Good morning, and thank you for standing by. Welcome to the Nano-X Second Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers presentation there will be a question and answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would like now to turn the conference over to Mike Cavanaugh, Investor Relations. Please go ahead.

Good afternoon, and thank you for joining us today. Earlier today, Nano-X Imaging Ltd. released financial results for the quarter ended June 30, 2023. The release is currently available on the Investors section of the company's site. Erez Meltzer, Chief Executive Officer; and Ran Daniel, Chief Financial Officer, will host this morning'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 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 upon 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. Management will also refer to certain non-GAAP financial measures to provide additional information to investors. A reconciliation of each non-GAAP financial measure to the nearest GAAP financial measure is provided in the company's press release filed today. The non-GAAP financial measures include 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, non-GAAP other expenses and non-GAAP gross loss per share. With that, I'd like to turn the call over to Erez Meltzer.

Thanks, Mike, and welcome all to the Nanox second quarter 2023 earnings conference call. Throughout this quarter, we achieved significant advancements across multiple business segments. I would like to highlight that today's call will extend a bit beyond our typical duration as I aim to offer more comprehensive insights. I will delve into specifics, including our strategic approach to the U.S. market, the reinforcement of our manufacturing and supply chain and our regulatory process. During the quarter, ended June 30, 2023, we continue to advance our commercialization efforts outside the U.S. following FDA clearance to market the multi-source Nanox.ARC. With this clearance, we are now preparing to establish our foothold in the U.S. market, complemented by our ongoing commercialization initiatives outside the U.S. Today, we are excited to delve into our commercial efforts in both the U.S. and the non-U.S. markets. About the U.S. deployment and strategy. Obtaining the 510(k) clearance from the FDA for the multi-source Nanox.ARC has been a long-standing strategic goal for the company and enable us to deploy the Nanox.ARC in the U.S. for the indication of use cleared by the FDA. As previously announced, we are in the process of establishing a U.S. demo as part of our strategic approach for our U.S. commercial activities. We have decided to shift this first unit and are now planning to install the unit in a clinical setting rather than a stand-alone commercial site. The system is planned to be installed in an East Coast facility and will expect to start to generate revenues alongside training and demonstrations. We believe that this first site will serve a dual purpose: first, as a training and demonstration center for Nanox.ARC, which will provide potential buyers with live demonstration of the technology which we believe is essential for informed acquisitions purposes…

Thank you, Erez. We reported a GAAP net loss for the second quarter of 2023 of $17.4 million compared with a net loss of $19.6 million in the second quarter of 2022. The decrease was largely due to a goodwill impairment of $14.3 million that was recorded in the comparable period and not in the 3 months ended June 30, 2023, which effect was offset in part by a decrease in the company's earn-out liabilities in the amount of $12.8 million in the second quarter of 2022 versus an increase of $0.1 million in the second quarter of 2023. Revenues for the second quarter of 2023 were $2.6 million and the gross loss was $1.7 million on a GAAP basis. Revenues from the teleradiology services for the same period was $2.5 million with a gross profit of $0.4 million on a GAAP basis and a gross profit of $0.9 million on a non-GAAP basis, which represents a gross profit margin of approximately 14% on a GAAP basis and 36% on a non-GAAP basis. The increase in the company's revenue in the second quarter of 2023 is mainly due to the increase in the number of radiologists that engaged in reading during the overnight and weekend shift. The decrease in the gross profit margin on a GAAP and a non-GAAP basis is mainly due to an increase in the cost of the company's radiology due to the incentive payments which the company pays to the radiologist to engage in reading during the overnight and weekend shift. Research and development expenses for the second quarter of 2023 were $6.9 million as compared to $6.5 million for the comparable period in 2022. The increase of $0.4 million in our research and development expenses was mainly due to an increase in the company's cost…

Once again, I want to thank you all for being here today and for being with Nanox on our multiyear journey to make medical imaging more accessible around the world. We have made tremendous strides in realizing our vision this year, and I'm proud of what our team has done to bring our company to doorstep of commercializing the ARC system at scale. Before we end the call, I want to announce that we will be hosting an Investor Day to be held in New York City at the end of September or the beginning of October 2023. And if you would like to attend either in person or virtually, please contact our Investor Relations partner at ICR West. Have a great day. Operator, please open the call for questions.

[Operator Instructions] The first question will come from Ross Osborn with Cantor Fitzgerald.

Congrats on the progress. So starting off, would you discuss the level to which your system in Nigeria is operating in terms of scans per day?

I think it was indicated that the one in Nigeria right now is operating without the approval of getting scans for patients, or for human, and we're waiting for the final NNRA approval for the scans in human -- or to getting human images.

