NANO-X IMAGING LTD

Thank you for standing by. This is the conference operator. Welcome to the Nano-X Imaging second quarter 2021 earnings call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. I would now like to turn the conference over to Bob Yedid of Investor Relations. Please go ahead.

Thank you, Operator, and thanks to everyone for joining the NANOX Imaging Second Quarter 2021 Conference Call. On today's call, we will hear from Rand Polyakin, Chairman of the Board and Chief Executive Officer, and Yitzhak Mayan, Chief Financial Officer. Before we begin, I'd like to remind everyone that management's remarks today contain forward-looking statements regarding the company's financial results, proposed acquisitions, 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 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 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. Completion of the proposed ZebraMed acquisition is subject to, among others, approval of the transaction by the equity holders of ZebraMed. The acquisition of USA RAD is subject to the completion of due diligence and to negotiations of a definitive agreement. The definitive agreement with USA RAD may not be entered into on terms or in the timeframe currently contemplated. Both acquisitions are subject to satisfaction of the conditions to closing in the definitive agreements, regulatory approvals, and other customary conditions. Therefore, neither of the proposed transactions may be consummated on a timely basis or at all. With those prepared remarks, it's my pleasure to turn the call over to NARC's Chairman and CEO, Bram Polviakon. Bram?

Thank you, Bob, and thank you, everyone, for joining our call this morning. Also joining me is Yitzhak Mayan, our Chief Financial Officer. After my preparatory remark, I will turn the call over to Yitzhak to review the financials before opening the call for questions. Well, during the second quarter and the following period, we made substantial progress toward our goal of democratizing medical imaging. As we've said many times before, roughly two-thirds of the world's population do not have meaningful access to medical imaging, and we believe expanded global access to medical imaging devices will lead to earlier detection of chronical condition. In order to fulfill our mission, we aim to tackle three significant worldwide challenges. The first one, of course, is global shortage of medical images devices. The second one is global shortage of radiologists to read these images. And the third one is lack of data connectivity between patients and physicians and lack of data crunching platforms. In the context of shortage of medical imaging devices, we have made significant progress in the production, signing more partners, and the regulatory pass. So concerning the first challenge, the NanoXARC production, we continue to make important progress toward building our global supply chain, including scaling up our semiconductor fabrication plant in South Korea as planned. We're also advancing as scheduled with our tube production using our two tube suppliers for the multi-source system in Italy and South Korea. Finally, our production assembly line in Israel is fully occupied integrating those chips and tubes into systems. Concerning the existing and new partners of EMSAS agreements, we recently signed an MSAS agreement with Eleno Pharma to deploy 1,000 Nano-SARC systems across Nigeria, a country with a population of over 200 million. This is our first entry into the West African market, where we aim to make medical imaging available to both public and private medical institutions. With this agreement, we now have contracts in place to deploy 6150 Nano-SARC So 6,150 NanoTAC units plus agreements with USA RAD and SK Telecom to deploy an additional 5,500 units across the U.S., Korea, and Vietnam, pending, of course, local regulatory approvals and passing user acceptance tests. We're in constant communication with our various MSAS partners around the globe. This includes ongoing webinar sessions held on a monthly basis. These webinars include virtual tours of our production sites, 3D tomosynthesis images review and analysis, system comprehensive review, and system technical support maintenance review as well. All of that being done toward the first deployment that's expected later on this year and early next year. The third one is regulatory pass. So let me just remind everybody that in April, we received FDA clearance for our single-source nanoXARC X-ray system, a critical achievement for our company, and an important reference point for our digital source. In the second quarter of 2021, we submitted to the FDA a 510K application for the first version of our multi-source nanoXARC, and this is in progress with the FDA as we speak. We're in preparation phase for CE submission and some other regulatory bodies in other countries expected to be submitted during the first half of 2022. In summary, the deployment of 15,000 units of Nano-SARC before the end of 2024 is our way of meeting the first challenge by increasing availability of medical imaging worldwide. So just to summarize this overall section, we made a huge leap forward addressing the first challenge of shortage of global medical imaging devices in terms of production, existing and new MSAS partners, and the regulatory path. Now let's talk about the second challenge, the global shortage of radiologists. And let me just explain, I mean when you have so many devices are propelled globally, the next gating item will be radiologists. In light of the global shortage of trained radiologists, which creates a significant bottleneck in the imaging process, we developed a way to connect our imaging device via the internet, securely upload the images to our NanoX cloud, and then to a third-party network of radiologists. Using AI-based technology, as a decision support software for radiologists to streamline and optimize the load of diagnosis. We are establishing an academic method, the NanoX Academy, to educate hundreds of radiologists and clinicians worldwide in a multiple segment to read and diagnose imaging from the NanoX Arc. I believe this can be achieved through two proposed acquisitions. The first one is USA RAD Holding Inc., and the second one is Zebra Medical Vision. Regarding USA RAD Holding Inc., USA RAD Holding operates a network of over 300 U.S.