Q1 2021 Nano-X Imaging Ltd Earnings Call

Greetings and welcome to nano extra imaging L. T D first quarter 2021 earnings call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.

If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

As a reminder, this conference is being reported.

I'd now like to turn the conference over to your host Glen Godmother of Investor Relations.

Thank you Joe and thanks to everybody for joining the non Oxy imaging first quarter 2021 conference call on today's call. We will hear from Ron Paul Yadkin Chairman of the board of Directors and Chief Executive Officer, and in fact for my own Chief Financial Officer.

Before we begin I would like to remind everyone that managements remarks today may contain forward looking statements regarding the company's financial results research and development manufacturing and commercialization activities regulatory process operations the impact of COVID-19 on its business and other matters. These statements are subject to risks uncertainties and assumptions and 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 companys views as of any subsequent date factors that may cause such differences include but are not limited to those described in the company's filings with the SEC.

We will also refer to certain non-GAAP financial measures to provide additional information to investors a reconciliation of non-GAAP to GAAP measures is provided in our press release with the primary differences being stock based compensation and the class action related expenses with that I would like to turn the call over to non op is chairman and Chief Executive Officer, Ron <unk> Ron.

Thank you Glen and thanks to everyone <unk>, joining our first quarter update call also joining me on the call. This morning, because it talks about a young our CFO.

I would like to start with the F. D. A five 10-K clearance of non oxcart extra system.

The key highlights since our last quarterly update.

It's been the FDA clearance for our single source system.

Which we now refer to by its cleared name the non op car to X Ray system.

This five 10-K clearance for present, a significant milestone for our company. It is the result of nine years of R&D and Theyre very meaningful lift for wood in extra technology.

We believe that this clearance supports a similar regulatory pathway for the multi source system disk.

This clearance is an important stepping stone towards our designated commercial multi source system the non Oaks arc.

But leverages, our unique Mems cheap low voltage nano scale called Caso X Ray source technology.

It is smaller and cheaper to manufacture the legacy what's filament technology, that's required special cooling and rotating mechanics, and we believe it can replace analog X Ray technology that has been used for over 120 years.

As we demonstrated live Doris day, ne than non oak sock can produce high resolution clinical quality imaging in both two D and three day across a range of for imaging procedure.

We believe the result is a simpler more scope more cost effective machine.

With a smaller foot print.

Moving now to the supply chain.

And when a fiction ramp up for uptick.

So our supply our supply chain and the manufacturing ramp up.

We continue to make important progress building, our global supply chain, including scaling up our semiconductor fabrication plant in South Korea.

The fabrics currently in construction and will be viewed mix to the SK hynix semiconductor cluster in South Korea, the world's largest semiconductor center.

This upside is 12000 square meters, including a 1200 square meters main screen room. This overall project cost is estimated at $45 million.

And the plant is expected to be operational mid next year.

Meantime, we are currently operating out of a temporary manufacturing facility in South Korea for Mems production, which will start contributing to our end to end cheap production process. During the second half of this year.

Technology transfer from Japan to our South Korean subsidiary is progressing as planned.

At this point I would like to provide an update on the development of our multi source non oaks arc, which will be our Oxford a commercial device.

Recently, we've experienced delays, which were compounded by the COVID-19 pandemic. We the first one fixture of our second generation hydropower ceramics tube. We are currently working with two alternative tube suppliers.

For the multi source system.

As a result.

While we do not expect to meet our previously announced milestone of shipment of 1000 units multi source non ops by the first quarter of 'twenty 'twenty. Two we believe that we will be able to gain ground during the year to reach the shipment milestone of 1000 non op units during 2020 to impose.

More you for the multi source non Oaks arc is cleared by the FDA and authorized.

But I'll just similar regulatory agencies.

Nonetheless continues to expect submission or for five 10-K, premarket notification to the F D. A.

The multi source non oak Socs, and then Alex cloud during 2021.

And deployment of an initial wave or for approximately 15000, non Osaka units by the end of 'twenty 'twenty four.

Moving to the commercial update.

This point I would like to provide an update on our commercial activities recall that we have a unique business model, which we call M sauce.

Medical screening as a service, which employs a pay per scan approach. This is a key differentiator for us it avoids the significant upfront investment associated with traditional extra technology.

Making that machine more affordable for her to scare facilities of all sizes. We believe this model has been key to our early success in entering into commercial agreements.

