with 275,367 shares held as treasury
shares, thus bringing the total number of shares outstanding to 36,927,364.
As of March 31, 2023, the Board of Directors and the Senior Executive Officers of the Company held a total
of 321,621 shares. The Board of Directors and Senior Executive Officers beneficially own, in the aggregate less than
1% of the Company’s shares.
As of March 31, 2023, Senior Executive Officers held a total of 276,929 shares and an aggregate of 617,500
options to purchase or to subscribe a total of 617,500 ordinary shares, with a weighted average exercise price of €3.40
per share. Of these options, 220,000 expire on April 26, 2026, 55,000 expire on April 25, 2027, 25,000 expire on
August 29, 2028, 40,000 expire on April 4, 2029 and 277,500 expire on June 11, 2031.
Options to Purchase or Subscribe for Securities – Free Shares
Options
On December 19, 2012, the shareholders authorized the Board of Directors to grant up to 500,000 options to
subscribe to 500,000 new shares at a fixed price to be set by the Board of Directors.
On February 18, 2016, the shareholders authorized the Board of Directors to grant up to 1,000,000 options to
subscribe to 1,000,000 new shares at a fixed price to be set by the Board of Directors.
On June 28, 2019, the shareholders authorized the Board of Directors to grant up to a maximum of 358,528
options to purchase pre-existing shares at a fixed price to be set by the Board of Directors. All of the shares that may
be purchased through the exercise of stock options are currently held as treasury stock. On June 28, 2019, the
shareholders also authorized the Board of Directors to grant up to 1,000,000 options to subscribe to 1,000,000 new
shares at a fixed price to be set by the Board of Directors.
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On June 30, 2021, the shareholders authorized the Board of Directors to grant up to 2,000,000 options to
subscribe to 2,000,000 new shares at a fixed price to be set by the Board of Directors and 200,000 free shares.
On June 30, 2022, the shareholders authorized the Board of Directors to grant up to 600,000 free shares. This
new resolution superseded the June 30, 2021 resolution, cancelling the unused portion of the 2021 resolution.
As of March 31, 2023, we had sponsored four stock purchase and subscription option plans open to employees
of EDAP TMS group and two free share plans.
On December 31, 2022, the expiration of our stock options was as follows:
Date of expiration
April 25, 2026
April 26, 2027
August 25, 2028
April 4, 2029
June 11, 2031
Number of
Options
400,000
146,080
105,000
107,500
1,287,428
As of December 31, 2022, a summary of stock option activity to purchase or to subscribe to shares under
these plans is as follows:
2022
2021
2020
Outstanding on January 1,
Granted
Exercised
Forfeited
Expired
Outstanding on December 31,
Exercisable on December 31,
Share purchase options available for grant on
December 31,
Weighted
average
exercise
price
Options
2,408,508
571,000
(320,622)
(45,000)
—
2,613,886
1,362,205
Options
(€)
4.38
1,186,900
9.07 1,392,428
(150,820)
2.14
(20,000)
5.34
—
—
5.66 2,408,508
4.35 1,149,401
Weighted
average
exercise
price
(€)
2.81
5.56
2.93
4.01
—
Options
1,273,900
—
(23,750)
(21,250)
(42,000)
4.38 1,186,900
970,650
3.25
Weighted
average
exercise
price
(€)
2.78
—
3
2.55
2
2.81
2.73
20,000
5,000
292,428
As of December 31, 2022, 1,329,000 options to subscribe to new shares are available for future grants.
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Table of Contents
The following table summarizes information about options to purchase existing shares held by the Company,
or to subscribe to new shares, as of December 31, 2022:
Outstanding options
Weighted
average
Weighted
average
remaining exercise
contractual price
Aggregate
Intrinsic
Value
(2)
Fully vested options (1)
Weighted
average Aggregate
Intrinsic
exercise
price
Value
(2)
(€)
Exercise price (€)
10.32
9.94
6.41
5.59
5.18
3.90
3.22
2.65
2.39
2.39 to 10.32
Options
32,000
395,000
124,000
1,266,806
100,000
107,500
365,000
87,500
136,080
2,613,886
life
9.8
10.0
9.3
8.4
8.8
6.8
3.3
5.7
4.3
7.39
Options
(€)
—
330,240
10.32
—
3,926,300
9.94
24,111
794,840
6.41
633,403
7,081,446
5.59
36,111
518,000
5.18
80,000
419,250
3.90
365,000
1,175,300
3.22
87,500
231,875
2.65
2.39
136,080
325,231
5.66 14,802,482 1,362,205
—
—
—
—
154,552
6.41
3,540,723
5.59
187,056
5.18
3.90
312,000
3.22 1,175,300
231,875
2.65
2.39
325,231
4.35 5,926,737
(1)
Fully vested options are all exercisable options. On March 29, 2023, the Board of Directors unanimously decided to appoint Ryan Rhodes as the new Chief Executive Officer
of the Company, which will become effective on May 1, 2023. Marc Oczachowski will continue to serve as Chairman of the Board of the Company. In this context, the
Board decided to accelerate the vesting of all unvested options granted to Mr. Oczachowski under the 2019 option plans such that these options fully vested and became
exercisable on March 29, 2023.
(2) The aggregate intrinsic value represents the total pre-tax intrinsic value, based on the Company’s closing stock price of $10.66 at December 31, 2022, which would have
been received by the option holders had all in-the-money option holders exercised their options as of that date.
Free Shares
On September 28, 2021, 61,500 free shares were granted to certain officers and employees of the Company
and on September 28, 2022, 57,500 shares, out of these 61,500 free shares, were issued and acquired, with a 12-months
period conservation obligation.
On March 30, 2022, 40,000 free shares were granted to the Chief Executive Officer of the Company.
On November 8, 2022, 291,500 free shares were granted to certain officers and employees of the Company.
On March 29, 2023, 150,000 free shares were granted to the Chief Executive Officer of the Company.
See Note 17-5 of the consolidated financial statements.
Item 7. Major Shareholders and Related Party Transactions
Major Shareholders
To our knowledge, we are not directly or indirectly owned or controlled by another corporation, by any foreign
government, or by any other natural or legal person or persons acting severally or jointly.
On the basis of the notifications received or filed with the SEC, as of April 7, 2023, (i) Soleus Capital Master
Fund, L.P. filed a report showing an increase in its ownership interest in the Company to 5,134,430 ADSs, representing
13.9% of our outstanding ADSs and (ii) Morgan Stanley filed a report showing an increase in its ownership interest in
the Company to 3,136,680 ADSs, representing 8.5% of our outstanding ADSs There are no arrangements known to
us, the operation of which may at a later date result in a change of control of the Company. All shares issued by the
Company have the same voting rights, except the treasury shares held by the Company, which have no voting rights.
As of March 15, 2023, 37,202,731 shares were issued, including 36,927,364 outstanding and 275,367 treasury
shares. At March 15, 2023, there were 37,121,481 ADSs, each representing one Share, all of which were held of record
by 19 registered holders (including The Depository Trust Company).
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Related Party Transactions
On August 19, 2019, EDAP Technomed Co. Ltd. (Japan) contracted a loan for 80,000,000 JPY. As a current
practice in Japan, this loan required a personal guarantee from the representative director, president and CEO of the
subsidiary, Mr. Jean-François Bachelard. EDAP TMS S.A., as the parent company, counter-guaranteed this personal
loan and agreed to indemnify Mr. Bachelard, in an indemnification letter dated September 12, 2019, expiring upon
loan maturity date of August 26, 2026.
On April 22, 2020, EDAP Technomed Co. Ltd (Japan) contracted another loan for 50,000,000 JPY requiring
a personal guarantee from the representative director, president and CEO of the subsidiary, Mr. Jean-François
Bachelard. EDAP TMS S.A., as the parent company, counter-guaranteed this personal loan and agreed to indemnify
Mr. Bachelard, in an indemnification letter dated June 2, 2020, expiring upon loan maturity date of April 2, 2025.
On April 27, 2021, EDAP Technomed Sdn Bdh (Malaysia) contracted with Maybank to issue a Performance
Guarantee amounting 8,000.00 MYR, expiring on June 30, 2023. As a current practice in Malaysia, any bank guarantee
requires a personal warranty from the representative director, president and CEO of the subsidiary Mr. Hervé de
Soultrait. Consequently, Mr. de Soultrait personally counter-garanteed this Performance Guarantee by making a fixed
deposit of 8,000.00 to Maybank, valid until June 30, 2023.
Interests of Experts and Counsel
Not applicable.
Item 8. Financial Information
Consolidated Financial Statements
See Item 18, “Financial Statements.”
Export Sales
As of December 31, 2022, total consolidated export net sales, which we define as sales made outside of
mainland France, were €44.5 million, which represented 81% of total net sales.
As part of our business, we are engaged in sales and marketing activities with hospitals, clinics, distributors
or agents in countries on a worldwide basis where we can provide our minimally invasive therapeutic solutions to
patients with prostate cancer or urinary stones. The following information complies with the sub-section “Disclosure
of Certain Activities Relating to Iran” of the Section 13 of the U.S. Securities Exchange Act of 1934 as amended: in
2015 we honored warranty contracts on previous sales of lithotripsy devices to three Iranian public hospitals in order
to provide the hospitals with the necessary disposables and services to treat patients with kidney stones using our
devices. As part of these warranty commitments, we did not invoice any medical equipment to the hospitals in 2022
or 2021.
Legal Proceedings
From time to time, we may become involved in legal proceedings or be subject to claims arising in the
ordinary course of our business. Regardless of the outcome, litigation can have an adverse impact on us because of
defense and settlement costs, diversion of management resources and other factors. We do not have any legal
proceedings outstanding.
Dividends and Dividend Policy
The payment and amount of dividends depend on our earnings and financial condition and such other factors
that our Board of Directors deems relevant. Dividends are subject to recommendation by the Board of Directors and a
vote by the shareholders at the shareholders’ ordinary general meeting. Dividends, if any, would be paid in euro and,
with respect to ADSs, would be converted at the then-prevailing exchange rate into U.S. dollars. Holders of ADSs will
be entitled to receive payments in respect of dividends on the underlying shares in accordance with the Deposit
Agreement.
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No dividends were paid with respect to fiscal years 2016 through 2021, and we do not anticipate paying any
dividends for the foreseeable future. Thereafter, any declaration of dividends on our shares as well as the amount and
payment will be determined by majority vote of the holders of our shares at an ordinary general meeting, following
the recommendation of our Board of Directors. Such declaration will depend upon, among other things, future earnings,
if any, the operating and financial condition of our business, our capital requirements, general business conditions and
such other factors as our Board of Directors deems relevant in its recommendation to shareholders.
Significant Changes as of April 7, 2023
In line with EDAP’s global group strategy, and its focus on expansion in the United States and rest of world
markets, and upon recommendation of the Compensation Committee and the Nomination Committee, on March 29,
2023 the Board of Directors unanimously decided to appoint Ryan Rhodes as the new Chief Executive Officer of the
Company for an indefinite term, which will become effective on May 1, 2023. Marc Oczachowski will continue to
serve as Chairman of the Board of the Company. In this context, the Board decided to accelerate the vesting of all
unvested options granted to Mr. Oczachowski under the 2019 option plans such that these options fully vested and
became exercisable on March 29, 2023, and, with respect to the previously granted free shares and as permitted under
the plans, waived certain conditions to vesting. The Company is currently evaluating the costs associated with the
severance package and the acceleration of vesting of share-based plans, which will be recorded in financial year 2023.
Item 9. The Offer and Listing
Description of Securities
The shares are traded solely in the form of ADSs, each ADS representing one ordinary share. Each ADS may
be evidenced by an American Depositary Receipt issued by The Bank of New York Mellon, our Depositary. The
principal United States trading market for the ADSs, which is also the principal trading market for the ADSs overall,
is The Nasdaq Global Market of The Nasdaq Stock Market, Inc. (“The Nasdaq”), on which the ADSs are quoted under
the symbol “EDAP.”
Item 10. Additional Information
Memorandum and Articles of Association
Set forth below is a brief summary of significant provisions of our by-laws (or statuts) and applicable French
laws. This is not a complete description and is qualified in its entirety by reference to our by-laws, a translation of
which is provided in Exhibit 1.1 to this annual report. Each time they are modified, which can only occur with the
approval of a two third majority of the shareholders present or represented at a shareholders’ meeting, we file copies
of our statuts with, and such by-laws are publicly available from, the Registry of Commerce and Companies in Lyon,
France, under number 316 488 204.
Our corporate affairs are governed by our by-laws and by Book II of the French Commercial Code.
Our by-laws were updated on January 24, 2023 to reflect the latest increases in share capital related to the
issuance of additional shares following the exercise of options.
Corporate Purposes
Pursuant to Article 2 of the by-laws, the corporate purpose of the Company is:
-
-
-
-
the taking of financial interests, under whatever form, in all French or foreign groups, companies or businesses
which currently exist or which may be created in the future, mainly through contribution, subscription or
purchasing of stocks or shares, obligations or other securities, mergers, holding companies, groups, alliances or
partnerships;
the management of such financial investments;
the direction, management, control and coordination of its subsidiaries and interests;
the provision of all administrative, financial, technical or other services; and
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- generally, all transactions of whatever nature, whether financial, commercial, industrial, civil, relating to
property and/or real estate, which may be connected directly or indirectly, in whole or in part, to the Company’s
purposes or to any similar or related purposes which may favor the extension or development of such purpose.
Board of Directors
The Board of Directors is currently composed of five members, four of which were appointed by the
shareholders for a period of six years expiring on the date of the annual general shareholders’ meeting approving the
accounts for fiscal year 2025. Mr. Marc Oczachowski, Chief Executive Officer, and elected Chairman of the Board as
of March 25, 2020, was appointed director of the Company by the shareholders on June 30, 2017, effective July 1,
2017, for a period of six years expiring on the date of the annual general shareholders’ meeting approving the accounts
for the fiscal year 2022. See Item 6, “Directors, Senior Management and Employees.” A director’s term ends at the
end of the ordinary general shareholders” meeting convened to vote on the accounts of the then-preceding fiscal year
and held in the year during which the term of such director comes to an end. Directors may be re-elected; a director
may also be dismissed at any time at the shareholders’ meeting.
An individual person may not be a member of more than five Boards of Directors or Supervisory Boards in
corporations (société anonyme) registered in France; directorships held in controlled companies (as defined by
Section L.233-16 of the French Commercial Code) by the Company are not taken into account.
In the event of the death or resignation of one or more directors, the Board of Directors may make provisional
appointments to fill vacancies before the next general shareholders’ meetings, provided that the number of directors
still in office is not below the required legal minimum of directors (two). These provisional appointments must be
ratified by the next ordinary shareholders meeting. Even if a provisional appointment is not ratified, resolutions and
acts previously approved by the Board of Directors nonetheless remain valid.
If the number of Directors falls below the compulsory legal minimum, the remaining directors must
immediately convene an ordinary general shareholders’ meeting to reach a full Board of Directors.
Any director appointed in replacement of another director whose term has not expired remains in office only
for the remaining duration of the term of his predecessor.
One of our employees may be appointed to serve as a director. His/her employment contract must include
actual work obligations. In this case, he/she does not lose the benefit of his/her employment contract.
The number of directors that have employment contracts with the Company may not exceed one third of the
directors then in office and in any case, a maximum of five members.
Pursuant to our by-laws, a director may not be over eighty-five years old. If a director reaches this age limit
during his/her term, such director is automatically considered to have resigned at the next general shareholders meeting.
A director cannot borrow money from the Company.
The Board of Directors determines the direction of our business and supervises its implementation. Within
the limits set out by the corporate purposes and the powers expressly granted by law to the general shareholders’
meeting, the Board of Directors may deliberate upon our operations and make any decisions in accordance with our
business. A director must abstain from voting on matters in which the director has an interest. The resolutions passed
in a meeting of the Board of Directors are valid only if a quorum of half of the Directors is reached. Decisions of the
Board of Directors are made by a majority vote; in case of a tie the Chairman of the Board has a deciding vote.
French law provides that the functions of Chairman of the Board and Chief Executive Officer in a French
société anonyme may be distinct and held by two separate individuals or combined. The choice between these two
methods of management belongs to the Board of Directors and must be made pursuant to our by-laws and applicable
French law.
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The Chairman of the Board
The Board of Directors must elect one of its members as Chairman of the Board of Directors, who must be
an individual. The Board of Directors determines the duration of the term of the Chairman, which cannot exceed that
of his/her tenure as a director. The Board of Directors may revoke the Chairman at any time. The Chairman’s
compensation is determined by the Board of Directors, upon recommendation of the Compensation Committee. See
Item 6, “Directors, Senior Management and Employees–Compensation Committee.” The Chairman represents the
Board of Directors and organizes its work. The Chairman reports on the Board’s behalf to the general shareholders’
meeting. The Chairman is responsible for ensuring the proper functioning of our governing bodies and that the Board
members have the means to perform their duties.
As with any other director, the Chairman may not be over eighty-five years old. In case the Chairman reaches
this age limit during his/her tenure, he/she will automatically be considered to have resigned. However, his/her tenure
is extended until the next Board of Directors meeting, during which his/her successor will be appointed. Subject to the
age limit provision, the Chairman of the Board may also be re-elected.
The Chief Executive Officer
We are managed by an individual elected by the Board of Directors bearing the title of Chief Executive Officer
(directeur général). On March 31, 2007, the Board of Directors appointed Mr. Marc Oczachowski as Chief Executive
Officer and on March 25, 2020, the Board of Directors decided to combine the roles of Chairman of the Board and
Chief Executive Officer, as allowed by the Company’s by-laws, and elected Mr. Marc Oczachowski as both the
Chairman of the Board of Directors and Chief Executive Officer.
The Chief Executive Officer is vested with the powers to act under all circumstances on behalf of the
Company, within the limits set out by the Company’s corporate purposes, and subject to the powers expressly granted
by the law to the Board of Directors and the general shareholders’ meeting.
The Chief Executive Officer represents the Company with respect to third parties. The Company is bound by
any acts of the Chief Executive Officer even if they are contrary to corporate purposes, unless it is proven that the third
party knew such act exceeded the Company’s corporate purposes or could not ignore it in light of the circumstances.
Publication of the by-laws alone is not sufficient evidence of such knowledge.
The Chief Executive Officer’s compensation is set by the Board of Directors, upon recommendation of the
Compensation Committee. The Chief Executive Officer can be revoked at any time by the Board of Directors. If such
termination is found to be unjustified, damages may be allocated to the Chief Executive Officer, except when the Chief
Executive Officer is also the Chairman of the Board.
The Chief Executive Officer may not hold another position as Chief Executive Officer or member of a
Supervisory Board in a corporation (société anonyme) registered in France except when (a) such company is controlled
(as referred to in Section L.233-16 of the French Commercial Code) by the Company and (b) when this controlled
company’s shares are not traded on a regulated market.
Pursuant to our by-laws, the Chief Executive Officer may not be over seventy years old. In case the Chief
Executive Officer reaches this age limit during his/her office, he/she is automatically considered to have resigned.
However, his/her tenure is extended until the next Board of Directors meeting, during which his/her successor must be
appointed.
Pursuant to Section 706-43 of the French Criminal Proceedings Code, the Chief Executive Officer may
validly delegate to any person he/she chooses the power to represent us in any criminal proceedings that we may face.
Dividend and Liquidation Rights (French Law)
Net income in each fiscal year, increased or reduced, as the case may be, by any profit or loss of the Company
carried forward from prior years, less any contributions to legal reserves, is available for distribution to our
shareholders as dividends, subject to the requirements of French law and our by-laws.
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Under French law, we are required to allocate at least 5% of our unconsolidated net profits in each fiscal year
to a legal reserve fund before dividends may be paid with respect to that year. Such allocation is compulsory until the
amount in such reserve fund is equal to 10% of the nominal amount of the registered capital. The legal reserve is
distributable only upon the liquidation of the Company.
Our shareholders may, upon recommendation of the Board of Directors, decide to allocate all or a part of
distributable profits, if any, among special or general reserves, to carry them forward to the next fiscal year as retained
earnings, or to allocate them to the shareholders as dividends.
Our by-laws provide that, if so agreed by the shareholders, reserves that are available for distribution under
French law and our by-laws may be distributed as dividends, subject to certain limitations.
If we have made distributable profits since the end of the preceding fiscal year (as shown on an interim income
statement certified by our statutory auditors), the Board of Directors has the authority under French law, without the
approval of shareholders, to distribute interim dividends to the extent of such distributable profits. We have never paid
interim dividends.
Under French law, dividends are distributed to shareholders pro rata according to their respective
shareholdings. Dividends are payable to holders of shares outstanding on the date of the annual shareholders’ meeting
deciding the distribution of dividends, or in the case of interim dividends, on the date of the Board of Directors meeting
approving the distribution of interim dividends. However, holders of newly issued shares may have their rights to
dividends limited with respect to certain fiscal years. The actual dividend payment date is decided by the shareholders
in an ordinary general meeting or by the Board of Directors in the absence of such a decision by the shareholders. The
payment of the dividends must occur within nine months from the end of our fiscal year. Under French law, dividends
not claimed within five years of the date of payment revert to the French State.
If the Company is liquidated, our assets remaining after payment of our debts, liquidation expenses and all of
our remaining obligations will be distributed first to repay in full the nominal value of the shares, then the surplus, if
any, will be distributed pro rata among the shareholders based on the nominal value of their shareholdings and subject
to any special rights granted to holders of priority shares, if any. Shareholders are liable for corporate liabilities only
up to the par value of the shares they hold and are not liable to further capital calls of the Company.
Changes in Share Capital (French Law)
Our share capital may be increased only with the approval of two thirds of the shareholders voting or
represented at an extraordinary general meeting, following a recommendation of the Board of Directors. Increases in
the share capital may be effected either by the issuance of additional shares (including the creation of a new class of
shares) or by an increase in the nominal value of existing shares or by the exercise of rights attached to securities giving
access to the share capital. Additional Shares may be issued for cash or for assets contributed in kind, upon the
conversion of debt securities previously issued by the Company, by capitalization of reserves, or, subject to certain
conditions, by way of offset against indebtedness incurred by the Company. Dividends paid in the form of shares may
be distributed in lieu of payment of cash dividends, as described above under “—Dividend and Liquidation Rights
(French law).” French law permits different classes of shares to have liquidation, voting and dividend rights different
from those of the outstanding ordinary shares, although we only have one class of shares.
Our share capital may be decreased only with the approval of two thirds of the shareholders voting or
represented at an extraordinary general meeting. The share capital may be reduced either by decreasing the nominal
value of the shares or by reducing the number of outstanding shares. The conditions under which the registered capital
may be reduced will vary depending upon whether or not the reduction is attributable to losses incurred by the
Company. The number of outstanding shares may be reduced either by an exchange of shares or by the repurchase and
cancellation by the Company of its shares. Under French law, all the shareholders in each class of shares must be
treated equally unless the inequality in treatment is accepted by the affected shareholder. If the reduction is not
attributable to losses incurred by us, each shareholder will be offered an opportunity to participate in such capital
reduction and may decide whether or not to participate therein.
