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spk03: scheduled to begin shortly please continue to stand by and thank you for your patience so Thank you. Good day, and thank you for standing by. Welcome to the Nanox Imaging Third Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you'll need to press star 1 on your telephone. I would now like to turn the conference over to your speaker today, Mike Cavanaugh, Investor Relations with ICR Westwick. You may begin.
spk14: Good afternoon and thank you for joining us today.
spk15: Earlier today, Nanox Imaging Limited released financial results for the quarter ended September 30, 2021. The release is currently available on the investor section of the company's website. Ron Paliatine, Chairman of the Board and Chief Executive Officer, Erez Meltzer, Executive Board Member and incoming Chief Executive Officer, and Ron Donio, Chief Financial Officer, will host this afternoon'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 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 may cause such a difference. Those 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. We will also refer to certain non-GAAP financial measures to provide additional information to investors. A reconciliation of the non-gap-to-gap measures is provided with our press release, with the primary differences being stock-based compensation and class-action-related expenses. I'd now like to turn the call over to NANAC's Chairman and CEO, Ron Poliakim.
spk24: Thank you, Mike, and thank you all for joining the call today. Today, I will give an overview of our achievement during the quarter, as well as corporate updates. before turning the call over to Randaniel, our CFO, to review our financial results. We will then open the call to questions. We've been busy since our last earning call advancing the NanoXARC system, which has the potential to improve accessibility and aims to drive a significant increase in the delivery of medical imaging all over the world. Besides greater availability and accessibility, we believe the NanoXARC system and its end-to-end ecosystem will enable healthcare providers to obtain crucial information which has the potential to shorten diagnostic and treatment time and promote early detection. It is well known that earlier intervention is a key contributor to better health outcomes for patients. Before I begin, I would like to have Eris Meltzer, Nanox incoming CEO, say a few words and introduce some of our latest developments. There is.
spk18: Thank you, Ron, and thank you all for being on the call today. I'm excited about the leading and dedicated and talented Nanops team as we move ahead towards commercializing the Nanops Arc system. I'm working closely with the team to prepare for assuming the CEO award beginning on January 1st, 2022, and I look forward to participating in the Q&A session at the end of today's call. Turning for accomplishments during the quarter, as many of you know, we recently completed our three previously announced strategic transactions. First, we completed the merger with Nanox AI, formerly known as Zebra Medical Vision. Second, we completed the acquisition of USA Rod Holdings. And third, completed the acquisition of the assets of MDW, We believe that having a more accessible medical imaging technology would not be enough to transform the global marketplace, but we also had to have an AI capability to complete and complement our technology. Nanops AI fulfilled this need and provides the image analytics necessary to locate a problem and begin the process of diagnosis and treatment. The acquisition of USA-Rod and MDW provide a connected team of professional radiologists and decentralized marketplace that connects facilities and patients with radiologists that begin the next step of the evaluation process if the area alerts to a potential problem. These transactions help to fulfill our AI-powered workflow and provide some of the important final pieces of the non-oxfam system. as we head toward commercialization. With that, I'll turn the call back over to Ramtol Yakin.
spk24: Ramtol Yakin Thank you, Erez, and I would like to quickly highlight a few other achievements since our last report. In October, we announced that we entered into an AMSAS agreement with International Clinics Group, a medical equipment distributor that serves hospitals, health systems, clinics, and other medical facilities in Chile, Bolivia, and Peru. which adds to the growing future demand for our Nano-X Arc system. The agreement calls for the deployment of 350 Nano-X Arc devices across the region. To date, the company entered into MSOS agreement for deployment of 6,500 Nano-X Arc units. In September, Nano-X AI received its eighth 510K FDA clearance, in this case for coronary artery calcium solution, known as CAC, as part of its population health offering. CAC is a key biomarker indicating risks of cardiovascular disease and can help Nano-X AI identify potential medium and high-risk patients, which can then be flagged for further evaluation, and is another enhancement of the AI-powered workflow that we feel will lead to better value-based population health. Operationally, we continue to progress towards commercial production of the silicon-mesh chips, Nano-X's only-owned Korean subsidiary that is integral to Nano-X's digital exchange source. We expect production at the new facility to begin pilot production in 2022. This key initiative is especially important given the current supply chain shortage for many products worldwide. This will not only help to secure the stable supply of the chips, that we need for the production of the Nano-X Arc, but we'll also ensure that the quality of our chips is not a concern for us or the healthcare professionals using the Nano-X Arc systems. And finally, before I turn the call over to Ron Daniel, I would like to take a moment to update you on our commercialization efforts, including the regulatory process with the FDA. We're still in the process of responding to the FDA after receiving their comments on our first submission. As you all know, we are planning a second submission in the near term that will cover the next version of the multi-source Danlos Arc. And we believe that the feedback we have received from our first submission will help inform any subsequent submission. With that, I would like to turn the call over to Randanielle, Chief Financial Officer.
