TABLE OF CONTENTS

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PART I

PART II

PART III

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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’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^®, , Sonolith i-move^®, Focal.One^®. This annual report also makes references to trade names and trademarks of companies other than the Company.

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CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION

This annual report includes certain forward-looking statements within the meaning of 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,’’ ‘‘plan,’’ ‘‘intend,’’ “should,” ‘‘estimate,’’ ‘‘expect’’ and ‘‘anticipate’’ or 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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You should also consider the information contained in Item 3, ‘‘Key Information—Risk Factors’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. Forward-lookingForward-

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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.

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PART I

Item 1. Identity of Directors, Senior Management and Advisors

Not applicable.

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Item 2. Offer Statistics and Expected Timetable

Not applicable.

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Item 3. Key Information

Selected Financial Data

The following table sets forth selected consolidated financial data for the periods indicated. Following recent SEC rule changes on the presentation of selected financial data, we have chosen to present the information below to facilitate assessment of our financial condition and results of operations. This information is qualified by and should be read in conjunction with the consolidated financial statements and the Notes thereto included in Part III of this annual report, as well as Item 5, ‘‘Operating and Financial Review and Prospects.’’ The selected balance sheet data as of December 31, 20192020 and 20182019 and the selected statement of income statement(loss) data for the years ended December 31, 2020, 2019 2018 and 20172018 set forth below have been derived from our consolidated financial statements included in this annual report. Our consolidated financial statements have been prepared in accordance with U.S. GAAP. To date, we have not been required,As the Company has exceeded certain levels of revenues and presently are not requiredbalance sheet set under French law, to preparethe 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. 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 under French GAAP or IFRS, nor have we done so.prepared in accordance with International Financial Reporting Standards.

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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. Although we are constantly monitoring the impact across our businesses of the recent coronavirus outbreakpandemic which has already caused disruption of our activities in 2020, the severity of the operational and financial impact will depend on how long and widespread the disruption proves to be.lasts. Furthermore, 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 could have a material adverse effect on our business as clinics and hospitals curtail and reduce capital and overall expenditures. Finally, we cannot predict the impact that COVID-19 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 COVID-19 may also exacerbate other risks discussed in this section, any of which could have a material effect on us. This situationAs of the date of filing of this report, the global economy remains heavily impacted by the outbreak of the coronavirus and the extent to which the COVID-19 pandemic may materially adversely affect the Company’s financial condition, liquidity, or results of operations is changing rapidly and additional impacts may ariseuncertain. We believe that wethe recently emerged variants of the COVID-19 are not aware of currently.likely to modify the risks as described above.

We have a history of operating losses and although we achieved profitability in 2019, it is uncertain whether we can maintain profitability in the future.

Although we achieved operational profitability in 2019, we have incurred operating losses in 2020, 2018 and 2017 and in each previous 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 lithotripsy and particularly our HIFU devices. We may not, however, 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.’’

Our future revenue growth and income depend, among other things, on the success of our HIFU technology.

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 particularly but not limited to the Focal One, to generate significant additional revenues, achieve, and sustain profitability in the future. Our Extracorporeal Shockwave Lithotripsy (“ESWL”) line of products competes in a mature market that has experienced overall declining unit sales prices in recent years.

Although we are particularly dependent on the success of our HIFU technology to grow our business through our   HIFU (“HIFU”) division, other revenues, generated by our Urology Devices and ServicesExtracorporeal ShockWave Lithotripsy (“UDS”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 believe that our UDSDistribution 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“Information on the Company—UDSDistribution Division— UDSDistribution Division Sales and Distribution of Products.”

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, such as the U.S. Foreign Corrupt Practices Act, 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”) effective as of May 26, 2020,2021, following the expiration of the three-yearfour-year transition period, imposing stricter requirements on the conformity assessment and the commercialization of our products. 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 HIFU & ESWL devices may be distributed on the European and international market after May 2020.

The process of applying for regulatory approval is often lengthy and requires the expenditure of substantial resources. Further, there can be no assurance that we will receive the required approvals 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.

2021.

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’Regulation’’ and “Information“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.

Furthermore,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 also subject to healthcare laws and regulations pertaining to physician payment transparency, privacy and regulations. These regulations include, but are not limited to (i) the U.S. federal Health Insurance Portability and Accountability Act (“HIPAA”) of 1996, as amendedinspection by regulatory authorities at any time. If any inspection by the Health Information Technology for Economicregulatory authorities reveals deficiencies in manufacturing, we could be required to take immediate remedial actions, suspend production or close the current and Clinical Health Act,future production facilities, 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 Centers for Medicare & Medicaid Services (“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” 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. Anywould disrupt our manufacturing processes. Accordingly, failure to comply with these regulations maycould 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.