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Repurchase of Shares (French Law)
Pursuant to French law, the Company, as a company whose shares are not admitted to trading on a regulated
market subject to the provisions of Article L. 433-3 II of the French Monetary and Financial Code, may not acquire its
own shares except (a) to reduce its share capital under certain circumstances with the approval of the shareholders at
an extraordinary general meeting, (b) to provide shares for distribution to employees under a profit sharing or a stock
option plan, (c) to offer shares as payment in exchange for assets acquired by the Company in the context of an external
growth, merger, demerger or contribution transaction or (d) to provide shares to shareholders as part of a sale procedure
organized by the Company. However, the Company may not hold more than 10% of its shares then-issued and 5% for
a repurchase of shares to offer them as payment or in exchange for assets acquired by the Company in the context of
an external growth, merger, demerger or contribution transaction. A subsidiary of the Company is prohibited by French
law from holding shares of the Company and, in the event it becomes a shareholder of the Company, such shareholder
must transfer all the shares of the Company that it holds.
Attendance and Voting at Shareholders’ Meetings (French Law)
In accordance with French law, there are two types of general shareholders’ meetings, ordinary and
extraordinary. Ordinary general meetings are required for matters such as the election of directors, the appointment of
statutory auditors, the approval of the report prepared by the Board of Directors, the annual accounts and the declaration
of dividends.
Extraordinary general meetings are required for approval of matters such as amendments to the Company’s
by-laws, modification of shareholders’ rights, approval of mergers, increases or decreases in share capital (including a
waiver of preferential subscription rights), the creation of a new class of shares, the authorization of the issuance of
investment certificates or securities convertible or exchangeable into shares and for the sale or transfer of substantially
all of the Company’s assets.
The Board of Directors is required to convene an annual ordinary general shareholders’ meeting, which must
be held within six months of the end of our fiscal year, for approval of the annual accounts. Other ordinary or
extraordinary meetings may be convened at any time during the year. Shareholders’ meetings may be convened by the
Board of Directors or, if the Board of Directors fails to call such a meeting, by our statutory auditors or by a court-
appointed agent. The court may be requested to appoint an agent either by one or more shareholders holding at least
5% of the registered capital or by an interested party under certain circumstances, or, in case of an urgent matter, by
the Work Council (Comité Social et Economique) representing the employees. The notice calling a meeting must state
the agenda for such meeting.
French law provides that, at least 15 days before the date set for any general meeting on first notice, and at
least ten days before the date set for any general meeting on second notice, notice of the meeting (avis de convocation)
must be sent by mail to all holders of properly registered shares who have held such shares for more than one month
before the date of the notice. A preliminary written notice (avis de réunion) must be sent to each shareholder who has
requested to be notified in writing. Under French law, one or several shareholders together holding a
specified percentage of shares may propose resolutions to be submitted for approval by the shareholders at the meeting.
Upon our request, the Bank of New York Mellon will send to holders of ADSs notices of shareholders’ meetings and
other reports and communications that are made generally available to shareholders. The Work Council may also
require the registration of resolution proposals on the agenda.
Attendance and exercise of voting rights at ordinary and extraordinary general shareholders’ meetings are
subject to certain conditions. Shareholders deciding to exercise their voting rights must have their shares registered in
their names in the shareholder registry maintained by or on behalf of the Company before the meeting. An ADS holder
must timely and properly return its voting instruction card to the Depositary to exercise the voting rights relating to the
shares represented by its ADSs. The Depositary will use its reasonable efforts to vote the underlying shares in the
manner indicated by the ADS holder. In addition, if an ADS holder does not timely return a voting instruction card or
the voting instruction card received is improperly completed or blank, that holder will be deemed to have given the
Depositary a proxy to vote, and the Depositary will vote in favor of all proposals recommended by the Board of
Directors and against all proposals that are not recommended by the Board of Directors.
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All shareholders who have properly registered their shares have the right to participate in general
shareholders’ meetings, either in person, by proxy, or by mail, and to vote according to the number of shares they hold.
Each share confers on the shareholder the right to one vote. Under French law, an entity we control directly or indirectly
is prohibited from holding shares in the Company and, in the event it becomes a shareholder, shares held by such entity
would be deprived of voting rights. A proxy may be granted by a shareholder whose name is registered on our share
registry to his or her spouse, to another shareholder or to a legal representative, in the case of a legal entity, or by
sending a proxy to the Company. Under French law, a proxy that is returned without instructions will be counted as
present for purposes of the quorum and will be counted (i) in favor of the adoption of the draft resolutions presented
or approved by the Board of Directors and (ii) against the adoption of all other draft resolutions which were not
expressly presented or approved by the Board of Directors.
The presence in person or by proxy of shareholders having not less than 20% (in the case of an ordinary
general meeting or an extraordinary general meeting deciding upon any capital increase by capitalization of reserves)
or 25% (in the case of any other extraordinary general meeting) of the shares entitled to vote is necessary to reach a
quorum. If a quorum is not reached at any meeting, the meeting is adjourned. Upon reconvening of an adjourned
meeting, there is no quorum requirement in the case of an ordinary general meeting or an extraordinary general meeting
deciding upon any capital increase by capitalization of reserves. The presence in person or by proxy of shareholders
having not less than 20% of the shares is necessary to reach a quorum in the case of any other type of extraordinary
general meeting.
At an ordinary general meeting or an extraordinary general meeting deciding upon any capital increase by
capitalization of reserves, a simple majority of the votes of the shareholders present or represented by proxy is required
to approve a resolution. At any other extraordinary general meeting, two-thirds of the votes cast is required. However,
a unanimous vote is required to increase liabilities of shareholders.
Under French law, abstention from voting, blank votes and null votes by those present or those represented
by proxy or voting by mail are no longer counted as votes against the resolution submitted to a shareholder vote at any
of the two types of meetings.
In addition to his/her rights to certain information regarding the Company, any shareholder may, during the
two-week period preceding a shareholders’ meeting, and at the latest four business days prior to such meeting, submit
to the Board of Directors written questions relating to the agenda for the meeting. The Board of Directors must respond
to such questions during the meeting.
Under French law, shareholders can nominate individuals or company for election to the Board of Directors
at a shareholders’ meeting. When the nomination is part of the agenda of the shareholders’ meeting, the nomination
must contain the name, age, professional references and professional activity of the nominee for the past five years, as
well as the number of shares owned by such candidate, if any. In addition, if the agenda for the shareholders’ meeting
includes the election of members of the Board of Directors, any shareholder may require, during the meeting, the
nomination of a candidate for election at the Board of Directors at the shareholders’ meeting, even if such shareholder
has not followed the nomination procedures. Under French law, shareholders cannot elect a new member of the Board
of Directors at a general shareholders meeting if the agenda for the meeting does not include the election of a member
of the Board of Directors, unless such nomination is necessary to fill a vacancy due to the previous dismissal of a
member.
As set forth in our by-laws, shareholders’ meetings are held at the registered office of the Company or at any
other locations specified in the written notice. We do not have staggered or cumulative voting arrangements for the
election of Directors.
Preferential Subscription Rights (French Law)
Shareholders have preferential rights to subscribe for additional shares issued by the Company for cash on a
pro rata basis (or any equity securities of the Company or other securities giving a right, directly or indirectly, to equity
securities issued by the Company). Shareholders may waive their preferential rights, either individually or at an
extraordinary general meeting under certain circumstances. Preferential subscription rights, if not previously waived,
are transferable during the subscription period relating to a particular offering of shares. U.S. holders of ADSs may
not be able to exercise preferential rights for shares underlying their ADSs unless a registration statement under the
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Securities Act is effective with respect to such rights or an exemption from the registration requirement thereunder is
available.
Provisions With Respect to Directors (French Law)
Transactions in Which Directors Are Materially Interested
Under French law, any agreement entered into (directly or through an intermediary) between the Company
and any one of the members of the Board of Directors that is not entered into (i) in the ordinary course of our business
and (ii) under normal conditions, is subject to the prior authorization of the Board of Directors with only the
disinterested members of the Board of Directors voting. This provision applies in particular to any undertaking taken
by our Company for the benefit of our Chairman, Chief Executive Officer or his delegates (délégués) pursuant to which
such persons will or may be granted compensation, benefits or any other advantages as a result of the termination of
or a change in their offices or following such termination or change.
The same provision applies to agreements between our Company and another company if one of the members
of the Board of Directors is the owner, general partner, manager, director, general manager or member of the executive
or supervisory board of the other company, as well as to agreements in which one of the members of the Board of
Directors has an indirect interest.
In accordance with Article L. 225-38 of the French Commercial Code, each related-party agreement entered
into during the fiscal year is submitted for approval by our shareholders at the annual general shareholders’ meeting;
the interested director (directly or through an intermediary), if he/she is a shareholder of the Company, may not take
part in the vote and the shares held by the interested director are not taken into account for the calculation of the
majority vote count.
Directors’ Compensation
The aggregate amount of compensation of the Board of Directors is determined at the ordinary general
shareholders’ meeting. The Board of Directors then divides this aggregate amount among its members by a simple
majority vote. In addition, the Board of Directors may grant exceptional compensation (rémunérations exceptionnelles)
to individual directors on a case-by-case basis for special assignments following the procedures described above at “-
Transactions in which directors are materially Interested.” The Board of Directors may also authorize the
reimbursement of travel and accommodation expenses, as well as other expenses incurred by Directors in the corporate
interest. See also Item 6, “Directors, Senior Management and Employees”.
Board of Directors’ Borrowing Powers
All loans or borrowings on behalf of the Company may be decided by the Board of Directors within the limits,
if any, imposed by the extraordinary meeting of the shareholders. There are currently no limits imposed on the amounts
of loans or borrowings that the Board of Directors may approve.
Form and Holding of Shares (French Law)
Form of Shares
Our by-laws provide that shares can only be held in registered form.
Holding of Shares
The shares are registered in the name of the respective owners thereof in the registry maintained by or on
behalf of the Company.
Stock certificates evidencing shares, in a manner comparable to that in the United States, are not issued by
French companies, but we may issue or cause to be issued confirmations of shareholdings registered in such registry
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to the persons in whose names the shares are registered. Pursuant to French law, such confirmations do not constitute
documents of title and are not negotiable instruments.
Ownership of ADSs or Shares by Non-French Residents (French Law)
Under current French law, there is no limitation on the right of non-French residents or non-French security
holders to own, or where applicable, vote securities of a French company.
Nevertheless, any investment: (i) by (a) any non-French citizen, (b) any French citizen not residing in France,
(c) any non-French entity or (d) any French entity controlled by one of the aforementioned individuals or entities;
(ii) that will result in the relevant investor (a) acquiring control of an entity having its registered office in France,
(b) acquiring all or part of a business line of an entity having its registered office in France, or (c) for non-EU or non-
EEA investors crossing, directly or indirectly, alone or in concert, a 25% threshold of voting rights in an entity having
its registered office in France; and (iii) developing activities in certain strategic industries related to: (a) activities likely
to prejudice national defense interests, participating in the exercise of official authority or likely to prejudice public
order and public security (including activities related to weapons, dual-use goods and technologies, IT systems,
cryptology, data capturing devices, gambling, toxic agents or data storage), (b) activities relating to essential
infrastructure, goods or services (including energy, water, transportation, space, telecom, public health, farm products
or media), (c) research and development activities related to critical technologies (including cybersecurity, artificial
intelligence, robotics, additive manufacturing, semiconductors, quantum
technologies, energy storage or
biotechnology) or dual-use goods and technologies, is subject to the prior authorization of the French Minister of
Economy, which authorization, if granted, may be subject to certain undertakings. This request for prior authorization
must be filed with the French Ministry of Economy, which has 30 business days from receipt of the complete file to
provide a first decision which may (i) unconditionally authorize the investment or (ii) indicate that further examination
is required. In the latter case, the French Ministry of Economy must make a second decision within 45 business days
from its first decision. In case of lack of response from the French Ministry of Economy within the above mentioned
timeframe, the authorization will be deemed refused. If the authorization is granted, it may be subject to the signature
of a letter of undertakings aimed at protecting the French national interests. If an investment requiring the prior
authorization of the French Minister of Economy is completed without such authorization having been granted, the
French Minister of Economy might direct the relevant investor to (i) submit a request for authorization, (ii) have the
previous situation restored at its own expense, or (iii) amend the investment. The relevant investor might also be found
criminally liable and might be sanctioned with a fine which cannot exceed the greater of: (i) twice the amount of the
relevant investment, (ii) 10% of the annual turnover before tax of the target company and (iii) €5 million (for a
company) or €1 million (for an individual).
The French Monetary and Financial Code (CMF) provides for statistical reporting requirements. Transactions
by which non-French residents acquire at least 10% of the share capital or voting rights, or cross the 10% threshold,
of a French resident company, are considered as foreign direct investments in France and are subject to statistical
reporting requirements (Articles R. 152-1; R.152-3 and R. 152-11 of the CMF). When the investment exceeds
€12,500,000, companies must declare foreign transactions directly to the Banque de France within 20 business days
following the date of certain direct foreign investments in us, including any purchase of ADSs. Failure to comply with
such statistical reporting requirement may be sanctioned by five years’ imprisonment and a fine of a maximum amount
equal to twice the amount which should have been reported, in accordance with Article L 165-1 of the CMF. This
amount may be increased fivefold if the violation is made by a legal entity.
Certain Exemptions (U.S. Law)
Under the U.S. securities laws, as a foreign private issuer, we are exempt from certain rules that apply to
domestic U.S. issuers with equity securities registered under the U.S. Securities Exchange Act of 1934, including the
proxy solicitation rules and the rules requiring disclosure of share ownership by directors, officers and certain
shareholders. We are also exempt from certain of the current Nasdaq corporate governance requirements. For more
information on these exemptions, see Item 16G, “Corporate Governance —Exemptions from Certain Nasdaq
Corporate Governance Rules.”
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Enforceability of Civil Liabilities (French Law)
We are a société anonyme, or limited liability corporation, organized under the laws of the Republic of France.
The majority of our directors and executive officers reside in the Republic of France. In addition, a substantial portion
of our assets is located outside of the United States. As a result, it may be difficult for investors:
•
•
•
•
to obtain jurisdiction over us or our non-U.S. resident officers and directors in U.S. courts, or obtain
evidence in France or from French citizen or any individual being resident in France or any officer,
representative, agent or employee of a legal person having its registered office or an establishment in a
territory of France, in connection with those actions in actions predicated on the civil liability provisions
of the U.S. federal securities laws;
to enforce in U.S. courts judgments obtained in such actions against us or our non-U.S. resident officers
and directors;
to bring an original action in a French court to enforce liabilities based upon the U.S. federal securities
laws against us or our non-U.S. resident officers or directors; and
to enforce in U.S. courts against us or our directors in non-U.S. courts, including French courts,
judgments of U.S. courts predicated upon the civil liability provisions of the U.S. federal securities laws.
Nevertheless, a final judgment for the payment of money rendered by any federal or state court in the
United States based on civil liability, whether or not predicated solely upon the U.S. federal securities laws, would be
recognized and enforced in France provided that a French judge considers that this judgment meets the French legal
requirement concerning the recognition and the enforcement of foreign judgments and is capable of being immediately
enforced in the United States. A French court is therefore likely to grant the enforcement of a foreign judgment without
a review of the merits of the underlying claim, only if (i) the judgment was rendered by a court having jurisdiction
over the matter as the dispute is clearly connected to the jurisdiction of such court, the choice of the U.S. court was not
fraudulent and the French courts did not have exclusive jurisdiction over the matter, (ii) the judgment does not
contravene international public policy rules, as applied by French courts, whether such rules pertain to the merits or to
the procedure of the case, including any defense rights, (iii) the judgment is not tainted with fraud and (iv) the judgment
does not conflict with a French judgment or a foreign judgment (or an arbitral award) which has become effective in
France. In addition, French law guarantees full compensation for the harm suffered but is limited to the actual damages,
so the victim does not suffer or benefit from the situation, it being specified that under French law, the principle of
awarding punitive damages is not, per se, contrary to public order, provided the amount awarded is not disproportionate
to the harm suffered and the defendant’s breach.
As a result, the enforcement, by U.S. investors, of any judgments obtained in U.S. courts in civil and
commercial matters, including judgments under the U.S. federal securities law against us or members of our Board of
Directors, officers or certain experts named herein who are residents of France or countries other than the United States
would be subject to the above conditions.
Finally, there may be doubt as to whether a French court would impose civil liability on us, the members of
our Board of Directors, our officers or certain experts named herein in an original action predicated solely upon the
U.S. federal securities laws brought in a court of competent jurisdiction in France against us or such members, officers
or experts, respectively.
Material Contracts
None.
Exchange Controls
Under current French foreign exchange control regulations, there are no limitations on the amount of cash
payments that we may remit to residents of foreign countries. Laws and regulations concerning foreign exchange
controls do require, however, that all payments or transfers of funds made by a French resident to a non-resident be
handled by an accredited intermediary.
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Certain Income Tax Considerations
General
The following generally summarizes the material French and U.S. federal income tax consequences to
U.S. holders (as defined below) of purchasing, owning and disposing of ADSs and shares (collectively the
“Securities”). This discussion is intended only as a descriptive summary and does not purport to be a complete analysis
or listing of all potential tax effects of the purchase, ownership or disposition of the Securities. All of the following is
subject to change. Such changes could apply retroactively and could affect the consequences described below.
This summary does not constitute a legal opinion or tax advice. Holders are urged to consult their own tax
advisers regarding the tax consequences of the purchase, ownership and disposition of Securities in light of their
particular circumstances, including the effect of any U.S. federal, state, local or other national tax laws.
A set of tax rules is applicable to French assets that are held by or in foreign trusts. These rules provide
inter alia for the inclusion of trust assets in the settlor’s net assets for purpose of applying the French real estate wealth
tax, for the application of French gift and death duties to French assets held in trust, for a specific tax on capital on the
French assets of foreign trusts not already subject to the French real estate wealth tax and for a number of French tax
reporting and disclosure obligations. The following discussion does not address the French tax consequences
applicable to Securities held in trusts. If Securities are held in trust, the grantor, trustee and beneficiary are urged to
consult their own tax adviser regarding the specific tax consequences of acquiring, owning and disposing of Securities.
The description of the French and U.S. federal income tax consequences set forth below is based on the laws
(including, for U.S. federal income tax purposes, the Internal Revenue Code of 1986, as amended (the “Code”), final,
temporary and proposed U.S. Treasury Regulations promulgated thereunder and administrative and judicial
interpretations thereof) in force as of the date of this annual report, the Convention Between the Government of the
United States of America and the Government of the French Republic for the Avoidance of Double Taxation and the
Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital of August 31, 1994 (the “Treaty”), which
entered into force on December 30, 1995 (as amended by any subsequent protocols, including the protocol of
January 13, 2009), and the tax regulations issued by the French tax authorities within the Bulletin Officiel des Finances
Publiques-Impôts (the “Regulations”) in force as of the date of this report. U.S. holders are advised to consult their
own tax advisers regarding their eligibility for Treaty benefits, especially with regard to the “Limitations on Benefits”
provision, in light of their own particular circumstances.
No advance ruling has been obtained with respect to the tax consequences of the acquisition, ownership or
disposition of the Securities from either the French or U.S. tax authorities. Thus, there can be no assurances that one
or both of such authorities will not take a position concerning such tax consequences different from that set out herein
or that such a position would not be sustained by a court.
For the purposes of this discussion, a U.S. holder is a beneficial owner of Securities that is (i) an individual
who is a U.S. citizen or resident for U.S. federal income tax purposes, (ii) a U.S. domestic corporation or certain other
entities created or organized in or under the laws of the United States or any state thereof, including the District of
Columbia, or (iii) otherwise subject to U.S. federal income taxation on a net income basis in respect of Securities. A
non-U.S. holder is a person other than a U.S. holder.
If a partnership holds Securities, the tax treatment of a partner generally will depend upon the status of the
partner and the activities of the partnership. If a U.S. holder is a partner in a partnership that holds Securities, the
holder is urged to consult its own tax adviser regarding the specific tax consequences of acquiring, owning and
disposing of Securities.
This discussion is intended only as a general summary and does not purport to be a complete analysis or
listing of all potential tax effects of the acquisition, ownership or disposition of the Securities to any particular investor,
and does not discuss tax considerations that arise from rules of general application or that are generally assumed to be
known by investors. The discussion applies only to investors that hold the Securities as capital assets that have the
U.S. dollar as their functional currency, that are entitled to Treaty benefits under the “Limitation on Benefits” provision
contained in the Treaty, and whose ownership of the Securities is not effectively connected to a permanent
establishment or a fixed base in France. Certain holders (including, but not limited to, U.S. expatriates, partnerships or
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other entities classified as partnerships for U.S. federal income tax purposes, banks, insurance companies, regulated
investment companies, tax-exempt organizations, financial institutions, persons subject to the alternative minimum
tax, persons who acquired the Securities pursuant to the exercise of employee stock options or otherwise as
compensation, persons that own (directly, indirectly or by attribution) 5% or more of the Company’s voting stock or
5% or more of the Company’s outstanding share capital, dealers in securities or currencies, persons that elect to mark
their securities to market for U.S. federal income tax purposes, and persons holding Securities as a position in a
synthetic security, straddle or conversion transaction) may be subject to special rules not discussed below. Holders of
Securities are advised to consult their own tax advisers with regard to the application of French tax law and
U.S. federal tax law to their particular situations, as well as any tax consequences arising under the laws of any state,
local or other foreign jurisdiction.
French Taxes
Estate and gift taxes and transfer taxes
In general, a transfer of Securities by gift or by reason of death of a U.S. holder that would otherwise be
subject to French gift or inheritance tax, respectively, will not be subject to such French tax by reason of the Convention
between the Government of the United States of America and the Government of the French Republic for the
Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Estates, Inheritances
and Gifts, dated November 24, 1978, unless the donor or the transferor is domiciled in France at the time of making
the gift or at the time of his or her death, or the Securities were used in, or held for use in, the conduct of a business
through a permanent establishment or a fixed base in France.
Pursuant to Article 235 ter ZD of the French General Tax Code, purchases of certain securities issued by a
French company, including shares and ADSs, which are listed on a regulated market of the EU or an exchange market
formally acknowledged by the AMF (in each case within the meaning of the French Monetary and Financial Code)
are subject in France to a 0.3% tax on financial transactions, or the TFT, provided inter alia that the issuer’s market
capitalization exceeds €1.0 billion as of December 1 of the year preceding the taxation year. A list of companies whose
market capitalization exceeds €1.0 billion as of December 1 of the year preceding the taxation year within the meaning
of Article 235 ter ZD of the French General Tax Code has been published by the French tax authorities in its official
guidelines on December 21, 2022 (BOI-ANNX-000467-21/12/2022). The Company was not included in such list as
its market capitalization did not exceed €1.0 billion as at December 1, 2022. Please note that such list may be updated
from time to time, or may not be published anymore in the future. Furthermore, Nasdaq is not currently acknowledged
by the French AMF, but this may change in the future. Therefore, purchases of the Securities in 2023 are not subject
to the TFT.
