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. Call. I would now like to turn the conference over to Bob Yedidt 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 Ram Polyakan, Chairman of the Board and Chief Executive Officer and Yitzhak Mahyan, Chief Financial Officer. Before we begin, I would 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-nineteen 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 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 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 ZivraMed acquisition is subject to, among others, Approval of the transaction by the equity holders of ZEVR Med. 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 Nanonix Chairman and CEO, Ram Poliakken. Ram?
Thank you, Bob, and thank you, everyone, for joining our call this morning. Also joining me is Itzhak Mahyan, our Chief Financial Officer. After my prepared remarks, I will turn the call over to Itzhak to review the financials before opening the call for questions. Well, during the Q2 and the following period, we made substantial progress toward our goal of democratizing medical imaging. As we've said many times before, roughly 2 thirds of the world population do not have meaningful access to medical imaging, And we believe extended global access to medical imaging devices will lead to earlier detection of chronicle condition.
In order to fulfill our mission, we aim to tackle 3 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 patient 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 path.
So concerning the first challenge, The Nanox Art Production, we continue to make important progress towards building our global supply chain, including scaling up our semiconductor fabrication plant in South Korea as planned. We're also advancing as schedule With our tube production using our 2 tube suppliers for the multi store 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 MSAS agreements, we recently signed an MSAS agreement With Elino Pharma to deploy 1,000 Nanox Arc System across Nigeria, a country with population of over 200,000,000. 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 contract in place to deploy 6,150 Nanoxarc Units of 6,150 nanotoxac 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 test. We're in constant communication with our various MSaaS partners around the globe. This includes ongoing webinar sessions held on a monthly basis. These webinars include virtual tours of our production sites, 3 d tomosynthesis images review and analysis, system comprehensive review and system technical support maintenance review as well.
All of that being done towards 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 Nanox SCART X-ray System, a critical achievement for our company and an important reference point for our digital source. In the Q2 of 2021, we submitted to the FDA a 510 application for the first version of our multi source Nanox ARC 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 twenty twenty two.
In summary, The deployment of 15,000 units of NanoxArc 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 MSaaS 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 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 3rd party network of radiologists.
Using AI based technology, The decision support software for audiologists 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 multiple segments To read and diagnose imaging from the NanoxArc. I believe this can be achieved through 2 proposed acquisition. The first one is USA Rad Holding, Inc. And the second one is Zebra Medical Vision.
Regarding USA Ride Holding, Inc, USA Ride 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 U. S.
ERAD Holding Inc. If consummated, it represents strategic opportunities for Nanox that is based on the following. Starting with the fact that U. S. Eirad is partially backed by Siemens HealthSneur, which is significant.
It will enhance our go to market strategy, potentially allowing us to place NanoxArch into thousands of smaller U. S. Practices and provide this end to end globally connected medical imaging solution. Through the USA RAD network, We will have direct access to relationship with hundreds of medical practices across multiple specialties. Additionally, This will provide us instant access to train radiologists, lower the barrier to U.
S. 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 USirad and all of the assets of its affiliate company Medical Diagnostics Web or MDW.
In terms of financial details, we expect to acquire USA RAD for Total consideration of up to $27,000,000 comprised of $18,000,000 of Nanox shares and $9,000,000 in cash. Of this total, dollars 18,500,000 in cash and shares is expected to be paid upon closing And the remaining $8,500,000 is expected to be paid in cash and shares based on the achievement of certain milestone. We also expect to acquire MDW for total consideration of up to $3,000,000 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 algorithm and Bringto NANO's clinical regulatory and cloud deployment credibility.
The strategic opportunities if the acquisitions 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 of 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 2,000,000 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 example of Zebra capabilities includes The fact that Zebra has dozens of patents, 7 FDA cleared products for radiology AI and the CPT code for radiology.
