Jacob Goldberger - C. G. Capital Philippe Chauveau - Chairman Marc Oczachowski - Chief Executive Officer Francois Dietsch - Chief Financial Officer

Swayampakula Ramakanth - H.C. Wainwright

Greetings and welcome to the EDAP TMS Fourth Quarter and Full Year 2016 Results Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Jacob Goldberger with C. G. Capital. Thank you. You may begin.

Good morning and thank you for joining us for the EDAP TMS fourth quarter and full year 2016 earnings conference call. On today’s call, we will hear from Philippe Chauveau, Chairman of the Board; Marc Oczachowski, Chief Executive Officer; and Francois Dietsch, Chief Financial Officer. This call is being recorded and includes a slide presentation which is being webcast. To view the webcast, please visit the investor information section of www.edap-tms.com. Before we begin, I would like to remind everyone that management’s remarks today may contain forward-looking statements which include statements regarding the company’s growth and expansion plans. Such statements are based on management’s current expectations and are subject to a number of uncertainties and risks that could cause actual results to differ from those described in such forward-looking statements. Factors that may cause such a difference include, but are not limited to those described in the company’s filings with the Securities and Exchange Commission. I would now like to turn the call over to EDAP’s Chairman, Mr. Philippe Chauveau.

Thank you, and once again thank you all for joining us today. The year 2016 was a tremendous year for EDAP. We continued to expand the global reach of an incredible HIFU devices, allowing an ever increasing number of patients access to this revolutionary treatment for early stage prostate cancer. As a result of our dedicated team’s continuous successful efforts, we reached record revenue in 2016. Now, I would like to introduce Marc Oczachowski, our CEO.

