Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2020 | Apr. 28, 2020 | |
Document and Entity Information [Abstract] | ||
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2020 | |
Entity Registrant Name | ZYNEX INC | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 33,192,517 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q1 | |
Entity Central Index Key | 0000846475 | |
Amendment Flag | false | |
Trading Symbol | ZYXI |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Current assets: | ||
Cash | $ 14,585 | $ 14,040 |
Accounts receivable | 6,549 | 5,833 |
Inventory, net | 3,429 | 2,378 |
Prepaid expenses and other | 1,135 | 315 |
Total current assets | 25,698 | 22,566 |
Property and equipment, net | 1,116 | 858 |
Operating lease asset | 4,980 | 3,831 |
Finance lease asset | 168 | 180 |
Deposits | 275 | 329 |
Long term deferred income taxes | 985 | 513 |
Total assets | 33,222 | 28,277 |
Current liabilities: | ||
Accounts payable and accrued expenses | 2,292 | 2,141 |
Lease liability - operating leases | 1,678 | 1,211 |
Lease liability - finance leases | 53 | 45 |
Income taxes payable | 39 | 52 |
Accrued payroll and related taxes | 1,772 | 1,748 |
Total current liabilities | 5,834 | 5,197 |
Long-term liabilities: | ||
Lease liability - operating leases | 3,954 | 3,282 |
Lease liability - finance leases | 126 | 145 |
Total liabilities | 9,914 | 8,624 |
Commitments and contingencies | ||
Stockholders' equity: | ||
Preferred stock, $0.001 par value; 10,000,000 shares authorized; no shares issued and outstanding as of March 31, 2020 and December 31, 2019 | 0 | 0 |
Common stock, $0.001 par value; 100,000,000 shares authorized; 34,348,802 issued and 33,177,582 outstanding as of March 31, 2020 and 33,862,885 issued and 32,791,665 outstanding as of December 31, 2019 | 34 | 34 |
Additional paid-in capital | 9,916 | 9,198 |
Treasury stock 1,071,220 shares, at March 31, 2020 and December 31, 2019, respectively, at cost | (3,846) | (3,846) |
Retained earnings | 17,293 | 14,356 |
Total Zynex, Inc. stockholders' equity | 23,397 | 19,742 |
Non-controlling interest | (89) | (89) |
Total stockholders' equity | 23,308 | 19,653 |
Total liabilities and stockholders' equity | $ 33,222 | $ 28,277 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Mar. 31, 2020 | Dec. 31, 2019 |
CONSOLIDATED BALANCE SHEETS | ||
Preferred Stock, Par or Stated Value Per Share | $ 0.001 | $ 0.001 |
Preferred Stock, Shares Authorized | 10,000,000 | 10,000,000 |
Preferred Stock, Shares Issued | 0 | 0 |
Preferred Stock, Shares Outstanding | 0 | 0 |
Common Stock, Par or Stated Value Per Share | $ 0.001 | $ 0.001 |
Common Stock, Shares Authorized | 100,000,000 | 100,000,000 |
Common Stock, Shares, Issued | 34,348,802 | 33,862,885 |
Common Stock, Shares, Outstanding | 33,177,582 | 32,791,665 |
Treasury Stock, Shares | 1,071,220 | 1,071,220 |
CONSOLIDATED STATEMENTS OF INCO
CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
NET REVENUE | ||
Total net revenue | $ 15,228 | $ 9,196 |
COSTS OF REVENUE AND OPERATING EXPENSES | ||
Costs of revenue - devices and supplies | 3,401 | 1,784 |
Sales and marketing | 5,209 | 2,473 |
General and administrative | 4,160 | 2,683 |
Total costs of revenue and operating expenses | 12,770 | 6,940 |
Income from operations | 2,458 | 2,256 |
Other income/ (expense) | ||
Deferred insurance reimbursement | 0 | 880 |
Interest income/ (expense) | (4) | 0 |
Other income/ (expense), net | (4) | 880 |
Income from operations before income taxes | 2,454 | 3,136 |
Income tax (benefit)/ expense | (483) | 786 |
Net income | $ 2,937 | $ 2,350 |
Net income per share: | ||
Basic | $ 0.09 | $ 0.07 |
Diluted | $ 0.09 | $ 0.07 |
Weighted average basic shares outstanding | 32,913 | 32,233 |
Weighted average diluted shares outstanding | 34,204 | 33,721 |
Devices [Member] | ||
NET REVENUE | ||
Total net revenue | $ 3,444 | $ 1,975 |
Supplies [Member] | ||
NET REVENUE | ||
Total net revenue | $ 11,784 | $ 7,221 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net income | $ 2,937 | $ 2,350 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation | 252 | 160 |
Inventory reserves | 249 | 150 |
Stock-based compensation | 497 | 140 |
Non-cash lease expense | (10) | 153 |
Provision for deferred income taxes | (473) | 786 |
Change in operating assets and liabilities: | ||
Accounts receivable | (716) | (355) |
Prepaid and other assets | (819) | (170) |
Accounts payable and other accrued liabilities | 162 | (204) |
Inventory | (1,501) | (366) |
Deposits | 54 | 0 |
Other long-term obligations | 0 | (880) |
Net cash provided by operating activities | 632 | 1,764 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchase of property and equipment | (297) | (46) |
Net cash used in investing activities | (297) | (46) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Payments on finance lease obligations | (11) | (4) |
Common stock cash dividends | 0 | (2,259) |
Purchase of treasury stock | 0 | (171) |
Proceeds from the issuance of common stock | 221 | 7 |
Net cash used in financing activities | 210 | (2,427) |
Net increase in cash and cash equivalents | 545 | (709) |
Cash and cash equivalents at beginning of period | 14,040 | 10,128 |
Cash and cash equivalents at end of period | 14,585 | 9,419 |
Supplemental disclosure of cash flow information: | ||
Cash paid for interest | (4) | 0 |
Cash paid for rent | (328) | (206) |
Supplemental disclosure of non-cash investing and financing activities: | ||
Right-of-use assets obtained in exchange for new operating lease liabilities | 1,433 | 0 |
Inventory transferred to property and equipment under lease | 187 | 112 |
Common stock dividend declared and unpaid | $ 0 | $ 2,259 |
CONSOLIDATED STATEMENTS OF STOC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) $ in Thousands | Common Stock[Member] | Additional Paid-in Capital | Treasury Stock | Retained Earnings | Non-Controlling Interest | Total |
Balance at Dec. 31, 2018 | $ 34 | $ 8,157 | $ (3,675) | $ 4,864 | $ (89) | $ 9,291 |
Balance (in shares) at Dec. 31, 2018 | 32,271,367 | |||||
Exercised and vested stock-based awards | 8 | 8 | ||||
Exercised and vested stock-based awards (in shares) | 21,832 | |||||
Stock-based compensation expense | 140 | 140 | ||||
Treasury stock | (171) | (171) | ||||
Treasury stock (in shares) | (52,000) | |||||
Other (in shares) | (8) | |||||
Net income | 2,350 | 2,350 | ||||
Balance at Mar. 31, 2019 | $ 34 | 8,305 | (3,846) | 7,214 | (89) | 11,618 |
Balance (in shares) at Mar. 31, 2019 | 32,241,191 | |||||
Balance at Dec. 31, 2019 | $ 34 | 9,198 | (3,846) | 14,356 | (89) | 19,653 |
Balance (in shares) at Dec. 31, 2019 | 32,791,665 | |||||
Exercised and vested stock-based awards | 221 | 221 | ||||
Exercised and vested stock-based awards (in shares) | 385,917 | |||||
Stock-based compensation expense | 497 | 497 | ||||
Net income | 2,937 | 2,937 | ||||
Balance at Mar. 31, 2020 | $ 34 | $ 9,916 | $ (3,846) | $ 17,293 | $ (89) | $ 23,308 |
Balance (in shares) at Mar. 31, 2020 | 33,177,582 |
BASIS OF PRESENTATION
BASIS OF PRESENTATION | 3 Months Ended |
Mar. 31, 2020 | |
BASIS OF PRESENTATION | |
BASIS OF PRESENTATION | (1) BASIS OF PRESENTATION Organization Zynex, Inc. (a Nevada corporation) has its headquarters in Englewood, Colorado. We operate in one primary business segment, medical devices which include electrotherapy and pain management products. As of March 31, 2020, the Company’s only active subsidiary is Zynex Medical, Inc. (“ZMI,” a wholly-owned Colorado corporation) through which the Company conducts most of its operations. One other subsidiary, Zynex Europe, ApS (“ZEU,” a wholly-owned Denmark corporation), did not generate material revenues during the three months ended March 31, 2020 and 2019 from international sales and marketing. Zynex Monitoring Solutions, Inc. (“ZMS,” a wholly-owned Colorado corporation) has developed a blood volume monitoring device which was approved by the U.S. Food and Drug Administration (“FDA”) in February 2020 and is awaiting approval by the CE Marking in Europe; therefore, ZMS has achieved no revenues to date. Its inactive subsidiaries include Zynex NeuroDiagnostics, Inc. ("ZND," a wholly-owned Colorado corporation), Zynex Billing and Consulting, LLC ("ZBC," an 80% owned Colorado limited liability company) and Pharmazy, Inc. ("Pharmazy"), which was incorporated in June 2015 as a wholly-owned Colorado corporation. The Company's compound pharmacy operated as a division of ZMI doing business as Pharmazy through January 2016. The term “the Company” refers to Zynex, Inc. and its active and inactive subsidiaries. Nature of Business The Company designs, manufactures and markets medical devices that treat chronic and acute pain, as well as activate and exercise muscles for rehabilitative purposes with electrical stimulation. The Company’s devices are intended for pain management to reduce reliance on drugs and provide rehabilitation and increased mobility through the utilization of non-invasive muscle stimulation, electromyography technology, interferential current (“IFC”), neuromuscular electrical stimulation (“NMES”) and transcutaneous electrical nerve stimulation (“TENS”). All our medical devices are designed to be patient friendly and designed for home use. Our devices are small, portable, battery operated and include an electrical