Profound Medical Corp. 10-K

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Index to Financial Statements Page Report of Independent Registered Public Accounting Firm (PCAOB ID: 271 ) ​ F-2 Consolidated Balance Sheets as of December 31, 2024 and 2023 ​ F-4 Consolidated Statements of Operations and Comprehensive Loss for the Years Ended December 31, 2024 and 2023 ​ F-5 Consolidated Statements of Shareholders’ Equity for the Years Ended December 31, 2024 and 2023 ​ F-6 Consolidated Statements of Cash Flows for the Years Ended December 31, 2024 and 2023 ​ F-7 Notes to Consolidated Financial Statements ​ F-8 ​ ​ F-1 Table of Contents Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of Profound Medical Corp. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Profound Medical Corp. and its subsidiaries (the Company) as of December 31, 2024 and 2023, and the related consolidated statements of operations and comprehensive loss, of shareholders’ equity and of cash flows for the years then ended, including the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. F-2 Table of Contents Revenue Recognition As described in Notes 2 and 12 to the consolidated financial statements, the Company’s revenue was $10.7 million for the year ended December 31, 2024. Recurring non-capital revenue consists of revenues from the sale of one-time-use devices and services associated with extended warranties. Capital equipment revenue consists of revenues from the sale of capital equipment including installation and training amounts. The amount of revenue to be recognized is based on the transaction price the Company expects to receive in exchange for its goods and services. For contracts that contain multiple performance obligations the Company allocates the transaction price to each performance obligation and recognizes the related revenue when or as control of each individual performance obligation is transferred to customers. Revenue from sale of one-time-use devices and capital equipment is recognized when control is transferred to the customers, which generally occurs at the time of shipment. Service revenue related to extended warranties is deferred and recognized on a straight-line basis over the extended warranty period covered by the customer contract. The principal considerations for our determination that performing procedures relating to revenue recognition is a critical audit matter is the high degree of audit effort in performing procedures and evaluating audit evidence related to revenue recognition. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included, among others, evaluating the recognition of revenue on a sample basis by (i) evaluating the customer contract terms; (ii) identifying and assessing performance obligations; and (iii) obtaining and evaluating the underlying purchase orders, shipping documents, invoices and payment support, as applicable. /s/ PricewaterhouseCoopers LLP Chartered Professional Accountants, Licensed Public Accountants Toronto, Canada March 7, 2025 We have served as the Company’s auditor since 2013. ​ F-3 Table of Contents Profound Medical Corp. Consolidated Balance Sheet As at December 31, 2024 and 2023 In USD (000s) ​ ​ ​ ​ ​ ​ ​ 2024 2023 ​ ​ $ ​ $ Assets ​ ​ ​ ​ ​ ​ ​ ​ ​ Current assets: ​ ​ ​ ​ Cash ​ 54,912 26,213 Trade and other receivables, net (note 3) ​ 7,045 7,288 Inventory (note 4) ​ 5,801 6,989 Prepaid expenses and deposits ​ 1,307 1,406 Total current assets ​ 69,065 41,896 ​ ​ ​ ​ ​ Property and equipment, net (note 5) ​ 425 909 Intangible assets, net (note 6) ​ 261 490 Right-of-use assets, net (note 9) ​ 396 661 Deferred tax assets, net (note 13) ​ 87 ​ — Total assets ​ 70,234 43,956 ​ ​ ​ ​ ​ Liabilities ​ ​ ​ ​ ​ ​ ​ Current liabilities: ​ ​ Accounts payable ​ 1,317 865 Accrued expenses and other current liabilities (note 7) ​ 2,835 2,419 Deferred revenue ​ 419 721 Long-term debt (note 8) ​ 1,737 2,104 Lease liabilities (note 9) ​ 257 259 Total current liabilities ​ 6,565 6,368 ​ ​ ​ ​ ​ Deferred tax liabilities, net (note 13) ​ — 59 Deferred revenue ​ 49 728 Long-term debt (note 8) ​ 2,924 5,000 Lease liabilities (note 9) ​ 203 504 Other non - current liabilities (note 9) ​ 71 73 Total liabilities ​ 9,812 12,732 ​ ​ ​ ​ ​ Commitments and contingencies (note 15) ​ ​ ​ ​ ​ ​ ​ ​ Shareholders’ equity ​ ​ ​ ​ ​ ​ ​ ​ Common shares, no par value, unlimited shares authorized, 30,039,809 and 21,370,565 issued and outstanding at December 31, 2024 and 2023, respectively (note 10) ​ 281,552 222,205 Additional paid-in capital ​ 21,298 20,808 Accumulated other comprehensive income ​ 2,742 5,565 Accumulated deficit ​ ( 245,170 ) ( 217,354 ) Total shareholders’ equity ​ 60,422 31,224 ​ ​ ​ ​ ​ Total liabilities and shareholders’ equity ​ 70,234 43,956 ​ The accompanying notes are an integral part of these consolidated financial statements. F-4 Table of Contents Profound Medical Corp. Consolidated Statements of Operations and Comprehensive Loss For the year ended December 31, 2024 and 2023 In USD (000s) ​ ​ ​ ​ ​ ​ ​ ​ 2024 2023 ​ ​ $ ​ $ ​ Revenue (note 12) ​ ​ ​ ​ ​ Recurring - non-capital 8,240 6,806 Capital equipment 2,440 393 ​ 10,680 7,199 Cost of sales 3,643 2,887 Gross profit 7,037 4,312 ​ ​ ​ ​ ​ ​ Operating expenses ​ ​ Research and development 16,965 14,424 Selling, general and administrative 23,134 18,539 Total operating expenses 40,099 32,963 ​ ​ ​ ​ ​ ​ Operating loss 33,062 28,651 ​ ​ ​ ​ ​ ​ Other (income) expenses ​ ​ Net finance (income) expense ( 1,436 ) ( 775 ) Net foreign exchange (gain) loss ( 3,808 ) 575 Total other (income) expenses ( 5,244 ) ( 200 ) ​ ​ ​ ​ ​ ​ Net loss before income taxes 27,818 28,451 ​ ​ ​ ​ ​ ​ Income tax (recovery) expense (note 13) 144 ( 187 ) Deferred tax expense (note 13) ( 146 ) 59 Total income tax (recovery) expense ​ ( 2 ) ​ ( 128 ) ​ ​ ​ ​ ​ ​ ​ Net loss attributed to shareholders for the year 27,816 28,323 ​ ​ ​ ​ ​ ​ Other comprehensive (income) loss ​ ​ Item that may be reclassified to (income) loss ​ ​ Foreign currency translation adjustment 2,823 ( 644 ) ​ ​ ​ ​ ​ ​ Net loss and other comprehensive loss for the year 30,639 27,679 ​ ​ ​ ​ ​ ​ Loss per share (note 14) ​ ​ Basic and diluted net loss per common share 1.12 1.34 Basic and diluted weighted average common shares outstanding 24,765,503 21,182,558 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ ​ F-5 Table of Contents Profound Medical Corp. Consolidated Statements of Shareholders’ Equity For the year ended December 31, 2024 and 2023 In USD (000s) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ Other ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Paid-in ​ Comprehensive ​ Accumulated ​ ​ ​ ​ Common Shares ​ Capital ​ Income ​ Deficit ​ Tota1 ​ ​ Shares ​ Amount $ ​ $ ​ $ ​ $ ​ $ Balance – January 1, 2023 20,879,497 216,453 20,254 4,921 ( 189,031 ) 52,597 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net loss for the year — — — — ( 28,323 ) ( 28,323 ) Cumulative translation adjustment – net of tax of $nil — — — 644 — 644 Exercise of share options (note 11) 33,799 403 ( 158 ) — — 245 Exercise of warrants (note 8) 285,138 3,705 ( 1,264 ) — — 2,441 Vesting of RSUs (note 11) 162,131 1,509 ( 1,509 ) — — — Vesting of DSUs (note 11) 10,000 135 ( 135 ) — — — Change in terms of DSUs (note 11) — — 203 — — 203 Share-based compensation (note 11) — — 3,417 — — 3,417 Balance – December 31, 2023 21,370,565 222,205 20,808 5,565 ( 217,354 ) 31,224 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net loss for the year — — — — ( 27,816 ) ( 27,816 ) Cumulative translation adjustment – net of tax of $nil — — — ( 2,823 ) — ( 2,823 ) Shares issued in private placement and public offerings (note 10) ​ 8,425,039 ​ 57,211 ​ — ​ — ​ — ​ 57,211 Exercise of share options (note 11) 7,101 ​ 76 ( 31 ) — — 45 Vesting of RSUs (note 11) 228,774 1,990 ( 1,990 ) — — — Vesting of DSUs (note 11) ​ 8,330 ​ 70 ​ ( 70 ) ​ — ​ — ​ — Share-based compensation (note 11) — — 2,581 — — 2,581 Balance – December 31, 2024 30,039,809 281,552 21,298 2,742 ( 245,170 ) 60,422 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ ​ ​ F-6 Table of Contents Profound Medical Corp. Consolidated Statements of Cash Flows For the year ended December 31, 2024 and 2023 In USD (000s) ​ ​ ​ ​ ​ ​ ​ 2024 2023 ​ ​ $ ​ $ Cash flows from operating activities Net loss for the year ( 27,816 ) ( 28,323 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation of property and equipment (note 5) 707 727 Amortization of intangible assets (note 6) 229 202 Non-cash lease expense adjustment ( 38 ) ( 45 ) Share-based compensation (note 11) 2,581 3,417 Interest and accretion expense (note 8) 600 727 Change in amortized cost of trade and other receivables ( 307 ) 146 Changes in operating assets and liabilities: ​ Trade and other receivables (note 3) 186 ( 956 ) Inventory (note 4) 656 353 