Nanox Announces First Quarter of 2023 Financial Results and Provides Business Update

Reports progress towards global supply chain development

Ended the first quarter of 2023 with cash, cash equivalents, restricted cash and marketable securities of $91.0 million

Management to host conference call and webcast Monday, May 22, 2023 at 8:30 AM ET

NEVE ILAN, Israel, May 22, 2023 (GLOBE NEWSWIRE) -- NANO-X IMAGING LTD (NASDAQ: NNOX) (“Nanox” or the “Company”), an innovative medical imaging technology company, today announced results for the first quarter ended March 31, 2023 and provided a business update.

First Quarter 2023 Highlights and Recent Developments:

• On April 28, 2023, the Company received clearance from the U.S. Food and Drug Administration (the “FDA”) to market the Nanox.ARC (including the Nanox.CLOUD) as a stationary ‎X-ray ‎system ‎intended to produce tomographic images of the human musculoskeletal system adjunctive to conventional radiography, on adult patients. This device is ‎intended to be used in professional healthcare ‎facilities or ‎radiological ‎environments, such as ‎hospitals, clinics, imaging ‎centers and ‎other medical practices‎ by trained radiographers, ‎radiologists and physicians.
• Generated $2.4 million in revenue in the first quarter of 2023 compared to $1.8 million in the first quarter of 2022.
• Received ISO 13485 certification for Medical Devices Quality Management Systems for the Company’s Korean fabrication facility, which covers Design, Development, Manufacturing, and Sales of X-Ray Tube for Medical Use, and is valid for a period of three years.
• Working to establish a demo center in Fort Lauderdale, Florida for the Nanox.ARC system. We expect to receive an import license during the second quarter of 2023.
• On May 19, 2023, we entered into a three-year distribution pre-sale agreement with Vital Tech SARL to deploy 270 Nanox.ARC units in the Kingdom of Morocco. We obtained an import license.
  
  “The first quarter of 2023 was another successful quarter for Nanox, as we continued to advance our commercialization efforts on multiple fronts, culminating with the FDA clearance of the Nanox.ARC system in April. The entire Nanox organization was focused on securing FDA clearance for our cloud-connected imaging technology, and I am proud of our work” said Erez Meltzer, Chief Executive Officer of Nanox. “In addition, we have enhanced our presence in Africa by entering into a distribution agreement with Vital Tech SARL to deploy 270 Nanox.ARC units in the Kingdom of Morocco over three years and advancing our deployment activities in Ghana and Nigeria which we expect to be the first markets with large scale deployments of the Nanox.ARC. With FDA clearance now secured, we are working to expand our U.S. presence by establishing a demo center in Florida, and we expect to receive an import license to ship a Nanox.ARC unit to that facility this quarter. We have also strengthened our supply chain and manufacturing capabilities and established new distribution and component partnerships. We have made much progress thus far in 2023 and look forward to capitalizing on our momentum throughout the coming months”.

Financial results for three months ended March 31, 2023

For the three months ended March 31, 2023, the Company reported a net loss of $11.8 million, compared to a net loss of $21.7 million for the three months ended March 31, 2022 (which is referred to as the “comparable period”), which decrease was largely due to a decrease in the Company’s earn-out liabilities in the amount of $5.1 million and a decrease in its general and administrative expenses in the amount of $3.5 million.

For the three months ended March 31, 2023, the Company reported revenue of $2.4 million, compared to $1.8 million in the comparable period. During the three months ended March 31, 2023, the Company generated revenues through the sales of teleradiology services and AI solutions. The Company’s gross loss during the three months ended March 31, 2023 totaled $1.5 million on a GAAP basis, as compared to a gross loss of $1.9 million in the comparable period, which represents a gross loss margin of approximately (62%) on a GAAP basis, as compared to (106%) on a GAAP basis in the comparable period. Non-GAAP gross profit for the three months ended March 31, 2023 was $1.0 million for the three months ended March 31, 2023, as compared to $0.7 million in the comparable period, which represents a gross profit margin of approximately 43% on a non-GAAP basis, as compared to 37% on a non-GAAP basis in the comparable period.