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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 advancedlater-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:

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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 CMSCenters for Medicare and Medicaid Services (CMS) for Medicare reimbursement, state Medicaid agencies, individual managed care organizations, private insurers and other payers. These decisions may be revised from time to time, which could negatively affect reimbursement for procedures performed using our devices. In May 2017, CMS granted a C-code forWith the usesupport of HIFU for prostate tissue ablation, effective July 1^st, 2017. This C-code covers hospital practical feesthe American Urological Association, and remains temporary. In May 2019,the American Association of Clinical Urologists, the American Medical Association’s CPT Editorial Panel accepted our request to establishAssociation (AMA) established a new Category 1 CPT code that will facilitate reimbursement for the ablation of malignant prostate tissue with HIFU. The CPT specific code description selected by the panelHIFU technology, effective January 1, 2021. In late 2020, CMS published its final rules 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. For private insurers, policy coverage decisions supporting coverage and reimbursement related to HIFU procedures are limited given that HIFU is “Ablation of malignant prostate tissue, transrectal with high intensity focused ultrasound guidance.” The establishment of a CPT code allows for reimbursement for both the technical feenew technology. To further support and raise awareness as well as additional reimbursement to the surgeon. We are currentlyuse of HIFU as an alternative to more traditional treatments, we engaged Medical Technology Partners (MTP) and Argenta Advisors, two leading reimbursement consultancies, to assist in discussion withnavigating reimbursement analysis and strategies, including technology feasibility and assessment needs, payor advisory panels, outcome studies and understanding manufacturer billing education resources. With expanded third party coverage decisions, our Focal One HIFU procedure will have broader market access in the United States. However, public or private insurerspayors may decide to advance on thelimit 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 for prostate tissue ablation.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. In the European Union, there is no harmonized procedure for obtaining reimbursementauthorities and consequently, we must seek regulatory approval in each Member State. Procedures performed with our HIFU devices are not reimbursed in the European Union with the exception

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we cannot guarantee that a definitive reimbursement code will finally 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 payor coverage or reimbursement for procedures related to our products is unavailable, limited in scope or amount, or if pricing is set at unsatisfactorycertain levels and if we fail to establishof public or maintain a certain level ofprivate payor reimbursement or full reimbursement from healthcare payers or governments and private healthcare payers’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 as well as marketing campaigns and promotional tools, particularlyother market costs related to implementimplementing our expanded U.S. and global strategy following the FDA clearance of Ablatherm, and Focal One whileand CMS CPT code 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. Our future cash flow may also be affected by the decrease in revenues directly linked to delay and postponing of treatments and sales projects due to COVID-19 crisis. It may also be affected by the increase in expenses linkedcrisis and to the management by EDAP of the COVID-19 virus.situation.

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. Other energies addressing prostate cancer ablation are also currently being developed such as electroporation and microwave. 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 was approved by the FDA for commercialization in the U.S. in October 2015. Profound Medical, a Canadian company, is developing transurethral ultrasound therapy for prostate cancer. 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 and brain disorders. Theraclion, a French company licensed by EDAP to use of some 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. In addition, we believe that because ESWL has long been the standard treatment for urinary tract calculus disease, competition in that market comes principally from current manufacturers of lithotripters, including Wolf, Storz and Dornier. See Item 4, ‘‘Information on the Company—HIFU Division— HIFU Competition’Competition’’ and Item 4, ‘‘Information on the Company—UDSESWL 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

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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.

Our manufacturing operations are highly regulated and failure to comply with those regulations would harm our business.

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’’) mandated by the FDA and European Union standards for quality assurance and manufacturing process control. 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. Our manufacturing facilities are subject to inspection by regulatory authorities at any time. If any inspection by the regulatory authorities 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.

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 were 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. Since mid-March 2019,2020, we have taken the previously announced steps of requiring the majority of our employees to work remotely, maintaining minimum supply chain activity and curtailing allmost business travel. If we are unable to manufacture a sufficient or consistent supply of our products or products we are developing, or if we cannot do so efficiently, our revenue, business and financial prospects would be adversely affected.

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 COVID-19 pandemic and implied restrictions, our manufacturing and marketing of the affected products would be delayed. 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 and therefore cause additional charges for the Company. We expect to continue to depend upon our suppliers for the foreseeable future. Failure to obtain adequate supplies of components or services in a timely manner and at the agreed price could have a material adverse effect on our business, financial condition and results of operations.

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.

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, regulatory clearances or approvals, pricing, competition, market and consumer acceptance, the manufacturing and supply costs, and the risk that new devices may have quality or other defects in the early stages of introduction.

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.

Our gross profit margins may vary overtime and could adversely impact our financial results.

Our gross profit margins may be adversely impacted by various factors, including but not limited to: changes in product mix, in business models (sales of devices, treatment procedures or leases), introduction of new devices which may generate lower margins than our existing products, changes in manufacturing and labor costs, sale prices, market conditions.