spk09: Thank you, Ron. Before I get started on my first earnings commentary as the CFO of Nanox, I would like to say how excited I am to be part of the team that is working to transform the future of medical imaging. I am looking forward to the work ahead with the talented team. I would also like to mention another change. We recently partnered with ICR Westwick, a leading healthcare-focused integrated communications firm, as our new investor relations advisor. They are highly experienced in the medical technology space and will be a good addition to the team adding into the important year of 2022. With that, on to the financials. Nano supported a gap net loss for the third quarters of 2021 of $13.6 million, compared to a net loss of $11.1 million for the same period in 2020, largely due due to an increase in our research and development expenses and general and administrative expenses, which were mitigated by a decrease in our marketing expenses. Non-GAAP net loss applicable to the ordinary shares for the third quarter of 2021 was $8.5 million, compared to a non-GAAP net loss of $5.1 million for the same period in 2020. A reconciliation between gap net loss and non-gap net loss for the three-month period ended on September 30, 2021, and 2020 is provided in the financial results that are part of the press release we issued this morning. The difference between gap and non-gap net loss is mainly due to the share-based compensations and legal fees related to the SEC inquiry and class actions litigations. Research and development expenses for the third quarter of 2021 were $3.7 million as compared to $2.1 million for the same period in 2020, reflecting the increased development activities for our NANAC system and the related regulatory costs. Marketing expenses for the third quarter of 2021 were $1.5 million as compared to $2.7 million for the same period in 2020, due to a decrease in share-based compensation. G&A expenses for the third quarters of 2021 were $8.2 million as compared to $6.3 million for the same period in 2020. The increase was due largely to an increase in our labor costs of approximately $0.5 million due to an increase in our ad count in connection with the expansions of the company's management team and the overall organization infrastructure increasing our DNO insurance expenses of approximately $0.5 million, increasing our legal fees in the amount of approximately $0.6 million due to the SEC inquiry and class actions litigation as described in our 6K file today, and transaction expenses with connection to the acquisitions of NanoCI, US RAD, Aldings, and assets of MDW in the amount of approximately $0.5 million. Net cash used in operating activities during the third quarter of 2021 was $7.0 million. For the nine months ended September 30th, 2021, Ninox recorded a gap net loss applicable to the ordinary shares of $39.8 million compared to a net loss of $24.9 million for the same period in 2020. Non-GAAP net loss for the first nine months of 2021 was $24.2 million compared to a non-GAAP net loss of $10.5 million for the same period in 2020. The difference between GAAP and non-GAAP net loss to the ordinary share is mainly due to a share based compensation expenses related to the secondary share offering, which closed in the first quarter of 2021. and legal fees in response to the SEC inquiry and class actions litigation as reported in our 6K file today. As of September 30, 2021, we had approximately 47.9 million shares outstanding. We ended the third quarter of 2021 with cash equivalents and marketable securities of over $180 million and $3 million loans from banks. Before we take your questions, I would like to mention that the company has been providing documents and information to the SEC in connection with an investigation and has now received a subpoena from the SEC requesting that the company provide documents and other information relating to the development cost of the company's NinoxARC prototypes, as well as the company's estimate for the cost of assembling the final NinoxARC product at scale. The company is cooperating with the SEC in responding to its request. With that, I will end the call back over to Rampalir Khan.
spk24: Thank you for the financial update, Ron. I understand that this is a lot of information to digest and that many of you likely have more questions than we can address on the call today. We're committed to being accessible to the investment community, and for this reason, we will engage in a robust investor outreach in the coming months. Additionally, as was noted in our last press release last week, we will be attending the 2021 Radiology Society of North America annual meeting in Chicago from November 28 to December 2. While there, we will demonstrate new features of the NanoX Arc system. NanoX AI will host an on-site booth there where the company will showcase its AI-enabled medical imaging software, population health solution, and on December 1st, Nanox will broadcast a virtual tour of Nanox Arc in a clinic setting from the Shamir Hospital in Israel. We will close our attendance at the RSNA annual meeting with an exclusive webinar specifically for investors. We hope to see many of you there. We hope to meet you soon again. Thank you for the time today and continued support, and especially for your belief in our vision, a vision that will improve the health of all of us. Thank you very much. We will now open up the call for questions, which Rondaniel and Erez will handle today. Operator, please begin the Q&A session.