Prepaid expenses and deposits 31 ( 158 ) Accounts payable, accrued expenses and other liabilities (note 7) 815 1,354 Deferred revenue ( 948 ) 187 Income taxes payable (note 13) — ( 299 ) Deferred tax liabilities (note 13) ( 58 ) 59 Deferred tax assets (note 13) ​ ( 91 ) ​ — Net cash used in operating activities ( 23,453 ) ( 22,609 ) ​ ​ ​ ​ ​ Cash flows from financing activities ​ Issuance of commons shares (note 10) ​ 62,106 ​ — Payments of financing costs (note 10) ​ ( 4,895 ) ​ — Repayments of long-term debt (note 8) ( 2,560 ) ( 912 ) Proceeds from the exercise of stock options (note 11) 45 245 Proceeds from the exercise of warrants (note 8) — 2,423 Net cash provided by financing activities 54,696 1,756 ​ ​ ​ ​ ​ Net increase (decrease) in cash and cash equivalents 31,243 ( 20,853 ) Effect of exchange rate changes on cash ( 2,544 ) 549 Cash, beginning of year 26,213 46,517 Cash, end of year 54,912 26,213 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ ​ F-7 Table of Contents Profound Medical Corp. Notes to Consolidated Financial Statements December 31, 2024 and 2023 In USD (000s) 1 Description of business Profound Medical Corp. (Profound) and its subsidiaries (together, the Company) were incorporated under the Ontario Business Corporations Act on July 16, 2014. The Company is a commercial-stage medical device company focused on the development and marketing of customizable, incision-free therapeutic systems for the ablation of diseased tissue utilizing platform technologies. The Company’s registered address is 2400 Skymark Avenue, Unit 6, Mississauga, Ontario, Canada, L4W 5K5. 2 Summary of significant accounting policies Basis of preparation The Company prepares its consolidated financial statements in accordance with accounting principles generally accepted in the United States (US GAAP). The consolidated financial statements include the accounts of wholly owned subsidiaries, after elimination of intercompany accounts and transactions. The consolidated financial information presented herein reflects all financial information that, in the opinion of management, is necessary for a fair statement of financial position, results of operations and cash flows for the periods presented. Use of estimates The preparation of the Company’s consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, assumptions related to the valuation of inventory, the determination of the amortized cost of trade and other receivables, determination of expected credit loss, and the valuation of stock options and warrants. The Company based its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates when there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results could differ from those estimates. Certain of the Company’s revenue is generated from sales to distributors. Where these sales have payment terms based on installation, the Company exercises judgement in determining when to recognize revenue. Once revenue is recognized, the Company records a contract asset until such time as the right to payment is not just subject to the passage of time, typically related to installation of the product. Consolidation The financial statements include the accounts of the Company and all its consolidated subsidiaries after elimination of intercompany transactions and balances. The Company consolidates all entities that it controls either through a majority voting interest or as the primary beneficiary of variable interest entities (VIE). Currently, the Company has no involvement with variable interest entities. All subsidiaries are evaluated under the voting interest entity model. The Company consolidates those entities it controls through a majority voting interest. The consolidated financial statements of the Company include the following wholly owned subsidiaries: Profound Medical Inc. (Canada), Profound Medical Oy (Finland), Profound Medical GmbH (Germany), Profound Medical (U.S.) Inc. (United States), Profound Medical Technology Services (Beijing) Co., Ltd. (China) and 2753079 Ontario Inc. (Canada). F-8 Table of Contents Profound Medical Corp. Notes to Consolidated Financial Statements December 31, 2024 and 2023 In USD (000s) Segment reporting Operating segments reflect the way the Company is managed, and for which separate financial information is available and evaluated regularly by the Company’s chief operating decision maker (CODM) in deciding how to allocate resources and assess performance. The chief executive officer, who is the CODM, views the Company’s operations and manages its business in one operating segment, which is medical technology focused on magnetic resonance guided ablation procedures for the treatments to ablate the prostate gland, uterine fibroids, osteoid osteoma and nerves for palliative pain relief for patients with metastatic bone disease. Foreign currency translation The consolidated financial statements are presented in US dollars. The functional currency of Profound Medical Corp. is Canadian dollars. The functional currency of each subsidiary is determined based on facts and circumstances in the financial and operational environment relevant for each subsidiary. Where the Company’s presentation currency of US dollars differs from the functional currency of a subsidiary, the assets, liabilities and equity of the subsidiary are translated from the functional currency into the presentation currency at the exchange rates as at the reporting date. The income and expenses of the subsidiaries are translated at rates approximating the exchange rates at the dates of the transactions. Exchange differences arising on the translation of the consolidated financial statements of the Company’s subsidiaries are recognized in other comprehensive (income) loss. Foreign currency transactions are translated into the functional currency of the Company or its subsidiaries, using the exchange rates prevailing at the dates of these transactions. Foreign exchange gains and losses resulting from the settlement of foreign currency transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in currencies other than an entity’s functional currency are recognized in the consolidated statements of operations and comprehensive loss, within net foreign exchange (gain) loss. Fair value measurements Certain assets and liabilities of the Company are carried at fair value under US GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable: ● Level 1 - Quoted prices in active markets for identical assets or liabilities. ● Level 2 - Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data. ● Level 3 - Unobservable inputs that are supported by little or no market activity that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques. For assets and liabilities that are recognized in the consolidated financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by reassessing the categorization at the end of each reporting period. There were no transfers between levels during the period presented . The Company currently does not have any level 3 financial instruments. F-9 Table of Contents Profound Medical Corp. Notes to Consolidated Financial Statements December 31, 2024 and 2023 In USD (000s) The Company considers its cash, trade and other receivables, net, prepaid expenses and deposits, accounts payable, accrued expenses and other liabilities and long-term debt to be financial instruments. Concentrations of credit risk Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and trade and other receivables, net. The Company maintains its cash balances in various operating accounts including cash deposited at a major financial institution that management believes to be creditworthy. Management has not previously experienced non-performance by any financial institution. Concentrations of credit risk with respect to trade and other receivables, net are limited due to a large number of customers who are widely dispersed. The Company monitors the creditworthiness of its customers to which it grants credit terms in the normal course of business. Trade and other receivables and allowance for expected credit losses Trade and other receivables are stated net of an allowance for expected credit losses. The Company grants credit to customers in the normal course of business and maintains an allowance for expected credit losses which reflect the current estimate of credit losses expected to be incurred over the life of the receivables. The Company considers various factors in establishing, monitoring, and adjusting its allowance for expected credit losses, including the aging of the accounts and aging trends, the historical level of charge-offs, and specific credit exposures related to particular customers. The Company also monitors other risk factors, such as country risk, when determining credit limits for customers and establishing