If we fail to actively reduce or mitigate the potential negative impact of the above factors our gross profit margins, our business, financial condition, results of operations, or cash flows could be materially adversely affected.

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. From time to time weWe may receive letters from third parties drawing our attention to their patent rights. 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. For example, a patent

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granted to us by the European Patent Office (“EPO”), covering Visiotrack technology for lithotripsy products (patent EP 2340781), has been opposed by Storz Medical. The opposition was rejected by the EPO and Storz Medical has filed an appeal, which is currently pending. The outcome following such appeal is unpredictable. If Storz Medical were to prevail, we would lose patent protection for our Visiotrack technology, which could result in our competitors and other third parties using our technology to compete with us. Such a 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’Property’’ and Item 4, ‘‘Information on the Company—UDSESWL Division—UDSESWL 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.

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, 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. Litigation may be necessary to protect trade secrets or know-how 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. If we fail to comply with 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 affectionsafflictions 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

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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.

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, 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. Moreover, 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. We have not experienced any significant or material cybersecurity threats or incidents through the date of this annual report. As these threats, 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.

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.

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 overalmost 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 n°2016-1691 (known as Sapin II law). In accordance with Sapin II law, we have implementedwhich 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 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- 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. Our success depends, in part, on our ability to anticipate these risks and manage these challenges. We have a disperseddecentralized 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.

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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.

In May 2018, the new EU data protection framework, the General Data Protection Regulation (“GDPR”) took effect. The GDPR significantly increases the level of data protection and imposes a greater compliance burden on companies. In particular, it now also 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. We believe that the regulation 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 private collected data or to react in due time to address an individual request linked to the GDPR application.

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 2019, approximately2020, 74% of our total costs of sales and operating expenses were denominated in euro, while approximately 51% 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 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, 2019,2020, 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. “Quantitative11, “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.

Our results of operations and financial condition could be adversely affected by the adverse economic, geo-political and financial developments.

The current geo-political, economic and financial environment has affected the level of public and private spending in the healthcare sector generally. A cautious or negative outlook may cause our customers to further delay or cancel investment in medical equipment, which would adversely affect our revenues.

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.

The United Kingdom (the “UK”) held a referendum in 2016 in which voters approved an exit from the European Union (the “EU”), commonly referred to as “Brexit.” On March 29, 2017, the UK formally notified the EU of its intention to withdraw pursuant to Article 50 of the Lisbon Treaty. The EU and UK have negotiated a withdrawal agreement, which was ratified by the British Parliament on January 9, 2020. The UK left the EU on January 31, 2020There will then be a transition period with negotiations between UK and EU to determine future relationship between the UK and EU countries. It is possible that there will be greater restrictions on imports and exports (i.e. custom duties) between the UK and EU countries, increased regulatory complexities (in particular in terms of approval of devices), and economic and political uncertaintyWe had in the region. We sell devices and spare parts in the UK and need to regularly maintain and service our installed base of equipment. Such restrictions on imports and exports may have a significant impact on our business in the UK. This impact will depend on the trade negotiations and the length of the transition period.

We have been and 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 have identified a material weaknessweaknesses in our internal controls over financial reporting, which are now fully remediated; however, we may, in the future, identify additional material weaknesses and if we fail to remediate adequately thisthese material weaknessweaknesses and 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 of December 31, 2019, as part2020, based on its assessment of our internal control, management concluded that our internal control over financial reporting was effective and following the re-assessment ofthat the material weakness reported in our Annual Report on 20-Fannual report for 2018 under item 15, we have reviewed our remediation plan and found that although we have implemented certain new controls duringthe year ended December 31, 2019, some of these controls were not considered as sufficiently robust. Also, part of the remediation plan was delayed due to IT staff shortage. As such, we considered that the 2018 material weakness was not fully remediated. Based on this evaluation,During the course of 2020, the Company implemented a formal “Ticketing tool” in order to strengthen the change management identifiedprocess and documentation. The

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Company also strengthened its IT team to ensure a material weakness in our 2019 internal control over financial reporting with respect to this not fully executed 2018 remediation plan. Execution was found deficient as it related to the implementation of IT program development changes and more specifically the logging of change requests, the tracking of application change validations, the acceptance testing documentation and a lack ofbetter segregation of duties upon IT changes implementation due to small size of our IT structure and organization.

Although we have started additional remediation actions to closeimplementation. The Company therefore consider that this material weakness has been remediated as of December 31, 2020.

We may in the future identify new material weaknesses in our internal control and we may not be able or our auditors may find that we have not been able, to fully address the identified deficiencies and consistently execute on the Company’s internal controls over financial reporting in a satisfactory manner.

remediate these material weaknesses. 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 develops, additional resources and management oversight may be required.