spk03: Thank you. To ask a question, you'll need to press star 1 on your telephone. To withdraw your question, press the pound key. Our first question comes from Jeffrey Cohen with Ladenburg Thalmann. Your line is open.
spk10: Good morning. How are you?
spk00: Good.
spk13: So a couple questions from Aaron. So you have 0.6 of legal expenses for Q3. Any insight into what that may look like for the fourth quarter? Ron?
spk09: Yes. We don't have any insight for the moment. But as we said, we filed the 6K today and we refer to the information that we enclosed over there. That's what we can update at the moment.
spk13: Okay, got it. You had some commentary, Ran, about pilot production. I think the press release read early 2022 and you stated 2022. Can you give us a walkthrough of the facility in South Korea as far as the construction and how that looks now and how the timeline is looking over the next number of months, please?
spk02: With respect to the Korean facility?
spk12: Yes, please.
spk02: Okay, I think that we've indicated that... We have launched the new site. We have already a site which is operating right now on a temporary basis. We expect that the new site will be operating second quarter of highly likely that it will be operating in the second quarter of next year. And It's in line of the original expectations and in line of the plans.
spk13: Okay, got it. And then could you walk us through what you stated about the FDA timeline? I know that you stated that you were responding to the first set of questions from the FDA. Will that go in as a response to the first set of questions, and will that be separate from... a second submission, as you called it, for the ARC?
spk02: First of all, I think that Ron addressed it very, very clearly, that basically we're going to meet the 180 days window that we currently have to the latest submission, that basically we're going to use all the feedback that we get, including the future feedback that we'll get in order to – to work on the future applications and future submissions that we're planning to do. This is basically with respect to the ARC. As you can see on the Nano-X AI, we always and we continue to submit other FDAs and to connect to work with them to get another approvals, FDAs, and CPT codes.
spk13: Okay, got it. Thank you very much for us.
spk25: Thank you, Jeffrey. Thank you very much.
spk03: Thank you. Our next question comes from Siraj Khalia with Oppenheimer. Your line is open.
spk21: Good morning, everyone. Can you hear me all right?
spk04: Yeah, we're trying to. Yes, we do. Perfect.
spk22: Okay. So, Iran, Erez, anyone, I'll throw it out there. So, What does considering filing another 510 mean? There's a change in the wording and I'm curious what is driving that or am I reading too much into it?
spk02: I'm not sure that I understand what is referring that is not clearly written in the document.
spk22: Yeah, your earnings release says you're considering filing another 510K, and I'm curious why. Is there any other mitigating factor that is causing some sort of reconsideration of filing, or am I reading too much into the word considering filing?
spk02: Yeah, you are reading too much. I think that if you can see that basically on all fronts, on the NanoX AI, including the ARC, we're all the time developing more and more. We're going to show in the RSNA new applications and new ways of using the ARC. So it will be presented in the RSNA. Having said that, it doesn't say anything that, it doesn't say that we're not going in the future to submit applications more FDA approvals or more requests for FDA approvals for future uses of our system, including both the source and the ARC itself.
spk22: Got it. And in terms of the multi-source, has it been independently validated, i.e., you know, with non-Nanox affiliated people? Has any other independent expert evaluated it so far?
spk02: First of all, this happens all the time. But I would suggest that, as Ron said, wait for the RSNA, and you will see what's coming up.
spk22: Okay. Eris, forgive me if I missed this. The 1,000-unit production run that has been talked about in the past, I don't I'm not sure if I heard an update on that. Maybe you could provide some color.
spk02: We don't have any reason right now to believe that this is not the target that we would like to continue to stand behind. Okay.
spk22: And finally, on the SEC subpoena, when was the original request for documentation information received? When was it first received?
spk09: As we said in our findings today, the original written request for documentation from the SEC was received on November 8th.
spk22: November 8th. Okay, perfect. Gentlemen, thank you very much for the time and answering my questions. I do appreciate it.
spk06: You're more than welcome.
spk03: Thank you. And our next question comes from Ravi Misra. With Berenberg Capital, your line is open.
spk17: Good morning, Arez. Good morning, Ron. Hi, Ravi. Good morning. So I want to just kind of go back to that 1,000-unit production cycle that you're discussing. Can you just kind of give us, in light of the updated commentary out of the Korean facility, I think you said second quarter, and kind of the original commentary from earlier this year saying some of these units will be produced in Israel – What is the kind of production schedule right now as you see it in terms of where the first thousand will be made? And I guess, is there any risk if there are delays in Korea that you're unable to hit that number next year?
