Core Viewpoint - Bragar Eagel & Squire, P.C. is investigating potential claims against Zynex, Inc. due to a class action complaint alleging breaches of fiduciary duties by the board of directors [1] Company Overview - Zynex, Inc. is facing scrutiny for allegedly inflating its stock price through false and misleading statements regarding its financial performance and operational practices [6] - The company reportedly engaged in a systemic "oversupplying scheme," shipping excessive quantities of supplies and billing insurers for inflated amounts [6] Financial Impact - The misconduct was revealed on March 11, 2025, when Zynex announced a significant revenue shortfall attributed to slower payments from insurers, particularly Tricare, which accounts for 20-25% of its annual revenue [6] - Following the announcement, Zynex's stock price dropped by $3.59 per share, or 51.3%, closing at $3.41 per share, resulting in a substantial loss of shareholder value [6]

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Core Viewpoint - Zynex, Inc. has appointed Steven Dyson as the new CEO and announced a new executive leadership team to enhance business performance and fulfill its mission in the medical technology sector [1][2][7]. Leadership Appointments - Steven Dyson has been appointed as CEO, effective June 30, 2025, and has since been working with the Board to finalize the executive team [2]. - Vikram Bajaj joins as Chief Financial Officer, bringing over 20 years of experience in finance and M&A within the med-tech sector, previously serving as CFO at Vyaire Medical and Kepro [3]. - John Bibb has been appointed as Chief Legal Officer, with over 20 years of experience in legal and compliance roles in the med-tech sector, including positions at Kinetic Concepts and Vyaire Medical [4]. - Ajay Gopal is the new EVP of Sales, recognized for his leadership in the healthcare and medical device sectors, with a history of transformative growth [5]. - Agnes Powell has been appointed as VP of Billing, with 20 years of experience in revenue cycle operations and compliance across various healthcare settings [6]. Executive Team Goals - The new executive team aims to improve business performance and uphold integrity in business practices, focusing on enhancing the quality of life for patients suffering from pain and illness [7]. - The Board expresses confidence in the new leadership team to drive Zynex towards greater success [7].

Core Viewpoint - The Portnoy Law Firm has initiated an investigation into Zynex, Inc. for possible securities fraud, potentially leading to a class action lawsuit for investors who suffered losses [1][3]. Company Overview - Zynex, Inc. is under scrutiny for allegedly inflating its stock price through false statements regarding its financial performance and operational practices [3]. - The company is accused of a systemic "oversupplying scheme," where excessive quantities of medical supplies were shipped to patients, leading to inflated billing to insurers [3]. Financial Impact - A significant revenue shortfall was disclosed in Zynex's fourth-quarter and full-year 2024 results, attributed to slower payments from certain payers, including a temporary suspension of payments from Tricare [4]. - Tricare, which accounted for approximately 20% to 25% of Zynex's annual revenue, is reviewing prior claims, raising concerns about the company's financial stability [4]. Market Reaction - Following the disclosure of these issues, Zynex's stock price plummeted by $3.59 per share, or 51.3%, closing at $3.41 per share, indicating a severe loss of shareholder value [5].

Core Viewpoint - Zynex reported disappointing Q2 2025 results, with significant declines in revenue and profitability, attributed to external reimbursement issues, internal cost cuts, and executive turnover [1][5][8] Financial Performance - GAAP revenue for Q2 2025 was $22.3 million, missing the forecast of $27.4 million, and down 55.3% from $49.9 million in Q2 2024 [2][5] - GAAP earnings per share were ($0.66), worse than the projected ($0.20) and a decline from $0.04 in the prior year [2][5] - Gross profit margin fell to 68%, down from 80% year-over-year, reflecting increased costs associated with supporting Tricare patients [2][5] - Adjusted EBITDA showed a loss of $8.9 million, a significant drop from a gain of $3.5 million in the previous year [2][5] - Cash and cash equivalents decreased to $17.5 million from $39.6 million at the end of 2024, indicating negative cash flow from operations [2][5] Business Overview - Zynex specializes in electrotherapy devices for pain management, generating revenue from device sales and consumable supplies [3][4] - The company has focused on expanding its U.S. sales force, seeking regulatory clearance for new devices, and building recurring revenue through consumable sales [4] Operational Developments - The quarter experienced a steep drop in sales, with supplies revenue down 66.9% year-over-year and device revenue declining 30.7% [5] - The Tricare payment suspension significantly impacted revenue, as the company continued to provide consumables without reimbursement [5] - Zynex shifted its strategy from rapid sales force expansion to consolidation and efficiency gains, reducing sales headcount [6] Product and Regulatory Updates - Zynex filed a new patient-monitoring device, the NiCO laser pulse oximeter, with the FDA, but commercial launch is not expected until 2026 [7] - The company is focusing on ensuring current products meet market needs and maintaining regulatory compliance [7] Future Outlook - Management has suspended all financial guidance amid leadership changes, with a new CEO set to review forecasting procedures [8] - Investors are advised to monitor the resolution of the Tricare payment suspension, cash flow issues, and the effectiveness of new leadership [9]

Company Performance - Zynex Inc. reported a quarterly loss of $0.32 per share, which was worse than the Zacks Consensus Estimate of a loss of $0.20, and a significant decline from earnings of $0.04 per share a year ago, indicating an earnings surprise of -60.00% [1] - The company posted revenues of $22.29 million for the quarter ended June 2025, missing the Zacks Consensus Estimate by 17.44%, and a substantial decrease from year-ago revenues of $49.88 million [2] - Over the last four quarters, Zynex has only surpassed consensus EPS estimates once and has not beaten consensus revenue estimates during the same period [2] Stock Performance - Zynex shares have declined approximately 68.9% since the beginning of the year, contrasting sharply with the S&P 500's gain of 8.2% [3] - The current Zacks Rank for Zynex is 4 (Sell), indicating expectations for the stock to underperform the market in the near future [6] Future Outlook - The consensus EPS estimate for the upcoming quarter is -$0.20 on revenues of $28.13 million, while for the current fiscal year, the estimate is -$0.81 on revenues of $110.3 million [7] - The outlook for the Medical - Products industry, to which Zynex belongs, is currently in the bottom 26% of over 250 Zacks industries, suggesting potential challenges ahead [8]