The Company’s revenue from teleradiology services for the three months ended March 31, 2023 was $2.4 million with a gross profit of $0.5 million on a GAAP basis, as compared to revenue of $1.7 million with a gross profit of $0.1 million on a GAAP basis in the comparable period which represents a gross profit margin of approximately 21% on a GAAP basis for the three months ended March 31, 2023 as compared to 6% on a GAAP basis in the comparable period. Non-GAAP gross profit of the Company’s teleradiology services for the three months ended March 31, 2023 was $1.1 million, as compared to $0.7 million in the comparable period on a non-GAAP basis, which represents a gross profit margin of approximately 44% on a non-GAAP basis for the three months ended March 31, 2023 as compared to 39% on a non-GAAP basis in the comparable period. The increase in gross profit margin on a non-GAAP basis is attributable mainly to the increase in the amount of the radiologic interpretations or reads and the Company’s rates for teleradiology services during the three months ended March 31, 2023, as compared to the comparable period.

The Company’s revenue from its AI solutions for the three months ended March 31, 2023 was less than $0.1 million with a gross loss of $2.0 million on a GAAP basis, as compared to revenue of $0.1 million with a gross loss of $2.0 million on a GAAP basis in the comparable period. Non-GAAP gross profit (loss) of the Company’s AI solutions for the three months ended March 31, 2023 was $0.0, unchanged from the comparable period on a non-GAAP basis.

Research and development expenses for the three months ended March 31, 2023, were $6.3 million, as compared to $6.8 million in the comparable period. The decrease of $0.5 million was mainly due to a decrease in the Company’s cost of labor in the amount of $0.5 million, and a decrease in share-based compensation in the amount of $0.8 million which was mitigated by an increase of $0.2 million in development expenses.

Sales and marketing expenses for the three months ended March 31, 2023 were $1.2 million, as compared to $1.1 million in the comparable period.

General and administrative expenses for the three months ended March 31, 2023 were $7.8 million, as compared to $11.3 million in the comparable period. The decrease of $3.5 million was mainly due to a decrease in the Company’s cost of labor in the amount of $0.8 million, a decrease in share-based compensation in the amount of $4.5 million and a decrease in the cost of the directors’ and officers’ liability insurance premium in the amount of $0.3 million which was offset by an increase in professional services in the amount of $0.7 million and an increase in the Company’s legal fees in the amount of $1.4 million due to an increase in the Company’s legal fees in connection with the U.S. Securities and Exchange Commission (“SEC”) investigation and class-action litigation as described in this Company’s Form 6-K filed on May 22, 2023. During the fourth quarter of 2022, the Company recorded $8 million under other expenses for future settlement expenses in connection with the two pending class action lawsuits against the Company.

Change in contingent earnout liability was $(4.7) million in the three months ended March 31, 2023, as compared to $0.4 million in the comparable period, due to the decrease in the Company’s contingent earnout liability as result of the settlement with the former stockholders of USARAD, which was entered on April 28, 2023. The Company agreed to pay an aggregate amount of $0.3 million in cash and 45,392 ordinary shares to the former stockholders of USARAD, in consideration for the achievement of certain milestones in connection with the first earn out period, as defined in the USARAD Stock Purchase Agreement. In addition, the Company and the former shareholders of USARAD entered into a settlement agreement with respect to any additional amount that could be granted to the shareholders of USARAD as consideration for the remainder of the milestones and applicable earn-outs under the USARAD Stock Purchase Agreement, according to which the Company agreed to pay an aggregate of $0.5 million in cash and 210,000 ordinary shares to the former stockholders of USARAD. As a result of the settlement, both parties’ performance obligations under the USARAD Stock Purchase Agreement have been satisfied in full.