Thank you, Philippe. Welcome and good morning everyone. As you saw in our press release yesterday evening, full year 2016 revenue grew 10.4% to €35.6 million compared to €32.3 million for 2015. Revenue from our HIFU division increased approximately 63% over the close of 2016 compared to 2015 as the total market begins to embrace this novel technology. We are pleased that the business continues to maintain its double digit growth momentum and record breaking sales milestones for the last three years. Our significant progress and expansion in HIFU sales has been the primary driver for this growth and continued expansion of global gross margins which increased over 300 basis points to 46.1% during 2016 from 42.8% in 2015. I am pleased to announce that our continued sales growth in combination with a focussed disciplined approach to the management of expenses and investments during the year, we have achieved yet another year of profitability with an operating profit of almost $0.5 million. 2016 was clearly another productive year during which we accomplished a number of significant milestones within the HIFU divisions as a result of our recent launch of the technology in the U.S. market since its approval during the fourth quarter of 2016. U.S. market penetration has started rapidly at the beginning of 2016. We implemented a strategy that’s focussed on targeting academic centers to build awareness and global adoption of the technology. As a result, EDAP now has HIFU systems available in the most prestigious institutions for prostate cancer management in the country such as USC in Los Angeles, University of Miami, Duke University, the Cleveland Clinic, and many others. What’s more impressive about the early adoption of our technology is that most of those centers were already renowned in Robotic surgery processes of prostate cancer. It was evident to us that Ablatherm Robotic HIFU would be an immediate and ideal fit into the treatment protocol of these institutions upon every approval. It is because HIFU is a unique technology that provides a non invasive solution for effective prostate tissue ablation with high preservation of quality of life. This growing trend of utilizing the innovative focal approach for the treatment of prostate cancer significantly favors a technology like HIFU as it excels in the key areas of precision, repeatability, and non invasiveness for the effective ablation of prostate tissue. While building the academic validation and recognition of our technology in 2016, we began to partner with companies providing mobile services to hospital, ambulatory surgical centers, and private groups of urologists. These partnerships offer an attractive alternative enabling hospitals or centers to access technology without a significant investment. By creating these alternative solutions, we can quickly penetrate rural areas, smaller private practices, or large hospitals that would like to begin using our technology without the administrative hassles and tasks. We continue to see a lot of traction and interest from the medical community. The current standard of care for prostate cancer must be modernized; an alternative that is less severe than radical prostatectomy but more effective in active surveillance or doing nothing is thoroughly needed. Our technology field did just well. Our focal approach facilitates efficacy it can to prostatectomy with minimal impact to the quality of life. After a strong start in the U.S. during the first half of 2016, we experienced a slight softening of revenue growth during the second half of the year. The result of the lower second half was anticipated and was due to the announcement of our new Focal One file submission to the FDA back in April 2016. While this is great news, customers may have deferred their purchase of Ablatherm in anticipation of Focal One’s availability. As previously discussed, Focal One and Ablatherm are complimentary devices and will allow EDAP to offer a unique and complete brand of HIFU devices and solutions. Potential customers and projects may be escalating [ph] between one and the other and would then prepare to postpone the decision until both are available. It is important to understand that the underlying demand for EDAP’s HIFU devices continues to rise. We have numerous prospects in our pipeline and continue to see interest from hospitals, surgery centers, and private groups across the country. Another factor contributing to the slowdown during the second half of 2016 is the lack of reimbursement in the U.S. This means only private paid patients currently have access to the HIFU treatment limiting the number of eligible patients. We are actively working towards reimbursements and submitted [indiscernible] to CMS to get the C-Code. This is a quick process which results in a temporary Code for three years in order to facilitate access to innovative technologies to the market before they get a definitive reimbursement code or CPT. We expect to receive feedback from CMS during December and will keep you updated whenever possible. Before reviewing some of our OUS achievements in 2016, I would like to give you a quick update on the 510(k) filing for Focal One here in the U.S. We filed in April 2016 and have been actively working with the FDA throughout the review process. Because the technology is new, the FDA looks at it very closely to ensure compliance with their standards. We are collaborating with FDA and are committed to providing all necessary clinical and technical data to assist in the decision for Focal One. We will of course keep the market posted of any progress or decisions when known. 2016 has also been a very exciting and productive year outside of the U.S. in our HIFU development. Focal One device sales revenue increased by 96% while maintaining steady growth in the treatment base revenues. The Focal trend for the treatment of prostate cancer combined with effective sales and marketing initiatives has allowed us to penetrate existing European markets further while expanding to new territories. Last weekend was the European Urology Association annual meeting in London. EDAP has the broadest presence at the exhibition area and during the scientific sessions and prostate presentations. We met with a lot of our users to discuss their experience and develop new sales leads. The enthusiasm and motivation within the Europe and International urology communities surrounding EDAP’s high school technologies and its unique features and capabilities was [Indiscernible]. On the clinical side, we also achieved an excellent year in publication and news. We released three heavy ablations Focal therapy publications from France and Belgium strengthening the positioning of EDAP’s HIFU technologies and devices towards partial treatment and focal ablation of the prostates for prostate cancer patients. A publication was released in Belgium on the matched pair analysis comparing Focal HIFU and radical prostatectomy showing the similar level of efficacy and disease control with a favourable morbidity profile for the HIFU arm [ph] of the comparison. Finally, in about two week ago, a Multicentric study on salvage treatment with HIFU following radiation failure with seven years follow up of 418 patients was accepted for publication. This is one of the largest and longest study regarding radiation failure. It shows a high level of prostate specific survival rate of 82% of seven years. This latest publication confirms the unique positioning of EDAP’s HIFU technologies in this key indication where no real therapeutic solution could be offered to patients. This fits perfectly in the salvage strategy delaying the time where only [Indiscernible] treatment is available offering a real therapeutic option. Turning to our UDS division, we experienced a slight decrease in revenue in 2016. 2015 was particularly high in Lithotripsy sales and we experienced delays while closing deals in Q4 of 2016. The main difference in our revenues came from of sales of lithotripters' during the last quarter of 2016 as compared to the same quarter in 2015. We started 2017 with a promising pipeline of projects and great expectations. We believe 2016 was an exception rather than trend. Lithotripsy is still the gold standard of treatment for kidney stones and represents a majority of kidney stones treatments in the world. As a final topic of discussion for today, I would like to share some recent changes to our organisation that will strengthen our expansion and growth program worldwide and more specifically in the U.S. As we recently announced, we just recruited Noah Bartsch, our new Vice President of Global Medical, Regulatory, and Quality Affairs based in Austin, Texas at our U.S. Corporate Office. Although his role will be global, he will primarily focus on bringing his experience and expertise in his major fields which are critical to the development of the markets such as the U.S. The goal is to drive adoption and recognition of the new and innovative technology. In parallel, we decided to strengthen our marketing and sales initiative in the U.S. by increasing spending on marketing and promotion in the U.S. We’ve then decided to recolate to us [Indiscernible] our Chief Marketing Officer who has been leading our OUS marketing programs for more than five years trust [ph] him to lead our U.S. marketing program. He has been with the company for nearly ten years and has a deep understanding of our customers, products and technologies. He goes to U.S., he is aware that the company will invest most of its marketing efforts, resale’s having our leading marketing assets they call their operations of the subsidiaries by the wisest course of action. These strong team at our Austin Base, U.S Corporate office will be focussed on developing and penetrating the U.S. markets with our HIFU technology. This will also allow me to get back fully to my role as the CEO of EDAP TMS group while maintaining our U.S. focus and being based upon corporate headquarters in Lyon, France. We are pleased with our record sales revenue in 2016 strongly driven by the expansion and growth of our HIFU businesses. Before turning over the call to Francois for the comprehensive review of our finances, I would like to highlight the fact that EDAP was profitable for the entire year of 2016 and for the second year in a row. Last, but not the least the company shows a strong €22 million cash position as of December 31, 2016 which will enable us to invest more into many of our programs including R&D and marketing initiative. Francois?