pulse generator which is connected to the body via electrodes. All of our medical devices are marketed in the U.S. and are subject to FDA regulation and approval. Our products require a physician’s prescription before they can be dispensed in the U.S. Our primary product is the NexWave device, which is marketed to physicians and therapists by our field sales representatives. The NexWave requires consumable supplies, such as electrodes and batteries, which are shipped to patients on a recurring monthly basis, as needed. During the three months ended March 31, 2020 and 2019, the Company generated substantially all of its revenue in North America from sales of its devices and supplies to patients and health care providers. Unaudited Consolidated Financial Statements The unaudited consolidated financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and accounting principles generally accepted in the United States of America (“U.S. GAAP”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures included herein are adequate to make the information presented not misleading. A description of the Company’s accounting policies and other financial information is included in the audited consolidated financial statements as filed with the SEC in the Company’s Annual Report on Form 10‑K for the year ended December 31, 2019. Amounts as of December 31, 2019, are derived from those audited consolidated financial statements. These interim consolidated financial statements should be read in conjunction with the annual audited financial statements, accounting policies and notes thereto, included in the Company’s Annual Report on Form 10‑K for the year ended December 31, 2019, which has previously been filed with the SEC. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly the financial position of the Company as of March 31, 2020 and the results of its operations and its cash flows for the periods presented. The results of operations for the three months ended March 31, 2020 are not necessarily indicative of the results that may be achieved for a full fiscal year and cannot be used to indicate financial performance for the entire year. Principles of Consolidation The accompanying consolidated financial statements include the accounts of Zynex, Inc. and its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Use of Estimates Preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The most significant management estimates used in the preparation of the accompanying consolidated financial statements are associated with the allowance for billing adjustments and uncollectible accounts receivable, the reserve for obsolete and damaged inventory, stock-based compensation, and valuation of long-lived assets and realizability of deferred tax assets. Leases The Company recognizes finance and operating lease right-of-use assets and liabilities at the lease commencement date based on the estimated present value of the lease payments over the lease term. For our finance leases, the Company uses the implicit rate to determine the present value of future lease payments. For our operating leases that do not provide an implicit rate, the Company uses incremental borrowing rates to determine the present value of future lease payments. The Company includes options to extend or terminate a lease in the lease term when it is reasonably certain to exercise such options. The Company recognizes leases with an initial term of 12 months or less as lease expense over the lease term and those leases are not recorded on our Consolidated Balance Sheets. For additional information on our leases where the Company is the lessee, see Note 8- Leases. A significant portion of our device revenue is derived from patients who obtain our devices under month-to-month lease arrangements. Revenue related to devices on lease is recognized in accordance with ASC 842, Leases. Using the guidance in ASC 842, we concluded our transactions should be accounted for as operating leases based on the following criteria below: · The lease does not transfer ownership of the underlying asset to the lessee by the end of the lease term. · The lease does not grant the lessee an option to purchase the underlying asset that the lessee is reasonably certain to exercise. · The lease term is month to month, which does not meet the major part of the remaining economic life of the underlying asset. However, if the commencement date falls at or near the end of the economic life of the underlying asset, this criterion shall not be used for purposes of classifying the lease. · There is no residual value guaranteed and the present value of the sum of the lease payments does not equal or exceed substantially all of the fair value of the underlying asset · The underlying asset is expected to have alternative uses to the lessor at the end of the lease term. Lease commencement occurs upon delivery of the device to the patient. The Company retains title to the leased device and those devices are classified as property and equipment on the balance sheet. Since our leases are month-to-month and can be returned by the patient at any time, revenue is recognized monthly for the duration of the period in which the patient retains the device. Revenue Recognition and Accounts Receivable Revenue is derived from sales and leases of our electrotherapy devices and sales of related supplies and complimentary products. The Company recognizes revenue when control of the product has been transferred to the patient, in the amount that reflects the consideration to which the Company expects to receive. In general, revenue from sales of our devices and supplies is recognized once the product is delivered to the patient, which is when control is deemed to have transferred to our patient. Sales of our devices and supplies are primarily made with, and shipped directly to the patient with a small amount of revenue generated from sales to distributors. In the healthcare industry there is often a third party involved that will pay on the patients’ behalf for purchased or leased devices and supplies. The terms of the separate arrangement impact certain aspects of the contracts, with patients covered by third party payers, such as contract type, performance obligations and transaction price, but for purposes of revenue recognition the contract with the customer refers to the arrangement between the Company and the patient. The Company does not have any material deferred revenue in the normal course of business as each performance obligation is met upon delivery of goods to the patient. There are no substantial costs incurred through support or warranty obligations. The following table provides a breakdown of net revenue related to devices accounted for as purchases subject to ASC 606 and leases subject to ASC 842 (in thousands): For the Three Months Ended March 31, 2020 2019 Device revenue Purchased $ 1,280 $ 590 Leased 2,164 1,385 Total Device revenue 3,444 1,975 Primarily all of the Company’s receivables are due from patients with commercial or government health plans and workers compensation claims with a small portion related to private pay individuals, attorney and auto claims. Revenues are estimated using the portfolio approach by third party payer type based upon historical rates of collection, aging of receivables, trends in historical reimbursement rates by third-party payer types, and current relationships and experience with the third-party payers, which includes estimated constraints for third-party payer refund requests, deductions and adjustments. Inherent in these estimates is the risk that they will have to be revised as additional information becomes available and constraints are released. Specifically, the complexity of third-party payer billing arrangements and the uncertainty of reimbursement amounts for certain products from third-party payers or unanticipated requirements to refund payments previously received may result in adjustments to amounts originally recorded. Due to continuing changes in the health care industry and third-party payer reimbursement, it is possible our forecasting model to estimate collections could change, which could have an impact on our results of operations and cash flows. Any differences between estimated and actual collectability are reflected in the period in which received. Historically these differences have been immaterial and the Company has not had to go back and reassess the adjustments of future periods for past billing adjustments. A change in the way estimates are determined can result from a number of factors, including changes in the reimbursement policies or practices of third-party payers, or changes in industry rates of reimbursement. The Company monitors the variability and uncertain timing over third-party payer types in our portfolios. If there is a change in our third-party payer mix over time, it could affect our net revenue and related receivables. We believe we have a sufficient history of collection experience to estimate the net collectible amounts by third-party payer type. However, changes to constraints for billing adjustments have historically fluctuated and may continue to fluctuate significantly from quarter to quarter and year to year. Stock-based Compensation The Company accounts for stock-based