Additional procedures were performed for year-end 2019 to demonstrate that no inappropriate use of our IT occurred as of December 31, 2019, and that this material weakness did not result in a material misstatement of the consolidated financial statements for the year ended December 31, 2019 or restatement of any prior period previously reported by the Company.

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.

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.

OurADSs are currently traded on theThe NASDAQ Global Market. The average daily trading volume of our ADSs in 20192020 was 177,251,107,764, the high and low bid price of our ADSs for the last two financial years ended on December 31, 20192020 and December 31, 2018,2019, was $5.28 and $1.46, and $5.42 and $1.78, and $4.25 and $1.35, 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 20182019 was 90,875120,648 as opposed to 120,648126,839 for the same period of 2019.2020. 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.

In addition, following periods of volatility in the market price of a company'scompany’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.

We may issue additional securities that may be dilutive to our existing shareholders.

On June 28, 2019, our shareholders adopted 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 development. On June 28, 2019, our shareholders also adopted a resolution allowing the Board of Directors to issue 1 million new shares under the form of subscription options to motivate and reward teams dedicated to successfully implementing our U.S. and worldwide expansion plans. As of December 31, 2019, no additional shares were issued nor options allocated as authorized under this Plan.

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.

We currently do not intend to pay dividends, and cannot assure shareholders that we will make dividend payments in the future.

We have never paid any dividend on our shares and do not anticipate paying any dividends for the foreseeable future. Thereafter, declaration of dividends on our shares 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. See Item 8, “Financial Information—Dividends and Dividend Policy.”

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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:

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.

Holders of our ADSs may be exposed to increased transaction costs as a result of proposed European financial transaction taxes.

On February 14, 2013, the EU Commission adopted a proposal for a Council Directive (the "Draft Directive") on a common financial transaction tax (the "FTT"). According to the Draft Directive, the FTT should have been implemented and should have entered into effect in 10 EU Member States (Austria, Belgium, Estonia, France, Germany, Greece, Italy, Portugal, Spain, Slovakia, and Slovenia, each a “Participating Member State”). In March of 2016, Estonia indicated its withdrawal from enhanced cooperation. In February 2021, the Portuguese Presidency of the Council proposed an inclusive discussion among all Member States on tax design issues of the FTT at the EU level.

Pursuant to the Draft Directive, the FTT was to be payable on financial transactions provided at least one party to the financial transaction was established or deemed established in a Participating Member State and there was a financial institution established or deemed established in a Participating Member State which was a party to the financial transaction, or was acting in the name of a party to the transaction. Under the Draft Directive, the FTT should not have applied, however, to (inter alia) primary market transactions referred to in Article 5(c) of Regulation (EC) No 1287/2006, including the activity of underwriting and subsequent allocation of financial instruments in the framework of their issue. The rates of the FTT were to be fixed by each Participating Member State but for transactions involving financial instruments other than derivatives would have amounted to at least 0.1 per cent0.1% of the taxable amount. The taxable amount for such transactions would have been generally determined by reference to the consideration paid or owed in return for the transfer. The FTT would have been payable by each financial institution established or deemed established in a Participating Member State which was either a party to the financial transaction, or acting in the name of a party to the transaction or where the transaction had been carried out on its account. Where the FTT due had not been paid within the applicable time limits, each party to a financial transaction, including persons other than financial institutions, would have become jointly and severally liable for the payment of the FTT due.

The Draft Directive has not been adopted. The FTT proposal is still subject to negotiation between the Participating Member States and therefore may be changed at any time. In this respect, a new FTT proposal was submitted in December 2019. Under this new proposal, the FTT would be imposed at a 0.2 per cent0.2% rate on the purchase of shares in domestically listed companies with a market capitalization in excess of €1.0 billion, and would also apply to depositary receipts issued domestically and abroad and which are backed by shares in these companies.

Moreover, once a final agreement on such FTT proposal will be reached (the "FTT Directive"), it will need to be implemented into the respective domestic laws of the Participating Member States and the domestic provisions implementing the FTT Directive might deviate from the FTT Directive itself. See Item 10, "Additional Information - "Additional Information—Certain Income Tax Considerations."

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Prospective holders should therefore note, in particular, that any sale, purchase, or exchange of the Shares or ADSs could become subject to the FTT at a minimum rate of 0.1 per cent.0.1%. The holder may be liable to itself pay this charge or reimburse a financial institution for the charge, and / or may affect the value of the Shares or ADSs.

In any case, prospective holders should consult their own advisers in relation to the consequences of the FTT associated with subscribing for, purchasing, holding and disposing of ADSs.

Our investors may not realize the potential benefits of inspections under the PCAOB’s cooperative arrangement until a new cooperative arrangement with the French audit authority is entered into and inspections in France resume.