Apologies, I may have missed it. So is Ghana operating on human scans, or is that also waiting?

Ghana is waiting for the final approval for commercial use.

Okay. Understood. And then following on.

The one in Morocco is operating with human scans with images, like it's in the full operation at the hospital.

Okay. Great. Would you be able to provide

With all the -- I beg your pardon?

Would you be able to provide the level to which it's operating in terms of scans per day?

Right now, we don't disclose what's the number of scans per day. But I think that in the next call or probably even earlier, in the Investors Day, we will provide the initial indication for the scans per day in all the units that we have installed.

And then following up on this, when can we expect for you to deliver more systems to your commercialized operating countries? I believe Nigeria calls for 1,000, Ghana for 350 and Morocco for 270 systems.

First of all, as soon as we get the final approvals. But this basically will start in the next 2 quarters for sure.

And then turning to the U.S., could you just walk us through the rationale for the delay in the training center operating? I believe it was previously calling for this summer.

The one thing that we've had an early indication is that we're going to send the first systems. We are waiting for the approval of the demo center itself. But in the meanwhile, we have decided, as mentioned in the -- in my preliminary, the -- what I said actually earlier today, that we wanted to -- we preferred to have the first system to be installed in a clinical site and to make it commercial earlier than the original plan. Since we have already a few clinical locations or clinics that are willing to install the systems even before we have the full operating -- U.S. operation system -- U.S. operation, then we decided that the first system will be installed in the next few weeks in one of these locations and would start both, first of all, to generate to scan patients and to generate revenues.

And then last one for us and I'll jump back in the queue. Would you discuss the size of your U.S. contract you announced today? And just so we're on the same page, did the OEM sign on for your comprehensive system? Or are you now selling your chips on a stand-alone basis?

You mean the OEM agreement?

Yes.

The OEM, we have a few OEM arrangements and collaboration. The one that was mentioned, it's for the chip only. The others are into either chip or chip and tube. In addition, we are in the process of having a full demo, not only the tube itself, that will be tested in the next, I would say, 6 months.

And then are you able to disclose the size of the contract with the U.S. government agency?

We are not allowed to.

The next question comes from Jeff Cohen with Ladenburg. Your line is open.

This is actually Destiny on for Jeff. I will start by kind of continuing on the last group of questions. I'm curious, how are you determining the initial physicians that will be welcomed into your demo sites? And is this going to be more of a group demonstration? Or is this going to be on a kind of one-to-one basis?

First of all, right now, as we have shared, it's -- actually, it's a full range. So we have individuals that are coming to see the systems and will be coming to see the system. We have some delegations, one of them was even like 10 or 15 people. We are willing and will be willing to host any size of group that will be able to see what we do.

And there could be multiple people from a single site, I would assume. So that makes sense.

Absolutely.

And then you mentioned the sales team, a direct sales force in the U.S. I'm wondering about the size of that sales team, the timing of the onboarding of your initial sales reps and then how we should be thinking about the impact to sales and marketing expense going forward for modeling purposes.

Let's start with the first question. So as I've indicated, we are building the team as we speak. We mentioned in the past that we are in the final process of conclude and complete the full action plan or execution plan of the deployment in the U.S. Part of what -- of this, I've shared with earlier today. And the full, I would say, more detailed plan including numbers and further indications will be presented in the Investors Day that we’re planning to the end of September. By then, we are going to have probably most of the team already ready to do the work. We are planning the kickoff early October In the U.S. A few of the people have already engaged and working in the U.S. So I think that more of this, you will be able to hear -- we are talking, by the way, on the September 22 at NASDAQ to have the Investors Day that we're planning. And more details to come on this.

Excellent. Looking forward to that Investor Day. And then lastly for us, you're collecting a lot of clinical and some real-world data. I'm wondering if you'll create some kind of registry to kind of capture all of that.

The answer is yes. Part of it will be shown and presented in our website. Everything based on what is allowed, what we can, it will be based on regulation related to this disclosure. We are also in the process of preparing all the clinical data collected and prepare the paper that we're going to release. So this is actually, at the same time that we do all the commercial deployment, we're going to make a lot of efforts and emphasize the clinical side of what we are doing. I think that I've shared a little bit today that, as you know, in the U.S. we are allowed right now to do the MSK, but in the rest of the world we do chest, abdomen and other anatomies. So both in Israel and in Morocco, we have already tested and scanned humans in the other anatomies used. So basically, this is the plan that we move forward in order to enhance our ability to do the clinical -- to provide the clinical data and explore the opportunities for the future intended use.

Thank you. This is all the time we have for questions. Thank you for your participation in today's conference. You may disconnect. Have a great day.