Ladies and gentlemen, thank you for standing by and welcome to the Nano-X Imaging Q4 and Full Year 2021 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Mike Cavanaugh, Investor Relations. You may begin.

Thank you. Good afternoon and thank you for joining us today. Earlier today, Nano-X Imaging Limited released financial results for the full year and quarter ended December 31, 2021. The release is currently available on the Investors section of the company’s website. Erez Meltzer, Chief Executive Officer and Ran Daniel, Chief Financial Officer, will host this afternoon’s call. Before we get started, I would like to remind everyone that management will be making statements during this call that include forward-looking statements regarding the company’s financial results, research and development, manufacturing and commercialization activities, regulatory process operations, the impact of COVID-19 on its business and other matters. These statements are subject to risks, uncertainties and assumptions that are based on management’s current expectations as of today and may not be updated in the future. Therefore, these statements should not be relied on as representing the company’s views as of any subsequent date. Factors that may cause such a difference include, but are not limited to, those described in the company’s filings with the Securities and Exchange Commission. We will also refer to certain non-GAAP financial measures to provide additional information to investors. A reconciliation of the non-GAAP to GAAP measures is provided with our press release, with the primary differences being stock-based compensation and class action-related expenses. I would now like to turn the call over to Nanox’s CEO, Erez Meltzer.

Thank you, Mike and thank you all for joining the call today. As most of you know, I assumed my role as CEO on January 1 as what I considered to be a pivotal time in Nanox development trajectory. We have made several advancements since our last earnings call. We look forward to sharing some exciting developments with you today. I will give an overview of our achievements since our last earnings call as well as share our outlook on the year ahead. Before turning the call over to Ran Daniel, our CFO, to review our financial results, we will then open the call up to questions. I would like to start by providing an update on our regulatory and commercialization progress as it pertains to our conversations with the FDA around the Nanox.ARC system. We announced last quarter that we would be reviewing a feedback from the FDA pertaining to our first submission relating to our multi-source Nanox.ARC. In January of this year, after a careful review of the FDA’s feedback on our first submission, we filed a pre-submission towards an additional 510(k) application for the second version of Nanox.ARC, our high-performance, multi-source system via the agency Q-Submission program. We are in continuous communication with the FDA and believe that this route will be the most expeditious pathway to further FDA feedback, which will be followed by formal submission. We expect that the Q-Submission will lead to thoughtful improvements to the Nanox.ARC and they have been cleared by the FDA, the system will be suitable for development later this year. We have made considerable headway towards commercialization over the past year and our team remains committed to deployment of the Nanox.ARC units and is focused on execution in the months ahead. We are pleased to report that we have…

Thank you, Erez. We reported a GAAP net loss for the full year of 2021 of $61 million compared with a net loss of $43 million for 2020. We reported a GAAP net loss for the fourth quarter of 2021 of $22 million compared to a net loss of $19 million for the same period in 2020. Our revenue for the year ended on December 31, 2021, and for the fourth quarter of 2021, was $1.3 million. And our gross loss was $1.5 million. Our revenue stems from the sales of radiology services and AI solutions, resulting from the acquisitions of Nanox.AI, USARAD and the Nanox marketplace platform, which we closed during the fourth quarter of 2021. And in fact, those revenue represent 2 months of operations. Of such revenue, our revenue from radiology services for the same period was $1 million, with a gross profit of $0.0 million on a GAAP basis and a gross profit of $0.4 million on a non-GAAP basis, which represents a gross profit margin of approximately 40%. In addition, our revenue from licensing of AI applications for the same period of – was $0.3 million, with a gross loss of $1.5 million on a GAAP basis and a $0.2 million on a non-GAAP basis. Research and development expenses for the year ended on December 31, 2021, were $17.1 million compared to $9.2 million in 2020. Research and development expenses for the fourth quarter of 2021 were $6.5 million as compared to $3.0 million for the same period in 2020. The increase in our research and development expenses was mainly due to the merger with Nanox.AI, the development of our multi-source and cloud systems, increase in our R&D headcount, share-based compensation and costs related to the ongoing regulatory approval process. Sales and marketing expenses for…

Thank you for the financial update, Ran. I was delighted to assume the role of CEO for this exciting company, and I’m pleased to have so much positive news to report in my first earnings call as Nanox leader. We thank you for joining us today, and as always, appreciate your continued support. We will now open the call for questions. Operator, please begin the Q&A session.