Thank you Marc and good morning everyone. I will now take a few minutes to review our financial results for the three and 12-months period ended December 31st 2016. The revenue for the fourth quarter of 2016 was €10.7 million or $11.4 million, a decline of 9.3% compared to €11.8 million or $12.8 million during the fourth quarter of 2015. This decrease was due in large part to an unusual large amount of lithotripsy equipments sold during Q4 2015 even if HIFU revenue reached a record level on Q4 2016. The total revenue in the HIFU business for the fourth quarter of 2016 was €4.6 million or $4.9 million compared to €3.3 million or $3.6 million for Q4 2015. This 38.3% increase is based on growth in both further equipment and treatment driven revenue. For Q4, 2016 total revenue for the lithotripsy division was €6.1 million or $6.5 million compared to €8.5 million or $9.2 million during the year ago period, the 27.9% decrease. During the fourth quarter of 2016 the company recorded sales of 9 lithotripsy machines which compares to an extraordinary total of 25 devices sold in the fourth quarter of 2015. Gross proceeds for the fourth quarter of 2016 was €5.2 million or $5.3 million compared €5.6 million or $5.7 million for the year ago period. Gross profit margin and net sales improved from 45% in the fourth quarter of 2015 to 48.8% in Q4 2016 since primarily to the favourable mix of the sale between HIFU and UDS. Operating Profit for the fourth quarter of 2016 amounted to €0.3 million or $0.4 million compared to an operating profit of €1.6 million or US$1.7 million in the fourth quarter of 2015. Net loss for the fourth quarter of 2016 was €1.3 million or US$1.4 million, or a loss of €0.04 per diluted share as compared to a net income of €5.1 million or US$5.5 million, or an income of €0.18 per diluted share in the year ago period. Net loss in the fourth quarter of 2016 including non-cash interest expense of €0.4 million, or US$0.5 million to adjust the accounting fair value of the outstanding warrants. Turing to the results for the full year of 2016, total 2016 revenue was €35.6 million or US$39.3 million, an increase of 10.4% compared to €32.3 million or US$35.6 million of total revenue in 2016 and a new record level on a full year. Total annual 2016 HIFU revenue was €13.8 million or US$15.2 million, an increase of 63% compared to €8.5 million or US$9.4 million in 2016. In 2016, we sold 14 HIFU machines from 37 in 2011and treatment driven revenue increased by 25.8% from one year to another. For the full year Lithotripsy revenue were €21.8 million or US$24 million, a decrease of 8.3% compared to €23.8 million or US$26.2 million for 2015. In 2016, we sold 36 lithotripsy machines compared to 52 in 2015. Full year 2016 gross profit was €16.4 million or US$18.1 million, an increase of 19% compared to gross profit of €13.8 million, or US$15.2 million in 2015. Gross margin in 2016 expanded to 46.1% from 42.8% during the year of 2015. In 2016, we recorded for second year in a row, the full year operating profit amounting €0.4 or US$0.4 compared to an operating profit of €0.5 million or US$0.5 million during the prior year period. In 2016, full year net income was €3.8 million or US$4.2 million, or an income of €0.13 per diluted share as compared to a net loss of €1.7 million or US$1.8 million or a loss of €0.07 per diluted share in 2015. Full year net income included non-cash interest income of €4 million to adjust accounting fair value of the outstanding warrants. These non-cash income is mainly due to the decrease in the company’s stock price between December 31, 2015 and December 31, 2016. As of the 31st of December, 2016 the Company had cash and cash equivalent for €22 million or US$23.2 million has not included. We are well funded to proceed with the company’s works. I would like to now the turn back over to Marc.

