Document And Entity Information
Document And Entity Information - shares | 9 Months Ended | |
Sep. 30, 2018 | Nov. 05, 2018 | |
Document Information [Line Items] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2018 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q3 | |
Entity Registrant Name | ZYNEX INC | |
Entity Central Index Key | 846,475 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Trading Symbol | ZYXI | |
Entity Common Stock, Shares Outstanding | 32,276,614 | |
Entity Emerging Growth Company | false | |
Entity Small Business | true |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Sep. 30, 2018 | Dec. 31, 2017 |
Current assets: | ||
Cash | $ 8,096 | $ 5,565 |
Accounts receivable, net | 2,898 | 2,185 |
Inventory, net | 796 | 423 |
Prepaid expenses and other assets | 364 | 198 |
Total current assets | 12,154 | 8,371 |
Property and equipment, net | 829 | 188 |
Deposits | 314 | 370 |
Total assets | 13,297 | 8,929 |
Current liabilities: | ||
Current portion of unsecured subordinated promissory notes | 0 | 231 |
Current portion of capital leases | 34 | 123 |
Accounts payable and accrued expenses | 1,842 | 2,243 |
Accrued payroll and related taxes | 766 | 538 |
Deferred insurance reimbursement | 880 | 880 |
Total current liabilities | 3,522 | 4,015 |
Long-term liabilities: | ||
Deferred rent | 559 | 0 |
Warranty liability | 12 | 12 |
Deferred income taxes | 51 | 0 |
Total liabilities | 4,144 | 4,027 |
Commitments and contingencies | ||
Stockholders' equity: | ||
Preferred stock, $0.001 par value; 10,000,000 shares authorized; no shares issued and outstanding as of September 30, 2018 and December 31, 2017 | 0 | 0 |
Common stock, $0.001 par value; 100,000,000 shares authorized; 33,281,616 issued and 32,385,598 outstanding as of September 30, 2018 and 32,864,877 issued and 32,778,040 outstanding as of December 31, 2017 | 34 | 33 |
Additional paid-in capital | 7,978 | 7,612 |
Treasury stock 896,018 and 86,837 shares, at September 30, 2018 and December 31, 2017, respectively, at cost | (3,289) | (243) |
Accumulated earnings (deficit) | 4,519 | (2,411) |
Total Zynex, Inc. stockholders' equity | 9,242 | 4,991 |
Non-controlling interest | (89) | (89) |
Total stockholders' equity | 9,153 | 4,902 |
Total liabilities and stockholders' equity | $ 13,297 | $ 8,929 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Sep. 30, 2018 | Dec. 31, 2017 |
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 | 33,281,616 | 32,864,877 |
Common Stock, Shares, Outstanding | 32,385,598 | 32,778,040 |
Treasury Stock, Shares | 896,018 | 86,837 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
NET REVENUE | ||||
Total net revenue | $ 8,131 | $ 6,820 | $ 22,580 | $ 15,298 |
COSTS OF REVENUE AND OPERATING EXPENSES | ||||
Costs of revenue - rental, product & supply | 1,641 | 1,347 | 4,207 | 3,289 |
Selling, general and administrative expense | 3,670 | 2,538 | 10,883 | 6,656 |
Total costs of revenue and operating expenses | 5,311 | 3,885 | 15,090 | 9,945 |
Income from operations | 2,820 | 2,935 | 7,490 | 5,353 |
Other expense | ||||
Interest expense | (1) | (691) | (153) | (1,206) |
Other expense, net | (1) | (691) | (153) | (1,206) |
Income from operations before income taxes | 2,819 | 2,244 | 7,337 | 4,147 |
Income tax expense | 228 | 44 | 407 | 89 |
Net Income | 2,591 | 2,200 | 6,930 | 4,058 |
Plus: Net income (loss) - noncontrolling interest | 0 | 0 | 0 | 0 |
Net income - attributable to Zynex, Inc. | $ 2,591 | $ 2,200 | $ 6,930 | $ 4,058 |
Net income per share attributable to Zynex, Inc.: | ||||
Basic | $ 0.08 | $ 0.07 | $ 0.21 | $ 0.13 |
Diluted | $ 0.08 | $ 0.07 | $ 0.20 | $ 0.12 |
Weighted average basic shares outstanding | 32,521 | 32,327 | 32,580 | 31,931 |
Weighted average diluted shares outstanding | 33,931 | 33,545 | 34,171 | 32,790 |
Devices [Member] | ||||
NET REVENUE | ||||
Total net revenue | $ 1,811 | $ 1,145 | $ 5,072 | $ 3,760 |
Supplies [Member] | ||||
NET REVENUE | ||||
Total net revenue | $ 6,320 | $ 5,675 | $ 17,508 | $ 11,538 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net cash provided by operating activities | $ 6,767 | $ 4,738 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchase of property and equipment | (891) | (149) |
Net cash used in investing activities | (891) | (149) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Net (repayments) borrowings on line of credit | 0 | (2,771) |
Principal payments on subordinated promissory notes | (385) | (269) |
Proceeds from unsecured subordinated promissory notes | 0 | 1,035 |
Payment of commission and placement agent fees and related expenses | 0 | (155) |
Payments on capital lease obligations | (89) | (102) |
Purchase of treasury stock | (3,045) | 0 |
Proceeds from option and warrant exercises | 174 | 0 |
Net cash used in financing activities | (3,345) | (2,262) |
Net increase in cash and cash equivalents | 2,531 | 2,327 |
Cash and cash equivalents at beginning of period | 5,565 | 247 |
Cash and cash equivalents at end of period | 8,096 | 2,574 |
Supplemental disclosure of cash and non-cash transactions: | ||
Interest paid | 12 | 176 |
Income taxes paid | 228 | 0 |
Rent paid | 394 | 0 |
Lease incentive received | $ 213 | $ 0 |
BASIS OF PRESENTATION
BASIS OF PRESENTATION | 9 Months Ended |
Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
BASIS OF PRESENTATION | (1) BASIS OF PRESENTATION Organization Zynex, Inc. (a Nevada corporation) has its headquarters in Englewood, Colorado. We operate one primary business segment, medical devices which include Electrotherapy and Pain Management Products. As of September 30, 2018, 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 nine months ended September 30, 2018 and 2017 from international sales and marketing. Zynex Monitoring Solutions, Inc. (“ZMS,” a wholly-owned Colorado corporation) has developed a blood volume monitoring device, but it is awaiting approval by the U.S. Food and Drug Administration (“FDA”) as well as CE Marking in Europe, therefore, ZMS has achieved no revenues to date. 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 medications 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. The NexWave 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 and nine months ended September 30, 2018 and 2017, the Company generated substantially all of its revenue ( 99.99 Unaudited Condensed Consolidated Financial Statements The unaudited condensed 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, 2017. Amounts as of December 31, 2017, are derived from those audited consolidated financial statements. These interim condensed 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, 2017, which has previously been filed with the SEC. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to present fairly the financial position of the Company as of September 30, 2018 and the results of its operations and its cash flows for the periods presented. The results of operations for the three and nine months ended September 30, 2018, 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. Non-controlling Interest Non-controlling interest in the equity of a subsidiary is accounted for and reported as stockholders’ equity. Non-controlling interest represents the 20% ownership in the Company’s majority-owned (but currently inactive) subsidiary, ZBC. Reclassifications Certain reclassifications have been made to the 2017 financial statements to conform to the consolidated 2018 financial statement presentation. These reclassifications had no effect on net earnings or cash flows as previously reported. We reclassified amounts between device and supplies revenue for all of the quarters ended during 2017. The change was due to enhanced information which allowed us to perform a more detailed analysis of revenue and the related classifications. The reclassification did not change total net revenue. 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. Revenue Recognition, Allowance for Billing Adjustments and Collectability On January 1, 2018 the company adopted the new accounting standard on revenue recognition issued by the Financial Accounting Standards Board (“FASB”). Pursuant to the revenue from contracts with customer’s standards the Company recognizes revenue when it transfers promised goods to customers in an amount that reflects the consideration to which the company expects to be entitled, known as the transaction price. The company elected to use the modified retrospective method which resulted in immaterial changes to previously issued financial statements and retained earnings. Revenue is generated primarily from sales in the United States of our electrotherapy devices and associated supplies. Sales are primarily made with, and shipped, direct to the patient with a small amount of revenue generated from sales to distributors. Device sales can be in the form of a purchase or a lease. Revenue related to purchased devices are recognized in accordance with ASU No. 2014-09—“Revenue from Contracts with Customers” (Topic 606) and is recognized when the device, which has been prescribed by a doctor, is delivered to the patient. Revenue related to leased devices are recognized in accordance with ASC 840, Leases. Using the guidance in ASC 840, 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. Leased units still require a doctor’s prescription and the lease inception is dependent upon delivery. 