adequate allowances. Uncollectible accounts are written-off against the allowance when there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include, amongst others, failure to make contractual payments for a period of greater than 180 days past due. Inventory Inventories are valued at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. Cost is determined using the first-in, first-out method for finished goods and weighted average cost for raw materials. The Company evaluates the carrying value of inventory on a regular basis, taking into account factors such as historical and anticipated future sales compared with quantities on hand, the price the Company expects to obtain for products in their respective markets compared with historical cost, obsolescence due to development of technology. Property and equipment, net Property and equipment are stated at cost, less accumulated depreciation and accumulated impairment losses. The initial cost of property and equipment consists of its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Expenditures incurred after the assets have been put into operation, such as repairs and maintenance, are charged to the consolidated statements of operations and comprehensive loss during the year in which they are incurred. The major categories of property and equipment are depreciated on a straight-line basis as follows: ​ ​ ​ ​ ​ Furniture and fittings 5 years Equipment under operating lease ​ 2 years ​ Leasehold improvements ​ Lesser of the estimated useful life or the lease term ​ ​ Residual values, methods of depreciation and useful lives of the assets are reviewed annually and adjusted if appropriate. F-10 Table of Contents Profound Medical Corp. Notes to Consolidated Financial Statements December 31, 2024 and 2023 In USD (000s) Intangible assets The Company’s intangible assets are stated at cost, less accumulated amortization and accumulated impairment losses. Intangible assets are amortized on a straight-line basis in the consolidated statements of operations and comprehensive loss over their estimated useful lives. The major categories of intangible assets are amortized as follows: ​ ​ ​ ​ ​ Exclusive licence agreement 20 years Software ​ 5 years ​ ​ Impairment of long-lived assets Property and equipment, net, right-of-use assets, and intangible assets with finite lives are tested for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. These assets are evaluated for impairment on an individual asset or group of assets with similar characteristics basis. If indicators of impairment are present, the asset is tested for recoverability by comparing the carrying value of the asset to the related estimated undiscounted future cash flows expected to be derived from the asset, which include the amount and timing of the projected future cash flows. If the expected undiscounted cash flows are less than the carrying value of the asset, then the asset is considered to be impaired and its carrying value is written down to fair value, based on the related estimated discounted future cash flows. Accounts payable, accrued expenses and other current liabilities These amounts represent liabilities for goods and services provided to the Company before the end of the financial year, which are unpaid. Accounts payable, accrued expenses and other current liabilities are presented as current liabilities unless payment is not due within 12 months after the reporting period. They are recognized initially at their fair value and subsequently measured at amortized cost using the effective interest method. Long-term debt Long-term debt is initially recognized at fair value, net of transaction costs incurred. Long-term debt is subsequently measured at amortized cost. Any difference between the proceeds (net of transaction costs) and the principal amount is recognized in the consolidated statements of operations and comprehensive loss over the contractual lives of the long-term debt using the effective interest method. Long-term debt is removed from the consolidated balance sheets when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished and the consideration paid is recognized in the consolidated statements of operations and comprehensive loss, within other (income) expense, net. Warrants The Company issued warrants to certain of its debt holder and equity investors and accounts for warrant instruments as either equity-classified or liability-classified instruments based on an assessment of the specific terms of the warrants and applicable authoritative guidance in ASC 480 Distinguishing Liabilities from Equity (ASC 480) and ASC 815, Derivatives and Hedging (ASC 815). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own stock and whether the holders of the warrants could F-11 Table of Contents Profound Medical Corp. Notes to Consolidated Financial Statements December 31, 2024 and 2023 In USD (000s) potentially require net cash settlement in a circumstance outside of the Company’s control, among other conditions for equity classification. Leases Leases where the Company is the Lessee The Company accounts for leases in accordance with ASC 842, Leases (ASC 842). At inception of a contract, the Company assesses whether a contract is, or contains, a lease based on whether the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Company determines the initial classification and measurement of its right-of-use assets and lease liabilities at the lease commencement date. The lease term includes any renewal options and termination options that the Company is reasonably certain to exercise. Lease liabilities and the corresponding right-of-use assets are recorded based on the present values of lease payments over the terms. The present value of the lease payments is determined using the rate implicit in that lease. If the information necessary to determine the rate implicit in a lease is not available, the Company uses its incremental borrowing rate at the commencement of the lease, which represents the rate of interest that the Company would incur to borrow on a collateralized basis over a similar term. All leases must be classified as either an operating lease or finance lease. The classification is determined based on whether substantive control has been transferred to the lessee. The classification governs the pattern of lease expense recognition. For leases classified as operating leases, total lease expense over the term of the lease is equal to the undiscounted payments due in accordance with the lease arrangement. Fixed lease expense is recognized on a straight-line basis over the term of each lease and includes: (i) imputed interest during the period on the lease liability determined using the effective interest rate method plus (ii) amortization of the right-of-use asset for that period. Amortization of the right-of-use asset during the period is calculated as the difference between the straight-line expense and the imputed interest on the lease liability for that period. Variable lease expense is recognized in the period in which the obligation for variable lease payments is incurred. All of the Company’s leases are classified as operating leases. The Company has elected not to record on the consolidated balance sheets a lease for which the term is 12 months or less. Leases where the Company is the Lessor Revenue from leasing arrangements is not subject to the revenue standard for contracts with customers and remains separately accounted for under ASC 842. In accordance with ASC 842, lessors should classify and account for a lease as an operating lease or a finance lease. All of the Company’s leases are qualified as operating leases. The Company does not derecognize the leased equipment at the time of the arrangement but depreciates the leased equipment over its useful life. Revenue Revenue is derived primarily from the sale of the TULSA-PRO and Sonalleve systems and one time use devices. All products generally contain a one-year warranty. The Company recognizes revenue when the customer obtains control of promised goods or services and in an amount that reflects the consideration to which the Company expects to be entitled to receive in exchange for those goods or services. To achieve this core principle, the Company applies the five-step revenue model to contracts within its scope: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract and (v) recognize revenue when (or as) the entity satisfies a performance obligation. F-12 Table of Contents Profound Medical Corp. Notes to Consolidated Financial Statements December 31, 2024 and 2023 In USD (000s) The amount of revenue to be recognized is based on the transaction price the Company expects to receive in exchange for its goods and services. For contracts that contain multiple performance obligations, the