compensation through recognition of the cost of employee services received in exchange for an award of equity instruments, which is measured based on the grant date fair value of the award that is ultimately expected to vest during the period. The stock-based compensation expenses are recognized over the period during which an employee is required to provide service in exchange for the award (the requisite service period, which in the Company’s case is the same as the vesting period). For awards subject to the achievement of performance metrics, stock-based compensation expense is recognized when it becomes probable that the performance conditions will be achieved over the respective performance period. Fair Value of Financial Instruments The Company’s financial instruments include cash, accounts receivable, accounts payable, and accrued liabilities, for which current carrying amounts approximate fair value due to their short-term nature. Financial instruments also included our operating and finance lease obligations, the carrying value of which approximates fair value because the interest rates on the outstanding borrowings are at rates that approximate market rates for borrowings with similar terms and average maturities. Inventory Inventories are stated at the lower of cost and net realizable value. Cost is computed using standard costs, which approximates actual costs on an average cost basis. Following are the components of inventory (in thousands): March 31, 2020 December 31, 2019 Raw Materials $ 1,381 $ 953 Work-in-process 256 200 Finished Goods 1,944 1,640 $ 3,581 2,793 Less: reserve (152) (415) $ 3,429 $ 2,378 The Company monitors inventory for turnover and obsolescence and records losses for excess and obsolete inventory, as appropriate. The Company provides reserves for estimated excess and obsolete inventories based upon assumptions about future demand. If future demand is less favorable than currently projected by management, additional inventory write-downs may be required. Segment Information We define operating segments as components of our enterprise for which separate financial information is reviewed regularly by the chief operating decision-makers to evaluate performance and to make operating decisions. We have identified our Chief Executive Officer, Chief Financial Officer, and Chief Operating Officer as our chief operating decision-makers (“CODM”). We currently operate our business as one operating segment which includes two revenue types: Devices and Supplies. Income Taxes We record deferred tax assets and liabilities for the estimated future tax effects of temporary differences between the tax bases of assets and liabilities and amounts reported in the accompanying consolidated balance sheets, as well as operating loss and tax credit carry-forwards. We measure deferred tax assets and liabilities using enacted tax rates expected to be applied to taxable income in the years in which those temporary differences are expected to be recovered or settled. We reduce deferred tax assets by a valuation allowance if, based on available evidence, it is more likely than not that these benefits will not be realized. The Company is subject to the provisions of the Financial Accounting Standards Board (“FASB”) ASC 740-10, Income Taxes, which requires that the effect on deferred tax assets and liabilities of a change in tax rates be recognized in the period the tax rate change was enacted. Recent Accounting Pronouncements In June 2016, FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) ("ASU 2016-13"), Measurement of Credit Losses on Financial Instruments. The standard significantly changes how entities will measure credit losses for most financial assets and certain other instruments that aren't measured at fair value through net income. The standard will replace today's "incurred loss" approach with an "expected loss" model for instruments measured at amortized cost. For available-for-sale debt securities, entities will be required to record allowances rather than reduce the carrying amount, as they do today under the other-than-temporary impairment model. It also simplifies the accounting model for purchased credit-impaired debt securities and loans. This ASU is effective for annual periods beginning after December 15, 2022, and interim periods therein for smaller reporting companies. Early adoption is permitted for annual periods beginning after December 15, 2018, and interim periods therein. The Company is currently evaluating the impact that the adoption of ASU 2016-13 will have on our financial condition, results of operations and cash flows. In December 2019, FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” The amendments simplify the accounting for income taxes by removing certain exceptions to the general principals of Topic 740, “Income Taxes” and also improve consistent application by clarifying and amending existing guidance. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted, with the amendments to be applied on a retrospective, modified retrospective or prospective basis, depending on the specific amendment. The Company is currently evaluating the impact of adopting this guidance. Management has evaluated other recently issued accounting pronouncements and does not believe that any of these pronouncements will have a material impact on the Company’s consolidated financial statements. |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 3 Months Ended |
Mar. 31, 2020 | |
PROPERTY AND EQUIPMENT | |
PROPERTY AND EQUIPMENT | (2) PROPERTY AND EQUIPMENT The components of property and equipment are as follows (in thousands): March 31, 2020 December 31, 2019 Property and equipment Office furniture and equipment $ 1,431 $ 1,178 Assembly equipment 128 128 Vehicles 181 181 Leasehold improvements 544 500 Leased devices 1,077 934 $ 3,361 2,921 Less accumulated depreciation (2,245) (2,063) $ 1,116 $ 858 The Company monitors devices out on lease for potential loss and places an estimated reserve on the net book value based on historical loss rates. Total depreciation expense related to our property and equipment was $0.1 million for each of the three months ended March 31, 2020 and 2019. Total depreciation expense related to devices out on lease was $0.2 million and $0.1 million for the three months ended March 31, 2020 and 2019, respectively. Depreciation on leased units is reflected on the income statement as cost of revenue. |
EARNINGS PER SHARE
EARNINGS PER SHARE | 3 Months Ended |
Mar. 31, 2020 | |
EARNINGS PER SHARE | |
EARNINGS PER SHARE | (3) EARNINGS PER SHARE Basic earnings per share are computed by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income by the weighted-average number of common shares outstanding and the number of dilutive potential common share equivalents during the period, calculated using the treasury-stock method for outstanding stock options. The calculation of basic and diluted earnings per share for the three months ended March 31, 2020 and 2019 are as follows (in thousands, except per share data): For the Three Months Ended March 31, 2020 2019 Basic earnings per share Net income available to common stockholders $ 2,937 $ 2,350 Basic weighted-average shares outstanding 32,913 32,233 Basic earnings per share $ 0.09 $ 0.07 Diluted earnings per share Net income available to common stockholders $ 2,937 $ 2,350 Weighted-average shares outstanding 32,913 32,233 Effect of dilutive securities - options and restricted stock 1,291 1,488 Diluted weighted-average shares outstanding 34,204 33,721 Diluted earnings per share $ 0.09 $ 0.07 For the three months ended March 31, 2020 and 2019, 0.3 million and 0.4 million shares of common stock were excluded from the dilutive stock calculation because their effect would have been anti-dilutive. |
STOCK-BASED COMPENSATION PLANS
STOCK-BASED COMPENSATION PLANS | 3 Months Ended |
Mar. 31, 2020 | |
STOCK-BASED COMPENSATION PLANS | |