Thanks, Francois. 2016 was a tremendous year for EDAP. This is successfully broke into the U.S. marketplace with Ablatherm and so continued expansion globally. The potential for growth in 2017 is considerable both the C-Code we will proceed and Focal One that the approval represent significant milestone for EDAP in the U.S. and would remove major workloads [ph] to our ability to provide patients with the treatments that Ablatherm improve their quality of life. Demand for [Indiscernible] treatments in the global clinical community has flourished, thanks to the marketing efforts our team and we are grateful for the opportunity to positively impact the lives of so many men. Thank you all for joining us today and I would like to begin our question-and-answer session. Operator, please.

Thank you. [Operator Instructions]. Our first question comes from the line of Swayampakula Ramakanth with H.C. Wainwright. Please proceed with your questions.

Thank you. Good morning, Marc.

Good morning RK.

Couple of questions, I know you gave us a little bit of an update on the reimbursement process. Could you kindly give us a little bit more detail in terms of where you are in the process? How long would it take for you to get your initial C-Code? And what else you need to give to the CMS to get your CPK – CPT, sorry?

So, as I just said, we submitted our complete clinical dossier to CMS at the end of February of this year. The process is normally pretty quick, so the expectation is to get some feedback from CMS somewhere in summer. And then we’ll have an answer about the C-Code and its positioning as well. As I said, the C-Code is a temporary code that is allocated for three years, and that gives you time to build a deeper and more comprehensive clinical file and a clinical file as well to apply for CPT Code. So basically the C-Code is kind of a quick procedure to the low-innovative technologies to get a temporary reimbursement while you’re building that CPT Code.

And that C-Code is applicable to the both Ablatherm and Focal One. Is that right?

Yes. It’s not device related. It’s technology related and treatment related.

Okay. Fantastic. And then, regarding Focal One, how would you characterize your interactions with FDA at this point. And where in the process do you think FDA is generally -- what is the expectation of the management in terms of approval?

As you know, it’s complicated to get expectations somewhere on the midyear file. But basically we've been in the process for almost a year now, and we’re working on it and we are – I would say close to the end. But again, it’s difficult even close to the end to tell you anything about timing and expectation.