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 typically recognized monthly as use by the patient persists. Devices sales between purchased and leased are broken down as following (in thousands) : For the Three Months Ended September 30, For the Nine Months Ended September 30, 2018 2017 2018 2017 DEVICE REVENUE Purchased $ 547 $ 304 $ 1,260 $ 1,189 Leased 1,264 841 3,812 2,571 Total Device revenue 1,811 1,145 5,072 3,760 Supplies revenue is recognized once delivered to the patient. Supplies needed for the device can be set up as a recurring shipment or ordered thru the customer support team or online store as needed. In the healthcare industry there is often a third party involved that will pay on the patients’ behalf. The terms of the separate arrangement impact certain aspects of the contracts, with patients covered by third party payors, 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. The Company has $0.9 million at the end of September 30, 2018 in deferred revenue related to an insurance reimbursement claim that is expected to be resolved in 2019. For additional detail see description below in Note 8. There are no substantial costs incurred through support or warranty obligations. A significant portion of the Company’s revenues are derived, and the related receivables are due, from a commercial health insurance company or government agency (collectively “Third-party Payors”). Transaction price is estimated with variable consideration using the most likely amount technique for Third-party Payor reimbursement deductions, known throughout the health care industry as “billing adjustments” whereby the Third-party Payors unilaterally reduce the amount they reimburse for the Company’s products, refund requests, and for the timing and values of amounts to be billed. 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 billing arrangements and the uncertainty of reimbursement amounts for certain products from payors 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 reimbursement, as well as changes in our billing practices to increase cash collections, 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 settlements and final determinations are reflected as an increase or a reduction to revenue in the period when such final determinations are known. The basis of estimates include historical rates of collection, the aging of the receivables, trends in the historical reimbursement rates by insurance groups, determined using the portfolio approach, and current relationships and experience with the Third-party Payors. A change in the way estimates are determined can result from a number of factors, including experience and training of billing personnel, changes in the reimbursement policies or practices of Third-party Payors, or changes in industry rates of reimbursement. The Company monitors the variability and uncertain timing over payor groups in our portfolios. If there is a change in our payor 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 payor. However, changes to the allowance for billing adjustments, which are recorded as a reduction of transaction price, have historically fluctuated and may continue to fluctuate significantly from quarter to quarter and year to year. The Company frequently receives refund requests from insurance providers relating to specific patients and dates of service. Billing and reimbursement disputes are very common in the Company’s industry. These requests are sometimes related to a limited number of patients or products; at other times, they include a significant number of refund claims in a single request. The Company reviews and evaluates these requests and determines if any refund request is appropriate. The Company also reviews these refund claims when it is rebilling or pursuing reimbursement from insurance providers. The Company frequently has significant offsets against such refund requests, and sometimes amounts are due to the Company in excess of the amounts of refunds requested by the insurance providers. Therefore, at the time of receipt of such refund requests, the Company is generally unable to determine if a refund request is valid and should be accrued. Such refunds are recorded when the amount is fixed and determinable. However, management maintains an allowance for estimated future refunds which we believe is sufficient to cover future claims in connection with its estimates of variable consideration recorded at the time sales are recorded. 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 the notes payable related to our private placement and capitalized leases, 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, which primarily represents devices, parts and supplies, are valued at the lower of cost (average) or market. 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 equal to the difference between the costs of inventories on hand and the estimated market value based upon assumptions about future demand. If future demand is less favorable than currently projected by management, additional inventory write-downs may be required. Total gross inventories at September 30, 2018 were $0.8 million which was comprised of finished goods, work in progress, and parts and supplies as compared to December 31, 2017 of $0.4 million. 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 and Chief Financial 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 basis 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. On December 22, 2017, the U.S. government enacted comprehensive tax legislation (the “Tax Act”), which significantly revises the ongoing U.S. corporate income tax law by lowering the U.S. federal corporate income tax rate from 35% to 21%, implementing a territorial tax system, imposing a one-time tax on foreign unremitted earnings and setting limitations on deductibility of certain costs, among other things. 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. Due to the complexities involved in accounting for the recently enacted Tax Act, the U.S. Securities and Exchange Commission’s Staff Accounting Bulletin (“SAB”) 118 requires that the Company include in its financial statements the reasonable estimate of the impact of the Tax Act on earnings to the extent such estimate has been determined. Pursuant to the SAB118, the Company is allowed a measurement period of up to one year after the enactment date of the Tax Act to finalize the recording of the related tax impacts. The final impact on the Company from the Tax Act’s transition tax legislation may differ from the aforementioned estimates due to the complexity of calculating and supporting with primary evidence such U.S. tax attributes such as accumulated foreign earnings and profits, foreign tax paid, and other tax components involved in foreign tax credit calculations for prior years back to 1998. Such differences could be material, due to, among other things, changes in interpretations of the Tax Act, future legislative action to address questions that arise because of the Tax Act, changes in accounting standards for income taxes or related interpretations in response to the Tax Act, or any updates or changes to estimates the Company has utilized to calculate the transition tax's reasonable estimate. The Company has not made any estimates regarding the U.S. Tax Act. The Company will continue to evaluate the impact of the U.S. Tax Act and will record any resulting material tax adjustments during 2018. Recent Accounting Pronouncements In August 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities (“ASU 2017-12”), which amends and simplifies existing guidance in order to allow companies to more accurately present the economic effects of risk management activities in the financial statements. ASU 2017-12 is effective for us in the first quarter of fiscal 2020, and earlier adoption is permitted. We are currently evaluating the impact of our pending adoption of ASU 2017-12 on our consolidated financial statements. 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, 2019, and interim periods therein. Early adoption is permitted for annual periods beginning after December 15, 2018, and interim periods therein. We are currently evaluating the impact that the adoption of ASU 2016-13 will have on our financial condition, results of operations and cash flows. In February 2018, the FASB issued Accounting Standards Update No. 