Nanox Announces Third Quarter 2022 Financial Results and Provides Business Update

Reports progress towards global supply chain development

Ended the third quarter of 2022 with cash, cash equivalents and marketable securities of $117.1 million

Management to host conference call and webcast Thursday, November 10, 2022 at 8:30 AM ET

NEVE ILAN, Israel, Nov. 10, 2022 (GLOBE NEWSWIRE) — NANO-X IMAGING LTD (NASDAQ: NNOX) (“Nanox” or the “Company”), an innovative medical imaging technology company, today announced results for the third quarter ended September 30, 2022 and provided a business update.

Third Quarter 2022 Highlights and Recent Developments:

• Generated $2.4 million in revenue in the third quarter of 2022 compared to $2.2 million in the second quarter of 2022 and $1.8 million in the first quarter of 2022.

• Submitted a 510(k) premarket notification to the U.S. Food and Drug Administration as part of the Company’s 510(k) application process for the multi-source Nanox.ARC system

• Received a Helsinki permit to conduct clinical trials at Shamir Hospital, Israel using the multisource Nanox.ARC system, with a goal of generating sample images in the fourth quarter of 2022.

• Engaged a Notified Body to work with during the CE marking process.

“As we report third quarter results, I am proud of the Nanox team’s progress across multiple fronts. We continue to generate revenues from our AI and teleradiology businesses and advance toward the deployment of our Nanox.ARC multi-source imaging system,” said Erez Meltzer, Nanox Imaging Chief Executive Officer. “It’s an exciting time at Nanox, and we look forward to sharing more updates on our progress in the months ahead.”

Financial results for three months ended September 30, 2022

For the three months ended September 30, 2022, the Company reported a net loss of $19.1 million, compared to a net loss of $13.5 million in the comparable period, which increase was largely due to the consolidation of Nanox.AI and USARAD with the Company since the fourth quarter of 2021, an increase in the Company’s research and development expenses, an increase in the Company’s general and administrative expenses, which was mitigated by a decrease in the Company’s sales and marketing expenses and a $1.0 million expense due to change in the Company’s obligation in connection of acquisitions.

For the three months ended September 30, 2022, the Company reported revenue of $2.4 million, compared to none for the three months ended September 30, 2021 (which is referred to as the “comparable period”). During the three months ended September 30, 2022, the Company generated revenues through the sales of teleradiology services and AI solutions. The Company’s gross loss during the three months ended September 30, 2022 totaled $1.5 million on a GAAP basis. The Company’s revenue from teleradiology services for the three months ended September 30, 2022 was $2.4 million with a gross profit of $0.6 million on a GAAP basis. The increase in the Company’s revenue represents a growth of more than 11.2% in its sales of teleradiology services from the previous quarter which is attributable to revenues from a data monetization project in the amount of $0.3 million. The Company’s revenue from its AI solutions for the three months ended September 30, 2022 was $0.1 million with a gross loss of $2.1 million on a GAAP basis. Non-GAAP cost of revenue of the Company’s teleradiology services for the three months ended September 30, 2022 was $1.2 million, as compared to none in the comparable period, resulting in a non-GAAP gross profit of $1.2 million for the three months ended September 30, 2022, which represents a gross profit margin of approximately 49.4 % on a non-GAAP basis. The Company’s non-GAAP gross loss from its AI solutions for the three months ended September 30, 2022 was $0 million. In total, non-GAAP cost of revenue for the three months ended September 30, 2022 was $1.3 million, as compared to none in the comparable period, resulting in a non-GAAP gross profit of $1.1 million for the three months ended September 30, 2022, which represents a gross profit margin of approximately 46.0% on a non-GAAP basis.

Research and development expenses for the three months ended September 30, 2022 were $6.1 million, as compared to $3.7 million in the comparable period. The increase of $2.4 million was mainly due to the consolidation of Nanox.AI with the Company since the fourth quarter of 2021 and the balance due to the development of the multi-source Nanox.ARC and the Nanox.CLOUD and share-based compensation.

Sales and marketing expenses for the three months ended September 30, 2022 were $0.7 million, as compared to $1.5 million in the comparable period. The decrease of $0.8 million was mainly due to a decrease in the cost of employees and in share-based compensation.

General and administrative expenses for the three months ended September 30, 2022 were $10.6 million, as compared to $8.2 million in the comparable period. The increase of $2.4 million was mainly due to the consolidation of Nanox.AI and USARAD with the Company since the fourth quarter of 2021, an increase in the Company’s head count and the overall organization infrastructure and an increase in the Company’s legal fees due to the U.S. Securities and Exchange Commission (“SEC”) inquiry and class-action litigation, as described in the Company’s Form 20-F for the year ended December 31, 2021 filed on May 2, 2022.

Change in obligation in connection of acquisitions was $1.0 million, as compared to none in the comparable period, due to the decrease in the Company’s contingent earnout liability.

Non-GAAP net loss applicable to ordinary shares for the three months ended September 30, 2022 was $8.1 million, as compared to $8.4 million in the comparable period. Non-GAAP gross profit for the three months ended September 30, 2022 was $1.1 million, as compared to none the comparable period. Non-GAAP research and development expenses for the three months ended September 30, 2022 were $5.0 million, as compared to $3.0 million in the comparable period. Non-GAAP sales and marketing expenses for the three months ended September 30, 2022 were $0.4 million, as compared to $1.0 million in the comparable period. Non-GAAP general and administrative expenses for the three months ended September 30, 2022 were $4.5 million, as compared to $4.4 million in the comparable period.