[PART I—FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) This section provides the unaudited condensed consolidated financial statements and related notes, offering a detailed view of the company's financial position and performance [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including balance sheets, income statements, cash flow statements, and statements of stockholders' equity, along with detailed notes. Key financial highlights include a significant decrease in cash and cash equivalents, a shift from net income to substantial net losses, and a working capital deficit, primarily driven by the Tricare payment suspension and increased current portion of convertible senior notes [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section presents the company's financial position at specific points in time, detailing assets, liabilities, and equity | Metric | June 30, 2025 (unaudited) (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :--------------------------------------- | :------------------------------- | :-------------------- | :------- | | Cash and cash equivalents | $17,543 | $39,631 | $(22,088) | -55.7% | | Accounts receivable, net | $10,345 | $18,022 | $(7,677) | -42.6% | | Total current assets | $45,600 | $75,179 | $(29,579) | -39.3% | | Total assets | $85,935 | $122,079 | $(36,144) | -29.6% | | Current portion of convertible senior notes | $59,074 | $0 | $59,074 | N/A | | Total current liabilities | $73,859 | $16,864 | $56,995 | 337.9% | | Total liabilities | $84,674 | $86,371 | $(1,697) | -2.0% | | Total stockholders' equity | $1,261 | $35,708 | $(34,447) | -96.5% | [Unaudited Condensed Consolidated Statements of Income (Loss)](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Income%20(Loss)) This section details the company's revenues, expenses, and net income or loss over specific reporting periods | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total net revenue | $22,290 | $49,883 | $48,868 | $96,414 | | Income (loss) from operations | $(10,283) | $2,226 | $(23,380) | $2,751 | | Net income (loss) | $(20,033) | $1,217 | $(30,429) | $1,227 | | Basic EPS | $(0.66) | $0.04 | $(0.98) | $0.04 | | Diluted EPS | $(0.66) | $0.04 | $(0.98) | $0.04 | - Net revenue decreased by **55.3%** for the three months ended June 30, 2025, and by **49.3%** for the six months ended June 30, 2025, compared to the same periods in 2024, primarily due to the Tricare payment suspension and decreased device orders[11](index=11&type=chunk)[143](index=143&type=chunk) - The Company reported a significant net loss of **$20.0 million** for the three months and **$30.4 million** for the six months ended June 30, 2025, a substantial decline from net income of **$1.2 million** in both comparable periods of 2024[11](index=11&type=chunk)[139](index=139&type=chunk) [Unaudited Condensed Consolidated Statements of Cash Flows](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section outlines the cash inflows and outflows from operating, investing, and financing activities over specific periods | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by (used in) operating activities | $(16,703) | $3,202 | | Net cash (used in) investing activities | $(197) | $(290) | | Net cash (used in) financing activities | $(5,188) | $(16,595) |\ | Net decrease in cash | $(22,088) | $(13,683) | | Cash and cash equivalents at end of period | $17,543 | $30,896 | - Operating activities shifted from providing **$3.2 million** in cash in H1 2024 to using **$16.7 million** in H1 2025, primarily due to lower net income from the Tricare payment suspension[13](index=13&type=chunk)[161](index=161&type=chunk) - Cash used in financing activities decreased from **$16.6 million** in H1 2024 to **$5.2 million** in H1 2025, mainly due to reduced treasury stock purchases[13](index=13&type=chunk)[163](index=163&type=chunk) [Unaudited Condensed Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) This section details changes in the company's equity accounts, including common stock, additional paid-in capital, treasury stock, and retained earnings | Stockholders' Equity (in thousands) | December 31, 2024 | June 30, 2025 | | :---------------------------------- | :---------------- | :------------ | | Common Stock Amount | $32 | $30 | | Additional Paid-in Capital | $93,088 | $94,009 | | Treasury Stock | $(87,186) | $(92,123) |\ | Retained Earnings (deficit) | $29,774 | $(655) | | Total Stockholders' Equity | $35,708 | $1,261 | - Total stockholders' equity significantly decreased from **$35.7 million** at December 31, 2024, to **$1.3 million** at June 30, 2025, primarily due to a net loss of **$30.4 million** and treasury stock purchases[14](index=14&type=chunk)[139](index=139&type=chunk) - Retained earnings shifted to a deficit of **$0.7 million** at June 30, 2025, from positive retained earnings of **$29.8 million** at December 31, 2024, reflecting the net losses incurred[14](index=14&type=chunk) [Unaudited Notes to Condensed Consolidated Financial Statements](index=7&type=section&id=Unaudited%20Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and additional information supporting the condensed consolidated financial statements [(1) BASIS OF PRESENTATION](index=7&type=section&id=(1)%20BASIS%20OF%20PRESENTATION) This note describes the company's business operations, recent significant events, and management's going concern assessment - Zynex, Inc. operates primarily in one business segment: medical devices, including electrotherapy and pain management products, marketed in the U.S. and subject to FDA regulation[16](index=16&type=chunk)[18](index=18&type=chunk) - The Company's Zynex Monitoring Solutions, Inc. (ZMS) subsidiary received FDA approval for a fluid monitoring system in 2020 and is developing laser-based patient monitoring technology (NiCO™ and HemeOx™), with a 510(k) application submitted for NiCO™ in Q2 2025[16](index=16&type=chunk)[17](index=17&type=chunk) - Tricare, historically representing **20-25% of annual revenue**, temporarily suspended payments in Q1 2025 due to alleged misrepresentation of billing and diagnoses, leading to a full reserve on related receivables as of June 30, 2025[20](index=20&type=chunk)[21](index=21&type=chunk) - The Company implemented workforce reductions in Q1 and Q2 2025, affecting **15%** and **14%** of employees respectively, anticipating approximately **$40.0 million** in annualized cost savings[24](index=24&type=chunk)[25](index=25&type=chunk) - The SEC initiated an investigation in June 2025, requesting documents to determine potential federal securities law violations, with the Company cooperating[26](index=26&type=chunk) - Management concluded that substantial doubt exists about the Company's ability to continue as a going concern for the next 12 months, citing net losses, reduced cash, and dependence on refinancing convertible senior notes or securing additional financing[27](index=27&type=chunk)[28](index=28&type=chunk) [(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=9&type=section&id=(2)%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines the key accounting principles and methods used in preparing the financial statements, including revenue recognition and segment reporting - Revenue is recognized when performance obligations are met upon product delivery to the patient, with estimates for third-party payer reimbursement deductions and uncollectible accounts based on historical rates and current relationships[43](index=43&type=chunk)[46](index=46&type=chunk) Disaggregated Net Revenues (in thousands) | Revenue Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Device revenue | $11,034 | $15,920 | $22,932 | $29,945 | | Supplies revenue | $11,256 | $33,963 | $25,936 | $66,469 | | Total revenue | $22,290 | $49,883 | $48,868 | $96,414 | - The Company operates as one primary business segment (medical devices), with device and supply revenues not considered separate segments as they share sales channels and are interdependent[55](index=55&type=chunk) - The Company adopted ASU 2023-09, 'Improvements to Income Tax Disclosures,' in Q1 2025, with disclosures to be presented in the 2025 annual report[63](index=63&type=chunk) [(3) FAIR VALUE OF FINANCIAL INSTRUMENTS](index=18&type=section&id=(3)%20FAIR%20VALUE%20OF%20FINANCIAL%20INSTRUMENTS) This note explains how the fair value of financial assets and liabilities is determined and classified within a three-level hierarchy - The carrying amounts of cash, accounts receivable, accounts payable, and accrued liabilities approximate their fair value due to their short maturities[64](index=64&type=chunk) - The Company classifies financial instruments using a three-level hierarchy based on the observability of inputs, maximizing the use of observable inputs[65](index=65&type=chunk) [(4) INVENTORY](index=18&type=section&id=(4)%20INVENTORY) This note provides a breakdown of inventory components and changes over the reporting period Inventory Components (in thousands) | Component | June 30, 2025 | December 31, 2024 | | :---------------- | :------------ | :---------------- | | Raw materials | $5,146 | $5,525 | | Work-in-process | - | $143 | | Finished goods | $6,016 | $7,085 | | Inventory in transit | $1,203 | $1,320 | | Less: reserve | $(154) | $(154) | | Total inventory | $12,211 | $13,919 | - Total inventory decreased from **$13.9 million** at December 31, 2024, to **$12.2 million** at June 30, 2025, primarily due to reductions in finished goods and raw materials[67](index=67&type=chunk) [(5) PROPERTY AND EQUIPMENT](index=19&type=section&id=(5)%20PROPERTY%20AND%20EQUIPMENT) This note details the company's property and equipment, including cost, accumulated depreciation, and depreciation expense Property and Equipment, Net (in thousands) | Component | June 30, 2025 | December 31, 2024 | | :------------------------------ | :------------ | :---------------- | | Total property and equipment at cost | $6,838 | $6,600 | | Less accumulated depreciation | $(3,976) | $(3,516) |\ | Total property and equipment, net | $2,862 | $3,084 | - Total depreciation expense related to property and equipment was **$0.3 million** for Q2 2025 (vs. **$0.2 million** in Q2 2024) and **$0.6 million** for H1 2025 (vs. **$0.4 million** in H1 2024)[69](index=69&type=chunk) - Depreciation expense for leased devices, reflected as cost of revenue, was **$0.3 million** for Q2 2025 (vs. **$0.5 million** in Q2 2024) and **$0.6 million** for H1 2025 (vs. **$0.9 million** in H1 2024)[70](index=70&type=chunk) [(6) GOODWILL AND OTHER INTANGIBLE ASSETS](index=19&type=section&id=(6)%20GOODWILL%20AND%20OTHER%20INTANGIBLE%20ASSETS) This note provides information on goodwill and other intangible assets, including their carrying amounts and amortization schedules - Goodwill remained unchanged at **$20.4 million** as of June 30, 2025, with no impairment indicators[71](index=71&type=chunk) Intangible Assets (Acquired Patents) (in thousands) | Metric | December 31, 2024 | June 30, 2025 | | :------------------------- | :---------------- | :------------ | | Gross Carrying Amount | $10,000 | $10,000 | | Accumulated Amortization | $(2,753) | $(3,203) |\ | Net Carrying Amount | $7,247 | $6,797 | | Weighted Average Remaining Life (years) | 8.00 | 7.50 | Estimated Future Amortization Expense (in thousands) | Period | Amount | | :----------------------------------- | :----- | | July 1, 2025 through December 31, 2025 | $458 | | 2026 | $908 | | 2027 | $908 | | 2028 | $911 | | 2029 | $908 | | Thereafter | $2,704 |\ | Total future amortization expense | $6,797 | [(7) EARNINGS (LOSS) PER SHARE](index=20&type=section&id=(7)%20EARNINGS%20(LOSS)%20PER%20SHARE) This note details the calculation of basic and diluted earnings per share, including factors affecting anti-dilutive securities Basic and Diluted EPS (in thousands, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $(20,033) | $1,217 | $(30,429) | $1,227 | | Basic weighted average shares outstanding | 30,258 | 31,762 | 30,927 | 32,053 | | Basic earnings (loss) per share | $(0.66) | $0.04 | $(0.98) | $0.04 | | Diluted weighted-average shares outstanding | 30,258 | 32,204 | 30,927 | 32,516 | | Diluted earnings per share (loss) | $(0.66) | $0.04 | $(0.98) | $0.04 | - For both the three and six months ended June 30, 2025, diluted loss per share was computed on the same basis as basic loss per share due to the anti-dilutive effect of potential common shares[76](index=76&type=chunk) - Conversion options for **5.6 million shares** from the 2023 Convertible Senior Notes were excluded from diluted EPS calculations for both periods in 2025 and 2024 as they were anti-dilutive[77](index=77&type=chunk) [(8) CONVERTIBLE SENIOR NOTES](index=20&type=section&id=(8)%20CONVERTIBLE%20SENIOR%20NOTES) This note provides details on the company's convertible senior notes, including principal amount, interest rate, conversion terms, and future interest payments - The Company has **$60.0 million** aggregate principal amount of **5.00%** Convertible Senior Notes due May 15, 2026, with unamortized issuance costs of **$0.9 million** as of June 30, 2025[78](index=78&type=chunk)[79](index=79&type=chunk) - The notes are convertible at a rate of **92.8031 shares** of common stock per **$1,000** principal amount (approximately **$10.78 per share**) and can be settled in cash, common stock, or a combination[83](index=83&type=chunk) Minimum Interest Payments (in thousands) | Year | Amount | | :--- | :----- | | 2025 | $1,500 |\ | 2026 | $1,500 | [(9) STOCK-BASED COMPENSATION PLANS](index=23&type=section&id=(9)%20STOCK-BASED%20COMPENSATION%20PLANS) This note describes the company's stock-based compensation plans, including outstanding options, restricted stock grants, and related expenses - The Company had **0.3 million** stock options outstanding and exercisable at June 30, 2025, with no new stock option awards granted in Q2 or H1 2025 or 2024[88](index=88&type=chunk)[89](index=89&type=chunk) - **0.1 million** and **0.2 million shares** of restricted stock were granted in Q2 and H1 2025, respectively, under the 2017 Stock Plan[88](index=88&type=chunk) Stock-Based Compensation Expenses (in thousands) | Expense Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Cost of Revenue | $11 | $9 | $21 | $17 | | Sales and marketing expense | $81 | $207 | $156 | $367 | | General, and administrative | $467 | $625 | $959 | $1,191 | | Total | $559 | $841 | $1,136 | $1,575 | - As of June 30, 2025, **$3.0 million** of unrecognized compensation expense related to stock options and restricted stock awards is expected to be recognized over a weighted average period of approximately **2.3 years**[91](index=91&type=chunk) [(10) STOCKHOLDERS' EQUITY](index=24&type=section&id=(10)%20STOCKHOLDERS'%20EQUITY) This note details changes in stockholders' equity, including stock repurchase programs and related party transactions - The Company completed a **$20.0 million** stock repurchase program in Q1 2024, purchasing **887,820 shares** at an average price of **$11.73**[92](index=92&type=chunk) - A subsequent **$20.0 million** repurchase program, approved in March 2024, expired on March 4, 2025, with **423,894 shares** purchased for **$5.2 million** at an average price of **$12.29**[93](index=93&type=chunk) - On March 13, 2025, the Company purchased **1,700,000 shares** of common stock from CEO Thomas Sandgaard for **$4.9 million** at **$2.905 per share**, approved by the disinterested Board and Audit Committee[94](index=94&type=chunk)[111](index=111&type=chunk) [(11) INCOME TAXES](index=24&type=section&id=(11)%20INCOME%20TAXES) This note explains the company's income tax expense, effective tax rate, and the establishment of a valuation allowance for deferred tax assets - The Company's effective income tax rate was **(22%)** for the six months ended June 30, 2025, compared to **25%** for the same period in 2024, primarily due to a valuation allowance related to deferred tax assets and changes in income (loss) from operations[97](index=97&type=chunk) - Income tax expense was **$8.9 million** for Q2 2025 and **$5.5 million** for H1 2025, significantly higher than **$0.4 million** for both periods in 2024, largely due to a **$6.8 million** and **$7.0 million** valuation allowance charge, respectively[96](index=96&type=chunk)[97](index=97&type=chunk) - A valuation allowance was established for deferred income tax assets as of June 30, 2025, due to reductions in future profitability estimates and substantial doubt about the Company's ability to continue as a going concern[98](index=98&type=chunk) [(12) LEASES](index=26&type=section&id=(12)%20LEASES) This note provides information on the company's operating and finance lease liabilities, including weighted average rates, remaining terms, and future minimum payments - The Company's weighted average borrowing rate for operating lease liabilities was **4.91%**, and for finance lease liabilities was **4.79%** as of June 30, 2025[102](index=102&type=chunk) - The weighted average remaining lease term was **2.90 years** for operating leases and **3.70 years** for finance leases as of June 30, 2025[102](index=102&type=chunk) Future Minimum Lease Payments (in thousands) | Period | Operating Lease Liability | Finance Lease Liability | | :----------------------------------- | :------------------------ | :---------------------- | | July 1, 2025 through December 31, 2025 | $2,352 | $231 | | 2026 | $4,509 | $312 | | 2027 | $4,319 | $264 | | 2028 | $2,193 | $171 | | 2029 | — | $121 | | Total undiscounted future minimum lease payments | $13,373 | $1,099 | [(13) CONCENTRATIONS](index=27&type=section&id=(13)%20CONCENTRATIONS) This note discusses significant concentrations of risk related to suppliers and customers - For Q2 2025, approximately **67%** of electrotherapy product supplies were sourced from four significant vendors, an increase from **49%** from three vendors in Q2 2024[104](index=104&type=chunk) - For H1 2025, approximately **45%** of electrotherapy product supplies were sourced from three significant vendors, compared to **40%** from three vendors in H1 2024[105](index=105&type=chunk) - As of June 30, 2025, and December 31, 2024, no single third-party payer accounted for over **10%** of the net accounts receivable balance[105](index=105&type=chunk) [(14) COMMITMENTS AND CONTINGENCIES](index=27&type=section&id=(14)%20COMMITMENTS%20AND%20CONTINGENCIES) This note outlines the company's legal proceedings and potential loss contingencies - The Company is not currently a party to any material pending legal proceedings that would give rise to potential loss contingencies[109](index=109&type=chunk) - The Company is cooperating with voluntary document requests from the SEC regarding an investigation into potential federal securities law violations, the outcome of which cannot be predicted[110](index=110&type=chunk) [(15) RELATED PARTIES](index=29&type=section&id=(15)%20RELATED%20PARTIES) This note describes transactions involving related parties, specifically a stock purchase from the CEO - On March 13, 2025, the Company purchased **1,700,000 common shares** from Thomas Sandgaard, Chairman, President, and CEO, for **$4.9 million** at the closing market price of **$2.905 per share**[111](index=111&type=chunk) - The disinterested Board and Audit Committee approved the transaction, deeming it in the Company's best interest due to perceived undervaluation of stock and a good use of funds, considering cash position, alternative uses, and potential impact on EPS and book value[112](index=112&type=chunk) [(16) SUBSEQUENT EVENTS](index=29&type=section&id=(16)%20SUBSEQUENT%20EVENTS) This note reports significant events that occurred after the balance sheet date but before the financial statements were issued - Steven Dyson was appointed CEO, effective August 18, 2025, succeeding Thomas Sandgaard, who will remain Chairman and Chair of the Technology Committee[113](index=113&type=chunk)[114](index=114&type=chunk) - Mr. Dyson's employment agreement includes an initial annual base salary of **$750,000**, eligibility for a **100% discretionary bonus**, and a success fee upon a change of control[115](index=115&type=chunk) - CFO Dan Moorhead notified the Company of his resignation, effective August 29, 2025, with plans for a consulting agreement to assist with transition[117](index=117&type=chunk)[118](index=118&type=chunk) - The 'One Big Beautiful Bill Act' (OBBBA) was signed into law on July 4, 2025, restoring **100% bonus depreciation** and introducing immediate expensing of R&E expenditures, with the Company evaluating its impact for Q3 2025 but not expecting a material effect[120](index=120&type=chunk)[121](index=121&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=32&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial performance and condition for the quarter ended June 30, 2025. It highlights a significant decline in net revenue and a shift to net losses, primarily attributed to the temporary Tricare payment suspension and workforce reductions. The Company's liquidity has deteriorated, raising substantial doubt about its ability to continue as a going concern, necessitating potential refinancing of convertible senior notes or securing additional capital [General](index=32&type=section&id=General) This section provides an overview of the company's business segments and product development initiatives - Zynex, Inc. operates in one primary business segment: medical devices, including electrotherapy and pain management products, through its active subsidiaries Zynex Medical, Inc. (ZMI) and Zynex Monitoring Solutions, Inc. (ZMS)[126](index=126&type=chunk) - ZMS, which acquired Kestrel Labs, Inc. in December 2021, is developing laser-based patient monitoring technology, including the NiCO™ CO-Oximeter (510(k) application submitted in Q2 2025) and HemeOx™[127](index=127&type=chunk) [Recent Developments](index=34&type=section&id=Recent%20Developments) This section summarizes key events and changes impacting the company, including personnel changes, workforce reductions, and regulatory investigations - CFO Dan Moorhead resigned, effective August 29, 2025, with plans for a consulting agreement to aid transition[129](index=129&type=chunk)[130](index=130&type=chunk) - Steven Dyson was appointed CEO, effective August 18, 2025, succeeding Thomas Sandgaard, who will remain Chairman[132](index=132&type=chunk) - The Company reduced its workforce by **86 corporate roles** (**14% of employees**) on June 18, 2025, expecting **$5 million** in annualized cost savings[134](index=134&type=chunk) - The SEC requested documents in June 2025 for an investigation into potential federal securities law violations, with the Company cooperating[135](index=135&type=chunk) - Tricare's temporary payment suspension, initiated in Q1 2025 due to alleged billing misrepresentations, continued into Q2 2025, significantly impacting revenue[136](index=136&type=chunk)[137](index=137&type=chunk) [RESULTS OF OPERATIONS](index=35&type=section&id=RESULTS%20OF%20OPERATIONS) This section analyzes the company's financial performance, focusing on revenue, expenses, and profitability trends [Summary](index=35&type=section&id=Summary) This summary provides an overview of key financial performance metrics, highlighting significant changes in revenue and net income (loss) Key Financial Performance (in millions) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :------------ | :------ | :------ | :------ | :------ | | Net Revenue | $22.3 | $49.9 | $48.9 | $96.4 | | Net Income (Loss) | $(20.0) | $1.2 | $(30.4) | $1.2 | | Cash from Operating Activities | $(16.7) | $3.2 | $(16.7) | $3.2 | - Net revenue decreased by **$27.6 million** (**55.3%**) for Q2 2025 and **$47.5 million** (**49%**) for H1 2025 compared to the prior year, primarily due to the Tricare payment suspension and a **12-20%** decrease in device orders[138](index=138&type=chunk)[143](index=143&type=chunk) - The Company experienced a net loss of **$20.0 million** in Q2 2025 and **$30.4 million** in H1 2025, a significant reversal from net income of **$1.2 million** in the comparable 2024 periods[139](index=139&type=chunk) [Net Revenue](index=35&type=section&id=Net%20Revenue) This section analyzes the factors contributing to changes in the company's total net revenue, including the impact of payment suspensions and order declines - Net revenue decreased by **$27.6 million** to **$22.3 million** for Q2 2025 and by **$47.5 million** (**49%**) to **$48.9 million** for H1 2025, primarily due to the temporary Tricare payment suspension and a decline in device orders[143](index=143&type=chunk) - During the Tricare payment suspension, the Company is required to fulfill new prescriptions and existing patient supply orders[143](index=143&type=chunk) [Device Revenue](index=36&type=section&id=Device%20Revenue) This section examines the trends and drivers behind changes in the company's device revenue - Device revenue decreased by **$4.9 million** (**31%**) to **$11.0 million** for Q2 2025 and by **$7.0 million** (**23%**) to **$22.9 million** for H1 2025[144](index=144&type=chunk)[145](index=145&type=chunk) - The decline in device revenue is attributed to the Tricare payment suspension (**$1.6 million** in Q2 2025, **$2.8 million** in H1 2025), slightly lower collection rates, and a **20% (Q2) / 12% (H1)** decrease in device orders due to sales force reduction[144](index=144&type=chunk)[146](index=146&type=chunk) [Supplies Revenue](index=36&type=section&id=Supplies%20Revenue) This section analyzes the factors influencing changes in the company's supplies revenue - Supplies revenue decreased by **$22.7 million** (**67%**) to **$11.3 million** for Q2 2025 and by **$40.5 million** (**61%**) to **$25.9 million** for H1 2025[147](index=147&type=chunk)[148](index=148&type=chunk) - The