Our auditor, KPMG S.A., is registered with the Public Company Accounting Oversight Board, or PCAOB, in the United States. The PCAOB’s cooperative arrangement with the French audit authority expired in December 2019. The expiration of this cooperation arrangement prevents inspections of registered firms in France until a new arrangement is concluded. Such inspections assess a registered firm’s compliance with U.S. law and professional standards in connection with the performance of audits of financial statements filed with the SEC. As a result, our investors may not realize the potential benefits of such inspections until a new cooperative arrangement, which is currently under negotiation, is entered into and inspections in France resume. The current inability of the PCAOB to conduct inspections of auditors in France also makes it more difficult to evaluate the effectiveness of our auditor’s audit procedures or quality control procedures as compared to auditors outside France that are subject to PCAOB inspections.

General Risks Factors

Our results of operations and financial condition could be adversely affected by the adverse economic, geo-political and financial developments.

The current geo-political, economic and financial environment, and particularly the COVID-19 pandemic, has significantly impacted the global, worldwide economies and has affected the level of public and private spending in the healthcare sector generally. A cautious or negative outlook or a COVID-19 crisis which lasts may cause our customers to further delay or cancel investment in medical equipment, which would adversely affect our revenues. See “-- 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.”

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 28, 2019, our shareholders adopted 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 development, which can be used to finance the acceleration of the roll out of our HIFU activities in the United States, given the CPT Code Category 1 approval for HIFU technology that was confirmed for execution in January 2021. On June 30, 2020, some of these financing resolutions were extended as they came to expiration. On June 28, 2019, our shareholders also adopted a resolution allowing the Board of Directors to issue 1 million new shares under the form of subscription options to motivate and reward the management teams dedicated to successfully implementing our U.S. and worldwide expansion plans. As of December 31, 2020, no additional shares were issued nor options allocated as authorized under the above Plan.

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.

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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:

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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, 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. As of the date of this annual report, we have received fraudulent invoices, purportedly from our suppliers, submitted to us using fraudulent email addresses and have 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.

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

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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.

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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, but also breast and gynecological tumors.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 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 September 11, 2017, we submitted a (510K) application for our Focal One HIFU device in accordance with FDA guidance.

On June 7, 2018, we obtained FDA clearance for our Focal One device dedicated to the focal ablation of prostate cancer.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, ExactVu^TM, 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 approachOne 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 localized prostate cancer reduces side effects and improves patients’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 enrollment is proceeding as planned.

In May 2019,Finally, in January 2021, U.S. CPT Code Category 1 reimbursement for HIFU became effective. CMS established, for the American Medical Association’s (“AMA”) CPT Editorial Panel accepted our request to establishfirst time, a new Category 1 CPT code that will facilitateincluding reimbursement for theto physicians performing ablation of malignant prostate tissue with HIFU. The establishment of a CPT code allows for reimbursement for bothHIFU in the technical fee as well as additional reimbursement to the surgeon. AMA’s decision is expected in January 2021.

On October 30, 2019, we introduced a new concept of endourology multi-modality Platform Endo-UP designed for the management of urinary stones, responding to the rapidly evolving urinary calculi paradigm. Endo-UP Platform is expected to be commercially available in 2020 in Europe, when CE mark is granted,

United States.

Additional information regarding the principal capital expenditures and divestitures can be found in Item 5, ‘‘Operating and Financial Review and Prospects’’.

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.

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We recently implemented organizational changes in our structure and realigned our activity is organized in twointo three divisions: HIFU, and UDSESWL (including lithotripsy activities). and Distribution to better reflect how we view our businesses and how we measure our progress. Through these twothree divisions, we develop, produce, market and marketdistribute minimally invasive medical devices, mainly for urological diseases. The HIFU division includes sales of Focal One, Ablatherm and related consumables and services, 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.

We believe that these three divisions will help to better support the creationexpansion of these two divisions has allowed usour HIFU development and sales activities as well as to expandmaximize the potential of our market share by optimizing worldwide distribution capabilities, all of which is coordinated through our subsidiaries.

Distribution activities.

Our HIFU and UDSthree 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 €11.4 million, €14.1 million and €11.0 million for 2020, 2019 and €9.5 million for 2019, 2018, and 2017, respectively. Those sales are generated in Europe, the United States and the rest of the world, excluding certain countries in Asia, (including Japan)such as Japan, where our HIFU devices are not approved yet. Total net sales for the UDSESWL division were €30.8€12.9 million (including €17.5million€6.7 million in Asia and €13.3€6.2 million in Europe and the rest of the world), €28.1€14.1 million (including €13.9€7.1 million in Asia and €14.2€7.0 million in Europe and the rest of the world),) and €14.5 million (including €6.1 million in Asia and €8.3 million in Europe and the rest of the world),, each for 2020, 2019 and 2018, respectively. Total net sales for the Distribution division were €17.3 million (including €9.0 million in Asia and €8.3 million in Europe and the rest of the world), €16.6 million (including €10.3 million in Asia and €6.3 million in Europe and the rest of the world), and €26.2€13.7 million (including €13.4€7.8 million in Asia and €12.8€5.9 million in Europe and the rest of the world), each for 2020, 2019 and 2018, and 2017, respectively.