A reconciliation between GAAP and non-GAAP financial measures for the three-month periods ended September 30, 2022 and 2021 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, secondary offering expenses, goodwill impairment, change in obligation in connection of acquisitions and legal fees in connection with class-action litigation and the SEC inquiry.

Liquidity and Capital Resources

The Company ended the third quarter of 2022 with total cash, cash equivalents and marketable securities of $117.1 million. As of September 30, 2022, the Company had $88.1 million of cash, cash equivalents and short-term marketable securities and $29.0 million of long-term marketable securities. As of September 30, 2022, the Company had total current assets of $90.6 million and total current liabilities of $43.6 million, creating a working capital of $47.0 million.

As of December 31, 2021, the Company had $88.7 million of cash, cash equivalents and short-term marketable securities and $67.9 million of long-term marketable securities and in total, $156.6 of cash and marketable securities. As of December 31, 2021, the Company had total current assets of $94.9 million and total current liabilities of $52.8 million, creating a working capital of $42.1 million.

The decrease in the Company’s cash, cash equivalents and marketable securities of $39.5 million during the nine-month period ended September 30, 2022 was primarily due to negative cash flow from operations of $30.5 million and purchase of property and equipment of $7.4 million for the Company’s fabrication facility in South Korea and long lead items for the Company’s multi-source systems.

Other Assets

As of September 30, 2022, the Company had property and equipment, net of $44.1 million as compared to $37.4 million as of December 31, 2021. The increase is mainly attributed to the completion of the construction of the Company’s fabrication facility in South Korea and purchase of machinery and equipment.

As of September 30, 2022, the Company had intangible assets and goodwill of $137.8 million as compared to $160.1 million as of December 31, 2021. The decrease is attributable to the periodic amortization of intangible assets and impairment of goodwill.

Shareholders’ Equity

As of September 30, 2022, the Company had approximately 52.3 million shares outstanding as compared to 51.8 million shares outstanding as of December 31, 2021. The increase was mainly due to the exercise of 192,927 warrants and the exercise of 192,820 options. The Company generated approximately $0.7 million in gross proceeds from the exercise of such options and warrants. In addition, during the nine-month period ended September 30, 2022, the Company issued 89,286 shares to the former equity holders of Nanox.AI due to the achievement of a milestone pursuant to the terms of the Agreement and Plan of Merger, dated August 9, 2021, as amended, among the Company, Nanox.AI and Perryllion Ltd., as representative of Nanox.AI’s equity holders.

Conference Call and Webcast Details

Thursday, November 10, 2022 @ 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 its proprietary medical imaging technology and solutions to make diagnostic medicine more accessible and affordable across the globe. The vision of Nanox is to increase the early detection of medical conditions that are discoverable by medical image technologies based on X-rays, which Nanox believes is key to increasing early prevention and treatment, improving health outcomes, and, ultimately, saving lives. Nanox is developing a holistic imaging solution, which includes the Nanox System, comprised of the Nanox.ARC using its novel MEMs X-ray source technology, and the Nanox.CLOUD, a companion cloud software, integrated with AI solutions and teleradiology services. 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 complete development of the Nanox 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 the recent 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 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, 2021, 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 report 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 research and development expenses, non-GAAP sales and marketing expenses, non-GAAP general and administrative expenses and non-GAAP gross loss. 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. Non-GAAP net loss attributable to ordinary shares, non-GAAP cost of revenue, non-GAAP gross profit, non-GAAP research and development expenses, non-GAAP sales and marketing expenses, non-GAAP general and administrative expenses and non-GAAP gross loss adjusts (as applicable) for amortization of intangible assets, stock-based compensation expenses, secondary offering expenses, goodwill impairment, change in obligation in connection of acquisitions and legal fees in connection with class-action litigation and the SEC inquiry. 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, non-GAAP net loss attributable to ordinary shares, non-GAAP cost of revenue, non-GAAP research and development expenses, non-GAAP sales and marketing expenses and non-GAAP general and administrative expenses 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, non-GAAP net loss attributable to ordinary shares, non-GAAP cost of revenue, non-GAAP research and development expenses, non-GAAP sales and marketing expenses and non-GAAP general and administrative expenses 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.

NANO-X IMAGING LTD.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(U.S. dollars in thousands except share and per share data)

NANO-X IMAGING LTD.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(U.S. dollars in thousands except share and per share data)

NANO-X IMAGING LTD.
UNAUDITED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(U.S. dollars in thousands, except share and per share data)

* Less than $1.

NANO-X IMAGING LTD.
UNAUDITED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Unaudited)
(U.S. dollars in thousands, except share and per share data)

* Less than $1.

* Less than $1.

NANO-X IMAGING LTD. 
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. dollars in thousands)

UNAUDITED RECONCILIATION OF GAAP AND NON-GAAP RESULTS

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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 (“U.S. GAAP”). The Company uses non-GAAP net loss attributable to ordinary shareholders. Non-GAAP net loss attributable to ordinary shareholders is net loss attributable to ordinary shareholders excluding change in obligation in connection of acquisitions, impairment of goodwill, amortization of intangible assets, share-based compensation expenses, legal fees in connection with class-action litigation and the SEC inquiry and secondary offering expenses. 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.

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

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)

Investors:
Mike Cavanaugh
ICR Westwicke
IR@nanox.vision

Media:
Rachael Roselli
ICR Westwicke
NanoxPR@icrinc.com

Source: NANO-X IMAGING LTD