He called that we currently have contracts in place for the deployment of 5150 non Oak Sox units with ninth service providers in 13 countries. In addition, we have collaborations with USA Rod and SK telecom for the deployment or for an additional five.

<unk> thousand 500 units in the U S South Korea and Vietnam.

And following our lifetime with Arseniy, we've been experiencing increasing interest from service providers across many countries, resulting in a growing pipeline of potential opportunities to enter into additional M source agreements.

The non ops arc is just one element or for potential value proposition. We believe that the medical imaging should migrate to a universally connected global cloud service with superior accessibility to medical data and this.

Honest is for the benefit of.

Preventive healthcare our vision is to provide the worldwide the influenza medical imaging solution income.

Looting remote services, such as image repository radiologist matching online and offline diagnostic review in our notation connectivity for medical imaging AI systems and billing and reporting.

As we move forward towards commercialization, we're continuously seeking opportunities to expand our capabilities true potential partnerships and acquisitions.

Yeah.

Moving onto team additions before turning the call over to talk to review the financials I'm turning now to our team I'm excited to say that we've made a number of significant additions to our leadership. Most recently with the addition of Mr. Stengel, Our chief business Officer.

Most share has substantial experience in global and medical business development and sales executive we also announced the additions of Jim There are C O O or field, Corin, CTO and tomorrow on corn and see them. All all of these individuals brings substantial experience to their Roes I.

I believe this is an indication that we are building out a world class team that best positioned us for long term success.

At this point I will turn the call over to talk for a review of our financials. It's hard for this.

Thank you Ron.

Now it looks reported a GAAP net loss applicable to ordinary share for the first quarter of 2021 of $12 $7 million compared to a net loss of $7.4 million for the first quarter of 2020.

Non-GAAP net loss applicable to ordinary shares for the first quarter of 2021 was $7 1 million compared to a non-GAAP net loss of $2 $6 million for the same period in 2020.

A reconciliation between GAAP net loss and non-GAAP net loss for the free spirit in March for the first 2021 and.

'twenty 'twenty two is provided in the financial resolve the top part of the press release, we issued this morning.

The difference between GAAP and non-GAAP net loss per ordinary shares is mainly due to share based compensation and expenses associated with the secondary offering completed during the quarter.

Non-GAAP research and development expenses for the first quarter of 2021 were $2 1 million as compared to 699000.

For the comparable period in 2020, reflecting the increased development activities of our non Existant no.

Non-GAAP marketing expenses for the first quarter of 'twenty, 'twenty, one where at 1.2 million as compared to 651 thousands for the comparable periods in 2020, as we continue building our brand awareness and product marketing capabilities.

Non-GAAP general and administrate administrative expenses for the first quarter of 2021 with $3 7 million as compared to $1.2 million for the comparable periods in 2020.

We are ramping up our investment in expanding our magnet management team and the overall organizational infrastructure in additional costs related to the company's secondary equity offering.

Net cash used in operating activities during the first quarter of 2021 was for $4 million as compared to two for 3 million dollar and for the comparable period in 2020.

As of March 31st 2021, we had approximately 47.6 million shares outstanding.

We ended the first quarter of 'twenty, 'twenty, one with cash and cash equivalents of approximately $219 3 million.

Clothing, tilting point $6 million.

Cash and transit, which will pay soon after the quarter ended and we have no debt.

For the quarter cash uses included funding of our operating activities and investing $5 $7 million in purchasing for property and equipment.

[noise] nanos cash position increased versus the year end 2020 is our financing activities generated $15 9 million.

Including $2.2 million from option and warrant exercises and $13 6 million daus, we filled by a trustee following share option exercises.

We believe that our current cash is sufficient to fully execute on our plan of manufacturing shipping and installing 50000 of non Oaks our Q&A.

Which while targeting by the end of 2020 full while continuing to expand our delivery capabilities and investing in our clinical and product roadmap.

And with that we'd like to open the call for questions. Operator, Please start the Q&A session.

Yeah.

Thank you.

We will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad and a confirmation tone will indicate that your line is in the queue.

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For anyone for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.

Our first question is from Carl Mixon Cantor Fitzgerald. Please proceed.

Thanks, Hi, guys. Congrats on the approval of course.

So just was wondering if you could provide more detail on why the third party tube manufacturer experience, but the delay is just wondering if that's consistent systemic kind of issue.

It just sounded like a you know.

