Zynex Announces 42% Increase in Third Quarter 2010 Revenue
Released: 11/08/10 08:01 AM EST

Zynex, Inc. (OTCBB:ZYXI), a provider of pain management systems and electrotherapy products for medical patients with functional disability, announces a record number of orders and billed patients in the three months ended September 30, 2010. The Company also generated record net revenues of $6,657,000 for the three months ended September 30, 2010, which represents a 42% increase over third quarter 2009 net revenue and a 16% increase sequentially over the second quarter of 2010. Year to date net revenue of $17,274,000 increased 30% over the prior year to date net revenue. Thomas Sandgaard, CEO, stated: “We are excited with the continued revenue growth and outlook of the Company. The investment in our sales team continues to generate a significant increase in orders.”

Zynex’s third quarter 2010 gross profit of $5,231,000 is also a record and reflects a 79% gross profit margin, unchanged from the previous quarter’s gross profit margin. SG&A expenses in the third quarter totaled $4,606,000 compared to $2,906,000 in the third quarter 2009 and increased by 5% in the third quarter of 2010 as compared to $4,390,000 in the second quarter of 2010. SG&A expenses reported in the third quarter of 2010 included expenses of $200,000, related to the transition of the Company’s Chief Financial Officer. The Company reported positive net income for the quarter ended September 30, 2010 of $368,000, which showed significant improvement over the second quarter of 2010, as expenditures made in prior quarters have helped drive further top-line growth. The Company’s continued focus on strengthening its balance sheet resulted in strong cash collections from customers in the quarter, which resulted in a cash position of $593,000 as of September 30, 2010 and a net reduction of the amount outstanding under the Company’s revolving line of credit.

Zynex is providing guidance for the full year of 2010 net revenues of between $24 million and $25 million.

Thomas Sandgaard, CEO, said: “I am happy to announce that our third quarter revenue came in at the high end of our estimated range of $6.2 to $6.8 million. We continued the trend of sequentially growing our top line 16%, significantly more than our selling, general and administrative expenses which only increased 5% between the second and third quarter. Our cash position also improved by $500,000, while at the same time the use of our Line of Credit decreased. We have previously made investments in our infrastructure that we believe put us in a position to finish the year strong and prepare us for continued growth in 2011.”

Highlights from the third quarter 2010 condensed consolidated financial statements:

(unaudited, amounts in thousands, except per share amounts)

Three Months Ended Nine Months Ended
September 30, September 30,
2010 2009 2010 2009
Net revenue $ 6,657 $ 4,691 $ 17,274 $ 13,270
Gross profit 5,231 3,793 13,630 11,113
Net income 368 459 330 2,118
Net income per share - diluted $ 0.01 $ 0.02 $ 0.01 $ 0.07
Weighted average number of common shares outstanding - diluted 30,667,064 30,282,030 30,744,764 30,223,547
Cash $ 593 $ 239 $ 593 $ 239
Total stockholders’ equity 8,080 7,053 8,080 7,053

About Zynex

Zynex, Inc. (founded in 1996) engineers, manufactures, markets and sells its own design of electrotherapy medical devices in two distinct markets: standard digital electrotherapy products for pain relief and pain management; and the NeuroMove(TM) for stroke and spinal cord injury rehabilitation. Zynex's product lines are fully developed, FDA-cleared, commercially sold, and have been developed to uphold the Company's mission of improving the quality of life for patients suffering from impaired mobility due to stroke, spinal cord injury, or debilitating and chronic pain. Zynex has also announced the development of two new business units, Zynex Monitoring Solutions and Zynex NeuroDiagnostic.

Safe Harbor Statement

Certain statements in this release are "forward-looking" and as such are subject to numerous risks and uncertainties. Actual results may vary significantly from the results expressed or implied in such statements. Factors that could cause actual results to materially differ from forward-looking statements include, but are not limited to, the need to obtain additional capital in order to grow our business, our ability to engage additional sales representatives, the success of such additional sales representatives, the need to obtain FDA clearance and CE marking of new products, the acceptance of new products as well as existing products by doctors and hospitals, larger competitors with greater financial resources, the need to keep pace with technological changes, our dependence on the reimbursement from insurance companies for products sold or rented to our customers, acceptance of our products by health insurance providers, our dependence on third party manufacturers to produce our goods on time and to our specifications, implementation of our sales strategy including a strong direct sales force, the uncertain outcome of pending material litigation and other risks described in our filings with the Securities and Exchange Commission including the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2009.

