NNOX

Business Context and Reporting Period

Company: Nano-X Imaging Ltd. (NNOX)
Filing Type: Annual Report on Form 20-F
Reporting Period: Fiscal year ended December 31, 2024
Business Overview: Nano-X is an initial launch-stage medical imaging company developing the Nanox System, which combines the Nanox.ARC (a multi-source 3D digital tomosynthesis system) and Nanox.CLOUD (cloud-based software). The company also provides teleradiology services and AI imaging solutions through its subsidiaries USARAD and Nanox AI. The company operates under three business models: Subscription (MSaaS), CapEx (sales), and Licensing (OEM).

Key Financial Metrics (Year Ended Dec 31, 2024)

Revenue Breakdown (2024): Teleradiology services ($10.3M), AI solutions ($0.7M), and Scan services/Nanox.ARC sales ($0.3M).
Outstanding Shares: 63,762,001 ordinary shares as of December 31, 2024.

Material Changes vs. Prior Period

• Revenue Growth: Total revenue increased 14% year-over-year, driven primarily by a $0.8 million increase in teleradiology services and a $0.4 million increase in AI solutions revenue.
• Cost of Revenue Expansion: Cost of revenue increased 33% to $21.9 million. This was largely due to a significant increase in costs associated with scan services and the sale of Nanox.ARC/Nanox.CONNECT units ($4.9M in 2024 vs. $0.1M in 2023), reflecting the initial commercial deployment of the Nanox System.
• Operating Expenses: Total operating expenses decreased 16% to $46.1 million.
  • R&D: Decreased 23% to $20.2 million, attributed to headcount reductions in Nanox AI and reclassification of Korean R&D employees to production.
  • G&A: Decreased 8% to $22.5 million, primarily due to a $2.4 million reduction in legal fees related to settled SEC investigations and class actions, and lower D&O insurance premiums.
• Goodwill Impairment: No goodwill impairment was recorded in 2024, compared to $7.4 million in 2023. All goodwill from prior acquisitions (Nanox AI and USARAD) was fully impaired in previous years.
• Liquidity: Cash and cash equivalents decreased by approximately $17 million, despite raising $39.5 million in financing activities, due to significant operating losses and investing outflows (purchase of marketable securities and deposits).

Guidance, Outlook, and Risks

Outlook and Management Commentary:

• Commercialization: The company is in the initial stages of commercializing the Nanox System. It has received FDA 510(k) clearance for general use (Dec 2024) and CE mark certification (Feb 2025). Management expects to incur significant expenses related to manufacturing, deployment, and maintenance of the Nanox System.
• Liquidity: Management believes current cash, cash equivalents, and marketable securities ($83.5 million total liquid assets) are sufficient to fund operations for at least the next 12 months.
• Financing: The company has an active "At-the-Market" (ATM) sales agreement allowing for the sale of up to $100 million in shares; $37.8 million was raised under this agreement in 2024.

Key Risks and Contingencies:

• Geopolitical Instability: Operations in Israel are subject to risks from the ongoing war with Hamas and regional conflicts. While facilities have not been damaged, the situation remains volatile and could disrupt operations or supply chains.
• Regulatory & Reimbursement: The Nanox System is not yet widely approved for third-party payor coverage or reimbursement. Failure to obtain adequate reimbursement could prevent significant revenue generation.
• Manufacturing & Supply Chain: The company relies on third-party manufacturers (e.g., Varex, CEI, FITI) for X-ray tubes and system assembly. Disruptions or quality issues could delay deployment.
• Legal Proceedings:
  • Class Actions: Settled for $8 million (finalized May 2024).
  • SEC Investigation: Settled in Oct 2023; Company paid a $650,000 civil penalty.
  • Gibraltar Entity Claim: A claim filed in Israel regarding a predecessor entity was stayed pending a final decision in Gibraltar (as of March 2025).
• PFIC Status: The company may be classified as a Passive Foreign Investment Company (PFIC) for U.S. tax purposes, which could have adverse tax consequences for U.S. holders.

Investor Verification Checklist

• Reimbursement Status: Verify the progress of third-party payor coverage and reimbursement negotiations for the Nanox System in the U.S. and internationally.
• Deployment Metrics: Confirm the number of Nanox.ARC units deployed, operational uptime, and scan volume per unit to assess the viability of the MSaaS (Subscription) model.
• Manufacturing Capacity: Review the status of the Korean fabrication facility and agreements with third-party tube manufacturers (Varex, CEI) to ensure supply chain scalability.
• Cash Burn Rate: Monitor the monthly burn rate and the timeline for the next potential equity raise, given the $17 million decrease in cash during 2024.
• Geopolitical Impact: Assess the current status of the war in Israel and its specific impact on employee availability, facility operations, and supply chain logistics.
• Legal Resolutions: Track the resolution of the Gibraltar Entity claim and any potential new litigation arising from the recent settlements.