decrease in supplies revenue is primarily due to the Tricare payment suspension (**$11.2 million** in Q2 2025, **$19.6 million** in H1 2025) and a smaller patient base resulting from slowing order growth and sales force trimming[147](index=147&type=chunk)[148](index=148&type=chunk) [Operating Expenses](index=36&type=section&id=Operating%20Expenses) This section provides an overview of the company's operating expenses, including cost of revenue, sales and marketing, and general and administrative expenses [Cost of Revenue – Devices and Supplies](index=36&type=section&id=Cost%20of%20Revenue%20%E2%80%93%20Devices%20and%20Supplies) This section analyzes the cost of revenue for devices and supplies, including changes in absolute terms and as a percentage of revenue - Cost of revenue decreased by **$2.9 million** (**29%**) to **$7.1 million** for Q2 2025 and by **$3.8 million** (**20%**) to **$15.4 million** for H1 2025, driven by lower orders and fewer products shipped[149](index=149&type=chunk)[150](index=150&type=chunk)[151](index=151&type=chunk) - As a percentage of revenue, cost of revenue increased to **32%** for both Q2 and H1 2025, up from **20%** in the comparable 2024 periods, due to the overall decrease in revenue[149](index=149&type=chunk)[150](index=150&type=chunk)[151](index=151&type=chunk) [Sales and Marketing Expense](index=36&type=section&id=Sales%20and%20Marketing%20Expense) This section examines trends in sales and marketing expenses, including the impact of sales force reductions and changes as a percentage of revenue - Sales and marketing expense decreased by **$10.4 million** (**45%**) to **$12.8 million** for Q2 2025 and by **$16.9 million** (**36%**) to **$29.8 million** for H1 2025, primarily due to lower employee compensation from decreased sales force headcount[153](index=153&type=chunk)[154](index=154&type=chunk) - As a percentage of revenue, sales and marketing expense increased to **57%** for Q2 2025 (from **47%** in Q2 2024) and **61%** for H1 2025 (from **48%** in H1 2024), mainly due to the decreased revenue[153](index=153&type=chunk)[155](index=155&type=chunk) [General and Administrative Expense](index=38&type=section&id=General%20and%20Administrative%20Expense) This section analyzes general and administrative expenses, including the impact of headcount reductions and professional fees, and their proportion to revenue - General and administrative expense decreased by **$1.9 million** (**12%**) to **$12.7 million** for Q2 2025 and by **$0.7 million** (**3%**) to **$27.1 million** for H1 2025, mainly due to lower headcount in billing and corporate departments, partially offset by increased professional fees[156](index=156&type=chunk)[157](index=157&type=chunk)[158](index=158&type=chunk) - As a percentage of revenue, general and administrative expense increased to **57%** for Q2 2025 (from **29%** in Q2 2024) and **55%** for H1 2025 (from **29%** in H1 2024), primarily due to decreased revenue[156](index=156&type=chunk)[157](index=157&type=chunk)[158](index=158&type=chunk) [Income Taxes](index=38&type=section&id=Income%20Taxes) This section discusses the company's income tax rates and expenses, highlighting the impact of valuation allowances - The effective income tax rate was **(80%)** for Q2 2025 and **(22%)** for H1 2025, compared to **25%** for both periods in 2024[159](index=159&type=chunk) - Income tax expense was **$8.9 million** for Q2 2025 and **$5.5 million** for H1 2025, significantly higher than **$0.4 million** for both periods in 2024, largely due to discrete valuation allowance charges of **$27.2 million**[159](index=159&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=38&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) This section assesses the company's ability to meet its financial obligations, detailing cash position, operating cash flows, and going concern considerations - As of June 30, 2025, the Company's liquidity consisted of **$17.5 million** in cash and cash equivalents and **$10.3 million** in accounts receivable[160](index=160&type=chunk) - Net cash used in operating activities was **$16.7 million** for H1 2025, a decrease from **$3.2 million** provided in H1 2024, primarily due to lower net income resulting from the Tricare payment suspension[161](index=161&type=chunk) - Net cash used in financing activities decreased to **$5.2 million** for H1 2025 from **$16.6 million** in H1 2024, mainly due to reduced treasury stock purchases[163](index=163&type=chunk) - The Company's ability to continue as a going concern is dependent on obtaining creditor consent, refinancing convertible senior notes, or securing necessary financing, as substantial doubt exists[27](index=27&type=chunk)[28](index=28&type=chunk)[184](index=184&type=chunk)[185](index=185&type=chunk) [CRITICAL ACCOUNTING POLICIES AND ESTIMATES](index=38&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20ESTIMATES) This section refers to the company's critical accounting policies and estimates as detailed in its annual report - The Company's critical accounting policies and estimates are discussed in detail in its Annual Report on Form 10-K for the year ended December 31, 2024[165](index=165&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=39&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states that there are no quantitative and qualitative disclosures about market risk to report for the period - No quantitative and qualitative disclosures about market risk are applicable for this reporting period[166](index=166&type=chunk) [Item 4. Controls and Procedures](index=39&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the Company's disclosure controls and procedures were not effective as of June 30, 2025, due to a material weakness in Information Technology General Controls (ITGCs). A remediation plan is being developed, and despite the weakness, the financial statements are fairly presented [Disclosure Controls and Procedures](index=39&type=section&id=Disclosure%20Controls%20and%20Procedures) This section reports on the effectiveness of the company's disclosure controls and procedures as assessed by management - Management, including the CEO and CFO, concluded that disclosure controls and procedures were not effective as of June 30, 2025[167](index=167&type=chunk) [Material Weakness in Internal Control](index=39&type=section&id=Material%20Weakness%20in%20Internal%20Control) This section identifies a material weakness in internal control over financial reporting and its implications for financial statement accuracy - A material weakness was identified related to Information Technology General Controls (ITGCs) not being effectively designed and operated to ensure appropriate identification, testing, authorization, and implementation of IT program and data changes affecting financial IT applications[168](index=168&type=chunk) - Despite the material weakness, no material misstatements occurred in the financial statements, and previously released financial results remain unchanged[169](index=169&type=chunk) [Remediation Plan](index=39&type=section&id=Remediation%20Plan) This section outlines management's commitment and plans to address the identified material weakness in internal control - Management is committed to remediating the identified material weakness in internal control over financial reporting and is developing and implementing comprehensive remediation plans[171](index=171&type=chunk) [Changes in Internal Control over Financial Reporting](index=39&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) This section reports on any changes in internal control over financial reporting during the period - No other changes in internal control over financial reporting materially affected or are reasonably likely to materially affect internal controls during the quarter ended June 30, 2025, other than the identified material weakness[172](index=172&type=chunk) [Inherent Limitation on the Effectiveness of Internal Control](index=39&type=section&id=Inherent%20Limitation%20on%20the%20Effectiveness%20of%20Internal%20Control) This section acknowledges the inherent limitations of any internal control system in preventing all errors or fraud - The Company acknowledges the inherent limitations of any control system, which can only provide reasonable assurance against errors and fraud, and may be circumvented by individual acts, collusion, or management override[173](index=173&type=chunk) [PART II—OTHER INFORMATION](index=41&type=section&id=PART%20II%E2%80%94OTHER%20INFORMATION) This section covers legal proceedings, risk factors, equity sales, defaults, and other miscellaneous information not included in the financial statements [Item 1. Legal Proceedings](index=41&type=section&id=Item%201.