In the case where the TFT is not applicable, transfers of shares issued by a French company which are not
listed on a regulated or organized market within the meaning of the French Monetary and Financial Code are subject
to uncapped registration duties at the rate of 0.1% notwithstanding the existence of a written statement (acte). As shares
of the Company are not listed, their transfer should be subject to uncapped registration duties at the rate of 0.1%
notwithstanding the existence of a written agreement (acte). Although the official guidelines published by the French
tax authorities are silent on this point, ADSs should remain outside of the scope of the aforementioned 0.1% registration
duties.
Wealth Tax
The French wealth tax (impôt de solidarité sur la fortune) has been replaced with a French real estate wealth
tax (impôt sur la fortune immobilière) with effect from January 1, 2018. French real estate wealth tax applies only to
individuals and does not generally apply to the Securities if the holder is a U.S. resident, as defined pursuant to the
provisions of the Treaty, provided that the individual does not own directly or indirectly a shareholding exceeding 10%
of the financial rights and voting rights.
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U.S. Taxes
Ownership of the securities
Deposits and withdrawals by a U.S. holder of shares in exchange for ADSs, will not be taxable events for
U.S. federal income tax purposes. For U.S. tax purposes, holders of ADSs will be treated as owners of the shares
represented by such ADSs. Accordingly, the discussion that follows regarding the U.S. federal income tax
consequences of acquiring, owning and disposing of shares is equally applicable to ADSs.
Information reporting and backup withholding tax
Distributions made to holders and proceeds paid from the sale, exchange, redemption or disposal of Securities
may be subject to information reporting to the Internal Revenue Service. Such payments may be subject to backup
withholding taxes unless the holder (i) is a corporation or other exempt recipient or (ii) provides a taxpayer
identification number and certifies that no loss of exemption from backup withholding has occurred. Holders that are
not U.S. persons generally are not subject to information reporting or backup withholding. However, such a holder
may be required to provide a certification of its non-U.S. status in connection with payments received within the
United States or through a U.S.-related financial intermediary to establish that it is an exempt recipient. Backup
withholding is not an additional tax. Amounts withheld as backup withholding may be credited against a holder’s
U.S. federal income tax liability. A holder may obtain a refund of any excess amounts withheld under the backup
withholding rules by filing the appropriate claim for refund with the Internal Revenue Service and furnishing any
required information.
Foreign asset reporting
In addition, a U.S. holder that is an individual (and, to the extent provided in future regulations, an entity),
may be subject to recently-enacted reporting obligations with respect to shares and ADSs if the aggregate value of
these and certain other “specified foreign financial assets” exceeds $50,000. If required, this disclosure is made by
filing Form 8938 with the U.S. Internal Revenue Service. Significant penalties can apply if holders are required to
make this disclosure and fail to do so. In addition, a U.S. holder should consider the possible obligation to file online
a FinCEN Form 114 - Foreign Bank and Financial Accounts Report as a result of holding shares or ADSs. Holders are
encouraged to consult their U.S. tax advisors with respect to these and other reporting requirements that may apply to
their acquisition of shares and ADSs.
State and local taxes
In addition to U.S. federal income tax, U.S. holders of Securities may be subject to U.S. state and local taxes
with respect to such Securities. Holders of Securities are advised to consult their own tax advisers with regard to the
application of U.S. state and local income tax law to their particular situation.
ADSs and Shares
French Taxes
Taxation of dividends
Under French law, dividends paid by a French corporation, such as the Company, to corporations which are
not domiciled in France are generally subject to French withholding tax at a rate of 25% (12.8% for distributions made
to individuals, and 15% for distributions made to not-for-profit organizations with a head office in a Member State of
the European Economic Area which would be subject to the tax regime set forth under article 206 paragraph 2 of the
French General Tax Code if its head office were located in France and which meet the criteria set forth in the
Regulations BOI-RPPM-RCM-30-30-10-70-24/12/2019, no 130). Dividends paid by a French corporation, such as the
Company, towards non-cooperative States or territories, as defined in Article 238-0 A of the French General Tax Code,
will generally be subject to French withholding tax at a rate of 75%, irrespective of the tax residence of the beneficiary
of the dividends if the dividends are received in such States or territories; however, eligible U.S. holders entitled to
Treaty benefits under the “Limitation on Benefits” provision contained in the Treaty who are U.S. residents, as defined
pursuant to the provisions of the Treaty and who receive dividends in non-cooperative States or territories, will not be
subject to this 75% withholding tax rate.
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Under the Treaty, the rate of French withholding tax on dividends paid to an eligible U.S. holder who is a
U.S. resident as defined pursuant to the provisions of the Treaty and whose ownership of the shares or ADSs is not
effectively connected with a permanent establishment or fixed base that such U.S. holder has in France, is reduced to
15%, or to 5% if such U.S. holder is a corporation and owns directly or indirectly at least 10% of the share capital of
the issuing company; such U.S. holder may claim a refund from the French tax authorities of the amount withheld in
excess of the Treaty rates of 15% or 5%, if any. For U.S. holders that are not individuals but are U.S. residents, as
defined pursuant to the provisions of the Treaty, the requirements for eligibility for Treaty benefits, including the
reduced 5% or 15% withholding tax rates contained in the “Limitation on Benefits” provision of the Treaty, are subject
to specific conditions, and certain technical changes were made to these requirements by the protocol of January 13,
2009. U.S. holders are advised to consult their own tax advisers regarding their eligibility for Treaty benefits in light
of their own particular circumstances.
Dividends paid to an eligible U.S. holder may immediately be subject to the reduced rates of 5% or 15%
provided that such holder establishes before the date of payment that it is a U.S. resident under the Treaty by completing
and providing the depositary with a treaty form (Form 5000). Dividends paid to a U.S. holder that has not filed the
Form 5000 before the dividend payment date will be subject to French withholding tax at the rate of 25% and then
reduced at a later date to 5% or 15%, provided that such holder duly completes and provides the French tax authorities
with the treaty forms Form 5000 and Form 5001 before December 31 of the second calendar year following the year
during which the dividend is paid. Pension funds and certain other tax-exempt entities are subject to the same general
filing requirements as other U.S. holders except that they may have to supply additional documentation evidencing
their entitlement to these benefits.
The depositary agrees to use reasonable efforts to follow the procedures established, or that may be
established, by the French tax authorities (i) to enable eligible U.S. holders to qualify for the reduced withholding tax
rate provided by the Treaty, if available at the time the dividends are paid, or (ii) to recover any excess French
withholding taxes initially withheld or deducted with respect to dividends and other distributions to which such
U.S. holders may be eligible from the French tax authorities and (iii) to recover any other available tax credits. In
particular, associated forms (including Form 5000 and Form 5001, together with their instructions), will be made
available by the depositary to all U.S. holders registered with the depositary, and are also generally available from the
U.S. Internal Revenue Service.
The withholding tax refund, if any, ordinarily is paid within 12 months of filing the applicable French
Treasury Form, but not before January 15 of the year following the calendar year in which the related dividend is paid.
Tax on sale or other disposition
In general, under the Treaty, a U.S. holder who is a U.S. resident for purposes of the Treaty will not be subject
to French tax on any capital gain from the redemption (other than redemption proceeds characterized as dividends
under French domestic law), sale or exchange of shares or ADSs unless the shares or the ADSs form part of the business
property of a permanent establishment or fixed base that the U.S. holder has in France. Special rules apply to holders
who are residents of more than one country.
U.S. Taxes
Taxation of dividends
For U.S. federal income tax purposes, the gross amount of any distribution paid to U.S. holders (that is, the
net distribution received plus any tax withheld therefrom) will be treated as ordinary dividend income to the extent
paid or deemed paid out of the current or accumulated earnings and profits of the Company (as determined under
U.S. federal income tax principles). Dividends paid by the Company will not be eligible for the dividends-received
deduction generally allowed to corporate U.S. holders.
Subject to certain exceptions for short-term and hedged positions, the U.S. dollar amount of dividends
received by an individual U.S. holder with respect to the ADSs or shares is currently subject to taxation at a maximum
rate of 20% if the dividends are “qualified dividends”. Dividends paid on the shares or ADSs will be treated as qualified
dividends if (i) the issuer is eligible for the benefits of a comprehensive income tax treaty with the United States that
the Internal Revenue Service has approved for the purposes of the qualified dividend rules and (ii) the issuer was not,
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in the year prior to the year in which the dividend was paid, and is not, in the year in which the dividend is paid, a
passive foreign investment company (“PFIC”). The Treaty has been approved for the purposes of the qualified dividend
rules. Based on the Company’s financial statements and relevant market and shareholder data, the Company believes
it was not a PFIC for U.S. federal income tax purposes with respect to its 2022 taxable year. In addition, based on its
current expectations regarding the value and nature of its assets, the sources and nature of its income, and relevant
market and shareholder data, the Company does not anticipate that it will become a PFIC for its 2023 taxable year. See
“— Passive Foreign Investment Company Rules”, below. Holders of shares and ADSs should consult their own tax
advisers regarding the availability of the reduced dividend tax rate in light of their own particular circumstances.
Dividend income received by a U.S. Holder with respect to ADSs or shares generally will be treated as foreign
source income for foreign tax credit purposes. The limitation on foreign taxes eligible for credit is calculated separately
with respect to specific classes of income. Distributions out of earnings and profits with respect to the ADSs or shares
generally will be treated as “passive category” income (or, in the case of certain U.S. holders, “general category”
income). Subject to certain limitations, French income tax withheld in connection with any distribution with respect to
the ADSs or shares may be claimed as a credit against the U.S. federal income tax liability of a U.S. holder if such
U.S. holder elects for that year to credit all foreign income taxes. Alternatively, such French withholding tax may be
taken as a deduction against taxable income. Foreign tax credits will not be allowed for withholding taxes imposed in
respect of certain short-term or hedged positions in Securities and may not be allowed in respect of certain
arrangements in which a U.S. holder’s expected economic profit is insubstantial. The U.S. federal income tax
rules governing the availability and computation of foreign tax credits are complex. U.S. holders should consult their
own tax advisers concerning the implications of these rules in light of their particular circumstances.
To the extent that an amount received by a U.S. holder exceeds the allocable share of the Company’s current
and accumulated earnings and profits, such excess will be applied first to reduce such U.S. holder’s tax basis in its
shares or ADSs and then, to the extent it exceeds the U.S. holder’s tax basis, it will constitute capital gain from a
deemed sale or exchange of such shares or ADSs (see “—Tax on Sale or Other Disposition”, below).
The amount of any distribution paid in euros will be equal to the U.S. dollar value of the euro amount
distributed, calculated by reference to the exchange rate in effect on the date the dividend is received by a U.S. holder
of shares (or by the depositary, in the case of ADSs) regardless of whether the payment is in fact converted into
U.S. dollars on such date. U.S. holders should consult their own tax advisers regarding the treatment of foreign
currency gain or loss, if any, on any euros received by a U.S. holder that are converted into U.S. dollars on a date
subsequent to receipt.
Distributions to holders of additional shares (or ADSs) with respect to their shares (or ADSs) that are made
as part of a pro rata distribution to all shareholders generally will not be subject to U.S. federal income tax. However,
if a U.S. holder has the option to receive a distribution in shares (or ADSs) or to receive cash in lieu of such shares
(or ADSs), the distribution of shares (or ADSs) will be taxable as if the holder had received an amount equal to the
fair market value of the distributed shares (or ADSs), and such holder’s tax basis in the distributed shares (or ADSs)
will be equal to such amount.
Tax on sale or other disposition
In general, for U.S. federal income tax purposes, a U.S. holder that sells, exchanges or otherwise disposes of
its shares or ADSs will recognize capital gain or loss in an amount equal to the U.S. dollar value of the difference
between the amount realized for the shares or ADSs and the U.S. holder’s adjusted tax basis (determined in U.S. dollars
and under U.S. federal income tax rules) in the shares or ADSs. Such gain or loss generally will be U.S.-source gain
or loss, and will be treated as long-term capital gain or loss if the U.S. holder’s holding period in the shares or ADSs
exceeds one year at the time of disposition. If the U.S. holder is an individual, any capital gain generally will be subject
to U.S. federal income tax at preferential rates (currently a maximum of 20%) if specified minimum holding periods
are met. The deductibility of capital losses is subject to significant limitations.
Medicare tax
Certain U.S. holders who are individuals, estates or trusts are required to pay a Medicare tax of 3.8%
(in addition to taxes they would otherwise be subject to) on their “net investment income” which would include, among
other things, dividends and capital gains from the shares and ADSs.
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Passive Foreign Investment Company Rules
Unfavorable U.S. tax rules apply to companies that are considered PFICs. The Company will be classified as
a PFIC in a particular taxable year if either (a) 75% or more of its gross income is treated as passive income for
purposes of the PFIC rules; or (b) the average percentage of the value of its assets that produce or are held for the
production of passive income is at least 50%.
As explained above, based on the Company’s financial statements and relevant market and shareholder data,
the Company believes it was not a PFIC with respect to its 2022 taxable year. In addition, based on its current
expectations regarding the value and nature of its assets, the sources and nature of its income, and relevant market and
shareholder data, the Company does not anticipate that it will become a PFIC for its 2023 taxable year. However, as
discussed in our annual report on Form 20-Fs filed by the Company with respect to certain prior years the Company
believes that it was a PFIC in the past. Moreover, because the PFIC determination is made annually and is dependent
upon a number of factors, some of which are beyond the Company’s control (including whether the Company continues
to earn substantial amounts of operating income as well as the market composition and value of the Company’s assets),
there can be no assurance that the Company will not become a PFIC in future years.
U.S. holders that hold Securities at any time during years when the Company is a PFIC and do not make
certain U.S. tax elections (a "mark-to-market election" or a "QEF election") will be subject to adverse tax treatment.
For instance, such holders will be subject to a special tax at ordinary income tax rates on certain dividends that the
Company pays and on gains realized on the sale of Securities (“excess distributions”) in all subsequent years, even
though the Company ceased to qualify as a PFIC. The amount of this tax will be increased by an interest charge to
compensate for tax deferral, calculated as if the excess distributions had been earned ratably over the period the U.S.
holder held its Securities. It may be possible, in certain circumstances, for a holder to avoid the application of the PFIC
rules by making a "deemed sale" election for its taxable year that includes the last day of the Company’s last
taxable year during which it qualified as a PFIC. The PFIC rules are extremely complex, and holders should consult
their own tax advisers regarding the possible application of the PFIC rules to their Securities and the desirability and
availability of the above elections.
The discussion above is a general summary. It does not cover all tax matters that may be important to
you. You should consult your tax advisors regarding the application of the U.S. federal tax rules to your
particular circumstances, as well as the state, local, non-U.S. and other tax consequences to you of the purchase,
ownership and disposition of the Securities.
Statement by Experts
Not applicable.
Documents on Display
We file annual, periodic, and other reports and information with the SEC. These materials, including this
annual report and the exhibits hereto, may be inspected and copied at the SEC’s Public Reference Room at 100 F
Street, N.E., Washington, D.C. 20549. The public may obtain information on the operation of the SEC’s Public
Reference Room by calling the SEC in the United States at +1 800 SEC 0330. Certain of our public filings are also
available on the SEC’s website at http://www.sec.gov (such documents are not incorporated by reference in this annual
report).
Subsidiary Information
Not applicable.
Item 11. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to market risk from changes in both foreign currency exchange rates and interest rates. We
do not hold or issue derivative or other financial instruments. During 2022 and as of December 31, 2022, we had no
outstanding foreign exchange sale or purchase contracts.
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Exchange Rate Risk
Revenues and Expenses in Foreign Currencies
We are exposed to foreign currency exchange rate risk because a significant portion of our costs are
denominated in currencies other than those in which we earn revenues. In 2022, 60% of our total costs of sales and
operating expenses were denominated in euro. During the same period, 41% of our net sales were denominated in euro,
the rest being denominated primarily in U.S. dollars and Japanese yen.
A uniform 10% strengthening in the value of the euro as of December 31, 2022 relative to the U.S. dollar and
the Japanese yen would have resulted in an increase in income before taxes of approximately €361,000 for the year
ended December 31, 2022, compared to an increase of approximately €42,000 for the year ended December 31, 2021.
A uniform 10% decrease in the value of the euro as of December 31, 2022 relative to the U.S. dollar and the Japanese
yen would have resulted in a decrease in income before taxes of approximately €397,000 for the year ended
December 31, 2022 as compared to a decrease of approximately €47,000 for the year ended December 31, 2021. This
calculation assumes that the U.S. dollar and Japanese yen exchange rates would have changed in the same direction
relative to the euro. In addition to the direct effect of changes in exchange rates quantified above, changes in exchange
rates also affect the volume of sales.
We regularly assess the exposure of our receivables to fluctuations in the exchange rates of the principal
foreign currencies in which our sales are denominated (in particular, the U.S. dollar and the Japanese yen) and, from
time to time, hedge such exposure by entering into forward sale contracts for the amounts denominated in such
currencies that we expect to receive from our local subsidiaries. As of December 31, 2022, we had no outstanding
hedging instruments.
Financial Instruments and Indebtedness in Foreign Currencies
Over the past three years, we also had exchange rate exposures with respect to indebtedness and assets
denominated in Japanese yen and U.S. dollars. €1.0 million, €1.2 million and €1.1 million of our outstanding
indebtedness (excluding lease obligations) at December 31, 2022, 2021, and 2020, respectively, were denominated in
Japanese yen. €0.0 million, €0.0 million and €0.2 million of our outstanding indebtedness (excluding lease obligations)
at December 31, 2022, 2021 and 2020, respectively, were denominated in U.S. dollars. In addition, we had €28.8
million, €28.5 million and €6.0 million of cash denominated in U.S. dollars at December 31, 2022, 2021 and 2020,
respectively, and €3.9 million, €3.6 million and €2.7 million of cash denominated in Japanese yen at December 31,
2022, 2021 and 2020, respectively.
Equity Price Risk
Not applicable.
Item 12. Description of Securities Other than Equity Securities
American Depositary Shares
For general information on our ADSs, please refer to Exhibit 2.3 “Description of securities registered under Section
12 of the Exchange Act” of this annual report.
Fees Payable to ADS Holders
The Bank of New York Mellon, as the Company’s Depositary, currently collects its fees for the delivery and
surrender of ADSs directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal or
from intermediaries acting for them.
The Depositary may collect fees for making distributions to investors by deducting those fees from the
amounts distributed or by selling a portion of distributable property to pay the fees. The Depositary may collect its
annual fee for Depositary services by deductions from cash distributions or by directly billing investors or by charging
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the book-entry system accounts of participants acting for them. The Depositary may generally refuse to provide fee-
attracting services until the fees for those services are paid.
Fees:
For:
$5.00 (or less) per 100 ADSs
(or portion of 100 ADSs)
-
Issuance of ADSs, including issuances resulting from a distribution of
shares or rights or other property,
- Cancellation of ADSs for the purpose of withdrawal, including if the
deposit agreement terminates.
$0.2 (or less) per ADS
- Any cash distribution to ADS registered holders.
A fee equivalent to the fee that
would be payable if securities
distributed to you had been
shares and the shares had been
deposited to issuance of ADSs
Registration or transfer fees
Expenses of the Depositary
Taxes and other governmental
charges the Depositary or the
custodian have to pay on any
ADS or share underlying an
ADS, for example, stock
transfer taxes, stamp duty or
withholding taxes
Any charges incurred by the
Depositary or its agents for
servicing the deposited
securities
- Distribution of securities distributed to holders of deposited securities
which are distributed by the Depositary to ADS registered holders.
- Transfer and registration of shares on our share register to or from the na
me of the Depositary or its agent when you deposit or withdraw shares
- Cable, telex and facsimile transmissions (when expressly provided in the
deposit agreement)
- Converting foreign currency to U.S. dollars
- As necessary
- As necessary
Fees Payable to the Company by the Depositary
From January 1, 2022 to March 31, 2023, the following amounts were paid by the Depositary to the Company:
$90,000 and $14,752.26 respectively for the administration of the ADR program and for expenses linked to the
preparation of our Assembly meeting of shareholders and the assistance in identifying shareholders of the Company.
Item 13. Defaults, Dividend Arrearages and Delinquencies
PART II
None.
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
Not applicable.
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Item 15. Controls and Procedures
Disclosure Controls and Procedures
The Company’s management, with the participation of the Chief Executive Officer and Chief Financial
Officer, conducted an evaluation, pursuant to Rule 13a-15(e) promulgated under the Securities Act of 1934, as
amended (the "Exchange Act"), of the effectiveness of our disclosure controls and procedures as of
December 31, 2022. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that
our disclosure controls and procedures were not effective as of December 31, 2022, because of the material weaknesses
described below.
In response to the identification of the material weaknesses described below, the Company performed
additional analysis and other post-closing procedures. Based upon the work performed, management believes that the
Company’s consolidated financial statements for the periods covered by and included in this annual report on
Form 20-F fairly present in all material respects the Company’s financial position, results of operations and cash flows,
in conformity with U.S. generally accepted accounting principles.
Disclosure controls and procedures means controls and other procedures that are designed to ensure that
information required to be disclosed by us in the reports that we file or submit 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 us in the reports that we file or submit under the Exchange Act is accumulated
and communicated to our management, including our 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.
Management’s Annual Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting
(as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) and for the assessment of the effectiveness of
our internal control over financial reporting. Internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles.
The Company’s internal controls over financial reporting include those policies and procedures that:
• Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the
transactions and dispositions of the assets of the Company;
• Provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the Company are being made only in accordance with authorizations of the Company’s
management and directors; and
• Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use
or disposition of the Company’s assets that could have a material effect on the financial statements.
Because of inherent limitations, internal controls over financial reporting may not prevent or detect
misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures
may deteriorate.
Management assessed the effectiveness of internal control over financial reporting as of December 31, 2022,
based upon the internal control framework as set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (2013 COSO). Based on management’s assessment, management concluded that the Company’s internal
control over financial reporting was not effective as of December 31, 2022, because of the material weaknesses
described below.
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Based on this evaluation, management identified three material weaknesses with respect to internal controls
in our U.S. subsidiary, Edap Technomed Inc, which were due to insufficient resources in the finance department of the
subsidiary, leading to insufficient segregation of duties and inability to perform certain controls. This led to the
following material weaknesses at our U.S. subsidiary:
(cid:0)
Ineffective design of the subsidiary’s control over the recording of third-party vendor invoices;
(cid:0) Deficiencies in the design and implementation of the subsidiary’s controls over the recording of sales
invoices;
(cid:0) Deficiencies in the design and implementation of the subsidiary’s control over the inventory count.
Our management has concluded that, as a result, our internal control over financial reporting was not
effective as of December 31, 2022.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial
reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial
statements will not be prevented or detected on a timely basis.
Remediation Activities
These material weaknesses did not result in a material misstatement of the consolidated financial statements
for the year ended December 31, 2022 or restatement of any prior period previously reported by the Company.
