Nano-X Imaging Ltd. Form 20-F Summary
Business Context and Reporting Period
Nano-X Imaging Ltd. is an Israeli medical-imaging technology company reporting under U.S. GAAP. The filing is an annual report for the fiscal year ended December 31, 2023; it does not provide a separate standalone fourth-quarter income statement. Nanox develops the Nanox.ARC digital tomosynthesis system, Nanox.CLOUD, AI imaging solutions, teleradiology services, Nanox.MARKETPLACE and Nanox.CONNECT.
The Nanox.ARC, including Nanox.CLOUD, received FDA 510(k) clearance in April 2023 for specified stationary X-ray tomographic imaging of the adult human musculoskeletal system. Israel approved the device in November 2023. Commercial deployment remains at an early stage, and the company had not generated revenue from Nanox System imaging services as of December 31, 2023.
Financial and Operating Metrics
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Revenue | $9.9 million | $8.6 million | 15.5% increase |
| Gross loss | $6.6 million | $6.9 million | Improved by $0.3 million |
| Gross margin | (66.5%) | (80.2%) | Improved |
| Operating loss | $62.6 million | $117.7 million | Improved by $55.1 million |
| Net loss | $60.8 million | $113.2 million | Improved by $52.5 million |
| Loss per share | $1.08 | $2.17 | Improved |
| Cash used in operations | $44.8 million | $43.4 million | Use increased by $1.4 million |
| Cash, cash equivalents and marketable securities | $82.8 million | $102.8 million | Decreased by $20.0 million |
| Working capital | $73.1 million | $57.4 million | Increased by $15.7 million |
| Shareholders’ equity | $195.5 million | $216.7 million | Decreased by $21.2 million |
Revenue was concentrated in teleradiology services of $9.5 million, compared with $8.2 million in 2022. Scan services and Nanox.CONNECT contributed $0.1 million, while AI revenue was $0.3 million. Approximately 99% of total revenue was generated in the United States.
Cost of revenue was $16.5 million, including $8.0 million for teleradiology and $8.3 million for AI solutions. AI cost of revenue substantially exceeded AI revenue because it included $8.0 million of amortization of acquired intangible assets.
Research and development expense was $26.0 million, sales and marketing expense was $4.2 million, and general and administrative expense was $24.3 million. The company recorded $7.4 million of goodwill impairment, fully impairing goodwill assigned to the AI Solutions and Radiology Services reporting units.
Net cash used in investing activities was $35.4 million, primarily reflecting $39.1 million of proceeds from marketable securities, partially offset by $3.3 million of capital expenditures. Financing activities provided $27.3 million, principally from the July 2023 registered direct offering.
At December 31, 2023, the company had $3.5 million of current loan maturities and no non-current loan balance. Operating lease liabilities totaled $4.9 million. Management stated that available cash, cash equivalents and marketable securities should fund operating expenses and capital requirements for at least twelve months from the financial-statement issuance date, subject to assumptions that may prove incorrect.
Material Changes Versus the Prior Comparable Period
- Revenue increased 15.5%, primarily from higher teleradiology rates and additional hospital and imaging-center contracts.
- The company began recognizing revenue from Nanox.CONNECT and scan services, but Nanox.ARC imaging-service revenue remained zero as of year-end.
- Operating and net losses declined substantially, mainly because 2022 included $50.9 million of goodwill impairment, $20.4 million of changes in contingent earnout liabilities and higher legal and share-based compensation expense.
- Goodwill impairment was $7.4 million in 2023, compared with $50.9 million in 2022; all goodwill was eliminated from the balance sheet at December 31, 2023.
- Cash used in operations remained elevated at $44.8 million despite the lower net loss, reflecting continued development and commercialization spending.
- In July 2023, Nanox issued 2.14 million ordinary shares and warrants to purchase an additional 2.14 million shares for gross proceeds of approximately $30 million and net proceeds of approximately $27.1 million.
- Shares outstanding increased to 57.8 million from 55.1 million, excluding the potential dilution from outstanding options and warrants.
- A previously reported material weakness in internal control over financial reporting was remediated, and management and the independent auditor concluded that controls were effective as of December 31, 2023.
Guidance, Outlook, Risks and Unusual Items
The filing does not provide formal quantitative revenue, earnings or deployment guidance. Management expects continued significant research and development, manufacturing, regulatory, sales, marketing and support costs, and expects losses and negative operating cash flow to continue. Additional financing may be required; future equity financing could dilute shareholders and debt financing could impose restrictive covenants.
Nanox reported 13 international MSaaS agreements covering a potential 7,125 systems in 19 regions and approximately $155 million of aggregate minimum annual fees, excluding partner payments. These agreements remain subject to regulatory approvals, acceptance testing, deployment, scan-volume and financial-guarantee conditions. Several agreements are in early stages, and Russia and Belarus agreements are frozen; the stated commitments may change.
- Key execution risks include manufacturing scale-up, product reliability, third-party suppliers, deployment delays, customer adoption, scan utilization, reimbursement and the commercial viability of the MSaaS model.
- The FDA clearance is limited to specified indications. Additional uses and international commercialization require further clearances, registrations or approvals.
- The Nanox System is not yet approved for third-party payor coverage or reimbursement. Management identified CPT code 76100 as a potentially viable reporting code, but coverage and payment levels remain uncertain.
- In October 2023, the company settled an SEC investigation relating to prototype development costs and estimated production costs. Nanox paid a $650,000 civil penalty and accepted permanent injunctions concerning specified securities-law provisions.
- The company agreed to an $8 million settlement of consolidated securities class actions. At year-end, Nanox deposited $5 million and its D&O insurer deposited $3 million into a trust; final court approval remained pending as of the filing date.
- A separate Israeli claim seeks approximately $1.26 million in consulting fees and approximately $25 million relating to alleged securities rights of the former Gibraltar entity. Nanox denies liability and is defending the matter.
- Nanox disclosed an unsuccessful spear-phishing attempt identified in January 2024 that did not materially affect the company. No material cybersecurity incident was reported for 2023.
- The company faces continuing risks from the war in Israel, regional escalation, supply-chain disruption, foreign exchange movements, inflation, regulatory changes, data privacy obligations and potential product-liability or malpractice claims.
- Nanox believes it was likely a passive foreign investment company for U.S. tax purposes in 2023, which may create adverse tax consequences for U.S. shareholders.
Most Important Facts for Investors to Verify
- Whether Nanox can convert FDA clearance and early deployments into material recurring Nanox.ARC and Nanox.CLOUD revenue.
- Actual system installations, active clinical sites, scan volumes, utilization rates and revenue recognized under MSaaS agreements.
- Regulatory progress outside the United States, including CE marking, state approvals and approvals required in contracted international markets.
- Cash burn, remaining liquidity and the timing and terms of any additional equity or debt financing.
- Manufacturing capacity, unit economics, production yields, supplier commitments and the enforceability of arrangements with third-party manufacturers.
- Coverage, coding and reimbursement developments for Nanox.ARC imaging services.
- Status and ultimate cost of the securities class-action settlement and other disclosed litigation and contingencies.
- Whether the company can sustain effective internal controls after remediating the 2022 material weakness.
- Potential dilution from 4.46 million outstanding warrants, approximately 5.22 million outstanding options and additional equity awards.