For background I guess on the last call you mentioned two tube suppliers in Korea, but stated that you wanted to bring that in house. Eventually so just wanted to understand if there's an update there.

And all of a sudden I was wondering if the delay is indicative of any issues with the ability of the two components to withstand the temperature between cathode data.

Thank you.

Okay. Let me take the thank you. Thanks for the question I would I would go back again, just for the context in terms of our supply chain. So our you own. It says based on Oh. They are to remain I would say are critical components. One is the chip. The other one is accused of being closed.

With the chip and the other one is all the system I believe that in terms of the system. What we reported before is that a given didn't mutations of traveling during COVID-19, we are mitigate our risk and we are successfully opened up a manufacturing plant in <unk>.

A subcontractor in Israel for the system integration and they believe we also issued a press release on that.

So that's a that's not change in terms of the treatment effect change what we've also I believe released it that we do have a long term investment in a beautiful facility in South Korea, and we are now migrating to technology from Japan to Korea to deliver that by the second half of this city or we would have.

If sufficient ability we believe to supply the cheap component in terms of the tubes are we are working currently with three suppliers actually where the supplier in Korea that for Zara, leading supplier in the simply had a issues are related to the.

Find that assembly and testing.

Hum.

They're still working on it and when we saw that this is delayed we just opened up two other suppliers are one of which already are in a good position to supply those tubes and the second one is expecting to show some results later on.

And this year and we also believe that even the first supplier that our experienced some delays will come around so what we what we're doing we're mitigating the risk of Oh, you know the delays by opening two additional suppliers and also.

Making sure that we have a sufficient I would say sufficient access to our suppliers out there not only in Korea. So we open up another one in Italy. So that's really what we did I believe that due to COVID-19, also traveling and making sure.

Everything is okay. It's not easy so overall, that's why we felt that it would be prudent from the company's point of view to to plan and to report that our we're not going to ship those 1000 units on the first quarter as previously announced.

That was perfect. Thanks, a lot Ron for that and positive obviously about the 15000 place from gold remains in place, but could you just talk about your level of confidence that you'll be able to hit that because obviously, it's a pretty steep ramp in 'twenty two and beyond.

And then kind of related to that is there any concern or risk about the on the X Ray car T manufacturing as well according to the original plans.

I'm sorry can you repeat the second one sorry, I got the first one but what was the second one and the risk.

And you risk could be cards being manufactured because we talked about tubes and chips, but just wondering what the cars themselves.

Yeah, Yeah, Yeah. So I think let me answer the first one first I mean, the good news is that we have and I think unfairly demand I mean, we have Oh videos. We reported 5150 units that are spoken for in over 13 countries are based on the prototype that our customers have seen we also have.

Collaboration agreements with U S C rather than to SK telecom for additional 5500 units and we have a very very healthy pipeline. Following the arsenic show. So I think on the demand side I don't see any reason why we couldn't meet our goal of a first wave of 15000 units on the supply chain.

I think that the focus right now will be in two areas. One is to really complete the scaling up of non fiction and are getting our units are on its way to customers and that's something that we do believe has a very little risk in terms of validity.

Because we have the prototypes and we're just now getting things in line in terms of of Oh for motor fixed chink in the assembly and we do not see any reason that we cannot meet our numbers, even with our facility in Israel and as we reported before we expect to Oh open up.

The facility in Taiwan with folks going as soon as Oh, the World will open a little bit more no. All of that are the big caveat. We have industrially I think I believe part of for the reasons for our delays is really that Oh, while we feel that the COVID-19 in some countries as especially to use that as a kind of sticky.

Carol if you in other countries, it's a much more difficult specifically in Korea.

Hum there've been a lot of our restrictions and that's something that we should pay attention to because it's a it could delay somewhat but not a fundamentally I think so on the on the supply side, we don't see any long term risk. We're just experiencing go what are I believe.

For many other companies are experiencing which is really the COVID-19.

Issues as well as you know Oh, what do you call a normal assembly issues that are or going to be taken care off.

All right understood. Thanks for that and just one last question for me in the new expectation for the at least 1000 placements in 2022, I guess when do you expect to receive FDA clearance and CE Mark approval, because I know you want to submit those this year yeah. Thanks, Yeah actually actually that's actually the second the second part of your previous call.

And the second one that we need to.

To make sure that is happening in order to meet all.

The demand is really to get the clearances not only for the USDA for the U S market, but in all those countries that were signed contract with and our first a step toward that was clearly the clearance of the non Oaks cart, which we got earlier this year and the next milestone will.