However, there is a reasonable possibility that a material misstatement of the consolidated financial statements would
not have been prevented or detected on a timely basis due to the failure in designing and implementing appropriate
controls over the sales, purchase to pay and inventory processes, and therefore, our management has determined these
deficiencies constitute material weaknesses.
In an effort to remediate the material weaknesses that were identified as of December 31, 2022 and to enhance
our overall control environment, the Company has hired a Chief Financial Officer for the US subsidiary on December
5th, 2022 and hired a person responsible for financial planning and analysis in January 2023. Controls are being
designed and/or implemented, including appropriate segregation of duties. We believe this will allow us to remediate
these deficiencies in the short term.
Change in Internal Control over Financial Reporting
Other than the material weaknesses and remediation activities described above, there were no changes in the
Company’s internal control over financial reporting during the period covered by this report that has materially
affected, or is reasonably likely to materially affect the Company’s internal control over financial reporting.
Attestation Report of Registered Public Accounting Firm
The effectiveness of the Company’s internal control over financial reporting as of December 31, 2022, has
been audited by KPMG S.A., an independent registered public accounting firm, as stated in its report on the Company’s
internal control over financial reporting included on page F-4 of this annual report.
Its report expresses an opinion that the Company did not maintain effective internal control over financial
reporting as of December 31, 2022 because of the effect of the material weaknesses described above.
Item 16. [Reserved]
Item 16A. Audit Committee Financial Expert
Our Board of Directors has determined that the chair of the Board’s Audit Committee, Mr. Pierre Beysson,
an independent director, qualifies as an audit committee financial expert.
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Item 16B. Code of Ethics
We have adopted a code of ethics applicable to our Chief Executive Officer, Chief Financial Officer, principal
accounting officers and to any persons performing similar functions. The code of ethics is regularly reviewed and
updated as needed.. Our code of ethics has been made available on our website at http://www.edap-tms.com. The
contents of our website is not incorporated by reference or otherwise included in this annual report on Form 20-F. You
may request a copy of our code of ethics free of charge upon request to Blandine Confort, Investor Relations Officer,
at bconfort@edap-tms.com.
Item 16C. Principal Accountant Fees and Services
The following table summarizes the aggregate fees of our independent registered accounting firm, billed to
us for the fiscal years ended December 31, 2022 and December 31, 2021 for audit and other services. KPMG S.A.
(“KPMG”) served as the Company’s independent registered accounting firm for the fiscal years ended
December 31, 2022 and 2021.
Nature of the Fees
Audit fees (1)
Audit-related fees
Tax fees
All other fees
Total
Fees for
2022
(in €)
592,000
47,266
—
—
639,266
Fees for
2021
(in €)
374,299
59,385
—
—
433,684
As the Company has exceeded certain levels of revenues and balance sheet set under French law, the
appointment of a joint-auditor, as well as the production of consolidated accounts under International Financial
Reporting Standards, is required for the fiscal year 2020 and beyond. On June 30, 2020, the shareholders appointed
the audit firm of Agili(3F) as our independent joint-auditors starting with the 2020 fiscal year for the audit of the
statutory consolidated financial statements prepared in accordance with International Financial Reporting Standards.
Audit fees billed to us by Agili(3F) for fiscal years ended December 31, 2022 and 2021 are as follows:
Nature of the Fees
Audit fees
Audit-related fees
Tax fees
All other fees
Total
Audit Fees
Fees for
2022
(in €)
29,000
—
—
—
29,000
Fees for
2021
(in €)
27,300
—
—
—
27,300
The following services were billed under the category “audit services”: audit of financial statements and
services performed in relation to legal obligations, including the formulation of audit opinions, consents and reports,
domestic and international legal audits.
Audit-Related Fees
Audit-related services billed under this category only consist of attestation services related to financial
reporting that are not required by statute or regulation.
Pre-approval policy
The “Audit and Non-Audit Services Pre-Approval Policy” was approved by our Audit Committee on
December 22, 2003 (the “2003 Rules”) and reviewed on November 20, 2012. This requires all services which are to
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be performed by our external auditors to be pre-approved. Pre-approval may be in the form of a general pre-approval
or as pre-approval on a case-by-case basis. All services to be performed by the external auditors were subjected to the
above policy and approved in advance. The Audit Committee has been regularly informed of the services and the fees
to be paid.
Item 16D. Exemptions from the Listing Standards for Audit Committees
None.
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
Item 16F. Change in Registrant’s Certifying Accountant
Not applicable.
Item 16G. Corporate Governance Requirements
Exemptions from Certain Nasdaq Corporate Governance Rules
EDAP is incorporated under the laws of France, with securities listed on The Nasdaq Global Market in the
United States. As a foreign private issuer listed on Nasdaq, under Nasdaq corporate governance requirements, we may
follow French law corporate governance practices in lieu of following certain Nasdaq corporate governance rules. We
summarize below the main practices we follow in lieu of Nasdaq corporate governance rules.
We are exempt from Nasdaq’s quorum requirements applicable to meetings of shareholders. In keeping with
French law and generally accepted business practices in France, the presence in person or by proxy of shareholders
having not less than 20% (in the case of an ordinary general meeting or an extraordinary general meeting deciding
upon any capital increase by capitalization of reserves) or 25% (in the case of an extraordinary general meeting) of the
shares is necessary for a quorum. If a quorum is not present at any meeting, the meeting is adjourned. Upon
recommencement of an adjourned meeting, there is no quorum requirement in the case of an ordinary general meeting
or an extraordinary general meeting deciding upon any capital increase by capitalization of reserves. The presence in
person or by proxy of shareholders having not less than 20% of the shares is necessary for a quorum in the case of any
other type of extraordinary general meeting. Therefore, EDAP will not follow Nasdaq’s Listing Rule 5620(c), which
provides that the minimum quorum requirement for a meeting of shareholders is 33 1⁄3% of the outstanding common
voting shares of the company. In accordance with the provisions of the French Commercial Code, the required majority
for the adoption of a decision is a simple majority (for an ordinary general meeting of the shareholders) or a two-thirds
majority (for an extraordinary general meeting) of the votes cast by the shareholders present or represented.
Under French law, the committees of our Board of Directors are advisory only, and where Nasdaq
requirements would vest certain decision-making powers with specific committees by delegation (e.g., nominating,
compensation or audit committees), our Board of Directors is, pursuant to French law the only competent body to take
such decisions, albeit taking into account the recommendation of the relevant committees. Additionally, under French
corporate law, it is the shareholder meeting of the Company that is competent to appoint our auditors upon the proposal
of our Board of Directors. Our Compensation Committee is composed of four members who meet the definition of
independence contained in Nasdaq Listing Rule 5602(a) and is governed by a charter which sets forth its composition
and defines its scope of authority. However, in accordance with French law, the Compensation Committee is not vested
with the same scope of authority and responsibilities as set out in the Nasdaq Listing Rules.
On August 26, 2020, the Board of Directors approved the creation of a Strategic Committee to address
strategic issues and governed by a charter which sets forth its composition and defines its scope of authority.
Nasdaq rules require shareholder approval in certain circumstances, including in connection with the issuance
of shares as part of an acquisition of stock or assets of another company (Rule 5635(a)), a company change of control
within the meaning of Nasdaq’s rules (Rule 5635(b)), when a plan or other equity compensation arrangement is
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established or materially amended (Rule 5635(c)), and in connection with certain issuances involving 20% or more of
the ordinary shares or voting power outstanding before the issuance at a price lower than a minimum price specified
in the Nasdaq rules (Rule 5635(d)). Under French law our shareholders must decide any issuance of equity, as a general
matter. Such shareholder approval is typically provided by the adoption of authorizing resolutions at the Company’s
annual shareholders’ meeting at which shareholders approve delegations of authority to the Executive Board to increase
the Company’s share capital within specified parameters, which may include specified price limitations and/or specific
or aggregate limitations on the size of the share capital increase. While the Company views such shareholder approvals
to be consistent with the purpose of the Nasdaq shareholder approval rules, it is not certain that Nasdaq would accept
the Company’s shareholder-approved resolutions as sufficient to satisfy the Nasdaq shareholder approval rules in
connection with a specific transaction. Accordingly, we follow our French home country practice and obtain
shareholder approval for delegations of authority (i) to issue equity to our directors, officers and employees, subject to
the limitations of such approvals, and (ii) to define the final terms of such transactions (including the final terms of
any equity compensation plan or arrangements) to our directors, officers and employees. The Company may, from
time to time, ask for our shareholders’ approval in respect of a specific transaction or we may seek subsequent approval
of an equity compensation arrangement in order to obtain advantageous tax treatment or otherwise. In addition, under
French law, we must obtain the prior approval of our shareholders before issuing equity or establishing or amending a
compensatory plan or arrangement that would exceed the limits of the shareholder-granted delegations.
Because we are a “foreign private issuer” as described above, our Chief Executive Officer and our Chief
Financial Officer issue the certifications required by Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002
on an annual basis (with the filing of our annual report on Form 20-F) rather than on a quarterly basis as would be the
case of a U.S. corporation filing quarterly reports on Form 10- Q.
French corporate law provides that the Board of Directors must vote to approve a broadly defined range of
related-party transactions (conventions règlementées) between EDAP on the one hand and its directors and Chief
Executive Officer on the other hand, which are then presented to shareholders for approval at the next annual meeting.
This legal safeguard operates in place of certain provisions of the Nasdaq Listing Rules.
Item 16H. Mine Safety Disclosure
Not applicable.
Item 16I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
Item 17. Financial Statements.
See Item 18, "Financial Statements."
Item 18. Financial Statements
PART III
The financial statements listed in the Index to Financial Statements are filed as a part of this annual report.
Item 19. Exhibits
The exhibits listed in the Index to Exhibits are filed or incorporated by reference as a part of this annual report.
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INDEX TO EXHIBITS
Pursuant to the rules and regulations of the Securities and Exchange Commission, the Company has filed
certain agreements as exhibits to this annual report on Form 20-F. These agreements may contain representations and
warranties by the parties. These representations and warranties have been made solely for the benefit of the other party
or parties to such agreements and (i) may be intended not as statements of fact, but rather as a way of allocating the
risk to one of the parties to such agreements if those statements turn out to be inaccurate; (ii) may have been qualified
by disclosures that were made to such other party or parties and that either have been reflected in the Company’s filings
or are not required to be disclosed in those filings; (iii) may apply materiality standards different from what may be
viewed as material to investors; and (iv) were made only as of the date of such agreements or such other date(s) as may
be specified in such agreements and are subject to more recent developments. Accordingly, these representations and
warranties may not describe the Company’s actual state of affairs at the date hereof.
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Exhibit Description
Number:
1.1
By-laws (statuts) of EDAP TMS S.A. as amended as of January 24, 2023
2.1#
2.2
2.3
4.1#
4.2#
Form of Amended and Restated Depositary Agreement between EDAP TMS S.A. and The Bank of New
York Mellon, as depositary (incorporated herein by reference to Exhibit 1.2 to Form F-6 dated
September 15, 2011, SEC File No. 333-176843).
Form of American Depositary Receipt (included in Exhibit 2.1).
Description of securities registered under Section 12 of the Exchange Act
French version of Commercial Lease dated July 1, 2015 between Maison Antoine Baud and EDAP TMS
France (incorporated herein by reference to Exhibit 4.1 to Form 20-F dated April 4, 2016, SEC File No.
000-29374)
English language summary of Commercial Lease dated July 1, 2015 between Maison Antoine Baud and
EDAP TMS France (incorporated herein by reference to Exhibit 4.2 to Form 20-F dated April 4, 2016, SEC
File No. 000-29374)
4.3†#
2016 Stock Option Plan on Form S-8 dated April 5, 2017, File Number 333-217160
4.4†#
2019 Stock-Option Subscription Plan on Form S-8 dated June 16, 2021, File Number 333-257142
4.5†#
2019 Stock-Option Purchase Plan on Form S-8 dated June 16, 2021, File Number 333-257142
4.6†#
2021 Free Share Plan on Form S-8 dated September 28, 2021, File Number 333-259857
4.7†#
2021 Share Subscription Option Plan on Form S-8 dated November 18, 2021, File Number 333-261182
4.8†#
2022 Free Share Plan on Form S-8 dated November 9, 2022, File Number 333-268265
8.1
List of significant subsidiaries, see “Item 4. Information on the Company — C. Organizational Structure”
of this annual report on Form 20-F
12.1
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
12.2
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
13.1
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
15.1
Consent of KPMG.
101.INS
Inline XBRL Instance Document
101.SC
H
101.CA
L
101.DE
F
101.LA
B
101.PR
E
Inline XBRL Taxonomy Extension Schema Document.
Inline XBRL Taxonomy Extension Calculation Linkbase Document.
Inline XBRL Taxonomy Definition Linkbase Document.
Inline XBRL Taxonomy Extension Label Linkbase Document.
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
104
† Indicates a management contract or any compensatory plan, contract or arrangement.
# Indicates a document previously filed with the Commission.
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The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly
caused and authorized the undersigned to sign this annual report on its behalf.
SIGNATURES
Dated: April 7, 2023
Dated: April 7, 2023
EDAP TMS S.A.
/s/ Marc Oczachowski
Marc Oczachowski
Chief Executive Officer
/s/ François Dietsch
François Dietsch
Chief Financial Officer
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INDEX TO FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm on the Consolidated Financial Statements
(KPMG S.A., Lyon, France, PCAOB ID 1253)
Report of Independent Registered Public Accounting Firm on the Internal Control over Financial Reporting
Consolidated Balance Sheets
Consolidated Statements of Income (Loss)
Consolidated Statements of Comprehensive Income (Loss)
Consolidated Statements of Shareholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
F-2
F-4
F-6
F-7
F-8
F-9
F-10
F-11
F-1
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of EDAP TMS S.A. and subsidiaries (the Company)
as of December 31, 2022 and 2021, the related consolidated statements of income (loss), comprehensive income (loss),
shareholders’ equity, and cash flows for each of the years in the three year period ended December 31, 2022, and the
related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements
present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and
the results of its operations and its cash flows for each of the years in the three year period ended December 31, 2022,
in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria
established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations
of the Treadway Commission, and our report dated April 7, 2023 expressed an adverse opinion on the effectiveness of
the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to
express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and
the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of
material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of
material misstatement of the consolidated financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the
amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated
financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates
to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially
challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way
our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical
audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which
it relates.
Revenue recognition – Identification of distinct performance obligations in multiple-element arrangements related to
sales of medical devices produced by the Company
As discussed in Note 1.5 to the consolidated financial statements, the Company’s sale arrangements may contain
multiple elements, including medical devices produced by the Company, consumables, and services such as
F-2
Table of Contents
maintenance or warranty extensions. The Company identifies goods or services within the contract that constitute
distinct performance obligations.
We identified the identification of distinct performance obligations included in the contracts with customers for the
sales of medical devices produced by the Company as a critical audit matter, because each customer contract is a
specific contract, with distinct performance obligations. Challenging auditor judgment was required in evaluating the
impact of the terms and conditions in contracts with multiple elements to assess the identification of distinct
performance obligations.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design
and tested the operating effectiveness of an internal control over the Company’s revenue recognition process related
to the identification of distinct performance obligations included in multiple-element arrangements. For certain medical
device sales, we obtained and read the executed contracts and assessed the Company’s identification of distinct
performance obligations.
Lyon, April 7, 2023
KPMG S.A.
Sara Claire Righenzi Hugon de Villers
Partner
We have served as the Company’s auditor since 2018.
F-3
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
Opinion on Internal Control Over Financial Reporting
We have audited EDAP TMS S.A. and subsidiaries’ (the Company) internal control over financial reporting as of
December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, because of the effect of the
material weaknesses, described below, on the achievement of the objectives of the control criteria, the Company has
not maintained effective internal control over financial reporting as of December 31, 2022, based on criteria established
in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related
consolidated statements of income (loss), comprehensive income (loss), shareholders’ equity, and cash flows for each
of the years in the three-year period ended December 31, 2022, and the related notes (collectively, the consolidated
financial statements), and our report dated April 7, 2023 expressed an unqualified opinion on those consolidated
financial statements.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such
that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial
statements will not be prevented or detected on a timely basis. Material weaknesses at the Company’s U.S. subsidiary
have been identified and included in management’s assessment related to (i) ineffective design of the subsidiary’s
control over the recording of third party vendor invoices; (ii) deficiencies in the design and implementation of the
subsidiary’s controls over the recording of sales invoices; and (iii) deficiencies in the design and implementation of
the subsidiary’s control over the inventory count. The material weaknesses were considered in determining the nature,
timing, and extent of audit tests applied in our audit of the 2022 consolidated financial statements, and this report does
not affect our report on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for
its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion
on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and
the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing
and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also
F-4
Table of Contents
included performing such other procedures as we considered necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have
a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
Lyon, April 7, 2023
KPMG S.A.
Sara Claire Righenzi Hugon de Villers
Partner
F-5
Table of Contents
EDAP TMS S.A. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of December 31, 2022 and 2021
(in thousands of euros unless otherwise noted)
ASSETS
Current assets
Cash and cash equivalents
Current portion of net trade accounts and notes receivable
Other receivables
Inventories
Other assets, current portion
Total current assets
Non-current assets
Property and equipment, net
Operating lease right-of-use assets
Intangible assets, net
Goodwill
Deposits and other non-current assets
Deferred tax assets
Net Trade accounts and notes receivable, non-current
Total assets
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Trade accounts and notes payable
Deferred revenues, current portion
Social security and other payroll withholdings taxes
Employee absences compensation
Income taxes payable
Other accrued liabilities
Short-term borrowings
Current obligations under finance leases
Current portion of operating lease obligations
Current portion of long-term debt
Total current liabilities
Non-current liabilities
Deferred revenues, non-current
Obligations under finance leases
Operating lease obligations, non-current
Long-term debt, non-current
Other long-term liabilities
Total liabilities
Shareholders’ equity
Common stock, €0.13 par value; 37,197,731 shares issued and 36,910,925
shares outstanding at December 31, 2022 €0.13 par value 33,758,564 shares
issued and 33,466,136 shares outstanding at December 31, 2021
Additional paid-in capital
Retained earnings
Cumulative other comprehensive loss
Treasury stock, at cost 286,806 shares at December 31, 2022 and 292,428
shares at December 31, 2021
Total shareholders’ equity
Total liabilities and shareholders’ equity
Notes
2022
2021
2
3
4
5
6
7
8
9
9
23‑3
3
10
11
12
14
13‑1
13‑2
15‑1
11
13‑1
13‑2
15‑1
16
63,136
13,421
1,522
11,780
660
90,518
4,200
1,784
725
2,412
656
829
—
101,123
6,647
4,050
1,550
798
219
3,873
1,846
224
901
1,601
21,708
264
324
899
3,587
2,710
29,492
47,183
10,864
1,255
7,499
581
67,382
3,617
1,555
728
2,412
634
898
—
77,226
5,512
3,408
1,314
704
501
2,755
1,914
340
673
830
17,951
440
430
888
4,930
2,534
27,172
4,776
113,952
(42,372)
(3,829)
4,389
89,621
(39,438)
(3,589)
17
17
(897)
71,632
101,123
(928)
50,054
77,226
F-6
Table of Contents
The accompanying notes are an integral part of the consolidated financial statements.
EDAP TMS S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
For the years ended December 31, 2022, 2021 and 2020
(in thousands of euros except share and per share data)
Sales of goods
Sales of RPPs & leases
Sales of spare parts and services
Total sales
Other revenues
Total revenues
Cost of goods
Cost of RPPs & leases
Cost of spare parts and services
Total cost of sales
Gross profit
Research and development expenses
Selling and marketing expenses
General and administrative expenses
Income (loss) from operations
Financial (expense) income, net
Foreign currency exchange gain (loss), net
Income (loss) before taxes
Income tax (expense) benefit
Net income (loss)
Basic income (loss) per share
Diluted income (loss) per share
Basic Weighted average shares outstanding
Diluted Weighted average shares outstanding
Note
18
19
20
21
22
2022
38,462
5,617
11,030
55,108
—
55,108
2021
29,040
4,968
10,052
44,060
6
44,065
2020
27,523
4,745
9,382
41,649
12
41,662
(20,528)
(3,387)
(7,000)
(30,916)
(16,181)
(3,108)
(6,354)
(25,643)
(14,951)
(2,601)
(5,732)
(23,283)
24,193
18,422
18,379
(4,920)
(16,379)
(7,152)
(3,402)
(10,732)
(5,900)
(4,257)
236
1,925
(1,612)
145
2,360
(4,496)
(9,279)
(4,335)
269
(98)
(1,359)
23‑1
23‑2
(2,096)
(837)
(2,933)
(0.09)
(0.09)
(1,188)
(516)
(1,704)
(0.06)
(0.06)
34,392,598 32,129,047 29,148,108
34,392,598 32,422,871 29,148,108
893
(193)
700
0.02
0.02
24
24
24
24
The accompanying notes are an integral part of the consolidated financial statements.
F-7
Table of Contents
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
EDAP TMS S.A. AND SUBSIDIARIES
For the years ended December 31, 2022, 2021 and 2020
(in thousands of euros unless otherwise noted)
Net income (loss)
Other comprehensive income (loss) :
Foreign currency translation adjustments
Provision for retirement indemnities
Deferred tax for retirement indemnities
Comprehensive income (loss), net of tax
2022
(2,933)
2021
700
2020
(1,704)
17‑6
17‑6
17‑6
(596)
282
73
(3,173)
(554)
77
(48)
175
410
(38)
—
(1,332)
The accompanying notes are an integral part of the consolidated financial statements.
F-8
Table of Contents
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
EDAP TMS S.A. AND SUBSIDIARIES
For the years ended December 31, 2022, 2021 and 2020
(in thousands of euros unless otherwise noted)
Additional Retained
Other
Number
of shares
Common
stock
paid-in
capital
Earnings / comprehensive Treasury
(Loss)
Balance as of December 31, 2019
Net (loss) / income
Translation adjustment
Stock-based compensation
Capital increase
Treasury stock disposition
Provision for retirement indemnities
Balance as of December 31, 2020
Net (loss) / income
Translation adjustment
Stock-based compensation
Capital increase net of issuance costs of
€1,961 thousand
Treasury stock disposition
Provision for retirement indemnities
Deferred tax for retirement indemnities
Balance as of December 31, 2021
Net (loss) / income
Translation adjustment
Stock-based compensation
Capital increase net of issuance costs of
€1,954 thousand
Treasury stock disposition
Provision for retirement indemnities
Deferred tax for retirement indemnities
Balance as of December 31, 2022
29,141,566
—
—
—
23,750
—
—
29,165,316
—
—
—
4,300,820
—
—
—
33,466,136
—
—
—
3,826
—
—
—
3
—
—
3,830
—
—
—
559
—
—
—
4,389
—
—
—
66,331
—
—
160
57
—
—
66,548
—
—
1,900
21,173
—
—
—
89,621
—
—
2,103
—
—
—
—
(39,439)
(2,933)
—
—
3,444,789
—
—
—
36,910,925
388
—
—
—
4,776
22,228
—
—
—
113,952
—
—
—
—
(42,372)
(38,435)
(1,704)
—
—
—
—
—
(40,139)
700
—
—
income (loss) stock
(3,436)
—
410
—
—
—
(38)
(3,064)
—
(554)
—
Total
(928) 27,359
(1,704)
410
160
60
—
(38)
(928) 26,248
700
(554)
1,900
—
—
—
—
—
—
—
—
—
—
—
77
(48)
(3,589)
—
(596)
—
—
—
282
73
(3,829)
— 21,732
—
—
77
—
(48)
—
(928) 50,054
(2,933)
(596)
2,103
—
—
—
— 22,616
31
31
282
—
73
—
(897) 71,632
The accompanying notes are an integral part of the consolidated financial statements.