STOCK-BASED COMPENSATION PLANS | (4) STOCK-BASED COMPENSATION PLANS In June 2017, our stockholders approved the 2017 Stock Incentive Plan (the “2017 Stock Plan”) with a maximum of 5,000,000 shares reserved for issuance. Awards permitted under the 2017 Stock Plan include: Stock Options and Restricted Stock. Awards issued under the 2017 Stock Plan are at the discretion of the Board of Directors. As applicable, awards are granted with an exercise price equal to the closing price of our common stock on the date of grant and generally vest over four years. Restricted Stock Awards are issued to the recipient upon vesting and are not included in outstanding shares until such vesting and issuance occurs. During the three months ended March 31, 2020, 14,000 stock option awards were granted under the 2017 Stock Plan. During the three months ended March 31, 2019, 0.3 million stock option awards were granted under the 2017 Stock Plan. At March 31, 2020, the company had 1.3 million stock options outstanding and 0.7 million exercisable under the following plans: Outstanding Exercisable Number of Options Number of Options (in thousands) (in thousands) Plan Category 2005 Stock Option Plan 388 388 Equity Compensation Plans not approved by Shareholders 59 30 2017 Stock Option Plan 869 238 Total 1,316 $ 656 During the three months ended March 31, 2020, 165,000 shares of restricted stock were granted to the Board of Directors and management under the 2017 Stock Plan. During the three months ended March 31, 2019, 5,000 shares of restricted stock were granted. The fair market value of restricted shares for share-based compensation expensing is equal to the closing price of our common stock on the date of grant. The vesting on the Restricted Stock is typically released quarterly over three years for the Board of Directors and annually or quarterly over four years for management. The following summarizes stock-based compensation expenses recorded in the consolidated statements of operations: For the Three Months Ended March 31, 2020 2019 Cost of Revenue $ 6 $ 6 Sales and marketing expense 29 41 General, and administrative 462 93 Total stock based compensation expense $ 497 $ 140 During the three months ended March 31, 2020, there were 14,000 options granted at a weighted average exercise price of $10.15 per share. The weighted-average grant date fair value of options granted during the three months ended March 31, 2020 was $8.88. The Company issued 165,000 shares of restricted stock to management during the three months ended March 31, 2020. During the three months ended March 31, 2019, there were 0.3 million options granted at a weighted average exercise price of $4.37 per share. The weighted-average grant date fair value of options granted during the three months ended March 31, 2019 was $3.86. The Company issued 5,000 shares of restricted stock to management during the three months ended March 31, 2019. The Company received proceeds of $0.2 million and $8,000 related to option exercises during the three months ended March 31, 2020 and 2019, respectively. The Company used the Black-Scholes option pricing model to determine the fair value of stock option grants, using the following assumptions for the three months ended March 31, 2020 and March 31, 2019. For the Three Months Ended March 31, 2020 2019 Expected term (years) 6.79 6.25 Risk-free interest rate 1.59 % 2.62 % Expected volatility 116.76 % 121.98 % Expected dividend yield — % — % A summary of stock option activity under all equity compensation plans for the three months ended March 31, 2020, is presented below: Weighted- Average Weighted- Remaining Aggregate Number of Average Contractual Intrinsic Shares Exercise Term Value (in thousands) Price (Years) (in thousands) Outstanding at December 31, 2019 1,855 $ 2.48 6.42 $ 10,032 Granted 14 $ 10.15 Forfeited (175) $ 5.40 Exercised (378) $ 0.58 Outstanding at March 31, 2020 1,316 $ 2.72 7.18 $ 10,991 Exercisable at March 31, 2020 656 $ 1.00 5.81 $ 6,604 A summary of restricted stock award activity under all equity compensation plans for the three months ended March 31, 2019, is presented below: Number of Shares (in thousands) Granted but not vested at December 31, 2019 102 Granted 165 Vested (7) Granted but not vested at March 31, 2020 260 As of March 31, 2020, the Company had approximately $3.8 million of unrecognized compensation expense related to stock options and restricted stock awards that will be recognized over a weighted average period of approximately 2.5 years. |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 3 Months Ended |
Mar. 31, 2020 | |
STOCKHOLDERS' EQUITY | |
STOCKHOLDERS' EQUITY | (5) STOCKHOLDERS’ EQUITY Treasury Stock On May 14, 2018, our Board of Directors approved a new program to buy back an additional $2.0 million of our common stock at prevailing market prices either in the open market or through privately negotiated transactions through May 13, 2019. For the three months ending March 31, 2019, the Company purchased 52,000 shares of our common stock for $0.2 million for an average price of $3.29 per share, related to the new program. From May 14, 2018 through March 31, 2019, the Company purchased 576,129 shares of our common stock for $1.8 million or an average price $3.20 per share. Warrants In October 2017, 150,000 common stock warrants were issued in exchange for professional services. In connection with the agreement entered into on March 28, 2016, with Triumph Bank, we issued a common stock warrant to purchase 50,000 shares of the Company's common stock. A summary of stock warrant activity for the three months ended March 31, 2020 is presented below: Weighted Average Weighted Remaining Aggregate Number of Average Contractual Intrinsic Warrants Exercise Life Value (in thousands) Price (Years) (in thousands) Outstanding at December 31, 2019 100 $ 2.63 4.77 $ 525 Granted — $ — Exercised — $ — Forfeited — $ — Outstanding and Exercisable at March 31, 2020 100 $ 2.63 4.52 $ 845 |
INCOME TAXES
INCOME TAXES | 3 Months Ended |
Mar. 31, 2020 | |
INCOME TAXES | |
INCOME TAXES | (6) INCOME TAXES The income tax provision for interim periods is determined using an estimate of the annual effective tax rate, adjusted for discrete items, primarily related to excess tax benefits on stock option exercises. For the three months ended March 31, 2020 discrete items adjusted were $1.1 million. At March 31, 2020 the Company is currently estimating an annual effective tax rate of approximately 26%. Each quarter, the estimate of the annual effective tax rate is updated, and if the estimated effective tax rate changes, a cumulative adjustment is made. There is a potential for volatility of the effective tax rate due to various factors. The provision for income taxes is recorded at the end of each interim period based on the Company’s best estimate of its effective income tax rate expected to be applicable for the full fiscal year. The Company’s effective income tax rate was (19)% for the three months ended March 31, 2020. Discrete items recognized during the three months ended March 31, 2020 and 2019, resulted in a tax benefit of approximately $1.1 million and $18,000, respectively. The Company recorded an income tax benefit of $483,000 and income tax expense of $786,000 for the three months ended March 31, 2020 and 2019, respectively. On March 27, 2020, President Trump signed into U.S. federal law the CARES Act, which is aimed at providing emergency assistance and health care for individuals, families, and businesses affected by the COVID-19 pandemic and generally supporting the U.S. economy. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. In particular, under the CARES Act, (i) for taxable years beginning before 2021, net operating loss carryforwards and carrybacks may offset 100% of taxable income, (ii) NOLs arising in 2018, 2019, and 2020 taxable years may be carried back to each of the preceding five years to generate a refund and (iii) for taxable years beginning in 2019 and 2020, the base for interest deductibility is increased from 30% to 50% of EBITDA. We are analyzing the different aspects of the CARES Act to determine whether any specific provisions may impact us. No taxes were paid during the three months ended March 31, 2020 and 2019. |
DEFERRED INSURANCE REIMBURSEMEN
DEFERRED INSURANCE REIMBURSEMENT | 3 Months Ended |
Mar. 31, 2020 | |
DEFERRED INSURANCE REIMBURSEMENT | |
DEFERRED INSURANCE REIMBURSEMENT | (7) DEFERRED INSURANCE REIMBURSEMENT During the first quarter of 2016, the Company collected $880,000 from a single insurance company for accounts receivable. The accounts receivable had been previously reduced to zero by the allowance for billing adjustments. Subsequent to March 31, 2016, the insurance company verbally communicated to the Company that this payment was made in error and requested it be refunded to the insurance company. The Company recorded this $880,000 insurance reimbursement as a deferred insurance liability. During the first quarter of 2019, the Company recognized $880,000 as other income and reversed the liability. The Company has included this amount in other income in order to ensure comparability of the Company’s operating income results for the three months ended March 31, 2019 and 2018. Management’s legal determination that any refund obligation is remote was based on the facts and circumstances related to the dispute, which included reviewing the legal statutes within the jurisdictions the Company operates. |
LEASES
LEASES | 3 Months Ended |
Mar. 31, 2020 | |
LEASES | |