B to submit the multi source system the commercial system and we believe we will do that with the F. D. A still within this year and in parallel or shortly after we would also submitted in other countries and that's a precondition obviously to start and operate the business in all those countries, where we got where we got.

A contract signed with we do believe that Oh, when do we deploy in Moss in 'twenty 'twenty two we should already have clearances in multiple countries and that's what we're planning on.

Great Alright, Thanks again guys.

Okay.

Thank you.

Thank you. Our next question is from Ravi Misra with Bahrenburg capital markets. Please proceed.

Hi, good morning, good afternoon guys.

So just one on the tubing and kind of how it applies to the multi store system.

Can you just kind of remind us regarding your supplier contracts with the multi source is that based on a ceramic tube or you know or is the glass two possible number one from a contract perspective number two from an engineering perspective.

You know say you have a more unanticipated delays around putting in the ceramic tube. It is is this something you can submit to the F D. A.

At kind of the K P. P range, you've discussed in the past up to 120 from a glass tube and then third maybe.

Uh huh.

Just on the multi source submission what is the cadence that we're looking at when it comes to the filing that will be submitted for FDA approval. Thank you.

Yeah, Okay. Thank you Ravi and so I think it's a very good question and the answer is both for possible I mean currently our most tubes in the world based on glass. So there are no limitations and glass tube to.

To reach K V P nor are to meet any submission to the FDA a wheel working in parallel on both ceramic and our lost hills as I've mentioned in previous calls the ceramic cubes is mainly due to our use of non fiction and we do have a confidence that in both technologies.

Ceramic and and glass one can achieve that the the required schools, which is in our case are up to 120 K V uncertain a N a and that's something that we feel very confident that we can do and we demonstrated a dart at least so far with the glass tube and though we are in for.

Cost of completing the ceramic tube for a stabilization that's call. It as we speak so I don't see any real concern. There are both of them are totally Oh do kits in order to submit to the FDA and that's something that Oh, you know that.

We'll take it to the finish line. We it's good that we have to alternative and three suppliers are and we believe that that will not be an issue from data from doctor area.

In terms of in terms of Oh, what we are planning to submit that as we mentioned before we're planning to submit a a submission that is either 100 to 120 K fee. That's all related to the procedures that we will include in the submission and that's something that we're reviewing right now.

I want to Oh, I assure you that the limitation would not be from technology point of view, but rather from procedures point of view, we would decide well now you know which procedures, we want to submit with the us FDA or any other regulatory submission and we'll take it from there but from a technology point of view there is absolutely no limitation to.

To go the full range.

Great and then just maybe on the the manufacturing just just let's just I just I'm trying to kind of quantify the risk around you know your margin profile.

If this thing gets to market as the glass tube and you've said in the past kind of 10 to 12000 kind of manufacturing cost what kind of kind of a step up or or or Delta. You know what we see here between a system that had had net glass and ER versus there is something that we should be.

Contemplating there in a margin kind of thank you.

Well I don't think so I think cockpit list for our suppliers with the glass tube coded Oh $200 in a mass production. That's for the initial quote and we believe it's reasonable it may be a little bit more than the ceramic tool, but remember we have only five for tubes and assistance. So overall I think the other component.

Your power supply detect or mechanics for much more in parks for in terms of our music is a $10000. It goes over time than the students themselves. So the answer it's not going to have a big impact the impact that Oh, we are we're mitigating it's really scalability and how quickly.

We make a big quantities.

And we now are feared that the Boston to ceramic into Clos are ways to make a lot. It's one bit and that's something that we felt very comfortable with our with our suppliers glass suppliers actually showed us.

Okay.

Thank you.

Next question is from Jeffrey Cohen with Ladenburg Thalmann. Please proceed.

Oh, Hi, Brandon It's Scott how are you.

Very good things.

So I'm wondering if you could expand upon your regulatory strategy for she and somebody or their territory.

Do you plan to a wait and see.

True D.

The FDA has cleared the.

The multi shore system and then pursue.

She mark and other March with the other agencies or are you planning on taking the shingles schorsch into other regulatory approvals.

Well.

Okay, Let me try and if so does the so the first the first pointed that we're not expecting currently to take the single source to be cleared in any other countries other than the U S. So that's for the first thing. The second thing is alongside the submission of the multi source in the U S to the F D. A.

Oh shortly after you actually go into vision submitting <unk> to other regulatory authorities.