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (“ASU 2018-02”), which allows companies to reclassify stranded tax effects resulting from the 2017 Tax Cuts and Jobs Act (the Tax Act), from accumulated other comprehensive income to retained earnings. The new standard is effective for us beginning January 1, 2019, with early adoption permitted. We are currently evaluating the effects that the adoption of this guidance will have on our consolidated financial statements and the related disclosures. In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). These amendments require the recognition of lease assets and lease liabilities on the balance sheet by lessees for those leases currently classified as operating leases under ASC 840 “Leases”. These amendments also require qualitative disclosures along with specific quantitative disclosures. These amendments are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted. Entities are required to apply the amendments at the beginning of the earliest period presented using a modified retrospective approach. We are currently evaluating the impact that the adoption of ASU 2016-02 will have on our financial condition, results of operations and cash flows. In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718), Improvements to Nonemployee Share-based Payments (“ASU 2018-07”). This ASU expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The effective date for the standard is for interim periods in fiscal years beginning after December 15, 2018, with early adoption permitted. The new guidance is required to be applied retrospectively with the cumulative effect recognized at the date of initial application. The Company is currently evaluating the effect ASU 2018-07 will have on the consolidated financial statements. 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. Recent Adopted Accounting Pronouncements In May 2014, the FASB issued ASU No. 2014-09—“Revenue from Contracts with Customers” (Topic 606) which amended revenue recognition guidance to clarify the principles for recognizing revenue from contracts with customers. The guidance requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. The guidance also requires expanded disclosures relating to the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Additionally, qualitative and quantitative disclosures are required about customer contracts, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. The Company adopted the new ASU as of January 1, 2018 using the modified retrospective method and resulted in no material changes to previously stated financial statements. For further details see the revenue recognition policy described previously in Note 1. |
BALANCE SHEET COMPONENTS
BALANCE SHEET COMPONENTS | 9 Months Ended |
Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
BALANCE SHEET COMPONENTS | (2) BALANCE SHEET COMPONENTS The components of certain balance sheet line items are as follows (in thousands): September 30, 2018 December 31, 2017 Property and equipment: Office furniture and equipment $ 1,149 $ 998 Assembly equipment 128 128 Vehicles 181 76 Leasehold improvements 480 - Leased devices 152 - $ 2,090 $ 1,202 Less accumulated depreciation (1,261 ) (1,014 ) $ 829 $ 188 September 30,2018 December 31,2017 Assets acquired under capital lease: Original book value $ 461 $ 461 Accumulated depreciation (427 ) (379 ) Net book value $ 34 $ 82 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 the three months ended September 30, 2018 and 2017. Total depreciation expense was $0.1 million and $0.2 million for the nine months ending September 30, 2018 and 2017, respectively Total depreciation expense related to devices out on lease was $0.1 million for the three and nine months ended September 30, 2018. Total depreciation expense was $0.2 million and $0.3 million for the three and nine months ending September 30, 2017, respectively. Depreciation on leased units is reflected on the income statement as cost of revenue. Included in office furniture and equipment at September 30, 2018 and December 31, 2017 are assets under capital lease. Depreciation expense related to assets under capital leases was $16,000 and $48,000 for the three and nine months ended September 30, 2018. |
EARNINGS PER SHARE
EARNINGS PER SHARE | 9 Months Ended |
Sep. 30, 2018 | |
Earnings Per Share [Abstract] | |
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 and nine months ended September 30, 2018 and 2017 are as follows: For the Three Months Ended September 30, For the Nine Months Ended September 30, 2018 2017 2018 2017 Basic income per share: Net income available to common stockholders $ 2,591 $ 2,200 $ 6,930 $ 4,058 Basic weighted average shares outstanding 32,521 32,327 32,580 31,931 Basic income per share: $ 0.08 $ 0.07 $ 0.21 $ 0.13 Diluted income per share: Net income available to common stockholders $ 2,591 $ 2,200 $ 6,930 $ 4,058 Weighted average shares outstanding 32,521 32,327 32,580 31,931 Effect of dilutive securities - options and restricted stock 1,410 1,218 1,591 859 Diluted weighted average shares outstanding 33,931 33,545 34,171 32,790 Diluted income per share: $ 0.08 $ 0.07 $ 0.20 $ 0.12 For the three and nine months ended September 30, 2018, 0.3 million shares of common stock were excluded from the dilutive stock calculation because their exercise prices were greater than the average fair value of our common stock for the period. For the three and nine months ended September 30, 2017, 1.0 million and 0.8 million shares, respectively, of common stock were excluded from the dilutive stock calculation because their exercise prices were greater than the average fair value of our common stock for the period. Prior to their issuance on August 28, 2017, the dilutive securities calculation included 776,250 shares of common stock issuable related to the private placement, which was completed on February 28, 2017. The common shares were issuable six months from the closing of the shareholder notes. |
STOCK-BASED COMPENSATION PLANS
STOCK-BASED COMPENSATION PLANS | 9 Months Ended |
Sep. 30, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
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 and nine months ended September 30, 2018, 0.1 million stock option awards were granted under the 2017 Stock Plan. At September 30, 2018, 0.7 million Stock Option Awards remain issued and outstanding. During the three and nine months ended September 30, 2018, 5,000 and 75,000 shares of restricted stock were granted to the Board of Directors and management under the 2017 Stock Plan. 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 Awards are typically released quarterly over three years for the Board of Directors and annually over four years for management. The Company previously reserved 3,000,000 shares of common stock for issuance under its 2005 Stock Option Plan (the “Option Plan”). The Option Plan expired as of December 31, 2014. Vesting provisions of the expired plan were determined by the Board of Directors. All stock options under the Option Plan expire no later than ten years from the date of grant. Options granted in 2016 and through May 2017 prior to the approval of the 2017 Stock Incentive Plan were approved by and certified by the board of directors on September 6, 2017 under the existing 2005 stock option plan. At September 30, 2018, 1.1 million options remain issued and outstanding under the 2005 Stock Option Plan. The following summarizes stock-based compensation expenses recorded in the condensed consolidated statements of operations: During the three months ended September 30, 2018 and 2017, the Company recorded compensation expense related to stock options of approximately $76,000 and $9,000, respectively, all of which was recorded in selling, general and administrative expense on the accompanying condensed consolidated statements of operations. During the nine months ended September 30, 2018 and 2017, the Company recorded share based compensation expense related to stock options of approximately $0.2 million and $46,000, respectively, all of which was recorded in selling, general and administrative expense on the accompanying condensed consolidated statements of operations. During the three and nine months ended September 30, 2018, there were 0.1 million options granted, plus the aforementioned restricted stock grants. The options were granted at a weighted average exercise price of $2.64 per share. The weighted-average grant date fair value of options granted during the three and nine months ended September 30, 2018 was $2.34. During the three and nine months ended September 30, 2017, the Company granted options to purchase up to 0.1 million and 0.5 million shares of common stock to employees at a weighted average exercise price of $0.92 and $0.41 per share, respectively. The weighted-average grant date fair value of options granted during the three and nine months ended September 30, 2017 were $0.90 and $0.39, respectively. The company issued 0 and 10,000 shares of restricted stock to management during the three and nine months ended September 30, 2017, respectively. The Company received proceeds of approximately $21,000 and $0.2 million related to option exercises during the three and nine months ended September 30, 2018, respectively. No options were exercised during the three or nine months ended September 30, 2017. 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 and nine months ended September 30, 2018 and 2017. For the Three Months Ended September 30, For the Nine Months Ended September 30, 2018 2017 2018 2017 Expected term (years) 6.25 6.25 6.25 6.25 Risk-free interest rate 2.78 % 1.82 % 2.78 % 1.79 % Expected volatility 123.05 % 123.85 % 123.05 % 124.38 % Expected dividend yield 0.00 % 0.00 % 0.00 % 0.00 % A summary of stock option activity under all equity compensation plans for the nine months ended September 30, 2018, 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, 2017 2,126 $ 0.56 6.6 $ 5,579 Granted 120 $ 2.64 Forfeited (86 ) $ 1.31 Exercised (353 ) $ 0.44 Outstanding at September 30, 2018 1,807 $ 0.67 6.4 $ 4,174 Exercisable at September 30, 2018 1,235 $ 0.38 5.3 $ 3,215 A summary of restricted stock award activity under all equity compensation plans for the nine months ended September 30, 2018, is presented below: Number of Shares (in thousands) Granted but not vested at December 31, 2017 15 Granted 75 Forfeited - Vested (13 ) Granted but not vested at September 30, 2018 77 As of September 30, 2018, the Company had approximately $0.8 million of unrecognized compensation expense related to stock options and restricted stock awards that will be recognized over a weighted average period of approximately 2.8 years. |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 9 Months Ended |
