Good day and welcome to the EDAP TMS Third Quarter 2015 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Lee Roth of the Ruth Group. Please go ahead.

Thanks, Carey and once again good morning and thank you all for joining us today. With me from management are Philippe Chauveau, Chairman of the Board; Marc Oczachowski, Chief Executive Officer; and Francois Dietsch, Chief Financial Officer. Before we begin, I would like to remind everyone that management’s remarks today may contain forward-looking statements. These 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 our 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 U.S. Securities and Exchange Commission. With that said, it’s now my pleasure to turn the call over to EDAP’s Chairman of the Board, Mr. Philippe Chauveau. Philippe?

Thank you, Lee. Good morning and welcome to EDAP’s Q3 2015 conference call. I have brief opening remarks to share with you. This is a historic time at EDAP. Friday, November 6 afternoon is a moment when we at EDAP will remember for long time. It is when EDAP obtained FDA clearance for our Ablatherm Robotic HIFU technology. This landmark event allows EDAP to immediately commercialize HIFU in the U.S. The EDAP Board which met yesterday again wishes to convey their congratulations to our CEO, Marc Oczachowski who moving to the U.S. may now this happen. Indeed, already Marc and his U.S. team have sold our first four, I repeat, four Ablatherm systems to leading U.S. urology groups and academic centers in this November for immediate delivery. For Q3 ending September 30, 2015, EDAP experienced continued growth with net sales for the first nine months at $20.5 million, which is a record for the company. Now, I will turn over the call to Marc. Marc?

Thank you, Philippe and good morning everyone. Last week, we announced that our Ablatherm Robotic HIFU was cleared by the FDA for the ablation of prostate tissue. We have been working towards this goal for several years and it is extremely gratifying to be in this position today. This is a huge win for EDAP after so many years of work to get to this point. We are excited at the opportunity in front of us and believe that Ablatherm will enjoy a robust market here in the United States. This also enables us to leverage the commercial infrastructure that we have put in place over the last few years for our lithotripsy products by leveraging them to sell Ablatherm to U.S. hospitals, urology groups and other stakeholders in the urology market. EDAP is now recognized and established in the U.S. urology community as a key innovator in non-invasive technologies. This leadership position will clearly benefit us as we addressed the strong demand in the U.S. for non-invasive tools for prostate tissue ablation. EDAP’s Ablatherm Robotic HIFU device and its unique features and capabilities will provide an answer to the unmet medical need for both urologists and patients in the United States. The U.S. is by far the world’s largest market for prostate ablation. There are an estimated of 138,000 procedures performed annually. It represents the largest commercial opportunity we have had in our history and it is one which we intend to maximize. We are delighted to tell you that in the initial days following clearance we booked four Ablatherm Robotic HIFU orders from cutting-edge urology groups and academic centers. We are starting shipments from a manufacturing facility in France this week and we expect to complete the first installations in the coming days or weeks. Clinics and hospitals…

Thank you, Marc and good morning everyone. I will first take a few minutes to review our financial results for our Q3 2015. Total revenue for Q3 2015 was €6.4 million or $7.1 million compared to €6.9 million or $9 million for the same quarter 2014 which included €0.5 million or $0.7 million one-off revenue related to the licensing of HIFU patent. Gross profit for the third quarter of 2015 was €2.6 million or $2.9 million compared to €3.4 million or $4.4 million for the year ago period. Gross profit margin on net sales was 40.2% compared to 53.2% in the year ago period which included €0.5 million one-off HIFU license revenue. Operating loss in Q3 was €0.3 million or $0.3 million compared to operating income of €0.3 million or $0.4 million in the third quarter of 2014. Finally, net loss for Q3 was €4.8 million or $5.3 million or €0.19 per diluted share as compared to net income of Q3 2014 of €6.6 million or $8.6 million or €0.26 per diluted share. Net loss in the third quarter of 2015 included a non-cash interest expense of €4.5 million to adjust the accounting fair value of the outstanding warrants. Now turning to the first nine months of 2015 total revenue was €20.5 million or $22.7 million which was a record for the period. This compares to €20.3 million or $27.4 million for the first nine months of 2014. As Marc already mentioned the growth in the nine months period resulted from both procedure-driven HIFU revenues and UDS businesses. Gross profit for the first nine months of 2015 was €8.5 million or $9.4 million and gross profit of 41.5% compared to 44.3% in the year ago period. Operating loss for the first nine months of 2015 was €1.1 million or $1.2 million compared to €0.7 million or $1 million in the same period last year. Including a non-cash interest expense of €5.9 million to adjust outstanding warrants to fair value net loss for the first nine months of 2015 was €6.8 million or $7.5 million or €0.20 per diluted share. This compares to the first nine months of 2014 net income of €2.1 million or $2.9 million or €0.09 per diluted share. Our net income for the first nine months of 2014 included non-cash interest income of €2 million. Finally, at the 30 September, 2015, cash and cash equivalents including certain treasury investments were €11.1 million or $12.4 million. With that, I will turn the call over to the operator who will open the line for questions. Operator?