Zebra is some of the world's top healthcare institutes and customers, including Apollo India, Intermountain Health, IRAMUS, the U. K. And Scotland NHS, Albert Einstein Brazil, J and 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 $200,000,000 in Nano stocks for 100% of the shares Capital of Zebra on a fully diluted basis. Dollars 100,000,000 is expected to be payable by means of Nanox ordinary shares to be issued upon closing. Dollars 16,000,000 in deferred consideration is expected to be payable by means of Nanox ordinary shares to be issued Upon signing of 3 new business contracts within 6 months of closing and up to $84,000,000 is expected to be payable by means of Nanox ordinary shares to be issued upon achievement of certain milestone. Zebra is expected to operate as a wholly owned subsidiary under the Nanox brand. The shares Nanox shares expected to be issued to Zebra Med, USA RAD and MDW Shareholders are not expected to be registered and will be subject to restrictions on resell 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 USERVAD 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 3rd challenge, Lack of data connectivity between patients and physicians, the lack of sophisticated data analytics and population health solution.
Well, Nanox believes it can help solve this challenge. With our Nanox Arc system and if our proposed transactions are consummated, We will have the radiologists of Eurowserrad and the AI capabilities of Zebra. As such, we will be able Create a globally connected end to end radiology solution. Before turning the call over to Itzhak 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 2 years To step forward and become our CEO. Erez is a world class executive who has tremendous amount of He was most recently the Executive Chairman of Adasa University Hospital and the Chairman of Adacit 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 Kim McCall 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 $1,300,000,000 in capital for AFI development on the LSC 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 Nanox Executive Chairman focusing on longer 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 Itrak Mayan, 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 Itzhak for its 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, Will join us as of August 15.
Mr. Daniel is licensed and certified public accountant in both the United States and Israel, Chartered's 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 as we work to I'll 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 Itzhak to review the financials. Itzhak?
Thank you, Ron. And just let me say that it has been a privilege working at Nanox and being a part of creating a vision aiming to change people's lives on a global scale. During the past 2 years, I believe we have built a solid foundation from which To drive future growth, Tran and the rest of the senior management team are very capable of driving forward. In addition, I have had the pleasure of working with Erez Meltzer as a member of the Board of Nanox since late 2019 prior to the company's IPO And I wish him well in his new role. Now turning to the numbers.
Nanox reported a GAAP net loss Applicable to ordinary shares for the Q2 of 2021 of $13,600,000 compared to a net loss of $6,400,000 for the comparable period in 2020. Non GAAP net loss applicable to ordinary shares for the Q2 of 2021 was $8,600,000 compared to a non GAAP net loss of $2,900,000 for the same period in 2020. A reconciliation between GAAP net loss and non GAAP net loss for the 3 months period ended on June 30, 2021, 2022 is provided in the financial results that are part of the press release we issued this morning. The difference between GAAP and non GAAP net loss to ordinary shares is mainly due to share based compensation and secondary offering costs. Non GAAP research and development expenses for the Q2 of 2021 were $3,400,000 as compared to $1,500,000 for the comparable period in 2020, reflecting the increased development activities of our Nanox system and the related regulatory costs.
Non GAAP marketing expenses for the Q2 of 2021 were $1,000,000 as compared to $500,000 for the comparable period in 2020 as we continue building our brand awareness and product marketing capabilities. Non GAAP general and administrative expenses for the Q2 of 2021 We have $4,100,000 as compared to $900,000 for the comparable period in 2020 as we ramped up our investment in Our management team and our global organizational infrastructure. For the 6 months ended June 30, 2021, Nanox reported a GAAP net loss applicable to ordinary shares of $26,300,000 compared to a net loss of $13,800,000 for the comparable period in 2020. Non GAAP net loss applicable to ordinary shares for the first half 2021 was $15,700,000 compared to non GAAP net loss of $5,400,000 for the same period in 2020. The difference between GAAP and non GAAP net loss to ordinary shares is mainly due to share based compensation and expenses related to the secondary share offering, which closed in the Q1 of 2021.
Net cash used in operating activities during the 1st 6 months of 2021 was $11,700,000 as compared to $4,700,000 in the comparable period in 2020. As of June 30, 2021, we had approximately 47,800,000 shares outstanding. We ended the Q2 of 2021 with cash, cash and marketable securities in approximately $193,400,000 and 0 debt. For the quarter, cash uses included funding our operating activities and investing $6,700,000 in purchasing property and equipment, Principally, as we establish MEMCHI's manufacturing capacity in Korea. And with that, we would like to open the call for questions.
Operator, please start the Q and A session.
