NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS

The Company has experienced net losses and negative cash flows from operations since its inception. The Company anticipates such losses will continue until its product candidates reach commercial profitability.

Since incorporation through June 30, 2026, the Company has an accumulated deficit of $519 and its activities have been funded mainly by the sale of its ordinary shares and positive cash flow from the Teleradiology business segment. The Company expects to continue to incur significant costs related to its ongoing operations. Management expects that the Company’s cash and cash equivalents, and deposits as of June 30, 2026 are not sufficient to support the Company’s operations under its current operating plans for at least one year from the issuance date of these financial statements. These factors raise substantial doubt as to the Company’s ability to continue as a going concern.

Management is continuing in the process of fund raising in the private equity and capital markets as the Company will need to finance future activities. However, there is no assurance that the Company will be able to obtain such funding. In addition, the Company is exploring the use of mitigating actions such as postponing expenses that are not based on firm commitments. These consolidated financial statements do not include any adjustments that may be necessary should the Company be unable to continue as a going concern.

U.S., Israel and global economies and markets are experiencing volatility and disruption following the escalation of geopolitical tensions. As a result of the military conflict between Russia and Ukraine, sanctions and penalties have been levied by the United States, European Union and other countries against Russia. Russian military actions and the resulting sanctions could have a negative impact on supply chains, the Company’s MSaaS agreements relating to Russia and Belarus or the region and adversely affect the global economy and financial markets.

Additionally, the Company monitors changes in tariffs, including recently imposed tariffs by the U.S. government and the effects of retaliatory tariffs and countermeasures from affected countries.

Although the length and impact of the ongoing military conflicts and tariffs are highly unpredictable, they could lead to market disruptions, including significant volatility in commodity prices, credit and capital markets. Any of the abovementioned factors could affect the Company’s business, prospects, financial condition, and operating results. The extent and duration of the military actions, sanctions and resulting market disruptions are impossible to predict, but could be substantial.

As of June 2026, the impact of this war on the Company’s results of operations and financial condition was immaterial, but such impact may increase, which could be material, as a result of the continuation, escalation, or expansion of such war.

In October 2023, Israel was attacked by Hamas, a terrorist organization and entered a state of war. Since the commencement of these events, there have been additional active hostilities, including with Hezbollah in Lebanon, the Houthi movement which controls parts of Yemen, and with Iran. In October 2025, the Israeli-Hamas war concluded pursuant to a ceasefire that has mostly been upheld by the sides since that time.

On February 28, 2026, Israel and the United States initiated a preemptive attack on Iran to which Iran responded with ballistic missile and drone attacks. On April 8, 2026 a ceasefire between the parties was declared. To date, there has been no material adverse impact on the Company’s operations and financial conditions due to this war. The Company continues to monitor political and military developments closely and examine the consequences for its operations and assets.

The Company’s headquarters, its R&D operations, and certain manufacturing and assembly facilities are located in Israel.

Currently, such activities in Israel remain largely unaffected. As of June 30, 2026, the impact of this war on the Company’s results of operations and financial condition was immaterial.  

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

The unaudited consolidated financial statements include the accounts of the Company and its subsidiaries, prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. Accordingly, they do not contain all information and notes required by U.S. GAAP for annual financial statements. In the opinion of management, these unaudited condensed consolidated financial statements reflect all adjustments, which include normal recurring adjustments, necessary for a fair statement of the Company’s condensed consolidated financial position as of June 30, 2026, the condensed consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2026 and 2025 and the condensed consolidated statements of cash flows and the condensed consolidated statements of equity for the six months ended June 30, 2026 and 2025. The significant accounting policies adopted and used in the preparation of the financial statements are consistent with those of the previous financial year, except income taxes. The preparation of financial statements in conformity with GAAP requires the Company to make certain estimates and assumptions for the reporting periods covered by the financial statements. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues, and expenses. Actual amounts could differ from these estimates.

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 20-F for the fiscal year ended December 31, 2025, filed with the SEC on April 30, 2026 (the “Annual Report”). For further information, reference is made to the consolidated financial statements and footnotes thereto included in the Annual Report.

NOTE 3 – INTANGIBLE ASSETS

During the second quarter of 2026, in connection with a significant decline in the Company’s share price, the Company identified indicators of impairment related to its AI Solutions business unit (excluding Nanox Health IT Inc.) and its Nanox ARC business unit, which are at the lowest level of determining asset groups that generate cash flows separate from other asset groups. The indicators of impairment for each asset group were reduced forecasted revenues and operating results. As a result, the Company performed undiscounted cash flow analyses at each asset group level pursuant to ASC 360 to determine if the cash flows expected to be generated by each respective reporting unit over the estimated remaining useful life of the respective business unit’s primary asset were sufficient to recover the carrying value of each asset group.