Sep. 30, 2018 | |
Equity [Abstract] | |
STOCKHOLDERS' EQUITY | (5) STOCKHOLDERS’ EQUITY Treasury Stock From December 6, 2017 through March 6, 2018, we had the ability through our stock purchase program to re-purchase our common stock at prevailing market prices either in the open market or through privately negotiated transactions up to $2.0 million. On March 6, 2018, we reached the limit of $2.0 million and share re-purchases were ceased. From the inception of the plan through March 6, 2018, we purchased 495,091 shares of our common stock for $2.0 million or an average price of $4.04 per share. 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 September 30, 2018, the Company purchased 334,414 shares of our common stock for $1.1 million for an average price of $3.22 per share, related to the new program. For the nine months ending September 30, 2018 the Company purchased 400,927 shares of our common stock for $1.3 million or an average price $3.21 per share. Warrants In October 2017, 150,000 The Company previously had a revolving line of credit with Triumph Healthcare Finance. This credit facility was paid in full on June 30, 2017. In connection with the forbearance agreement with Triumph entered into on March 28, 2016, the lender suspended monthly payment requirements for February, March and April of 2016 in exchange for the issuance of a common stock warrant of 50,000. A summary of stock warrant activity for the nine months ended September 30, 2018 are presented below: Number of Warrants (in thousands) Weighted Average Exercise Price Weighted Average Remaining Contractual Life (Years) Aggregate Intrinsic Value (in thousands ) Outstanding at December 31, 2017 200 $ 1.86 5.87 $ 264 Granted - $ - Exercised (50 ) $ 0.20 Forfeited - $ - Outstanding at September 30, 2018 150 $ 2.42 6.02 $ 85 There were no warrants granted during the three or nine months ended September 30, 2018 or 2017. |
INCOME TAXES
INCOME TAXES | 9 Months Ended |
Sep. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | (6) INCOME TAXES The Company recorded an income tax expense of $0.2 million and $44,000 for the three months ended September 30, 2018 and 2017, respectively. For the nine months ended September 30, 2018 and 2017, the Company recorded an income tax provision of $0.4 million and $0.1 million respectively. 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 and nine months ended September 30, 2018 discrete items adjusted were $16,000 and $0.3 million respectively. At September 30, 2018 the Company is currently estimating an annual effective tax rate of approximately 9%. 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. ASC 740, Income Taxes, provides for the recognition of deferred tax assets if realization of such assets is more likely than not. As of December 31, 2017, our deferred tax assets were fully offset by a valuation allowance. Based upon the weight of available evidence, which includes recent operating performance, and forecasting our future results, we released a portion of the valuation allowance against our deferred tax assets during the period ending September 30, 2018. Since the deferred tax assets are expected to be utilized in the current year and in connection with interim reporting requirements, we have adjusted our annual effective tax rate to recognize the benefit ratably over all quarters of 2018. We will continue to reassess valuation allowance considerations on a quarterly basis. Taxes of approximately $0.2 million were paid during the nine months ended September 30, 2018. No taxes were paid in the nine months ended September 30, 2017. |
PRIVATE PLACEMENT
PRIVATE PLACEMENT | 9 Months Ended |
Sep. 30, 2018 | |
Private Placement Memorandum Disclosure [Abstract] | |
PRIVATE PLACEMENT | (7) P R Commencing in November of 2016, the Company conducted a private placement on a “best efforts, minimum-maximum” basis of 12% unsecured subordinated promissory notes, for a minimum of $1,000,000 and a maximum of $1,500,000 pursuant to Sections 4(a)(2) and 4(a)(5) of the Securities Act of 1933, as amended (the “1933 Act”) and Rule 506(b) of the 1933 Act. The offering was conducted through a FINRA registered broker, Newbridge Securities Corporation (“Newbridge”). On February 28, 2017, the Company issued promissory notes totaling $1,035,000, with a maturity date of June 28, 2018. The Company was obligated to make monthly repayments commencing on July 1, 2017, until the senior lender had been paid in full with a limitation on the funds available for repayment to the note holders to an amount equal to 5% of the Company’s collections received by the senior lender during that month. Newbridge was compensated in connection with sales made in the offering consisting of (i) a cash amount equaling 10% commissions; (ii) a 3% non-accountable expense allowance (iii) expense reimbursement of $155,000 (iv) 776,250 shares of our common stock and (v) fees totaling $255,000. In connection with the sale of the notes, the Company had an obligation to issue 776,250 shares of the common stock, six months after issuance of the notes to the noteholders which had initially been recorded as a liability totaling $255,000. The shares were issued to the note holders on August 28, 2017. In connection with the Offering, we also paid Triumph Bank, our senior secured lender, $342,000 as repayment of principal and interest on the outstanding obligations. The common stock issued to the note holders represents additional interest expense and was initially recorded as a liability and was adjusted each reporting period based upon the fair value of the underlying stock until issued on August 28, 2017. During the three months ended September 30, 2018 and 2017, the Company recognized $0 and $143,000, respectively in debt issuance costs and debt discount amortization expense included in interest expense, respectively. During the nine months ended September 30, 2018 and 2017, the Company recognized $153,000 and $292,000, respectively in debt issuance costs and debt discount amortization expense included in interest expense, respectively. Also, included in interest expense is the increase in value of the common shares to be issued to the private placement noteholders from the date of issue of approximately $529,000 and $740,000 for the three and nine month periods ended September 30, 2017. The table below summarizes the cash and non-cash components of the private placement memorandum (in thousands): September 30, 2018 Proceeds from unsecured subordinated promissory notes $ 1,035 Less debt issuance costs and discount Payment of commission and placement agent fees and related expenses (155 ) Principal payments on promissory notes (1,035 ) Non-cash activity Common stock issued to placement agent (255 ) Obligation to issue common stock to private placement noteholders (255 ) Amortization of issuance costs and debt discount 665 Unsecured subordinated promissory notes, net of issuance and debt discount - Current portion of unsecured subordinated promissory notes - |
DEFERRED INSURANCE REIMBURSEMEN
DEFERRED INSURANCE REIMBURSEMENT | 9 Months Ended |
Sep. 30, 2018 | |
Insurance [Abstract] | |
DEFERRED INSURANCE REIMBURSEMENT | (8) DEFERRED INSURANCE REIMBURSEMENT During the first quarter of 2016, the Company collected $ 880 880 |
CAPITAL LEASES AND OTHER OBLIGA
CAPITAL LEASES AND OTHER OBLIGATIONS | 9 Months Ended |
Sep. 30, 2018 | |
Leases, Capital [Abstract] | |