ZYNEX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED, AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Three Months Ended Nine Months Ended
September 30, September 30,
2010 2009 2010 2009
Net revenue:
Rental $ 2,032 $ 2,548 $ 6,639 $ 7,797
Sales 4,625 2,143 10,635 5,473
6,657 4,691 17,274 13,270
Cost of revenue:
Rental 169 346 702 967
Sales 1,257 552 2,942 1,190
1,426 898 3,644 2,157
Gross profit 5,231 3,793 13,630 11,113
Selling, general and administrative expense 4,606 2,906 12,842 7,784
Income from operations 625 887 788 3,329
Other income expense:
Interest income 2 - 5 3

Interest expense and loss on extinguishment of debt

(45 ) (38 ) (177 ) (113 )
Other expense - - (16 ) (1 )
(Loss) gain on value of derivative liability - (25 ) - 172
(43 ) (63 ) (188 ) 61
Income before income tax 582 824 600 3,390
Income tax expense 214 365 270 1,272
Net income $ 368 $ 459 $ 330 $ 2,118
Net income per share:
Basic $ 0.01 $ 0.02 $ 0.01 $ 0.07
Diluted $ 0.01 $ 0.02 $ 0.01 $ 0.07

Weighted average number of common shares outstanding:

Basic 30,569,441 30,086,784 30,555,778 29,997,276
Diluted 30,667,064 30,282,030 30,744,764 30,223,547
ZYNEX, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

(AMOUNTS IN THOUSANDS, EXCEPT NUMBER OF SHARES)

September 30, December 31,
2010 2009
(UNAUDITED)
ASSETS
Current Assets:
Cash $ 593 $ 863
Accounts receivable, net 6,628 5,039
Inventory 3,425 2,034
Prepaid expenses 39 139
Deferred tax asset 1,248 864
Other current assets 76 77
Total current assets 12,009 9,016
Property and equipment, net 2,654 2,718
Deposits 174 166
Deferred financing fees, net 100 30
Total assets $ 14,937 $ 11,930
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Line of credit $ 972 $ -
Current portion of capital leases and other obligations 71 95
Accounts payable 1,485 1,127
Income taxes payable 541 905
Accrued payroll and payroll taxes 651 426
Other accrued liabilities 894 788
Total current liabilities 4,614 3,341
Capital leases and other obligations, less current portion 261 20
Deferred rent liability 1,390 544
Deferred tax liability 592 539
Total liabilities 6,857 4,444
Stockholders' Equity:

Preferred stock, $.001 par value, 10,000,000 shares authorized, no shares issued or outstanding

- -

Common stock, $.001 par value, 100,000,000 shares authorized, 30,569,667 (2010) and 30,497,318 (2009) shares issued and outstanding

31 30
Paid-in capital 4,620 4,357
Retained earnings 3,429 3,099
Total stockholders' equity 8,080 7,486
Total liabilities and stockholders’ equity $ 14,937 $ 11,930
ZYNEX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, AMOUNTS IN THOUSANDS)
Nine Months Ended
September 30,
2010 2009
Cash flows from operating activities:
Net income $ 330 $ 2,118

Adjustments to reconcile net income to net cash (used in) provided by operating activities:

Depreciation expense 591 499
Provision for provider discounts 55,221 39,004
Provision for losses in accounts receivable (uncollectibility) 3,286 2,369
Amortization of financing fees 31 21
Gain on value of derivative liability - (172 )
Change in reserve for obsolete inventory (2 ) 152
Deferred rent expense 846 -
Net loss on disposal of equipment 18 -
Issuance of common stock for consulting services 61 75
Employee stock based compensation expense 203 113
Deferred tax benefit (331 ) (172 )
Changes in operating assets and liabilities:
Accounts receivable (60,096 ) (41,851 )
Inventory (1,389 ) (88 )
Prepaid expenses 100 53
Other current assets (19 ) (108 )
Accounts payable 358 (306 )
Accrued liabilities 331 (451 )
Income taxes payable (364 ) 506
Net cash (used in) provided by operating activities (825 ) 1,762
Cash flows from investing activities:
Proceeds received in lease termination 108 -
Purchases of equipment (271 ) (818 )
Net cash used in investing activities (163 ) (818 )
Cash flows from financing activities:
Decrease in bank overdraft - (113 )
Net borrowings from (payments on) line of credit 972 (682 )
Deferred financing fees (90 ) -
Payments on notes payable and capital leases (164 ) (29 )
Repayments of loans from stockholder - (25 )
Issuance of common stock - 144
Net cash provided by (used in) financing activities 718 (705 )
Net (decrease) increase in cash (270 ) 239
Cash at beginning of period 863 -
Cash at end of period $ 593 $ 239
Supplemental cash flow information:
Interest paid $ 75 $ 113
Income taxes paid (including interest and penalties) $ 955 $ 935
Supplemental disclosure of non-cash investing and financing activities:
Equipment acquired through capital lease $ 334 $ -

Contacts:

<fc:contacts xmlns="http://www.w3.org/1999/xhtml"> Zynex, Inc.<br/>Thomas Sandgaard, CEO, 303-703-4906 </fc:contacts>