We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from RK Ramakanth of H C Wainwright. Please go ahead.

Good morning Marc. Good morning Francois. Excellent, obviously this is a momentous time for the company and congratulations for the entire people at EDAP.

Thank you.

For getting Ablatherm. So, couple of quick questions, can you help us understand the startup commercialization model that you are adopting during these early times of getting the launch released in the U.S.?

So actually, again as I have said today we are getting a lot of demands from a lot of private groups and academic centers throughout the U.S. And therefore the model we are going to prioritize in the U.S. will be capital sale of device.

Okay. And then in terms of the two groups that you have talked about in the press release both urology groups and academic centers what are the approximate number of these groups out there in the United States and what kind of adoption would you be – will it be satisfied for you guys?

Well, we didn’t disclose yet the group of urologists and academic institution that have contracted with us. We will do so very soon once we deliver and install the devices in their location and in accordance to their communications policy as well. But I can tell you that these groups are among the leading groups in both robotic surgery and prostate activity in the U.S.

Okay. And then can you touch a little bit on the transaction process, could you please help us understand from the get-go how long of an transaction process that is before installation and how does the recognition of revenue that accounts on your books?

So, we sign contract and we receive down payments from these customers. And as I have said before we will start delivering and shipping machine out of our factory actually exactly tomorrow morning. So installation will follow as we clear custom here in the U.S. and get the devices delivered to the different hospitals and locations.

And then you have to increase your manufacturing capacity to handle the U.S. launch or you will have enough capacity as it’s right now?

So we – I mean again I mean that has been a project that we have been working on for the last 10 years, so we anticipated and we are fully prepared and to again – to be able to serve the American needs. So this has been anticipated and worked out, so we are ready to go.

Okay. Couple of last questions. One of them is on reimbursement process, EDAP’s reimbursement, is reimbursement an issue in adoption of these devices or in your model, reimbursement is not a challenge?

Reimbursement is always a challenge and a key component of the penetration of the market. This being said we know that there is to start with and that’s the case of every and each new technology cleared by FDA that the first step in the first market you can go and penetrate is the private patient market, the self paid patient market. We know that this is not the majority of the market in the U.S., but that’s already a very interesting market to start penetrating the market and start getting the adoption of the technology in the U.S. As a reminder, there were hundreds of patients traveling abroad every year in the Caribbean, in Latin America or in Europe to be treated on HIFU, because it was not available in the U.S. So, there are thousands of patients that could – that are kind of making that private self paid market and that’s the first targeted market until the reimbursement stops getting out.

Okay. So, the last question is regarding South America, this quarter you reported the first payout in that geography of the state. How different is that market? What are the plans in expanding that market on the terms of increasing penetration from where you are right now?

RK, the line is extremely bad. I couldn’t hear what you said.

Okay. This is regarding South American commercialization you reported first product how big is that geography for you and what is commercialization process yet in South America?

Okay, got it. Well, actually we announced our first Focal One sales in Latin America and in Chile, but I mean – we have been working in the Latin American market for many years and we have a complete network of distributors and agents that are managing so far a strong installed base of EDAP lithotripters and Ablatherm Robotic HIFU devices. So, we are going to continue using our established and well-known network of distributors and agents to commercialize the entire range of products, including Focal One that again was sold for the first time in Latin America and Chile.