LEASES | (8) LEASES The Company has three operating leases pertaining to its corporate headquarters located in Englewood, CO. Details of each lease are as follows: · The Company entered into a sublease agreement on October 20, 2017 with CSG Systems Inc. for approximately 41,715 square feet. The term of the sublease runs through June 30, 2023, with an option to extend for an additional two years through June 30, 2025. During the first year of the sublease, the rent per square foot is $7.50, increasing to $19.75 during the second year of the sublease and each year thereafter for the initial term increasing by an additional $1 per square foot. The Company has not yet determined whether it is reasonably certain to exercise its renewal option and has therefore only considered the initial term when determining the lease liability and lease asset. The Company is also obligated to pay its proportionate share of building operating expenses. The sub-landlord agreed to contribute approximately $0.2 million toward tenant improvements which is accounted for as a reduction of the operating lease asset and subsequently treated as a reduction of rent expense over the term of the lease. Upon lease commencement, the Company recorded an operating lease liability of $3.9 million and a corresponding right-of-use asset for $3.6 million. · The Company entered into an amendment to its sublease agreement, above, on March 11, 2019 for an additional 21,420 square feet of office space. The term of the sublease for the additional space began on June 1, 2019 and runs through June 30, 2023, with an option to extend the term for an additional two years through June 30, 2025. During the first seven months of the Amendment to the Sublease, the rent per square foot is $10.00, increasing to $20.75 from January 1, 2020 through October 31, 2020. For annual periods beginning November 1, 2020, the price per square foot increases by an additional $1 per square foot. The expansion work was completed, and the lease commenced, on June 1, 2019. Upon lease commencement, the Company recorded an operating lease liability and a corresponding right-of-use asset for $1.6 million each. · The Company entered into an amendment to its sublease agreement, above, on January 3, 2020 for an additional 22,546 square feet of office space. The term of the sublease began on March 9, 2020 and will run through June 30, 2025. From the commencement date through October 31, 2020, the rent per square foot is $13.00, increasing to $21.75 per square foot from November 1, 2020 through October 31, 2021. The price per square foot increases by an additional $1 annually beginning November 1, 2021. Upon lease commencement, the Company recorded an operating lease liability and a corresponding right-of-use asset for $1.4 million each. The Company has one finance lease for office equipment as follows: · The Company entered into an equipment lease on September 20, 2019 with Konica Minolta Premier Finance for a copier/printer and related software located at its corporate offices. The term of the equipment lease agreement is 5 years with the option to purchase the equipment at the end of the lease. The Company does not expect to exercise the option to purchase the equipment and, accordingly, has not considered the effect of the purchase in the evaluation of the lease asset and liability. Rent is to be paid monthly at a fixed rate for the term of the equipment lease agreement. Upon lease commencement, the Company recorded a finance lease liability and a corresponding right-of-use asset for $0.2 million each. The Company’s operating leases do not provide an implicit rate, and therefore the Company uses its incremental borrowing rate as the discount rate when measuring the lease liability. The incremental borrowing rate represents an estimate of the interest rate the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease. The Company’s incremental borrowing rate was determined to be 4.5% for its operating lease liabilities. The Company’s equipment lease agreement has an implicit rate of 8.3%, which was used to measure its finance lease liability. The remaining lease term was 3.3 years for the Company’s operating leases and 4.6 years for its finance leases. Operating lease liability Financing lease liability April 1, 2020 through December 31, 2020 1,246 42 2021 1,878 45 2022 1,964 45 2023 1,017 45 2024 — 34 Total undiscounted future minimum lease payments 6,105 211 Less: Difference between undiscounted lease payments and discounted lease liabilities: (473) (32) Total lease liabilities $ 5,632 $ 179 Operating lease costs were $0.4 million and $0.2 million for the three months ended March 31, 2020 and 2019, respectively, which were included in general and administrative expenses on the consolidated statement of operations. |
CONCENTRATIONS
CONCENTRATIONS | 3 Months Ended |
Mar. 31, 2020 | |
CONCENTRATIONS | |
CONCENTRATIONS | (9) CONCENTRATIONS For the three months ended March 31, 2020, the Company sourced approximately 40% of the components for its electrotherapy products from two significant vendors (defined as supplying at least 10%). For the three months ended March 31, 2019 the company sourced approximately 57% of components from two significant vendors. Management believes that its relationships with suppliers are good; however, if the relationships were to be replaced, there may be a short-term disruption to operations, a period of time in which products may not be available and additional expenses may be incurred. The Company had receivables from two third-party payers at March 31, 2020 and December 31, 2019, that made up approximately 39% of the net accounts receivable balance. |
LITIGATION
LITIGATION | 3 Months Ended |
Mar. 31, 2020 | |
LITIGATION | |
LITIGATION | (10) LITIGATION From time to time, the Company may become party to litigation and other claims in the ordinary course of business. To the extent that such claims and litigation arise, management would accrue the estimated exposure for such events when losses are determined to be both probable and estimable. The Company is currently not a party to any material pending legal proceedings. |
SUBSEQUENT EVENT
SUBSEQUENT EVENT | 3 Months Ended |
Mar. 31, 2020 | |
SUBSEQUENT EVENT | |
SUBSEQUENT EVENT | (11) SUBSEQUENT EVENT In December 2019, a novel Coronavirus disease (“COVID-19”) was reported and on March 11, 2020, the World Health Organization characterized COVID-19 as a pandemic. While the Company did not incur significant disruptions to its operations during the first quarter of 2020 from COVID-19, it is unable at this time to predict the impact that COVID-19 will have on its business, financial position and operating results in future periods due to numerous uncertainties. The Company has been and continues to closely monitor the impact of the pandemic on all aspects of its business. See also the risk factor relating to COVID-19 disclosed in Item 1A of Part II, below. The Company evaluated subsequent events up to April 28, 2020 and concluded that there were no additional subsequent events. |
BASIS OF PRESENTATION (Policies
BASIS OF PRESENTATION (Policies) | 3 Months Ended |
Mar. 31, 2020 | |
BASIS OF PRESENTATION | |
Principles of Consolidation | Principles of Consolidation The accompanying consolidated financial statements include the accounts of Zynex, Inc. and its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. |
Use of Estimates | Use of Estimates Preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The most significant management estimates used in the preparation of the accompanying consolidated financial statements are associated with the allowance for billing adjustments and uncollectible accounts receivable, the reserve for obsolete and damaged inventory, stock-based compensation, and valuation of long-lived assets and realizability of deferred tax assets. |
Leases | Leases The Company recognizes finance and operating lease right-of-use assets and liabilities at the lease commencement date based on the estimated present value of the lease payments over the lease term. For our finance leases, the Company uses the implicit rate to determine the present value of future lease payments. For our operating leases that do not provide an implicit rate, the Company uses incremental borrowing rates to determine the present value of future lease payments. The Company includes options to extend or terminate a lease in the lease term when it is reasonably certain to exercise such options. The Company recognizes leases with an initial term of 12 months or less as lease expense over the lease term and those leases are not recorded on our Consolidated Balance Sheets. For additional information on our leases where the Company is the lessee, see Note 8- Leases. A significant portion of our device revenue is derived from patients who obtain our devices under month-to-month lease arrangements. Revenue related to devices on lease is recognized in accordance with ASC 842, Leases. Using the guidance in ASC 842, we concluded our transactions should be accounted for as operating leases based on the following criteria below: · The lease does not transfer ownership of the underlying asset to the lessee by the end of the lease term. · The lease does not grant the lessee an option to purchase the underlying asset that the lessee is reasonably certain to exercise. · The lease term is month to month, which does not meet the major part of the remaining economic life of the underlying asset. However, if the commencement date falls at or near the end of the economic life of the underlying asset, this criterion shall not be used for purposes of classifying the lease. · There is no residual value guaranteed and the present value of the sum of the lease payments does not equal or exceed substantially all of the fair value of the underlying asset · The underlying asset is expected to have alternative uses to the lessor at the end of the lease term. Lease commencement occurs upon delivery of the device to the patient. The Company retains title to the leased device and those devices are classified as property and equipment on the balance sheet. Since our leases are month-to-month and can be returned by the patient at any time, revenue is recognized monthly for the duration of the period in which the patient retains the device. |