Thank you. We'll now begin the question and answer session. Sorry, you'll hear a tone acknowledging your request. Our first question is from Steve Halper with Cantor. Please go ahead.
A couple of questions. I appreciate the operational update On the 15,000 units by 2024, could you give us an update on the 1,000 units in 2022. And then my second question, can you give us a framework Of the revenue and EBITDA contribution from the companies that you're acquiring.
Yes, sure. So, hi, Steve. I will start with answering the first question and then Jacques will address the second one. So we are on plan and we do have all the confidence that at least 1,000 units will be shipped during 2022. As we see things today, we have everything ready and we are getting the final integration V and V And of course, waiting for the regulatory pass, but there is no reason for us to believe that we could not ship at least 1,000 units.
As you know, We have at least 6,100 units booked by customers. So we should start to see A significant ramp up as of 2022 and all as planned and reported before. Itzhak, do you want to answer the second one?
Yes. Stephen, I will just say shortly, obviously, we are not giving a distinct any kind of guidance on revenue, but I can tell you that our estimation, especially when you relate To Zebra that it will move to profitability as it's ramping up into the population health product offering. It will reach profitability somewhere around 2023. This is one. The second one as it relates to USERAD, This acquisition and the performance of USRS currently is at cash neutral basis.
Thank you.
The next question is from Jeffrey Cohen with Ladenburg. Please go ahead.
Hi, Rand and Yitzhak. How are you?
Good. Excellent. Very exciting day.
So just a couple of questions from our side and I think I may have missed part of it. As far as the Zebra acquisition in totality, it sounds like 6040 shares in cash. And could you just recap that with me and then also talk a little bit about The 100 milestones behind it, how many milestones are there? And are they related solely to Sales numbers.
Yes. Well, first of all, maybe I misspoke. It's only shares And it's divided to 3 tranches of shares. The first one is $100,000,000 in ordinary shares of Nanox, and that's upon closing. And then there are 3 agreements, business development agreement, new ones that will actually, if being signed, will account for additional $16,000,000 in ordinary shares, all shares.
And lastly, there is Maybe a group of 7 different type of milestones that includes revenues, retention, etcetera, The thief achieved will be granting up to additional $84,000,000 in Nanox Ordinary shares and one point to that is important that will be done at the price at the time of the achievement. So The price will be relevant when achieved. So it's all shares based transaction. Got it. Do you want to add anything?
I think that was Pretty accurate. Maybe I can just in terms of the milestone, indeed there are about 7 different milestones. Some of them related to attaining the business projection that came along with the acquisition. Obviously, the other one is related to Integrating the Zebra technology within the overall product offering at Nanox, which makes it a very attractive Acquisition from a performance standpoint for us.
Okay. Got it.
And then secondly, could you Give us a little bit more color and update as far as the current manufacturing and its transfer to your South Korean temporary facility And an update on the new facility in South Korea and also an update perhaps on specific to manufacturing Of the ARC as far as production in tubes go?
Yes, absolutely. So I will take this one. So first of all, We are meeting all our timelines in terms of transferring the knowledge from Japan to Korea. As you recall, currently we have a semiconductor manufacturing Facility in Japan that is providing a full solution for the chip. So the production line right now is in Japan.
As we scale up and towards The really big demand that we have, we've transferring the knowledge and the manufacturing line in 2 phases. The first one When we put our equipment in a temporary manufacturing site in Korea and That will be in charge of about half of the process. So half of it is in Korea, half in Japan. And this was a lot of work that was done in the last, I would say, 6 months and this is done. So we can say that this capabilities of The combination of Japan Korea temporary fab with our equipment is done and we're ready for prime time there ahead of time actually.
The second initiative that we're doing and there we're investing a lot of funds actually too during this year. This is the new factory and This is also just developing on schedule and we expect to finalize all the building Those infrastructures there by the end of this year starting to run some, I would say, pilot early next year and be in full operation, Let's say before the end of the first half of next year, it's important to say that this is a time line, but also important to say that we have full capabilities and Really scalable type of capabilities within the TAMP factory and Japan as we speak today. So this is not a concern at all. In terms of the tube making, we have 2 suppliers that completed basically the integration. And as you recall, we already demonstrated The 100 kV done from Italy, we've done that also in Korea.