In terms of the sea Oh, we also need to make sure that the companies are compatible with a certain ISIL.

A standard in order to be able to submit to the C and that's something we're working on our overall are the reason why were waiting until the submission, but not the clearance of the multi source to the F. D. A simply because a lot of the testing and a lot of the laboratory testing that we are conducting for the F. D. A R. A very.

Similar to what the other countries are requiring a when submission there. So that's the only reason we are doing it a bit after the submission of the multi source to the F. D. A.

Okay got it that's helpful and can you talk about software developments during the first quarter. It seems like most discussion has been around the hardware and the regulatory side was there any significant milestones on the software side this quarter.

No no not everything goes as planned I mean, we have a we have Oh God I mean, our software had a true component one component really is the operating system for the for the machine itself and that's fully functional if you could also get the impression I believe from the demonstration.

Our Sunday, So does say, let's go to the operating system for the second component has to do with what we called the reconstruction or how we take multiple images from different angles and make sense out of them, whereas the algorithm and mesh technology, which is a software that we developed in house.

And does something that we are we have version, but we're continuing to obviously to improve it and the third one is really the cloud and the uploading of the cloud management and that's something that we are in the in the cloud we have the personal cloud interconnect for cloud and that's all are in progress as planned we do believe that.

A long son sides with launching the commercial our solution all of them to come to a place where its mature and stable and are ready for scalability.

Wonderful and then lastly for me you mentioned opening as showed in Italy can you just.

For my Edification for that.

Activities, you're going to be going on there.

Yeah actually we do have a supplier in Italy, which is the leading supplier for our tubes that are we assign a mitigation plan are to provide us with a tube that including our chips and that so we did a very very quick this quarter actually with either very quick education for both sides.

And we sent a it's supposed to go for certain people from Israel to Italy. So our engineers are spent time, there and so far so good though we have a very good confidence that the suppliers are able and capable to a supply tubes are always our chips and.

And we're doing it for Oh really for redundancy and AR in order to make sure that a we will have tubes are ready for our big vision to deploy many units and dots are happening as we speak. So that's the reason we did that and again is.

You know Oh, we have two suppliers in Korea.

But Korea is also going through some speeds from through some COVID-19 are the mutation. So it's sometimes hard to predict when you know things would happen. So Oh, we took if a mitigation plan. We opened another supplier and do you brought up to speed very quickly so now.

We have three suppliers.

And the Italian one is very very much capability to give us thoughts for news.

Okay Super that's helpful. Thanks for taking the questions.

Youre welcome.

Yeah.

Thank you.

Our next question is from Suraj Kalia with Oppenheimer. Please proceed.

Hey, Ron it's how can you hear me all right.

Yes, yes.

Perfect. So.

<unk> run a lot has been discussed and let me see if I can hone in on a few specifics.

You mentioned parallel pathing to glass and ceramic tubes for the multi source.

Hum.

The single source, what's it the glass or a ceramic to Iran that would be my first question and you know by definition.

If the cube architecture has switched.

And your T V piece that changed.

You know the the change in cube architecture would mandate a certain level of stability and lifecycle testing just kind of walk us through given the switch in suppliers.

Your line thinking about the the multi source submission, especially with your comment about per passing glass and ceramic Gibbs.

Well okay. So the first question is that the the the car T itself to non Oaks cart was using the glass cube. So that's to answer your first question and I think in terms of Oh, the tube for I would say that there's no I mean, it's the same.

P P I.

Other than a minor mechanics, maybe mechanics are that we need to adjust Oh, we can go either with ceramic or get lost so we don't see any concern there in terms of the you know all day electrical system or the the housing system. The the drivers the digital driving it's always the same.

Exact same.

Ah you're absolutely right that the supplier that is coming in line needs to meet the qualification Oh for medical supplier and that's why we're very happy to say that even the new supply. That's for both for me today is very famous for tubes for a medical equipment.

Equipment and they need to meet our Ruggedized, a you know a test and acceleration test and there is a whole list of V. N V. What you called a a validation and verification that we need to go true before we qualified this too and that's something that is ongoing as we speak and.

Should not be a concern toward the submission of Oh, the application a two day F D. A I would say though that.

Given the basic fact that our first supplier in Korea.

Failed to deliver on time the tubes are by definition, the multi source a submission.