spk02: So, first of all, we have not disclosed any specific on this one. Bear in mind that we have already enough chips that will enable us to do what we do from the original manufacturer from the Japanese. So currently we have a lot which is independent to the manufacturing of the Korean one. Right now all the units are being assembled in Israel and we have not made a decision yet when we're going to switch to gear up to scale up the process of assembly. Once we do, and I think it may be sometime during the first third of next year, if there are any changes, we're going to let the market know any changes that will take place on this one. Right now, we don't see the... We're making orders in the supply chain in order to be ready.
spk17: Okay, and then... On the kind of potential second submission to the FDA, can you just help us think about what is going to be the key difference between that and the original submission?
spk02: I think that it was clear that it's not a second submission, okay? We are planning a lot of submissions in the future to the FDA. Once we move on and we develop more applications and more releases in terms of the use of the system, Then we're going to submit further. I think that after the RSNA, when you see the system, you will probably be more into the understanding of what has to be done and what kind of further submission we would like to do in the future.
spk17: And is that RSNA, are you going to be attending the event or is it going to be virtual like last year? And then I guess my last question is, would be just on the SEC investigation. I mean, November 8th, I guess, is when you said they've started the first line of inquiry. The subpoena, I guess, was received, what, today, yesterday, or a few days after that? Can you just help put some timing around that? Thank you.
spk02: I'll give Ron to answer the SEC, and then I will address the RCNA. Okay.
spk09: As for the SEC matters, the subpoena was received on November 8th. We had informal and verbal discussions with the SEC.
spk02: That's it. So with respect to the RSNA, the ARC is going to be presented virtual. Actually, what used to be Zebra has secured a booth. In present, in the RSNA, they are going to be, will be presented there as people will be there as well in present. Part of our people will be there, including people from the ARC division.
spk17: Okay, thanks. And then just maybe one final clarification, and thank you very much. If the subpoena was November 8th, just curious, when did the original SEC investigation begin?
spk05: Thanks. It was a short period before.
spk03: Okay, our next question comes from Rahul Rekhit with Lifestyle Capital. Your line is open.
spk16: Hey, guys. Thanks for taking the questions. Just two from me. In terms of the upcoming filing, maybe could you comment on the X-ray tube that you guys want to use, maybe on what the KVP could be or whether it's going to be a glass or ceramic tube and maybe an update on the manufacturing there as well?
spk02: First of all, I think I mentioned it. We are with the original process and plans for the manufacturing. Right now it's being done in Israel. We have nothing to add in terms of the KV that we have already achieved. It will be all presented live, not live in present, but live when it takes place in the virtual presentation in the RSNA, so you'll be able to see also answer to the question that you asked. In addition, I think that the more we go into the deployment process right now in the countries that we're going to operate and initially start to implement and put our systems next year in place, we will probably be more exposed to what further applications, requests, detail has to be further presented and submitted to the FDA. So the more we go into the future, the better we know about this one as well. Got it. Okay.
spk16: Appreciate that color. And just last one for me. Once again, congrats on the most recent contract. Maybe you could talk a little bit about the interest that you're seeing and tell us geographically kind of where you guys expect to see a bit of interest or the next few contracts. Thanks for taking the questions. You mean next contract?
spk02: Yes, looking forward. Once we sign, we announce this will be the next 6K. I would say that there is kind of a race between a few of the players that we're trying to engage in in the future. who's going to sign first. I'm kidding. But seriously speaking, I think that once we have more clarity on the next agreement, then we know what to tell and when it's going to be implemented. But right now, as you can imagine and see, we are getting more and more attraction to future deals that are to be signed. And as we speak, there are a lot in the process and in the pipeline.
spk16: Got it. Good to hear. Appreciate it, guys. Thank you.
spk03: Thank you. And we have a follow-up from Jeffrey Coonan with Landberg Thalman. Your line is open.
spk13: Thanks again for taking the question. So I wondered on the regulatory front outside the U.S. for the multisources, is there any update or any progress on – timing with regard to CE and other territories?
spk02: No, nothing due in this respect. We will be working on the CE simultaneously with the FDA. As you can imagine, since we work on a global basis, not everywhere we need FDA or CE. Some countries will require local. So we Generally speaking, we work on a global basis to get the FDA and the CDC and others, but at the same time, we're going to implement the deploy in other countries where it's not necessarily well required to this specific regulatory approvals.
spk11: Okay, perfect. Thanks again.
spk03: Thank you. And I'm showing no other questions in the queue. I'd like to turn the call back to Erez Meltzer for closing comments.
spk02: So thanks for the support and for participating in this call. We'll further discuss, as Ron was saying, and we'll probably have more discussions either on one more on or others that will come in the near future. Feel free to get in touch with the with Mike or with either one of us to further, and thank you so for being part of today's call. Thank you all.