So those both of those factories are Invested a lot of efforts in, I would say, taking the prototypes into production and we feel that this is And we started to get tubes actually in Israel. We have beautiful images from the new tubes in Israel When we integrate them into the system, so overall, we feel that also that is right on time and We feel that there is no limitation there at all. We have we're hedging In a way, it was 2 suppliers, 1 in Korea, 1 in Italy. Both of them are equipped to supply those tubes. 1 is ceramic, 1 is glass, But they demonstrated the ability within the Nanox chip to have Over 100 kV, which is what you need for the multi store system.
So this is the second part. On the assembly part, As you recall, we are given the COVID-nineteen, we never really started the integration into the Foxconn Facilities in Taiwan and China and we mitigate this risk of people not being able to travel, especially engineers, By building a facility here in Israel in a place called the Al Binyamin, where we have Our systems integration done and I think the limitation there would be Really making more than 1,000. So up to 1,000 units, we don't have any limitation there. And there we have A lot of activities related to V and V, what we call the validation and verification. As you know, every time we submit the FDA, it comes with huge amount of external and internal documentation and testing that needs to be done.
All of that is in place and we have systems that are already working and ready to be scaled up. And the only downside is that we may, for the at least for the first 100 units, we may be looking at a little bit higher Cost than expected simply because Israel is a little bit more expensive than Taiwan. As we clear With COVID-nineteen, the transfer of knowledge will be done to Foxconn. And then when we ramp up mass production, I think it will be Already meeting also our target costs.
Okay, got it. Ran, thank you very much. Hiscox, thank you very much And congrats on all the news in the quarter.
Thank you very much.
Our next Question is from Suraj Kalia with Oppenheimer and Company. Please go ahead.
Good morning, everyone. Ron, Itzhak, can you hear me all right?
Yes.
Yes, Suraj. Perfect.
So before I go on to my questions, Itzhak, it's been a pleasure working with you. We wish you the best in your next endeavor. Hey, Ron.
Hey, Shiv. A
lot of things happening, right? So I want to ask the obvious, Why the management change now? And I'm curious how the process has gone about The timing and when this all came, just kind of thread the needle for us in terms, especially the timing and the switch in terms of other management.
Absolutely, absolutely. No, that's all good news. And I think it's pretty obvious. I think 2021 For us, it was a year of infrastructure building. We invested over $40,000,000 in Korea and just establishing the new factories.
We went through a very, very rapid growth in teams in terms of regulatory team as well as the V and V Skillset you need for really scaling up everything from what we've shown in the RSNA last year to what is expected from the company in terms of deliveries and fulfill our commitment to our customers. So the year of 2021 is really about Building the infrastructure and getting ready to prime time. As such, I think that we had To deal with what is it that is missing in terms of the components needed in order to fulfill our mission. And I think we spoke always about our vision of democratizing Medical Imaging that includes not only the medical devices, but also the software part of the cloud, the AI component as well as the radiologists. So that's pretty obvious why early on this year when we saw that everything is on plan, We started to look at the proposed acquisition that we announced today.
And I would tell you that's a long process. It's not started today. And in terms of management, what we also realized is what we knew already that the year of 2022, while we are going to ship a lot Products, as we believe, is going to be really the year of execution. It's going to be execution, execution, execution. And as such, we really wanted to make sure that we put the right teams that can Really globally manage this effort including the integration of both YoceRad And Zebra Medical into our overall Nanox umbrella.
And as such, we've looked To discuss among the Board members as who are the best people we know that could lead this change From an R and D vision company into execution company, when we get ready to prime time and the answer was pretty obvious. It took a bit of time to convince Erez Melter, but as he was serving already on the Board and very involved in a lot of the day to day processes and With his really exceptional background, Christian Israel is like a hero because he was CEO of the 3 largest Out of 10 companies in Israel, he was willing to take on the challenge and really help building A global company from Israel that includes the The vision of Nanox overall and that's how it came about. This is a month of discussion. As to myself, of course, as the Founder and the Chairman, I will still I'll be very much involved in the day to day by hunting elephants, but the execution part, which I think we will be judged by next year, It's planned to be managed by Ares. Now I cannot speak for Itzhak, but I can only tell you that The new CFO that's coming on board is, as we said, lives in New York and that's part also of what we realized will happen next year As we integrate USA ROD and we are working closer to investors and the capital markets, we will need more presence and more Access, I would say, daily access to our investors as well as the capital market in New York.