See Note 2829 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“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 decision and investment processes. Hence, our quarterly revenues are often impacted and fluctuate according to these parameters, possiblygenerally resulting in a higher purchasing activity in the last quarter of the year. The HIFU division contributed €14.1€11.4 million to our consolidated net sales during the fiscal year ended December 31, 2019.2020.

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 three HIFU devices: the Ablatherm, the Ablatherm Fusion and the Focal One. The Ablatherm and Ablatherm Fusion are dedicated todirected at prostate tissue ablation in the treatment of localized organ-confined prostate cancer, referred to as T1-T2 stage. The Focal One high-end device is a HIFU fully robotic device for prostate tissue ablation dedicated to the focal therapy of localized prostate cancer of T1-T2 stage, thereby destroying targeted cancer cells only. The robotic features of our HIFU devices make the treatment procedure much safer for the patient and less operator dependent. All three devices 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) revenue-per-procedure (“RPP”) and (iv) treatment related services. TheWe 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 installed base.devices. As of December 31, 2019,2020, the HIFU division had an active installed base of 153122 HIFU devices of which 4461 Focal One machines.

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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:

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HIFU Products

Currently, we commercialize three products utilizing the HIFU technology. 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.

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HIFU Division Patents and Intellectual Property

As of December 31, 2019,2020, the HIFU division’s patent portfolio contained 4033 granted owned or co-owned patents consisting of 12eight granted patents in the United States, 2211 patents in the European Union, andeight granted patents in Japan and 6six patents in both Israel and the rest of the world. TheyChina. These patents belong to 1612 groups of patents covering key technologies related to therapeutic ultrasound principles, systems and associated software.

During 2019, oneAdditional owned or co-owned patent covering ultrasound imaging of HIFU lesions within the liver has been granted in the United States. Two additional patents were granted in France. One covers a specific transducer cooling process adapted to high ultrasound energy emission and the other one concerns the design of a detachable probe part, used to easily fix disposable coupling covers or engineering tools servicing the probe.

Nine additional patentsapplications covering certain other aspects of our HIFU technology, including two patent application in the United States, four patent applications in the European Union,  two patent applications in Japan and Japan (five), the United States (two), and the rest of the world (two)two patent applications in China, are currently under review.pending before the relevant patent offices. During 2020, one such new patent application was filed in France, covering a new ultrasound dynamic focusing technology. 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 givecollaboration gives rise in some cases to the filing of patents,patent applications, followed by the grant of co-owned patents. We have entered into various license agreements with INSERM related to certain patents co-owned with INSERM whereby we commit to pay a fixedan amount of royalties to INSERM based on a fixed rate of the net revenues generated from the sales of HIFU devices using co-owned patents. Under these agreements, which last for the life of each co-owned patent, we have the exclusive right to the commercial use of the 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.

In AugustJuly 2004, we licensed our HIFU technology for the specific treatment of the ‘‘cervicofacial’’ lesions, including the thyroid, to Theraclion, a French company created by our former director of research and development. On January 11,10, 2011, we extended the above license by granting Theraclion exclusivity for the treatment of benign breast tumors and by granting a non-exclusive worldwide license for the treatment of malignant breast tumors. This license agreement provides for the payment of certain royalties calculated on the basis of Theraclion’s sales of devices. We determined that we could not invest in these specific applications at that time and this license agreement therefore allows Theraclion to pursue the development of HIFU for these applications. We own no interest in Theraclion.

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 adverse effect on our ability to market HIFU systems. See Item 3, “Risk Factors – “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 2005, EDAP started an Investigational Device Exemption (“IDE”) study (G050103) to assess the safety and effectiveness of Ablatherm HIFU in the U.S. for the treatment of low risk, localized prostate cancer. This study was designed as a pivotal study to support PMA approval. This study was planned as a multicentric, prospective, non-randomized, concurrently controlled clinical trial comparing Ablatherm HIFU to cryotherapy in patients with low risk, localized prostate cancer. Due to accrual difficulties, particularly in the cryosurgery arm, this planned study was not completed. Of the planned 205 patients per arm, 136 and five patients were recruited to the Ablatherm HIFU and cryosurgery arms, respectively. We completed the treatment of 134 patients in June 2010, the required two years’ follow-up phase was completed in June 2012. Clinical outcomes from these patients combined with our strong European long-term database formed the foundation of our PMA submission to the FDA on January 31, 2013.