spk03: This concludes today's conference call. Thank you for participating. You may now disconnect. Thank you. Thank you. Bye. Thank you.
spk01: Thank you. you Thank you.
spk14: Good afternoon, and thank you for joining us today.
spk15: Earlier today, Nanox Imaging Limited released financial results for the quarter-ended September 30, 2021. The release is currently available on the investor section of the company's website. Ron Paliatine, Chairman of the Board and Chief Executive Officer, Eris Meltzer, Executive Board Member and incoming Chief Executive Officer, and Ron Donio, Chief Financial Officer, will host this afternoon's calls. 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 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 may cause such a difference. Those 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. We will also refer to certain non-GAAP financial measures to provide additional information to investors. A reconciliation of the non-gap-to-gap measures is provided with our press release, with the primary differences being stock-based compensation and class-action-related expenses. I'd now like to turn the call over to NANAC's Chairman and CEO, Ron Poliakim.
spk24: Thank you, Mike, and thank you all for joining the call today. Today, I will give an overview of our achievement during the quarter, as well as corporate updates. before turning the call over to Randaniel, our CFO, to review our financial results. We will then open the call to questions. We've been busy since our last earning call advancing the NanoXARC system, which has the potential to improve accessibility and aims to drive a significant increase in the delivery of medical imaging all over the world. Besides greater availability and accessibility, we believe the NanoXARC system and its end-to-end ecosystem will enable health care providers to obtain crucial information which has the potential to shorten diagnostic and treatment time and promote early detection. It is well known that earlier intervention is a key contributor to better health outcomes for patients. Before I begin, I would like to have Eris Meltzer, NANOC's incoming CEO, say a few words and introduce some of our latest developments. There is.
spk18: Thank you, Ron, and thank you all for being on the call today. I'm excited about the leading and dedicated and talented Nanops team as we move ahead towards commercializing the Nanops Arc system. I'm working closely with the team to prepare for assuming the CEO award beginning on January 1st, 2022, and I look forward to participating in the Q&A session at the end of today's call. Turning for accomplishments during the quarter, as many of you know, we recently completed our three previously announced strategic transactions. First, we completed the merger with Nanox AI, formerly known as Zebra Medical Vision. Second, we completed the acquisition of USA Rod Holdings. And third, completed the acquisition of the assets of MDW, We believe that having a more accessible medical imaging technology would not be enough to transform the global marketplace, but we also have to have an AI capability to complete and complement our technology. Nanook's AI fulfilled this need and provides the image analytics necessary to locate a problem and begin the process of diagnosis and treatment. The acquisition of USA-Rod and MDW provide a connected team of professional radiologists and decentralized marketplace that connects facilities and patients with radiologists that begin the next step of the evaluation process if the area alerts to a potential problem. These transactions help to fulfill our AI-powered workflow and provide some of the important final pieces of the non-oxford system. as we head toward commercialization. With that, I'll turn the call back over to Rantol Yakin.
spk24: Thank you, Erez, and I would like to quickly highlight a few other achievements since our last report. In October, we announced that we entered into an AMSAS agreement with International Clinics Group, a medical equipment distributor that serves hospitals, health systems, clinics, and other medical facilities in Chile, Bolivia, and Peru. which adds to the growing future demand for our Nano-X Arc system. The agreement calls for the deployment of 350 Nano-X Arc devices across the region. To date, the company entered into an MSAS agreement for deployment of 6,500 Nano-X Arc units. In September, Nano-X AI received its eighth 510K FDA clearance, in this case for coronary artery calcium solution, known as CAC, as part of its population health offering. CAC is a key biomarker indicating risks of cardiovascular disease and can help Nanox AI identify potential medium and high-risk patients, which can then be flagged for further evaluation, and is another enhancement of the AI-powered workflow that we feel will lead to better value-based population health. Operationally, we continue to progress towards commercial production of the silicon-mesh chips, Nano-X's only-owned Korean subsidiary that is integral to Nano-X's digital exchange source. We expect production at the new facility to begin pilot production in 2022. This key initiative is especially important given the current supply chain shortage for many products worldwide. This will not only help to secure the stable supply of the chips, that we need for the production of the Nano-X Arc, but we'll also ensure that the quality of our chips is not a concern for us or the healthcare professionals using the Nano-X Arc systems. And finally, before I turn the call over to Ran Daniel, I would like to take a moment to update you on our commercialization efforts, including the regulatory process with the FDA. We're still in the process of responding to the FDA after receiving their comments on our first submission. As you all know, we are planning a second submission in the near term that will cover the next version of the multi-source Linux Arc, and we believe that the feedback we have received from our first submission will help inform any subsequent submission. With that, I would like to turn the call over to Ron Daniel, Chief Financial Officer.