Based on these analyses, the Company determined the undiscounted cash flows for the ARC asset group was sufficient to recover its carrying value whereas the undiscounted cash flows for the AI Solutions asset group was not sufficient to recover the carrying value of its long-lived assets.

As a result, the Company determined the fair value of the AI Solutions asset group. To estimate the fair value of the asset group, the Company utilized Level 3 measures that represent unobservable inputs, under the income approach, which is based on a discounted cash flow (DCF) analysis using market participants’ assumptions and calculates the fair value by estimating the after-tax cash flows attributable to the asset group and then discounting the after-tax cash flows to present value using a risk-adjusted discount rate.

Assumptions used in the DCF require significant judgment, including judgment about appropriate discount rates, growth rates, and the amount and timing of expected future cash flows. Key assumptions used to determine the estimated fair value include: (a) internal cash flows forecasts for 5.5 years following the assessment date, including expected revenue growth, costs to sales and operating expenses and (b) a discount rate of 25.3% (after tax) which reflects the weighted-average cost of capital adjusted for the relevant risk associated with the AI solutions asset group operations and the uncertainty inherent in the Company’s internally developed forecasts. The forecasted cash flows for the AI Solutions asset group were based on the Company’s most recent strategic plan and for periods beyond the strategic plan, the Company’s estimates were based on assumed growth rates expected as of the measurement date. The Company believes its assumptions were consistent with the plans and estimates that a market participant would use to manage its business. As a result of this analysis, the Company determined the fair value of the asset group was below its carrying value.

To record the asset group to fair value, the Company recorded an impairment charge of $40,695 thousand during the second quarter of 2026 recorded to cost of revenues – Impairment of intangible assets reducing the fair value of this asset group to $1,865 thousand. The impairment charge was allocated to the long-lived assets on a pro-rata basis as follows: $13,595 thousand to developed technology and $27,100 thousand to Image big data. Actual operating results and the related cash flows of the asset group could differ from the estimated operating results and related cash flows. In the event the asset group does not meet its forecasted projections, additional impairment charges could be recorded in the future. The Company also re-evaluated the remaining useful lives of the intangible assets and concluded no changes were necessary.

NOTE 4 – COMMITMENTS AND CONTINGENCIES:

From time to time, the Company may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm the Company’s business.

On January 14, 2026, an amended claim was filed in the Circuit Court of the 1st Judicial Circuit in and for Okaloosa County, Florida, against several defendants, including USARAD, and a USARAD radiologist, alleging failure to diagnose an aneurysm and negligent communication to an ordering physician.

Based on the progress achieved and the insurance Company’s written confirmation, the parties reached a settlement agreement. Subject to the final execution of such agreement, the company will pay an amount of $650 thousand, which will be reimbursed by the insurance company. Accordingly, on June 30, 2026, the Company recorded a provision of $650 thousand and recognized an insurance recovery asset for the same amount. The provision and the recovery asset are recorded in Other current liabilities and Other current assets respectively.

On May 1, 2023, the Company received a notice alleging several causes of action, including breach of a consulting agreement between the claimant and Nanox Imaging PLC (the “Gibraltar Entity”) that was entered into in 2015. The claimant’s demand from the Company is for the payment of approximately$1.26 million for unpaid consulting fees from the Gibraltar Entity and approximately $25 million connection with his claimed entitlement to securities in the Gibraltar Entity. On or about December 21, 2023, a claim was filed in Israel against the Company, the Gibraltar Entity and the late Mr. Ran Poliakine, based on allegations previously dismissed by a U.S. court in the State of California. The Company reiterates its strong denial of the plaintiff’s baseless claims and emphasizes that the Company was never a party to the consulting agreement with the plaintiff. In addition, the Company is not responsible for any potential liabilities of the Gibraltar Entity, which is a separate legal entity. On April 5, 2024, the Gibraltar Entity filed an amended claim and a request for an anti-suit injunction (“ASI”) in Gibraltar against the plaintiff. On November 18, 2024, the Gibraltar court granted the Gibraltar Entity’s request and issued an ASI, preventing the plaintiff from continuing to pursue the present claim against the Gibraltar Entity in Israel. As a result, the dispute between the plaintiff and the Gibraltar Entity will be adjudicated before the Gibraltar court, in accordance with Gibraltar law.

