Nanox Announces Fourth Quarter 2022 Financial Results and Provides Business Update

Reports progress towards global supply chain development

Ended the fourth quarter of 2022 with cash, cash equivalents and marketable securities of $102.9 million

Management to host conference call and webcast Thursday, March 9, 2023 at 8:30 AM ET

NEVE ILAN, Israel, March 09, 2023 (GLOBE NEWSWIRE) —  NANO-X IMAGING LTD (NASDAQ: NNOX) (“Nanox” or the “Company”), an innovative medical imaging technology company, today announced results for the fourth quarter ended December 31, 2022 and provided a business update.

Fourth Quarter 2022 Highlights and Recent Developments:

“I am happy to report our continued progress on multiple business fronts.  This includes making significant progress toward the initial deployment of the Nanox.ARC system in Ghana and Nigeria, expanding the availability of the Nanox AI solution via a key commercial partnership, while also continuing the FDA review process for the Nanox.ARC,” said Erez Meltzer, Nanox Chief Executive Officer. “Looking back, 2022 was a successful year for Nanox as we spent much time and effort on our 510(k) submission to the FDA, rationalized costs to extend our cash runway, and strengthened our manufacturing infrastructure.  We believe that 2023 will also be a highly impactful year, as we aim to announce the initial shipments of the Nanox.ARC system.” 

Financial results for three months ended December 31, 2022

For the three months ended December 31, 2022, the Company reported a net loss of $44.8 million, compared to a net loss of $22.0 million for the three months ended December 31, 2021 (which is referred to as the “comparable period”), which increase was largely due to a goodwill impairment in the amount of $36.5 million for the three months ended December 31, 2022, an increase in the Company’s research and development expenses in the amount of $0.7 million, which was mitigated by a decrease in the Company’s general and administrative expenses in the amount of $2.7 million, a decrease in the Company’s sales and marketing expenses in the amount of $0.4 million and $9.3 million income due to change in the Company’s contingent earnout liability.

For the three months ended December 31, 2022, the Company reported revenue of $2.1 million, compared to $1.3 million in the comparable period. During the three months ended December 31, 2022, the Company generated revenues through the sales of teleradiology services and AI solutions. The Company’s gross loss during the three months ended December 31, 2022, totaled $1.7 million on a GAAP basis as compared to a gross loss of $1.5 million in the comparable period. The Company’s revenue from teleradiology services for the three months ended December 31, 2022 was $2.0 million with a gross profit of $0.3 million on a GAAP basis as compared to $1.0 million with a gross profit of $0.0 million on a GAAP basis in the comparable period. The Company’s revenue from its AI solutions for the three months ended December 31, 2022, was $0.1 million with a gross loss of $2.0 million on a GAAP basis as compared to $0.3 million with a gross loss of $1.5 million on a GAAP basis in the comparable period. Non-GAAP cost of revenue of the Company’s teleradiology services for the three months ended December 31, 2022 was $1.2 million, as compared to $0.6 million in the comparable period, resulting in a non-GAAP gross profit of $0.8 million for the three months ended December 31, 2022 as compared to $0.4 million in the comparable period on a non-GAAP basis, which represents a gross profit margin of approximately 40% on a non-GAAP basis for the three months ended December 31, 2022 as compared to 39% in the comparable period. The increase in gross profit margin on a non-GAAP basis is attributable mainly to the increase in our rates for teleradiology services. The Company’s non-GAAP gross profit from its AI solutions for the three months ended December 31, 2022 was $0.0 million as compared to $0.2 million for the comparable period. In total, non-GAAP cost of revenue for the three months ended December 31, 2022 was $1.3 million, as compared to $1.1 million in the comparable period, resulting in a non-GAAP gross profit of $0.8 million for the three months ended December 31, 2022, as compared to $0.4 million in the comparable period which represents a gross profit margin of approximately 39% on a non-GAAP basis as compared to 40% on a non-GAAP basis in the comparable period.

Research and development expenses for the three months ended December 31, 2022 were $7.1 million, as compared to $6.4 million in the comparable period. The increase of $0.7 million was mainly due to an increase in our cost of labor in the amount of $0.2 million and the cost of development of our systems in the amount of $0.5 million due to the development of the multi-source Nanox.ARC and the Nanox.CLOUD.

Sales and marketing expenses for the three months ended December 31, 2022 were $1.5 million, as compared to $1.9 million in the comparable period. The decrease of $0.4 million was mainly due to a decrease in the cost of labor in the amount of $0.1 million and a decrease in share-based compensation in the amount of $0.2 million.

General and administrative expenses for the three months ended December 31, 2022, were $8.2 million, as compared to $10.9 million in the comparable period. The decrease of $2.7 million was mainly due to a decrease in the Company’s cost of labor in the amount of $0.5 million, a decrease in share-based compensation in the amount of $2.3, a decrease in our cost of the Company’s directors’ and officer’s liability insurance premium of $0.3 million, a decrease in other professional services in the amount of $0.4 million, and a decrease in the Company’s legal fees due to the U.S. Securities and Exchange Commission (“SEC”) investigation and class-action litigation as described in this Company’s Form 6-K filed on March 9, 2023 in the amount of $2.0 million.