spk09: Thank you, Ron. Before I get started on my first earnings commentary as the CFO of Nanox, I would like to say how excited I am to be part of the team that is working to transform the future of medical imaging. I am looking forward to the work I had with the talented team. I would also like to mention another change. We recently partnered with ICR Westwick, a leading healthcare-focused integrated communications firm, as our new investor relations advisor. They are highly experienced in the medical technology space and will be a good addition to the team adding into the important year of 2022. With that, on to the financials. Nano supported a gap net loss for the third quarters of 2021 of $13.6 million, compared to a net loss of $11.1 million for the same period in 2020, largely due due to an increase in our research and development expenses and general and administrative expenses, which were mitigated by a decrease in our marketing expenses. Non-GAAP net loss applicable to the ordinary shares for the third quarters of 2021 was $8.5 million, compared to a non-GAAP net loss of $5.1 million for the same period in 2020. A reconciliation between gap net loss and non-gap net loss for the three-month period ended on September 30, 2021, and 2020 is provided in the financial results that are part of the press release we issued this morning. The difference between gap and non-gap net loss is mainly due to the share-based compensations and legal fees related to the SEC inquiry and class actions litigations. Research and development expenses for the third quarter of 2021 were $3.7 million as compared to $2.1 million for the same period in 2020, reflecting the increased development activities for our NANAC systems and the related regulatory costs. Marketing expenses for the third quarter of 2021 were $1.5 million as compared to $2.7 million for the same period in 2020, due to a decrease in share-based compensation. G&A expenses for the third quarters of 2021 were $8.2 million as compared to $6.3 million for the same period in 2020. The increase was due largely to an increase in our labor costs of approximately $0.5 million due to an increase in our ad count in connection with the expansions of the company's management team and the overall organization infrastructure increasing our DNO insurance expenses of approximately $0.5 million, increasing our legal fees in the amount of approximately $0.6 million due to the SEC inquiry and class actions litigation as described in our 6K file today, and transaction expenses with connection to the acquisitions of NanoCI, US RAD, Aldings, and assets of MDW in the amount of approximately $0.5 million. Net cash used in operating activities during the third quarter of 2021 was $7.0 million. For the nine months ended September 30th, 2021, Ninox recorded a gap net loss applicable to the ordinary shares of $39.8 million compared to a net loss of $24.9 million for the same period in 2020. Non-GAAP net loss for the first nine months of 2021 was $24.2 million compared to a non-GAAP net loss of $10.5 million for the same period in 2020. The difference between GAAP and non-GAAP net loss to the ordinary share is mainly due to a share based compensation expenses related to the secondary share offering, which closed in the first quarter of 2021. and legal fees in response to the SEC inquiry and class actions litigation as reported in our 6K file today. As of September 30th, 2021, we had approximately 47.9 million shares outstanding. We ended the third quarter of 2021 with cash equivalents and marketable securities of over $180 million and $3 million loans from banks. Before we take your questions, I would like to mention that the company has been providing documents and information to the SEC in connection with an investigation and has now received a subpoena from the SEC requesting that the company provide documents and other information relating to the development cost of the company's NinoxARC prototypes, as well as the company's estimate for the cost of assembling the final NinoxARC product at scale. The company is cooperating with the SEC in responding to its request. With that, I will end the call back over to Rampalir Khan.
spk24: Thank you for the financial update, Ron. I understand that this is a lot of information to digest and that many of you likely have more questions than we can address on the call today. We're committed to being accessible to the investment community, and for this reason, we will engage in a robust investor outreach in the coming months. Additionally, as was noted in our last press release last week, we will be attending the 2021 Radiology Society of North America annual meeting in Chicago from November 28 to December 2. While there, we will demonstrate new features of the NanoX Arc system. NanoX AI will host an on-site booth there where the company will showcase its AI-enabled medical imaging software, population health solution, and on December 1st, Nanox will broadcast a virtual tour of Nanox Arc in a clinic setting from the Shamir Hospital in Israel. We will close our attendance at the RSNA annual meeting with an exclusive webinar specifically for investors. We hope to see many of you there. We hope to meet you soon again. Thank you for the time today and continued support, and especially for your belief in our vision, a vision that will improve the health of all of us. Thank you very much. We will now open up the call for questions, which Rondaniel and Erez will handle today. Operator, please begin the Q&A session.