In January 2025, the plaintiff filed a new claim against the Company with the Gibraltar court, which was dismissed due to procedural defects. The plaintiff filed an additional claim against the Company, which was served on the Company on December 25, 2025. The Company decided not to contest the jurisdiction of the Gibraltar court and consent to the Gibraltar jurisdiction, and will therefore submit a statement of defense in the Gibraltar court. In light of the above, on February 1, 2026, the plaintiff filed with the court in Israel a motion seeking to dismiss the claim submitted against the Company in Israel and thereby close the proceedings in Israel. The Company has submitted its response to the motion, together with a request for an award of costs, on April 26, 2026, in which it argued that there was no basis to file the claim against it in the first place, as its adjudication is contingent upon a prior determination of the date of termination of the engagement between the plaintiff and the Gibraltar Entity, before the court in Gibraltar, and only thereafter, to the extent it is determined that a breach occurred (which is denied), could the claims against the Company, which are wholly denied, be addressed.

On June 12, 2026, a class action complaint was filed in the United States District Court of New Jersey against the Company and certain of its officers, captioned Steele v. Nano-X Imaging Ltd. et al, Case No. 1:26-cv-07062. The complaint alleges violations of federal securities laws on behalf of all persons and entities that purchased or otherwise acquired the Company’s publicly traded securities between March 31, 2025 and April 17, 2026 in connection with certain disclosures concerning the Company’s business, operations, and prospects, including with respect to the Company’s manufacturing facility in Korea. The plaintiff is seeking money damages. The complaint alleges that defendants violated the federal securities laws in connection with certain disclosures concerning the Company’s business, operations, and prospects. Due to the early stage of the case, it is not possible to assess the probability of a loss or reasonably estimate the ultimate costs and damages. Consequently, no accrual has been made in the financial statements regarding this matter.

IIA grants

Under the Innovation Law (formerly known as the Encouragement of Industrial Research and Development Law, 5744-1984) as currently in effect, Nanox AI is required to pay royalties to the Israeli Innovation Authority (the “IIA”) of 3% on sales of products and services based on technology and know-how developed using such IIA research and development grants, until 100% (which may be increased under certain circumstances) of the grant, linked to the U.S. dollar and bearing interest at the SOFR rate, is repaid. As of June 30, 2026, Nanox AI had paid royalties to the IIA in the amount of approximately $90 and had a remaining contingent liability to the IIA of approximately $4.2 million.

NOTE 5 – DEFERRED REVENUE

NOTE 6 – SHAREHOLDERS’ EQUITY:

Share capital

As of June 30, 2026, there were 1,473,154 ordinary shares reserved for the equity incentive plan. The Company’s board of directors also approved the Plan for the purpose of selecting the capital gains tax track, under Section 102 of the Israeli Income Tax Ordinance, for options granted to the Company’s Israeli employees.

In May 2025, the Company issued 116,226 ordinary shares in connection with the asset acquisition of MDWEB LLC, originally completed in 2021. The shares were issued following the achievement of certain milestones in 2023, at which time the corresponding earn-out contingent liability was reclassified to equity.

On December 11, 2025, the Company received a letter from a shareholder detailing certain purported concerns and allegations relating to representations made during negotiations regarding a certain asset transaction. On April 19, 2026, the Company entered into a settlement agreement with that shareholder, pursuant to which the alleging shareholder, on its own behalf and on behalf of its shareholders, fully released the Company from any and all claims, including those mentioned in the shareholder’s letter, claims relating to the asset transaction, and claims relating to the Company’s relationship with the shareholder and its affiliates and shareholders. In return for the release, and without admission of any liability, the Company issued the shareholder 450,000 ordinary shares on May 1, 2026. As of December 31,2025, the Company has accrued an amount of $1,260 thousand in connection with the above- mentioned complaint. In the six months ended June 30, 2026, the Company recorded income of $482 thousand, due to the change in fair value of the accrual, which was included in other expenses (income), net in the consolidated statements of operations and comprehensive loss.

Share-based compensation

On February 5, 2026, the Company granted certain employees, service providers and officers a total of 1,026,235 restricted share units (“RSUs”) under two different vesting schedules:

940,706 RSUs vest as follows: 50% on the first anniversary and 50% on the second anniversary from the “Vesting Start Date” as defined in the grant agreement. Included in the awards are 250,002 RSUs that were granted to certain officers of the Company.