[Operator Instructions] Our first question comes from Suraj Kalia with Oppenheimer.

Good morning, good afternoon. Erez, Ran, hope everyone is safe and healthy.

Yes, we are.

So Erez, historically, Q-Subs usually yield the pathway by – at least by guidelines by around 75 days. And by our calculation, you’ll are rough – somewhere around 77. Maybe if you could give us some additional color on the type of communications? If you’ve had any written feedback? And specifically, as we stand today, what is your update expectation on approval or clearance for the multisource?

Okay. Thanks, Suraj. The – first of all, with respect to the 75 days, when we decided a few months ago to go through the Q-Sub pathway, we, indeed, thought that it will be 75 days before they get a response to us. Having said that, I think it took us – it took them about 4 to 5 weeks to respond, schedule a meeting, and we had already a few discussions with them over time. The one thing that I said over a few times that the decision to go to a continuous dialogue with the FDA has proven to be the right one. We are talking to them quite a lot. So it’s not only waiting Q-Sub waiting for the answers, a respond, etcetera. The Q-Sub that we have made was based on the indications, all the comments that they have in the past when we initially sent the submission for the multi-source, they send us a lot of comments. In the Q-Sub, we have already fixed all their comments. It seems that right now, from their point of view, especially due to the fact that it’s a new technology. It seems that they are now internalizing what we are trying to do. And the decision last time was that they gave us a few guidance – guidelines what to do and for supplement information as part of the Q-Sub. So this is – this will be – and I don’t think that – I don’t expect that they had 75 days, but I don’t expect that this will take the 75 days. They will probably respond at least based on the notion of the calls that we had that will respond earlier. Having said that, right now, we hope for the good, but we can’t estimate exactly what will be the time. But the one thing I would reiterate the fact that, first of all, we are making a lot of progress in this area and the fact that we have decided to go to a continuous dialogue proven to be the right one.

Erez, has the discussion come up for a de novo 510(k)?

Can you please say it again? I couldn’t hear.

Sorry, Erez. What I was asking is, do you think there is a chance that the FDA might want you all to go down a de novo pathway?

Right now, the answer is no. And we are not going into the details, but it seems that it’s not going to be this way. It’s going to be – I would say it’s not going to be identified as such.

Okay. Erez, one quick one for you, and Ran, I will throw in one for you also. Erez, what are the yields now on the MEMS chips with this technology transfer to your Korean partners, because if memory serves me right, in Japan, the yields were roughly around 50%. So, I am curious on that. And Ran, if you could, what are the annualized revenue run rates and growth rates that we should assume for the Nanox.AI and the USARAD segments for FY ‘22?

Okay. So, with respect to the – with respect to the Korean, since we have indicated that, in the very near future, we are going to go for the mass production. Once we started the mass production, we will know to indicate what’s the yield. Definitely, it’s better than it used to be in the past, of course. But the mass production will be the one that will indicate where we are, okay. With respect to Ran, would you like to address the…?

Yes. So, you would expect the growth rate of – grossly of 50% growth of more than two lines that you have mentioned. That was the question, correct?

Right. And what is the – how should we think about the revenue run rate for the AI and the USARAD? Thanks.

Okay. So, about the revenue run rate of USARAD, you should expect for around $8 million to $9 million on an annual basis. And as for the AI section of the business, we should expect $3 million to $4 million a year as of now, based on the business right now. Correct.

Thank you.