spk03: Thank you. To ask a question, you'll need to press star 1 on your telephone. To withdraw your question, press the pound key. Our first question comes from Jeffrey Cohen with Ladenburg Thalmann. Your line is open.
spk10: Good morning. How are you?
spk00: Good.
spk13: So a couple questions from Aaron. So you have 0.6 of legal expenses for Q3. Any insight into what that may look like for the fourth quarter? Ron?
spk09: Yes. We don't have any insight for the moment. But as we said, we, we filed the six K today and then we refer to the information that we enclosed over there. Um, that's what we can update at the moment.
spk13: Okay. Got it. Um, you had some commentary ran about a pilot production. I think the press release read early 2022 and you stated 2022. Can you give us a walkthrough of the facility in South Korea as far as the construction and how that looks now and how the timeline is looking over the next number of months, please?
spk02: With respect to the Korean facility?
spk12: Yes, please.
spk02: Okay, I think that we've indicated that... We have launched the new site. We have already a site which is operating right now on a temporary basis. We expect that the new site will be operating second quarter of highly likely that it will be operating in the second quarter of next year. And It's in line of the original expectations and in line of the plans.
spk13: Okay, got it. And then could you walk us through what you stated about the FDA timeline? I know that you stated that you were responding to the first set of questions from the FDA. Will that go in as a response to the first set of questions, and will that be separate from – a second submission, as you called it, for the ARC?
spk02: First of all, I think that Ron addressed it very, very clearly, that basically we're going to meet the 180 days window that we currently have to the latest submission, that basically we're going to use all the feedback that we get, including the future feedback that we'll get in order to – to work on the future applications and future submissions that we're planning to do. This is basically with respect to the ARC. As you can see on the Nano-X AI, we always and we continue to submit other FDAs and to connect to work with them to get another approvals, FDAs, and CPT codes.
spk13: Okay, got it. Thank you very much for us.
spk25: Thank you, Jeffrey. Thank you very much.
spk03: Thank you. Our next question comes from Siraj Khalia with Oppenheimer. Your line is open.
spk21: Good morning, everyone. Can you hear me all right?
spk04: Yeah, we're trying to. Yes, we do. Perfect.
spk22: Okay. So, Iran, Erez, anyone, I'll throw it out there. So, What does considering filing another 510 mean? There's a change in the wording and I'm curious what is driving that or am I reading too much into it?
spk02: I'm not sure that I understand what is referring that is not clearly written in the document.
spk22: Yeah, your earnings release says you're considering filing another 510K, and I'm curious why. Is there anything, any other mitigating factor that is causing some sort of reconsideration of filing, or am I reading too much into the word considering filing?
spk02: Yeah, you are reading too much. I think that if you can see that basically on all fronts, on the NanoX AI, including the ARC, we're all the time developing more and more. We're going to show in the RSNA new applications and new ways of using the ARC, so it will be presented in the RSNA. Having said that, it doesn't say anything that, it doesn't say that we're not going in the future to submit applications more FDA approvals or more requests for FDA approvals for future uses of our system, including both the source and the ARC itself.
spk22: Got it. And in terms of the multi-source, has it been independently validated, i.e., you know, with non-Nanox affiliated people? Has any other independent expert evaluated it so far?
spk02: First of all, this happens all the time. But I would suggest that, as Ron said, wait for the RSNA, and you will see what's coming up.
spk22: Okay. Eris, forgive me if I missed this. The 1,000-unit production run that has been talked about in the past, I don't I'm not sure if I heard an update on that. Maybe you could provide some color.
spk02: We don't have any reason right now to believe that this is not the target that we would like to continue to stand behind. Okay.
spk22: And finally, on the SEC subpoena, when was the original request for documentation information received? When was it first received?
spk09: As we said in our findings today, the original written request for documentation from the SEC was received on November 8th.
spk22: November 8th. Okay, perfect. Gentlemen, thank you very much for the time and answering my questions. I do appreciate it.
spk06: You're more than welcome.
spk03: Thank you. And our next question comes from Ravi Misra. With Berenberg Capital, your line is open.
spk17: Good morning, Perez. Good morning, Ron. Hi, Ravi. Good morning. So I want to just kind of go back to that 1,000-unit production cycle that you're discussing. Can you just kind of give us, in light of the updated commentary out of the Korean facility, I think you said second quarter, and kind of the original commentary from earlier this year, saying some of these units will be produced in Israel – What is the kind of production schedule right now as you see it in terms of where the first thousand will be made? And I guess, is there any risk if there are delays in Korea that you're unable to hit that number next year?