On March 9, 2015, we announced that based on our collaborative discussions with the FDA, we planned to seek clearance of Ablatherm HIFU by way of a direct de novo 510(k) application as opposed to the PMA application amendment we had been considering. The FDA indicated that while PMA approval would be required for specific claims regarding treatment of prostate cancer, a prostate tissue ablation claim could be cleared via a direct de novo 510(k) application.

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.

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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 technologytechnology”— 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 to address the China market.

Clinical and Regulatory Status in the Rest of the World

The Ablatherm is cleared for distribution in Australia, Canada, South Korea, Costa Rica, Peru,Ecuador, Russia, Taiwan, Australia, Brazil, South Korea and Ecuador.

Taiwan.

The Focal One device is cleared for distribution in Saudi Arabia, Argentina, Brazil, Canada, South Korea, Costa Rica, United Arab Emirates, Ecuador, Israel, Malaysia, Mexico, Peru,U.K, Russia, Singapore,Switzerland, Ukraine, Uruguay and Venezuela.

See Item 3, “Risk Factors” – “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 will be followed for 30 months ahead of data analysis and results publication. During that follow-up period, we will be able to pursue patient treatments using HIFU under the specific Forfait Innovation coverage process, but these patients will not be followed as part of HIFI Study.

In November 2020, the Study Coordinator presented interim results at the AFU annual congress. The results of the interim analysis (non-consolidated results) show a significantly better 24-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 significantly better and erectile function was significantly less impacted for the patients undergoing HIFU compared to those in the RP arm.

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, 2020, we received refundable grant of a total of €0.6 million.

As part of PERFUSE project, several studies have already been initiated and sponsored by academic partner HCL - Edouard Herriot Hospital. In September 2018, we launched a phase 2 multicentricPhase II multi-centric study to evaluate the efficacy and safety of HIFU focal therapy in patients with intermediate-risk single-lobed prostate cancer (the “FOCAL”“FOCALE” study). 170 patients are to be included in the FOCALFOCALE study. As of January 2021, 141 patients have already been included in this study within 13 French active centers. In October 2018, we initiated a phase 3, multicentric,Phase III, multi-centric, randomized study 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). 146 patients are to be included in the study. As of January 2021, 58 patients have been included within 11 French active centers. In February 2020, French regulatory authorities authorized the initiation of a phase 1Phase I study 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). 40 patients are to be included in the study. The first patient was included in this study in July 2020.

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In early 2018, a new database,data collection collaborative effort, called the Focal Robotic Ultrasound Ablation Registry (“FoR-UsA”), has been established Registry, was initiated to initially collect high quality clinical data of U.S. patients treated with Ablatherm Robotic HIFU.EDAP’s HIFU devices in academic institutions in the U.S. Clinical data from Focal One treatments is now being added to the Registry.collected as part of this project. The FoR-UsA Registry is the first in the U.S. that specifically collects data on patients who have had HIFU focal therapy for prostate tissue ablation, giving urologists around the U.S. greater access to short and long-term HIFU outcomes. The registry also 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 a registrysuch prospective data collection efforts documenting HIFU data from patients in the U.S.

HIFU infor Potential Treatment of Liver Cancer

In June 2015,view of addressing liver cancer using HIFU technology, we entered into a multi-partner liver cancer development project organized by the HECAM consortium. This project aims at developing innovative diagnostic, imaging and therapeutic technologies to address liver cancer. Our focus withinnamed the HECAM consortium is on developingin 2015 to develop a novel HIFU treatment for–per operative- approach to treat liver cancer.metastasis. The HECAM project was completed in 2020. To fund this development program, EDAP is to receive a maximum of €2.4 million in non-dilutive financing from Bpifrance over the five-year project period. We received the first instalment of €0.7 million in June 2015 and a second installment of €0.8 million in June 2017 (i.e. a total of €1.5 million including €1.0 million as a conditional subsidy and €0.5 million as a grant). The HECAM project is currently being finalized and a multicentric phase II study will be initiated based onnon-refundable grant. Despite a first mono-centricsingle-center study successfully implemented with Lyon’s Centre Leon Bérard cancer center.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 requirement of the new European MDR regulations to become 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.

HIFU infor Potential Treatment of Deep Endometriosis

In 2020, we plan to initiateinitiated a multicentricPhase II 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. A total of 38 women will be enrolled in the study at five major hospitals in France and assessed over a six-month follow-up period. The intended end-point of this study is to evaluate the safety and efficacy of HIFU for this pathology. This Phase II study will complementcomplements a phasePhase I study successfully finalizedcompleted in 2019 which reported promising results with a significant improvement of the outcomes and in patient quality of life at six months. These results were published in November 2019.