%20Legal%20Proceedings) The Company is currently involved in a securities fraud class action and a shareholder derivative action, both filed in 2025, alleging misrepresentation of business facts, inflated revenue, and breaches of fiduciary duties. The Company intends to vigorously defend itself but cannot predict the outcome or potential losses [Putative Class Action Complaint](index=41&type=section&id=Putative%20Class%20Action%20Complaint) This section details a securities fraud class action lawsuit filed against the company and its executives - On March 20, 2025, a securities fraud class action was filed against the Company, its CEO, and CFO, alleging failure to disclose material adverse facts, inflated revenue, and concealment of scrutiny from insurers, violating Section 10(b) of the Securities Exchange Act of 1934[176](index=176&type=chunk) [Shareholder Derivative Complaint](index=41&type=section&id=Shareholder%20Derivative%20Complaint) This section describes a shareholder derivative action filed against the company's officers and directors - On July 9, 2025, a shareholder derivative action was filed against officers and directors, alleging breaches of fiduciary duties, waste of corporate assets, unjust enrichment, and gross mismanagement, seeking restitution and disgorgement of profits[177](index=177&type=chunk) [Other Legal Proceedings](index=41&type=section&id=Other%20Legal%20Proceedings) This section confirms the absence of other material pending legal proceedings beyond those specifically disclosed - Other than the disclosed class action and derivative complaints, the Company is not a party to any other material pending legal proceedings[178](index=178&type=chunk) [Item 1A. Risk Factors](index=41&type=section&id=Item%201A.%20Risk%20Factors) The Company faces significant risks including the adverse impact of new tariffs and trade barriers, the ongoing Tricare payment suspension affecting revenue and profits, substantial doubt about its ability to continue as a going concern, potential costs and adverse outcomes from pending litigation and regulatory investigations, and volatility in operating results due to fluctuations in tax obligations and deferred tax asset realization - New duties, tariffs, trade barriers, and retaliatory countermeasures could materially adversely affect the Company's business, increasing costs and reducing gross margin[179](index=179&type=chunk)[180](index=180&type=chunk) - The ongoing Tricare payment suspension has already adversely impacted and may continue to impact the Company's revenues and profits[182](index=182&type=chunk)[183](index=183&type=chunk) - Management has concluded that substantial doubt exists about the Company's ability to continue as a going concern, contingent on refinancing convertible senior notes or raising sufficient capital[184](index=184&type=chunk)[185](index=185&type=chunk) - The Company may incur substantial costs and adverse outcomes from pending securities fraud class action, shareholder derivative action, and SEC/government investigations, potentially leading to significant damages, fines, or operational restrictions[187](index=187&type=chunk)[188](index=188&type=chunk)[191](index=191&type=chunk) - Fluctuations in tax obligations, effective tax rates, and the realization of deferred tax assets, influenced by factors like changes in earnings mix, tax laws, and valuation allowances, may result in volatility of operating results[193](index=193&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=44&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section states that there were no unregistered sales of equity securities or use of proceeds to report for the period - There were no unregistered sales of equity securities or use of proceeds to report during the period[195](index=195&type=chunk) [Item 3. Defaults Upon Senior Securities](index=44&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section indicates that there were no defaults upon senior securities during the reporting period - There were no defaults upon senior securities during the reporting period[196](index=196&type=chunk) [Item 4. Mine Safety Disclosures](index=44&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section states that mine safety disclosures are not applicable to the Company - Mine safety disclosures are not applicable to the Company[197](index=197&type=chunk) [Item 5. Other Information](index=46&type=section&id=Item%205.%20Other%20Information) This section reports that no director or officer adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2025 [Rule 10b5-1 Trading Arrangement](index=46&type=section&id=Rule%2010b5-1%20Trading%20Arrangement) This section reports on the adoption or termination of Rule 10b5-1 trading arrangements by directors and officers - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2025[198](index=198&type=chunk) [Item 6. Exhibits](index=46&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including employment agreements, indemnification agreements, CEO and CFO certifications, and XBRL-related documents - Exhibits include the employment agreement for Steven Dyson, a form of indemnification agreement, CEO and CFO certifications (pursuant to Sarbanes-Oxley Act sections 302 and 906), and various XBRL taxonomy documents[199](index=199&type=chunk) [SIGNATURES](index=47&type=section&id=SIGNATURES) This section formally concludes the report with the required signatures from authorized company officials - The report was duly signed on behalf of Zynex, Inc. by Daniel J. Moorhead, Chief Financial Officer, on July 31, 2025[201](index=201&type=chunk)[203](index=203&type=chunk)

Financial Data and Key Metrics Changes - Net revenue for Q2 2025 was $22.3 million, a significant decline from $49.9 million in Q2 2024, primarily due to TRICARE's temporary payment suspension and reduced order growth [24][11] - Gross profit was $15.2 million, representing 68% of revenue, compared to $39.9 million or 80% of revenue in the same quarter last year [24] - Net loss was $20 million, or $0.66 per share, compared to a net income of $1.2 million in Q2 2024, with a noncash charge of $10.3 million related to deferred tax assets included in the loss [25][11] - Adjusted EBITDA loss for Q2 2025 was $8.9 million, compared to an adjusted EBITDA of $3.5 million in Q2 2024 [26] Business Line Data and Key Metrics Changes - Device revenue was $11 million, while supplies revenue was $11.3 million, indicating a decline in both segments due to the payment suspension and sales force reductions [24] - Sales and marketing expenses decreased by 45% to $12.8 million, primarily due to headcount reductions aimed at improving sales rep productivity [25] - General and administrative expenses were $12.7 million, down from $14.5 million in the previous year [25] Market Data and Key Metrics Changes - The company is actively working to diversify its revenue streams and reduce reliance on TRICARE, which has seen a reduction in patient inflow due to the payment suspension [10][36] - The patient monitoring market is estimated to be approximately $3.5 billion globally, with the company aiming to enter this market with its new Nico pulse oximeter technology [22] Company Strategy and Development Direction - The company is refocusing its pain management business model, restructuring its sales force, and streamlining operations to improve efficiency and reduce costs, targeting an annual savings of up to $40 million [5][13] - The new CEO, Steven Dyson, is expected to lead a review of the company's forecasting procedures and align strategies for growth [6][28] - The company aims to improve patient outcomes by providing non-opioid alternatives for pain management and enhancing the accuracy of patient