It's been dragged a bit longer it's still well within our guidance. So we're going to submitted within the sphere, but a it will require us to to work and partner with multiple suppliers and do those test and a few sites, but I don't think it's a major from risk point of view I don't see that.

There's a risk we don't believe it's Oh, there's a single risk other than the fact that the submission could've been done Oh earlier than later this year and that's something that we are fixing.

So run it Ron just to be clear now that youll are switching suppliers for the ceramic cubes per.

Prior to submission for your fight 10-K clearance would I be right in saying that you. All it is not possible to finish stability and lifecycle testing for this new true every supplier has to undergo qualification right.

But you would not have conducted the requisite amount of stability testing is that the right way to think about it yeah. Yeah, I think it's absolutely right for us. So what do you, what's you're doing you're actually taking the final tubes for Dominion system, and rather just system true stability test and all kinds of testing of Cuba.

Simply in the electrical testing and others and that's something that normally takes between I don't know for six weeks and that's something that you need to do anyways to what we're thinking and what we're doing is doing that in parallel with all suppliers. So we have redundancy again.

And again, we're planning to mitigate are all possible risk here, but it's true that when you are submitting.

Do your system to the FDA you need the system to be tested and and you need to go through the for testing of assistance that includes just said tubes.

No. So that's what you need to do and we are totally prepared to do it and we do it within time before the submission. So it's not it's not a big change in any way they need to do it.

Ron I know I'm getting in the weeds here. So forgive me just trying to understand no New York.

For a single source cube. It has a focused spot a 0.3 millimeter compared to the the predicate in the reference devices, which have like point 62 millimeters. So did you know given the difference in difficult spot right. They will be a difference for the required.

Exposure times, so I guess, maybe you could just kind of talk about the multi source system. How should we think about it you have five cubes will each to be capable only of 40 K V. P.

We're going to be any limitations in terms of exposure times and focal spots.

Yeah, what I think our I think our first of all our system multi source system is designed to to give a way more than a 49 cubic feet simply because we're looking at a full body scan in football just kind of requires sometimes 100 to true V P or even more so each one of the tools is.

For very little for moving from all the way from 20, K V or the way to 120 gave you for your thoughts or that's our Howard planet. So when you're looking at the soft tissue you can reduce the cave to a penetration forward that if we look at soft tissue and weighted what are you looking to a balloon you can increase the penetration power.

To 90, K V or whatever you need in that specific procedure. So that the flexibility that we have in our unique non OXXO extra tubes that is a.

Very unique to us. So that's one one point. So every one of our children's capable of moving towards a range of COVID-19 P. A from a very low which is really soft tissue the way to very high which is the heart tissue. Okay.

Each one of them is the operating separately, but in sequence, which means we can control each one of those fires tubes.

And as you recall they are located in different angles to the target and we cannot actually creates what we call a recipe and that's really a sequence of exposures.

It will be done specifically to Oh procedure for instance, if we're doing a tomo synthesis Oh, if we're trying to do it almost synthesis imaging for I don't for a chest there would be one recipe or if we're doing something like a we demonstrated in Dallas for ne which can be a hand.

The reason it would be another secret. So together that's something that our system is fully capable of doing now in terms of for her support Uh huh.

Youre right in most cases, you don't need a 0.3 millimeter for cause spot I think that the mutation comes from thermal dynamic and not from the because are you can you can go with focused sports is no. It's you want the at the end of the day. It's the question of thermodynamic and we have a special design that we believe is optimize.

I think our what we need in order to go through procedures that are most popular and a full body scanner, which are not necessarily going to be the same as the 0.3 millimeter focused part of the glass cube for the 49 at T V.

Got it final question, Ron and I'll hop back in queue.

I remember it. Please correct me if I'm wrong, you all had talked about building inventory for the multi source.

In anticipation of fight 10-K, there was some discussion and forgive me I have to go back and check my notes about about building some inventory could you give us a status update on that and have your partners.

That you all have signed these contracts reached out and asked for renegotiations based on any of these delays. Thank you for taking my questions.

Yeah, well I think I think Oh I think for the first question I mean, we do have the assembly line mutual and we are Oh, we already are we're ready to populate those units and we are we have no problem with scale. There. So we do have system's ready in our factory.

In Israel, the waiting for the fund that integration of the tubes, and what we called the N V.

That's something that they've not changed for my last I think last call that we had with us for it. So it's the same and we don't see any problem with scaling that and in terms of partners. I mean, we are in constant touch with each one of our partners and the idea there is to send our units as soon as we get them even prior to regulatory.