F-9
Table of Contents
EDAP TMS S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 2022, 2021 and 2020
(in thousands of euros unless otherwise noted)
Cash flows from operating activities
Net income (loss)
Adjustments to reconcile net income (loss) to net cash generated by (used
in) operating activities:
Depreciation and amortization
Share based compensation
U.S. Paycheck Protection Program loan Forgiveness
Change in allowances for doubtful accounts & slow-moving inventories
Change in long-term provisions
Net capital loss on disposals of assets
Deferred tax expense (benefit)
Operating cash flow before changes in working capital
Increase/Decrease in operating assets and liabilities:
Decrease (Increase) in trade accounts and notes and other receivables
Decrease (Increase) in inventories
Decrease (Increase) in other assets
(Decrease) Increase in trade accounts and notes payable
(Decrease) Increase in accrued expenses, other current liabilities
Net change in operating assets and liabilities
Net cash generated by (used in) operating activities
Cash flows from investing activities:
Additions to capitalized assets produced by the Company
Proceeds from sale of leased back assets
Acquisitions of property and equipment
Acquisitions of intangible assets
Decrease (Increase) of other financial assets
Increase in deposits and guarantees
Net cash generated by (used in) investing activities
Cash flow from financing activities:
Proceeds from capital increase (1)
Proceeds from stock-option exercise
Proceeds from long term borrowings, net of financing costs
Repayment of long term borrowings
Repayment of obligations under financing leases
Increase (decrease) in bank overdrafts and short-term borrowings
Net cash generated by (used in) financing activities
Net effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
2022
2021
2020
(2,933)
700
(1,704)
1,605
2,103
—
124
79
266
48
1,292
(1,974)
(4,482)
(82)
1,143
1,079
(4,316)
(3,024)
(1,570)
—
(613)
(137)
—
(58)
(2,378)
21,960
688
286
(803)
(350)
(38)
21,741
(388)
15,952
47,183
63,136
1,920
1,900
(187)
363
(350)
142
(563)
3,925
(103)
166
(210)
(38)
706
520
4,445
(1,161)
—
(393)
(92)
13
(6)
(1,638)
21,289
442
1,058
(1,401)
(406)
(717)
20,266
(585)
22,488
24,696
47,183
2,105
160
—
734
455
291
45
2,087
1,137
(554)
69
(422)
(339)
(110)
1,977
(1,339)
—
(531)
(103)
(2)
(36)
(2,011)
—
60
4,848
(519)
(321)
(867)
3,201
642
3,810
20,886
24,696
(1) The net proceeds from capital increase of €21,960 thousand relate to the Company’s successful common stock offering in
September 2022 and of €21,289 thousand relate to the Company’s successful common stock offering in April 2021 – refer to Note 17-1.
The accompanying notes are an integral part of the consolidated financial statements.
F-10
Table of Contents
EDAP TMS S.A. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of euros unless otherwise noted, except per share data)
1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1-1 Nature of operations
EDAP TMS S.A. and its subsidiaries (‘‘the Company’’) are engaged in the development, production,
marketing, distribution and maintenance of a portfolio of minimally-invasive medical devices for the treatment of
urological diseases. The Company currently produces innovative robotic devices for treating stones of the urinary
tract and localized prostate cancer. We also derive revenues from the distribution of urodynamics products and
urology lasers. Net sales consist primarily of direct sales to hospitals and clinics in France and Europe, export sales
to third-party distributors and agents, and export sales through subsidiaries based in Germany, Italy, the United
States and Asia.
The Company purchases the majority of the components used in its products from a number of suppliers
but for some components, relies on a single source. Delay would be caused if the supply of these components or
other components was interrupted and these delays could be extended in certain situations where a component
substitution may require regulatory approval. Failure to obtain adequate supplies of these components in a timely
manner could have a material adverse effect on the Company’s business, financial position and results of
operations.
1-2 Basis of preparation
These consolidated financial statements have been prepared in accordance with accounting principles
generally accepted in the United States (U.S. GAAP).
1-3 Management estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles
(‘‘U.S. GAAP’’) requires management to make estimates and assumptions, such as business plans, stock price
volatility, duration of standard warranty per market, duration and interest rate of operating leases, price of
maintenance contracts used to determine the amount of revenue to be deferred and life duration of our range of
products. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period.
1-4 Consolidation
The accompanying consolidated financial statements include the accounts of EDAP TMS S.A. and all its
domestic and foreign owned subsidiaries after elimination of intercompany balances and transactions. We do not
have any significant interests in any variable interest entities.
1-5 Revenue recognition
The Company’s revenue consists of:
- Sales of goods (devices and consumables), where invoicing generally takes place upon delivery.
Consumables revenues included in sales contracts are deferred until delivery.
- Revenue-per-Procedures (“RPP”) and leases: they comprise (i) revenues on a per treatment basis which
are invoiced after each treatment, or in advance, or on a periodic basis, (ii) leases of devices, which are generally
invoiced on a monthly or quarterly basis, and (iii) immaterial lease components arising from multiple-element
arrangements, where specific sales terms are negotiated in accordance with each customer’s individual
requirements and which are generally invoiced based on contract terms,
- Sales of spare parts and services (maintenance, upgrades, mobility and others). Spare parts are invoiced
when delivered. Regarding services, invoicing is performed either on a subscription basis (in advance or at the end
of the period) or when performed.
F-11
Table of Contents
EDAP TMS S.A. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of euros unless otherwise noted, except per share data)
Sales of our medical devices and sales of disposables, sales of RPPs and leases, and sales of spare parts
and services, are all net of commissions.
The Company invoices its customers based on the billing schedules in its sales arrangements. Payments
are generally due between one to three months from date of invoice.
The Company accounts for a contract with a customer when there is a legally enforceable contract
between the Company and its customer, the rights of the goods or services and their payment terms can be
identified, the contract has commercial substance, collectability of the contract consideration is probable, it is
approved and the parties are committed to their obligations.
Our sale arrangements may contain multiple elements, including device(s), consumables and services.
For these multiple-element arrangements, the Company accounts for individual goods and services as separate
performance obligations: (i) if a customer can benefit from the good or service on its own or with other resources
that are readily available to the customer, and (ii) if they are a distinct good or service that is separately identifiable
from other items in the multiple-element arrangement. The Company’s sale arrangements may include a
combination of the following performance obligations: device(s), consumables, leases and services (such as, but
not limited to, warranty extension).
For multiple-element arrangements, revenue is allocated to each performance obligation based on its
relative standalone selling price. Standalone selling prices are based on observable prices at which the Company
separately sells the goods or services. If a standalone selling price is not directly observable, then the Company
estimates the standalone selling price considering market conditions and entity-specific factors including, but not
limited to, features and functionality of the goods and services, geographies, and type of customer. The Company
regularly reviews standalone selling prices and updates these estimates as necessary.
The Company recognizes revenue when the performance obligations are satisfied by transferring control
over the goods or service to a customer.
The Company’s revenue consists of the following:
Sales of goods:
Sales of goods are and have historically been comprised of sales net of commission of medical devices
(ESWL lithotripters and HIFU devices) and net sales of disposables (mostly Focalpaks and Ablapaks in the HIFU
division and electrodes in the ESWL division). Sales of goods also includes products such as micro-ultrasound
devices, urology lasers and urodynamics devices distributed through our agents and third-party distributors.
For devices and disposables, revenue is recognized when the Company transfers control to the customer
(i.e. when the customer has the ability to direct the use of, and obtain substantially all of the remaining benefit
from, the device or disposables), which is generally at the point of delivery or installation, depending on the terms
of the arrangement (i.e. when the customer can use the goods to provide services or sell or exchange the good),
and based on contractual incoterms. Such installation-related costs are immaterial in the context of the contract
with the customer and do not constitute a distinct performance obligation.
The Company’s sales arrangements do not provide a right of return. The goods are generally covered by
a period of one to two years standard warranty upon installation depending of the geographic area. Over this
standard one to two years period, it is considered as an extension of such warranty period and constitutes a distinct
performance obligation. The Company also provides training associated with the sales of goods; such training-
related costs are immaterial in the context of the contract with the customer and do not constitute a distinct
performance obligation.
Sales of RPPs and leases:
Sales of RPP and leases include the revenues from the sale of treatment procedures and from the leasing
of machines. For RPP, we provide machines to clinics and hospitals for free for a limited period, rather than selling
F-12
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EDAP TMS S.A. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of euros unless otherwise noted, except per share data)
the devices. These hospitals and clinics perform treatments using the devices and usually pay us based on the
number of individual treatments provided. Revenues from leasing of machine are considered as immaterial.
Revenues related to the sale of treatments invoiced on a ‘‘Revenue-Per-Procedure’’ (‘‘RPP’’) basis are
recognized when the treatment procedure has been completed. Revenues from devices leased to customers under
operating leases are recognized on a straight-line basis.
Regarding multiple-element arrangements with a lease component, a portion of the contract is allocated
to the lease component on the basis of observable market prices applied by the Company for similar devices under
operating leases. The lease component is recognized on a straight line basis over the contractual period. Other
immaterial components under the contract are recognized in accordance with their nature.
Sales of spare parts and services:
Revenues related to spare parts are recognized when spare parts are delivered to distributors who perform
their own maintenance services. Spare parts used in the performance of EDAP’s own maintenance and repair
services are generally not recognized separately, unless a type of spare part is specifically excluded from the
maintenance contract terms.
Revenues related to Services mainly consist of maintenance contracts which rarely exceed one year and
are recognized on a straight line basis over the term of the service period as the customer benefits from the service
equally throughout the service contract period. For services rendered when no maintenance contract is in place or
for services not included in the scope of a maintenance contract, revenues are recorded when services are
performed.
The Company recognizes revenue for extended warranties included in the multiple-element arrangements
as a separate performance obligation in Sales of services on a straight-line basis over the extended warranty period.
In the majority of countries in which the Company operates, the statutory warranty period is one to two years and
the extended warranty covers periods beyond this statutory period. Standard warranties do not constitute a separate
performance obligation. The Company accrues for the warranty costs at the time of sale of the device through the
multiple-element arrangement.
Distributors:
As part of its sale process in countries other than continental France, when the Company does not have a
local subsidiary, sales of goods to end-customers are performed through agents and distributors. Such agents and
distributors are primarily responsible for the sales’ process, bear the inventory risk, and are free to determine the
sale prices. Sales of goods to agents and distributors are recognized when the control is transferred to the related
agent or distributor which generally occurs based on contractual incoterms.
Deferred revenue:
Deferred revenue for the periods presented primarily relates to service contracts where the service fees
are billed up-front, generally quarterly or annually, prior to those services having been performed, and consists
primarily of billing or cash receipts in advance of services due under maintenance contracts or extended warranty
contracts. The associated deferred revenue is generally recognized ratably over the service period.
Disaggregation of revenue:
Disaggregation by primary geographical market, and timing of revenue recognition is reported in Note 18.
Contract Balances:
Details on contract liabilities are reported on Note 11.
F-13
Table of Contents
EDAP TMS S.A. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of euros unless otherwise noted, except per share data)
The Company applies the practical expedient in paragraph 606-10-50-14 and does not disclose
information about remaining performance obligations that have original expected durations of one year or less.
This relates mainly to maintenance services.
1-6 Costs of sales
Costs of sales include all direct product costs, costs related to shipping, handling, duties and importation
fees, as well as certain indirect costs such as service and supply chain departments expenses. Indirect costs are
allocated by type of sales (goods, RPP and leases, spare parts and services) using an allocation method determined
by management by type of costs and segment activities and reviewed on an annual basis.
1-7 Shipping and handling costs
Shipping and handling costs are not considered as performance obligations. Shipping and handling costs
are recorded as a component of cost of sales.
1-8 Cash equivalents and short term investments
Cash equivalents are cash investments which are highly liquid and have initial maturities of 90 days or
less.
Cash investments with a maturity higher than 90 days are considered as short-term investments. There is
no short-term investment at December 31, 2022.
1-9 Accounts Receivable
The Company maintains an allowance for doubtful accounts for estimated losses inherent in its accounts
receivable portfolio. In establishing the required allowance, management considers historical losses adjusted to
take into account current market conditions and the Company’s customers’ financial condition, the amount of
receivables in dispute, and the current receivables aging and current payment patterns. The Company reviews its
allowance for doubtful accounts quarterly. Past due balances over 90 days and over a specified amount are
reviewed individually for collectability. Account balances are charged off against the allowance after all means of
collection have been exhausted and the potential for recovery is considered remote. Write-offs for 2022 and 2021
approximated €640 thousand and €0 thousand, respectively. The Company does not have any off-balance-sheet
credit exposure related to its customers.
1-10 Inventories
Inventories are valued at the lower of cost and net realizable value. Cost is either the manufacturing cost,
which is principally comprised of components and labor costs for our own manufactured products, or purchase
price for urology products we distribute. Cost is determined on a first-in, first-out basis for components and spare
parts and by specific identification for finished goods (medical devices). The Company establishes reserves for
inventory estimated to be obsolete, unmarketable or slow moving, first based on a detailed comparison between
quantity in inventory and historical consumption and then based on case-by-case analysis of the difference between
the cost of inventory and the related estimated market value.
1-11 Property and equipment
Property and equipment is stated at historical cost, net of accumulated depreciation and impairment.
Depreciation of property and equipment is calculated using the straight-line method over the estimated useful life
of the related assets, as follows:
Leasehold improvements (in years)
Equipment (in years)
Furniture, fixtures, fittings and other (in years)
10 or lease term if shorter
3
2
—
—
10
10
F-14
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EDAP TMS S.A. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of euros unless otherwise noted, except per share data)
Equipment includes industrial equipment and research equipment that has alternative future uses.
Equipment also includes devices that are manufactured by the Company and leased to customers through operating
leases related to Revenue-Per-Procedure transactions and devices subject to sale and leaseback transactions. This
equipment is depreciated over a period of seven years.
1-12 Long-lived assets
The Company reviews the carrying value of its long-lived assets, including fixed assets and intangible
assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of such
assets may not be fully recoverable. Recoverability of long-lived assets is assessed by a comparison of the carrying
amount of the assets (or the Group of assets, including the asset in question, that represents the lowest level of
separately-identifiable cash flows) to the total estimated undiscounted cash flows expected to be generated by the
asset or group of assets. If the future net undiscounted cash flows is less than the carrying amount of the asset or
group of assets, the asset or group of assets is considered impaired and an expense is recognized equal to the
amount required to reduce the carrying amount of the asset or group of assets to its then fair value. Fair value is
determined by discounting the cash flows expected to be generated by the assets, when the quoted market prices
are not available for the long-lived assets. Estimated future cash flows are based on assumptions and are subject
to risk and uncertainty.
1-13 Goodwill and intangible assets
Goodwill represents the excess of purchase price over the fair value of identifiable net assets of businesses
acquired. Goodwill is not amortized but instead tested annually for impairment or more frequently when events or
change in circumstances indicate that the assets might be impaired.
When impairment indicators are identified, the impairment test is performed by comparing the fair value
of a reporting unit with its carrying amount, including goodwill. An impairment charge should be recognized for
the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized
should not exceed the total amount of goodwill allocated to that reporting unit. For the purpose of any impairment
test, the Company relies upon projections of future undiscounted cash flows and takes into account assumptions
regarding the evolution of the market and its ability to successfully develop and commercialize its products.
Changes in market conditions could have a major impact on the valuation of these assets and could result
in additional impairment losses.
Intangible assets consist primarily of purchased patents relating to lithotripters, purchased licenses, a
purchased trade name and a purchased trademark. The basis for valuation of these assets is their historical
acquisition cost. Amortization of intangible assets is calculated by the straight-line method over the shorter of the
contractual or estimated useful life of the assets, as follows:
Patents (in years)
SAP Licenses (in years)
Other licenses (in years)
Trade name and trademark (in years)
1-14 Treasury Stocks
5
10
5
7
Treasury stock purchases are accounted for at cost. The sale of treasury stocks is accounted for using the
first in first out method. Gains on the sale or retirement of treasury stocks are accounted for as additional paid-in
capital whereas losses on the sale or retirement of treasury stock are recorded as additional paid-in capital to the
extent that previous net gains from sale or retirement of treasury stocks are included therein; otherwise the losses
shall be recorded to accumulated benefit (deficit) account. Gains or losses from the sale or retirement of treasury
stock do not affect reported results of operations. Treasury stocks held by a Company cannot exceed 10% of the
total number of shares issued.
F-15
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EDAP TMS S.A. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of euros unless otherwise noted, except per share data)
1-15 Warranty expenses
The Company provides customers with a warranty for each product sold and accrues warranty expense
at time of sale based upon historical claims experience. Standard warranty period may vary from 1 year to 2 years
depending on the market. The warranty expense is incurred at time of accrual and not when paid. Warranty expense
amounted to €112 thousand, €110 thousand and €266 thousand for the years ended December 31, 2022, 2021 and
2020, respectively.
1-16 Income taxes
The Company accounts for income taxes in accordance with ASC 740, ‘‘Accounting for Income Taxes’’
Under ASC 740, deferred tax assets and liabilities are determined based on differences between the financial
reporting and tax basis of assets and liabilities and are measured by applying enacted tax rates and laws to
taxable years in which such differences are expected to reverse. A valuation allowance is established if, based on
the weight of available evidence, it is more likely than not that some portion, or all of the deferred tax assets, will
not be realized. In accordance with ASC740, no provision has been made for income or withholding taxes on
undistributed earnings of foreign subsidiaries, such undistributed earnings being permanently reinvested.
Under ASC740, the measurement of a tax position that meets the more-likely-that-not recognition
threshold must take into consideration the amounts and probabilities of the outcomes that could be realized upon
ultimate settlement using the facts, circumstances and information available at the reporting date.
1-17 Research and development costs
Research and development costs are recorded as an expense in the period in which they are incurred.
The French government provides tax credits to companies for innovative research and development. This
tax credit is calculated based on a percentage of eligible research and development costs and it can be refundable
in cash and is not contingent on future taxable income. As such, the Company considers the research tax credits
as a grant, offsetting research and development expenses.
1-18 Advertising costs
Advertising costs are recorded as an expense in the period in which they are incurred and are included in
selling and administrative expenses in the accompanying consolidated statements of income (loss). Advertising
costs amounted to €929 thousand, €490 thousand and €291 thousand for the years ended December 31, 2022, 2021
and 2020, respectively.
1-19 Foreign currency translation and transactions
Translation of the financial statements of consolidated companies
The reporting currency of EDAP TMS S.A. for all years presented is the euro (€). The functional currency
of each subsidiary is its local currency. In accordance with ASC 830, all accounts in the financial statements are
translated into euro from the functional currency at the following exchange rates:
•
•
•
•
assets and liabilities are translated at year-end exchange rates;
shareholders’ equity is translated at historical exchange rates (as of the date of contribution);
statement of income (loss) items are translated at average exchange rates for the year; and
translation gains and losses are recorded in a separate component of shareholders’ equity.
Foreign currencies transactions
Transactions involving foreign currencies are translated into the functional currency using the exchange
rate prevailing at the time of the transactions. Receivables and payables denominated in foreign currencies are
F-16
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EDAP TMS S.A. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of euros unless otherwise noted, except per share data)
translated at year-end exchange rates. The resulting unrealized exchange gains and losses are recorded in the
statement of income (loss).
Presentation in the Statement of Income (loss)
Aggregate foreign currency transactions gains and losses are disclosed in a single caption in the Statement
of Income (loss) under section “Foreign currency exchange gain (loss), net”.
1-20 Earnings per share
Basic earnings per share is computed by dividing income available to common shareholders by the
weighted average number of shares of common stock outstanding for the period. Diluted earnings per share reflects
potential dilution that could occur if securities or other contracts to issue common stock were exercised or
converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the
Company. The dilutive effects of the Company’s common stock options and warrants is determined using the
treasury stock method to measure the number of shares that are assumed to have been repurchased using the
average market price during the period, which is converted from U.S. dollars at the average exchange rate for the
period.
1-21 Derivative instruments
ASC 815 requires the Company to recognize all of its derivative instruments as either assets or liabilities
in the statement of financial position at fair value. The accounting for changes in the fair value (i.e., gains or losses)
of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship
and further, on the type of hedging relationship. For those derivative instruments that are designated and qualify
as hedging instruments, the Company must classify the hedging instrument, based upon the exposure being hedged,
as fair value hedge, cash flow hedge or a hedge of a net investment in a foreign operation.
Gains and losses from derivative instruments are recorded in the Statement of Income (loss). As of
December 31, 2022, there are no derivative instruments.
1-22 Employee stock option and free shares plan
The accounting for stock-based awards is based on the fair value of the award measured at the grant date.
Accordingly, stock-based compensation cost is recognized in the consolidated statements of income (loss) and
comprehensive income (loss) as an operating expense over the requisite service period. The fair value of stock
options is determined using the Black-Scholes option-pricing model. The Company determines the fair value of
stock option awards on the date of grant using assumptions regarding expected term, share price volatility over the
expected term of the awards, risk-free interest rate, and dividend rate. The fair value of free shares is measured
using the fair value of the Company's shares as if the free shares were vested and issued on the grant date. Forfeited
stock-options and free shares are recognized as they occur, in accordance with ASU 2016-09. The Company
recognizes compensation cost for employee awards with only service conditions that have a graded vesting
schedule on a straight-line basis over the requisite service period for each separately vesting portion of the award
as if the award was, in-substance, multiple awards.
At December 31, 2022, the Company had four stock-based employee compensation plans and two free
shares plans.
1-23 Warrants
There are no warrants outstanding at December 31, 2022.
F-17
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EDAP TMS S.A. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of euros unless otherwise noted, except per share data)
1-24 Leases
Leases as a Lessee
In accordance with ASC 842, Leases, and as from January 1, 2019, the Company classifies all leases at
the inception of a contract and assess whether the contract is, or contains, a lease. The assessment is based on:
(1) whether the contract involves the use of a distinct identified asset, (2) whether the company controls the use of
the identified asset (e.g. whether the company has the right to obtain substantially all of the economic benefits
from the use of the asset throughout the period, and whether the company has the right to direct the use of the
asset).
Leases are classified as either finance leases or operating leases. Substantially all our operating leases are
comprised of office space leases, and substantially all our finance leases are comprised of office furniture and
technology equipment.