monitoring through innovative technologies [29] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about returning to positive cash flow by the end of the year, despite current challenges [5][12] - The company is committed to improving its operational sustainability and patient care, while navigating the complexities of the reimbursement landscape [14][29] - Management acknowledged the ongoing challenges with TRICARE but emphasized the importance of continuing to service existing patients [10][50] Other Important Information - The company has submitted its Nico pulse oximeter to the FDA, with expectations for a six-month clearance process following an additional information request [22][33] - The company is actively cooperating with TRICARE and advocating for the resolution of the payment suspension [9][10] Q&A Session Summary Question: Update on Nico submission and expected approval timeline - The company expects to receive additional questions from the FDA in August and anticipates clearance closer to December [32][33] Question: TRICARE payment suspension and patient referrals - The company continues to service existing and new TRICARE patients despite the payment suspension, although patient inflow has decreased due to reduced sales rep headcount [36][50] Question: Sales and marketing expenses outlook for the second half of the year - Continued reductions in sales and marketing expenses are expected, with a projected decrease of 15-20% in Q3 [37][38] Question: Nature of FDA data request and preparation - The FDA is focused on ensuring the new technology performs as well as or better than existing LED technology, and the company is prepared to respond quickly to any inquiries [41][42] Question: Future initiatives under the new CEO - The new CEO is aligned with the company's initiatives to refocus on pain management and improve overall company valuation [43]

[Company Overview & Management Commentary](index=1&type=section&id=1.%20Company%20Overview%20%26%20Management%20Commentary) This section introduces Zynex, Inc., its medical technology focus, and key management strategic highlights for Q2 2025 [Company Introduction](index=1&type=section&id=1.1.%20Company%20Introduction) Zynex, Inc. is an innovative medical technology company specializing in non-invasive medical devices for pain management, rehabilitation, and patient monitoring - **Zynex, Inc.** is a medical technology company focused on **non-invasive medical devices** for pain management, rehabilitation, and patient monitoring[1](index=1&type=chunk) [Management Strategic Highlights](index=1&type=section&id=1.2.%20Management%20Strategic%20Highlights) In Q2 2025, Zynex appointed Steven Dyson as the new CEO and submitted its NiCO laser pulse oximeter to the FDA, implementing efficiency improvements for annualized savings - **Steven Dyson appointed as the new CEO**, bringing over 25 years of experience in the medical technology sector[2](index=2&type=chunk) - Submitted the **NiCO laser pulse oximeter** to the FDA, marking a **significant milestone** in patient monitoring products[2](index=2&type=chunk) - Implemented efficiency improvements and sales force refocus, projected to result in **annualized savings of approximately $40 million**, with most effects in Q3 and Q4 2025[2](index=2&type=chunk) [Second Quarter 2025 Financial Results](index=1&type=section&id=2.%20Second%20Quarter%202025%20Financial%20Results) This section provides a comprehensive analysis of Zynex's Q2 2025 financial performance, including revenue, profit, balance sheet, and cash flow [Overview of Q2 2025 Performance](index=1&type=section&id=2.1.%20Overview%20of%20Q2%202025%20Performance) Zynex reported a significant decline in net revenue and a net loss for Q2 2025, primarily due to the Tricare payment suspension, billing changes, and sales force restructuring Key Financial Metrics | Metric | Q2 2025 (in millions) | Q2 2024 (in millions) | Change (YoY) | | :----- | :-------------------- | :-------------------- | :----------- | | Net Revenue | $22.3 | $49.9 | -55.3% | | Gross Profit | $15.2 | $39.9 | -61.9% | | Gross Profit Margin | 68% | 80% | -12 ppts | | Net Income (Loss) | ($20.0) | $1.2 | N/A (loss from profit) | | Basic & Diluted EPS | ($0.66) | $0.04 | N/A (loss from profit) | | Adjusted EBITDA | ($8.9) | $3.5 | N/A (loss from profit) | - **Net revenue** was negatively affected by the **Tricare payment suspension**, continued changes to shipment and billing procedures, and the impact of **sales force restructuring**[3](index=3&type=chunk) [Detailed Income Statement Analysis](index=1&type=section&id=2.2.%20Detailed%20Income%20Statement%20Analysis) Net revenue for Q2 2025 was $22.3 million, a 55.3% decrease, resulting in a net loss of ($20.0) million, including a $10.3 million non-cash deferred tax asset adjustment Income Statement Highlights | Metric | Q2 2025 (in millions) | Q2 2024 (in millions) | Change (YoY) | | :----- | :-------------------- | :-------------------- | :----------- | | Total Net Revenue | $22.3 million | $49.9 million | -55.3% | | Costs of Revenue | $7.1 million | $10.0 million | -29.2% | | Sales and Marketing | $12.8 million | $23.2 million | -45.0% | | General and Administrative | $12.7 million | $14.5 million | -12.1% | | Income (loss) from operations | ($10.3) million | $2.2 million | N/A | | Net Income (loss) | ($20.0) million | $1.2 million | N/A | - **Net loss** for Q2 2025 included a **non-cash adjustment of $10.3 million** ($0.34 per share) related to placing an **allowance on deferred tax assets**[6](index=6&type=chunk) [Balance Sheet Summary](index=6&type=section&id=2.3.%20Balance%20Sheet%20Summary) Total assets decreased to $85.9 million from $122.1 million, primarily due to reduced cash and accounts receivable, while total current liabilities significantly increased to $73.9 million Balance Sheet Highlights | Metric | June 30, 2025 (in millions) | December 31, 2024 (in millions) | | :----- | :-------------------------- | :------------------------------ | | Cash and cash equivalents | $17.5 million | $39.6 million | | Accounts receivable, net | $10.3 million | $18.0 million | | Total current assets | $45.6 million | $75.2 million | | Total assets | $85.9 million | $122.1 million | | Current portion of convertible senior notes, less issuance costs | $59.1 million | $— | | Total current liabilities | $73.9 million | $16.9 million | | Total liabilities | $84.7 million | $86.4 million | | Total stockholders' equity | $1.3 million | $35.7 million | - **Deferred income taxes decreased from $4,799 thousand at December 31, 2024, to $0 at June 30, 2025**[17](index=17&type=chunk) [Cash Flow Summary](index=3&type=section&id=2.4.%20Cash%20Flow%20Summary) Cash flow from operations for the six months ended June 30, 2025, was a loss of ($16.7) million, with a sequential quarterly reduction in deficit due to expense reductions Cash Flow Highlights | Metric | Six Months Ended June 30, 2025 (in millions) | Six Months Ended June 30, 2024 (in millions) | | :----- | :------------------------------------------- | :------------------------------------------- | | Net cash provided by (used in) operating activities | ($16.7) million | $3.2 million | | Net cash (used in) investing activities | ($0.2) million | ($0.3) million | | Net cash (used in) financing activities | ($5.2) million | ($16.6) million | | Net decrease in cash | ($22.1) million | ($13.7) million | | Cash and cash equivalents at end of period | $17.5 million | $30.9 million | - The **sequential quarterly reduction** in the deficit of **cash from operations** was attributed to the impact of **expense reductions**[8](index=8&type=chunk) [Financial Guidance](index=3&type=section&id=3.%20Financial%20Guidance) This section details the temporary suspension of Zynex's financial guidance due to recent executive transitions [Suspension of Guidance](index=3&type=section&id=3.1.%20Suspension%20of%20Guidance) Zynex has temporarily suspended its revenue and profitability guidance due to recent executive transitions, with an update expected in future quarters - **Revenue and profitability guidance temporarily suspended** due to **CEO and CFO transitions**[9](index=9&type=chunk) - **New CEO, Steven Dyson**, will lead a review of forecasting procedures and provide an update on **guidance resumption** in coming quarters[9](index=9&type=chunk) [Non-GAAP Financial Measures Explanation](index=4&type=section&id=4.