CAPITAL LEASES AND OTHER OBLIGATIONS | (9) CAPITAL LEASES AND OTHER OBLIGATIONS On October 20, 2017 the Company entered into a sublease agreement with CSG Systems Inc. for approximately 41,715 square feet at 9555 Maroon Circle, Englewood CO 80112. 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 accounts for the total rent expense over the lease term on a straight line basis and the additional payable as deferred rent. As of the nine months ended September 30, 2018, the Company had $0.6 million in deferred rent. 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 expense over the term of the lease. Our prior headquarters lease in Lone Tree, Colorado contained a termination clause which allowed the Company to terminate the lease at any time with three months written notice. We provided notice to the landlord at the end of October 2017. We entered into a month-to-month lease at our Lone Tree, Colorado location for warehouse and production space to cover the periods January – April 2018. In April we transitioned all warehouse and production facilities to our new Englewood, Colorado location. The lease was for 12,494 rentable square feet at $26.50 per square foot and could be terminated at any time with thirty days’ notice. Termination notice was given on April 3, 2018. The Company also leases certain equipment under capital leases which expire on various dates through 2018. Imputed interest rates on the leases range from approximately 2% to 10%. At September 30, 2018, the total recorded cost of assets under capital leases was approximately $0.5 million. Accumulated depreciation related to these assets totals approximately $0.4 million. |
CONCENTRATIONS
CONCENTRATIONS | 9 Months Ended |
Sep. 30, 2018 | |
Risks and Uncertainties [Abstract] | |
CONCENTRATIONS | (10) CONCENTRATIONS For the three months ended September 30, 2018, the Company sourced approximately 51% of the components for its electrotherapy products from three significant vendors (defined as supplying at least 10%). For the nine months ended September 30, 2018 the company sourced approximately 44% of components from one significant supplier. For the three months ended September 30, 2017, the Company sourced approximately 52% from three significant vendors. For the nine months ended September 30, 2017, the Company sourced 47% of its 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 a private health insurance carrier at September 30, 2018 and December 31, 2017, that made up approximately 22% and 24%, respectively, of the net accounts receivable balance. |
LITIGATION
LITIGATION | 9 Months Ended |
Sep. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
LITIGATION | (11) 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. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 9 Months Ended |
Sep. 30, 2018 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | ( 12) RELATED PARTY TRANSACTIONS The Company employs Mr. Martin Sandgaard and Mr. Joachim Sandgaard, both sons of Thomas Sandgaard. Total compensation for both was $40,000 and $43,000 for the three months ended September 30, 2018 and 2017, respectively. Compensation for both was $0.1 million for the nine months ended September 30, 2018 and 2017. To meet Mr. Sandgaard’s obligation to his former wife under a settlement agreement, the Company, during the fourth quarter of 2015, entered into 3-year employment arrangement totaling $100,000 per year with Mr. Joachim Sandgaard. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 30, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events [Text Block] | (1 3) SUBSEQUENT EVENTS On November 6, 2018 our board of Directors declared a special one-time cash dividend of $0.07 per share payable January 18, 2019 to stockholders of record on January 2, 2019. |
BASIS OF PRESENTATION (Policies
BASIS OF PRESENTATION (Policies) | 9 Months Ended |
Sep. 30, 2018 | |
Accounting Policies [Abstract] | |
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. |
Non-controlling Interest | Non-controlling Interest Non-controlling interest in the equity of a subsidiary is accounted for and reported as stockholders’ equity. Non-controlling interest represents the 20% ownership in the Company’s majority-owned (but currently inactive) subsidiary, ZBC. |
Reclassifications | Reclassifications Certain reclassifications have been made to the 2017 financial statements to conform to the consolidated 2018 financial statement presentation. These reclassifications had no effect on net earnings or cash flows as previously reported. We reclassified amounts between device and supplies revenue for all of the quarters ended during 2017. The change was due to enhanced information which allowed us to perform a more detailed analysis of revenue and the related classifications. The reclassification did not change total net revenue. |
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. |
Revenue Recognition, Allowance for Contractual Adjustments and Collectability | Revenue Recognition, Allowance for Billing Adjustments and Collectability On January 1, 2018 the company adopted the new accounting standard on revenue recognition issued by the Financial Accounting Standards Board (“FASB”). Pursuant to the revenue from contracts with customer’s standards the Company recognizes revenue when it transfers promised goods to customers in an amount that reflects the consideration to which the company expects to be entitled, known as the transaction price. The company elected to use the modified retrospective method which resulted in immaterial changes to previously issued financial statements and retained earnings. Revenue is generated primarily from sales in the United States of our electrotherapy devices and associated supplies. Sales are primarily made with, and shipped, direct to the patient with a small amount of revenue generated from sales to distributors. Device sales can be in the form of a purchase or a lease. Revenue related to purchased devices are recognized in accordance with ASU No. 2014-09—“Revenue from Contracts with Customers” (Topic 606) and is recognized when the device, which has been prescribed by a doctor, is delivered to the patient. Revenue related to leased devices are recognized in accordance with ASC 840, Leases. Using the guidance in ASC 840, 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. Leased units still require a doctor’s prescription and the lease inception is dependent upon delivery. 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 typically recognized monthly as use by the patient persists. Devices sales between purchased and leased are broken down as following (in thousands) : For the Three Months Ended September 30, For the Nine Months Ended September 30, 2018 2017 2018 2017 DEVICE REVENUE Purchased $ 547 $ 304 $ 1,260 $ 1,189 Leased 1,264 841 3,812 2,571 Total Device revenue 1,811 1,145 5,072 3,760 Supplies revenue is recognized once delivered to the patient. Supplies needed for the device can be set up as a recurring shipment or ordered thru the customer support team or online store as needed. In the healthcare industry there is often a third party involved that will pay on the patients’ behalf. The terms of the separate arrangement impact certain aspects of the contracts, with patients covered by third party payors, 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. The Company has $0.9 million at the end of September 30, 2018 in deferred revenue related to an insurance reimbursement claim that is expected to be resolved in 2019. For additional detail see description below in Note 8. There are no substantial costs incurred through support or warranty obligations. A significant portion of the Company’s revenues are derived, and the related receivables are due, from a commercial health insurance company or government agency (collectively “Third-party Payors”). Transaction price is estimated with variable consideration using the most likely amount technique for Third-party Payor reimbursement deductions, known throughout the health care industry as “billing adjustments” whereby the Third-party Payors unilaterally reduce the amount they reimburse for the Company’s products, refund requests, and for the timing and values of amounts to be billed. 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 billing arrangements and the uncertainty of reimbursement amounts for certain products from payors 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 reimbursement, as well as changes in our billing practices to increase cash collections, 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 settlements and final determinations are reflected as an increase or a reduction to revenue in the period when such final determinations are known. The basis of estimates include historical rates of collection, the aging of the receivables, trends in the historical reimbursement rates by insurance groups, determined using the portfolio approach, and current relationships and experience with the Third-party Payors. A change in the way estimates are determined can result from a number of factors, including experience and training of billing personnel, changes in the reimbursement policies or practices of Third-party Payors, or changes in industry rates of reimbursement. The Company monitors the variability and uncertain timing over payor groups in our portfolios. If there is a change in our payor 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 payor. However, changes to the allowance for billing adjustments, which are recorded as a reduction of transaction price, have historically fluctuated and may continue to fluctuate significantly from quarter to quarter and year to year. The Company frequently receives refund requests from insurance providers relating to specific patients and dates of service. Billing and reimbursement disputes are very common in the Company’s industry. These requests are sometimes related to a limited number of patients or products; at other times, they include a significant number of refund claims in a single request. The Company reviews and evaluates these requests and determines if any refund request is appropriate. The Company also reviews these refund claims when it is rebilling or pursuing reimbursement from insurance providers. The Company frequently has significant offsets against such refund requests, and sometimes amounts are due to the Company in excess of the amounts of refunds requested by the insurance providers. Therefore, at the time of receipt of such refund requests, the Company is generally unable to determine if a refund request is valid and should be accrued. Such refunds are recorded when the amount is fixed and determinable. However, management maintains an allowance for estimated future refunds which we believe is sufficient to cover future claims in connection with its estimates of variable consideration recorded at the time sales are recorded. |