You talked a little bit about the demand for Focal One and demand for Ablatherm and how things are progressing during the second half of this year. From that, can you kind of help us understand what sort of demand is there for Focal One? It looks like though there is an underlying demand for the technology, there is some kind of trying to figure out which technology to go far, so how are you helping out your prospective clients? How to think through this process and how they can use one or the other and what are the benefits?

As I said, since we announced and we announced the key and we said few times that Focal One was filed with the FDA. People trying up, like I said that clearly between making a decision for one or the other, so some of them are kind of waiting and again timing with the FDA is always something very difficult to evaluate. So people would be waiting. Again the interest is not only on Focal One, I think the interest is really on the technology, on the capability of the technology to do partial treatments, to do Focal approach of process ablation and also to use it for radiation failures [ph]. So, yes, that you know since more devices would be available to people who kind of see what will be new and what would be matching better their expectation and need in terms of device. So, we're working actively again in kind of maintaining and entertaining those prospects and projects that we're adding here today to our pipeline to ensure that we would be able to give them and to provide them with the right answer for the right news [ph].

Okay. And the last question from me. In the last 15, 16 months since approval of Ablatherm, how is the [indiscernible] adoption and demand compared to your expectations going in? And also you started this program of trying to get some of these key centers educate the community doctors [indiscernible]. So how is that process working? And is that working on par or you still have to increase such sessions? Is the strategy working or do you need to make some tweaks to that strategy?

No. I think it's working very well and again we get a number of major institutions. You know, the start of the new technology in a hospital always takes time because you need to train the people and you know the first case is people would like to see and follow-up the patient to get confidence and to be more comfortable in recruiting patients and all that. So we're going through that and we can see our first centers having already one year of follow-up in their first treatment with very promising results. We got our first centers doing their first biopsies today on the first patient treated at their [Indiscernible] and it looks very good, so I think we’re building not only adoption and technician but also building our clinical history of the U.S. we build nice institutions and building it very well.

Perfect. Congratulations and looking forward a great 2017.

Thanks RK.

Thank you. Our next question comes from the line of Stanley Mason, Private Investor. Please proceed with your questions.

Good morning, Marc.

Good morning.

Good morning. I just have few questions. With the FDA process going forward, approximately how many times has the clock [ph] been stopped due to questioning back in forth additional information. Because normally as we’ve discussed over different conversations in the past we would've expected within a year approval of Focal One, and obviously we haven't reached that goal and it must be because the FDA has presented numerous questions that have stopped the clock. Maybe I'm wrong in that assessment but that is what it appears to me to be?

Well, it’s not too much, the number of times or the number of questions, because some questions may even stop the clock, some of the questions might be stopping clock and it all depends the time you have to get the proper answer to the FDA. So, that's why time is very difficult to evaluate for maybe a project. So I don't exactly know how many times we’d stop the clock and how many questions did we have in total. But we had some interactive review. We had been stopping the clock question and answer and sometimes you get questions that requires to go into the -- into a very fine and deep review of patient size and clinical data that may take some times.

Okay. Now Focal One is approved in Canada now, right?

Yes.

And I don't think -- did you report how many Focal Ones’ you’ve sold in the last 2016?

We sold eight Focal Ones in 2016.

Compared to 2015 how many?

It was four I think.

Okay. Good, understood. And another question, obviously you’re in some very major high profile log institutions in the U.S., and now and then we see a report that you did one and the – that DaVinci did one. I forget what institution that was. But we know that you’ve done one here, one there and one so many there and here, but how many overall procedures would you say have been done in the United States regardless to reimbursement?

It’s difficult to exactly know, because there are facts where see the number of disposables and so we don’t known on a real-time basis how many they had and tell exactly, but we’ve done 200. I think it would more then offer 200 patients now at least.