The Company recognizes a right-of-use (“ROU”) asset and a lease liability at the lease commencement
date. The right-of-use asset is initially measured at cost, which primarily comprises the initial amount of the lease
liability, plus any initial direct costs incurred, plus prepaid lease payments, less any lease incentives received. All
ROU assets are reviewed for impairment. For operating leases, the lease liability is initially measured at the present
value of the unpaid lease payments at lease commencement date, discounted using the incremental borrowing rate
for assets of same duration or characteristics. For finance leases the lease liability is initially measured in the same
manner and date as for operating leases and is subsequently measured at amortized cost using the effective interest
method
For operating leases, the ROU asset is subsequently measured throughout the lease term at the carrying
amount of the lease liability, plus initial direct costs, plus (minus) any prepaid (accrued) lease payments, less the
unamortized balance of lease incentives received. Lease expense for lease payments is recognized on a straight-
line basis over the lease term.
For finance leases, the ROU asset is subsequently amortized using the straight-line method from the lease
commencement date to the earlier of the end of its useful life or the end of the lease term unless the lease transfers
ownership of the underlying asset to the Company or the Company is reasonably certain to exercise an option to
purchase the underlying asset. In those cases, the ROU asset is amortized over the useful life of the underlying
asset. Amortization of the ROU asset is recognized and presented separately from interest expense on the lease
liability.
Lease payments included in the measurement of the lease liability comprise the following: the fixed
payments, including in-substance fixed payments over the lease term (which includes termination penalties the
Company would owe if the lease term assumes the Company’s exercise of a termination option), variable lease
payments that depend on an index or rate payments for optional renewal periods where it is reasonably certain the
renewal period will be exercised, the exercise price of an option to purchase the underlying asset if the company
is reasonably certain to exercise the option, and amounts expected to be payable under a Company provided
residual value guarantee. The company assesses the discount rate by requesting credit simulation from certain
banks.
Variable lease payments associated with the Company’s leases are recognized when the event, activity,
or circumstance in the lease agreement on which those payments are assessed occurs. Variable lease payments are
presented as operating expenses in the Company’s consolidated statements of income (loss) in the same line item
as expenses arising from fixed lease payments (operating leases) or amortization of the ROU asset (finance leases).
Our real estate leases generally include non-lease maintenance services. The consideration in the contract
is allocated to the lease and non-lease components based on standalone selling prices.
Some of our real estate leases contain variable lease payments, including payments based on an index or
rate. Variable lease payments based on an index or rate are initially measured using the index or rate in effect at
lease commencement, and changes to index and rate-based variable lease payments are recognized in profit or loss
F-18
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EDAP TMS S.A. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of euros unless otherwise noted, except per share data)
in the period of the change. Variable payments that do not depend on an index or rate, such as rental payments
based on the use of the underlying asset or property taxes and insurance reimbursement, are recorded as operating
expenses when incurred. Lease modifications result in remeasurement of the lease payments when that
modification is not accounted for as a separate contract.
Lease expense for operating leases consists of the lease payments plus any initial direct costs, primarily
brokerage commissions, and is recognized on a straight-line basis over the lease term. Included in lease expense
are any variable lease payments incurred in the period that were not included in the initial lease liability. Lease
expense for finance leases consists of the amortization of the right-of-use asset on a straight-line basis over the
lease term and interest expense determined on an amortized cost basis. The lease payments are allocated between
a reduction of the lease liability and interest expense.
The lease term for all of the Company’s leases includes the non-cancellable period of the lease plus any
additional periods covered by either a Company option to extend (or not to terminate) the lease that the Company
is reasonably certain to exercise, or an option to extend (or not to terminate) the lease controlled by the lessor .
We have elected not to recognize right-of-use assets and lease liabilities for short-term leases that have a
term of 12 months or less. The effect of short-term leases on our right-of-use asset and lease liability was not
material. We have elected not to review the classification for expired or existing leases, prior to January 1, 2019.
Leases as a Lessor:
A lessor shall classify a lease as a sales-type lease when the lease meets any of the following criteria at
lease commencement:
• The lease transfers ownership of the underlying asset to the lessee by the end of the lease term.
• The lease grants the lessee an option to purchase the underlying asset that the lessee is reasonably
certain to exercise.
• The lease term is for the major part of the remaining economic life of the underlying asset. However,
if the commencement date falls at or near the end of the economic life of the underlying asset, this
criterion shall not be used for purposes of classifying the lease.
• The present value of the sum of the lease payments and any residual value guaranteed by the lessee
that is not already reflected in the lease payments in accordance with paragraph 842-10-30-5(f) equals
or exceeds substantially all of the fair value of the underlying asset.
• The underlying asset is of such a specialized nature that it is expected to have no alternative use to
the lessor at the end of the lease term.
When none of the criteria are met:
A lessor shall classify the lease as either a direct financing lease or an operating lease. A lessor shall
classify the lease as an operating lease unless both of the following criteria are met, in which case the lessor shall
classify the lease as a direct financing lease:
is not already
• The present value of the sum of the lease payments and any residual value guaranteed by the lessee
that
in accordance with paragraph
842-10-30-5(f) and/or any other third party unrelated to the lessor equals or exceeds substantially all
of the fair value of the underlying asset;
It is probable that the lessor will collect the lease payments plus any amount necessary to satisfy a
residual value guarantee.
lease payments
reflected
the
in
•
1-25 Recent accounting pronouncements
Recently Adopted Accounting Pronouncements
Effective January 1, 2022, the Company adopted ASU 2021-05 (Lessors—Certain leases with variable
lease payments) which requires lessors to classify as operating leases those leases with variable lease payments
F-19
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EDAP TMS S.A. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of euros unless otherwise noted, except per share data)
that do not depend on an index or rate if another classification (i.e. sales-type or direct financing) would result in
a commencement date (‘day 1’) selling loss. The adoption of ASU 2021-05 did not have a material impact on the
Company’s financial position or results of operations.
None of the recent accounting pronouncements not yet adopted by the Company are expected to have a
material impact on the Company’s financial statements.
CASH EQUIVALENTS
Cash equivalents at December 31, 2022 and 2021 only comprise cash investments which are highly liquid
and have initial maturities of 90 days or less.
Total cash and cash equivalents
Short term investment
Total cash and cash equivalents
TRADE ACCOUNTS AND NOTES RECEIVABLE, NET
Trade accounts and notes receivable consist of the following:
Trade accounts receivable
Notes receivable
Less: allowance for doubtful accounts
Total
Less current portion
Total long-term portion
December 31,
2022
63,136
—
63,136
2021
47,183
—
47,183
December 31,
2022
12,965
617
(161)
13,421
(13,421)
—
2021
10,992
615
(742)
10,864
(10,864)
—
Notes receivable usually represent commercial bills of exchange (drafts) with initial maturities of 90 days
or less.
Bad debt expenses amount to a net cost of €32 thousand, a net cost of €2 thousand and €87 thousand,
respectively for the years ended December 31, 2022, 2021 and 2020.
OTHER RECEIVABLES
Other receivables consist of the following:
Research and development tax credit receivable from the French State
Value-added taxes receivable
Other receivables from Government and public authorities
Others
Total
December 31,
2022
581
894
—
46
1,522
2021
617
574
—
64
1,255
F-20
Table of Contents
EDAP TMS S.A. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of euros unless otherwise noted, except per share data)
INVENTORIES
Components, spare parts
Work-in-progress
Finished goods – own manufactured products
Finished goods – distribution products
Total gross inventories
Less: allowance for slow-moving inventory and net realizable value
Total
December 31,
2022
7,543
283
1,514
3,702
13,042
(1,262)
11,780
2021
4,955
250
1,166
2,598
8,968
(1,470)
7,499
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 €93 thousand for the year ended December 31, 2022, €371 thousand for the year ended
December 31, 2021, and €651 thousand for the year ended December 31, 2020.
OTHER ASSETS
Other assets consist of the following:
Prepaid expenses, current portion
Total
December 31,
2022
2021
660
660
581
581
Prepaid expenses mainly consist of rental and future congresses and conferences expenses.
PROPERTY AND EQUIPMENT, NET
Property and equipment consist of Property and equipment purchased or capitalized by the Company and
finance leases for 2022 and 2021.
7-1 Property and Equipment, net
Property and equipment consist of the following:
Equipment
Furniture, fixture, and fittings and other
Total gross value
Less: accumulated depreciation and amortization
Total
December 31,
2022
9,553
3,108
12,661
(8,916)
3,745
2021
8,894
2,678
11,572
(8,594)
2,978
Depreciation expense related to property and equipment (inclusive of depreciation expense on equipment
leased to customers) amounted to €1,194 thousand, €1,521 thousand and €1,695 thousand for the years ended
December 31, 2022, 2021 and 2020, respectively.
Assets leased to customers:
Capitalized costs on equipment leased to customers of €753 thousand and €423 thousand are included in
property and equipment at December 31, 2022 and 2021, respectively. Accumulated amortization of these assets
leased to third parties was €264 thousand and €108 thousand, at December 31, 2022 and 2021, respectively.
F-21
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EDAP TMS S.A. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of euros unless otherwise noted, except per share data)
Depreciation expense on equipment leased to customers amounted to €37 thousand, €40 thousand and
€240 thousand, for the years ended December 31, 2022, 2021 and 2020, respectively.
7-2 Finance leases
Finance lease right-of-use assets in 2022 and previous years consist of the following:
Facilities
Equipment
Vehicles and IT equipment
Total gross value
Less: accumulated depreciation and amortization
Total
December 31,
2022
269
220
780
1,269
813
455
2021
290
220
1,497
2,007
1,368
639
Depreciation expense related to finance lease right-of-use assets amounted to €303 thousand, €275
thousand and €401 for the years ended December 31, 2022, 2021, 2020, respectively.
OPERATING LEASE RIGHT-OF-USE ASSETS
Operating lease right-of-use assets consist of the following:
Facilities
Equipment
Furniture, fixture, and fittings and other
Total net operating lease right of use
December 31,
2022
1,536
57
191
1,784
2021
1,290
158
107
1,555
Operating lease cost amounted to €910 thousand and €917 thousand for the years ended
December 31, 2022 and 2021, respectively.
Variable lease costs related to above contracts amounted to €152 thousand and €123 thousand for
the years ended December 31, 2022 and 2021, respectively.
Non-recognized lease liabilities for short term leases amounted to €74 thousand and €70 thousand for
the years ended December 31, 2022 and 2021, respectively.
GOODWILL AND INTANGIBLE ASSETS
As discussed in Note 1-13, 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 (DIST) — to be its reporting units for purposes of testing for
impairment. Goodwill amounts to €496 thousand for the ESWL division, 1,271 thousand for the DIST division
and to €645 thousand for the HIFU division, at December 31, 2022.
The Company completed the required annual impairment test in the fourth quarter of 2022. To determine
the fair value of the Company’s reporting units, the Company used the discounted cash flow approach for each of
the three 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 in no goodwill impairment.
F-22
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EDAP TMS S.A. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of euros unless otherwise noted, except per share data)
Intangible assets consist of the following:
Licenses
Trade name and trademark
Patents
Organization costs
Total gross value
Accumulated amortization for licenses
Accumulated amortization for trade name and trademark
Accumulated amortization for patents
Accumulated amortization for organization costs
Less: Total accumulated amortization
Total
December 31,
2022
1,585
370
412
225
2,592
(863)
(368)
(412)
(225)
(1,868)
725
2021
1,448
400
412
225
2,484
(723)
(397)
(412)
(225)
(1,756)
728
Amortization expenses related to intangible assets amounted to €141 thousand, €125 thousand and €113
thousand, for the years ended December 31, 2022, 2021 and 2020, respectively.
For the five coming years, the annual estimated amortization expense will consist of the following:
2023
2024
2025
2026
2027
2028 and thereafter
Total
TRADE ACCOUNTS AND NOTES PAYABLE
Trade accounts and notes payable consist of the following:
Trade accounts payable
Notes payable
Total
December 31,
2022
143
135
125
122
107
76
706
December 31,
2022
6,640
7
6,647
2021
5,511
1
5,512
Trade accounts payable usually represent invoices with a due date of 90 days or less and invoices to be
received.
Notes payable represent commercial bills of exchange (drafts) with initial maturities of 90 days or less.
F-23
Table of Contents
EDAP TMS S.A. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of euros unless otherwise noted, except per share data)
DEFERRED REVENUES
Deferred revenues consist of the following:
Deferred revenues on maintenance contracts
Deferred revenue on RPP
Deferred revenue on sale of devices
Deferred revenue on extension of warranty, included in sales contracts
Deferred revenue on treatment probe lease and other
Total
Less long term portion
Current portion
December 31,
2022
1,803
517
83
535
1,376
4,314
(264)
4,050
2021
1,624
315
114
740
1,055
3,848
(440)
3,408
Deferred revenue on extension of warranty will be recognized over the following periods:
2023
2024
2025
2026
2027
2028 and thereafter
Total
Changes in deferred revenue on extension of warranty are as follows:
Balance as of December 31, 2020
New extension of warranty
Recognition of revenue
Balance as of December 31, 2021
New extension of warranty
Recognition of revenue
Balance as of December 31, 2022
December 31,
2022
302
145
84
5
—
—
535
Total
782
256
(298)
740
162
(367)
535
F-24
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EDAP TMS S.A. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of euros unless otherwise noted, except per share data)
OTHER ACCRUED LIABILITIES
Other accrued liabilities consist of the following:
Retirement indemnities
Provision for warranty costs
Accruals for payroll and associated taxes
Conditional government advances
Value added tax payable
Advances received from customers
Provision for Asset Retirement Obligation (Japan)
Provision for employee termination indemnities (Korea)
Others
Total
Less non-current portion
Current portion
December 31,
2022
2,153
162
1,848
463
531
861
101
122
340
6,583
(2,710)
3,873
2021
2,382
252
944
463
463
225
109
97
353
5,289
(2,534)
2,755
We received government conditional advances and grants for advanced research program HECAM which
are provided for and managed by French state-owned entity “Banque Publique d’Investissement” (“Bpifrance”).
This arrangement consists of both grants and conditional advances which are paid in fixed instalments at
predetermined contractual dates, subject generally to milestones based on progress of the research and
documentation. Grants received are non-refundable. Conditional advances received are subject to a fixed 1.44%
interest rate.
Despite a first mono-centric study successfully implemented with Lyon’s Centre Leon Bérard cancer
center, we decided not to pursue the development of HIFU for liver cancer as a per-operative approach. The multi-
centric Phase II study, which was to be initiated following the mono-centric study, will not be implemented. We
considered that the per-operative approach initially targeted will not offer the breakthrough innovation expected
by the market and will lead to comparative lengthy clinical studies with existing therapeutic solutions to fulfill the
requirement of the new European MDR regulations which became effective in May 2021.
In 2020, the Company decided to reorient the efforts, knowledge and assets resulting from the HECAM
project in two directions. The first, with a technology and approach very similar to the one developed for liver
cancer, will focus on pancreatic cancer for patients with few or even no alternatives. The second will still target
liver cancer application but through an extracorporeal solution to offer to patients affected by primary or metastatic
liver cancer an undisputable benefit compared to the existing alternatives. In 2021, after agreeing with Bpifrance,
the Company decided not to pursue the HECAM project under the initial parameters and based on results obtained
as part of the HECAM program, and we had to reimburse €0.6 million, with the balance of €0.4 million reclassified
as a non-refundable grant.
In 2021, we also received conditional advances for €0.4 million from Banque Publique d’Investissement
for business development programs in China and Africa.
Grants that relate to expenses we incur for this research program are recognized in the line item “Research
and Development Expenses” in the period in which the expenses subject to the grants have been incurred (see
Note 21).
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EDAP TMS S.A. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of euros unless otherwise noted, except per share data)
Conditional advances as of December 31, 2022, mature as follows:
2023
2024
2025
2026
2027
2028 and thereafter
Total
Changes in the provision for warranty costs are as follows:
Beginning of year
Amount used during the year
New warranty expenses
End of year
Less current portion
Long term portion
LEASE OBLIGATIONS
13-1 Financing leases
18
93
93
93
86
81
463
2022
2021
252
(202)
112
162
(100)
62
368
(225)
110
252
(206)
46
The Company leases certain of its equipment under finance leases. At December 31, 2022, the
corresponding liability associated with this lease equipment amounts to €55 thousand for medical devices and to
€494 thousand for vehicles and other IT equipment.
Maturities of finance leases liabilities for the years ended December 31, 2022 and 2021 are as follows:
2023
2024
2025
2026
2027
2028 and thereafter
Total undiscounted minimum lease payments
Less: amount representing interest
Present value of minimum lease payments
Less: current portion
Long-term portion
2022
2023
2024
2025
2026
2027 and thereafter
Total undiscounted minimum lease payments
Less: amount representing interest
Present value of minimum lease payments
Less: current portion
Long-term portion
December 31,
2022
234
149
102
63
12
6
566
(17)
548
(224)
324
December 31,
2021
358
215
124
75
46
7
825
(55)
770
(340)
430
F-26
Table of Contents
EDAP TMS S.A. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of euros unless otherwise noted, except per share data)
Interest paid under finance lease obligations was €12 thousand, €55 thousand and €29 thousand the years
ended December 31, 2022, 2021 and 2020 respectively.
The weighted average remaining lease term and the weighted average discount rate for finance leases at
December 31, 2022 was 1.02 years and 1.32% and at December 31, 2021 was 2.11 years and 2.93%.
13-2 Operating leases
Maturities of operating lease liabilities consist of the following amounts:
2023
2024
2025
2026
2027
2028 and thereafter
Total undiscounted minimum lease payments
Less: current portion
Long-term portion
2022
2023
2024
2025
2026
2027 and thereafter
Total undiscounted minimum lease payments
Less: current portion
Long-term portion
December 31,
2022
901
636
238
24
—
—
1,799
(901)
899
December 31,
2021
673
523
277
69
18
2
1,562
(673)
888
The weighted average remaining lease term and the weighted average discount rate for operating leases
at December 31, 2022 was 2.18 years and 2.29% and at December 31, 2021 was 2.62 years and 1.69%.
Total rent expenses under operating leases amounted to €912 thousand, €953 thousand and €941
thousand, for the years ended December 31, 2022, 2021 and 2020, respectively. These total rent expenses are
related to office rentals, office equipment and car rentals.
SHORT-TERM BORROWINGS
As of December 31, 2022 and 2021, short-term borrowings consist mainly of €1,846 thousand and €1,914
thousand of factored account receivables and for which the Company maintains the effective control, respectively.
F-27
Table of Contents
EDAP TMS S.A. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of euros unless otherwise noted, except per share data)
LONG TERM DEBT
15-1 Long-term debt:
France term loan
Japanese term loan
Germany term loan
USA term loan
Korea term loan
Malaysia term loan
Total long term debt
Less current portion
Total long-term portion
December 31,
2022
4,593
558
28
—
8
—
5,188
(1,601)
3,587
2021
4,848
786
111
—
11
3
5,759
(830)
4,930
As of December 31, 2022 and 2021, long-term debt in Japan consists of two loans in denominated in Yen
and subscribed with the following conditions:
EDAP Technomed Co. Ltd
EDAP Technomed Co. Ltd
80,000,000 August 2, 2026
50,000,000 April 2, 2025
1.98 % Monthly installment
1.8 % Monthly installment
Initial
Amount
Maturity
Fixed Interest rate
Frequency of
principal payments
As of December 31, 2022 and 2021, long-term debt in Germany consists of one loan in Euro with the
following terms :
EDAP TMS GMBH
Initial
Amount
400,000 April 30, 2023
Maturity
Fixed Interest rate
2.40 % Monthly installment
Frequency of
principal payments
This loan was pledged against an HIFU equipment with a purchase value of €438 thousand.
As of December 31, 2022, long-term debt in France consists of three loans in Euro subscribed in 2020
which terms and maturity were amended and a new loan in Euro subscribed in 2021 with the following terms:
EDAP TMS FRANCE
1,066,081 July 1, 2025
0.99 % Monthly installment
Drown
Amount
Maturity
Fixed Interest rate
Frequency of
principal payments
This loan is pledged against the Company’s cash in USD for an amount equal to the countervalue of the
loan in USD. This loan constitutes a complete financial package of €1,530,000, of which €1,066,081 were drawn
at the end of December 2022 to finance HIFU treatment probes.
EDAP TMS FRANCE
2,000,000 July 30, 2026
0.73 % Monthly installment
Initial
Amount
Maturity
Fixed Interest rate
Frequency of
principal payments
This loan is a COVID-related loan guaranteed by the French government entered into in 2020 with an
initial one-year repayment term subsequently extended to six years.
EDAP TMS FRANCE
2,000,000 August 4, 2026
0.73 % Monthly installment
Initial
Amount
Maturity
Fixed Interest rate
Frequency of
principal payments
F-28
Table of Contents
EDAP TMS S.A. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of euros unless otherwise noted, except per share data)
This loan, in Euro, is a COVID-related loan guaranteed by the French government in 2020 with an initial
one year repayment term subsequently extended to six years.
EDAP TMS FRANCE
Initial
Amount
72,222
Maturity
July 5, 2024
Fixed Interest rate
0.45 % Monthly installment
Frequency of
principal payments
This loan is related to the acquisition of computer servers.
As of December 31, 2021, long-term debt in France consists of a loan in Euro to finance the ERP project
and three loans in Euro subscribed in 2020 with the following terms:
EDAP TMS FRANCE
Drown
Amount
780,457 April 1, 2025
Maturity
Fixed Interest rate
Frequency of
principal payments
0.99 % Monthly installment
This loan is pledged against the Company’s cash in USD for an amount equal to the countervalue of the
loan in USD. This loan constitutes a complete financial package of €1,530,000, of which €780,457 was drawn at
the end of December to finance HIFU treatment probes.
EDAP TMS FRANCE
2,000,000 July 30, 2026
0.73 % Monthly installment
Initial
Amount
Maturity
Fixed Interest rate
Frequency of
principal payments
This loan is a COVID-related loan guaranteed by the French government in 2020 with an initial one year
repayment term subsequently extended to six years.
EDAP TMS FRANCE
2,000,000 August 4, 2026
0.73 % Monthly installment
Initial
Amount
Maturity
Fixed Interest rate
Frequency of
principal payments
This loan is a COVID-related loan guaranteed by the French government in 2020 with an initial one year
repayment term.
EDAP TMS FRANCE
Initial
Amount
72,222
Maturity
July 5, 2024
Fixed Interest rate
0.45 % Monthly instalment
Frequency of
principal payments
This loan is related to the acquisition of computer servers.
As of December 31, 2021, long-term debt in Malaysia consisted of a loan in Ringgit with the following
conditions:
EDAP TECHNOMED SDN BHD
Initial
Amount
90,000 July 31, 2022
Maturity
Fixed Interest rate
Frequency of
principal payments
4.64 % Monthly installment
A long-term debt in the USA which consisted of a loan denominated in USD with the following terms
and related to the U.S. Paycheck Protection Program was forgiven in 2021:
EDAP TECHNOMED INC
Initial
Amount
221,217 May 14, 2022
Maturity
Fixed Interest rate
Frequency of
principal payments
1 % Monthly installment
F-29
Table of Contents
EDAP TMS S.A. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of euros unless otherwise noted, except per share data)
15-2 Financial instruments carried at fair value:
As of December 31, 2022, there are no warrants outstanding.