HIFU Clinical Publications

To date, clinical results related to our HIFU devices have been published in renowned peer-reviewed journals.

In October 2016, clinical results were published in the European Urology journal (Rischmann et al.). They validated a new focal HIFU strategy in the treatment of prostate cancer localized in a single lobe of the prostate (hemi-ablation treatment). The goal of focal treatment as opposed to “radical” treatment is to reduce the complications associated with standard treatments, particularly the risks of incontinence and impotence.

In December 2016, Professor Roland van Velthoven from Institut Bordet Oncology Center, Brussels, Belgium published in the Journal of Endourology a matched pair analysis of HIFU Hemi-ablation vs robotic assisted laparoscopic prostatectomy. In this study, 55 patients with prostate cancer localized in a single lobe of the prostate were treated using Ablatherm-HIFU and their outcomes were compared 1:1 with patients having similar clinical criteria but who underwent robotic-assisted laparoscopic prostatectomy.

In 2017, Crouzet et al. from Edouard Herriot Hospital, Lyon, France, reported in the British Journal of Urology (BJU), oncological outcomes of salvage HIFU for locally recurrent prostate cancer after External Beam Radiotherapy (“EBRT”). This retrospective study comprises 418 patients from nine centers with local recurrent cancer after EBRT treated with HIFU from 1995 to 2009. The publication is the largest series of salvage treatment confirming very positive oncological outcomes.

More recently, Ganzer & al., Germany, evaluated focal HIFU Hemi-ablation in a prospective trial. Their data were published in the Journal of Urology in April 2018. In their conclusion, they reported that focal therapy Hemi-ablation is safe with acceptable oncologic outcome.

In November 2019, Philip CA et al, from Croix Rousse Hospital, Lyon, France, published in Ultrasound Obstet Gynecology journal, the results of the treatment of 20 patients with deep rectal endometriosis using Focal One HIFU. This EDAP sponsored study

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is the first one on the use of HIFU in this indication. The authors reported very promising results with low morbidity and significant efficiency on intestinal and gynecological symptoms as well as in the quality of life.

In September 2019, Dupré et al. from Leon Bérard Cancer Center, Lyon, France, published in the Journal of Visualized Experiments an evaluation of the feasibility, safety and accuracy of an Intraoperative HIFU device for treating liver metastases. Results are promising and a multicentric phasemulti-centric Phase II study is to be initiated.

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 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.

HIFU Division Market Potential

Prostate cancer is currently the first or(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 20202021 to be approximately 191,930,248,530, 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, gynecological, bladder, kidney, brain pancreatic and retroperitoneal 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 1Phase 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. AIn 2020, we initiated a Phase II multi-centric study is to be initiated in 2020 to investigate further the use of HIFU in this pathology. 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.

HIFU Reimbursement status

In the United States, following the AMA’s recognition 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

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related to HIFU procedures for prostate tissue ablation. 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 final rule maintains the HIFU procedure in the Level 5 Urology Ambulatory Payment Classification (APC) in 2021. This translates into a payment for a hospital performing a HIFU procedure on a Medicare patient of around $4,400 as a national average, adjusted locally based on the wage index. This represents an increase of 5%, from the payment hospitals receive from Medicare for a HIFU procedure in 2020.

In the physician fee schedule final rule, CMS has established for the first time a payment to physicians performing a HIFU procedure in the U.S. In the final rule, CMS has set a total Relative Value Units (“RVUs”) for a physician performing a HIFU procedure at 28.57. This translates to an average payment of $997 for a urologist performing a HIFU procedure on a Medicare patient in a facility setting. As a reference, a comparable established minimally invasive therapy for prostate cancer, cryotherapy, yields 22.28 RVUs, which translates to $786 for the urologist under the same setting and patient conditions. A radical prostatectomy would grant the urologist 34.06 RVUs, which translates to a Medicare payment of $1,188, or 41.95 RVUs and $1,464 if performed laparoscopically.

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. HIFU patients are still being treated and entered into a multi-partner liver cancer development project named the HECAM consortiumdedicated registry. Under this specific process, French healthcare government authorities will review the clinical data gathered following this decision in 2015 to develop a novel HIFU approach to treat liver metastasis. The HECAM project is being finalized and a multicentric study is to be initiated based on a first mono-centric study implemented with Lyon’s Centre Leon Bérard cancer center.view of granting definitive reimbursement for HIFU.

We also anticipate to develop HIFU technology to address pancreatic, breast and gynecological tumors. However, the expansion of the use of HIFU to other areas of treatment will require a significant investment in research and development, an investment we will undertake gradually while focusing on the acceptance of HIFU as a treatment for localized prostate cancer.

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 newnewer 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, EBRTexternal 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 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 – 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.