And we felt that When it's Chuck, I've decided to move on to his next challenge that this will be the right profile for us. Again, it took some time to identify And we felt in full transparency that this is the right time to expose this information in the context of really The 2 proposed acquisition and the what we feel is readiness to prime time that will come in 2022.
So Ron, two additional questions from my side and I'll hop back in the queue. First on Zebra, And
forgive me,
I haven't looked at the filings in terms of additional information on Zebra. So maybe it's buried in there. Is there a color on the stock price for Zebra? And also as I understand it, The Zebra has like a chest X-ray AI software cleared. And I'm curious How you see the implementation or integration playing out with Zebra, because at least from what personally I was able to glean, Their AI is talking about deeper imaging or relatively deeper tissue and bone imaging.
And based on at least what Nanox's filings are, this is just kind of thread the needle again for us, Ron, in terms of timing, how you all thought that as a strategic fit in terms of what you guys are doing especially the valuation.
Yes, absolutely. So I would just refer to that from high level as you all understand Just completed a very, very long due diligence. We have some thoughts about the actual integration. But from signing to closing, we have Sometimes and that would allow us really to perfect our operational plan. But overall, from 30,000 feet, There is no doubt that diagnosis of AI for radiology will be part of the future.
In developing in developed There are a lot of talks of This being this software based AI being the first line of defense to see if something is normal or Now, so the first usage of the way we look at the strategic usage of the very, very deep Knowledge of Zebra into this domain is to perfect the products that are most frequent in terms of Radiology and try to come up with modules that will enable, in essence, Coupling each one of our Nanox Arc into this software solution that will go after the most common and frequent Type of modalities. And that's something that we believe after a lot of due diligence that is within the capabilities of Zebra's team. They are one of the most impressive team I ever seen In terms of algorithm and AI and also they are very much well known in this domain for their ability To close the loop and actually get something through regulatory clearance and also its partners. So this is the first part. The second part is that Zebra is very Busy now with some payers actually to build what will become I mean, if we're talking in terms of annotation, this Like early detection, I would say, annotation.
They're also very much busy these days in working on what will provide Shifting that domain all using the same capabilities of AI and that we believe also a capability that will be very important for Nanox. As you know, remember that we are going to place many, many units around the world that are going to scan globally, a lot of And we need someone to look at those images to see if normal or not, and that's really the AI based technology that will be helping, Let's say, there are geologists that will look at that. And the second one is really to crunch all this data and try to come up with a pathway That will indicate for specific patients something that means prevention. And that's part of the population health initiative That they are spearheading the way we look at us. So both of them are very relevant to Nanos.
And if you look back to our Vision and what we want to do, it's really the fitting very well with our strategy. Now As we move forward in the transaction, we will come with a very detailed operational plan. But overall, we are very honored To have these capabilities of joining forces with Zebra because they're absolutely, as we feel, a huge addition to what we're trying to do And really adding the layer of intelligence to our hardware piece that is very much needed in order to fulfill our vision. So that's basically What we see there. Now it's true that Zivra has already 7 cleared FDA products, We showed a lot about their strengths, and it's not necessarily that their product will be fitting to our more frequent Scanning needs, but that's not a problem because their methodology and their technology and their platform is so impressive and versatile That there is no problem for them to adopt their technology into a modality that we are being that is requested by You know our customers.
So that's really the answer to your question.
And finally, Ron, on USA RAD, if I could, When did the discussions with the USA RAD start? How does the accounting now work for your USA RAD contracts? And is the goal moving forward now to essentially let's say you have contracts In Belarus and Brazil and other places that even if the scans are done and radiologists are not present, The U. S. Remote monitoring with USA RAD is going to facilitate that.
Just kind of and if that is the case, maybe you can walk us through how you enforce the logistics and the payment portion. Thank you for taking my questions.
Yes, okay. So I will let the instructor answer the accounting, but again, I will answer a very simple question simple answer. Part of our total value to customers is also the ability, if they want, to get access to our AI modality as well as radiologists. And U. S.