Company allocates the transaction price to each performance obligation and recognizes the related revenue when or as control of each individual performance obligation is transferred to customers. Recurring – non-capital Recurring - non-capital revenue consists of the sale of one-time-use devices and services associated with extended warranties. Revenue from sale of one-time-use devices is recognized when control is transferred to the customers, which generally occurs at the time of shipment. Service revenue related to extended warranties is deferred and recognized on a straight-line basis over the extended warranty period covered by the customer contract. Capital equipment Capital equipment revenue consists of the sale of capital equipment including installation and training amounts. Revenue is recognized when the Company transfers control to the customer, which is generally at the time of shipment. The Company’s customer arrangements generally do not provide a right of return. Contract Assets Contract assets arise from billed amounts in customer arrangements and the Company’s right to payment is not just subject to the passage of time, typically related to installation of the product. The Company recognizes a receivable at the point in time at which it has an unconditional right to payment. Sales to distributors The Company markets and sells its products primarily through its direct sales force, which sells its products to end customers. A portion of the Company’s revenue is generated by sales to distributors primarily in Europe and Asia. When the Company transacts with a distributor, its contractual arrangement is with the distributor and not with the end customer. Whether the Company transacts business with and receives the order from a distributor or directly from an end customer, its revenue recognition policy and resulting pattern of revenue recognition for the order are generally the same. Cost of sales Cost of sales primarily includes the cost of finished goods, depreciation of equipment under lease, inventory write-downs, royalties, warranty expense, freight and direct overhead and labor expenses necessary to acquire or manufacture the finished goods. Income taxes The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the consolidated financial statements. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Changes in deferred tax assets and liabilities are recorded in the provision for income taxes. The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely than not that all or a portion of the deferred tax assets will not be realized, a valuation allowance is established through a charge to income tax expense. Potential for recovery of deferred tax assets is evaluated by estimating the future taxable profits expected and considering prudent and feasible tax planning strategies. F-13 Table of Contents Profound Medical Corp. Notes to Consolidated Financial Statements December 31, 2024 and 2023 In USD (000s) The Company accounts for uncertainty in income taxes recognized in the consolidated financial statements by applying a two-step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained based on the technical merits of the position. If the tax position is deemed more-likely-than-not to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the consolidated financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority. The provision for income taxes includes the effects of unrecognized tax benefits, as well as the related interest and penalties. Share-based compensation The Company grants share options periodically to certain employees, directors and officers. Options currently outstanding vest over four years and have a contractual life of ten years . Each tranche in an award is considered a separate award with its own vesting period and grant date fair value. The fair value of each tranche is measured at the date of grant using the Black-Scholes option pricing model. Compensation expense is recognized over the tranche’s vesting period using the graded vesting method by increasing additional paid-in capital based on the number of awards expected to vest. The Company has a long-term incentive plan (LTIP) with a requisite service period of 3 years . For each Restricted Share Unit (RSU) and Deferred Share Unit (DSU) granted under the long-term incentive plan, the Company recognizes an expense equal to the market value of a Profound common share at the date of grant based on the number of RSUs and DSUs expected to vest, recognized over the term of the vesting period, with a corresponding credit to additional paid-in capital for share-based compensation anticipated to be equity settled or a corresponding credit to a liability for those anticipated to be cash settled. Share-based compensation is adjusted for subsequent changes in management’s estimate of the number of RSUs or DSUs that are expected to vest, for RSUs or DSUs anticipated to be cash settled and changes in the market value of Profound common shares. The effect of these changes is recognized in the period of the change. Vested RSUs and DSUs are settled either in Profound common shares or in cash or a combination thereof at the discretion of the Company. As of December 31, 2024, the Company authorized for issuance under the share-based compensation a total of 3,089,175 share option, 716,000 RSUs and 100,000 DSUs. Share-based compensation is recognized in the consolidated statements of operations and comprehensive loss in the same manner as the award recipients’ other compensation costs. Forfeitures are recognized as a reduction of share-based compensation expense as they occur. Research and development costs Research and development costs are charged to expense as incurred. Clinical trial expenses result from obligations under contracts with vendors, consultants and clinical site agreements in connection with conducting clinical trials. The financial terms of these contracts are subject to negotiations, which vary from contract to contract and may result in payment flows that do not match the periods over which materials or services are provided to the Company. These expenses are recorded according to the progress of the clinical trial as measured by patient progression and the timing of various aspects of the clinical trial. Clinical trial accrual estimates are determined through discussions with internal clinical personnel and outside service providers as to the progress or state of completion of clinical trials, or the services completed. Service provider status is then compared to the contractually obligated fees to be paid for such services. During the course of a clinical trial, the Company may adjust the rate of clinical expense recognized if actual results differ from management’s estimates. F-14 Table of Contents Profound Medical Corp. Notes to Consolidated Financial Statements December 31, 2024 and 2023 In USD (000s) Advertising and marketing costs Advertising and marketing costs are expensed as incurred. These costs are included in selling, general and administrative expenses and were $ 4,478 and $ 3,348 for the years ended December 31, 2024 and 2023, respectively. Loss per share Basic loss per share is calculated by dividing the net loss by the weighted average number of common shares outstanding during the reporting period. Diluted loss per share is calculated by dividing the applicable net loss by the sum of the weighted average number of shares outstanding during the reporting period and all additional common shares that would have been outstanding if potentially dilutive common shares had been issued during the reporting period, except where the effect of such common shares would be antidilutive. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding as inclusion of the potentially dilutive common shares would be antidilutive. Comprehensive (income) loss Comprehensive (income) loss comprises of net (income) loss and other comprehensive (income) loss. Other comprehensive (income) loss includes foreign currency translation adjustments. Accumulated other comprehensive (income) loss is recorded as a component of shareholders’ equity. Contingencies The Company records a liability in the consolidated financial statements on an undiscounted basis for loss contingencies related to legal actions when a loss is known or considered probable and the amount may be reasonably estimated. If the reasonable estimate of a known or probable loss is a range, and no amount within the range is a better estimate than any other, the minimum amount of the range is accrued. If a loss is reasonably possible but not known or probable, and may be reasonably estimated, the estimated loss or range of loss is disclosed. Recently adopted accounting pronouncements In September 2022, the Financial Accounting Standards Board (FASB) issued ASU 2022-04, Liabilities—Supplier Finance Programs (Subtopic 405-50), which requires that a buyer in a supplier finance program disclose sufficient information about the program to allow a user of financial statements to understand the program’s nature, activity during the period, changes from period to period, and potential magnitude. The Company adopted this guidance on January 1, 2024. The adoption of this standard did not have an impact on the Company’s consolidated financial statements. In November 2023, the FASB issued ASU 2023-07, Segment Reporting: Improvements to Reportable Segment Disclosures. This ASU modified the disclosure and presentation requirements primarily through enhanced disclosures of significant segment expenses and clarified that single reportable segment entities must apply ASC 280 in its entirety. This guidance is effective for the Company for the year beginning January 1, 2024, with early adoption permitted. The amendments should be applied retrospectively to all prior periods presented in the financial statement. The Company adopted ASU 2023-07 on January 1, 2024 and the adoption did not have a material effect on the Company’s consolidated financial statements. F-15 Table of Contents Profound Medical Corp. Notes to Consolidated Financial Statements December 31, 2024 and 2023 In USD (000s) In December 2023, the FASB issued ASU 2023-09, Income Taxes (ASC 740): Improvements to Income Tax Disclosures, which includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The amendments are effective for all public entities for fiscal years beginning after December 15, 2024, and early adoption is permitted. The Company elected to early adopt ASU 2023-09 on January 1, 2024 retrospectively and the adoption has an effect on the Company’s disclosures on income taxes (note 13). Recently issued accounting pronouncements In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements. The amendments in this update are the result of the FASB’s decision to incorporate into the Codification certain disclosures referred by the SEC that overlap with, but require incremental information to, US GAAP. The amendments in this update represent changes to clarify or improve disclosure and presentation requirements of a variety of topics in the Codification. For entities subject to the SEC’s existing requirements, the effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. The amendments in this update should be applied prospectively. The Company is currently evaluating the impact of this guidance. The Company does not believe there are any other recently issued, but not yet effective, accounting standards that would have a significant impact on the Company’s financial position or results of operations. 3 Trade and other receivables, net Trade receivables and other receivables, net, as of December 31, 2024 and 2023 consist of the following: ​ ​ ​ ​ ​ ​ ​ 2024 2023 ​ ​ $ ​ $ Trade receivables, gross 5,245 3,048 Contract assets, gross ​ 1,340 ​ 4,097 Trade receivables and contract assets ​ 6,585 ​ 7,145 Allowance for expected credit losses ( 158 ) ( 76 ) Less amortized cost adjustment — ( 315 ) Trade receivables, net 6,427 6,754 Tax receivables 308 414 Other receivables 310 120 Total trade and other receivables, net 7,045 7,288 ​ During the year ended December 31, 2024, $ 2,147 (2023 – $ nil ) of trade receivables were written off. The activity in the allowance for expected credit losses for trade receivables was as follows: ​ ​ ​ ​ ​ ​ ​ 2024 2023 ​ ​ $ ​ $ Balance, beginning of year 76 ​ — Provision for allowance for expected credit losses 82 76 Balance, end of year 158 76 ​ F-16 Table of Contents Profound Medical Corp. Notes to Consolidated Financial Statements December 31, 2024 and 2023 In USD (000s) The allowance for expected credit losses as at December 31, 2024 and 2023 for trade receivables is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2024 ​ ​ ​ ​ 0–30 ​ 31 ‑ 60 ​ 61 ‑ 90 ​ 90+ ​ Contract ​ ​ ​ Current days days days days assets ​ Total ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Expected loss rate 0.84 % 3.02 % 3.02 % 5.96 % 6.02 % 6.02 % Gross carrying amount 4,180 ​ 713 — — 352 1,340 ​ 6,585 Allowance for expected credit losses 35 21 — — 21 81 ​ 158 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 ​ ​ 0–30 31 ‑ 60 61 ‑ 90 90+ Contract ​ ​ ​ Current days days days days assets ​ Total ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Expected loss rate ​ 0.84 % 1.42 % 1.35 % 2.46 % 3.62 % 0.84 % Gross carrying amount ​ 2,400 — 93 — 555 4,097 ​ 7,145 Allowance for expected credit losses ​ 20 — 1 — 20 35 ​ 76 ​ ​ 4 Inventory Inventory as of December 31, 2024 and 2023 consist of the following: ​ ​ ​ ​ ​ ​ ​ 2024 2023 ​ ​ $ ​ $ Finished goods 3,837 4,638 Raw materials 1,964 2,351 Inventory 5,801 6,989 ​ During the year ended December 31, 2024, $ 3,178 (2023 - $ 2,704 ) of inventory was recognized in cost of sales. The Company recognized $ 43 inventory write - downs in cost of sales during the year ended December 31, 2024 (2023 – $ 3 ). ​ 5 Property and equipment, net The major components of property and equipment, net, as of December 31, 2024 and 2023 consist of the following: ​ ​ ​ ​ ​ ​ ​ 2024 2023 ​ ​ $ ​ $ Leasehold improvements 542 542 Equipment under operating lease 2,273 2,583 Total 2,815 3,125 Accumulated depreciation ( 2,390 ) ( 2,216 ) Property and equipment, net 425 909 ​ Depreciation expense for the year ended December 31, 2024 was $ 707 (2023 - $ 727 ). During the year ended December 31, 2024, the Company sold $ 532 (2023 - $ nil ) of equipment under operating lease to various customers. ​ F-17 Table of Contents Profound Medical Corp. Notes to Consolidated Financial Statements December 31, 2024 and 2023 In USD (000s) 6 Intangible assets The major components of intangible assets as of December 31, 2024 and 2023 consist of: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2024 2023 ​ ​ ​ ​ $ ​ $ ​ Weighted ​ ​ ​ ​ ​ ​ ​ ​ Average ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Remaining ​ ​ ​ Accumulated ​ ​ Accumulated ​ ​ ​ Useful ​ Gross ​ Amortization ​ Net ​ Gross ​ Amortization ​ Net ​ ​ Lives ​ Carrying ​ and ​ Carrying ​ Carrying ​ and ​ Carrying ​ ​ (Years) ​ Amount ​ Impairments Amount ​ Amount ​ Impairments ​ Amount Exclusive licence agreement ​ 4.7 ​ 231 ​ ( 142 ) ​ 89 ​ 231 ​ ( 114 ) ​ 117 Software ​ 1 ​ 978 ​ ( 806 ) ​ 172 ​ 978 ​ ( 605 ) ​ 373 ​ ​ ​ ​ 1,209 ​ ( 948 ) ​ 261 ​ 1,209 ​ ( 719 ) ​ 490 ​ The Company has a licence agreement (the licence) with Sunnybrook Health Sciences Centre (Sunnybrook), pursuant to which Sunnybrook licenses to the Company certain intellectual property and exclusively licenced-in rights that enable the Company to use Sunnybrook’s technology for MRI-guided trans-urethral ultrasound therapy. The Company has the option to acquire rights to improvements to the relevant technology and intellectual property. If the Company fails to comply with any of its obligations or otherwise breaches this agreement, Sunnybrook may have the right to terminate the licence. Amortization expense for the year ended December 31, 2024 was $ 229 (2023 - $ 202 ). Aggregate amortization expense for each of the five succeeding years related to intangible assets held as of December 31, 2024 is estimated as follows: ​ ​ ​ ​ 2025 189 2026 21 2027 19 2028 19 2029 13 Total 261 ​ 7 Accrued expenses and other current liabilities Accrued expenses and other current liabilities, as of December 31, 2024 and 2023 consist of the following: ​ ​ ​ ​ ​ ​ ​ 2024 2023 ​ ​ $ ​ $ Accrued employee compensation ​ 706 ​ 752 Clinical trails ​ 325 ​ 663 Other general accruals ​ 1,804 ​ 1,004 Accrued expenses and other current liabilities ​ 2,835 ​ 2,419 ​ ​ 8 Long-term debt On November 3, 2022, the Company signed a credit agreement with CIBC (the “ Original CIBC Credit Agreement ”) to provide a secured loan for total gross proceeds of C$ 10,000 maturing on November 3, 2027 with an interest rate based on CIBC prime plus 2 % (CIBC Loan). The Company was required to make interest only payments until October 31, 2023 and monthly repayments of C$ 208 plus accrued interest commenced on October 31, 2023. All obligations of the Company under the credit agreement with CIBC are guaranteed by current and future subsidiaries of the Company and include security of first priority interests in the assets of the Company and its subsidiaries. Initially, the Company had financial covenants in relation to the CIBC Loan where unrestricted cash is at all times greater than EBITDA for the most recent six-month period, reported on F-18 Table of Contents Profound Medical Corp. Notes to Consolidated Financial Statements December 31, 2024 and 2023 In USD (000s) a monthly basis and that revenue for any fiscal quarter must be 15 % greater than revenue for the