GAAP net loss attributable to ordinary shares for the three months ended March 31, 2023 was $11.8 million, as compared to $21.7 million in the comparable period. Non-GAAP net loss attributable to ordinary shares for the three months ended March 31, 2023 was $10.5 million, as compared to $11.6 million in the comparable period. Non-GAAP gross profit for the three months ended March 31, 2023 was $1.0 million, as compared to $0.7 million in the comparable period. Non-GAAP research and development expenses for the three months ended March 31, 2023 were $5.5 million, as compared to $5.3 million in the comparable period. Non-GAAP sales and marketing expenses for the three months ended March 31, 2023 were $1.0 million, as compared to $0.8 million in the comparable period. Non-GAAP general and administrative expenses for the three months ended March 31, 2023 were $5.4 million, as compared to $6.1 million in the comparable period.

A reconciliation between GAAP and non-GAAP financial measures for the three-month periods ended March 31, 2023 and 2022 is provided in the financial results that are part of this press release. The difference between the GAAP and non-GAAP financial measures above is mainly attributable to amortization of intangible assets, share-based compensation, change in contingent earnout liability and legal fees in connection with class-action litigation and the SEC investigation.

Liquidity and Capital Resources

As of March 31, 2023, the Company had total cash, cash equivalents, restricted cash and marketable securities of $91.0 million. As of March 31, 2023, the Company had $78.1 million of cash, cash equivalents and short-term marketable securities and $12.9 million of long-term marketable securities and restricted cash. As of March 31, 2023, the Company had total current assets of $81.9 million and total current liabilities of $24.2 million, creating a working capital of $57.7 million.

As of December 31, 2022, the Company had total cash, cash equivalents, restricted cash and marketable securities of $102.9 million. As of December 31, 2022, the Company had $77.6 million of cash, cash equivalents and short-term marketable securities and $25.3 million of long-term marketable securities and restricted cash. As of December 31, 2022, the Company had total current assets of $82.5 million and total current liabilities of $25.1 million, creating a working capital of $57.4 million.

The decrease in the Company’s cash, cash equivalents, restricted cash and marketable securities of $11.9 million during the three-month period ended March 31, 2023 was primarily due to negative cash flow from operations of $10.7 million and purchase of property and equipment of $1.5 million.

Other Assets

As of March 31, 2023, the Company had property and equipment, net of $45.1 million as compared to $43.5 million as of December 31, 2022. The increase is mainly attributed to the purchase of equipment and parts for the assembly of the Nanox.ARC (including the Nanox.CLOUD).

As of March 31, 2023, the Company had intangible assets and goodwill of $96.0 million as compared to $98.6 million as of December 31, 2022. The decrease is attributable to the periodic amortization of intangible assets in the amount of $2.6 million.

Shareholders’ Equity

As of March 31, 2023, the Company had approximately 55.2 million shares outstanding as compared to 55.1 million shares outstanding as of December 31, 2022. The increase was mainly due to the issuance of 56,108 shares upon the exercise of options, which generated, in the aggregate, approximately $0.2 million in gross proceeds to the Company.

FDA Clearance

On April 28, 2023, the Company received clearance from the FDA to market the Nanox.ARC (including the Nanox.CLOUD) as a stationary ‎X-ray ‎system ‎intended to produce tomographic images of the human musculoskeletal system adjunctive to conventional radiography, on adult patients. This device is ‎intended to be used in professional healthcare ‎facilities or ‎radiological ‎environments, such as ‎hospitals, clinics, imaging ‎centers and ‎other medical practices‎ by trained radiographers, ‎radiologists and physicians. The current FDA-cleared version of the Nanox.ARC is not intended for mammographic, angiographic, cardiac, pulmonary, intra-abdominal, intra-cranial, interventional, or fluoroscopic applications, or for imaging pediatric or neonatal patients.