Airrad have already demonstrated they have a business in the U. S. And also serving outside of the U. S. That is HIPAA compliant that is able today Without Nanox, actually to generate a lot of transactions that are connecting between patients or imaging centers into radiologists.
They've already done that. The only thing we're asking or we envision that this proposed acquisition will do is that Give us immediately the ability to offer that from within and would enable us to really climb up the value chain. As you recall, our business model is $14 per scan, But then up to 40 if we are provide diagnosis. So that's the first thing. And then of course, for all those countries that we signed contracts with They do not have not only medical devices, but also they do not have any radiologists around.
That would be an instant and very important component to fulfill this mission. And again, I will just say again that having many, many devices that generate brilliant X-ray images will not be sufficient without the ability to read them. And that's really how we Their current operation is very relevant to where we start to ramp up in the U. S. Following the FDA clearance.
And it will pretty much be we should see the fruit of that actually early 2022 in the U. S. And outside. The second one It's actually that Deradiologists are committed through the Nanox Academy to educate Other skilled clinicians in order to read Nanox images and that's an initiative that will also take That also will take place off. So this is my answer to the synergies and why it's very relevant immediately.
And I would like it's hard to talk about the accounting, please.
Yes. You know, Turaj, it's going to be very hard at this earlier stage to go into specific, but I want to lay out the principle of what we're What we're doing, when you think about it, when we have initiated the goal of targeting $40 per scan To the patient, we were speaking about 3 different parties within that $40 framework. We were talking about Nanox With the same as $14 per scan, we're talking about the service provider and we're also talking about the radiology is obviously on the low end Erbodology Annotation. What I think those two acquisition is enabling us is actually to vertically integrate 2 of the Different business offering that until now we were completely relied on 3rd parties. So even though that we We intend to maintain our 3rd party agreement with the AI companies.
We do intend to vertically integrate AI capability within the offering And obviously take bigger share of the margin associated with the AI portion within the $14 And the same thing when it comes to radiology annotation as a result of integrating USERAD within the overall framework of Nanook, it will allow us to take a higher margin on something that until now was mostly a follow through to the offering That went all the way straight to the 3rd party radiology annotation. So without going to the principle, obviously, that will allow Nanox maintain a higher margin profile once we fully vertically integrate the 2 businesses within the overall product offering.
The next question is from Ravi Misra with Berenberg. Please go ahead.
Hi, good morning. Can you hear me okay?
Yes. Hi, Ravi. Yes, Ravi.
Hi, Ron. Hi, Itzhak. Congrats, Itzhak. Best of luck to you on future endeavors. So just, I guess, more Questions on the acquisitions that you're announcing.
First, you haven't mentioned as far as I can tell any kind of around deal close timings. If you could kind of give us a sense of when you think that could happen if these agreements go through. Second, it's a little bit of a kind of grander strategy. It sounds like that you're going after with both of these acquisitions and Kind of the hardware and MSaaS provider model that we've all been thinking about. So just help me understand in terms of, I thought you gave a little bit of color on margin, but when you make that margin commentary, is that on gross margin?
Like how should we think about the kind of longer term operating margin performance of the business here? Are the 300 radiologists that you're getting through USA RAD potentially, are those now going to be part of your kind of employee headcount? How should we think about some of the imaging AI integration that Zebra brings with your other partners. I mean, is this kind of mutually exclusive or complementary? And what else needs to be done to kind of develop that Nanox Cloud and Academy aspect of the engine.
And I guess I'll just put my second follow-up really quick. There have been a lot of questions. The public streaming event that you discussed on August 16, can you just give us some understanding of what that's all about? Thank you.
Sure. So maybe it's like you'll start on the numbers question and I will try to provide some On the strategy and also on the event on the 16.
Yes. I mean, in gravi, meaning it's going to be and Kele told me just to relate right now at this early stage on When it comes to accurate margin, but one way to think about it, and I want to make sure it's not being glossed with all the details, is the fact that As you think about the Zebra integration moving forward, it has 2 different components when it comes to Nanox. First of all, I don't want to be a complete miss that Zebra is continuing to be operating as a standalone business Under the Nanox brand, what it means that they will continue and invest and deploy their move into population health as a transition from their very Extensive triage based business that they were very successful building with 7 FDAs and so forth. So first of all, We do forecast and we do project that over time, okay, Zebra will bring revenue of its own Coming for those population health product offering beyond their contribution to the MSAs model. So the overall Margin impact as related to Zebra will have both components, both the impact on the Nanox MSAs offering, but also Their own revenue as they're going to be rapidly building entering into the population health product offering.