Revenue Recognition and Accounts Receivable | Revenue Recognition and Accounts Receivable Revenue is derived from sales and leases of our electrotherapy devices and sales of related supplies and complimentary products. The Company recognizes revenue when control of the product has been transferred to the patient, in the amount that reflects the consideration to which the Company expects to receive. In general, revenue from sales of our devices and supplies is recognized once the product is delivered to the patient, which is when control is deemed to have transferred to our patient. Sales of our devices and supplies are primarily made with, and shipped directly to the patient with a small amount of revenue generated from sales to distributors. In the healthcare industry there is often a third party involved that will pay on the patients’ behalf for purchased or leased devices and supplies. The terms of the separate arrangement impact certain aspects of the contracts, with patients covered by third party payers, such as contract type, performance obligations and transaction price, but for purposes of revenue recognition the contract with the customer refers to the arrangement between the Company and the patient. The Company does not have any material deferred revenue in the normal course of business as each performance obligation is met upon delivery of goods to the patient. There are no substantial costs incurred through support or warranty obligations. The following table provides a breakdown of net revenue related to devices accounted for as purchases subject to ASC 606 and leases subject to ASC 842 (in thousands): For the Three Months Ended March 31, 2020 2019 Device revenue Purchased $ 1,280 $ 590 Leased 2,164 1,385 Total Device revenue 3,444 1,975 Primarily all of the Company’s receivables are due from patients with commercial or government health plans and workers compensation claims with a small portion related to private pay individuals, attorney and auto claims. Revenues are estimated using the portfolio approach by third party payer type based upon historical rates of collection, aging of receivables, trends in historical reimbursement rates by third-party payer types, and current relationships and experience with the third-party payers, which includes estimated constraints for third-party payer refund requests, deductions and adjustments. Inherent in these estimates is the risk that they will have to be revised as additional information becomes available and constraints are released. Specifically, the complexity of third-party payer billing arrangements and the uncertainty of reimbursement amounts for certain products from third-party payers or unanticipated requirements to refund payments previously received may result in adjustments to amounts originally recorded. Due to continuing changes in the health care industry and third-party payer reimbursement, it is possible our forecasting model to estimate collections could change, which could have an impact on our results of operations and cash flows. Any differences between estimated and actual collectability are reflected in the period in which received. Historically these differences have been immaterial and the Company has not had to go back and reassess the adjustments of future periods for past billing adjustments. A change in the way estimates are determined can result from a number of factors, including changes in the reimbursement policies or practices of third-party payers, or changes in industry rates of reimbursement. The Company monitors the variability and uncertain timing over third-party payer types in our portfolios. If there is a change in our third-party payer mix over time, it could affect our net revenue and related receivables. We believe we have a sufficient history of collection experience to estimate the net collectible amounts by third-party payer type. However, changes to constraints for billing adjustments have historically fluctuated and may continue to fluctuate significantly from quarter to quarter and year to year. |
Stock-based Compensation | Stock-based Compensation The Company accounts for stock-based compensation through recognition of the cost of employee services received in exchange for an award of equity instruments, which is measured based on the grant date fair value of the award that is ultimately expected to vest during the period. The stock-based compensation expenses are recognized over the period during which an employee is required to provide service in exchange for the award (the requisite service period, which in the Company’s case is the same as the vesting period). For awards subject to the achievement of performance metrics, stock-based compensation expense is recognized when it becomes probable that the performance conditions will be achieved over the respective performance period. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company’s financial instruments include cash, accounts receivable, accounts payable, and accrued liabilities, for which current carrying amounts approximate fair value due to their short-term nature. Financial instruments also included our operating and finance lease obligations, the carrying value of which approximates fair value because the interest rates on the outstanding borrowings are at rates that approximate market rates for borrowings with similar terms and average maturities. |
Inventory | Inventory Inventories are stated at the lower of cost and net realizable value. Cost is computed using standard costs, which approximates actual costs on an average cost basis. Following are the components of inventory (in thousands): March 31, 2020 December 31, 2019 Raw Materials $ 1,381 $ 953 Work-in-process 256 200 Finished Goods 1,944 1,640 $ 3,581 2,793 Less: reserve (152) (415) $ 3,429 $ 2,378 The Company monitors inventory for turnover and obsolescence and records losses for excess and obsolete inventory, as appropriate. The Company provides reserves for estimated excess and obsolete inventories based upon assumptions about future demand. If future demand is less favorable than currently projected by management, additional inventory write-downs may be required. |
Segment Information | Segment Information We define operating segments as components of our enterprise for which separate financial information is reviewed regularly by the chief operating decision-makers to evaluate performance and to make operating decisions. We have identified our Chief Executive Officer, Chief Financial Officer, and Chief Operating Officer as our chief operating decision-makers (“CODM”). We currently operate our business as one operating segment which includes two revenue types: Devices and Supplies. |
Income Taxes | Income Taxes We record deferred tax assets and liabilities for the estimated future tax effects of temporary differences between the tax bases of assets and liabilities and amounts reported in the accompanying consolidated balance sheets, as well as operating loss and tax credit carry-forwards. We measure deferred tax assets and liabilities using enacted tax rates expected to be applied to taxable income in the years in which those temporary differences are expected to be recovered or settled. We reduce deferred tax assets by a valuation allowance if, based on available evidence, it is more likely than not that these benefits will not be realized. The Company is subject to the provisions of the Financial Accounting Standards Board (“FASB”) ASC 740-10, Income Taxes, which requires that the effect on deferred tax assets and liabilities of a change in tax rates be recognized in the period the tax rate change was enacted. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In June 2016, FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) ("ASU 2016-13"), Measurement of Credit Losses on Financial Instruments. The standard significantly changes how entities will measure credit losses for most financial assets and certain other instruments that aren't measured at fair value through net income. The standard will replace today's "incurred loss" approach with an "expected loss" model for instruments measured at amortized cost. For available-for-sale debt securities, entities will be required to record allowances rather than reduce the carrying amount, as they do today under the other-than-temporary impairment model. It also simplifies the accounting model for purchased credit-impaired debt securities and loans. This ASU is effective for annual periods beginning after December 15, 2022, and interim periods therein for smaller reporting companies. Early adoption is permitted for annual periods beginning after December 15, 2018, and interim periods therein. The Company is currently evaluating the impact that the adoption of ASU 2016-13 will have on our financial condition, results of operations and cash flows. In December 2019, FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” The amendments simplify the accounting for income taxes by removing certain exceptions to the general principals of Topic 740, “Income Taxes” and also improve consistent application by clarifying and amending existing guidance. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted, with the amendments to be applied on a retrospective, modified retrospective or prospective basis, depending on the specific amendment. The Company is currently evaluating the impact of adopting this guidance. Management has evaluated other recently issued accounting pronouncements and does not believe that any of these pronouncements will have a material impact on the Company’s consolidated financial statements. |