%20Non-GAAP%20Financial%20Measures%20Explanation) This section defines Adjusted EBITDA as a non-GAAP measure, explaining its components and purpose for financial transparency [Adjusted EBITDA Definition and Use](index=4&type=section&id=4.1.%20Adjusted%20EBITDA%20Definition%20and%20Use) Zynex provides Adjusted EBITDA as a non-GAAP financial measure to offer greater transparency into the company's financial health and performance - **Adjusted EBITDA** is presented as a **non-GAAP measure** to provide **greater transparency** into the company's financial health and performance[11](index=11&type=chunk) - **Adjusted EBITDA definition includes adjustments for interest, taxes, depreciation, amortization, stock compensation, restructuring, receivables adjustment, and non-cash lease charges**[11](index=11&type=chunk) [Safe Harbor Statement](index=4&type=section&id=5.%20Safe%20Harbor%20Statement) This section outlines forward-looking statements, emphasizing inherent risks and uncertainties that could impact actual results [Forward-Looking Statements and Risks](index=4&type=section&id=5.1.%20Forward-Looking%20Statements%20and%20Risks) This section outlines forward-looking statements, emphasizing that they are predictions subject to inherent risks, uncertainties, and assumptions - The press release contains **forward-looking statements** that are predictions subject to **risks, uncertainties, and assumptions**, and actual results may differ materially[12](index=12&type=chunk)[13](index=13&type=chunk) - **Key risk factors** include the need to obtain CE marking of new products, acceptance of products by doctors and hospitals, **competition**, **dependence on health insurance reimbursement** (including the outcome of the **Tricare payment suspension**), and **economic factors**[13](index=13&type=chunk) [About Zynex, Inc.](index=5&type=section&id=6.%20About%20Zynex,%20Inc.) This section provides a brief description of Zynex, Inc., its founding, and its core business in medical device development [Company Description](index=5&type=section&id=6.1.%20Company%20Description) Zynex, founded in 1996, develops, manufactures, markets, and sells medical devices for pain management, rehabilitation, and non-invasive monitoring systems for hospitals - **Zynex** develops, manufactures, markets, and sells **medical devices for pain management, rehabilitation, and non-invasive monitoring systems** for hospitals[15](index=15&type=chunk) [Condensed Consolidated Financial Statements](index=6&type=section&id=7.%20Condensed%20Consolidated%20Financial%20Statements) This section presents Zynex's condensed consolidated financial statements, including balance sheets, income statements, and cash flows [Condensed Consolidated Balance Sheets](index=6&type=section&id=7.1.%20Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows a decrease in total assets from $122.1 million to $85.9 million, primarily due to reduced cash and accounts receivable, with current liabilities increasing significantly Condensed Consolidated Balance Sheets | ASSETS | June 30, 2025 (in millions) | December 31, 2024 (in millions) | | :----- | :-------------------------- | :------------------------------ | | Cash and cash equivalents | $17.5 million | $39.6 million | | Accounts receivable, net | $10.3 million | $18.0 million | | Inventory, net | $12.2 million | $13.9 million | | Total current assets | $45.6 million | $75.2 million | | Deferred income taxes | $— | $4.8 million | | Total assets | $85.9 million | $122.1 million | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | Current portion of convertible senior notes, less issuance costs | $59.1 million | $— | | Total current liabilities | $73.9 million | $16.9 million | | Total liabilities | $84.7 million | $86.4 million | | Total stockholders' equity | $1.3 million | $35.7 million | [Condensed Consolidated Statements of Income (Loss)](index=7&type=section&id=7.2.%20Condensed%20Consolidated%20Statements%20of%20Income%20(Loss)) For the three months ended June 30, 2025, Zynex reported total net revenue of $22.3 million, resulting in an operating loss of ($10.3) million and a net loss of ($20.0) million Condensed Consolidated Statements of Income (Loss) | Metric | For the Three Months Ended June 30, 2025 (in millions) | For the Three Months Ended June 30, 2024 (in millions) | For the Six Months Ended June 30, 2025 (in millions) | For the Six Months Ended June 30, 2024 (in millions) | | :----- | :------------------------------------------------------- | :------------------------------------------------------- | :--------------------------------------------------- | :--------------------------------------------------- | | Total net revenue | $22.3 million | $49.9 million | $48.9 million | $96.4 million | | Costs of revenue - devices and supplies | $7.1 million | $10.0 million | $15.4 million | $19.3 million | | Sales and marketing | $12.8 million | $23.2 million | $29.8 million | $46.6 million | | General and administrative | $12.7 million | $14.5 million | $27.1 million | $27.8 million | | Income (loss) from operations | ($10.3) million | $2.2 million | ($23.4) million | $2.8 million | | Income tax expense | $8.9 million | $0.4 million | $5.5 million | $0.4 million | | Net income (loss) | ($20.0) million | $1.2 million | ($30.4) million | $1.2 million | | Basic Net income (loss) per share | ($0.66) | $0.04 | ($0.98) | $0.04 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=7.3.%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2025, net cash used in operating activities was ($16.7) million, with a total cash decrease of $22.1 million during the period Condensed Consolidated Statements of Cash Flows | Metric | For the Six Months Ended June 30, 2025 (in millions) | For the Six Months Ended June 30, 2024 (in millions) | | :----- | :--------------------------------------------------- | :--------------------------------------------------- | | Net income (loss) | ($30.4) million | $1.2 million | | Net cash provided by (used in) operating activities | ($16.7) million | $3.2 million | | Net cash (used in) investing activities | ($0.2) million | ($0.3) million | | Net cash (used in) financing activities | ($5.2) million | ($16.6) million | | Net decrease in cash | ($22.1) million | ($13.7) million | | Cash and cash equivalents at end of period | $17.5 million | $30.9 million | [Reconciliation of GAAP to Non-GAAP Measures](index=9&type=section&id=7.4.%20Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Measures) Adjusted EBITDA for Q2 2025 was a loss of ($8.9) million, or (40)% of net revenue, a substantial decline from $3.5 million in Q2 2024 Adjusted EBITDA Reconciliation | Metric | For the Three Months Ended June 30, 2025 (in millions) | For the Three Months Ended June 30, 2024 (in millions) | For the Six Months Ended June 30, 2025 (in millions) | For the Six Months Ended June 30, 2024 (in millions) | | :----- | :------------------------------------------------------- | :------------------------------------------------------- | :--------------------------------------------------- | :--------------------------------------------------- | | Net income (loss) | ($20.0) million | $1.2 million | ($30.4) million | $1.2 million | | Depreciation and Amortization | $0.5 million | $0.5 million | $1.0 million | $0.9 million | | Stock-based compensation expense | $0.6 million | $0.8 million | $1.1 million | $1.6 million | | Interest expense and other, net | $0.8 million | $0.6 million | $1.5 million | $1.1 million | | Restructuring charges | $0.3 million | $— | $0.6 million | $— | | Income tax (benefit) expense | $8.9 million | $0.4 million | $5.5 million | $0.4 million | | Adjusted EBITDA | ($8.9) million | $3.5 million | ($20.7) million | $5.2 million | | % of Net Revenue | (40)% | 7% | (42)% | 3% | - **Restructuring charges of $327 thousand in Q2 2025** and **$554 thousand year-to-date 2025** were **fully expensed severance** of former corporate employees[21](index=21&type=chunk)[22](index=22&type=chunk)

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