-certified radiologists across the United States who can read medical images remotely. We are already in partnership with them and have now signed a binding letter of intent for the acquisition of of USERAD Holding Inc. If consummated, it represents strategic opportunities for NANOX that is based on the following. Starting with the fact that USERAD is partially backed by Siemens HealthNear, which is significant. It will enhance our go-to-market strategy, potentially allowing us to place NANOX ARC into thousands of smaller US practices and provide this end-to-end globally connected medical imaging solution. Through the US-IRAD network, we will have direct access to relationships with hundreds of medical practices across multiple specialties. Additionally, this will provide us instant access to train radiologists, lower the barrier to US market entry and other countries around the globe. This will allow us to increase our share in the value chain by providing not only the upload of the image, but now the radiology services. USA-Rad is expected to play a significant role in NANOX Academy initiative. Under the USA-Rad letter of intent, NANOX intends to purchase all of the shares of USA-Rad and all of the assets of its affiliate company, Medical Diagnosis Web, or MDW. In terms of financial details, we expect to acquire U.S. ERAD for a total consideration of up to $27 million, comprised of $18 million of non-NOx shares and $9 million in cash. Of this total, $18.5 million in cash and shares is expected to be paid upon closing, and the remaining $18.5 million is expected to be paid in cash and shares based on the achievement of certain milestones. We also expect to acquire MDW for total consideration of up to $3 million in Anox shares. I'm also happy to announce that we've entered into an agreement to acquire Zebra Medical Vision, a deep learning medical imaging analytics company. If consummated, this will allow us to support our systems with highly advanced AI algorithms and bring to NanoX clinical regulatory and cloud deployment credibility. The strategic opportunities, if the acquisition is consummated, includes creating the next generation medical device with imaging AI solution, leading and shaping a new AI-enabled diagnosis space with hardware capabilities from NanoX and AI cloud delivery capabilities from Zebra, together with a proven regulatory and quality framework. Zebra is comprised principally of experts in AI applications and software engineers. Zebra uses a proprietary database of over 2 million images scans using machine and deep learning tools. It's analysis data in real time with human level accuracy. So radiologists can receive the assistance they need to manage their growing workload with precision, Some examples of Zebra capabilities include the fact that Zebra has dozens of patents, seven FDA-cleared products for radiology AI, and a CPT code for radiology. Zebra has some of the world's top healthcare institutes and customers, including Apollo India, Intermountain Health, Iramus, the UK and Scotland NHS, Albert Einstein Brazil, J&J, and many others. Zebra pricing is well aligned with NanoX per scan model and its goal of democratizing medical imaging. Adding Zebra capabilities will allow the combined companies to capture a larger share of the average $40 per scan included in our existing MSAS agreement. Touching now on a few financial details of the transaction, We expect to pay the shareholders and employees of Zebra up to $200 million in NanoX stocks for 100% of the shares capital of Zebra on a fully diluted basis. $100 million is expected to be payable by means of NanoX ordinary shares to be issued upon closing. $60 million in deferred consideration is expected to be payable by means of Nano-X ordinary shares to be issued upon signing of three new business contracts within six months of closing, and up to $84 million is expected to be payable by means of Nano-X ordinary shares to be issued upon achievement of certain milestones. Zebra is expected to operate as a wholly owned subsidiary under the Nano-X brand. The Nano-X shares are expected to be issued to Zebra U.S. ARAD and MDW shareholders are not expected to be registered and will be subject to restrictions on resale under the U.S. security laws. This is a full alignment with our goal to provide end-to-end medical imaging for all. If the combination of Zebra and U.S. ARAD with the company is completed, it has the potential to bring together the power of human radiologists, and advanced AI capabilities, helping us solve the second challenge, the challenge of shortage of radiologists. All of this actually leads us to the third challenge, lack of data connectivity between patients and physicians, a lack of sophisticated data analytics, and population health solution. Well, NanoX believes it can help solve this challenge. With our Nano-SARC system, and if our proposed transactions are consummated, we will have the radiologies of USA-Rad and the AI capabilities of Zebra. As such, we will be able to create a globally connected end-to-end radiology solution. Before turning the call over to Yitzhak to review the financials, I would like to provide an update on our leadership transition that we announced today. As we are preparing to scale globally, and integrate the new founded partnership, I have asked Erez Meltzer, who has served as director at Nanox for the last two years, to step forward and become our CEO. Erez is a world-class executive with tremendous amount of experience in scaling organizations to become global corporation. He was most recently the executive chairman of Hadassah University Hospital, and the chairman of Hadassit Medical Research Service and Development, in which he led a turnaround and the recovery plan. Erez served as an executive vice chairman and CEO of Gadot Chemical and Shipping Group. He was the CEO of Africa Israel LTD, a global holding company, and president and CEO of Netafim, the leading global agrotech company. Erez also led the largest ever IPO for an Israeli company, raising $1.3 billion in capital for AFI development on the LSE main list. We are greatly honored to have Erez join our team, and I'm sure that he has the executive experience and leadership skills to take NanoX forward to execute our expected deployment and beyond. I will continue as NANOC's executive chairman, focusing on long-term initiatives and future collaboration and fulfill our goal to provide a worldwide end-to-end medical imaging solution for everyone. We're also announcing today that Ron Daniel will replace Yitzhak Maayan, our chief financial officer, who will continue in his role until the end of September. I, along with the board and leadership team, would like to thank Yitzhak for his many contributions to get as to where we are today, including leading the organization through a very successful initial public offering last year. We are excited to welcome Ron Daniel, who will join us as of August 15. Mr. Daniel is a licensed and certified public accountant in both the United States and Israel, chartered financial analyst, and is admitted to practice law in the state of New York. With over 25 years of financial and business management experience, Mr. Daniel will be based in the USA, and we work to strengthen our U.S. presence and to leverage the relationship with investors and the overall market. At this point, I would like to turn the call over to Yitzhak to review the financials. Yitzhak?