same fiscal quarter in the prior fiscal year, reported on a quarterly basis. The term loan matures in November 2027. On September 26, 2023, an amendment to the CIBC Loan resulted in a change to the financial covenants. The amended covenants are that unrestricted cash must at all times be greater of: (i) to the extent EBITDA is negative for such period, EBITDA for the most recent nine-month period and (ii) $ 7,500 , reported on a monthly basis; and that recurring revenue for any fiscal quarter must be 15 % greater than recurring revenue for the same fiscal quarter in the prior fiscal year, reported on a quarterly basis. On May 3, 2024, a second amendment to the CIBC Loan resulted in another change to the financial covenants. The amended covenants are that the recurring revenue covenant shall not be tested for any fiscal quarter in the 2024 fiscal year so long as unrestricted cash is no less than 2.5 multiplied by the principal amount of outstanding CIBC Loan at all times. The Company is in compliance with these financial covenants as at December 31, 2024. ​ ​ ​ ​ ​ ​ ​ 2024 2023 ​ ​ $ ​ $ Balance - Beginning of year ​ 7,104 ​ 7,174 Interest and accretion expense ​ 600 ​ 727 Foreign exchange ​ ( 483 ) ​ 115 Repayment ​ ( 2,560 ) ​ ( 912 ) Balance - End of year ​ 4,661 ​ 7,104 Less: Current portion ​ 1,737 ​ 2,104 Long-term portion ​ 2,924 ​ 5,000 ​ Principal payments required on long-term debt outstanding at December 31, 2024 are $ 1,737 in 2025, $ 1,738 in 2026, and $ 1,186 in 2027. In connection with the CIBC term loan agreements, the Company had issued warrants to CIBC on July 30, 2018 and November 3, 2022, with each warrant entitling the holder to acquire one common share at a price of C$ 9.70 and C$ 5.29 per common share, respectively, with a cashless exercise feature (collectively, CIBC Warrants). These warrants were determined to be equity classified and the fair value of the warrants on issuance date was recognized in additional paid-in capital. On June 14, 2023, all of the outstanding CIBC Warrants were exercised resulting in the issuance of common shares of the Company, resulting in a reclassification from additional paid-in capital to share capital. There were no CIBC Warrants outstanding as of December 31, 2024 and 2023. 9 Leases Leases where the Company is the Lessee The Company leases certain office premises. Its operating leases have fixed payment structures expiring in 2026. Lease liabilities and corresponding right-of-use assets were recognized based on the present value of future lease payments. Lease expense for the years 2024 and 2023 include: ​ ​ ​ ​ ​ ​ ​ ​ 2024 2023 ​ ​ $ ​ $ ​ Operating lease costs ​ 243 ​ 247 Total lease costs ​ 243 ​ 247 ​ F-19 Table of Contents Profound Medical Corp. Notes to Consolidated Financial Statements December 31, 2024 and 2023 In USD (000s) Other information related to operating leases for 2024 and 2023 is as follows: ​ ​ ​ ​ ​ ​ ​ ​ 2024 2023 Cash paid from operating cash flows for amounts included in the measurement of lease liabilities 288 292 Weighted average remaining lease term 1.75 years 2.75 years Weighted average discount rate 5.99 % 5.99 % ​ Maturities of the operating lease liabilities and minimum payments for operating leases having initial or remaining noncancellable terms in excess of one year as of December 31, 2024 were as follows: ​ ​ ​ ​ 2025 274 2026 206 Total 480 Less: Imputed interest 20 Present value of remaining lease payments 460 Less: Current portion 257 Non-current portion 203 ​ Leases where the Company is the lessor Certain medical equipment are leased to customers under contractual arrangements that typically include an operating lease as well as performance obligations for sale of one-time-use devices. Contract terms vary by customer and may include options to terminate the contract or options to extend the contract. Where instruments are provided under operating lease arrangements, some portion or the entire lease revenue may be variable and collected as part of expected sales of certain related goods, which are separate performance obligations from subsequent non-lease component (e.g., sale of one-time-use devices). The allocation of revenue between the lease and non-lease components is based on standalone selling prices. Assets related to operating leases are reported within property and equipment, net on the consolidated balance sheets. The original cost and the net book value of such assets were $ 2,273 and $ 332 , respectively, as of December 31, 2024 (2023 - $ 2,583 and $ 751 , respectively). 10 Share capital Common shares The Company is authorized to issue an unlimited number of common shares. ​ ​ ​ ​ ​ ​ ​ 2024 2023 Issued and outstanding (with no par value) ​ $ ​ $ 30,039,809 (2023 – 21,370,565 ) common shares ​ 281,552 ​ 222,205 ​ On January 2, 2024, the Company closed a public offering, resulting in the issuance of 2,666,667 common shares at a price of $ 7.50 , for gross proceeds of $ 20,000 ($ 18,238 , net of transaction costs). On January 16, 2024, the Company closed a non-brokered private placement, resulting in the issuance of 391,667 common shares at a price of $ 7.50 , for gross proceeds of $ 2,938 ($ 2,841 , net of transaction costs). On December 10, 2024, the Company closed a public offering, resulting in the issuance of 5,366,705 common shares at a price of $ 7.50 , for gross proceeds of $ 40,250 ( $ 36,132 , net of transaction costs). F-20 Table of Contents Profound Medical Corp. Notes to Consolidated Financial Statements December 31, 2024 and 2023 In USD (000s) Voting Power Except as otherwise required by law, the holders of common shares possess all voting power for the election of the Company’s directors and all other matters requiring shareholder action. Holders of common shares are entitled to one vote per share on matters to be voted on by shareholders. Dividends Holders of common shares will be entitled to receive such dividends, if any, as may be declared from time to time by the Company’s board of directors in its discretion out of funds legally available therefor. In no event will any stock dividends or stock splits or combinations of stock be declared or made on common stock unless the shares of common stock at the time outstanding are treated equally and identically. Liquidation, Dissolution and Winding Up In the event of the Company’s voluntary or involuntary liquidation, dissolution, distribution of assets or winding-up, the holders of the common stock will be entitled to receive an equal amount per share of all of the Company’s assets of whatever kind available for distribution to shareholders, after the rights of the creditors have been satisfied. Warrants A summary of warrants outstanding is shown below for the year ended December 31, 2023. There are no warrants outstanding at December 31, 2024: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ Weighted ​ average ​ ​ ​ ​ average ​ remaining ​ ​ ​ ​ exercise ​ contractual ​ ​ Number of ​ price ​ life ​ ​ warrants ​ C$ ​ (years) Balance - January 1, 2023 772,270 13.29 0.82 Expired ( 458,477 ) 14.00 — Exercised ( 313,793 ) 13.48 — Balance - December 31, 2023 — — — ​ ​ 11 Share-based payments Share options Effective May 20, 2020, the Company adopted amendments to the share option plan (the Share Option Plan). The maximum number of common shares reserved for issuance under the share option plan and the long-term incentive plan is 3,905,175 common shares or such other number as may be approved by the holders of the voting shares of the Company. As at December 31, 2024, 2,291,152 (2023 – 1,474,809 ) options are outstanding. Each share option granted allows the holder to purchase one common share, at an exercise price not less than the lesser of the closing trading price of the common shares on the TSX (or other exchange where the common shares are listed), on the date a share option is granted and the volume-weighted average price of the common shares for the five trading days immediately preceding the date the share option is granted. Share options granted under the Share Option Plan generally have a maximum term of ten years and vest over a period of up to four years. F-21 Table of Contents Profound Medical Corp. Notes to Consolidated Financial Statements December 31, 2024 and 2023 In USD (000s) A summary of the share option activity during the year presented and the total number of share options outstanding as at those dates are set forth below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ Weighted ​ ​ ​ ​ ​ ​ average ​ average ​ ​ ​ ​ ​ ​ exercise ​ remaining ​ Aggregate ​ ​ Number ​ price ​ contractual ​ intrinsic ​ of options C$ term value Balance - January 1, 2023 1,511,773 16.07 Granted 59,300 15.42 Exercised ( 33,799 ) 9.86 Forfeited/expired ( 62,465 ) 16.13 Balance - December 31, 2023 1,474,809 16.19 