Approval just for them to get us for the training session I mean to put a partner in a in a way that they can function you need to train you need to two goes for regulatory approval. Luckily we need to go through acceptance test. So we are in a very good thought for the other partners and also new partners that are.

Trying to get in line.

And everybody's expecting the units to be shipped I think in generally speaking I think everybody expected ought to be able to start using our AR device commercially.

2022, or so and that are in that sense. We are not are really in a delay mode. What is delaying that are the are the.

Submission of our I'm sorry, the are they are the shipments over the first two units right now seems to be a delayed but the overall 'twenty 'twenty two will be a prime time of year for us and that's where our communication to our partners and they are very eager to start obviously like us and using our technology.

Thank you.

Thank you.

As a reminder, if you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is in the queue.

Our next question is from Rahul Rocky with lifestyle capital. Please proceed.

Hey can you guys hear me.

Yes.

Awesome alright, thanks for taking the questions. So I apologize if I missed this in the prepared remarks, but can you remind me the regulatory requirements for the new Yorks cloud, they're going to be a separate five 10-K submission required.

Yeah.

Yeah, I mean wouldn't know before going because before going to life, we're going to submit the cloud and the AR and the arc. So two separate systems that needs to go through regulatory clearance.

Got it and it's the timing of that clearance for that application tied to that of the arc or do you expect it to to come separately.

Yeah, I mean, its total comes together to our primetime when do we start to operating the business. So we believe that we're going to submit our everything in time, but didnt do fear.

And before we go live everything will be in place. So that we can not only in the U S. But also in other countries start to conduct business.

Understood and then.

Following five 10-K clearance Oh, what does timing look like for some of those ex U S regulatory approvals I know you touched on it a bit but maybe you can help me better understand which regions outside of the U S. Do you view as low hanging fruit.

Which regions do you expect to have a bit lengthier of a regulatory process just in terms of thinking about some of this earlier revenue.

Yeah, well I think I think first of all a reminder, again we are we have agreements in 13 countries. Today I think it's very obviously the U S market is a very important market for us in there for the first submission that will see Oh. We're also looking at Korea, South Korea, we are a strategic partner there is a very important market.

Whereas Israel, which is a big door Vic yards for us other than that the CE Mark.

Mark will give us access to a at least right now two agreements that we have in Italy, and Spain, Spain, Portugal, actually and a I would say that another index.

The indication that Oh, we're actually studying now is submitting in countries, where we believe that the clearance would be short and I think we also have some additional countries that will come in that category, but overall I think you'll see a market as a major.

The market for our South Korea, Israel and all the other countries that we are signed either within the T or other than to see Mark and all of that will start a rapidly to submit once we submit it to multi source.

Two the F D. A later this year.

Got it okay. So I guess, just kind of pushing on that a little bit more of the first 1000 units that you're expecting to deploy do you think you know the majority of those will be deployed in the U S as well as Israel or do you think you know more of those systems will be ex U S or are in the EU.

Yeah at this point at this point they are I don't want to provide any and specific numbers, but I think I gave you kind of where we believe the markets are tough we'll submit the first would be in and.

And we don't know exactly which units are growing quicker because it's all also depending on the time to go for the regulatory for US. So for instance, if we'll get to regret it there for us in the U S. But non other countries by definition for 1000 units will go to the U S. First you for where we will get the clearance in the U S. In the parlor in Israel first.

That will be the first are the first countries will be operating at a the good news is that we would have no problem with demand and that's very good news for a company like non Oaks, because we can really we're sitting in now in a very very big backlog before there's a dot are subject to acceptance tests non regulatory for us and that's why I think I cannot give you an accurate.

And Sir at this point for that before I get the clearance for the different countries.

Understood no that's.

That's still helpful. I appreciate it.

Thank you for the questions guys.

Yeah.

Thank you ladies and gentlemen, we have reached the end of the question and answer session and I would like to turn the call back to Ron Paul for closing remarks.

Thank you very much so I think that concludes our call for this morning again, we're very excited to receive FDA clearance.

Oh for a single source extra car system, we delivered on our key milestone. This year. We believe this clearance supports a similar regulatory pathway to ultimately gain clearance for a multi source device. We're working on submission of our five 10-K.

Oh for a commercially designated multi source Nox Sox devices here. Thank you again and have a good day.

Yeah.

Yeah.

Okay.

Yeah.

Yeah.

Okay.