Thank you.

You are welcome, RK.

Our next question comes from Stanley Mason, a Private Investor. Please go ahead.

Good morning, gentlemen. First, I would like to express my thoughts and prayers for the French people and congratulations on your – getting FDA approval. My first question with regards to your statement, have you submitted a 510(k) for the Focal One?

Good morning, Stanley and thank you for your thoughts and congratulations. We are working as we announced [Technical Difficulty].

Okay. And another question I think last quarter, second quarter of this year we had a profit, if I am not mistaken, is that correct?

I can’t hear you very well. What was the question on the second quarter?

As said, in the second quarter, I believe we had a profit, is that not correct?

We had a what?

A profit in the statement? Was there not a profit in the second quarter of 2015? Did I lose you?

No, I can hear you. So, Francois, I mean, Stanley is asking if we were – regarding profit in Q2, can you answer that question? The quarter itself was close to breakeven in Q2, that’s what we communicated last quarter indeed. So, what’s the question there?

In Q3, we have a loss due to the variation of the fair value of the warrants, but it’s a non-cash expense that’s extended the loss on Q3.

Okay. So, did you say we did have a profit as of Q2 second quarter, I am sorry?

Yes, on Q2 alone, we had a profit, but due to fair value variation of the warrants, which is not a variation and on the third quarter, we had an expense due to these variations, but the non-cash variation, which generates a loss on Q3.

Okay. So, that’s the difference. And then the other question was the revenue per procedure, in other words, I know that France and Germany and I think Italy are now paying for the software or the kit that comes with the treatment. Has that increased quarter-to-quarter from second quarter to third quarter?

The revenue per procedure is increasing. Yes, we have continuous growth on HIFU treatment revenue from the beginning of the year.

Okay. And it has increased over second quarter, because since now becoming evident that we are getting payments just like the last question when will payments start in the U.S. to more looking at private pay first and then getting the insurance companies to recognize this and setup a reimbursement for the HIFU procedure here in the U.S., but we know that France has already done that, we know that Germany has done that and I believe Italy and maybe some other European nations. And I know in the second quarter we had a fair amount of revenue from that because more procedures are done, the more revenue that we receive. And I am asking now has the revenue once again gone up from quarter two to quarter three, in other words showing that there are more procedures being done in quarter three than they were in quarter two?

Yes. We have more procedure in quarter three than in quarter two, there is revenue.

Excellent. Well, that’s – that was my question. And so the reason that we don’t have such a great quarter this time is the warrants dropped the number of shares up and diluted the actual earnings that would have been there had the warrants not been a factor?

Yes. There is a fair value of the warrants have increased due to the share price and so this generates a negative impact on the net – and so a net loss.

Okay. Well, thank you very much. And I wish you well and Marc if there is anything I can do for you here in the U.S. please contact me. Guys, you know I have been through this procedure and I am a firm believer in it. I am very happy that you received the FDA approvals and hope that the Focal One will follow and that you will have a huge success here in the U.S.

Thanks.

Take care. Have a good day.

Thanks.

Our next question comes from Carey Trecartin, a Private Investor. [Operator Instructions] Carey please go ahead.

Yes. Good morning and congratulations.

Good morning.

Yes. Good morning and congratulations. I am a long-term holder in the company and I have a marketing suggestion. In concert with your contacts with the medical community I believe demand for HIFU services needs to be driven through marketing, through the potential patient consumer population. I would like to suggest that EDAP executives work to get news of HIFU into mainstream media through appearances on TV news shows such as those on the CNBC Network, what are your plans on these lanes? Thank you.

Well, thank you Carey for your suggestion and actually that’s something we are working on. I won’t disclose in that public call the marketing strategy of the company for obvious competition reasons. But we are strongly believing like you do, that this is a patient driven technology and treatment and we will definitely take that into consideration in our marketing and sales plan.

Great. Thank you very much.

Thank you, Carey.

And this concludes of question-and-answer session, so I would now like to turn the conference back over to Mr. Chauveau for any closing remarks.

Thank you, everyone for participating on today’s conference call. There being no further questions, I will now officially close this conference call. Thank you.

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect your lines. Have a great day.