Okay. That’s good. And obviously trying to get a CPT Code, your competitor must be working on this as well. And should they get the CPT Code or their application had been in before yours. Once a CPT code is approved, it’s approved no matter which company is using HIFU, I would imagine?

Yes. That’s correct. And actually we’re working jointly on building the C-Code and reimbursement process as it is a common goal.

Okay. So you’re working on and you know they’re working it on it too, right?

Yes. And we’re working on it together.

Excellent, excellent. I’m sorry, I didn’t hear you correctly. Okay. Well, that’s and then right, does Canada have a similar type of CPT code where they’re reimbursing?

Well, as I said before, we’re working now on the C-Code and once we get a C-Code and we can start the process for CPT code that’s much stronger. So the C-Code as I said to a sort of temporary reimbursement that will give us time to build the blogs [ph] for CPT Code, that takes more time.

Okay. But, so the two countries right now that have reimbursement are Germany and France, or there are others?

No. They are many others like Switzerland as well. We have U.K. on a registered basis [ph]. There are different countries that are offering their reimbursement now in Europe. Italy as well reimbursing the treatment, so now there are more countries that are offering reimbursement on HIFU.

Excellent. That’s end my questions. Thank you very much and good luck.

Thanks.

Thank you. [Operator Instructions] Our next question comes from the line of Mike Donovan, Private Investor. Please proceed with your questions.

Good morning to you all. This is Mike Donovan, been an investor, multiple years now, have thought this should have already come to fruition, a lot better than what it is. And I just noticed looking on the Internet, the cancer centers of America advertises HIFU. And I know you have a competitor here that claims they sold several hundred machines, they have a new updated one that’s already been approved by the FDA. I just wonder why we’re not making better penetration with actual companies that are treating cancer in the United States instead of just going to the Universities as such. I understand training the people up and everything like that, but why do you feel like we’re not getting better penetration at companies that treat cancer and hospitals that treat cancer?

I don’t really pick that question, but again we’re not only targeting the universities and academic centers. As I said in the call we also partnering with mobile services and mobilizers that are providing our technology to smaller hospitals, smaller service centers and private groups of urology. And by the way several hundred equipments from our competitor I don't think your source of information is good.

Okay, well that’s what they claim on their website.

Well they can it’s probably several hundreds of trained doctors but not machines and we claim more than 200 doctors trained on our device as well. So, again – it’s a question of education so the first step is to indicate patient, doctors or physicians so they are able to recruit and explain the treatment and the technology to their patients so then they can switch to the next level which is treating them by using weather fixed equipment in big centers or mobile equipments that – in the next [ph] sets of the technology. So it takes a little while and as I said as well there are some limiting factors like reimbursement and [Indiscernible] that make the penetration probably slower than you would have expected, but again we have to build blocks [ph] we have to build the market, we have to create a recognition of a technology that is based on clinical data and experience and that’s what we are doing and our competitors are doing that as well.

Right. I guess my main question is why cancer centers of America and M.D. Anderson Cancer and some of the major cancer centers. I know this does – I know it’s getting known because everybody I talk to here in Conroe, Texas just outside of Houston has had a discussion with their doctor about HIFU, the potential use in HIFU on their case. So I know the word is getting around that it’s available. I just feel like possibly maybe or I’ll look at selling the lesser machine to somebody or atleast in the lesser machine to somebody to get them going with your product until Focal One gets approved as a potential sales tool to get your product in instead of competitors product in because the United States is going to be a large market for anybody if they can get going. That’s all I had to say. I own more shares than everybody on the management team and the board of directors, and I owned more than a lot of the other institutional investors that’s why I am kind of saddened by what’s being going on as if I have a lot invested in this company and had high hopes for it so far.

Thank you. Mr. Oczachowski, there are no further questions at this time. I’d like to turn the floor back to you for any final remarks.

Well thank you and thanks again for joining us today and we are looking forward to updating you soon on our major projects and developments. Thank you, and have a nice day.

Thank you. This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.