Conference Call and Webcast Details

Monday, May 22, 2023 @ 8:30am ET

Individuals interested in listening to the conference call may do so by joining the live webcast on the Investors section of the Nanox website under Events and Presentations. Alternatively, individuals can register online to receive a dial-in number and personalized PIN to participate in the call. An archived webcast of the event will be available for replay following the event.

About Nanox:

Nanox (NASDAQ: NNOX) is focused on applying our proprietary medical imaging technology and solutions to make diagnostic medicine more accessible and affordable across the globe. Nanox’s vision is to increase access, reduce costs and enhance the efficiency of routine medical imaging technology and processes, in order to improve early detection and treatment, which Nanox believes is key to helping people achieve better health outcomes, and, ultimately, to save lives. The Nanox ecosystem includes Nanox.ARC - a multi-source Digital Tomosynthesis system that is cost-effective, and user-friendly; an AI-based suite of algorithms that augment the readings of routine CT imaging to highlight early signs often related to chronic disease, (Nanox.AI); a cloud-based infrastructure (Nanox.CLOUD); and a proprietary decentralized marketplace, through Nanox’s subsidiary, USARAD Holdings Inc., that provides remote access to radiology and cardiology experts; and a comprehensive teleradiology services platform (Nanox.MARKETPLACE). Together, Nanox’s products and services create a worldwide, innovative, and comprehensive solution that connects medical imaging solutions, from scan to diagnosis. For more information, please visit www.nanox.vision.

Forward-Looking Statements:

This press release may contain forward-looking statements that are subject to risks and uncertainties. All statements that are not historical facts contained in this press release are forward-looking statements. Such statements include, but are not limited to, any statements relating to the initiation, timing, progress and results of the Company’s research and development, manufacturing, and commercialization activities with respect to its X-ray source technology and the Nanox.ARC, the ability to realize the expected benefits of its recent acquisitions and the projected business prospects of the Company and the acquired companies. In some cases, you can identify forward-looking statements by terminology such as “can,” “might,” “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “should,” “could,” “expect,” “predict,” “potential,” or the negative of these terms or other similar expressions. Forward-looking statements are based on information the Company has when those statements are made or management’s good faith belief as of that time with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Factors that could cause actual results to differ materially from those currently anticipated include: risks related to (i) Nanox’s ability to continue to develop of the Nanox imaging system; (ii) Nanox’s ability to successfully demonstrate the feasibility of its technology for commercial applications; (iii) Nanox’s expectations regarding the necessity of, timing of filing for, and receipt and maintenance of, regulatory clearances or approvals regarding its technology, the Nanox.ARC and Nanox.CLOUD from regulatory agencies worldwide and its ongoing compliance with applicable quality standards and regulatory requirements; (iv) Nanox’s ability to realize the anticipated benefits of acquisitions, which may be affected by, among other things, competition, brand recognition, the ability of the acquired companies to grow and manage growth profitably and retain their key employees; (v) Nanox’s ability to enter into and maintain commercially reasonable arrangements with third-party manufacturers and suppliers to manufacture the Nanox.ARC; (vi) the market acceptance of the Nanox imaging system and the proposed pay-per-scan business model; (vii) Nanox’s expectations regarding collaborations with third-parties and their potential benefits; and (viii) Nanox’s ability to conduct business globally; (ix) changes in global, political, economic, business, competitive, market and regulatory forces; and (x) risks related to business interruptions resulting from the COVID-19 pandemic or similar public health crises, among other things.

For a discussion of other risks and uncertainties, and other important factors, any of which could cause Nanox’s actual results to differ from those contained in the Forward-Looking Statements, see the section titled “Risk Factors” in Nanox’s Annual Report on Form 20-F for the year ended December 31, 2022, and subsequent filings with the U.S. Securities and Exchange Commission. The reader should not place undue reliance on any forward-looking statements included in this press release.