85,529 RSUs vest as follows: 25% on the first anniversary from the “Vesting Start Date” as defined in the grant agreement and remainder vest ratably over the following 12 quarters.

On June 23, 2026, the Company granted certain employees a total of 46,358 RSUs that vest as follows: 25% on the first anniversary from the “Vesting Start Date” as defined in the grant agreement; and the remainder vest ratably over the following 12 quarters.

The fair value of the above RSUs was approximately $2,410 thousand.

NOTE 7 – SEGMENTS OF OPERATIONS

The Company’s chief operating decision maker is the Company’s Chief Executive Officer (the “CODM”), who makes resource allocation decisions and assesses performance based on financial information prepared on a consolidated basis, accompanied by disaggregated information about revenues, gross profit (loss) and operating loss by the three identified reportable segments.

The CODM uses gross profit (loss) and operating loss for each segment predominantly in the annual budget and forecasting process. The CODM considers budget-to-actual variances on a quarterly basis for all measures when making decisions about the allocation of operating and capital resources to each segment.

The Company reports segment information based on the “management” approach. The management approach designates the internal reporting used by management for making decisions and assessing performance as the source of the Company’s reportable operating segments. The Company manages its business primarily on a service basis. The Company’s reportable segments consist of the Nanox.ARC division, the radiology services division and the AI and software solutions division. Each one is managed separately to better align with the Company’s customers and distribution partners and the unique market dynamics of each segment. Operating loss for each segment includes revenues from third parties, related cost of revenues and operating expenses directly attributable to the segment. The Company does not include intercompany transfers between segments for management reporting.

Nanox health IT Inc.’s operational results are included in the AI and software solutions segment.

AI and Software Solutions - change in the fair value of earn out liability obligation.

As of June 30, 2026 and December 31, 2025, no individual customer exceeded 10% of the Company’s accounts receivables.

NOTE 8 – LOSS PER SHARE:

As of June 30, 2026, and June 30, 2025, the Company had outstanding 2,142,858 and 2,192,858 warrants, respectively. As of June 30, 2026, and June 30, 2025, the Company had 4,221,803 and 4,216,533 outstanding options awards and 1,138,332 and 59,407 outstanding unvested RSUs awards, respectively. These warrants and awards were not considered when calculating diluted loss per share since their effect is anti-dilutive.

NOTE 9 – SUBSEQUENT EVENTS:

During July 2026, the Company issued a total of 527,300 ordinary shares, utilizing an at-the-market, resulting in net proceeds of approximately $469 thousand, after deducting sales commissions and estimated offering expenses of $12 thousand paid to Cantor Fitzgerald & Co. and Mizuho Securities USA LLC, as the Sales Agents.

On August 7, 2026, the Company completed a registered direct offering in which it sold to a single institutional investor 3,700,000 of the Company’s ordinary shares and 4,300,000 pre-funded warrants to purchase up to 4,300,000 ordinary shares, along with 8,000,000 ordinary warrants to purchase up to 8,000,000 ordinary shares, at a combined purchase price of $1.00 per ordinary share and accompanying ordinary warrant (or $0.9999 per pre-funded warrant and accompanying ordinary warrant). The pre-funded warrants sold in the offering had an exercise price of $0.0001 per underlying ordinary share, were immediately exercisable, and were not to expire until exercised in full. The ordinary warrants have an exercise price of $1.15 per ordinary share, will be exercisable beginning six months following issuance and will expire five years from the closing date of the offering.  Each of the pre-funded warrants and the ordinary warrants could not be exercised to the extent that exercise would raise the beneficial ownership of the investor above 4.99% of the Company’s ordinary shares. All pre-funded warrants were subsequently exercised by the investor, in August 2026. The gross proceeds to the Company from the offering were approximately $8 million, while agent fees and other offering expenses were estimated at $650 thousand.

On August 13, 2026, the Company granted employees a total of 1,465,256 RSUs. The RSUs will vest and settle for underlying ordinary shares of the Company over a period of two (2) years from the grant date, in four (4) equal installments, such that twenty-five percent (25%) of the RSUs will vest every six (6) months following the grant date, subject to each grantee’s continued service through each applicable vesting date.

The fair value of the above RSUs was approximately $1,451 thousand.

During August 2026, the Company initiated a structural transformation of its South Korea operations, including transitioning substantially all chip manufacturing activities to qualified third-party manufacturing partners and undertaking other efficiency initiatives including reduction of approximately 67% in the headcount. The restructuring is expected to result in approximately $850 thousand of restructuring-related expenses.