Refer to Note 26 for more details on the fair value of other Financial Instruments.
15-3 Long-term debt maturity:
Long-term debt carried at amortized cost at December 31, 2022 matures as follows:
2023
2024
2025
2026
2027
2028 and thereafter
Total
OTHER LONG-TERM LIABILITIES
Other long-term liabilities consist of the following:
Provision for retirement indemnities (Japan & France), less current portion
Provision for employee termination indemnities (Korea) less current portion
Provision for Asset Retirement Obligation (Japan) less current portion
Provision for warranty costs, less current portion
Conditional government advances, less current portion
Accrued interest less current portion
Total
1,601
1,570
1,335
682
—
—
5,188
December 31,
2022
1,962
122
101
62
463
—
2,710
2021
2,281
97
109
46
—
—
2,534
Provision for asset retirement obligation in Japan is related to subsidiary’s offices and warehouses.
Pension, post-retirement and post-employment benefits for most of the Company’s employees are
sponsored by European governments. In addition to government-sponsored plans, subsidiaries in Japan and France
have defined benefit retirement plans in place. The provision for retirement indemnities at December 31, 2022
represents an accrual for lump-sum retirement benefit payments to be paid at the time an employee retires if he or
she is still present at the Company at the date of retirement. This provision has been calculated taking into account
the estimated payment at retirement (discounted to the current date), turnover and salary increases.
The provision is management’s best estimate based on the following assumptions as of year-end:
Discount rate
Salary increase
Retirement age
Average retirement remaining service period
Discount rate
Salary increase
Retirement age
Average retirement remaining service period
Pension benefits France
2022
3.80%
3.00%
65
24
2021
1.05%
2.50%
65
24
Pension benefits Japan
2021
0.60%
2.50%
60
14
2022
1.30%
2.50%
60
14
F-30
Table of Contents
EDAP TMS S.A. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of euros unless otherwise noted, except per share data)
The discount rate retained is determined by reference to the high quality rates for AA- rated corporate
bonds for a duration equivalent to that of the obligations.
At December 31, 2022, the provision which represents the projected benefit obligation in accordance with
ASC 718 consists of:
Non-current liabilities
Current liabilities
Total projected benefit obligation
France
845
89
934
Japan
1,117
102
1,219
At December 31, 2021, the provision which represents the projected benefit obligation in accordance with
ASC 718 consists of:
Non-current liabilities
Current liabilities
Total projected benefit obligation
France
1,080
—
1,080
Japan
1,200
102
1,302
The Company does not have a funded benefit plan. A detailed reconciliation of pension cost components
(in thousands of euros) during fiscal year for each of the three years ending December 31, 2022 is as follows:
France
Change in benefit obligations:
Projected Benefit obligations at beginning of year
Service cost
Interest cost
Net loss or (gain)
Actuarial (gain) or loss
Amortization of net prior service cost
Benefits paid
Projected Benefit obligations at end of year (1)
Unrecognized actuarial (gain) loss (2)
Unrecognized prior service cost (2)
2022
2021
2020
1,080
84
11
—
(241)
—
—
934
(219)
14
1,111
90
6
—
(72)
—
(56)
1,080
22
16
969
88
9
—
46
1
—
1,111
94
17
(1) The accumulated benefit obligation was €701 thousand and €780 thousand at December 31, 2022 and 2021 respectively.
(2) The amount in accumulated other comprehensive income (loss) to be recognized as components of net periodic benefit costs in
2022 is 205 thousand.
Japan
Change in benefit obligations:
Projected Benefit obligations at beginning of year
Service cost
Interest cost
Amortization of net loss
Actuarial (gain) / loss
Benefits paid
Exchange rate impact
Projected Benefit obligations at end of year (1)
Unrecognized actuarial (gain) loss (2)
Unrecognized prior service cost (2)
2022
2021
2020
1,302
112
7
—
(30)
(75)
(95)
1,219
86
—
1,310
120
7
—
—
(97)
(39)
1,302
126
—
1,230
123
7
1
(1)
(5)
(44)
1,310
130
—
(1)
(2)
The accumulated benefit obligation was €1,027 thousand and €1,123 thousand at December 31, 2022 and 2021, respectively.
The amount in accumulated other comprehensive income (loss) to be recognized as components of net periodic benefit costs in 2022
is €86 thousand.
F-31
Table of Contents
EDAP TMS S.A. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of euros unless otherwise noted, except per share data)
The benefits expected to be paid in each of the next five fiscal years, and in the aggregate for the five
fiscal years thereafter, are detailed in the table below:
2023
2024
2025
2026
2027
2028-2032
SHAREHOLDERS’ EQUITY
17-1 Common stock
France
Japan
91
—
—
129
85
408
713
103
75
156
157
72
682
1,246
As of December 31, 2022, EDAP TMS S.A.’s common stock consisted of 37,197,731 issued shares fully
paid and with a par value of €0.13 each. 36,910,925 of the shares were outstanding.
In April 2021, the Company completed a successful common stock offering and issued 4,150,000 new
common shares in the form of ADS for $6.75 per share which resulted in gross proceeds of €23,255 thousand. In
connection with this offering, the Company incurred issuance costs amounting to €1,961 thousand.
In September 2022, the Company completed a successful common stock offering and issued 3,066,667
new common shares in the form of ADS for $7.50 per share which resulted in gross proceeds of €23,913 thousand.
In connection with this offering, the Company incurred issuance costs amounting to €1,954 thousand.
17-2 Pre-emptive subscription rights
Shareholders have preemptive rights to subscribe on a pro rata basis for additional shares issued by the
Company for cash. Shareholders may waive such preemptive subscription rights at an extraordinary general
meeting of shareholders under certain circumstances. Preemptive subscription rights, if not previously waived, are
transferable during the subscription period relating to a particular offer of shares.
17-3 Dividend rights
Dividends may be distributed from the statutory retained earnings, subject to the requirements of French
law and the Company’s by-laws. The Company has not distributed any dividends since its inception as the result
of an accumulated statutory deficit of 14,329 thousand. Dividend distributions, if any, will be made in euros. The
Company has no plans to distribute dividends in the foreseeable future.
17-4 Treasury stock
As of December 31, 2022, all 286,806 shares held as treasury stock consisted of (i) , 106,516 shares
acquired between August and December 1998 and (ii) 180,290 shares acquired in June and July 2001 for a total
of €697 thousand. All treasury stocks have been acquired to cover stock purchase options (see Note 17-5).
17-5 Stock-option and free share plans
As of December 31, 2022, EDAP TMS S.A. sponsored four stock purchase and subscription option plans
open to employees of EDAP TMS group:
On December 19, 2012, the shareholders authorized the Board of Directors to grant up to 500,000 options
to subscribe 500,000 new shares at a fixed price to be set by the Board of Directors. Conforming to this stock
F-32
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EDAP TMS S.A. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of euros unless otherwise noted, except per share data)
option plan, the Board of Directors granted 500,000 options to subscribe to new shares to certain employees of
EDAP TMS on January 18, 2013. The exercise price was fixed at €1.91 per share. Options were to begin vesting
one year after the date of grant and all options were fully vested as of January 18, 2017 (i.e., four years after the
date of grant). The options will expire on January 18, 2023 (i.e., ten years after the date of grant) or when
employment with the Company ceases, whichever occurs earlier. The total fair value of the options granted under
this plan was €660 thousand. This non-cash compensation expense was recognized in the Company’s operating
expenses over a period of 48 months (using the graded vesting method). Under this plan, there are no more options
outstanding at December 31, 2022.
On February 18, 2016, the shareholders authorized the Board of Directors to grant up to 1,000,000 options
to subscribe to 1,000,000 new shares at a fixed price to be set by the Board of Directors. Conforming to this stock
option plan, the Board of Directors granted 575,000 options to subscribe to new shares to certain employees of
EDAP TMS on April 26, 2016. The exercise price was fixed at €3.22 per share. Options were to begin vesting
one year after the date of grant and all options were fully vested as of April 26, 2020 (i.e., four years after the date
of grant). The options will expire on April 26, 2026 (i.e., ten years after the date of grant) or when employment
with the Company ceases, whichever occurs earlier. The total fair value of the options granted under this plan was
€960 thousand. This non-cash compensation expense was recognized in the Company’s operating expenses over
a period of 48 months (using the graded vesting method).
Conforming to this February 18, 2016, stock option plan, the Board of Directors granted 260,000 options
to subscribe to new shares to certain employees of EDAP TMS on April 25, 2017. The exercise price was fixed at
€2.39 per share. Options were to begin vesting one year after the date of grant and all options will be fully vested
as of April 25, 2021 (i.e., four years after the date of grant). The options will expire on April 25, 2027 (i.e.,
ten years after the date of grant) or when employment with the Company ceases, whichever occurs earlier. The
total fair value of the options granted on April 25, 2017 under this plan was €335 thousand. This non-cash
compensation expense was recognized in the Company’s operating expenses over a period of 48 months (using
the graded vesting method).
Conforming to this February 18, 2016 stock option plan, the Board of Directors granted 165,000 options
to subscribe to new shares to certain employees of EDAP TMS on August 29, 2018. The exercise price was fixed
at €2.65 per share. Options were to begin vesting one year after the date of grant and all options will be fully vested
as of August 29, 2022 (i.e., four years after the date of grant). The options will expire on August 29, 2029 (i.e.,
ten years after the date of grant) or when employment with the Company ceases, whichever occurs earlier. The
total fair value of the options granted on August 29, 2018 under this plan was €219 thousand. This non-cash
compensation expense was recognized in the Company’s operating expenses over a period of 48 months (using
the graded vesting method).
Conforming to this February 18, 2016 stock option plan, the Board of Directors granted 155,000 options
to subscribe to new shares to certain employees of EDAP TMS on April 4, 2019. Forfeited options corresponding
to employees’ departures were re-allocated. The exercise price was fixed at €3.90 per share. Options were to begin
vesting one year after the date of grant and all options will be fully vested as of April 4, 2023 (i.e., four years after
the date of grant). The options will expire on April 4, 2029 (i.e., ten years after the date of grant) or when
employment with the Company ceases, whichever occurs earlier. The total fair value of the options granted on
April 4, 2019 under this plan was €299 thousand. This non-cash compensation expense was recognized in the
Company’s operating expenses over a period of 48 months (using the graded vesting method).
The impact of this February 18, 2016 Plan on operating income, in accordance with ASC 718, was €160
thousand, €65 thousand and €25 thousand in 2020, 2021 and 2022, respectively.
Under this 2016 plan, 696,080 options are outstanding, 668,580 options are exercisable at December 31,
2022.
On June 28, 2019, the shareholders authorized the Board of Directors to grant up to a maximum of
358,528 options to purchase pre-existing shares and to grant 1,000,000 options to subscribe to 1,000,000 new
shares at a fixed price to be set by the Board of Directors. Conforming to this June 28, 2019 stock option plan, the
Board of Directors granted 292,428 options to purchase pre-existing shares and 1,000,000 options to subscribe to
F-33
Table of Contents
EDAP TMS S.A. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of euros unless otherwise noted, except per share data)
new shares to certain employees of EDAP TMS on June 11, 2021. The exercise price was fixed at €5.59 per share.
Options were to begin vesting six months after the date of grant and all options will be fully vested as of June 11,
2024 (i.e., three years after the date of grant). The options will expire on June 11, 2031 (i.e., ten years after the
date of grant) or when employment with the Company ceases, whichever occurs earlier. The total fair value of
subscription options granted on June 11, 2021 under this plan was €681 thousand and the total fair value of
purchase options was €2,371 thousand. This non-cash compensation expense was recognized in the Company’s
operating expenses over a period of 36 months (using the graded vesting method).
The impact of this June 28, 2019 Plan on operating income, in accordance with ASC 718, was €1,484
thousand and €1,104 thousand in 2021 and 2022, respectively.
Under this 2019 plan, 1,266,806 options are outstanding, 633,403 options are exercisable at December 31,
2022.
On June 30, 2021, the shareholders authorized the Board of Directors to grant up to a maximum of
2,000,000 options to subscribe to 2,000,000 new shares at a fixed price to be set by the Board of Directors.
Conforming to this June 30, 2021 stock-option plan, the Board of Directors granted:
(i)
(ii)
(iii)
(iv)
100,000 options to subscribe to new shares to certain employees of EDAP TMS on November
17, 2021. The exercise price was fixed at €5.18 per share. Options were to begin vesting six
months after the date of grant and all options will be fully vested as of November 17, 2024 (i.e.,
three years after the date of grant). The options will expire on November 17, 2031 (i.e., ten years
after the date of grant) or when employment with the Company ceases, whichever occurs earlier.
The total fair value of the options granted on November 17, 2021 under this plan was €229
thousand. This non-cash compensation expense was recognized in the Company’s operating
expenses over a period of 36 months (using the graded vesting method).
144,000 options to subscribe to new shares to certain employees of EDAP TMS on May 17,
2022. The exercise price was fixed at €6.41 per share. Options were to begin vesting six months
after the date of grant and all options will be fully vested as of May 17, 2025 (i.e., three years
after the date of grant). The options will expire on May 17, 2032 (i.e., ten years after the date of
grant) or when employment with the Company ceases, whichever occurs earlier. The total fair
value of the options granted on May 17, 2022 under this plan was €450 thousand. This non-cash
compensation expense was recognized in the Company’s operating expenses over a period of
36 months (using the graded vesting method).
32,000 options to subscribe to new shares to certain employees of EDAP TMS on November 8,
2022. The exercise price was fixed at €10.32 per share. Options were to begin vesting six months
after the date of grant and all options will be fully vested as of November 8, 2025 (i.e., three years
after the date of grant). The options will expire on November 8, 2032 (i.e., ten years after the
date of grant) or when employment with the Company ceases, whichever occurs earlier. The
total fair value of the options granted on November 8, 2022 under this plan was €161 thousand.
This non-cash compensation expense was recognized in the Company’s operating expenses over
a period of 36 months (using the graded vesting method).
395,000 options to subscribe to new shares to certain employees of EDAP TMS on December
15, 2022. The exercise price was fixed at €9.94 per share. Options were to begin vesting six
months after the date of grant and all options will be fully vested as of December 15, 2025 (i.e.,
three years after the date of grant). The options will expire on December 15, 2032 (i.e., ten years
after the date of grant) or when employment with the Company ceases, whichever occurs earlier.
The total fair value of the options granted on December 15, 2022 under this plan was €1,858
thousand. This non-cash compensation expense was recognized in the Company’s operating
expenses over a period of 36 months (using the graded vesting method).
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EDAP TMS S.A. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of euros unless otherwise noted, except per share data)
The impact of this June 30, 2021 Plan on operating income, in accordance with ASC 718, was €25
thousand and €442 thousand in 2021 and 2022, respectively.
Under this 2021 plan, 651,000 options are outstanding at December 31, 2022.
Forfeited stock-options are recognized as they occur, in accordance with ASU 2016-09.
The fair value of each stock option granted during the year is estimated on the date of grant using the
Black-Scholes option pricing model with the following assumptions:
December 2022 November 2022 May 2022 November 2021 June 2021
Weighted-average expected
life (years)
Expected volatility rates(1)
Expected dividend yield
Risk-free interest rate
Weighted-average exercise
price (€)
Weighted-average fair value
of options granted during the
year (€)
5.79
45.41 %
0 %
3.62 %
5.79
45.38 %
0 %
4.32 %
5.79
44.96 %
0 %
3.00 %
5.79
45.08 %
0 %
1.32 %
5.79
46.34
0
0.63
9.94
10.32
6.41
5.18
5.59
4.70
5.05
3.13
2.29
2.37
(1) Historical volatility calculated over the weighted-average expected life.
(2) There was no new plan for the year 2020.
As of December 31, 2022, a summary of stock option activity to purchase or to subscribe to Shares under
these plans is as follows:
2022
2021
2020
Options Weighted
average
exercice
price (€)
Options Weighted
average
exercice
price (€)
Outstanding on January 1,
Granted
Exercised
Forfeited
Expired
Outstanding on December 31,
Exercisable on December 31,
Share purchase options available for grant on
December 31,
2,408,508
571,000
(320,622)
(45,000)
—
2,613,886
1,362,205
4.38 1,186,900
9.07 1,392,428
(150,820)
2.14
(20,000)
5.34
—
—
5.66 2,408,508
4.35 1,149,401
20,000
5,000
292,428
Options Weighted
average
exercice
price (€)
2.78
—
2.54
2.55
2
2.81
2.73
2.81 1,273,900
—
5.56
(23,750)
2.93
(21,250)
4.01
(42,000)
—
4.38 1,186,900
970,650
3.25
As of December 31, 2022, 1,329,000 options to subscribe to new shares are available for future grants.
F-35
Table of Contents
EDAP TMS S.A. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of euros unless otherwise noted, except per share data)
The following table summarizes information about options to purchase existing Shares held by the
Company, or to subscribe to new Shares, at December 31, 2022:
Fully vested options (1)
life
Options
Aggregate
Intrinsic
Value
(2)
average
remaining
contractual
Outstanding options
Weighted Weighted
average
exercise
price
(€)
—
330,240
10.32
—
3,926,300
9.94
24,111
794,840
6.41
633,403
7,081,446
5.59
36,111
518,000
5.18
80,000
419,250
3.90
365,000
1,175,300
3.22
87,500
231,875
2.65
2.39
136,080
325,231
5.66 14,802,482 1,362,205
9.8
10.0
9.3
8.4
8.8
6.8
3.3
5.7
4.3
7.4
Weighted
average
exercise
price
(€)
—
—
6.41
5.59
5.18
3.90
3.22
2.65
2.39
4.35
Aggregate
Intrinsic
Value
(2)
—
—
154,552
3,540,723
187,055.56
312,000
1,175,300
231,875
325,231
5,926,737
Options
32,000
395,000
124,000
1,266,806
100,000
107,500
365,000
87,500
136,080
2,613,886
Exercise price (€)
10.32
9.94
6.41
5.59
5.18
3.90
3.22
2.65
2.39
2.39 to 10.32
(1) Fully vested options are all exercisable options. On March 29, 2023, the Board of Directors unanimously decided to appoint Ryan Rhodes as the new
Chief Executive Officer of the Company, which will become effective on May 1, 2023. Marc Oczachowski will continue to serve as Chairman of the
Board of the Company. In this context, the Board decided to accelerate the vesting of all unvested options granted to Mr. Oczachowski under the 2019
option plans such that these options fully vested and became exercisable on March 29, 2023. (Ref. Note 33. Subsequent Events.)
(2) The aggregate intrinsic value represents the total pre-tax intrinsic value, based on the Company’s closing stock price of $10.66 at December 31, 2022,
which would have been received by the option holders had all in-the-money option holders exercised their options as of that date.
A summary of the status of the non-vested options to purchase shares or to subscribe to new shares as of
December 31, 2022, and changes during the three years ended December 31, 2022, is presented below:
Non-vested at January 1, 2020
Granted
Vested
Forfeited
Non-vested at December 31, 2020
Granted
Vested
Forfeited
Non-vested at December 31, 2021
Granted
Vested
Forfeited
Non-vested at December 31, 2022
Weighted average
Grant-Date Fair
Options
455,000
—
(235,000)
(3,750)
216,250
1,392,428
(329,571)
(20,000)
1,259,107
571,000
(543,426)
(35,000)
1,251,681
Value (€)
1.58
—
1.58
1.54
1.59
2.37
2.06
1.89
2.32
4.33
2.32
2.80
3.22
As of December 31, 2022, there were €2,612 thousand of total unrecognized compensation expenses
related to non-vested stock-options, over a period of 2,9 years.
On June 30, 2021, the shareholders authorized the Board of Directors to grant up to a maximum of
200,000 free shares to certain employees. Conforming to this June 30, 2021 authorization, the Board of Directors
granted:
(i)
61,500 free shares to certain employees of EDAP TMS on September 28, 2021. Free shares shall be
definitively acquired by the relevant beneficiaries at the end of the vesting period (minimum one year
period starting on the allocation date and ending on the acquisition date, i.e. two years starting on the
allocation date). On September 28, 2022, 57,500 free shares were definitely acquired by French
F-36
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EDAP TMS S.A. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of euros unless otherwise noted, except per share data)
resident beneficiaries. The total fair value of the free shares granted on September 28, 2021 under
this plan was €340 thousand. This non-cash compensation expense was recognized in the Company’s
operating expenses upon allocation.
(ii)
40,000 free shares to the CEO of EDAP TMS on March 30, 2022. Free shares shall be definitively
acquired by the relevant beneficiaries at the end of the vesting period (minimum one year period
starting on the allocation date and ending on the acquisition date, i.e. two years starting on the
allocation date). The total fair value of the free shares granted on March 30, 2022 under this plan was
€259 thousand. This non-cash compensation expense was recognized in the Company’s operating
expenses upon allocation.
Under this 2021 plan, 44,000 free shares are outstanding at December 31, 2022.
On June 30, 2022, the shareholders authorized the Board of Directors to grant up to 600,000 free shares.
This new resolution superseded the June 30, 2021 resolution, cancelling the unused portion of the 2021 resolution.
Conforming to this June 30, 2022 authorization, the Board of Directors granted 291,500 free shares to certain
employees of EDAP TMS on November 8, 2022. Free shares shall be definitively acquired by the relevant
beneficiaries at the end of the vesting period, which begins six months after the date of grant and all shares will be
fully vested as of November 8, 2025 (i.e. three years after the date of the grant). The total fair value of the free
shares granted on November 8, 2022 under this plan was €2,963 thousand. This non-cash compensation expense
is recognized in the Company’s operating expenses over a period of 36 months (using the graded vesting method).
Under this 2022 plan, 286,000 free shares are outstanding at December 31, 2022.
17-6 Accumulated other comprehensive income (loss)
The components of accumulated other comprehensive income (loss) net of tax, for the years ended
December 31, 2022, and 2021, are as follows:
Year Ended December 31, 2022
Foreign currency
translation
adjustment
Provision for
retirement indemnities
(net of tax)
Beginning balance
Other comprehensive income (loss) before reclassifications
Reclassified from accumulated other comprehensive loss
Net current-period other comprehensive income (loss)
Ending balance
(3,377)
—
—
(596)
(3,973)
(212)
—
—
355
144
Year Ended December 31, 2021
Foreign currency
translation
adjustment
Provision for
retirement indemnities
(net of tax)
Beginning balance
Other comprehensive income (loss) before reclassifications
Reclassified from accumulated other comprehensive loss
Net current-period other comprehensive income (loss)
Ending balance
(2,824)
—
—
(554)
(3,377)
(241)
—
—
29
(212)
Total
(3,589)
—
—
(240)
(3,829)
Total
(3,064)
—
—
(525)
(3,589)
F-37
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EDAP TMS S.A. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of euros unless otherwise noted, except per share data)
TOTAL SALES
Amount of net sales derived from our operations in Asia, France, the United States. and other
geographical areas, are as follows:
Primary geographical markets (€)
Asia
France
United States
Others geographical areas
Total Net Sales
Year Ended December 31,
2020
2021
2022
17,936 16,009 15,872
10,637 12,251 10,021
15,036
5,611
11,500 10,276 10,146
55,108 44,060 41,649
5,524
The amount of net sales is recognized following the timing above:
Timing of revenue recognition
Products transferred at a point in time
Products and services transferred over time
Total Net Sales
OTHER REVENUES
Other revenues consist of the following:
Licenses and others
Total
Year Ended December 31,
2020
2022
2021
44,173 34,552 32,862
10,935
8,787
55,108 44,060 41,649
9,508
2022
2021
Year Ended December 31,
2020
12
12
—
—
6
6
In 2021 and 2020, other revenues mainly consist of sales of a license to Theraclion and training to
customers.
