Nano-X Imaging Ltd. — FY2022 Form 20-F Summary
Business context and reporting period
Nano-X Imaging Ltd. is an Israeli development-stage medical-imaging company reporting under U.S. GAAP. The filing covers the fiscal year ended December 31, 2022, including fourth-quarter results and subsequent events through May 1, 2023. The company is developing the Nanox System, consisting of the Nanox.ARC digital X-ray/tomosynthesis device and Nanox.CLOUD software, alongside acquired AI-imaging and teleradiology businesses.
Nanox generated revenue from teleradiology and AI solutions but had not generated revenue from Nanox System sales or imaging services. It had 55,094,237 ordinary shares outstanding at December 31, 2022.
Key financial metrics
| U.S. dollars in millions, except per-share data | 2022 | 2021 | Change |
|---|---|---|---|
| Revenue | $8.6 | $1.3 | +$7.3 |
| Gross loss | $(6.9) | $(1.5) | Worsened |
| Operating loss | $(117.7) | $(61.6) | Worsened |
| Net loss | $(113.2) | $(61.8) | Worsened |
| Loss per share | $(2.17) | $(1.28) | Worsened |
| Cash used in operations | $(43.4) | $(38.1) | Higher use |
| Cash, cash equivalents and restricted cash | $38.5 | $66.8 | Lower |
| Cash and marketable securities | $102.9 | Not clearly provided as a comparable aggregate | — |
| Working capital | $57.4 | $42.1 | Higher |
| Shareholders’ equity | $216.7 | $292.1 | Lower |
- Teleradiology revenue was $8.2 million, compared with $1.0 million in 2021; AI revenue was $0.3 million, compared with $0.3 million.
- Revenue increased primarily because the acquired businesses were consolidated for the full year in 2022 versus approximately two months in 2021, with management also citing approximately 33% annualized growth in teleradiology sales.
- Cost of revenue was $15.5 million, producing a gross margin of approximately negative 80%. AI solutions generated an $8.2 million gross loss, largely because of $8.0 million of amortization of acquired intangible assets.
- Research and development expense increased to $26.5 million from $17.1 million. General and administrative expense increased to $41.3 million from $34.7 million, including $7.7 million of legal fees related primarily to the SEC inquiry and securities litigation.
- The company recorded $50.9 million of goodwill impairment related to Nanox AI, including $36.5 million in the fourth quarter. AI solutions goodwill declined to approximately $0.4 million from $51.2 million at acquisition.
- Net debt was approximately $3.5 million based on a $3.5 million long-term loan balance and no reported current debt, excluding lease and contingent earnout liabilities. The Korean loan had a principal balance of approximately $3.8 million and matures at the end of its three-year term.
- Operating cash burn increased to $43.4 million. Investing activities provided $14.6 million, primarily because of marketable-securities maturities, while financing activities provided $0.8 million.
Material changes versus the prior comparable period
- Revenue scaled materially after the full-year consolidation of Nanox AI, USARAD and MDWEB, but the company remained substantially pre-commercial for the Nanox System.
- Losses increased substantially because of higher R&D and administrative costs, acquired-intangible amortization, legal expenses and the $50.9 million AI goodwill impairment charge.
- Cash and cash equivalents plus restricted cash declined by approximately $28.2 million during 2022, although marketable securities and working capital supported reported liquidity.
- The company issued 89,286 shares related to a Nanox AI milestone and 2,648,424 shares under a December 2022 settlement with former Nanox AI shareholders, increasing dilution.
- Management remediated three previously reported internal-control weaknesses but retained a material weakness relating to insufficient financial-reporting personnel with appropriate knowledge, experience and training.
Guidance, outlook, risks and unusual items
- Management stated that cash on hand and cash equivalents were expected to fund operating expenses and capital expenditures for at least twelve months from the financial-statement issuance date, but acknowledged that assumptions could prove incorrect and additional financing may be required.
- The company’s stated objective is to deploy an initial approximately 15,000 Nanox System units within three years after FDA clearance of the multi-source Nanox.ARC and Nanox.CLOUD. The filing does not provide revenue or profitability guidance.
- As of year-end, the company had 12 MSaaS agreements covering a potential 6,850 systems in 17 regions, with stated minimum annual fees totaling approximately $155 million before partner payments. These arrangements remained subject to regulatory approvals, acceptance testing, deployment and, in many cases, standby letters of credit or financial guarantees; the filing cautions that the commitments may not convert into revenue.
- On April 28, 2023, after the reporting period, the FDA cleared the Nanox.ARC, including Nanox.CLOUD, for a specified stationary X-ray use involving tomographic images of the adult human musculoskeletal system. The clearance does not establish third-party reimbursement, broad international approvals or commercial-scale market acceptance.
- The company accrued $8.0 million for settlement expenses related to two securities class actions. On April 28, 2023, it signed a term sheet to settle those actions for $8.0 million, subject to a formal agreement and court approval.
- The SEC Division of Enforcement investigation remained outstanding. The company is cooperating, but stated that the duration, outcome and potential loss could not be estimated.
- Principal risks include continued operating losses and cash burn, possible need for additional capital, regulatory and reimbursement uncertainty, manufacturing and supply-chain execution, competition, cybersecurity and health-data compliance, litigation, foreign-exchange exposure, geopolitical conditions in Israel and elsewhere, and potential PFIC tax treatment for U.S. shareholders.
- The company reported a phishing attack in October 2022 that it believed did not have a material adverse effect, but warned that future cybersecurity incidents could materially affect operations.
Most important facts for investors to verify
- Whether Nanox.ARC units are being commercially deployed, at what pace, and whether deployments produce recurring scan-based revenue.
- Whether the MSaaS counterparties satisfy regulatory conditions, acceptance testing, minimum-scan requirements and financial-guarantee obligations.
- Actual cash burn, marketable-securities liquidity and the timing and terms of any additional equity or debt financing.
- Progress in converting teleradiology and AI revenue into sustainable positive gross margins, particularly after amortization and other acquired-asset costs.
- Status and final cost of the securities-litigation settlement, the SEC investigation and any related contingencies.
- Remediation of the remaining material weakness in internal control over financial reporting.
- International regulatory clearances, reimbursement or coding decisions, manufacturing capacity and quality-system readiness.
- Potential dilution from outstanding options, warrants, earnout settlements and future capital raises.