BASIS OF PRESENTATION (Tables)
BASIS OF PRESENTATION (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
BASIS OF PRESENTATION | |
Disaggregation of Revenue | For the Three Months Ended March 31, 2020 2019 Device revenue Purchased $ 1,280 $ 590 Leased 2,164 1,385 Total Device revenue 3,444 1,975 |
Schedule of components of inventory | March 31, 2020 December 31, 2019 Raw Materials $ 1,381 $ 953 Work-in-process 256 200 Finished Goods 1,944 1,640 $ 3,581 2,793 Less: reserve (152) (415) $ 3,429 $ 2,378 |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
PROPERTY AND EQUIPMENT | |
Schedule of components of property and equipment | The components of property and equipment are as follows (in thousands): March 31, 2020 December 31, 2019 Property and equipment Office furniture and equipment $ 1,431 $ 1,178 Assembly equipment 128 128 Vehicles 181 181 Leasehold improvements 544 500 Leased devices 1,077 934 $ 3,361 2,921 Less accumulated depreciation (2,245) (2,063) $ 1,116 $ 858 |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
EARNINGS PER SHARE | |
Schedule of Calculation of Basic and Diluted earnings per share | The calculation of basic and diluted earnings per share for the three months ended March 31, 2020 and 2019 are as follows (in thousands, except per share data): For the Three Months Ended March 31, 2020 2019 Basic earnings per share Net income available to common stockholders $ 2,937 $ 2,350 Basic weighted-average shares outstanding 32,913 32,233 Basic earnings per share $ 0.09 $ 0.07 Diluted earnings per share Net income available to common stockholders $ 2,937 $ 2,350 Weighted-average shares outstanding 32,913 32,233 Effect of dilutive securities - options and restricted stock 1,291 1,488 Diluted weighted-average shares outstanding 34,204 33,721 Diluted earnings per share $ 0.09 $ 0.07 |
STOCK-BASED COMPENSATION PLANS
STOCK-BASED COMPENSATION PLANS (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
STOCK-BASED COMPENSATION PLANS | |
Schedule of outstanding and exercisable number of options | Outstanding Exercisable Number of Options Number of Options (in thousands) (in thousands) Plan Category 2005 Stock Option Plan 388 388 Equity Compensation Plans not approved by Shareholders 59 30 2017 Stock Option Plan 869 238 Total 1,316 $ 656 |
Schedule of share based compensation expenses recorded in the consolidated statement of income | The following summarizes stock-based compensation expenses recorded in the consolidated statements of operations: For the Three Months Ended March 31, 2020 2019 Cost of Revenue $ 6 $ 6 Sales and marketing expense 29 41 General, and administrative 462 93 Total stock based compensation expense $ 497 $ 140 |
Fair Value of Stock Options Grants | The Company used the Black-Scholes option pricing model to determine the fair value of stock option grants, using the following assumptions for the three months ended March 31, 2020 and March 31, 2019. For the Three Months Ended March 31, 2020 2019 Expected term (years) 6.79 6.25 Risk-free interest rate 1.59 % 2.62 % Expected volatility 116.76 % 121.98 % Expected dividend yield — % — % |
Summary of Stock Option Activity Under the Option Plan | A summary of stock option activity under all equity compensation plans for the three months ended March 31, 2020, is presented below: Weighted- Average Weighted- Remaining Aggregate Number of Average Contractual Intrinsic Shares Exercise Term Value (in thousands) Price (Years) (in thousands) Outstanding at December 31, 2019 1,855 $ 2.48 6.42 $ 10,032 Granted 14 $ 10.15 Forfeited (175) $ 5.40 Exercised (378) $ 0.58 Outstanding at March 31, 2020 1,316 $ 2.72 7.18 $ 10,991 Exercisable at March 31, 2020 656 $ 1.00 5.81 $ 6,604 |
Restricted Stock Award Activity Under all Equity Compensation Plans | A summary of restricted stock award activity under all equity compensation plans for the three months ended March 31, 2019, is presented below: Number of Shares (in thousands) Granted but not vested at December 31, 2019 102 Granted 165 Vested (7) Granted but not vested at March 31, 2020 260 |
STOCKHOLDERS' EQUITY (Tables)
STOCKHOLDERS' EQUITY (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
STOCKHOLDERS' EQUITY | |
Schedule of stock warrant activity | A summary of stock warrant activity for the three months ended March 31, 2020 is presented below: Weighted Average Weighted Remaining Aggregate Number of Average Contractual Intrinsic Warrants Exercise Life Value (in thousands) Price (Years) (in thousands) Outstanding at December 31, 2019 100 $ 2.63 4.77 $ 525 Granted — $ — Exercised — $ — Forfeited — $ — Outstanding and Exercisable at March 31, 2020 100 $ 2.63 4.52 $ 845 |
LEASES (Tables)
LEASES (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
LEASES | |
Schedule of future minimum lease payments under the Company's operating leases | Operating lease liability Financing lease liability April 1, 2020 through December 31, 2020 1,246 42 2021 1,878 45 2022 1,964 45 2023 1,017 45 2024 — 34 Total undiscounted future minimum lease payments 6,105 211 Less: Difference between undiscounted lease payments and discounted lease liabilities: (473) (32) Total lease liabilities $ 5,632 $ 179 |
Schedule of future minimum lease payments under the Company's financing leases | Operating lease liability Financing lease liability April 1, 2020 through December 31, 2020 1,246 42 2021 1,878 45 2022 1,964 45 2023 1,017 45 2024 — 34 Total undiscounted future minimum lease payments 6,105 211 Less: Difference between undiscounted lease payments and discounted lease liabilities: (473) (32) Total lease liabilities $ 5,632 $ 179 |
BASIS OF PRESENTATION - Breakdo
BASIS OF PRESENTATION - Breakdown of net revenue (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Device revenue | ||
Total Device revenue | $ 15,228 | $ 9,196 |
Devices [Member] | ||
Device revenue | ||
Purchased | 1,280 | 590 |
Leased | 2,164 | 1,385 |
Total Device revenue | $ 3,444 | $ 1,975 |
BASIS OF PRESENTATION - Invento
BASIS OF PRESENTATION - Inventory (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 | Mar. 31, 2019 |
Components of inventory | |||
Raw Materials | $ 1,381 | $ 953 | |
Work-in-process | 256 | 200 | |
Finished Goods | 1,944 | 1,640 | |
Total | 3,581 | 2,793 | |
Less: reserve | (152) | (415) | |
Inventory, net | $ 3,429 | $ 2,378 | $ 2,378 |
BASIS OF PRESENTATION - Additio
BASIS OF PRESENTATION - Additional Information (Details) | 3 Months Ended |
Mar. 31, 2020segment | |
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items] | |
Number of operating segments | 1 |
Zynex Billing And Consultancy, LLC [Member] | |
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items] | |
Noncontrolling Interest, Ownership Percentage by Parent | 80.00% |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Property, Plant and Equipment, Gross | $ 3,361 | $ 2,921 |
Less accumulated depreciation | (2,245) | (2,063) |
Property and Equipment, Net | 1,116 | 858 |
Office furniture and equipment | ||
Property, Plant and Equipment, Gross | 1,431 | 1,178 |
Assembly equipment | ||
Property, Plant and Equipment, Gross | 128 | 128 |
Vehicles | ||
Property, Plant and Equipment, Gross | 181 | 181 |
Leasehold improvements | ||
Property, Plant and Equipment, Gross | 544 | 500 |
Leased devices | ||
Property, Plant and Equipment, Gross | $ 1,077 | $ 934 |
PROPERTY AND EQUIPMENT - Additi
PROPERTY AND EQUIPMENT - Additional information (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Property, Plant and Equipment | ||
Depreciation | $ 252 | $ 160 |
Property and Equipment [Member] | ||
Property, Plant and Equipment | ||
Depreciation | 100 | 100 |
Leased Devices [Member] | ||
Property, Plant and Equipment | ||
Depreciation | $ 200 | $ 100 |
EARNINGS PER SHARE (Details)
EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Basic earnings per share | ||
Net income available to common stockholders | $ 2,937 | $ 2,350 |
Weighted average basic shares outstanding | 32,913 | 32,233 |
Basic earnings per share | $ 0.09 | $ 0.07 |
Diluted earnings per share | ||
Net income available to common stockholders | $ 2,937 | $ 2,350 |
Weighted-average shares outstanding | 32,913 | 32,233 |
Effect of dilutive securities - options and restricted stock | 1,291 | 1,488 |
Diluted weighted-average shares outstanding | 34,204 | 33,721 |
Diluted earnings per share | $ 0.09 | $ 0.07 |
EARNINGS PER SHARE - Additional
EARNINGS PER SHARE - Additional information (Details) - shares shares in Millions | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Common Stock[Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 0.3 | 0.4 |
STOCK-BASED COMPENSATION PLAN_2
STOCK-BASED COMPENSATION PLANS - Outstanding and exercisable number of stock options (Details) shares in Thousands | Mar. 31, 2020shares |
Share-based Compensation Arrangement by Share-based Payment Award | |
Outstanding Number of Options (in shares) | 1,316 |
Number of Shares, Exercisable | 656 |
2005 Stock Option Plan | |
Share-based Compensation Arrangement by Share-based Payment Award | |
Outstanding Number of Options (in shares) | 388 |