Our next question comes from Jeffrey Cohen with Ladenburg Thalmann.

Hi Erez and Ran. How are you?

Good.

So, just for you a bunch of questions. So firstly, what was the litigation expense in the fourth quarter?

Are you referring to the SEC probe and the class action?

Yes.

It’s actually mentioned in our non-GAAP adjustment between GAAP and non-GAAP. It was $455,000 for the quarter.

Okay. Got it. And I know that – we have heard about manufacturing and delivery. So, any commitment on deliveries or units for 2022 from the company as far as production and/or deliveries?

Right now, we don’t change anything with respect to what have been indicated. Right now, I would say that due to the fact that we have identified what are the long lead items in the – to be ready for the assembly. We have already ordered what is needed for the foreseeable future as we can say. The other thing that we have indicated that in the first quarter our assembly line in the [indiscernible] will be ready for hundreds of machines on a quarterly basis. So, right now, that’s where we are.

Okay. So, with the Korean facility up, you would anticipate next quarter that a few hundred could be produced by the end of this year?

We haven’t disclosed yet, but I think that in the very near future, you will hear something about it, which will not be far away from what you anticipate, I believe.

Got it. Okay. And could you talk about this large integrated healthcare organization. In the case of cardiovascular, is that – can you give us a sense of the number of lives covered by this organization, is it over 1 million, is it over 10 million?

You mean the number of the subscribers?

Just – I am trying to get a sense of the size of the integrated healthcare organization.

Okay. I would say that it’s among the top – I would say, top 30 in the U.S. I would even dare to say that it’s among the top 25. It’s pretty advance in the way they think about AI and future healthcare – providing healthcare. And it’s pretty sizable. We have also indicated that we are in continuous dialogue with a few others. And at least one of them is even more sizable than the one that we have signed already.

Okay. Got it. And one more, if we could. Could you give us a sense of initially, I don’t know what the initial period is, as far as ARC placements or system purchases? Any insight there into one over the other, or what we should anticipate for the coming year?

We have indicated already that we have orders for the 6,500. None of which have been either canceled or so – it’s still what we currently have. And since we have already indicated that we repeatedly saying that the first country that we are going to install are countries with different regulation, that the FDA is not necessary. Another regulation is necessary over there. And the indications that we currently have is the regulation that we will be required for the first part of the deployment, which obviously will be shortly announced will be – we will get it, again, once again in the very near future. I don’t have the exact date. But once we have it, we will announce it.

Okay. And one more if I may. Was the resolution on the glass versus ceramic to manufacturing, or is it currently two sources on the manufacturing front for the tubes?

Okay. So, right now, we are really working on a very wide range of solutions, okay? And I am not talking about one or two suppliers, I am talking about four or five suppliers that we are currently exploring. One or two of them is exploring this ceramic solution, and one or two of them are exploring glass solutions. And right now, we are doing both. The decision on which one we actually focus will probably be in the next few months once we get the yields, once we get the power and once we pass the FDA as well.

Okay. And can you give us a sense of which one was filed with the FDA queue?

We don’t disclose it. But I think that shortly, it will be disclosed.

Okay. Perfect. Thanks for taking the questions.

Thank you.

Thank you.

And I am not showing any further questions at the time. I would like to turn the call back to Erez for any final remarks.

Okay. So, thank you all for being with us today. We are – really appreciate the support – the continued support in the company and its future. It’s interesting that the ecosystem that we are building, with the combination of the Nanox.ARC, with other equipment that will be joined this in the future and will be reading by teleradiology provided by USARAD and MDW. And of course, the layer that we are adding with the AI is that definitely something that we see when we talk to customers and to potential players and to partners that it’s something that resonates quite well, to say the least. And we hope that it will be fulfilled in the very near future, and will generate the expected outcome for the company. Thanks once again and we will talk soon.

Ladies and gentlemen, this does conclude today’s presentation. You may now disconnect and have a wonderful day.