Change in contingent earnout liability was $9.1 million in the three months ended December 31, 2022, as compared to none in the comparable period, due to the decrease in the Company’s contingent earnout liability , largely due to a settlement agreement entered into with the former shareholders of Nanox AI Ltd. (“Nanox AI”) (formerly named Zebra Medical Vision Ltd. (“Zebra”)) with respect to any additional amount that could be granted under the Agreement and Plan of Merger, dated August 9, 2021, as amended, among the Company, Zebra and Perryllion Ltd., as representative of Zebra’s equity holders..

Goodwill impairment for the three months ended December 31, 2022, was $36.5 million due to the goodwill impairment related to the Nanox AI reporting unit as a result of the annual impairment test on goodwill. As part of this analysis the Company considered the potential impact of the sensitivity of certain estimates and assumptions. These considerations resulted in an estimate of longer than expected time to generate material revenues, gross profit, and positive operating cash flows of the Nanox AI reporting unit, especially with its population health applications. Therefore, the Company determined that the value of the Nanox AI reporting unit decreased below its carrying value, and the Company recorded a goodwill impairment charge of $36.5 million in the fourth quarter of 2022. 

Non-GAAP net loss applicable to ordinary shares for the three months ended December 31, 2022, was $9.9 million, as compared to $15.0 million in the comparable period. Non-GAAP gross profit for the three months ended December 31, 2022 was $0.8 million, as compared to $0.2 million the comparable period. Non-GAAP research and development expenses for the three months ended December 31, 2022 were $6.2 million, as compared to $5.4 million in the comparable period. Non-GAAP sales and marketing expenses for the three months ended December 31, 2022 were $1.1 million, as compared to $1.4 million in the comparable period. Non-GAAP general and administrative expenses for the three months ended December 31, 2022 were $4.7 million, as compared to $7.2 million in the comparable period.

A reconciliation between GAAP and non-GAAP financial measures for the three-month periods ended December 31, 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 goodwill impairment, amortization of intangible assets, share-based compensation, secondary offering expenses, change in contingent earnout liability and legal fees in connection with class-action litigation and the SEC investigation.

Liquidity and Capital Resources

The Company ended the fourth quarter of 2022 with total cash, cash equivalents and marketable securities of $102.9 million. As of December 31, 2022, the Company had $77.7 million of cash, cash equivalents and short-term marketable securities and $25.2 million of long-term marketable securities. As of December 31, 2022, the Company had total current assets of $82.5 million and total current liabilities of $17.1 million, creating a working capital of $65.4 million.

As of December 31, 2021, the Company had $88.7 million of cash, cash equivalents and short-term marketable securities and $67.8 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 $53.7 million during the twelve-month period ended December 31, 2022 was primarily due to negative cash flow from operations of $43.4 million and purchase of property and equipment of $7.2 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 December 31, 2022, the Company had property and equipment, net of $43.5 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 December 31, 2022, the Company had intangible assets and goodwill of $98.6 million as compared to $160.1 million as of December 31, 2021. The decrease is attributable to the periodic amortization of intangible assets in the amount of $10.6 million and impairment of goodwill in the amount of $50.9 million.

Shareholders’ Equity

As of December 31, 2022, the Company had approximately 55.1 million shares outstanding as compared to 51.8 million shares outstanding as of December 31, 2021. The increase was mainly due to the issuance of 89,286 shares to the former shareholders of Nanox.AI (formerly named Zebra) due to the achievement of a milestone pursuant to the terms of the Agreement and Plan of Merger, dated August 9, 2021, as amended (the “Agreement”), among the Company, Zebra and Perryllion Ltd., as representative of Zebra’s former shareholders and an additional aggregate 2,648,424 ordinary shares to the former shareholders of Zebra under a settlement with respect to any additional amount that could be granted under the Agreement. As a result of the settlement, both parties’ performance obligations under the Agreement have been satisfied in full. In addition, the increase was also due to the issuance of 192,927 ordinary shares upon the exercise of warrants and 372,159 ordinary shares upon the exercise of options, which generated, in the aggregate, approximately $0.9 million in gross proceeds to the Company.

Conference Call and Webcast Details

Thursday, March 9, 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 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 its 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; (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 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, secondary offering expenses, goodwill impairment, 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.

NANO-X IMAGING LTD.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

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 (“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, secondary offering expenses, goodwill impairment, 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 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)

Contacts
Nanox Media Contact:
Rachael Roselli
ICR Westwicke
NanoxPR@icrinc.com

Investor Contact:
Mike Cavanaugh
ICR Westwicke
mike.cavanaugh@westwicke.com