6.08 474 Exercisable - December 31, 2023 1,218,581 15.46 5.75 470 Expected to vest -December 31, 2023 1,474,809 16.19 6.08 474 Balance - January 1, 2024 1,474,809 16.19 Granted 946,900 11.14 Exercised ( 7,101 ) 8.99 Forfeited/expired ( 123,456 ) 16.17 Balance - December 31, 2024 2,291,152 14.13 5.36 429 Exercisable - December 31, 2024 1,326,573 15.98 4.92 348 Expected to vest -December 31, 2024 2,291,152 14.13 5.36 429 ​ The Company estimated the fair value of the share options granted during the year using the Black-Scholes option pricing model with the weighted average assumptions below. The Company estimated the expected future stock price volatility for its common stock by using its historical volatility based on daily price observations for the most recent historical period equal to the length of the instrument’s expected life of options. ​ ​ ​ ​ ​ ​ ​ ​ ​ November 18, ​ March 18, ​ Grant date 2024 2024 Exercise price C$ 11.14 C$ 11.24 ​ Expected volatility 70 % 70 % Expected life of options 6 years 6 years ​ Risk-free interest rate 3.17 % 3.54 % Dividend yield — — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 22, ​ June 12, ​ September 8, ​ November 16, ​ Grant date 2023 2023 2023 2023 Exercise price C$ 13.39 C$ 19.87 C$ 12.38 C$ 12.41 ​ Expected volatility 70 % 70 % 69 % 70 % Expected life of options 6 years 6 years 6 years 6 years ​ Risk-free interest rate 3.38 % 3.22 % 3.71 % 4.16 % Dividend yield — — — — ​ ​ ​ The weighted average grant date fair values of share options granted for the year ended December 31, 2024 were C$ 11.14 (2023 - C$ 10.10 ). The total remaining unrecognized compensation expense related to non-vested share options for the year ended December 31, 2024 was $ 4,160 , which will be amortized over the weighted-average period of 1.6 years. Long-term incentive plan Effective May 17, 2023, the Company adopted the amended long term incentive plan (the LTIP). The LTIP is an incentive-based equity compensation plan that provides for the grant of restricted share units (the RSUs) and deferred share units (the F-22 Table of Contents Profound Medical Corp. Notes to Consolidated Financial Statements December 31, 2024 and 2023 In USD (000s) DSUs, together with the RSUs, the Units). The maximum number of units which may be reserved for issuance under this LTIP in respect of grants of RSUs and DSUs shall not exceed 4.9 % of the issued and outstanding common shares on a non-diluted basis, provided that, the maximum number of shares which may be reserved for issuance pursuant to all of the Company’s security-based compensation arrangements shall not in the aggregate exceed 13 % of the issued and outstanding common shares on a non-diluted basis. The Company may grant Units to officers, directors or employees of the Company. Each Unit represents the right to receive one common share in accordance with the terms of the LTIP. The number of Units granted at any particular time will be calculated by dividing the dollar amount of such grant by the market value of a common share on the applicable grant date, which is equal to the volume weighted average trading price of all common shares traded on the TSX (or other exchange where the Common Shares are listed) for the five trading days immediately preceding such date. RSUs and DSUs granted under the LTIP vest over a period of up to three years. The following table summarizes RSUs activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ average grant ​ ​ ​ ​ date fair value ​ ​ Number of ​ per share ​ RSUs C$ Balance - January 1, 2023 443,861 12.62 Granted 235,500 12.38 Vested ( 162,131 ) 13.82 Forfeited ( 23,834 ) 10.15 Balance - December 31, 2023 493,396 12.23 Granted 107,500 ​ 11.02 Vested ( 228,774 ) ​ 13.33 Forfeited ( 47,501 ) ​ 11.25 Balance - December 31, 2024 324,621 ​ 11.18 ​ The total remaining unrecognized compensation expense related to non-vested RSUs for the year ended December 31, 2024 was $ 2,522 , which will be amortized over the weighted-average period of 1.8 years. Effective May 17, 2023, the Company adopted the approval of revision to the amended LTIP. Previously, vested DSUs were settled either in common shares or in cash or a combination thereof at the discretion of the holder and were classified as a cash-settled liability. Under the amended LTIP, vested DSUs are settled either in common shares or in cash or a combination thereof at the discretion of the Company. The change in terms resulted in the DSUs being classified as equity settled and the effect of this change was recognized in 2023 resulting in a reclassification between accrued expenses and other current liabilities and additional paid-in capital of $ 203 . F-23 Table of Contents Profound Medical Corp. Notes to Consolidated Financial Statements December 31, 2024 and 2023 In USD (000s) A summary of the DSUs changes during the year are set forth below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ average grant ​ ​ ​ ​ date fair value ​ ​ Number of ​ per share ​ DSUs C$ Balance - January 1, 2023 60,000 9.41 Granted 25,000 12.38 Vested ( 10,000 ) 9.41 Balance - December 31, 2023 75,000 10.40 Granted 25,000 ​ 11.07 Vested ( 8,330 ) ​ 12.38 Balance - December 31, 2024 91,670 ​ 10.40 ​ The total remaining unrecognized compensation expense related to non-vested DSUs for the year ended December 31, 2024 was $ 512 , which will be amortized over the weighted-average period of 1.7 years. Share-based compensation expense The following table presents the components and classification of share-based compensation recognized for share options, RSUs, and DSUs for the years ended December 31, 2024 and 2023: ​ ​ ​ ​ ​ ​ ​ ​ 2024 ​ 2023 ​ $ $ Share options 635 1,211 RSUs 1,517 1,914 DSUs 429 292 Share-based compensation 2,581 3,417 ​ ​ ​ ​ ​ Cost of sales 24 104 Research and development 636 758 Selling, general and administrative 1,921 2,555 Share-based compensation 2,581 3,417 ​ ​ ​ 12 Revenue The following table provides information about disaggregated revenue by products and services: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, 2024 ​ ​ Contracts with ​ ​ ​ ​ ​ ​ customers ​ Leasing ​ Total ​ $ $ $ Revenue Recurring - non-capital 7,300 940 8,240 Capital equipment 2,440 — 2,440 ​ 9,740 940 10,680 ​ ​ F-24 Table of Contents Profound Medical Corp. Notes to Consolidated Financial Statements December 31, 2024 and 2023 In USD (000s) ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, 2023 ​ ​ Contracts with ​ ​ ​ ​ ​ ​ customers ​ Leasing ​ Total ​ $ $ $ Revenue Recurring - non-capital 5,506 1,300 6,806 Capital equipment 393 — 393 ​ 5,899 1,300 7,199 ​ ​ 13 Income taxes Taxes on earnings reflect the annual effective rates, including charges for interest and penalties. Deferred income taxes reflect the tax consequences on future years of differences between the tax bases of assets and liabilities and their financial reporting amounts. The components of loss before income taxes for 2024 and 2023 consist of: ​ ​ ​ ​ ​ ​ ​ ​ 2024 ​ 2023 ​ $ $ Domestic ​ ( 28,286 ) ( 29,351 ) Foreign ​ 468 900 ​ ​ ( 27,818 ) ( 28,451 ) ​ The components of (provision for) benefit from income taxes for 2024 and 2023 consist of: ​ ​ ​ ​ ​ ​ ​ ​ 2024 ​ 2023 ​ $ $ Current ​ ​ ​ Foreign ​ 144 ​ ( 187 ) Total current income tax expense ​ 144 ​ ( 187 ) Deferred ​ ​ ​ ​ Foreign ​ ( 146 ) ​ 59 Total deferred tax expense ​ ( 146 ) ​ 59 Total income tax (recovery) expense ​ ( 2 ) ​ ( 128 ) ​ During the year ended December 31, 2024, the Company has early adopted ASU 2023-09 to enhance the income taxes disclosures regarding income taxes paid and the rate reconciliation disclosure. The income taxes paid by the Company are as follows: ​ ​ ​ ​ ​ ​ ​ ​ 2024 ​ 2023 ​ $ $ United States ​ 252 ​ 160 ​ ​ 252 ​ 160 ​ F-25 Table of Contents Profound Medical Corp. Notes to Consolidated Financial Statements December 31, 2024 and 2023 In USD (000s) The (provision for) benefit from income taxes differs from the expected amount calculated by applying the Company’s Canadian federal statutory rate to loss before income taxes for 2024 and 2023 as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2024 ​ 2023 ​ $ % $ % Loss before income taxes ​ ( 27,818 ) ​ — ( 28,451 ) ​ — (Provision for) benefit from income taxes ​ ​ ​ ​ ​ ​ ​ ​ Canadian federal statutory rate of 15 % (2023 - 15 % ) ​ ( 4,173 ) ​ 15.0 ​ ( 4,268 ) ​ 15.0 Provincial tax / state tax ​ ( 2,998 ) ​ 10.8 ​ ( 3,073 ) ​ 10.8 Foreign tax effects ​ ​ ​ ​ ​ ​ ​ ​ United States ​ ​ ​ ​ ​ ​ ​ ​ Statutory tax rate differences between United States and Canada ​ 16 ​ — ​ 15 ​ — Finland ​ ​ ​ ​ ​ ​ ​ ​ Statutory tax rate differences between Finland and Canada ​ 10 ​ — ​ 19 ​ — Germany ​ ​ ​ ​ ​ ​ ​ ​ Statutory tax rate differences between Germany and Canada ​ ( 42 ) ​ 0.1 ​ — ​ — Changes in valuation allowance ​ 7,085 ​ ( 25.5 ) ​ 6,944 ​ ( 