spk02: So, first of all, we have not disclosed any specific on this one. Bear in mind that we have already enough chips that will enable us to do what we do from the original manufacturer from the Japanese. So currently we have a lot which is independent to the manufacturing of the Korean one. Right now all the units are being assembled in Israel and we have not made a decision yet when we're going to switch to gear up to scale up the process of assembly. Once we do, and I think it may be sometime during the first third of next year, if there are any changes, we're going to let the market know any changes that will take place on this one. Right now, we don't see the... We're making orders in the supply chain in order to be ready.
spk17: Okay, and then... On the kind of potential second submission to the FDA, can you just help us think about what is going to be the key difference between that and the original submission?
spk02: I think that it was clear that it's not a second submission. We are planning a lot of submissions in the future to the FDA. Once we move on and we develop more applications and more releases in terms of the use of the system, Then we're going to submit further. I think that after the RSNA, when you see the system, you will probably be more into the understanding of what has to be done and what kind of further submission we would like to do in the future.
spk17: And is that RSNA, are you going to be attending the event or is it going to be virtual like last year? And then I guess my last question is, would be just on the SEC investigation, you know, I mean, November 8th, I guess, is when you said they've started the first line of inquiry. The subpoena, I guess, was received, what, today, yesterday, or a few days after that? Can you just help put some timing around that? Thank you.
spk02: So I'll give run to answer the SEC, and then I will address the RCNA. Okay.
spk09: As for the SEC matters, the subpoena was received on November 8th. We had informal and verbal discussions with the SEC.
spk02: That's it. So with respect to the RSNA, the ARC is going to be presented virtual. Actually, what used to be Zebra has secured a booth. in present, in the RSNA, and they are going to be, will be presented there as people will be there as well in present. Part of our people will be there, including people from the ARC division.
spk17: Okay, thanks. And then just maybe one final clarification, and thank you very much. If the subpoena was November 8th, just curious, when did the original SEC investigation begin?
spk05: Thanks. It was short period before.
spk03: Okay, our next question comes from Rahul Rekhit with Lifestyle Capital. Your line is open.
spk16: Hey, guys. Thanks for taking the questions. Just two from me. In terms of the upcoming filing, maybe could you comment on the X-ray tube that you guys want to use, maybe on what the KVP could be or whether it's going to be a glass or ceramic tube and maybe an update on the manufacturing there as well?
spk02: First of all, I think I mentioned it. We are with the original process and plans for the manufacturing. Right now it's being done in Israel. We have nothing to add in terms of the KV that we have already achieved. It will be all presented live, not live in present, but live when it takes place in the virtual presentation in the RSNA, so you'll be able to see also answer to the question that you asked. In addition, I think that the more we go into the deployment process right now in the countries that we're going to operate and initially start to implement and put our systems next year in place, we will probably be more exposed to what further applications, requests, detail has to be further presented and submitted to the FDA. So the more we go into the future, the better we know about this one as well. Got it. Okay. Appreciate that color.
spk16: And just last one for me. Once again, congrats on the most recent contract. Maybe you could talk a little bit about the interest that you're seeing and tell us geographically kind of where you guys expect to see a bit of interest or the next few contracts. Thanks for taking the questions. You mean next contract?
spk02: Yes, looking forward. Once we sign, we announce this will be the next 6K. I would say that there is kind of a race between a few of the players that we're trying to engage in in the future. who's going to sign first. I'm kidding. But seriously speaking, I think that once we have more clarity on the next agreement, then we know what to tell and when it's going to be implemented. But right now, as you can imagine and see, we are getting more and more attraction to future deals that are to be signed. And as we speak, there are a lot in the process and in the pipeline.
spk16: Got it. Good to hear. Appreciate it, guys. Thank you.
spk03: Thank you. And we have a follow-up from Jeffrey Coonan with Landberg Thalman. Your line is open.
spk13: Thanks again for taking the question. So I wondered on the regulatory front outside the U.S. for the multisources, is there any update or any progress on – timing with regard to CE and other territories?
spk02: No, nothing due in this respect. We will be working on the CE simultaneously with the FDA. As you can imagine, since we work on a global basis, not everywhere we need FDA or CE. Some countries will require local. So we Generally speaking, we work on a global basis to get the FDA and the CDC and others, but at the same time, we're going to implement the deploy in other countries where it's not necessarily well required to this specific regulatory approvals.
spk11: Okay, perfect. Thanks again.
spk03: Thank you. And I'm showing no other questions in the queue. I'd like to turn the call back to Erez Meltzer for closing comments.
spk02: So thanks for the support and for participating in this call. We'll further discuss, as Ron was saying, and we'll probably have more discussions either when we're on or others that will come in the near future. Feel free to get in touch with the with Mike or with either one of us to further and thank you so for being part of today's call.
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