Ram, I think it's is that a part?
Yes. So let me again yes, just we're a little bit, I think, getting to the end of the hour. So let me Let me just simply talk about strategy again. I think that the grand strategy is there from the IPO last year. I mean the idea of democratizing Medical Imaging includes component of number 1, create access to medical devices number 2, provide a secure platform that can Actually creates connectivity remotely between physicians and patients using and utilizing third party services, including AI, And the third one is actually to have someone sufficient, no matter what, not exclusive, but no matter what that can read Those images, again, because those images are not that important without someone that can analyze them.
So if you look at this strategy, Both acquisitions actually play perfectly into the strategy because on the medical device side, we feel that we are very near to prime time. We have also component, needed 2021 was really a great year of infrastructure and we feel very confident that we're going to ship many units The second level of connectivity and HIPAA compliance cloud is actually what we needed to make sure we are there In terms of product readiness, I think both MDW or USA RAD and Zebra has far more experience Then we do and they could shortcut a lot of our initiatives and that's a huge immediate value to what we do. And the third one is really has to do with the, let's call it, the analysis, whether it's human Or by academy or by software and both companies have proven actually their capabilities in terms of all of that. So USERAD is already operating consultant by the way, that are the network of 300 radiologists. They are their manpower is about 15 people And they're already running this business in a way that is working and they're also providing other than 50 states in the U.
S. Are providing Their services to other customers around the world successfully. So we are just coming into their We're integrating them into our offering, but like it's Chuck said, they have also a standalone Ability to generate and be cash positive actually. And then in terms of the AI capabilities of Zebra, Things they've already demonstrated, including one of the first AI based technology Product has worked clear at the FDA. So they are really leaders in that domain.
So they've demonstrated their ability to come up with software that can look at Millions of images have come up with something that makes sense for the acute care, which is really speak for the early detection and also For the prevention and that speaks for the population hence. So I think this fits perfectly into our strategy when we go On prime time, I would add to that that Nanox SolarWinds was like an open source. So the same way that we are working with big companies of medical device And we offer them our technology in exchange to license. We will continue to be open to other services As they come, so in no way we're going to block ourselves to other opportunities. So all in all, we feel that this is a very, very good strategic fit That actually fit exactly well with our vision from the get go, and it's a component that is much needed.
We just didn't want to, In a way, do any moves before we felt that on the hardware side and the deep technology side, we are ready for primetime or getting ready for primetime. So that's really the context.
Great. Thanks. And just the August 16 event?
I'm sorry?
Just on that August 16 event, just curious what that's going
to be. Yes. So no, no. Yes, yes, yes. So I think in August 2016, we're going to I mean okay, so let me just tell you that we know that We are sharing today a lot of information in one call.
And that's why we think that we need to be engaging in a very robust way And not only in August 2016, but actually I will announce later we have other dates from now until RSNA We're going to devote much more time in order to not only talk about the things, but actually let everybody see, engage with the let's say, with The production line to see the actual device in action, to see the actual images coming from the device, To see those images being uploaded to the cloud of that includes also the USA RAD cloud, To talk to the radiologists and also to have the Zebra people just explaining everything about AI and how they fit into Our strategy. So we start on August 16 with the webinar where we prepared actually a more informal, I would say, dialogue between The different components of what we have and of course the audience, we also will ask Erez Melter That will become the CEO as of January of 2022 to join us and so investors and analysts can actually Meet him. And that's we feel we'll give much more color and the following event as I will tell at the Very soon, we'll have some more events planned because as you realize, this is a very important day, but also a lot of information.
So we will need To make sense out of all of it through some separate events devoted to, for instance, AI or the Academy This August 16, where we are going to show practically our system at work.
The next question is from Rahul Rakit with LifeSci Capital. Please go ahead.
Hey, Ron. Hey, it's Sak. Thanks for taking my questions. I know there's been a bunch of questions so far, so I'll try to make it quick. But I want to get some clarification on regulatory timelines.