Except as required by law, Nanox undertakes no obligation to update publicly any forward-looking statements after the date of this press release to conform these statements to actual results or to changes in the Company’s expectations.

Non-GAAP Financial Measures

This press release includes information about certain financial measures that are not prepared in accordance with generally accepted accounting principles in the United States (“GAAP”), including non-GAAP net loss attributable to ordinary shares, non-GAAP cost of revenue, non-GAAP gross profit, non-GAAP gross profit margin, non-GAAP research and development expenses, non-GAAP sales and marketing expenses, non-GAAP general and administrative expenses and non-GAAP basic and diluted loss per share. These non-GAAP measures are not based on any standardized methodology prescribed by GAAP and are not necessarily comparable to similar measures presented by other companies. These non-GAAP measures are adjusted for (as applicable) amortization of intangible assets, share-based compensation expenses, change in contingent earnout liability and legal fees in connection with class-action litigation and the SEC investigation. The Company’s management and board of directors utilize these non-GAAP financial measures to evaluate the Company’s performance. The Company provides these non-GAAP measures of the Company’s performance to investors because management believes that these non-GAAP financial measures, when viewed with the Company’s results under GAAP and the accompanying reconciliations, are useful in identifying underlying trends in ongoing operations. However, these non-GAAP measures are not measures of financial performance under GAAP and, accordingly, should not be considered as alternatives to GAAP measures as indicators of operating performance. Further, these non-GAAP measures should not be considered measures of the Company’s liquidity. A reconciliation of certain GAAP to non-GAAP financial measures has been provided in the tables included in this press release.

* Less than $1.

* Less than $1.

UNAUDITED RECONCILIATION OF GAAP AND NON-GAAP RESULTS

(U.S. dollars in thousands (except per share data))

Use of Non-GAAP Financial Measures

The unaudited condensed consolidated financial information is prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The Company uses information about certain financial measures that are not prepared in accordance with GAAP, including non-GAAP net loss attributable to ordinary shares, non-GAAP cost of revenue, non-GAAP gross profit, non-GAAP gross profit margin, non-GAAP research and development expenses, non-GAAP sales and marketing expenses, non-GAAP general and administrative expenses and non-GAAP basic and diluted loss per share. These non-GAAP measures are adjusted for (as applicable) amortization of intangible assets, share-based compensation expenses, change in contingent earnout liability and legal fees in connection with class-action litigation and the SEC investigation. The Company believes that separate analysis and exclusion of the one-off or non-cash impact of the above reconciling items (as applicable) adds clarity to the constituent parts of its performance. The Company reviews these non-GAAP financial measures together with GAAP financial measures to obtain a better understanding of its operating performance. It uses the non-GAAP financial measures for planning, forecasting, and measuring results against the forecast. The Company believes that the non-GAAP financial measures are useful supplemental information for investors and analysts to assess its operating performance. However, these non-GAAP measures are not measures of financial performance under GAAP and, accordingly, should not be considered as alternatives to GAAP measures as indicators of operating performance.

Reconciliation of GAAP net loss attributable to ordinary shares to Non-GAAP net loss attributable to ordinary shares and Non-GAAP basic and diluted loss per share (U.S. dollars in thousands)

Reconciliation of GAAP cost of revenue to Non-GAAP cost of revenue (U.S. dollars in thousands)

Reconciliation of GAAP gross loss to Non-GAAP gross profit (U.S. dollars in thousands)

Reconciliation of GAAP gross loss margin to Non-GAAP gross profit margin (in percentage of revenue)

Reconciliation of GAAP research and development expenses to Non-GAAP research and development expenses (U.S. dollars in thousands)

Reconciliation of GAAP sales and marketing expenses to Non-GAAP sales and marketing expenses (U.S. dollars in thousands)

Reconciliation of GAAP general and administrative expenses to Non-GAAP general and administrative expenses (U.S. dollars in thousands)