COSTS OF SALES
Costs of sales consist of the following:
Direct costs of sales
Indirect costs of sales
Total costs of sales
2022
Year Ended December 31,
2021
(19,814) (16,199) (14,058)
(11,102)
(9,225)
(30,916) (25,643) (23,283)
(9,443)
2020
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses consist of the following:
Gross research and development expenses
Research Tax Credit
Grants
Net Research and development expenses
Year Ended December 31,
2020
2022
2021
(5,751) (4,757) (5,173)
492
184
(4,920) (3,402) (4,496)
581
250
617
739
In 2022, grants consisted mainly of national grants for the assessment and optimization of the focal
treatments of prostate cancer (Perfuse development project).
F-38
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EDAP TMS S.A. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of euros unless otherwise noted, except per share data)
In 2021, grants consisted mainly of national grants for the assessment and optimization of the focal
treatments of prostate cancer (Perfuse development project) and of a financial impact for the development of
innovative imaging solutions for the focal treatment of liver cancer (HECAM Development project). Ref. Note 12.
In 2020, grants consisted mainly of national grants for the assessment and optimization of the focal
treatments of prostate cancer (Perfuse development project).
Research and development costs are expensed as incurred and include amortization of assets, costs of
prototypes, salaries, benefits and other headcount related costs, contract and other outside service fees, and
facilities and overhead costs.
FINANCIAL INCOME, NET
Interest (expense) income, net consists of the following:
Interest income
Interest expense
Paycheck Protection Program loan forgiveness
Total
INCOME TAXES
23-1 Income / (Loss) before income taxes
Year Ended December 31,
2020
2021
2022
10
10
404
(108)
(52)
(168)
—
187
—
(98)
145
236
Income / (loss) before income taxes is comprised of the following:
France
Other countries
Total
23-2 Income tax (expense)/ benefit
Income tax (expense)/benefit consists of the following:
Current income tax expense:
France
Other countries
Sub-total current income tax expense
Deferred income tax (expense) benefit:
France
Other countries
Sub-total deferred income tax (expense) benefit
Total
23-3 Deferred income taxes:
2022
Year Ended December 31,
2020
2021
(2,042)
869
24
854
893 (1,188)
(418)
(1,678)
(2,096)
Year Ended December 31,
2021
2020
2022
(485)
(251)
(736)
(8)
(93)
(101)
(837)
(320)
(436)
(756)
8
556
563
(193)
(158)
(312)
(471)
8
(53)
(45)
(516)
Deferred income taxes reflect the impact of temporary differences between the amounts of assets and
liabilities reported for financial reporting purposes and such amounts as measured in accordance with tax laws.
F-39
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EDAP TMS S.A. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of euros unless otherwise noted, except per share data)
The tax effects of temporary differences which give rise to significant deferred tax assets (liabilities) are as follows
by nature :
Net operating loss carry forwards
Elimination of intercompany profit in inventory
Elimination of intercompany profit in fixed assets
Provisions for retirement indemnities
Capital leases treated as operating leases for tax
Other items
Total deferred tax assets
Total deferred tax liabilities
Net deferred tax assets
Valuation allowance for deferred tax assets
Deferred tax assets (liabilities), net of allowance
2022
13,793
480
256
658
26
360
15,573
—
15,573
(14,744)
829
2021
13,611
182
278
642
40
487
15,239
—
15,239
(14,341)
898
Net operating loss carryforwards available amount to €59,632 thousand as of December 31, 2022, of
which €29,791 thousand relates to EDAP TMS SA, €29,022 thousand relates to Edap Technomed Inc., €776
thousand relates to Edap Technomed Co Ltd Japan, —and €43 thousand relates to Edap TMS Gmbh. These net
operating losses generate deferred tax assets of €13,793 thousand as at December 31, 2022. Realization of these
tax assets is contingent on future taxable earnings in the applicable tax jurisdictions. As of December 31, 2022,
€58,856 thousand out of these €59,632 thousand net operating loss carry-forwards have no expiration date but the
amount of the net operating loss carry-forward, which can be used each year to offset taxable earnings, is limited
in all jurisdictions. The remaining tax loss carry-forwards expire from years 2022 through 2032. In accordance
with ASC 740, a valuation allowance is established if, based on the weight of available evidence, it is more-likely-
than-not that some portion or all of the deferred tax asset will not be realized.
The 2017 U.S. Tax Act was enacted on December 22, 2017. The 2017 U.S. Tax Act includes a number
of changes in existing tax law which impacted our business in the U.S. Starting with tax year 2018, the U.S.
corporate tax rates changed from a graduated system ranging from 15% to 39% to a flat 21% of taxable net income.
For taxable net income of $100 thousand and greater for years 2018 and following, EDAP’s U.S. subsidiary would
pay significantly lower taxes than with the previous tax law.
Starting from tax year 2020, the French corporate tax rates of taxable net income gradually decreased
from 28% to 25% in 2022.
23-4 Effective tax income (expense)
A reconciliation of differences between the statutory French income tax rate and the Company’s effective
tax income (loss) is as follows:
Theoretical income tax (expense) benefit at French statutory tax rate
Income of foreign subsidiaries taxed at different tax rates
Effect of net operating loss carry-forwards and valuation allowances (1)
Non-taxable debt fair value variation
Permanent differences
Effect of cancellation of intra-group positions
French business tax included in income tax (CVAE)
Other (1)
Effective income tax (expense) benefit
2022
524
(174)
(643)
—
(99)
(366)
(99)
20
(837)
2021
(237)
(95)
626
—
(258)
(130)
(85)
(15)
(193)
2020
333
9
(749)
—
(159)
152
(156)
55
(516)
(1) Certain immaterial amounts in prior years have been reclassified to conform to the current year presentation (deferred income taxes
on certain temporary differences impacted by a full valuation allowance reclassified from “other” to “Effect of net operating loss
carry-forwards and valuation allowances”).
F-40
Table of Contents
EDAP TMS S.A. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of euros unless otherwise noted, except per share data)
23-5 Uncertainty in Income Taxes
According to ASC 740, the Company reviewed the tax positions of each subsidiary. On
December 31, 2022 the Company believes that there is no significant uncertainty in the Company’s tax positions.
The Company remains subject to examination by major tax jurisdictions.
Interest and penalties on income taxes are classified as a component of the provision for income taxes.
There were no interest or penalties in 2022, 2021 and 2020.
EARNINGS (LOSS) PER SHARE
Income (loss) available to common shareholders (in Euros)
Weighted average number of shares for the computation of basic
EPS
Basic EPS (in Euros)
Effect of dilutive securities
Weighted average number of shares for the computation of
diluted EPS
Diluted EPS income / (loss) (in Euros)
2022
€ (2,933,058) €
Year Ended December 31,
2021
699,890 € (1,703,668)
2020
34,392,598 32,129,047 29,148,108
(0.06)
€
622,723
2,502,171
(0.09) €
293,824
0.02 €
34,392,598
32,422,871
€
(0.09) €
0.02 €
29,148,108
(0.06)
Diluted EPS income / (loss) available to common shareholders is computed including all dilutive
securities that are in the money.
The effects of dilutive securities for the year ended December 31, 2022 and 2020 were excluded from the
calculation of diluted earnings per share as a net loss was reported in this period.
COMMITMENTS AND CONTINGENCIES
25-1 Commitments
The Company currently has commitments regarding its operating leases as described in Note 13-2.
25-2 Contingencies
The Company currently has contingencies relating to standard warranties provided to customers for
products as described in Note 1-15 and Note 12.
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.
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Table of Contents
EDAP TMS S.A. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of euros unless otherwise noted, except per share data)
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 December 31, 2022 and December 31, 2021, the Company did not have any other asset
or liability measured at fair value.
As of December 31, 2022 and December 31, 2021, the fair value of the Company’s long-term debt was
not materially different from the carrying value.
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 €0.2 million and €0.7 million, for the years ended
December 31, 2022 and 2021, respectively.
Actual losses may vary from the current estimates, and any adjustments are reported in earnings in the
periods in which they become known.
In 2022, 2021 and 2020, the Company did not generate more than 10% revenue with a single customer.
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 December 31, 2022, there were no outstanding hedging instruments.
SEGMENT INFORMATION
Our activity is organized into three divisions: HIFU, ESWL (including lithotripsy activities) and
Distribution. Through these three divisions, we develop, produce, market and distribute minimally invasive
medical devices, mainly for urological diseases. HIFU division includes sales of Focal One, Ablatherm 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 our three 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
minimally invasive medical devices, primarily for the treatment of urological diseases. Substantially all revenues
result from the sale of medical devices and their related license and royalty payments from third parties. The
segments derive their revenues from this activity.
F-42
Table of Contents
EDAP TMS S.A. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of euros unless otherwise noted, except per share data)
The following tables set forth the key Statement of income (loss) figures, by segment for fiscal years
2022, 2021 and 2020 and the key balance sheet figures, by segment, for fiscal years 2022, 2021 and 2020. Segment
operating profit or loss and segment 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 CODM, who is the CEO. Interest
income and expense, current and deferred income taxes are not allocated to individual segments. A reconciliation
of segment operating profit or loss to consolidated net loss is as follows:
Segment operating income (loss)
Financial income (expense), net
Foreign Currency exchange (losses) gains, net
Income tax (expense) benefit
Consolidated net income (loss)
2021
2022
(4,257) (1,612)
145
Year Ended December 31,
2020
269
(98)
2,360 (1,359)
(193)
(516)
700 (1,704)
236
1,925
(837)
(2,933)
A summary of the Company’s operations by segment is presented below for years ended
HIFU
Division
ESWL
Division
DISTRIB Reconciling Total
December 31, 2022, 2021 and 2020:
2022
Sales of goods
Sales of RPPs & leases
Sales of spare parts and services
Total sales
External other revenues
Total revenues
Total COS
Gross profit
R&D expenses
Selling and marketing expenses
G&A expenses
Total expenses
Operating income (loss) from operations
Total Assets
Capital expenditures
Non-current assets
Goodwill
9,437
4,287
1,909
15,634
—
15,634
(6,788)
8,846
(3,525)
(8,083)
(2,131)
(13,739)
(4,894)
16,293
1,715
4,269
645
Division
24,145
4,880
272
1,058
3,491
5,630
27,907
11,568
—
—
11,568
27,907
(6,732) (17,396)
10,511
4,836
(444)
(950)
(6,409)
(1,887)
(1,690)
(1,077)
(8,543)
(3,914)
922
1,968
26,407
12,997
356
307
4,187
2,149
1,271
496
Items
—
—
—
—
—
—
—
—
—
—
(2,254)
(2,254)
(2,254)
45,426
—
—
—
consolidated
38,462
5,617
11,030
55,108
—
55,108
(30,916)
24,193
(4,920)
(16,379)
(7,152)
(28,450)
(4,257)
101,123
2,378
10,605
2,412
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Table of Contents
EDAP TMS S.A. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of euros unless otherwise noted, except per share data)
2021
Sales of goods
Sales of RPPs & leases
Sales of spare parts and services
Total sales
External other revenues
Total revenues
Total COS
Gross profit
R&D expenses
Selling and marketing expenses
G&A expenses
Total expenses
Operating income (loss) from operations
Total Assets
Capital expenditures
Non-current assets
Goodwill
2020
Sales of goods
Sales of RPPs & leases
Sales of spare parts and services
Total sales
External other revenues
Total revenues
Total COS
Gross profit
R&D expenses
Selling and marketing expenses
G&A expenses
Total expenses
Operating income (loss) from operations
Total Assets
Capital expenditures
Non-current assets
Goodwill
VALUATION ACCOUNTS
Balance as of December 31, 2019
Charges to costs and expenses
Deductions: write-off and others
Balance as of December 31, 2020
Charges to costs and expenses
Deductions: write-off and others
Balance as of December 31, 2021
Charges to costs and expenses
Deductions: write-off and others
Balance as of December 31, 2022
HIFU
Division
ESWL
Division
DISTRIB Reconciling Total
Division
Items
4,515
3,679
1,715
9,910
6
9,915
(5,311)
4,604
(2,238)
(3,910)
(1,481)
(7,630)
(3,025)
13,597
1,234
3,689
645
20,289
4,236
267
1,022
2,578
5,758
23,134
11,016
—
—
11,016
23,134
(6,080) (14,252)
8,882
4,936
(329)
(835)
(4,774)
(2,048)
(1,355)
(1,161)
(6,458)
(4,043)
2,424
893
25,344
13,596
261
141
3,971
2,185
1,271
496
6,000
3,594
1,831
11,425
12
11,438
(5,144)
6,293
(2,583)
(3,151)
(1,005)
(6,738)
(445)
16,279
1,144
3,706
645
15,274
6,248
224
927
1,844
5,707
17,342
12,882
—
—
17,342
12,882
(7,232) (10,906)
6,436
5,649
(358)
(1,555)
(4,076)
(2,052)
(900)
(964)
(5,335)
(4,572)
1,078
1,102
20,795
15,567
557
309
3,628
2,466
1,271
496
—
—
—
—
—
—
—
—
—
—
(1,904)
(1,904)
(1,904)
24,690
—
—
—
consolidated
29,040
4,968
10,052
44,060
6
44,065
(25,643)
18,422
(3,402)
(10,732)
(5,900)
(20,034)
(1,612)
77,226
1,636
9,845
2,412
Total
consolidated
27,523
4,745
9,382
41,649
12
41,662
(23,283)
18,379
(4,496)
(9,279)
(4,335)
(18,110)
269
55,193
2,010
9,801
2,412
—
—
—
—
—
—
—
—
—
0
(1,465)
(1,465)
(1,465)
2,551
—
—
—
HIFU
Division
ESWL
Division
DISTRIB Reconciling
Division
Items
Allowance Allowance
for deferred for doubtful Slow-moving Warranty
tax assets
14,977
596
(65)
15,508
346
(1,513)
14,341
1,538
(1,135)
14,744
accounts
1,489
90
(858)
721
2
19
742
32
(613)
161
inventory
1,084
651
(172)
1,563
371
(464)
1,470
93
(300)
1,262
reserve
371
266
(268)
369
110
(227)
252
112
(202)
162
F-44
Table of Contents
EDAP TMS S.A. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of euros unless otherwise noted, except per share data)
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest and income taxes paid are as follows:
Income taxes paid (refunds received)
Interest paid
Interest received
Non-cash transactions:
Financing lease obligations incurred
Operating lease obligations incurred
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flow used in operating leases
Operating cash flow used in finance leases
Financing cash flow used in finance leases
RELATED PARTY TRANSACTIONS
Year Ended December 31,
2022
2021
2020
410
168
403
307
114
10
377
124
10
Year Ended December 31,
2022
162
1,162
2021
2020
233
674
192
317
Year Ended December 31,
2022
2021
2020
900
12
350
916
18
406
941
18
321
On August 19, 2019, EDAP Technomed Co. Ltd. (Japan) contracted a loan amounting to JPY 80,000,000.
As a current practice in Japan, this loan required a personal warranty from the representative director, president
and CEO of the subsidiary Mr. Jean-François Bachelard. EDAP TMS S.A., as the parent company, counter-
warranted this personal loan and agreed to indemnify Mr. Bachelard, in an indemnification letter dated
September 12, 2019 expiring upon loan maturity date of August 26, 2026.
On April 22, 2020, EDAP Technomed Co. Ltd (Japan) contracted another loan amounting to JPY
50,000,000 requiring a personal warranty from the representative director, president and CEO of the subsidiary
Mr. Jean-François Bachelard. EDAP TMS S.A., as the parent company, counter-warranted this personal loan and
agreed to indemnify Mr. Bachelard, in an indemnification letter dated June 2, 2020, expiring upon loan maturity
date of April 2, 2025.
On April 27, 2021, EDAP Technomed Sdn Bdh (Malaysia) contracted with Maybank to issue a
Performance Guarantee amounting to MYR 8,000.00, expiring on June 30, 2023. As a current practice in Malaysia,
any bank guarantee requires a personal warranty from the representative director, president and CEO of the
subsidiary Mr. Hervé de Soultrait. Consequently, Mr. de Soultrait personally counter-guaranteed this Performance
Guarantee by making a fixed deposit of MYR 8,000.00 to Maybank, valid until June 30, 2023.
33— SUBSEQUENT EVENTS
In line with EDAP’s global group strategy, and its focus on expansion in the United States and rest of
world markets, and upon recommendation of the Compensation Committee and the Nomination Committee, on
March 29, 2023, the Board of Directors unanimously decided to appoint Ryan Rhodes as the new Chief Executive
Officer of the Company for an indefinite term, which will become effective on May 1, 2023. Marc Oczachowski
will continue to serve as Chairman of the Board of the Company. In this context, the Board decided to accelerate
the vesting of all unvested options granted to Mr. Oczachowski under the 2019 option plans such that these options
fully vested and became exercisable on March 29, 2023, and, with respect to the previously granted free shares
and as permitted under the plans, waived certain conditions to vesting. The Company is currently evaluating the
costs associated with the severance package and the acceleration of vesting of share-based plans, which will be
recorded in financial year 2023.
.
F-45
May 17, 2022
To my fellow Shareholders,
In 2022, EDAP delivered another strong year of financial and operational performance, achieving record
revenue and more than doubling worldwide Focal One sales compared to 2021. With EDAP experiencing
strong positive HIFU momentum, particularly in the U.S., we have now reached a key inflection point to
make this transition and to further accelerate our global expansion. The Board of Directors and myself
have complete confidence in Ryan Rhodes, as new Chief Executive Officer of EDAP Group and in his
ability to continue to accelerate the growth and development of the Company in support of its ongoing
strategic objectives.
As the global leader in therapeutic HIFU, it is becoming increasingly clear that EDAP’s technology
leadership, product offering, as well as customer support and distribution capabilities are all translating
into increased recognition of Focal One® Robotic HIFU as a leading non-invasive treatment option for
men diagnosed with prostate cancer. As we continue to demonstrate our technological leadership
in therapeutic HIFU, we also expect to benefit from higher levels of reimbursement for Focal One
procedures which officially went into effect on January 1st, 2023.
In addition to these strategic efforts, we are also making meaningful progress in developing HIFU beyond
prostate cancer. We recently announced positive clinical results from the Phase 2 study evaluating the
safety of therapeutic HIFU for the treatment of rectal endometriosis. Treatment with Focal One resulted
in significant improvements in endometriosis symptoms and quality of life and positive safety profile.
Based on this positive safety and preliminary efficacy data, we intend to confirm the efficacy of the Focal
One HIFU treatment in rectal endometriosis with a Phase 3 multi-center, double blind, randomized,
controlled clinical study. If successful, this rigorously designed study will provide the strongest clinical
evidence to date demonstrating the utility of therapeutic HIFU to address this painful and debilitating
condition.
We entered 2023 with a strong operational momentum, achieving record capital sales in the first quarter,
and we are sufficiently well capitalized to continue to execute on our growth plans while at the same
time pursuing potentially high-value pipeline expansion opportunities. Looking ahead, I remain very
optimistic about our sales pipeline and our team’s ability to execute and I believe EDAP will continue to
build on its ongoing success throughout 2023.
In closing, I would like to thank the entire EDAP team for their tireless work and dedication to get us to
this point and you, our shareholders, for your continued support.
Sincerely,
Marc Oczachowski
Chairman of the Board
EDAP TMS S.A.
Senior Executive Officers
EDAP TMS’s subsidiaries
Officers
Ryan Rhodes
Chief Executive Officer
François Dietsch
Chief Financial Officer
EDAP TMS S.A.
Board of Directors
Marc Oczachowski
Chairman
Lyon, France
Pierre Beysson
Paris, France
Rob Michiels
San Clemente, CA, USA
Argil Wheelock
Chattanooga, TN, USA
Marie Meynadier
Paris, France
EDAP TMS S.A.
Corporate Headquarters
Parc d’Activités - La Poudrette Lamartine
4, Rue du Dauphiné
F 69120 Vaulx-en-Velin - France
Tel : +33 (0)4 72 15 31 50
www.edap-tms.com
www.hifu-prostate.com
www.focalone.com
Blandine Confort
Head of Legal Affairs
Investor Relations
Tel : +33 4 72 15 31 72
bconfort@edap-tms.com
Frédéric Pech
President
EDAP TMS France S.A.S.
Lyon, France
Ryan Rhodes
Chief Executive Officer
EDAP Technomed, Inc.
Austin TX, USA
Judith Johannsen
General Manager
EDAP TMS GmbH
Flensburg, Germany
Jean-François Bachelard
Asia Operations Supervisor
General Manager
EDAP Technomed Co. Ltd
Tokyo, Japan
Hervé de Soultrait
General Manager
EDAP Technomed (M) Sdn, Bhd
Kuala Lumpur, Malaysia
EDAP TMS’s Branches
Officers
Jeon Jon-Hyeon
General Manager
EDAP TMS Korea
Seoul, Korea
Franck Lepoivre
General Manager
EDAP
Dubai, U.A.E.
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Change Your Health
Without Changing Your Life
EDAP TMS is a high-tech medical company listed on the
Nasdaq (EDAP) which develops, manufactures and markets
minimally invasive medical devices using ultrasound tech-
nology for various medical applications and offers a wide
portfolio of complementary distribution products in urology.
By strongly investing in R&D activities and partnering with
renowned medical research institutions since its incep-
tion, EDAP TMS today’s development efforts are focused
on making High Intensity Focused Ultrasound (HIFU) a
standard therapy for soft tissue ablation.
Based near Lyon-France, the company is actively operat-
ing worldwide with subsidiaries and offices in USA, Japan,
Germany, Malaysia, South Korea, as well as through more
than 70 distribution partners.
The HIFU and ESWL divisions market products developed
and manufactured by EDAP TMS for the treatment of
Prostate Cancer and Urinary Stones. To complete EDAP’s
product offering, the distribution division also markets
third-party devices in the urology space.
EDAP TMS - 4, rue du Dauphiné - PA La Poudrette Lamartine - 69120 Vaulx-en-Velin - FRANCE
Tel: +33 (0)4 72 15 31 50 - Fax: +33 (0)4 72 15 31 51 - www.edap-tms.com - contact@edap-tms.com
ANNUAL
REPORT
2022