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 the notes payable related to our private placement and capitalized leases, 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 Inventory, which primarily represents devices, parts and supplies, are valued at the lower of cost (average) or market. 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 equal to the difference between the costs of inventories on hand and the estimated market value based upon assumptions about future demand. If future demand is less favorable than currently projected by management, additional inventory write-downs may be required. Total gross inventories at September 30, 2018 were $0.8 million which was comprised of finished goods, work in progress, and parts and supplies as compared to December 31, 2017 of $0.4 million. |
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 and Chief Financial 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 basis 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. On December 22, 2017, the U.S. government enacted comprehensive tax legislation (the “Tax Act”), which significantly revises the ongoing U.S. corporate income tax law by lowering the U.S. federal corporate income tax rate from 35% to 21%, implementing a territorial tax system, imposing a one-time tax on foreign unremitted earnings and setting limitations on deductibility of certain costs, among other things. 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. Due to the complexities involved in accounting for the recently enacted Tax Act, the U.S. Securities and Exchange Commission’s Staff Accounting Bulletin (“SAB”) 118 requires that the Company include in its financial statements the reasonable estimate of the impact of the Tax Act on earnings to the extent such estimate has been determined. Pursuant to the SAB118, the Company is allowed a measurement period of up to one year after the enactment date of the Tax Act to finalize the recording of the related tax impacts. The final impact on the Company from the Tax Act’s transition tax legislation may differ from the aforementioned estimates due to the complexity of calculating and supporting with primary evidence such U.S. tax attributes such as accumulated foreign earnings and profits, foreign tax paid, and other tax components involved in foreign tax credit calculations for prior years back to 1998. Such differences could be material, due to, among other things, changes in interpretations of the Tax Act, future legislative action to address questions that arise because of the Tax Act, changes in accounting standards for income taxes or related interpretations in response to the Tax Act, or any updates or changes to estimates the Company has utilized to calculate the transition tax's reasonable estimate. The Company has not made any estimates regarding the U.S. Tax Act. The Company will continue to evaluate the impact of the U.S. Tax Act and will record any resulting material tax adjustments during 2018. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In August 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities (“ASU 2017-12”), which amends and simplifies existing guidance in order to allow companies to more accurately present the economic effects of risk management activities in the financial statements. ASU 2017-12 is effective for us in the first quarter of fiscal 2020, and earlier adoption is permitted. We are currently evaluating the impact of our pending adoption of ASU 2017-12 on our consolidated financial statements. 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, 2019, and interim periods therein. Early adoption is permitted for annual periods beginning after December 15, 2018, and interim periods therein. We are currently evaluating the impact that the adoption of ASU 2016-13 will have on our financial condition, results of operations and cash flows. In February 2018, the FASB issued Accounting Standards Update No. 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (“ASU 2018-02”), which allows companies to reclassify stranded tax effects resulting from the 2017 Tax Cuts and Jobs Act (the Tax Act), from accumulated other comprehensive income to retained earnings. The new standard is effective for us beginning January 1, 2019, with early adoption permitted. We are currently evaluating the effects that the adoption of this guidance will have on our consolidated financial statements and the related disclosures. In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). These amendments require the recognition of lease assets and lease liabilities on the balance sheet by lessees for those leases currently classified as operating leases under ASC 840 “Leases”. These amendments also require qualitative disclosures along with specific quantitative disclosures. These amendments are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted. Entities are required to apply the amendments at the beginning of the earliest period presented using a modified retrospective approach. We are currently evaluating the impact that the adoption of ASU 2016-02 will have on our financial condition, results of operations and cash flows. In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718), Improvements to Nonemployee Share-based Payments (“ASU 2018-07”). This ASU expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The effective date for the standard is for interim periods in fiscal years beginning after December 15, 2018, with early adoption permitted. The new guidance is required to be applied retrospectively with the cumulative effect recognized at the date of initial application. The Company is currently evaluating the effect ASU 2018-07 will have on the consolidated financial statements. 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. Recent Adopted Accounting Pronouncements In May 2014, the FASB issued ASU No. 2014-09—“Revenue from Contracts with Customers” (Topic 606) which amended revenue recognition guidance to clarify the principles for recognizing revenue from contracts with customers. The guidance requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. The guidance also requires expanded disclosures relating to the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Additionally, qualitative and quantitative disclosures are required about customer contracts, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. The Company adopted the new ASU as of January 1, 2018 using the modified retrospective method and resulted in no material changes to previously stated financial statements. For further details see the revenue recognition policy described previously in Note 1. |
BASIS OF PRESENTATION (Tables)
BASIS OF PRESENTATION (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Disaggregation of Revenue | Devices sales between purchased and leased are broken down as following (in thousands) : For the Three Months Ended September 30, For the Nine Months Ended September 30, 2018 2017 2018 2017 DEVICE REVENUE Purchased $ 547 $ 304 $ 1,260 $ 1,189 Leased 1,264 841 3,812 2,571 Total Device revenue 1,811 1,145 5,072 3,760 |
BALANCE SHEET COMPONENTS (Table
BALANCE SHEET COMPONENTS (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Condensed Balance Sheet | The components of certain balance sheet line items are as follows (in thousands): September 30, 2018 December 31, 2017 Property and equipment: Office furniture and equipment $ 1,149 $ 998 Assembly equipment 128 128 Vehicles 181 76 Leasehold improvements 480 - Leased devices 152 - $ 2,090 $ 1,202 Less accumulated depreciation (1,261 ) (1,014 ) $ 829 $ 188 September 30,2018 December 31,2017 Assets acquired under capital lease: Original book value $ 461 $ 461 Accumulated depreciation (427 ) (379 ) Net book value $ 34 $ 82 |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Earnings Per Share [Abstract] | |
Calculation of Basic and Diluted Earnings (Loss) Per Share | The calculation of basic and diluted earnings per share for the three and nine months ended September 30, 2018 and 2017 are as follows: For the Three Months Ended September 30, For the Nine Months Ended September 30, 2018 2017 2018 2017 Basic income per share: Net income available to common stockholders $ 2,591 $ 2,200 $ 6,930 $ 4,058 Basic weighted average shares outstanding 32,521 32,327 32,580 31,931 Basic income per share: $ 0.08 $ 0.07 $ 0.21 $ 0.13 Diluted income per share: Net income available to common stockholders $ 2,591 $ 2,200 $ 6,930 $ 4,058 Weighted average shares outstanding 32,521 32,327 32,580 31,931 Effect of dilutive securities - options and restricted stock 1,410 1,218 1,591 859 Diluted weighted average shares outstanding 33,931 33,545 34,171 32,790 Diluted income per share: $ 0.08 $ 0.07 $ 0.20 $ 0.12 |