Number of Shares, Exercisable | 388 |
Equity Compensation Plans not approved by Shareholders | |
Share-based Compensation Arrangement by Share-based Payment Award | |
Outstanding Number of Options (in shares) | 59 |
Number of Shares, Exercisable | 30 |
2017 Stock Option Plan | |
Share-based Compensation Arrangement by Share-based Payment Award | |
Outstanding Number of Options (in shares) | 869 |
Number of Shares, Exercisable | 238 |
STOCK-BASED COMPENSATION PLAN_3
STOCK-BASED COMPENSATION PLANS - stock-based compensation expenses (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Allocated Share-based Compensation Expense | $ 497 | $ 140 |
Cost of Revenue | ||
Allocated Share-based Compensation Expense | 6 | 6 |
Sales and marketing expense | ||
Allocated Share-based Compensation Expense | 29 | 41 |
General, and administrative | ||
Allocated Share-based Compensation Expense | $ 462 | $ 93 |
STOCK-BASED COMPENSATION PLAN_4
STOCK-BASED COMPENSATION PLANS - Stock options granted (Details) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Fair value of stock option grants | ||
Expected term (years) | 6 years 9 months 15 days | 6 years 3 months |
Risk-free interest rate | 1.59% | 2.62% |
Expected volatility | 116.76% | 121.98% |
Expected dividend yield | 0.00% | 0.00% |
STOCK-BASED COMPENSATION PLAN_5
STOCK-BASED COMPENSATION PLANS - Summary of stock option activity (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Summary of stock option activity under the option Plan | |||
Outstanding at ending | 1,316 | ||
Number of Shares, Exercisable | 656 | ||
Weighted Average Exercise Price, Granted | $ 4.37 | ||
Employee Stock Option [Member] | |||
Summary of stock option activity under the option Plan | |||
Outstanding at beginning | 1,855 | ||
Number of Shares, Granted | 14 | ||
Number of Shares, Forfeited | (175) | ||
Number of Warrants, Exercised | (378) | ||
Outstanding at ending | 1,316 | 1,855 | |
Number of Shares, Exercisable | 656 | ||
Weighted Average Exercise Price, Outstanding Beginning | $ 2.48 | ||
Weighted Average Exercise Price, Granted | 10.15 | ||
Weighted Average Exercise Price, Forfeited | 5.40 | ||
Weighted Average Exercise Price, Exercised | 0.58 | ||
Weighted Average Exercise Price, Outstanding Ending | 2.72 | $ 2.48 | |
Weighted Average Exercise Price, Exercisable | $ 1 | ||
Weighted Average Remaining Contractual Life, Outstanding | 7 years 2 months 5 days | 6 years 5 months 1 day | |
Weighted Average Remaining Contractual Life, Exercisable (Years) | 5 years 9 months 22 days | ||
Aggregate Intrinsic Value, Outstanding | $ 10,991 | $ 10,032 | |
Aggregate Intrinsic Value, Exercisable | $ 6,604 |
STOCK-BASED COMPENSATION PLAN_6
STOCK-BASED COMPENSATION PLANS - Summary of restricted stock award activity (Details) - Restricted Stock [Member] shares in Thousands | 3 Months Ended |
Mar. 31, 2020shares | |
Share-based Compensation Arrangement by Share-based Payment Award | |
Granted but not vested at December 31, 2019 | 102 |
Granted | 165 |
Vested | (7) |
Granted but not vested at March 31, 2020 | 260 |
STOCK-BASED COMPENSATION PLAN_7
STOCK-BASED COMPENSATION PLANS - Additional information (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost | ||
Weighted Average Exercise Price, Granted | $ 4.37 | |
Proceeds from Stock Options Exercised | $ 200 | $ 8,000 |
Unrecognized compensation expense related to stock options | $ 3,800 | |
Weighted-average period of unrecognized compensation expense related to stock options | 2 years 6 months | |
Weighted-average grant date fair value of options granted (in dollars per share) | $ 8.88 | $ 3.86 |
Restricted Stock [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost | ||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period | 165,000 | |
2017 Stock Option Plan | ||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost | ||
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized | 5,000,000 | |
Number of Warrants, Granted | 14,000 | 300,000 |
2017 Stock Option Plan | Management [Member] | Restricted Stock [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost | ||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period | 165,000 | 5,000 |
STOCKHOLDERS' EQUITY - Warrants
STOCKHOLDERS' EQUITY - Warrants (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Outstanding at ending | 1,316,000 | ||
Number of Warrants, Exercisable | 656,000 | ||
Weighted Average Exercise Price, Granted | $ 4.37 | ||
Warrant | |||
Outstanding at beginning | 100 | ||
Outstanding at ending | 100 | 100 | |
Weighted Average Exercise Price, Outstanding Beginning | $ 2.63 | ||
Weighted Average Exercise Price, Outstanding Ending | $ 2.63 | $ 2.63 | |
Weighted Average Remaining Contractual Life (Years) | 4 years 6 months 7 days | 4 years 9 months 7 days | |
Aggregate Intrinsic Value | $ 845 | $ 525 |
STOCKHOLDERS' EQUITY - Addition
STOCKHOLDERS' EQUITY - Additional Information (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 11 Months Ended | |||
Mar. 31, 2019 | Mar. 31, 2019 | Mar. 31, 2020 | May 14, 2018 | Oct. 31, 2017 | |
Subsidiary, Sale of Stock | |||||
Treasury Stock Acquired, Average Cost Per Share | $ 3.29 | $ 3.20 | |||
Stock Repurchased During Period, Value | $ 171 | $ 1,800 | |||
Common Stock[Member] | |||||
Subsidiary, Sale of Stock | |||||
Stock Repurchase Program Additional Authorized Amount | $ 2,000 | ||||
Stock Repurchased During Period, Shares | 52,000 | 576,129 | |||
Number of warrants exercised | 150,000 | ||||
Number of warrants withheld | 50,000 |
INCOME TAXES - Additional infor
INCOME TAXES - Additional information (Details) - USD ($) | 3 Months Ended | 15 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | Mar. 31, 2020 | |
INCOME TAXES | |||
Income Tax Credits and Adjustments | $ 1,100,000 | ||
Effective Income Tax Rate Reconciliation, Percent | 26.00% | ||
Statutory rate | (19.00%) | ||
Discrete Items Income Tax Benefit | $ 1,100,000 | $ 18,000 | |
Income tax expense | $ (483,000) | $ 786,000 | |
Income taxes paid | $ 0 |
DEFERRED INSURANCE REIMBURSEM_2
DEFERRED INSURANCE REIMBURSEMENT (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Mar. 31, 2016 | |
DEFERRED INSURANCE REIMBURSEMENT | |||
Liability for Claims and Claims Adjustment Expense, Total | $ 0 | $ 880,000 | |
Deferred Insurance Liability | $ 880,000 | ||
Deferred insurance reimbursement | $ 0 | $ (880,000) |
LEASES (Details)
LEASES (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Jan. 03, 2020 | Jun. 01, 2019 | Oct. 20, 2017 |
Operating lease liabilities | ||||
April 1, 2020 through December 31, 2020 | $ 1,246 | |||
2021 | 1,878 | |||
2022 | 1,964 | |||
2023 | 1,017 | |||
Total undiscounted future minimum lease payments | 6,105 | |||
Less: Difference between undiscounted lease payments and discounted operating lease liabilities: | (473) | |||
Total lease liabilities | 5,632 | $ 1,400 | $ 1,600 | $ 3,900 |
Finance lease liabilities | ||||
April 1, 2020 through December 31, 2020 | 42 | |||
2021 | 45 | |||
2022 | 45 | |||
2023 | 45 | |||
2024 | 34 | |||
Total undiscounted future minimum lease payments | 211 | |||
Less: Difference between undiscounted lease payments and discounted lease liabilities: | (32) | |||
Total lease liabilities | $ 179 |
LEASES - Additional information
LEASES - Additional information (Details) $ in Thousands | Nov. 01, 2021$ / ft² | Nov. 01, 2020$ / ft² | Oct. 20, 2019$ / ft² | Mar. 31, 2020USD ($)lease | Mar. 31, 2019USD ($) | Dec. 31, 2019USD ($)$ / ft² | Oct. 31, 2020$ / ft² | Oct. 31, 2020$ / ft² | Oct. 31, 2021$ / ft² | Oct. 19, 2019$ / ft² | Oct. 19, 2018$ / ft² | Jan. 03, 2020USD ($)ft² | Jun. 01, 2019USD ($) | Mar. 11, 2019ft² | Oct. 20, 2017USD ($)ft² |
Lessee, Lease, Description | |||||||||||||||
Number of operating leases | lease | 3 | ||||||||||||||
Land Subject to Ground Leases | ft² | 22,546 | 21,420 | 41,715 | ||||||||||||
Option to extend (in years) | 2 years | 2 years | |||||||||||||
Rent per square foot | $ / ft² | 10 | 13 | 20.75 | 21.75 | 19.75 | 7.50 | |||||||||
Additional rent per square foot | $ / ft² | 1 | 1 | 1 | ||||||||||||
Tenant Improvements | $ 200 | ||||||||||||||
Operating lease liabilities | $ 5,632 | $ 1,400 | $ 1,600 | 3,900 | |||||||||||
Operating lease asset | 4,980 | $ 3,831 | $ 1,400 | $ 1,600 | $ 3,600 | ||||||||||
Financing lease asset | 168 | $ 180 | |||||||||||||
Finance Lease, Liability | $ 179 | ||||||||||||||
Lessor, Direct Financing Lease, Term of Contract | 5 years | ||||||||||||||
Lessee, Operating Lease, Discount Rate | 4.50% | ||||||||||||||
Lessee, Finance Lease, Discount Rate | 8.30% | ||||||||||||||
Operating Lease, Weighted Average Remaining Lease Term | 3 years 3 months 18 days | ||||||||||||||
Finance Lease, Weighted Average Remaining Lease Term | 4 years 7 months 6 days | ||||||||||||||
General, and administrative | |||||||||||||||
Lessee, Lease, Description | |||||||||||||||
Operating Lease, Cost | $ 400 | $ 200 |
CONCENTRATIONS (Details)
CONCENTRATIONS (Details) - item | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Supplier Concentration Risk [Member] | Cost of Goods, Total [Member] | |||
Concentration Risk | |||
Concentration Risk, Percentage | 40.00% | 57.00% | |
Accounts Receivable [Member] | |||
Concentration Risk | |||
Concentration Risk, Percentage | 39.00% | ||
Number of Health Insurance carriers | 2 |