I know you mentioned that you've done the first $0.05 submission for the Nanok ARC, but Can you is this system commercial ready or are you expecting to make another submission for the commercial ready system? What would be the timing of that? And I guess what are the key differences between these two submissions? And then just following up from that, Given the amount of back and forth that you had with the FDA for the single source system and the complexity of the multi source submission, I guess, what is your thinking around the timing of an ultimate FDA clearance and whether you might see some ex U. S.
Approvals prior to that. Thank you.
Yes, okay. Let me just address that. So actually, we view the Nanox Heart as a very significant FDA approval because basically It cleared the technology and the multi source was submitted and immediately we got feedback from the FDA and some questions. So that's in process. As you all know, we cannot control the timing of the FDA, but we have all confident that we're in good shape there.
We're going to submit a second submission Of the Nanox Arc was the final, I would say, and the best performance Level of Denonox Arc still during this year and we expect that as we said that will allow us to in the U. S. And outside of the U. S. To Cheap to the very minimum 1,000 units during 2022.
Nothing has changed in that domain. The experience we had by the delay During the corona time, etcetera, with the FDA, is definitely not the same experience we have right now. And I can only say We already have some communication there, which is all positive and we feel confident that we are in a good shape to meet everything we said so far, which is Submit and get clearance in a way that will allow us to ship products in the U. S. And outside of the U.
S. As planned during 2022.
Got it. I appreciate that. And just one more quick one for me. Sorry, I just I haven't heard much around potential Nanox cloud filing. Is there anything that you could add there in terms of the timing of that and Ultimately, what that process may look like?
Thanks.
Yes, I mean, yes, sure. I mean, We're going to submit everything needed in order to operate, including the NICE cloud, but also we're going to very closely look at the 2 proposed acquisition and what can we Already utilized from there. Just again, to reiterate, both Zebra and the MDW actually have Very, very strong cloud capabilities that's already working in terms of US Air and MDW. They're already in operation for years, EPA compliance and everything is done. So we already integrated initial integration into their system just to see that it's working and it's working perfectly.
And the same will be done with Zebra that also have very, very strong cloud capabilities. So the answer is, A, we're going to submit to the very least our Nanox cloud, Which is already in preparation for the submission and we're going to also look very carefully and see if we can utilize what is already done for some time and cleared with our partners, so that we can shortcut and streamline The way for prime time of our business ramp up. So that's really the answer.
Got it. I appreciate that color. Thanks again for squeezing me in guys.
No problem.
This concludes the question and answer. Thank you. Pardon me. Go ahead, sir.
Okay. So this is Ron speaking. So we know this is a lot of information for one call and That is why we will be engaging in a very robust investor outreach that includes both financial conferences and meeting roadshows, And we hope to meet with you either in person or virtually in the near future. Meantime, we have a few upcoming events to Ravi's First of all, we'll have an investor webinar and this is where management will host a public streaming event on August 16 at 8:30 am EST. Following that, on September 30, we will do what's called the AI Day.
It's being taken from the Battery Day of Elon Musk. So we'll do AI Day basically. And this is where we're going to take you with The people of Zebra Medical and other people from our team through the AI initiative And we'll go through everything that you need to know in terms of what is the directions at AI in medical in general, but also Specifically, what we're going to do with all the skill set that we're just looking to acquire. We're also planning to participate in the RSNA Radiology Society of North America and that will be coming on November 28, When you will be able to see an actual practice and demonstration of our end to end vertically integrated medical imaging solution, Assuming we'll also show that show some component that will be added if those proposed transaction will be consummated. So to conclude, as you've just heard, Nanos continues to take significant steps to fulfill our vision Together for better health, we're doing this in 3 ways.
The first one is really continuing to scale up manufacturing of the nanoSARC, While in parallel, advance along regulatory pathway in key territories, most noticeably in the U. S, Our new relationship with 2 great companies, USA Rad Holding and Zebra Medical Vision, if consummated, will position us to make Significant progress in realizing our goal, a globally connected end to end radiology solution and finally, bringing in A world class CEO to sustain the momentum that we currently enjoy and lead our company forward with whom I will be working actively as So with that in mind, I would like to thank you for your 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. With that operator, we would like to start We would like to finish the call, I'm sorry.
Thank you. This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.