STOCK-BASED COMPENSATION PLANS
STOCK-BASED COMPENSATION PLANS (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
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 and nine months ended September 30, 2018 and 2017. For the Three Months Ended September 30, For the Nine Months Ended September 30, 2018 2017 2018 2017 Expected term (years) 6.25 6.25 6.25 6.25 Risk-free interest rate 2.78 % 1.82 % 2.78 % 1.79 % Expected volatility 123.05 % 123.85 % 123.05 % 124.38 % Expected dividend yield 0.00 % 0.00 % 0.00 % 0.00 % |
Summary of Stock Option Activity Under the Option Plan | A summary of stock option activity under all equity compensation plans for the nine months ended September 30, 2018, 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, 2017 2,126 $ 0.56 6.6 $ 5,579 Granted 120 $ 2.64 Forfeited (86 ) $ 1.31 Exercised (353 ) $ 0.44 Outstanding at September 30, 2018 1,807 $ 0.67 6.4 $ 4,174 Exercisable at September 30, 2018 1,235 $ 0.38 5.3 $ 3,215 |
Restricted Stock Award Activity Under all Equity Compensation Plans | A summary of restricted stock award activity under all equity compensation plans for the nine months ended September 30, 2018, is presented below: Number of Shares (in thousands) Granted but not vested at December 31, 2017 15 Granted 75 Forfeited - Vested (13 ) Granted but not vested at September 30, 2018 77 |
STOCKHOLDERS' EQUITY (Tables)
STOCKHOLDERS' EQUITY (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Equity [Abstract] | |
Summary of stock warrant activity | A summary of stock warrant activity for the nine months ended September 30, 2018 are presented below: Number of Warrants (in thousands) Weighted Average Exercise Price Weighted Average Remaining Contractual Life (Years) Aggregate Intrinsic Value (in thousands ) Outstanding at December 31, 2017 200 $ 1.86 5.87 $ 264 Granted - $ - Exercised (50 ) $ 0.20 Forfeited - $ - Outstanding at September 30, 2018 150 $ 2.42 6.02 $ 85 |
PRIVATE PLACEMENT (Tables)
PRIVATE PLACEMENT (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Private Placement Memorandum Disclosure [Abstract] | |
Schedule of Cash and Non-Cash Components Of The Private Placement Memorandum | The table below summarizes the cash and non-cash components of the private placement memorandum (in thousands): September 30, 2018 Proceeds from unsecured subordinated promissory notes $ 1,035 Less debt issuance costs and discount Payment of commission and placement agent fees and related expenses (155 ) Principal payments on promissory notes (1,035 ) Non-cash activity Common stock issued to placement agent (255 ) Obligation to issue common stock to private placement noteholders (255 ) Amortization of issuance costs and debt discount 665 Unsecured subordinated promissory notes, net of issuance and debt discount - Current portion of unsecured subordinated promissory notes - |
BASIS OF PRESENTATION (Details)
BASIS OF PRESENTATION (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Purchased | $ 547 | $ 304 | $ 1,260 | $ 1,189 |
Leased | 1,264 | 841 | 3,812 | 2,571 |
Total Device revenue | $ 1,811 | $ 1,145 | $ 5,072 | $ 3,760 |
BASIS OF PRESENTATION (Details
BASIS OF PRESENTATION (Details Textual) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Mar. 31, 2016 | |
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items] | |||||||
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent | 35.00% | ||||||
Inventory, Net | $ 796 | $ 796 | $ 423 | ||||
Liability for Claims and Claims Adjustment Expense | $ 880 | $ 880 | $ 880 | $ 880 | |||
ZBC [Member] | |||||||
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items] | |||||||
Noncontrolling Interest, Ownership Percentage by Parent | 20.00% | 20.00% | |||||
Scenario, Plan [Member] | |||||||
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items] | |||||||
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent | 21.00% | ||||||
North America [Member] | |||||||
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items] | |||||||
Percentage Of Revenues | 99.99% | 99.99% | 99.99% | 99.99% |
BALANCE SHEET COMPONENTS (Detai
BALANCE SHEET COMPONENTS (Details) - USD ($) $ in Thousands | Sep. 30, 2018 | Dec. 31, 2017 |
Property, Plant and Equipment, Gross | $ 2,090 | $ 1,202 |
Less accumulated depreciation | (1,261) | (1,014) |
Property and Equipment, Net | 829 | 188 |
Assets acquired under capital lease: | ||
Original book value | 461 | 461 |
Accumulated depreciation | (427) | (379) |
Net book value | 34 | 82 |
Office furniture and equipment | ||
Property, Plant and Equipment, Gross | 1,149 | 998 |
Assembly equipment | ||
Property, Plant and Equipment, Gross | 128 | 128 |
Vehicles | ||
Property, Plant and Equipment, Gross | 181 | 76 |
Leasehold improvements | ||
Property, Plant and Equipment, Gross | 480 | 0 |
Leased devices | ||
Property, Plant and Equipment, Gross | $ 152 | $ 0 |
BALANCE SHEET COMPONENTS (Det_2
BALANCE SHEET COMPONENTS (Details Textual) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Property and Equipment [Member] | ||||
Depreciation | $ 100,000 | $ 100,000 | $ 100,000 | $ 200,000 |
Leased Devices [Member] | ||||
Depreciation | 100,000 | $ 200,000 | 100,000 | $ 300,000 |
Assets Held under Capital Leases [Member] | ||||
Depreciation | $ 16,000 | $ 48,000 |
EARNINGS PER SHARE (Details)
EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Basic income per share: | ||||
Net income available to common stockholders | $ 2,591 | $ 2,200 | $ 6,930 | $ 4,058 |
Basic weighted average shares outstanding | 32,521 | 32,327 | 32,580 | 31,931 |
Basic income per share: | $ 0.08 | $ 0.07 | $ 0.21 | $ 0.13 |
Diluted income per share: | ||||
Net income available to common stockholders | $ 2,591 | $ 2,200 | $ 6,930 | $ 4,058 |
Weighted average shares outstanding | 32,521 | 32,327 | 32,580 | 31,931 |
Effect of dilutive securities - options and restricted stock | 1,410 | 1,218 | 1,591 | 859 |
Diluted weighted average shares outstanding | 33,931 | 33,545 | 34,171 | 32,790 |
Diluted income per share: | $ 0.08 | $ 0.07 | $ 0.20 | $ 0.12 |
EARNINGS PER SHARE (Details Tex
EARNINGS PER SHARE (Details Textual) - shares | 1 Months Ended | 3 Months Ended | 9 Months Ended | ||
Aug. 28, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 300,000 | 1,000,000 | 300,000 | 800,000 | |
Weighted Average Number Diluted Shares Outstanding Adjustment | 1,410,000 | 1,218,000 | 1,591,000 | 859,000 | |
Common Stock [Member] | Private Placement [Member] | |||||
Weighted Average Number Diluted Shares Outstanding Adjustment | 776,250 |
STOCK-BASED COMPENSATION PLAN_2
STOCK-BASED COMPENSATION PLANS (Details) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Fair value of stock option grants | ||||
Expected term (years) | 6 years 3 months | 6 years 3 months | 6 years 3 months | 6 years 3 months |
Risk-free interest rate | 2.78% | 1.82% | 2.78% | 1.79% |
Expected volatility | 123.05% | 123.85% | 123.05% | 124.38% |
Expected dividend yield | 0.00% | 0.00% | 0.00% | 0.00% |
STOCK-BASED COMPENSATION PLAN_3
STOCK-BASED COMPENSATION PLANS (Details 1) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | |
Summary of stock option activity under the option Plan | |||||
Number of Shares, Granted | 100 | 100 | 100 | 500 | |
Weighted Average Exercise Price, Granted | $ 2.64 | $ 0.92 | $ 2.64 | $ 0.41 | |
Employee Stock Option [Member] | |||||
Summary of stock option activity under the option Plan | |||||
Balance Beginning | 2,126 | ||||
Number of Shares, Granted | 120 | ||||
Number of Shares, Forfeited | (86) | ||||
Number of Shares, Exercised | (353) | ||||
Balance Ending | 1,807 | 1,807 | 2,126 | ||
Number of Shares, Exercisable at September 30, 2018 | 1,235 | 1,235 | |||
Weighted Average Exercise Price, Outstanding Beginning | $ 0.56 | ||||
Weighted Average Exercise Price, Granted | 2.64 | ||||
Weighted Average Exercise Price, Forfeited | 1.31 | ||||
Weighted Average Exercise Price, Exercised | 0.44 | ||||
Weighted Average Exercise Price, Outstanding Ending | $ 0.67 | 0.67 | $ 0.56 | ||
Weighted Average Exercise Price, Exercisable | $ 0.38 | $ 0.38 | |||
Weighted Average Remaining Contractual Life, Outstanding | 6 years 4 months 24 days | 6 years 7 months 6 days | |||
Weighted Average Remaining Contractual Life Exercisable | 5 years 3 months 18 days | ||||
Aggregate Intrinsic Value, Outstanding | $ 4,174 | $ 4,174 | $ 5,579 | ||
Aggregate Intrinsic Value, Exercisable | $ 3,215 | $ 3,215 |
STOCK-BASED COMPENSATION PLAN_4
STOCK-BASED COMPENSATION PLANS (Details 2) - Restricted Stock [Member] - shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Granted but not vested at December 31, 2017 | 15,000 | |||
Granted | 5,000 | 0 | 75,000 | 10,000 |
Forfeited | 0 | |||
Vested | (13,000) | |||
Granted but not vested at September 30, 2018 | 77,000 | 77,000 |