24.5 ) Non-taxable or non-deductible items ​ 206 ​ ( 0.7 ) ​ 467 ​ ( 1.6 ) True-up and other adjustments ​ ( 106 ) ​ 0.3 ​ ( 232 ) ​ 0.8 ​ ​ ( 2 ) ​ — ​ ( 128 ) ​ 0.5 ​ The components of deferred tax assets and liabilities are summarized as follows: ​ ​ ​ ​ ​ ​ ​ ​ 2024 ​ 2023 ​ $ $ Deferred tax assets: ​ ​ ​ ​ Operating loss carry forwards ​ 43,031 ​ 36,067 SR&ED expenditure pool ​ 4,344 ​ 4,202 Benefit of Investment tax credits ​ 2,078 ​ 2,786 Excess of tax value of property and equipment over book value ​ 2,392 ​ 2,112 Long term debt ​ ( 32 ) ​ 78 Financing fees ​ 1,042 ​ 543 Reserves ​ 827 ​ 220 Total deferred tax assets ​ 53,682 ​ 46,008 Valuation allowance ​ ( 53,595 ) ​ ( 46,008 ) Net deferred tax assets ​ 87 ​ — ​ ​ ​ ​ ​ Deferred tax liabilities: ​ ​ ​ ​ Excess of accounting value of property, plant and equipment over tax value ​ — ​ 59 Total deferred tax liabilities ​ — ​ 59 ​ Deferred income taxes reflect future tax effects of temporary differences between the tax and financial reporting basis of the Company’s assets and liabilities measured using enacted tax laws and statutory tax rates applicable to the periods when the temporary differences will affect taxable income. When necessary, deferred tax assets are reduced by a valuation allowance, if based on the weight of available positive and negative evidence, it is more likely than not that some portion or all the deferred tax assets will not be realized. The Company has $ 53,595 in valuation allowance against its deferred tax assets, for the year ended December 31, 2024 (2023 - $ 46,008 ). F-26 Table of Contents Profound Medical Corp. Notes to Consolidated Financial Statements December 31, 2024 and 2023 In USD (000s) The Company has non-capital loss carry-forwards in Canada of approximately $ 157,555 which expires as follows: ​ ​ ​ ​ ​ $ 2028 ​ 128 2029 ​ 215 2030 ​ 51 2031 ​ 446 Thereafter ​ 156,715 Total ​ 157,555 ​ The Company has SR&ED expenditures in Canada of approximately $ 15,905 as at December 31, 2024, which can be carried forward indefinitely to reduce future years’ taxable income. The Company has approximately $ 3,471 of Canadian federal and provincial tax credits that are available to be applied against Canadian federal and provincial taxes otherwise payable in future years and that expire in varying amounts from 2028 to 2044. ​ 14 Loss per share The following table shows the calculation of basic and diluted loss per share: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2024 2023 Net loss for the year $ 27,816 $ 28,323 Weighted average number of common shares ​ 24,765,503 ​ 21,182,558 Basic and diluted loss per share $ 1.12 $ 1.34 ​ The computation of diluted loss per share is equal to the basic loss per share due to the anti-dilutive effect of the share options, RSUs, DSUs and warrants. Of the 2,291,152 (2023 – 1,474,809 ) share options, 324,621 (2023 – 493,396 ) RSUs, and 91,670 (2023 – 75,000 ) DSUs not included in the calculation of diluted loss per share for the year ended December 31, 2024, 1,326,573 (2023 – 1,218,581 ) were exercisable. 15 Commitments and contingencies All directors and officers of the Company are indemnified by the Company for various items including, but not limited to, all costs to settle lawsuits or actions due to their association with the Company, subject to certain restrictions. The Company has purchased directors’ and officers’ liability insurance to mitigate the cost of any potential future lawsuits or actions. The term of the indemnification is not explicitly defined but is limited to events for the period during which the indemnified party served as a director or officer of the Company. The maximum amount of any potential future payment cannot be reasonably estimated but could have a material adverse effect on the Company. The Company has also indemnified certain lenders and underwriters in relation to certain debt and equity offerings and their respective affiliates and directors, officers, employees, shareholders, partners, advisers and agents and each other person, if any, controlling any of the underwriters or lenders or their affiliates against certain liabilities. As of December 31, 2024 and 2023, no material amounts were accrued for the Company’s obligations under these indemnification provisions. F-27 Table of Contents Profound Medical Corp. Notes to Consolidated Financial Statements December 31, 2024 and 2023 In USD (000s) 16 Segment reporting The Company’s operations are categorized into one industry segment, which is medical technology focused on magnetic resonance guided ablation procedures for the treatments to ablate the prostate gland, uterine fibroids, osteoid osteoma and nerves for palliative pain relief for patients with metastatic bone disease. The CODM regularly reviews the operating results of the Company on a consolidated basis as part of making decisions for allocating resources and evaluating performance. Further, the CODM is regularly provided with the consolidated expenses as noted on the consolidated statements of operations and comprehensive loss. The following tables represent total revenue by geographic area, based on the location of the location of the reporting entity for the years ended December 31, 2024 and 2023, respectively: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, 2024 ​ ​ Canada ​ USA ​ Germany ​ Total ​ $ $ $ $ Revenue ​ ​ ​ ​ ​ Recurring - non-capital ​ 891 ​ 6,458 ​ 891 ​ 8,240 Capital equipment 1,548 892 ​ — 2,440 ​ 2,439 7,350 ​ 891 10,680 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, 2023 ​ ​ Canada ​ USA ​ Germany ​ Total ​ $ $ $ $ Revenue ​ ​ ​ ​ ​ Recurring - non-capital ​ 230 ​ 5,126 ​ 1,450 ​ 6,806 Capital equipment — — ​ 393 393 ​ 230 5,126 ​ 1,843 7,199 ​ ​ The following tables represent other geographic information for the years ended December 31, 2024 and 2023, respectively: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, 2024 ​ ​ Canada ​ USA ​ Germany ​ China ​ Finland ​ Total ​ $ $ $ $ $ $ Total assets 58,743 6,351 1,661 92 3,387 70,234 Intangible assets 261 — — — — 261 Property and equipment 93 332 — — — 425 Right-of-use assets 396 — — — — 396 Amortization of intangible assets 229 — — — — 229 Depreciation of property and equipment 66 641 — — — 707 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, 2023 ​ ​ Canada ​ USA ​ Germany ​ China ​ Finland ​ Total ​ $ $ $ $ $ $ Total assets 34,302 4,067 1,952 82 3,553 43,956 Intangible assets 490 — — — — 490 Property and equipment 158 751 — — — 909 Right-of-use assets 661 — — — — 661 Amortization of intangible assets 202 — — — — 202 Depreciation of property and equipment 57 670 — — — 727 ​ ​ F-28 Table of Contents Profound Medical Corp. Notes to Consolidated Financial Statements December 31, 2024 and 2023 In USD (000s) ​ 17 Subsequent events On February 1, 2025, the President of the United States issued three executive orders directing the United States to impose new tariffs on imports originating from Canada, Mexico and China. These orders call for additional 25 % duty on imports into the United States of Canadian-origin and Mexican-origin products and 10 % duty on Chinese origin products, except for Canadian energy resources that are subject to an additional 10 % duty. The Company is assessing the direct and indirect impacts to its business of such tariffs, retaliatory tariffs or other trade protectionist measures implemented as this situation develops, and such impacts could be material. On March 3, 2025, the Company entered into an amended and restated credit agreement with CIBC (the “ CIBC Credit Agreement ”), which amended the terms of the CIBC Loan and the existing long-term debt provided under the Original CIBC Credit Agreement was repaid with proceeds from a new revolving line of credit provided by CIBC to the Company. The line of credit bears interest at the Wall Street Journal Prime Rate subject to a floor of 6.25 %. The CIBC Credit Agreement contains certain financial covenants, and the obligations thereunder are secured by, inter alia , a general security agreement over the assets of the Company and its subsidiaries. The revolving line of credit matures on March 3, 2027 and provides an option to increase the amount of the revolving commitment by $ 5,000 within 18 months from March 3, 2025, subject to achieving a minimum trailing 12 month revenue exceeding $ 15,000 . The exercise of the option would result in the size of the revolving commitment increasing from $ 10,000 to a maximum of $ 15,000 . Additionally, the CIBC Credit Agreement provides that the Company may request a one-time increase in the principal amount of the revolving line of credit up to a maximum amount of $ 10,000 , which is subject to the approval of CIBC in its sole discretion. ​ ​ ​ F-29 Table of Contents Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.