STOCK-BASED COMPENSATION PLAN_5
STOCK-BASED COMPENSATION PLANS (Details Textual) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Shares under option, granted | 100,000 | 100,000 | 100,000 | 500,000 |
Weighted Average Exercise Price, Granted | $ 2.64 | $ 0.92 | $ 2.64 | $ 0.41 |
Unrecognized compensation expense related to stock options | $ 800,000 | $ 800,000 | ||
Weighted-average period of unrecognized compensation expense related to stock options | 2 years 9 months 18 days | |||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value | $ 2.34 | $ 0.90 | $ 2.34 | $ 0.39 |
Proceeds from Stock Options Exercised | $ 21,000 | $ 200,000 | ||
Sharebased Compensation Arrangement by Sharebased Payment Award Options remain Issued Number | 700,000 | 700,000 | ||
Sharebased Compensation Arrangement by Sharebased Payment Award Options remain Outstanding Number | 700,000 | 700,000 | ||
Restricted Stock [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period | 5,000 | 0 | 75,000 | 10,000 |
Selling, General And Administrative Expenses | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Allocated Share-based Compensation Expense | $ 76,000 | $ 9,000 | $ 200,000 | $ 46,000 |
2005 Stock Option Plan | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized | 3,000,000 | 3,000,000 | ||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number | 1,100,000 | 1,100,000 | ||
Stock Incentive Plan 2017 [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized | 5,000,000 | 5,000,000 | ||
Shares under option, granted | 100,000 | 100,000 |
STOCKHOLDERS' EQUITY (Details)
STOCKHOLDERS' EQUITY (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | |
Shares under option, granted | 100 | 100 | 100 | 500 | |
Weighted Average Exercise Price, Granted | $ 2.64 | $ 0.92 | $ 2.64 | $ 0.41 | |
Warrant [Member] | |||||
Balance Beginning | 200 | ||||
Shares under option, granted | 0 | ||||
Number of Shares, Exercised | (50) | ||||
Number of Warrants, Forfeited | 0 | ||||
Balance Ending | 150 | 150 | 200 | ||
Weighted Average Exercise Price, Outstanding Beginning | $ 1.86 | ||||
Weighted Average Exercise Price, Granted | 0 | ||||
Weighted Average Exercise Price, Exercised | 0.20 | ||||
Weighted Average Exercise Price, Forfeited | 0 | ||||
Weighted Average Exercise Price, Outstanding Ending | $ 2.42 | $ 2.42 | $ 1.86 | ||
Weighted Average Remaining Contractual Life (Years) | 6 years 7 days | 5 years 10 months 13 days | |||
Aggregate Intrinsic Value Exercisable Balance | $ 264 | ||||
Aggregate Intrinsic Value Exercisable Balance | $ 85 | $ 85 | $ 264 |
STOCKHOLDERS' EQUITY (Details T
STOCKHOLDERS' EQUITY (Details Textual) - USD ($) $ / shares in Units, $ in Millions | 1 Months Ended | 3 Months Ended | 9 Months Ended | 37 Months Ended | ||
Oct. 31, 2017 | Sep. 30, 2018 | Sep. 30, 2018 | Mar. 06, 2018 | May 14, 2018 | Mar. 28, 2016 | |
Stock Repurchase Program, Authorized Amount | $ 2 | |||||
Stock Repurchased During Period, Shares | 334,414 | 400,927 | 495,091 | |||
Treasury Stock Acquired, Average Cost Per Share | $ 3.22 | $ 3.21 | $ 4.04 | |||
Stock Repurchased During Period, Value | $ 1.1 | $ 1.3 | $ 2 | |||
Stock Repurchase Program Additional Authorized Amount | $ 2 | |||||
Warrant [Member] | ||||||
Stock Issued During Period, Shares, Issued for Services | 150,000 | |||||
Triumph Bank [Member] | ||||||
Class of Warrant or Right, Number of Securities Called by Each Warrant or Right | 50,000 |
INCOME TAXES (Details Textual)
INCOME TAXES (Details Textual) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Income Taxes [Line Items] | ||||
Income Tax Expense (Benefit) | $ 228,000 | $ 44,000 | $ 407,000 | $ 89,000 |
Effective Income Tax Rate Reconciliation, Percent | 9.00% | |||
Income Taxes Paid | $ 228,000 | $ 0 | ||
Income Tax Credits and Adjustments | $ 16,000 | $ 300,000 |
PRIVATE PLACEMENT (Details)
PRIVATE PLACEMENT (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | |
Proceeds from unsecured subordinated promissory notes | $ 0 | $ 1,035,000 | |||
Less debt issuance costs and discount Payment of commission and placement agent fees and related expenses | 0 | (155,000) | |||
Principal payments on promissory notes | (385,000) | $ (269,000) | |||
Non-cash activity | |||||
Amortization of issuance costs and debt discount | $ 0 | $ 143,000 | |||
Current portion of unsecured subordinated promissory notes | 0 | 0 | $ (231,000) | ||
Private Placement Memorandum [Member] | |||||
Proceeds from unsecured subordinated promissory notes | 1,035,000 | ||||
Less debt issuance costs and discount Payment of commission and placement agent fees and related expenses | (155,000) | ||||
Principal payments on promissory notes | (1,035,000) | ||||
Non-cash activity | |||||
Common stock issued to placement agent | (255,000) | ||||
Obligation to issue common stock to private placement noteholders | (255,000) | ||||
Amortization of issuance costs and debt discount | 665,000 | ||||
Unsecured subordinated promissory notes, net of issuance and debt discount | 0 | ||||
Current portion of unsecured subordinated promissory notes | $ 0 | $ 0 |
PRIVATE PLACEMENT (Details Text
PRIVATE PLACEMENT (Details Textual) - USD ($) | 1 Months Ended | 3 Months Ended | 9 Months Ended | ||||
Aug. 28, 2017 | Feb. 28, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Nov. 30, 2016 | |
Amortization of Debt Issuance Costs and Discounts | $ 0 | $ 143,000 | |||||
Increase in Value of Common Shares to be Issued | $ 529,000 | $ 740,000 | |||||
Newbridge Securities Corporation [Member] | |||||||
Stock to be Issued For Services | 776,250 | ||||||
Stock Issued During Period, Shares, Issued for Services | 776,250 | ||||||
Stock Issued | $ 255,000 | $ 255,000 | |||||
Repayments of Unsecured Debt | $ 342,000 | ||||||
Amortization of Debt Issuance Costs and Discounts | $ 153,000 | $ 292,000 | |||||
Percentage Of Commissions In Cash | 10.00% | ||||||
Non Accountable Expense Allowance Percentage | 3.00% | ||||||
Expense Reimbursement | $ 155,000 | ||||||
Newbridge Securities Corporation [Member] | Unsecured Debt [Member] | |||||||
Funds Available For Repayment Of Note,Percentage | 5.00% | ||||||
Debt Instrument, Face Amount | $ 1,035,000 | ||||||
Newbridge Securities Corporation [Member] | Unsecured Debt [Member] | Minimum [Member] | |||||||
Debt Instrument, Face Amount | $ 1,000,000 | ||||||
Newbridge Securities Corporation [Member] | Unsecured Debt [Member] | Maximum [Member] | |||||||
Debt Instrument, Face Amount | $ 1,500,000 |
DEFERRED INSURANCE REIMBURSEM_2
DEFERRED INSURANCE REIMBURSEMENT (Details Textual) - USD ($) $ in Thousands | Sep. 30, 2018 | Dec. 31, 2017 | Mar. 31, 2016 |
Liability for Claims and Claims Adjustment Expense, Total | $ 880 | $ 880 | $ 880 |
CAPITAL LEASES AND OTHER OBLI_2
CAPITAL LEASES AND OTHER OBLIGATIONS (Details Textual) $ in Thousands | 1 Months Ended | 9 Months Ended | ||
Apr. 30, 2018ft² | Oct. 20, 2017USD ($)a | Sep. 30, 2018USD ($) | Dec. 31, 2017USD ($) | |
Debt Instrument [Line Items] | ||||
Cost of assets under capital lease | $ 461 | $ 461 | ||
Accumulated depreciation | 427 | 379 | ||
Land Subject to Ground Leases | 12,494 | 41,715 | ||
Tenant Improvements | $ 200 | |||
Lessee Operating Sublease Rent Description | 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. | |||
Lessee, Operating Sublease, Option to Extend | June 30, 2025 | |||
Deferred Rent Credit, Noncurrent | $ 559 | $ 0 | ||
Rate Per Square Feet | ft² | 26.50 | |||
Maximum | ||||
Debt Instrument [Line Items] | ||||
Imputed interest rate on lease | 10.00% | |||
Minimum | ||||
Debt Instrument [Line Items] | ||||
Imputed interest rate on lease | 2.00% |
CONCENTRATIONS (Details Textual
CONCENTRATIONS (Details Textual) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | |
Supplier Concentration Risk [Member] | Minimum [Member] | |||||
Concentration Risk [Line Items] | |||||
Concentration Risk, Percentage | 10.00% | ||||
Accounts Receivable [Member] | |||||
Concentration Risk [Line Items] | |||||
Concentration Risk, Percentage | 22.00% | 24.00% | |||
One Vendor [Member] | Supplier Concentration Risk [Member] | |||||
Concentration Risk [Line Items] | |||||
Concentration Risk, Percentage | 44.00% | ||||
Two Vendor [Member] | Supplier Concentration Risk [Member] | |||||
Concentration Risk [Line Items] | |||||
Concentration Risk, Percentage | 47.00% | ||||
Three Vendor [Member] | Supplier Concentration Risk [Member] | |||||
Concentration Risk [Line Items] | |||||
Concentration Risk, Percentage | 51.00% | 52.00% |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details Textual) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2015 | Sep. 30, 2018 | Sep. 30, 2017 | |
Related Party Transaction [Line Items] | |||||
Compensation paid | $ 40,000 | $ 43,000 | $ 100,000 | $ 100,000 | |
Employment Arrangement | Immediate Family Members of Management or Principal Owner | |||||
Related Party Transaction [Line Items] | |||||
Lump sum payment | $ 100,000 | ||||
Agreement term | 3 years |
SUBSEQUENT EVENTS (Details Text
SUBSEQUENT EVENTS (Details Textual) - Subsequent Event [Member] | Nov. 06, 2018$ / shares |
Dividends Payable, Amount Per Share | $ 0.07 |
Dividends Payable, Date of Record | Jan. 2, 2019 |
Dividends Payable, Date to be Paid | Jan. 18, 2019 |